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

We finance our acquisitions of pass-throughPT Agency RMBS with short-term financing. During periods of rising short-term interest rates, the income we earn on these securities will not change (with respect to Agency RMBS backed by fixed-rate mortgage loans) or will not increase at the same rate (with respect to Agency RMBS backed by ARMs and hybrid ARMs) as our related financing costs, which may reduce our net interest margin or result in losses.

Short-term interest rates havemay recently beenbecome higher than long-term interest rates.rates, Thiswhich phenomenon,is typically referred to as an inverted U.S. Treasury or yield curve,curve. An inverted yield curve occurred during 2022 through the majority of 2024, and may occur again in the future. Under such conditions our funding costs may equal or exceed yields available on our assets, adversely impacting our financial condition and results of operations and our ability to pay dividends to our stockholders.

As the Fed began to increase over-night funding rates during 2022, short-term interest rates began to rise faster than longer-term interest rates and eventually the U.S. Treasury yield curve became inverted, whereby yields on short-terms rates exceeded yields on long-term interest rates. This condition continued into 2023 and through the majority of 2024, and may occur again in the future. Consistent with this development, funding costs associated with our borrowings haveincreased increasedduring these periods relative to yields on our Agency RMBS securities. As a result, our net interest income hasdeclined declined.during these periods. We have employed various hedging strategies to off-set the phenomenon.inverted yield curve. However, such hedges may not be adequate to protect our interest income if the yield curve inverts again in the future. If the yield curve inverts again in the future, adversely affecting our financial condition, results of operations and our ability to pay dividends to our stockholders.stockholders could be materially adversely affected.

In the case of residential mortgages, there are seldom any restrictions on borrowers’ ability to prepay their loans. Prepayment rates generally increase when interest rates fall and decrease when interest rates rise. Prepayment rates also may be affected by other factors, including, without limitation, conditions in the housing and financial markets, governmental action, general economic conditions and the relative interest rates on ARMs, hybrid ARMs and fixed-rate mortgage loans. To the extent that our pass-throughPT Agency RMBS are carried at a premium to par, faster-than-expected prepayments could also materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders in various ways, including the following:

Adverse market developments, including a sharp or prolonged rise in interest rates, a change in prepayment rates or increasing market concern about the value or liquidity of one or more types of Agency RMBS, might reduce the market value of our portfolio, which might cause our lenders to initiate margin calls. A margin call means that the lender requires us to pledge additional collateral to re-establish the ratio of the value of the collateral to the amount of the borrowing. The specific collateral value to borrowing ratio that would trigger a margin call is not set in the master repurchase agreements and not determined until we engage in a repo transaction under these agreements. Our fixed-rate Agency RMBS generally are more susceptible to margin calls as increases in interest rates tend to more negatively affect the market value of fixed-rate securities. If we are unable to satisfy margin calls, our lenders may foreclose on our collateral. The threat or occurrence of a margin call could force us to sell, either directly or through a foreclosure, our Agency RMBS under adverse market conditions. Because of the significant leverage we have and expect to have, we may incur substantial losses upon the threat or occurrence of a margin call, which could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. We have sold Agency RMBS to satisfy margin calls in the past in adverse market conditions. These sales have, and may in the future, cause us to realize losses. Additionally, the liquidation of collateral may jeopardize our ability to maintain our qualification as a REIT, as we must comply with requirements regarding our assets and our sources of gross income. Our failure to maintain our qualification as a REIT would cause us to be subject to U.S. federal income tax (and any applicable state and local taxes) on all of our net taxable income.

There are no perfect hedging strategies, and interest rate hedging has failed in some situations, and may fail in the future, to protect us from loss. Alternatively, we may fail to properly assess a risk to our investment portfolio or may fail to recognize a risk entirely, leaving us exposed to losses without the benefit of any offsetting hedging activities. The derivative financial instruments we select may not have the effect of reducing our interest rate risk. The nature and timing of hedging transactions may influence the effectiveness of these strategies. Poorly designed strategies or improperly executed transactions could actually increase our risk and losses. In addition, hedging activities could result in losses if the event against which we hedge does not occur.

We calculate our leverage ratio by dividing our total liabilities, adjusted for net notional TBA positions, by total stockholders' equity at the end of each period. Under normal market conditions, we generally expect our leverage ratio to be less than 12 to 1, although at times our borrowings may be above or below this level. We incur this indebtedness by borrowing against a substantial portion of the market value of our pass-throughPT Agency RMBS and a portion of our structured Agency RMBS. Our total indebtedness, however, is not expressly limited by our policies and will depend on our prospective lenders’ estimates of the stability of our portfolio’s cash flow. As a result, there is no limit on the amount of leverage that we may incur. We face the risk that we might not be able to meet our debt service obligations or a lender’s margin requirements from our income and, to the extent we cannot, we might be forced to liquidate some of our Agency RMBS at unfavorable prices. Our use of leverage could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders. For example:

Significant adverse changes in financial market conditions can result in a deleveraging of the global financial system and the forced sale of large quantities of mortgage-related and other financial assets. Concerns over rising or high interest rates, inflation, economic recession, geopolitical issues including events such as global pandemics, the wars in Ukraine and Israel, policy priorities of a newthe U.S. presidential administration, tariffs or trade wars, unemployment, the availability and cost of financing, the mortgage market and a declining real estate market or prolonged government shutdown have in the past contributed, and may contribute in the future, to increased volatility and diminished expectations for the economy and markets.

Increased volatility and deterioration in the markets for mortgages and mortgage-related assets as well as the broader financial markets have in the past adversely affected, and may adversely affect in the future, the performance and market value of our Agency RMBS. If these conditions exist, institutions from which we seek financing for our investments may tighten their lending standards, increase margin calls or become insolvent, which could make it more difficult for us to obtain financing on favorable terms or at all. Our profitability and financial condition may be adversely affected if we are unable to obtain cost-effective financing for our investments.

