NLY 10-K & 10-Q changes, risk factors and insider trading

•Any new lawslaws, regulations or administrative actions modifying the relationship between Fannie Mae, Freddie Mac and the federal government could affect our business model or business operations.

Any new lawslaws, regulations or administrative actions modifying the relationship between Fannie Mae, Freddie Mac and the federal government could affect our business model or business operations.

InPurchase September 2008, Fannie MaeAgreements and Freddierelated Mac were placed into the conservatorship of the FHFA, their federal regulator, pursuant to its powers under The Federal Housing Finance Regulatory Reform Act of 2008, a part of the Housing and Economic Recovery Act of 2008. In addition to FHFA becoming the conservator of Fannie Mae and Freddie Mac, the U.S. Department of the Treasury entered into Preferred Stock Purchase Agreementsarrangements with the FHFA and havehas taken various actions intended to provide Fannie Mae and Freddie Mac with additional liquidity in an effort to ensure their financial stability. For example, in September 2019, FHFA and the U.S. Department of the Treasury agreed to modifications to the Preferred Stock Purchase Agreements that will permit Fannie Mae and Freddie Mac to maintain capital reserves of $25 billion and $20 billion, respectively. In January 2025, the FHFA and the U.S. Department of the Treasury under the Biden Administration announced an agreement with each of Fannie Mae and Freddie Macmodifications to modify the Preferred Stock Purchase Agreements to help ensure that the eventual release of Fannie Mae and Freddie Mac from conservatorship will be orderly and reflect certain existing practices.practices, Inand addition, under a separate side letter fromthe FHFA toindicated thethat U.S.it Department of the Treasury, FHFA willwould solicit public input,input before releasing either Fannie Mae or Freddie Mac from conservatorship,conservatorship. regardingWe cannot predict if, when or how the potentialconservatorships impactswill onend, or what associated changes, if any, may be made to the housingstructure, marketmandate andor overall business practices of Fannie Mae and Freddie Mac.

SinceThe FannieU.S. Maehousing andfinance Freddiesystem, Mac were placed in federal conservatorship,including the guarantee payment structurerole of Fannie Mae and Freddie Mac inand the U.S. housing finance market has been discussednature and re-examinedstructure of their guaranty obligations, remains subject to significant uncertainty and may be affected by regulatorslegislative andaction, administrations.regulatory Membersaction ofor theadministrative initiatives. The Trump Administration havehas recentlypublicly discussed significant potential changes to Fannie Mae and Freddie Mac,Mac althoughthat anycould finalaffect changestheir orroles, approach remains uncertain. The future roles of Fannie Mae and Freddie Macwhich could be significantly reducedmodified, and the nature and structure of their guaranteesguarantees, which could be eliminated or considerably limited relative to historical measurements.reduced. The U.S. Treasury could also stopalter providingthe amount or nature of the credit support provided to Fannie Mae and Freddie Mac in the future. Any changes to the nature and structure of the guarantees provided by Fannie Mae and Freddie Mac could redefine what constitutes an Agency mortgage-backed security and could have broad adverse market implications.implications, Whileincluding the likelihood that major mortgage finance system reform will be enacted in the short term remains uncertain due to political and practical complexities of the topic, it is possible that the adoption of any such reforms couldpotentially adversely affectaffecting the types of assets we can buy, the costs of these assetsassets, the terms on which we can finance them and our business operations. A potential reduction in the ability of mortgage loan originators to access Fannie Mae and Freddie Mac to sell their mortgage loans may adversely affect the mortgage markets generally and adversely affect the ability of mortgagors to refinance their mortgage loans. In addition, any decline in the value of securities issued by Fannie Mae and Freddie Mac may affect the value of MBS in general. If Fannie Mae or Freddie Mac was eliminated, or their structures were to change in a material manner that is not compatible with our business model, we would not be able to acquire Agency mortgage-backed securities from these entities, which could adversely affect our business operations.

While we are not required to obtain licenses to purchase mortgage-backed securities, the purchase of residential mortgage loans and certain business purpose mortgage loans in the secondary market requires us to maintain various state licenses. Acquiring the right to service residential mortgage loans and certain business purpose mortgage loans also requires us to maintain various state licenses, even though we currently do not expect to directly engage in loan servicing ourselves. Furthermore, we are required to comply with various information reporting and other regulatory requirements to maintain our licenses, and there is no assurance that we will be able to satisfy those requirements or other regulatory requirements applicable to our businesses of acquiring and servicing mortgage loans on an ongoing basis. Our failure to obtain or maintain required licenses or our failure to comply with regulatory requirements that are applicable to our businesses of acquiring and servicing mortgage loans may restrict our Residential Credit and MSR businesses and investment options and could harm our businesses and expose us to penalties or other claims.

Although we utilize unaffiliated servicing companies to carry out the actual servicing of MSR and the loans we purchase together with the related MSR (including all direct interface with the borrowers), we are ultimately responsible, vis-à-vis the borrowers and state and federal regulators, for ensuring that the loans and MSR are serviced in accordance with the terms of the related loans and mortgages and applicable law and regulation. To manage this risk, we have a robust process that monitors the activities of the third party servicers. This oversight process is also subject t oto regulatory requirements and expectations that we are expected to meet.