Agency RMBS might experience periods of illiquidity. Such conditions are more likely to occur for structured Agency RMBS because such securities are generally traded in markets much less liquid than the pass-throughPT Agency RMBS market. As a result, we may be unable to dispose of our Agency RMBS at advantageous times and prices or in a timely manner. The lack of liquidity might result from the absence of a willing buyer or an established market for these assets as well as legal or contractual restrictions on resale. The illiquidity of Agency RMBS could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

When we engage in a repo transaction, we initially sell securities to the financial institution under one of our master repurchase agreements in exchange for cash, and our counterparty is obligated to resell the securities to us at the end of the term of the transaction, which is typically fromless 24 tothan 90 days but may be up to 364 days or more. The cash we receive when we initially sell the securities is less than the value of those securities, which is referred to as the haircut. Many financial institutions from which we may obtain repurchase agreement financing have increased their haircuts in the past and may do so again in the future. When these haircuts are increased, we are required to post additional cash or securities as collateral for our Agency RMBS. If our counterparty defaults on its obligation to resell the securities to us, we would incur a loss on the transaction equal to the amount of the haircut (assuming there was no change in the value of the securities). We would also lose money on a repo transaction if the value of the underlying securities had declined as of the end of the transaction term, as we would have to repurchase the securities for their initial value but would receive securities worth less than that amount. Any losses we incur on our repo transactions could materially adversely affect our business, financial condition and results of operations and our ability to pay distributions to our stockholders.

In response to events having or expected to have adverse economic consequences or which create market uncertainty, clearing facilities or exchanges upon which some of our hedging instruments, such as T-Note, Fed Funds, SOFR and EurodollarERIS SOFR Swap futures contracts and interest rate swaps, are traded may require us to post additional collateral against our hedging instruments. In the event that future adverse economic developments or market uncertainty result in increased margin requirements for our hedging instruments, it could materially adversely affect our liquidity position, business, financial condition and results of operations.

We believe the risks associated with our business may be more severe during periods of economic slowdown or recession, especially if these periods are accompanied by declining real estate values. Declining real estate values have in the past reduced, and in the future will likely reducereduce, the level of new mortgage and other real estate-related loan originations since borrowers often use appreciation in the value of their existing properties to support the purchase of or investment in additional properties. Borrowers may also be unable to refinance their loans or sell their homes to facilitate relocating to a less distressed area of the country – thus lowering prepayment activity on our portfolio of Agency RMBS. To the extent securities in our portfolio of Agency RMBS are carried at prices below par, this would reduce the yield we realize on our portfolio, and adversely affect our results of operations, financial condition, liquidity and business and our ability to pay dividends to stockholders.

As conservator, the FHFA has assumed all the powers of the shareholders, directors and officers of the Enterprises with the goal of preserving and conserving their assets. At various times since implementation of the conservatorship, Congress hasand U.S. presidential administrations have considered structural changes to the Enterprises. The market value of Agency RMBS today is highly dependent on the continued support of the Enterprises by the U.S. government. If such support is modified or withdrawn, if the U.S. Treasury fails to inject new capital as needed, or if the Enterprises are released from conservatorship, the market value of Agency RMBS could significantly decline, making it difficult for us to obtain repurchase agreement financing and could force us to sell assets at substantial losses. Furthermore, any policy changes to the relationship between the Enterprises and the U.S. government may create market uncertainty and have the effect of reducing the actual or perceived credit quality of securities issued by the Enterprises. It may also interrupt the cash flow received by investors on the underlying Agency RMBS.

We have operated and intend to continue to operate our business so as to be exempt from registration under the Investment Company Act, because we are “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” Specifically, we invest and intend to continue to invest so that at least 55% of the assets that we own on an unconsolidated basis consist of qualifying mortgages and other liens and interests in real estate, which are collectively referred to as “qualifying real estate assets,” and so that at least 80% of the assets we own on an unconsolidated basis consist of real estate-related assets (including our qualifying real estate assets). We treat GSE whole-pool residential mortgage pass-throughPT securities issued with respect to an underlying pool of mortgage loans in which we hold all of the certificates issued by the pool as qualifying real estate assets based on no-action letters issued by the SEC. To the extent that the SEC publishes new or different guidance with respect to these matters, we may fail to qualify for this exemption.

If we fail to qualify for this exemption, we could be required to restructure our activities in a manner that, or at a time when, we would not otherwise choose to do so, which could negatively affect the value of shares of our common stock and our ability to distribute dividends. For example, if the market value of our investments in CMOs or structured Agency RMBS, neither of which are qualifying real estate assets for Investment Company Act purposes, were to increase by an amount that resulted in less than 55% of our assets being invested in pass-throughPT Agency RMBS, we might have to sell CMOs or structured Agency RMBS in order to maintain our exemption from the Investment Company Act. The sale could occur during adverse market conditions, and we could be forced to accept a price below that which we believe is acceptable.

Even if we qualify for taxation as a REIT, we may face other tax liabilities that reduce our cash flows.

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 earned directly by the parent REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation (other than a REIT) of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 20%25% of the value of a REIT’s total assets may consist of stock or securities of one or more TRSs. A domestic TRS will pay U.S. federal, state and local income tax at regular corporate rates on any income that it earns. In addition, the Code limits the deductibility of interest paid or accrued by a TRS to its parent REIT to ensure that the TRS is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s length basis. Any domestic TRS that we may form will pay U.S. federal, state and local income tax on its taxable income, and its after-tax net income will be available for distribution to us (but is not required to be distributed to us unlessat necessaryregular tocorporate maintain our REIT qualificationrates).

The maximum tax rate applicable to “qualified dividend income” payable to U.S. stockholders that are taxed at individual rates may be lower than ordinary income tax rates. Dividends payable by REITs, however, are generally not eligible for the reduced rates on qualified dividend income. Rather, ordinary REIT dividends constitute “qualified business income” and thus a 20% deduction is available to individual taxpayers with respect to such dividends. To qualify for this deduction, the U.S. stockholder receiving such dividends must hold the dividend-paying REIT stock for at least 46 days (taking into account certain special holding periods) of the 91-day period beginning 45 days before the stock becomes ex-dividend and cannot be under an obligation to make related payments with respect to a position in substantially similar or related property. The 20% deduction results in a 29.6% maximum U.S. federal income tax rate (plus the 3.8% surtax on net investment income, if applicable) for individual U.S. stockholders. Without further legislative action, the 20% deduction applicable to ordinary REIT dividends will expire on January 1, 2026. The more favorable rates applicable to regular corporate qualified dividends could cause investors who are taxed at individual rates to perceive investments in REITs to be relatively less attractive than investments in the stock of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our common stock.

To maintain our qualification as a REIT, we must comply with requirements regarding the composition of our assets and our sources of income. If we are compelled to liquidate our assets to repay obligations to our lenders, we may be unable to comply with these requirements, thereby jeopardizing our qualification as a REIT, or we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as inventory or property held primarily for sale to customers in the ordinary course of business.

We are a specialty finance company that invests in residential mortgage-backed securities (“RMBS”) which are issued and guaranteed by a federally chartered corporation or agency (“Agency RMBS”). Our investment strategy focuses on, and our portfolio consists of, two categories of Agency RMBS: (i) traditional pass-throughPT Agency RMBS, such as mortgage pass-throughPT certificates issued by the Federal National Mortgage Association ("Fannie Mae"), the Federal Home Loan Mortgage Corporation ("Freddie Mac" and together with Fannie Mae, the "Enterprises") or the Government National Mortgage Association ("Ginnie Mae" and, together with the Enterprises the “GSEs”) and collateralized mortgage obligations (“CMOs”) issued by the GSEs (“PT RMBS”) and (ii) structured Agency RMBS, such as interest-only securities (“IOs”), inverse interest-only securities (“IIOs”) and principal only securities (“POs”), among other types of structured Agency RMBS. We were formed by Bimini Capital Management, Inc. ("Bimini") in August 2010, commenced operations on November 24, 2010 and completed our initial public offering (“IPO”) on February 20, 2013. We are externally managed by Bimini Advisors, LLC ("Bimini Advisors," or our "Manager"), an investment adviser registered with the Securities and Exchange Commission (the “SEC”).

Our business objective is to provide attractive risk-adjusted total returns over the long term through a combination of capital appreciation and the payment of regular monthly distributions. We intend to achieve this objective by investing in and strategically allocating capital between the two categories of Agency RMBS described above. We seek to generate income from (i) the net interest margin on our leveraged PT RMBS portfolio and the leveraged portion of our structured Agency RMBS portfolio, and (ii) the interest income we generate from the unleveraged portion of our structured Agency RMBS portfolio. We intend to fund our PT RMBS and certain of our structured Agency RMBS through short-term borrowings structured as repurchase agreements. PT RMBS and structured Agency RMBS typically exhibit materially different sensitivities to movements in interest rates. Declines in the value of one portfolio may be offset by appreciation in the other. The percentage of capital that we allocate to our two Agency RMBS asset categories will vary and will be actively managed in an effort to maintain the level of income generated by the combined portfolios, the stability of that income stream and the stability of the value of the combined portfolios. We believe that this strategy will enhance our liquidity, earnings, book value stability and asset selection opportunities in various interest rate environments.

On June 11, 2024, we entered into an equity distribution agreement (the “June 2024 Equity Distribution Agreement”) with three sales agents pursuant to which we maycould offer and sell, from time to time, up to an aggregate amount of $250,000,000 of gross proceeds from the sales of shares of our common stock in transactions that arewere deemed to be “at the market” offerings and privately negotiated transactions. Through December 31, 2024, weWe issued a total of 19,842,08930,513,253 shares under the June 2024 Equity Distribution Agreement for aggregate gross proceeds of approximately $164.9$250.0 million,million and net proceeds of approximately $162.1$245.8 million, after commissions and fees.fees, Subsequentprior to Decemberits 31,termination 2024,in weFebruary issued a total of 10,671,164 shares under the June 2024 Equity Distribution Agreement for aggregate gross proceeds of approximately $85.1 million, and net proceeds of approximately $83.8 million, after commissions and fees.2025.

Net income for the year ended December 31, 2025 was $159.0 million, or $1.24 per share. Net income for the year ended December 31, 2024 was $37.7 million, or $0.57 per share. Net loss for the year ended December 31, 2023 was $39.2 million, or $0.89 per share. Net loss for the year ended December 31, 2022 was $258.5 million, or $6.90 per share. The components of net income (income (loss)) for the years ended December 31, 2024,2025, 20232024 and 20222023 are presented in the table below:

We use derivative and other hedging instruments, specifically Fed Funds, SOFR, ERIS SOFR Swap, and T-Note futures contracts, short positions in U.S. Treasury securities, interest rate floors and caps, dual digital options, interest rate swaps and swaptions, to hedge a portion of the interest rate risk on repurchase agreements in a rising rate environment.

For the purpose of computing economic net interest income and ratios relating to cost of funds measures, GAAP interest expense has been adjusted to reflect the realized and unrealized gains or losses on certain derivative instruments the Company uses, specifically Fed Funds, SOFR, ERIS SOFR Swap, and T-Note futures, dual digital options, interest rate floors and caps, and interest rate swaps and swaptions, that pertain to each period presented. We believe that adjusting our interest expense for the periods presented by the gains or losses on these derivative instruments would not accurately reflect our economic interest expense for these periods. The reason is that these derivative instruments may cover periods that extend into the future, not just the current period. Any realized or unrealized gains or losses on the instruments reflect the change in market value of the instrument caused by changes in underlying interest rates applicable to the term covered by the instrument, not just the current period. For each period presented, we have combined the effects of the derivative financial instruments in place for the respective period with the actual interest expense incurred on borrowings to reflect total economic interest expense for the applicable period. Interest expense, including the effect of derivative instruments for the period, is referred to as economic interest expense. Net interest income, when calculated to include the effect of derivative instruments for the period, is referred to as economic net interest income. This presentation includes gains or losses on all contracts in effect during the reporting period, covering the current period as well as periods in the future.

During the year ended December 31, 2025, we generated $108.3 million of net interest income, consisting of $414.0 million of interest income from RMBS assets offset by $305.7 million of interest expense on borrowings. For the comparable period ended December 31, 2024, we generated $5.3 million of net interest income, consisting of $241.6 million of interest income from RMBS assets offset by $236.3 million of interest expense on borrowings. For the comparable period ended December 31, 2023, we incurred $24.4 million of net interest expense, consisting of $177.6 million of interest income from RMBS assets offset by $201.9 million of interest expense on borrowings. The $64.0$172.4 million increase in interest income was driven by a 9726 basis points ("bps") increase in yield on average RMBS, combined with a $453.0$2,901.3 million increase in average RMBS. The $34.4$69.5 million increase in interest expense for the year ended December 31, 20242025 was driven by a 28$2,749.6 million increase in average borrowings, that was partially offset by 108 bps increasedecrease in the average cost of funds, combined with a $428.4 million increase in average borrowings.funds.

For the year ended December 31, 2022,2023, we generatedincurred $82.9$24.4 million of net interest income,expense, consisting of $144.6$177.6 million of interest income from RMBS assets offset by $61.7$201.9 million of interest expense on borrowings. The $32.9$64.0 million increase in interest income for the year ended December 31, 2023,2024, compared to the year ended December 31, 2022,2023, was due to a 8397 bps increase in yield on average RMBS, thatcombined was partially offset bywith a $34.3$453.0 million decreaseincrease in average RMBS. The $140.2$34.4 million increase in interest expense for the year ended December 31, 20232024 was due to a 35428 bps increase in the average cost of funds, partiallycombined offset bywith a $57.0$428.4 million decreaseincrease in average borrowings.