In the U.S., there are numerous federal, state and local data privacy and security laws and regulations governing the collection, sharing, use, retention, disclosure, security, storage, transfer and other processing of personal information. At the federal level, we are subject to, among other laws and regulations, the Gramm Leach Bliley Act (which regulates the confidentiality and security of customer information obtained by financial institutions and certain other types of financial services businesses) and regulations under it. Additionally, numerous states have enacted, or are in the process of enacting or considering, comprehensive state-level data privacy and security laws and regulations. Moreover, laws in all 50 U.S. states require businesses to provide notice under certain circumstances to consumers whose personal information has been disclosed as a result of a data breach.

We have a subsidiary that is registered with the SEC as an investment adviser under the Investment Advisers Act. As a result, we are subject to the anti-fraud provisions of the Investment Advisers Act and to fiduciary duties derived from these provisions that apply to our relationships with that subsidiary’s clients. These provisions and duties impose restrictions and obligations on us with respect to our dealings with our subsidiary’s clients, including, for example, restrictions on agency, cross and principal transactions. Our registered investment adviser subsidiary is subject to periodic SEC examinations and other requirements under the Investment Advisers Act and related regulations primarily intended to benefit advisory clients. These additional requirements relate to, among other things, maintaining an effective and comprehensive compliance program, recordkeeping and reporting requirements and disclosure requirements. The Investment Advisers Act generally grants the SEC broad administrative powers, including the power to limit or restrict an investment adviser from conducting advisory activities in the event it fails to comply with federal securities laws. Additional sanctions that may be imposed for failure to comply with applicable requirements under the Investment Advisers Act include the prohibition of individuals from associating with an investment adviser, the revocation of registrations and other censures and fines. We may in the future be required to register one or more entities as a commodity pool operator or commodity trading adviser, subjecting those entities to the regulations and oversight of the Commodity Futures Trading Commission and the National Futures Association. We may also become subject to various international regulations on the asset management industry.

We also indirectly own interests in entities that have elected to be taxed as REITs under the U.S. federal income tax laws, or “Subsidiary REITs.” Subsidiary REITs are subject to the various REIT qualification requirements that are applicable to us. If any Subsidiary REIT were to fail to qualify as a REIT, then (i) that Subsidiary REIT would become subject to regular U.S. federal, state, and local corporate income tax, (ii) our interest in such Subsidiary REIT would cease to be a qualifying asset for purposes of the REIT asset tests, and (iii) it is possible that we would fail certain of the REIT asset tests, in which event we also would fail to maintain our qualification as a REIT unless we could avail ourselves of certain relief provisions. While we believe that the Subsidiary REITs have qualified as REITs under the Code, we have joined each Subsidiary REIT in filing “protective” TRS elections under Section 856(l) of the Code. We cannot assure you that such “protective” TRS elections would be effective to avoid adverse consequences to us. Moreover, even if the “protective” TRS elections were to be effective, the Subsidiary REITs would be subject to regular corporate income tax, and we cannot assure you that we would not fail to satisfy the requirement that not more than 20% of the value of our total assets may be represented by the securities of one or more TRSs. If we fail to maintain our qualification as a REIT, we would be subject to U.S. federal income tax at regular corporate rates. Also, unless the IRS were to grant us relief under certain statutory provisions, we would remain disqualified as a REIT for four years following the year we first fail to qualify. If we fail to maintain our qualification as a REIT, we would have to

A REIT may own up to 100% of the stock of one or more TRSs. A TRS may earn income that would not be qualifying income if it was earned directly by the parent REIT. Overall, at the close of any calendar quarter, no more than 25% (20% for the taxable years beginning before January 1, 2026) of the value of a REIT’s assets may consist of stock or securities of one or more TRSs.

We intend to conduct our operations at the REIT level so that no asset that we own (or are treated as owning) will be treated as or as having been, held for sale to customers, and that a sale of any such asset will not be treated as having been in the ordinary course of our business. As a result, we may choose not to engage in certain transactions at the REIT level, and may limit the structures we utilize for our CMO transactions, even though the sales or structures might otherwise be beneficial to us. In addition, whether property is held “primarily for sale to customers in the ordinary course of a trade or business” depends on the particular facts and circumstances. No assurance can be given that any property that we sell will not be treated as property held for sale to customers, or that we can comply with certain safe-harbor provisions of the Code that would prevent such treatment. The 100% tax does not apply to gains from the sale of property that is held through a TRS or other taxable corporation, although such income will be subject to tax in the hands of the corporation at regular corporate rates. We intend to structure our activities to avoid the prohibited transaction tax.

The present U.S. federal income tax treatment of REITs may be modified, possibly with retroactive effect, by legislative, judicial or administrative action at any time, which could affect the U.S. federal income tax treatment of an investment in us. The U.S. federal income tax rules dealing with REITs are constantly under review by persons involved in the legislative process, the IRS and the U.S. Treasury, which results in statutory changes as well as frequent revisions to regulations and interpretations. Future revisions in federal tax laws and interpretations thereof could affect or cause us to change our investments and commitments and affect the tax considerations of an investment in us.

We invest in MSR and financial instruments whose cash flows are considered to be largely dependent on underlying MSR that either directly or indirectly act as collateral for the investment. We expect to increase our exposure to MSR-related investments in 2025. Generally, we have the right to receive certain cash flows from the MSR that are generated from the servicing fees and/or excess servicing spread associated with the MSR. Our investments in MSR-related assets have in the past and may in the future expose us to risks associated with MSR, including the following:

There is no assurance that borrowers have maintained or will maintain the insurance required under the applicable loan documents or that such insurance will be adequate. In addition, the effects of climate change have made, and may continue to make, certain types of insurance, such as flood insurance, increasingly difficult and/or expensive to obtain in certain areas. In addition, since the residential mortgage loans generally do not require maintenance of terrorism insurance, we cannot assuremake youassurances that any property will be covered by terrorism insurance. Therefore, damage to a collateral property that is not adequately insured or damage to a collateral property caused by acts of terror may not be covered by insurance and may result in substantial losses to us.