For the year ended December 31, 2022,2023, we had average borrowings of $4,042.1$3,985.0 million and total interest expense of $61.7$201.9 million, resulting in an average cost of funds of 1.53%.5.07%. There was a 35428 bps increase in the average cost of funds and an $57.0$428.4 million decreaseincrease in average outstanding borrowings during the year ended December 31, 20232024 as compared to the year ended December 31, 2022.2023.

Our economic interest expense was $119.5$222.4 million, $109.6$119.5 million and $48.1$109.6 million for the years ended December 31, 2024,2025, 20232024 and 2022,2023, respectively. There was a 40 bps increase in the average economic cost of funds to 3.11% for the year ended December 31, 2025 from 2.71% for the year ended December 31, 2024. There was a 4 bps decrease in the average economic cost of funds to 2.71% for the year ended December 31, 2024 from 2.75% for the year ended December 31, 2023. The reason for the decrease in economic cost of funds is primarily due to the positive performance of our hedging activities during the period, offset by the higher cost of our borrowings noted above. There was a 156 bps increase in the average economic cost of funds to 2.75% for the year ended December 31, 2023 from 1.19% for the year ended December 31, 2022.

Since all of our repurchase agreements are short-term, changes in market rates directly affect our interest expense. Our average cost of funds calculated on a GAAP basis was 268 bps above one-month average SOFR and 6 bps above six-month average SOFR for the year ended December 31, 2024. Our average economic cost of funds was 238 bps below one-month average SOFR and 25810 bps below six-month average SOFR for the year ended December 31, 2024.2025. Our average economic cost of funds was 108 bps below one-month average SOFR and 126 bps below six-month average SOFR for the year ended December 31, 2025. The average term to maturity of the outstanding repurchase agreements was 2639 days atas of December 31, 20242025 and 26 days atas of December 31, 2023.2024.

The tablestable below presentpresents the average balance of borrowings outstanding, interest expense and average cost of funds, and one-month average and six-month average SOFR rates for each quarter in 2024,2025, 20232024 and 20222023 and for the years ended December 31, 2024,2025, 20232024 and 20222023 on both a GAAP and economic basis.

We invest in RMBS with the intent to earn net income from the realized yield on those assets over their related funding and hedging costs, and not for the purpose of making short term gains from sales. However, we have sold, and may continue to sell, existing assets to acquire new assets, which our management believes might have higher risk-adjusted returns in light of current or anticipated interest rates, federal government programs or general economic conditions or to manage our balance sheet as part of our asset/liability management strategy. During the years ended December 31, 2024,2025, 20232024 and 2022,2023, the Company received proceeds of $904.3$1,455.1 million, $835.1$904.3 million, and $2,759.9$835.1 million, respectively, from the sales and maturities of RMBS and U.S. Treasury securities. Approximately $221.7 million of thesethe 2024 proceeds received in 2024 consisted of pools that were consolidated into a larger pool and simultaneously acquired by us. No gain or loss was recorded on this resecuritization.

As of December 31, 2023, the Company had accrued a liability of $0.6 million for bonuses to be paid to the Manager's employees. During the year ended December 31, 2024, the Company awarded shares of Company common stock with a fair value of $0.3 million. Accrued incentive compensation for the year ended December 31, 2024 includes a reversal of the over accrual of this liability. As of December 31, 2024, the Company had accrued a liability of $0.6 million for bonuses to be paid to the Manager's employees. During the year ended December 31, 2025, the Company awarded shares of Company common stock with a fair value of $0.2 million. Accrued incentive compensation for the year ended December 31, 2025 includes a reversal of the over accrual of this liability.

The following table presents the 3-month constant prepayment rate (“CPR”) experienced on our structured and PT RMBS sub-portfolios,portfolio, on an annualized basis, for the quarterly periods presented. CPR is a method of expressing the prepayment rate for a mortgage pool that assumes that a constant fraction of the remaining principal is prepaid each month or year. Specifically, the CPR in the chart below represents the three month prepayment rate of the securities in the respective asset category.securities.

As of December 31, 2024,2025, we had obligations outstanding under the repurchase agreements of approximately $5,025.5$10,115.5 million with a net weighted average borrowing cost of 4.66%.3.98%. The remaining maturity of our outstanding repurchase agreement obligations ranged from 85 to 139317 days, with a weighted average remaining maturity of 2639 days. Securing the repurchase agreement obligations as of December 31, 20242025 are RMBS with an estimated fair value, including accrued interest, of approximately $5,231.9$10,551.3 million. Through February 21,20, 2025,2026, we have been able to maintain our repurchase facilities with comparable terms to those that existed atas of December 31, 20242025 with maturities extending to various dates through MayNovember 19,13, 2025.2026.

We use two primary measures of leverage. Economic leverage is calculated by dividing the sum of total liabilities and our net notional TBA position, by stockholders' equity. We include our net TBA position in our calculation of economic leverage because a forward contract to purchase or sell an Agency RMBS in the TBA market carries similar risks to an Agency RMBS purchased or sold in the cash market and funded with repurchase agreement liabilities. Adjusted leverage is calculated by dividing our repurchase agreements by stockholders' equity. Our economic leverage atas of December 31, 20242025 was 7.37.4 to 1, compared to 6.77.3 to 1 as of December 31, 2023.2024. Our adjusted leverage atas of December 31, 20242025 was 7.57.4 to 1, compared to 7.97.5 to 1 as of December 31, 2023.2024. The following table presents information related to our historical leverage.

We invest a portion of our capital in structured Agency RMBS. We generally do not apply leverage to this portion of our portfolio. The leverage inherent in structured securities replaces the leverage obtained by acquiring PT securities and funding them in the repo market. This structured RMBS strategy has been a core element of the Company’s overall investment strategy since inception. However, we have and may continue to pledge a portion of our structured RMBS in order to raise our cash levels, but generally will not pledge these securities in order to acquire additional assets.

AtAs of December 31, 2024,2025, we had no material commitments for capital expenditures.