WhenItem we1A. sellRisk or securitize loans, we will be required to make customary representations and warranties about such loans to the loan purchaser. Our mortgage loan sale agreements will require us to repurchase or substitute loans in the event we breach a representation or warranty given to the loan purchaser. In addition, we have in the past and may in the future be required toFactors repurchase loans as a result of borrower fraud or in the event of early payment default on a mortgage loan. Likewise, we are not always required to repurchase or substitute loans if we breach a representation or warranty in connection with our securitizations. The remedies available to a purchaser of mortgage loans are generally broader than those available to us against the originating broker or correspondent. Further, if a purchaser enforces its remedies against us, we have in the past and may in the future not be able to enforce the remedies we have against the sellers. The repurchased loans typically can only be financed at a steep discount to their repurchase price, if at all. They are also typically sold at a significant discount to the unpaid principal balance. Significant repurchase activity could adversely affect our cash flow, results of operations, financial condition and business prospects.

Our policies permit us to enter into interest rate swaps, caps and floors, interest rate swaptions, interest rate futures, and other derivative transactions to help us mitigate our interest rate and prepayment risks described in other risk factors subject to maintaining our qualification as a REIT and our Investment Company Act exemption. We have used interest rate swaps and options to enter into interest rate swaps (commonly referred to as interest rate swaptions) to provide a level of protection against interest rate risks. We may also purchase or sell TBAs on Agency mortgage-backed securities, purchase or write put or call options on TBAs, invest in other types of mortgage derivatives, such as interest-only securities, and hold short positions in U.S. Treasury securities. No hedging strategy can protect us completely. Interest rate hedging may fail to protect or could adversely affect us because, among other things: interest rate hedging can be expensive, particularly during periods of volatile interest rates; available hedges may not correspond directly with the risk for which protection is sought; and the duration of the hedge may not match the duration of the related asset or liability.

Our business is highly dependent on communications and information systems and networks. Any failure or interruption of our or our counterparties’ systems or networks or cyberattacks or other information security breaches of our networks or systems may cause delays or other problems in our securities trading activities, including mortgage-backed securities trading activities. In addition, we also face the risk of operational failure, termination or capacity constraints of any of the third parties with which we do business or that facilitate our business activities, including clearing agents or other financial intermediaries we use to facilitate our securities transactions, if their respective systems experience failure, interruption, cyberattacks, or other information security breaches, including those caused by software bugs or errors, network failures, computer and telecommunication failures, usage errors, power, communications or other service outages or failures, fires, earthquakes, severe weather conditions or other catastrophic events. Certain third parties provide information needed for our financial statements that we cannot obtain or verify from other sources. If one of those third parties experiences a system or network failure or cybersecurity incident, we may not have access to that information or may not have confidence in its accuracy. AnyThere ofis thea controlsrisk andthat procedures,our operational safeguards, business continuitycontingency systemsplans, and information security systemsprotocols, weincluding orthose thirdimplemented partiesby uponour whom we rely have in placevendors, could prove to be inadequate.insufficient.

Cybersecurity risks for financial services businesses are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect, in part because of the proliferation of new technologies, including generative artificial intelligence,intelligence (“GenAI”), and the increased sophistication and activities of organized crime, hackers, terrorists, nation-states, state-sponsored actors and other external parties. Cyberattacks could include wrongful conduct by hostile foreign governments, industrial espionage, wire fraud and other forms of cyber fraud, the deployment of harmful malware, ransomware, denial-of-service, social engineering fraud or other means to threaten data security, confidentiality, integrity and availability. Cybersecurity risks also may derive from fraud or malice on the part of our employees or third parties, or may result from human error, software bugs, server malfunctions, software or hardware failure or other technological failure. Such threats may be difficult to detect for long periods of time and also may be further enhanced in frequency or effectiveness through threat actors’ use of artificial intelligence. Further, cybersecurity risks may be heightened as a result of ongoing global conflicts.

Although we have not detected a material cybersecurity breach to date, other financial institutions have reported material breaches of their systems, some of which have been significant. Even with all reasonable security efforts, not every breach can be prevented or even detected. It is possible that we have experienced an undetected breach. There is no assurance that we have not or will not experience a breach. There is no assurance that our cybersecurity incident response plan will allow us to successfully mitigate or recover from potential attacks. In addition, certain third parties that facilitate our business activities have reported breaches in the past and may experience breaches in the future, and there is no assurance that the third parties that have not reported breaches or will not experience a breach in the future. We may be held responsible if certain third parties that facilitate our business activities experience a breach. Additionally, we cannot be certain that our insurance coverage will be adequate for cybersecurity liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or at all, or that our insurer will not deny coverage as to any future claim.