On June 11, 2024, we entered into an equity distribution agreement (the “June 2024 Equity Distribution Agreement”) with three sales agents pursuant to which we maycould offer and sell, from time to time, up to an aggregate amount of $250,000,000 of gross proceeds from the sales of shares of our common stock in transactions that arewere deemed to be “at the market” offerings and privately negotiated transactions. Through December 31, 2024, weWe issued a total of 19,842,08930,513,253 shares under the June 2024 Equity Distribution Agreement for aggregate gross proceeds of approximately $164.9$250.0 million,million and net proceeds of approximately $162.1$245.8 million, after commissions and fees.fees, Subsequentprior to Decemberits 31,termination 2024,in weFebruary issued a total of 10,671,164 shares under the June 2024 Equity Distribution Agreement for aggregate gross proceeds of approximately $85.1 million, and net proceeds of approximately $83.8 million, after commissions and fees.2025.

Within Agency RMBS for the fourth quarter of 2024,2025, conventional 30-year mortgages generated a negative total return of -3.5%,1.7%, 15-year mortgages generated a negative total return of -2.2%1.5% and Ginnie Mae 30-year mortgages generated a total return of -2.7%.1.5%. Versus comparable duration swapsswaps, the returns were -0.8%,1.4%, -0.5%0.8% and -0.3%1.1% for 30-year conventional, 15-year conventional and Ginnie Mae 30-year mortgages, respectively. The Company invests predominantly in 30-year conventional mortgages. Returns with the 30-year stack of coupons were negativelyvery correlatedconsistent withacross the durationvarious of the respective securities, as lower coupon, longer durations bonds generated the most negative total returns and the highest coupon – 7.0% - generated positive total returns. The range for the coupon stack was -4.8% forcoupons: the 2.0% coupon togenerated +0.9%a forreturn of 1.3%, the 7.0%3.5% coupon duringgenerated thea fourth quarterreturn of 2024.2.2% and all other coupons were between 1.6% and 1.8%. Excess returns versus comparable duration swaps were in the range of -0.6%-0.5% to -0.9%2.1%, forwith the 3.5% coupon again being the outlier to the upside. The highest coupons – 6.0% and higher – all coupons between 2.0% and 6.0% during the fourth quarter of 2024. Conversely, thegenerated excess returnreturns below 1.0%. Excess returns for the 6.5%balance couponof wasthe -0.2%coupons were between 1.1% and +0.3%1.7%, forsimilar theto 7.0%absolute coupon during the fourth quarter of 2024.returns.

In response to the deterioration in the markets for U.S. Treasuries, Agency RMBS and other mortgage and fixed income markets resulting from the impacts of the COVID-19 pandemic, the Fed implemented a program of quantitative easing. Through November of 2021, the Fed was committed to purchasing $80 billion of U.S. Treasuries and $40 billion of Agency RMBS each month. In November of 2021, it began tapering its net asset purchases each month, ended net asset purchases by early March of 2022, and ended asset purchases entirely in September of 2022. On May 4, 2022, the FOMC announced a plan for reducing the Fed’s balance sheet. In June of 2022, in accordance with this plan, the Fed began reducing its balance sheet by a maximum of $30 billion of U.S. Treasuries and $17.5 billion of Agency RMBS each month. On September 21, 2022, the FOMC announced the Fed’s decision to continue reducing its balance sheet by a maximum of $60 billion of U.S. Treasuries and $35 billion of Agency RMBS per month. On May 1, 2024, the FOMC announced the Fed’s decision to reduce its balance sheet by a maximum of $25 billion of U.S. TreasuriesTreasury securities and remove the cap on Agency RMBS reduction, with any amounts in excess of $35 billion per month being reinvested in U.S. Treasury securities. On March 19, 2025, the FOMC announced the Fed's decision to reduce its balance sheet by a maximum of $5 billion of U.S. Treasury securities beginning April 1, 2025. Relatively high interest rates and slow prepayment speeds have kept the balance sheet reduction for Agency RMBS below $20 billion per month throughout 2024.2024 and 2025. As of December 31, 2024,2025, the Fed had reduced its balance sheet for Agency RMBS by approximately $507$741 billion from the peak to $2.2$2.0 trillion, shedding approximately 37%54% of the Agency RMBS added during pandemic quantitative easing and representing the lowest level since MayDecember 2021.2020. On December 1, 2025, the Fed ended quantitative tightening and began reinvesting all proceeds from maturing Agency RMBS up to a $35 billion per month cap in U.S. Treasuries and announced that it would begin buying an additional $40 billion per month of U.S. Treasuries via RMPs in order to maintain an ample level of reserves on an ongoing basis.

On September 14, 2021, the U.S. Treasury and the FHFA suspended certain policy provisions in the Enterprise capital framework established in December 2020, including limits on loans acquired for cash consideration, multifamily loans, loans with higher risk characteristics and second homes and investment properties (the "September 2021 Provisions"). Effective April 26, 2022, the FHFA further amended this framework by, among other things, replacing the fixed leverage buffer equal to 1.5% of an Enterprise’s adjusted total assets with a dynamic leverage buffer equal to 50% of an Enterprise’s stability capital buffer, reducing the risk weight floor from 10% to 5%, and removing the requirement that the Enterprises must apply an overall effectiveness adjustment to their credit risk transfer exposures. On June 14, 2022, the Enterprises announced that they would each charge a 50 bps fee for commingled securities issued on or after July 1, 2022 to cover the additional capital required for such securities under the Enterprise capital framework, which was subsequently reduced on January 19, 2023 to 9.375 bps for commingled securities issued on or after April 1, 2023 to address industry concern that the fee posed a risk to the fungibility of the Uniform Mortgage-Backed Security and negatively impacted liquidity and pricing in the market for TBA securities. On November 30, 2023, the FHFA published a final rule, which became effective April 1, 2024, which reduced the risk weight and credit conversion factor for guarantees on commingled securities to 5% and 50%, respectively; replaced the current exposure methodology with the standardized approach for counterparty credit risk as the method for computing exposure and risk-weighted asset amounts for derivatives and cleared transactions; updated the credit score assumption to 680 for single-family mortgage exposures originated without a representative credit score; and introduced a risk weight of 20% for guarantee assets. On January 2, 2025, the U.S. Treasury and FHFA entered into a letter agreement deleting the September 2021 Provisions entirely, as well as providing additional guidance on the process for a potential end to the conservatorship of the Enterprises. Throughout 2025, there was some speculation in the market regarding progress towards an end to the conservatorship, including through an initial public offering, but a directive by the Trump administration in January 2026 that the Enterprises purchase up to $200 billion of Agency RMBS from their accumulated cash reserves will increase the Enterprises’ balance sheets and exposure to mortgage risk and could make a near-term end to the conservatorship unlikely. The announcement of the directive, designed to increase liquidity and compress the spread between mortgage interest rates and the 10-year U.S. Treasury, had the intended effect immediately and significantly increased mortgage application volumes. The longer-term implications of this directive remain to be seen, with some analysts fearing a demand surge in home prices negating any affordability gains, systemic instability due to increased exposure to mortgage risk by the Enterprises, and volatility in the 10-year U.S. Treasury and mortgage interest spreads if the Fed decides to tighten monetary policy while the Trump administration is loosening it through the Enterprises. Further, the Enterprises are quickly approaching their regulatory asset caps, and it is unclear whether the FHFA will raise these caps to signal a long-term commitment to this directive or whether this is a limited intervention.