We use, or may in the future use, artificial intelligence, generative artificial intelligence,GenAI, machine learning and similar tools and technologies (collectively, “AI”) in connection with our business.business, including in our business or through third-party service providers. The use of generative artificial intelligence,GenAI, a relatively new and emerging technology in the early stages of commercial use, exposes us to additional risks, such as damage to our reputation, competitive position, and business, legal and regulatory risks and additional costs. For example, generative artificial intelligenceGenAI has been known to produce false or “hallucinatory” inferences or output, and certain generative artificial intelligenceGenAI uses machine learning and predictive analytics, which can create inaccurate, incomplete, or misleading content, unintended biases and other discriminatory or unexpected results, errors or inadequacies, any of which may not be easily detectable by us or any of our related service providers. Accordingly, whileWhile AI systems may help automate processes or provide more tailored or personalized user experiences, if the content, analyses, or recommendations that AI systems assist in producing in our products and solutions are, or are perceived to be, deficient, inaccurate, biased, unethical or otherwise flawed, our reputation, competitive position and business may be materially and adversely affected.

Additionally, if any of our employees, contractors, consultants, vendors or service providers use any third-party AI-powered software in connection with our business or the services they provide to us, it may lead to the inadvertent disclosure or incorporation of our confidential information into publicly available training sets, which may impact our ability to realize the benefit of, or adequately maintain, protect and enforce our intellectual property or confidential information, harming our competitive position and business. Any output created by us using AI tools may not be subject to copyright protection, which may adversely affect our intellectual property rights in, or ability to commercialize or use, any such content. In the United States, a number of civil lawsuits have been initiated related to the foregoing and other concerns, any one of which may, among other things, require us to limit the ways in which our AI systems are trained and may affect our ability to develop our own AI-powered products and solutions. To the extent that we do not have sufficient rights to use the data or other material or content used in or produced by the AI tools used in our business, or if we experience cybersecurity incidents in connection with our use of AI, it could adversely affect our reputation and expose us to legal liability or regulatory risk, including with respect to third-party intellectual property, privacy, data protection and cybersecurity, publicity, contractual or other rights. Further, our competitors or other third parties may incorporate AI into their products more quickly or more successfully than us, which could impair our ability to compete effectively.

In addition, the regulatory framework for AI and similar technologies, and automated decision making, is changing rapidly. It is possible that new laws and regulations will be adopted in the United States and in non-U.S. jurisdictions, or that existing laws and regulations may be interpreted, in ways that would affect the operation of our products and solutions and the way in which we use AI and similar technologies. For example, in Europe, on August 1, 2024, the European Union’s Artificial Intelligence Act (the “AI Act”) was entered into force. The AI Act establishes, among other things, a risk-based governance framework for regulating AI systems operating in the European Union. This framework would categorize AI systems, based on the risks associated with such AI systems’ intended purposes, as creating unacceptable or high risks, with all other AI systems being considered lowlimited or minimal risk. We may not be able to adequately anticipate or respond to these evolving laws and regulations, and we may need to expend additional resources to adjust our offerings in certain jurisdictions if applicable legal frameworks are inconsistent across jurisdictions. Moreover, because these technologies are themselves highly complex and rapidly developing, it is not possible to predict all of the legal or regulatory risks that may arise relating to our use of such technologies. Further, the cost to comply with such laws or regulations could be significant and would increase our operating expenses, which could adversely affect our business, financial condition and results of operations.

We depend on a variety of services provided by third party service providers related to our investments in mortgage loans and MSR as well as for general operating purposes. For example, we rely on the mortgage servicers who service the mortgage loans in our portfolio and those underlying our MSR to, among other things, collect principal and interest payments on such mortgage loans and perform loss mitigation services in accordance with applicable laws and regulations. Mortgage servicers and other service providers, such as trustees, bond insurance providers, due diligence vendors and document custodians, have in the past and may in the future fail to perform or otherwise not perform in a manner that promotes our interests.

For example, any legislation or regulation intended to reduce or prevent foreclosures through, among other things, loan modifications may reduce the value of mortgage loans, including those in our portfolio and those underlying our MSR. Mortgage servicers have in the past and may in the future be required or otherwise incentivized by the Federal or state governments to pursue actions designed to assist mortgagors, such as loan modifications, forbearance plans and other actions intended to prevent foreclosure even if such loan modifications and other actions are not in the best interests of the beneficial owners of the mortgage loans. Similarly, legislation delaying the initiation or completion of foreclosure proceedings on specified types of residential mortgage loans or otherwise limiting the ability of mortgage servicers to take actions that may be essential to preserve the value of the mortgage loans may also reduce the value of mortgage loans in our portfolio and those underlying our MSR. Any such limitations are likely to cause delayed or reduced collections from mortgagors and generally increase servicing costs. As a consequence of the foregoing matters, our business, financial condition and results of operations could be adversely affected.

Competition may affect abilityavailability and pricing of our target assets.

We operate in a highly competitive market for investment opportunities. Our profitability depends, in large part, on our ability to acquire our target assets at attractive prices. In acquiring our target assets, we compete with a variety of institutional investors, including other REITs, specialty finance companies, public and private funds, government entities, commercial and investment banks, commercial finance and insurance companies and other financial institutions. Many of our competitors are substantially larger and have considerably greater financial, technical, technological, marketing and other resources than we do. Other REITs with investment objectives that overlap with ours may elect to raise significant amounts of capital, which have in the past and may in the future create additional competition for investment opportunities. Some competitors may have a lower cost of funds and access to funding sources that may not be available to us. Many of our competitors are not subject to the operating constraints associated with REIT compliance or maintenance of an exemption from the Investment Company Act. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, competition for investments in our target assets may lead to the price of such assets increasing, which may further limit our ability to generate desired returns. We cannot provide assurance that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. Also, as a result of this competition, desirable investments in our target assets may

Item 1A. Risk Factors may be limited in the future and we may not be able to take advantage of attractive investment opportunities from time to time, as we can provide no assurance that we will be able to identify and make investments that are consistent with our investment objectives.

Net income (loss) was $2.1 billion, which includes $24.4 million attributable to noncontrolling interests, or $2.92 per average basic common share, for the year ended December 31, 2025 compared to $1.0 billion, which includes $9.9 million attributable to noncontrolling interests, or $1.62 per average basic common share, for the year ended December 31, 2024 compared to ($1.6) billion, which includes $4.7 million attributable to noncontrolling interests, or ($3.61) per average basic common share, for the same period in 2023.2024. We attribute the majority of the change in net income (loss) to a favorable change in net gains (losses) on derivatives,investments and other, net interest income, and net servicing income, partially offset by an unfavorable change in net gains (losses) on investments and other, and net servicing income. Net gains (losses) on derivatives for the year ended December 31, 2024 was $2.3 billion compared to $400.1 million for the same period in 2023. Net interest income for the year ended December 31, 2024 was $247.8 million compared to ($111.4) million for the same period in 2023.derivatives. Net gains (losses) on investments and other for the year ended December 31, 20242025 was ($1.8)$1.7 billion compared to ($2.1$1.8) billion for the same period in 2023.2024. Net interest income for the year ended December 31, 2025 was $1.1 billion compared to $247.8 million for the same period in 2024. Net servicing income for the year ended December 31, 20242025 was $435.9$519.3 million compared to $326.5$435.9 million for the same period in 2023.2024. Net gains (losses) on derivatives for the year ended December 31, 2025 was ($1.2) billion compared to $2.3 billion for the same period in 2024. Refer to the section titled “Other income (loss)” located within this Item 7 for additional information related to these changes.

Earnings available for distribution were $2.0 billion, or $2.92 per average common share, for the year ended December 31, 2025, compared to $1.6 billion, or $2.70 per average common share, for the year ended December 31, 2024, compared to $1.6 billion, or $2.86 per average common share, for the same period in 2023.2024. The change in earnings available for distribution for the year ended December 31, 20242025 compared to the same period in 20232024 was primarily due to higher coupon income, resulting from higher residential mortgage loan balances and purchasing securities higher up in the coupon stack,balances, and higher net servicing income. This change was almost entirelypartially offset by higher interest expense resulting from anhigher increasesecuritized indebt balances from new securitizations and higher average borrowingrates, partially offset by lower interest expense on repurchase agreements from lower average rates anddespite higher average interestrepurchase bearingagreement liabilities,balances, and an unfavorable change in the net interest component of interest rate swaps.swaps as the average net receive swap rate decreased on similar average balances for the year ended December 31, 2025 compared to the same period in 2024.

We use capital coupled with borrowed funds to invest primarily in real estate related investments, earning the spread between the yield on our assets and the cost of our borrowings and hedging activities. Our capital structure is designed to offer an efficient complement of funding sources to generate positive risk-adjusted returns for our stockholders while maintaining appropriate liquidity to support our business and meet our financial obligations under periods of market stress. To maintain our desired capital profile, we utilize a mix of debt and equity funding. Debt funding may include the use of repurchase agreements, loans, securitizations, participations issued, lines of credit, asset backed lending facilities, corporate bond issuance, convertible bonds, mortgages payablebonds or other liabilities. Equity capital primarily consists of common and preferred stock.

Our economic leverage ratio is computed as the sum of recourse debt, cost basis of TBA and CMBX derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of repurchase agreements, other secured financingfinancing, structured repurchase transactions (included within Debt issued by securitization vehicles) and U.SU.S. Treasury securities sold, not yet purchased. Debt issued by securitization vehicles (excluding structured repurchase transactions) and participations issued are non-recourse to us and are excluded from economic leverage.

Economic interest expense is comprised of GAAP interest expense, the net interest component of interest rate swaps (which includes net interest on variation margin related to interest rate swaps)swaps, and net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss). Net interest on variation margin related to interest rate swaps is included in the Net interest component of interest rate swaps in the Company’s Consolidated Statements of Comprehensive Income (Loss). We use interest rate swaps to manage our exposure to changing interest rates on repurchase agreements by economically hedging cash flows associated with these borrowings. Accordingly, adding the net interest component of interest rate swaps to interest expense, as computed in accordance with GAAP, reflects the total contractual interest expense and thus, provides investors with additional information about the cost of our financing strategy. We may use market agreed coupon (“MAC”) interest rate swaps in which we may receive or make a payment at the time of entering into such interest rate swap to compensate for the off-market nature of such interest rate swap. In accordance with GAAP, upfront payments associated with MAC interest rate swaps are not reflected in the net interest component of interest rate swaps, which is presented in Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss).

Economic interest expense increased by $1.1$717.7 billionmillion for the year ended December 31, 20242025 compared to the same period in 2023.2024. The change was primarily due to change in the net interest component of interest rate swaps, which was $716.5 million for the year ended December 31, 2025 compared to $1.2 billion for the same period in 2024 combined with higher average interest bearing liabilities from an increase in securitized debt balances due to the 2129 securitizations closed during the year ended December 31, 2024 combined with higher repurchase agreement balances and higher borrowing rates. This was partially offset by the change in the net interest component of interest rate swaps, which was $1.2 billion for the year ended December 31, 2024 compared to $1.6 billion for the same period in 2023.2025.