On July 27, 2023, the federal banking regulators, including the Office of the Comptroller of the Currency, (the "OCC") the FDIC and the Fed, jointly issued a proposed rule that would revise large bank capital requirements (the "Basel III Endgame"). The Basel III Endgame, if implemented as originally proposed, would significantly increase the credit weight risk for balance-sheet mortgages and for Agency RMBS sold to the GSEs, which could disincentivize banks from originating mortgages for sale to the GSEs and impact pricing in the Agency RMBS markets. The comment period for the Basel III Endgame closed on January 16, 2024, and the proposed rule was met with strong objections from the banking industry. InWhile testimonyimplementation before the United States Senate Committee on Banking, Housing and Urban Affairs in July 2024, Fed chairman Jerome Powell stated that the OCC, the FDIC and the Fed were in discussions to materially revise the proposed rule, and that there was consensus at the Fed to undergo another comment period. In remarks given on September 10, 2024, Michael Barr, the Fed's Vice Chair for Supervision, confirmed thatof the Basel III Endgame washas beingsince rewrittenstalled, to,Fed amongVice otherChair things,for reduceSupervision Michelle Bowman commented in August 2025 that a revised Basel III Endgame is expected to be issued for public comment in early 2026, which the riskmarket weightsexpects to be more capital-neutral than the original proposal. On November 25, 2025, the Fed, OCC and FDIC jointly adopted a final rule to revise the enhanced supplementary leverage ratio for residentialglobally realsystemically estateimportant bank holding companies (“GSIBs”). The rule, which becomes effective April 1, 2026 and retailmay exposures,be extendadopted by banks subject to the scoperule ofas early as January 1, 2026, seeks to promote effective GSIB capital management and remove disincentives for banks to engage in low-risk activities, particularly in the reducedU.S. riskTreasury weightmarket. forThis certainshift low-riskis corporateexpected debt,to free up significant capital, allowing GSIBs greater discretion in asset allocation and eliminatepotentially thefostering minimumincreased haircutlending forand securitieseconomic financing transactions.activity.

Higher long-term rates can also affect the value of our Agency RMBS. As long-term rates rise, rates available to borrowers also rise. This tends to cause prepayment activity to slow and extend the expected average life of mortgage cash flows. As the expected average life of the mortgage cash flows increases, coupled with higher discount rates, the value of Agency RMBS declines. Some of the instruments we use to hedge our Agency RMBS assets, such as interest rate futures, swaps and swaptions, are stable average life instruments. This means that to the extent we use such instruments to hedge our Agency RMBS assets, our hedges may not adequately protect us from price declines, and therefore may negatively impact our book value. It is for this reason we use interest only securities in our portfolio. As interest rates rise, the expected average life of these securities increases, causing generally positive price movements as the number and size of the cash flows increase the longer the underlying mortgages remain outstanding. This makes interest only securities desirable hedge instruments for pass-throughPT Agency RMBS.

In order to protect our net interest margin against increases in short-term interest rates, we may enter into interest rate swaps, which economically convert our floating-rate repurchase agreement debt to fixed-rate debt or utilize other hedging instruments such as Fed Funds, SOFR, ERIS SOFR Swap, and T-Note futures contracts, dual digital options or interest rate swaptions.

We use derivative instruments to manage interest rate risk, facilitate asset/liability strategies and manage other exposures, and we may continue to do so in the future. The principal instruments that we have used to date are Fed Funds, SOFR, T-Note and EurodollarERIS SOFR Swap futures contracts, interest rate swaps, interest rate swaptions, interest rate caps and TBA securities, but we may enter into other derivatives in the future.

All of our Agency RMBS are either pass-throughPT securities or structured Agency RMBS, including CMOs, IOs, IIOs or POs. Income on pass-throughPT securities, POs and CMOs that contain principal balances is based on the stated interest rate of the security. As a result of accounting for our RMBS under the fair value option, premium or discount present at the date of purchase is not amortized. For IOs, IIOs and CMOs that do not contain principal balances, income is accrued based on the carrying value and the effective yield. The difference between income accrued and the interest received on the security is characterized as a return of investment and serves to reduce the asset’s carrying value. At each reporting date, the effective yield is adjusted prospectively for future reporting periods based on the new estimate of prepayments, current interest rates and current asset prices. The new effective yield is calculated based on the carrying value at the end of the previous reporting period, the new prepayment estimates and the contractual terms of the security. Changes in fair value of all of our Agency RMBS during the period are recorded in earnings and reported as unrealized gains (losses) on mortgage-backed securities in the accompanying statements of comprehensive income (loss). For IIO securities, effective yield and income recognition calculations also take into account the index value applicable to the security.

A description of certain factors that may affect our future results and risk factors is set forth in our Annual Report on Form 10-K for the year ended December 31, 2025. As of MarchJune 31,30, 2026, there have been no material changes in our risk factors from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2025.

Our business objective is to provide attractive risk-adjusted total returns over the long term through a combination of capital appreciation and the payment of regular monthly distributions. We intend to achieve this objective by investing in the two categories of Agency RMBS described above. We seek to generate income from (i) the net interest margin on our leveraged PT RMBS portfolio and the leveraged portion of our structured Agency RMBS portfolio, and (ii) the interest income we generate from the unleveraged portion of our structured Agency RMBS portfolio. We intend to fund our PT RMBS and certain of our structured Agency RMBS through short-term borrowings structured as repurchase agreements.