Net gains (losses) on disposal of investments and other was ($1.1$391.4) billionmillion for the year ended December 31, 20242025 compared with ($2.9$1.1) billion for the same period in 2023.2024. For the year ended December 31, 2025, we disposed of Residential Securities with a carrying value of $15.0 billion for an aggregate net loss of ($99.6) million. For the same period in 2024, we disposed of Residential Securities with a carrying value of $21.4 billion for an aggregate net loss of ($886.0) million. For the same period in 2023, we disposed of Residential Securities with a carrying value of $36.4 billion for an aggregate net loss of ($2.9) billion.

Net unrealized gains (losses) on instruments measured at fair value through earnings was ($764.5)$2.1 millionbillion for the year ended December 31, 20242025 compared to $797.6($764.5) million for the same period in 2023,2024, primarily due to unfavorablefavorable changes in unrealized gains (losses) on Agency MBS of ($1.8)$3.2 billion, securitized residential whole loans of consolidated VIEs of ($231.0)$515.1 million, and residential whole loans of ($159.1) million, and CRT securities of ($71.9)$40.3 million, partially offset by favorableunfavorable changes in residential securitized debt of consolidated VIEs of $308.7($374.0) million, U.S. Treasury securities sold, not yet purchased of $293.5($218.8) million, participations issued of $71.8 million and MSR of $44.8($152.5) million, non-Agency MBS of ($83.6) million, and CRT securities of ($36.5) million.

Net gains (losses) on interest rate swaps for the year ended December 31, 20242025 was $2.1($716.8) billionmillion compared to $694.7$2.1 millionbillion for the same period in 2023,2024, attributable to favorableunfavorable changes in unrealized gains (losses) on interest rate swapsswaps, the net interest component of interest rate swaps, and realized gains (losses) on termination or maturity of interest rate swaps, partially offset by the change in the net interest component of interest rate swaps. Unrealized gains (losses) on interest rate swaps was $1.0($1.4) billion for the year ended December 31, 20242025 compared to ($815.6)$1.0 millionbillion for the same period in 2023.2024. Net interest component of interest rate swaps was $716.5 million for the year ended December 31, 2025 compared to $1.2 billion for the same period in 2024. Realized gains (losses) on termination or maturity of interest rate swaps was ($60.5$77.0) million resulting from the termination or maturity of interest rate swaps with a notional amount of $13.7 billion for the year ended December 31, 2024million, compared to ($74.8$60.5) million resulting from the termination of interest rate swaps with a notional amount of $12.7 billion for the same period in 2023.2024, Netwhich interestreflected componentour termination or maturity of fixed-rate payer and receiver interest rate swaps waswith $1.2notional billionamounts forof the$18.6 yearmillion endedand December$3.2 31,million, 2024respectively, compared to $1.6$9.6 billion and $4.1 billion notional amounts of fixed-rate payer and receiver interest rate swaps for the same period in 2023 due to a decrease in average net receive rate.2024.

Net gains (losses) on other derivatives was $124.9($490.4) million for the year ended December 31, 20242025 compared to ($294.6)$124.9 million for the same period in 2023.2024. The change in net gains (losses) on other derivatives was primarily due to favorableunfavorable changes in net gains (losses) on futures contracts, which was $257.5($619.5) million for the year ended December 31, 20242025 compared to ($6.8)$257.5 million for the same period in 2023,2024, partially offset by favorable changes in net gains (losses) on TBA derivatives, which was ($16.7)$135.7 million for the year ended December 31, 20242025 compared to ($140.8$16.7) million for the same period in 2023, and2024, net gains (losses) on interest rate swaptions, which was ($105.9) million for the year ended December 31, 2024 compared to ($148.8) million for the same period in 2023, partially offset by an unfavorable change in net gains (losses) on purchase commitments, which was ($10.0) million for the year ended December 31, 20242025 compared to $7.9($105.9) million for the same period in 2023.2024, and net gains (losses) on purchase commitments, which was $3.4 million for the year ended December 31, 2025 compared to ($10.0) million for the same period in 2024.

Other, net includes brokerage and commission fees, due diligence costs, securitization expenses, and interest on custodial balances.balances We also report in Other, netand items whose amounts, either individually or in the aggregate, would not, in the opinion of management, be meaningful to readers of the financial statements. Given the nature of certain components of this line item, balances may fluctuate from period to period. Other, net was $94.9$51.1 million for the year ended December 31, 20242025 compared to $73.7$94.9 million for the same period in 2023,2024, primarily attributable to an increase in MSR financing expenses, a decrease in net interest income on initial margin related to interest rate swaps, an increase in securitization related costs, and an increase in trading activity related expenses, a decrease in other interest and a decrease in earnings from unconsolidated joint ventures. This was partially offset by an increase in interest on custodial balances, partiallyadvisory offsetincome, byand anconduit increasetransaction in MSR financing expenses.fees.

G&A expenses increased $8.8$28.3 million to $171.4$199.6 million for the year ended December 31, 20242025 compared to the same period in 2023.2024. The change in the period was primarily due to an increase in compensation expense,expense partiallyand offset by lowerhigher expenses related to technologyprofessional fees, rent, and professional fees.technology.

TheItem fair7. valueManagement’s of these securities being less than amortized cost at December 31, 2024 is solely due to market conditionsDiscussion and not the quality of the assets. Substantially all of the Agency MBS have an actual or implied credit rating that is the same as thatAnalysis of the U.S. government. The investments do not require an allowance for credit losses because we currently have the ability and intent to hold the investments to maturity or for a period of time sufficient for a forecasted market price recovery up to or beyond the cost of the investments, and it is not more likely than not that we will be required to sell the investments before recovery of the amortized cost bases, which may be maturity. Also, we are guaranteed payment of the principal and interest amounts of the securities by the respective issuing Agency.

U.S. interest rates repriced sharply in Q1Q2 2026 as deteriorating risk sentiment tied to the conflict in Iran reignited inflation concernsforecasts andshifted promptedmeaningfully a reassessment of monetary policy.higher. Treasury yields rose across the yield curve, led by the front end,end (2-year yields up 38 bps), as expectations for Fed easingpricing wereflipped paredfrom back,cuts to hikes, resulting in a flatter yield curve.curve (2s10s down 23 bps during the quarter). Market-based measures of short‑termshort-term inflation expectations increased meaningfully alongside higher energy prices, though longer‑term inflation measures declined, suggesting the inflation shock was viewed as near‑term rather than structural. Against this backdrop, interest rate volatility rebounded from the subdued levels seen earlier in the year. Amid higher volatility and risinglong-end yields,yields mortgagereached spreadsyear-to-date widenedpeaks. Rate volatility, however, fell over the quarter, with the spread between the 30‑year Agency MBS coupon and the 10‑year U.S. Treasury rate widening to 106 bps.quarter.

The following table presents financial information related to our results of operations as of and for the three and six months ended MarchJune 31,30, 2026 and 2025.

Net income (loss) was $290.5$827.8 million, which includes $7.9$5.1 million attributable to noncontrolling interests, or $0.33$1.06 per average basic common share, for the three months ended MarchJune 31,30, 2026, compared to $130.3$60.4 million, which includes $6.1$3.3 million attributable to noncontrolling interests, or $0.15$0.03 per average basic common share, for the same period in 2025. We attribute the majority of the change in net income (loss) to favorable changes in net gains (losses) on derivatives, net interest income, and net servicing income, partially offset by an unfavorable change in net gains (losses) on investments and other. Net gains (losses) on derivatives was $409.1$552.4 million for the three months ended MarchJune 31,30, 2026 compared to ($977.9$388.8) million for the same period in 2025. Net interest income for the three months ended MarchJune 31,30, 2026 was $452.7$488.2 million, compared to $220.0$273.2 million for the same period in 2025. Net servicing income for the three months ended MarchJune 31,30, 2026 was $142.6$157.2 million, compared to $126.3$127.1 million for the same period in 2025. Net gains (losses) on investments and other was ($672.1$318.5) million for the three months ended MarchJune 31,30, 2026, compared to $810.8$83.5 million for the same period in 2025.

Earnings available for distribution were $589.9$627.7 million, or $0.76$0.79 per average common share, for the three months ended MarchJune 31,30, 2026, compared to $461.9$489.9 million, or $0.72$0.73 per average common share, for the same period in 2025. The change in earnings available for distribution during the three months ended MarchJune 31,30, 2026, compared to the same period in 2025, was primarily due to higher coupon incomeincome, resulting from higher average Agency securities and residential mortgage loan and securities balancesbalances, and purchasinghigher securitiesnet servicing income on higher upaverage in the coupon stack since Q1 2025.balances. This change was partially offset by higher interest expense, resulting from higher average securitized debt and repurchase agreement balances despite lower average rates, and ana unfavorable changedecrease in the net interest component of interest rate swaps.swaps, primarily due to lower average receive rates resulting from declines in SOFR.

We believe these non-GAAP measures provide management and investors with additional details regarding our underlying operating results and investment portfolio trends by (i) making adjustments to account for the disparate reporting of changes in fair value where certain instruments are reflected in GAAP net income (loss) while others are reflected in other comprehensive income (loss), and (ii) by excluding certain unrealized, non-cash or episodic components of GAAP net income (loss) in order to provide additional transparency into the operating performance of our portfolio. In addition, EAD serves as a useful indicator for investors in evaluating our performance and ability to pay dividends. Annualized EAD return on average equity, which is calculated by dividing earnings available for distribution over average stockholders’ equity, provides investors with additional detail on the earnings available for distribution generated by our invested equity capital.

TBA dollar roll transactions are accounted for under GAAP as a series of derivatives transactions. The fair value of TBA derivatives is based on methods similar to those used to value Agency MBS. We record TBA derivatives at fair value in our Consolidated Statements of Financial Condition and recognize periodic changes in fair value in Net gains (losses) on derivatives in our Consolidated Statements of Comprehensive Income (Loss), which includes both unrealized and realized gains and losses on derivatives.

Net interest spread (excluding PAA), which is the difference between the average yield on interest earning assets (excluding PAA), which represents annualized economic interest income divided by average interest earning assets, and the average economic cost of interest bearing liabilities, which represents annualized economic interest expense divided by average interest bearing liabilities, and net interest margin (excluding PAA), which is calculated as the sum of interest income (excluding PAA) plus TBA dollar roll income less economic interest expense divided by the sum of average interest earning assets plus average TBA contract balances, provide management with additional measures of our profitability that management relies upon in monitoring the performance of the business.