On October 27, 2025, we entered into an equity distribution agreement (the “October 2025 Equity Distribution Agreement”) with four sales agents pursuant to which we may offer and sell, from time to time, up to an aggregate amount of $500,000,000 of gross proceeds from the sales of shares of our common stock in transactions that are deemed to be “at the market” offerings and privately negotiated transactions. From inception through MarchJune 31,30, 2026, we issued a total of 44,824,64448,824,644 shares under the October 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $332.7$360.9 million, and net proceeds of approximately $327.5$355.2 million, after commissions and fees. For the threesix months ended MarchJune 31,30, 2026, we issued a total of 14,558,68118,558,681 shares under the October 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $109.5$137.7 million, and net proceeds of approximately $107.8$135.5 million, after commissions and fees. Subsequent to March 31, 2026, we issued a total of 4,000,000 shares under the October 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $28.2 million, and net proceeds of approximately $27.8 million, after commissions and fees.

From the inception of the stock repurchase program through MarchJune 31,30, 2026, the Company repurchased a total of 6,257,8267,364,383 shares at an aggregate cost of approximately $84.8$92.1 million, including commissions and fees, for a weighted average price of $13.55$12.51 per share. The Company did not repurchase any shares duringDuring the six and three months ended MarchJune 31,30, 2026.2026, the Company repurchased a total of 1,106,557 shares at an aggregate cost of approximately $7.3 million, including commissions and fees, for a weighted average price of $6.64 per share. During the year ended December 31, 2025, the Company repurchased a total of 1,113,224 shares at an aggregate cost of approximately $7.3 million, including commissions and fees, for a weighted average price of $6.52 per share. The remaining authorization under the stock repurchase program as of AprilJuly 23, 2026 was 2,719,13726,612,580 shares.

Described below are the Company’s results of operations for the six and three months ended MarchJune 31,30, 2026, as compared to the Company’s results of operations for the six and three months ended MarchJune 31,30, 2025.

Net Income (Loss) Income Summary

Net income for the six months ended June 30, 2026 was $69.2 million, or $0.35 per share. Net loss for the threesix months ended MarchJune 31,30, 20262025 was $20.0$16.5 million, or $0.11$0.16 per share. Net income for the three months ended MarchJune 31,30, 2026 was $89.2 million, or $0.44 per share. Net loss for the three months ended June 30, 2025 was $17.1$33.6 million, or $0.18$0.29 per share. The components of net income (loss) income for the six and three months ended MarchJune 31,30, 2026 and 2025, along with the changes in those components are presented in the table below:

Described below are the Company’s results of operations for the six months ended June 30, 2026 and 2025, and for each quarter in 2026 to date and 2025.

During the threesix months ended MarchJune 31,30, 2026, we earned net interest income of $57.1$117.0 million consisting of $157.8$322.0 million of interest income from RMBS assets offset by $100.8$205.0 million of interest expense on borrowings. For the comparable period ended MarchJune 31,30, 2025, we earned $19.7$42.9 million of net interest income, consisting of $81.1$173.4 million of interest income from RMBS assets offset by $61.4$130.5 million of interest expense on borrowings. The $76.7$148.6 million increase in interest income was due to a 3435 basis point ("bp") increase in the yield on average RMBS, combined with a $4,987.9$4,780.8 million increase in average RMBS. The $39.4$74.5 million increase in interest expense was due to a $4,768.0$4,603.3 million increase in average outstanding borrowings, offset by a 4544 bps decrease in the average cost of funds.

On an economic basis, our interest expense on borrowings for the threesix months ended MarchJune 31,30, 2026 and 2025 was $86.1$177.4 million and $40.5$88.7 million, respectively, resulting in $71.7$144.6 million and $40.6$84.7 million of economic net interest income, respectively.

The tables below provide information on our portfolio average balances, interest income, yield on assets, average borrowings, interest expense, cost of funds, net interest income and net interest spread for the six months ended June 30, 2026 and 2025, and for each quarter in 2026 to date and 2025 on both a GAAP and economic basis.

We had average outstanding borrowings of $10,490.1$10,733.0 million and $5,722.1$6,129.7 million and total interest expense of $100.8$205.0 million and $61.4$130.5 million for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. Our average cost of funds was 3.84%3.82% for the threesix months ended MarchJune 31,30, 2026, compared to 4.29%4.26% for the comparable period in 2025.

OurWe economichad average outstanding borrowings of $10,975.8 million and $6,537.3 million and total interest expense wasof $86.1$104.2 million and $40.5$69.1 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. There was a 45 bps increase in theOur average economic cost of funds towas 3.28%3.80% for the three months ended MarchJune 31,30, 2026, fromcompared 2.83%to 4.23% for the threecomparable monthsperiod ended March 31,in 2025.

Since all of our repurchase agreements are short-term, changes in market rates directly affect our interest expense. Our average cost of funds calculated on a GAAP basis was 1917 bps above the one-month average SOFR and 213 bps belowabove the six-month average SOFR for the quarter ended MarchJune 31,30, 2026. Our average economic cost of funds was 3730 bps below the average one-month SOFR and 5834 bps below the average six-month SOFR for the quarter ended MarchJune 31,30, 2026. The average term to maturity of the outstanding repurchase agreements was 4633 days at MarchJune 31,30, 2026 and 39 days at December 31, 2025.

The table below presents the one-month average and six-month average SOFR rates for the six months ended June 30, 2026 and 2025, and for each quarter in 2026 to date and 2025, on both a GAAP and economic basis.2025.

The table below presents our gains or losses for the six and three months ended MarchJune 31,30, 2026 and 2025.

We invest in RMBS with the intent to earn net income from the realized yield on those assets over their related funding and hedging costs, and not for the purpose of making short term gains from sales. However, we have sold, and may continue to sell, existing assets to acquire new assets, which our management believes might have higher risk-adjusted returns in light of current or anticipated interest rates, federal government programs or general economic conditions or to manage our balance sheet as part of our asset/liability management strategy. During the threesix months ended MarchJune 31,30, 2026, we received proceeds of $25.0$356.5 million from sales of RMBS, resulting in gains of approximately $39,000.$0.9 million. During the threesix months ended MarchJune 31,30, 2025, we received proceeds of $168.6$733.9 million from sales of RMBS, resulting in losses of approximately $1.3$9.3 million.

For the six and three months ended MarchJune 31,30, 2026, the Company’s total operating expenses were approximately $7.4$14.2 million and $6.8 million, respectively, compared to approximately $4.2$9.2 million and $5.0 million for the six and three months ended MarchJune 31,30, 2025.2025, respectively. The table below presents a breakdown of operating expenses for the six and three months ended MarchJune 31,30, 2026 and 2025.