Economic interest expense increased by $272.1$277.3 million for the three months ended MarchJune 31,30, 2026, compared to the same period in 2025, primarily due to thehigher reductionrepurchase agreement and securitized debt balances despite lower average rates, in addition to an unfavorable change in the net interest component of interest rate swaps, which was $96.8$87.5 million for the three months ended MarchJune 31,30, 2026, compared to $191.5$185.7 million for the same period in 2025. Adding to this increase was higher interest expense on increased securitized debt and repurchase agreement balances despite lower average rates.

At MarchJune 31,30, 2026 and December 31, 2025, the majority of our debt represented repurchase agreements and other secured financing arrangements collateralized by a pledge of our Residential Securities, residential mortgage loans, and MSR. All of our Residential Securities are currently accepted as collateral for these borrowings. However, we limit our borrowings, and thus our potential asset growth, in order to maintain unused borrowing capacity and maintain the liquidity and strength of our balance sheet.

OtherOther, Income (Loss)Net

For the ThreeSix Months Ended MarchJune 31,30, 2026 and 2025

Net gains (losses) on disposal of investments and other was ($26.7$117.9) million for the threesix months ended MarchJune 31,30, 2026, compared to ($49.4$132.8) million for the same period in 2025. For the threesix months ended MarchJune 31,30, 2026, we disposed of Residential Securities with a carrying value of $5.0$8.1 billion for an aggregate net gain (loss) of $35.9$18.4 million. For the same period in 2025, we disposed of Residential Securities with a carrying value of $5.2$8.5 billion for an aggregate net gain (loss) of ($54.6$80.4) million. Realized gains (losses) on residential mortgage loans, including loans transferred or pledged to securitization vehicles, was ($68.2) million for the six months ended June 30, 2026, compared to ($24.3) million for the same period in 2025. Realized gains (losses) on U.S. Treasury securities sold, not yet purchased was $16.4 million for the threesix months ended MarchJune 31,30, 2026, compared to $43.8 million for the same period in 2025. Realized gains (losses) on ResidentialMSR Loans waswere ($29.9$70.3) million for the threesix months ended MarchJune 31,30, 2026, compared to ($10.0$49.2) million for the same period in 2025. Realized gains (losses) on MSRparticipations issued were ($31.9$16.3) million for the threesix months ended MarchJune 31,30, 2026, compared to ($18.5$20.3) million for the same period in 2025 as prepayments increased slightly on a larger overall MSR portfolio.2025.

Net unrealized gains (losses) on instruments measured at fair value through earnings was ($645.5$872.8) million for the threesix months ended MarchJune 31,30, 2026, compared to $860.2$1.0 millionbillion for the same period in 2025, primarily due to unfavorable changes in unrealized gains (losses) on Agency MBS of ($1.7$2.0) billion, securitized residential whole loans of consolidated VIEs of ($169.5$416.8) million, and residential whole loans of ($56.8$46.0) million, MSR (including interests in MSR) of ($27.9) million, and non-Agency MBS of ($17.7) million, partially offset by favorable changes in residential securitized debt of consolidated VIEs of $294.9$503.4 million, U.S. Treasury securities sold, not yet purchased of $95.9$105.0 million, participations issued of $26.5$18.9 million, and CRT securities of $11.5$15.3 million.

Net gains (losses) on interest rate swaps for the threesix months ended MarchJune 31,30, 2026 was $322.9$859.2 million, compared to $($605.8944.2) million for the same period in 2025, primarily attributable to favorable changes in unrealized gains (losses) on interest rate swaps and realized gains (losses) on termination or maturity of interest rate swaps, partially offset by an unfavorable change in net interest component of interest rate swaps. Unrealized gains (losses) on interest rate swaps was $231.8$680.7 million for the threesix months ended MarchJune 31,30, 2026, compared to ($753.6$1.2) millionbillion for the same period in 2025. Realized gains (losses) on termination or maturity of interest rate swaps was ($5.8) million for the threesix months ended MarchJune 31,30, 2026, compared to ($43.8$75.6) million for the same period in 2025, which reflected our termination or maturity of fixed-rate payer interest rate swaps with a notional amount of $5.1 billion, compared to fixed-rate payer and receiver interest rate swaps with notional amounts of $11.7$15.5 billion and $3.2 billion, respectively, for the same period in 2025. Net interest component on interest rate swaps was $96.8$184.3 million for the threesix months ended MarchJune 31,30, 2026, compared to $191.5$377.2 million for the same period in 2025.

Net gains (losses) on other derivatives was $86.2$102.3 million for the threesix months ended MarchJune 31,30, 2026, compared to ($372.0$422.5) million for the same period in 2025. The change in net gains (losses) on other derivatives was primarily due to favorable changes in net gains (losses) on futures, which was $161.9$181.3 million for the threesix months ended MarchJune 31,30, 2026, compared to ($403.5$472.9) million for the same period in 2025, and net gains (losses) on interest rate swaptions, which was $21.1$22.2 million for the three months ended March 31, 2026, compared to ($8.6) million for the same period in 2025, partially offset by unfavorable changes in net gains (losses) on TBA derivatives, which was ($93.5) million for the three months ended March 31, 2026, compared to $30.2 million for the same period in 2025, and net gains (losses) on purchase commitments, which was ($3.3) million for the three months ended March 31, 2026, compared to $9.9 million for the same period in 2025.