As of December 31, 2025 and 2024, the Company had accrued a liability of $0.6 million for bonuses to be paid to the Manager's employees. During the threesix months ended MarchJune 31,30, 2026 and 2025, the Company awarded shares of Company common stock with a fair value of $1.7 million and $0.3 million, respectively. Accrued incentive compensation for the threesix months ended MarchJune 31,30, 2026 includes a reversal of a $1.1 million under accrual of thisthe December 31, 2025 liability. Incentive compensation for the threesix months ended MarchJune 31,30, 2025 includes a reversal of thea $0.4 million over accrual of thisthe December 31, 2024 liability.

On April 1, 2022, pursuant to the third amendment to the management agreement entered into on November 16, 2021, theThe Manager beganalso providingprovides certain repurchase agreement trading, clearing and administrative services to the Company that had been previously provided by AVM, L.P. under an agreement terminated on March 31, 2022.Company. In consideration for such services, the Company pays the following fees to the Manager:

The following table summarizes the management fee and overhead allocation expenses for six months ended June 30, 2026 and 2025, and for each quarter in 2026 to date and 2025.

As of MarchJune 31,30, 2026, our RMBS portfolio consisted of $11.3$11.5 billion of Agency RMBS at fair value and had a weighted average coupon on assets of 5.58%.5.52%. During the threesix months ended MarchJune 31,30, 2026, we received principal repayments of $404.7$863.5 million, compared to $133.0$332.2 million for the threesix months ended MarchJune 31,30, 2025. The average three month prepayment speeds for the quarters ended MarchJune 31,30, 2026 and 2025 were 14.7%10.9% and 7.8%,10.1%, respectively.

The following tables summarize certain characteristics of the Company’s RMBS portfolio as of MarchJune 31,30, 2026 and December 31, 2025:

As of MarchJune 31,30, 2026, the Company's portfolio had an effective duration of 3.005,3.180, indicating that an interest rate increase of 1.0% would be expected to cause a 3.005%3.180% decrease in the value of the RMBS in the Company’s investment portfolio. As of December 31, 2025, the Company's portfolio had an effective duration of 2.513, indicating that an interest rate increase of 1.0% would be expected to cause a 2.513% decrease in the value of the RMBS in the Company’s investment portfolio. These figures do not include the effect of the Company’s funding cost hedges. Effective duration quotes for individual investments are obtained from The Yield Book, Inc.

The following table presents a summary of portfolio assets acquired during the threesix months ended MarchJune 31,30, 2026 and 2025, including securities purchased during the period that settled after the end of the period, if any.

As of MarchJune 31,30, 2026, we had established borrowing facilities in the repurchase agreement market with a number of commercial banks and other financial institutions and had borrowings in place with 2833 of these counterparties. None of these lenders are affiliated with the Company. These borrowings are secured by the Company’s RMBS and cash, and bear interest at prevailing market rates. We believe our established repurchase agreement borrowing facilities provide borrowing capacity in excess of our needs.

As of MarchJune 31,30, 2026, we had obligations outstanding under the repurchase agreements of approximately $10.9$11.1 billion with a net weighted average borrowing cost of 3.79%.3.77%. The remaining maturity of our outstanding repurchase agreement obligations ranged from 2 to 227136 days, with a weighted average remaining maturity of 4633 days. Securing the repurchase agreement obligations as of MarchJune 31,30, 2026 are RMBS with an estimated fair value, including accrued interest, of approximately $11.3$11.5 billion, and cash pledged to counterparties of approximately $82.6$111.5 million. Through AprilJuly 24, 2026, we have been able to maintain our repurchase facilities with comparable terms to those that existed at MarchJune 31,30, 2026, with maturities through November 13, 2026.

We use two primary measures of leverage. Economic leverage is calculated by dividing total liabilities, adjusted for our net notional TBA position and securities borrowed, by stockholders' equity. We include our net TBA position in our calculation of economic leverage because a forward contract to purchase or sell an Agency RMBS in the TBA market carries similar risks to an Agency RMBS purchased or sold in the cash market and funded with repurchase agreement liabilities. Adjusted leverage is calculated by dividing our repurchase agreements by stockholders' equity. Our economic leverage as of MarchJune 31,30, 2026 was 7.9 to 1, compared to 7.4 to 1 as ofand December 31, 2025.2025 was 7.3 to 1. Our adjusted leverage as of MarchJune 31,30, 2026 was 7.87.7 to 1, compared to 7.4 to 1 as of December 31, 2025. The following table presents information related to our historical leverage.

Our internal sources of liquidity include our cash balances, unencumbered assets and our ability to liquidate our encumbered security holdings. Our balance sheet also generates liquidity on an on-going basis through payments of principal and interest we receive on our RMBS portfolio. Because our PT RMBS portfolio consists entirely of government and agency securities, we do not anticipate having difficulty converting our assets to cash should our liquidity needs ever exceed our immediately available sources of cash. Our structured RMBS portfolio also consists entirely of governmental agency securities, although they typically do not trade with comparable bid / ask spreads as PT RMBS. However, we anticipate that we would be able to liquidate such securities readily, even in distressed markets, although we would likely do so at prices below where such securities could be sold in a more stable market. To enhance our liquidity even further, we may pledge a portion of our structured RMBS as part of a repurchase agreement funding, but retain the cash in lieu of acquiring additional assets. In this way we can, at a modest cost, retain higher levels of cash on hand and decrease the likelihood we will have to sell assets in a distressed market in order to raise cash.

Under our repurchase agreement funding arrangements, we are required to post margin at the initiation of the borrowing. The margin posted represents the haircut, which is a percentage of the market value of the collateral pledged. To the extent the market value of the asset collateralizing the financing transaction declines, the market value of our posted margin will be insufficient, and we will be required to post additional collateral. Conversely, if the market value of the asset pledged increases in value, we would be over collateralized and we would be entitled to have excess margin returned to us by the counterparty. Our lenders typically value our pledged securities daily to ensure the adequacy of our margin and make margin calls as needed, as do we. Typically, but not always, the parties agree to a minimum threshold amount for margin calls so as to avoid the need for nuisance margin calls on a daily basis. Our master repurchase agreements do not specify the haircut; rather haircuts are determined on an individual repo transaction basis. Throughout the threesix months ended MarchJune 31,30, 2026, haircuts on our pledged collateral remained stable and as of MarchJune 31,30, 2026, our weighted average haircut was approximately 4.1% of the value of our collateral.

In future periods, we expect to continue to finance our activities in a manner that is consistent with our current operations through repurchase agreements. As of MarchJune 31,30, 2026, we had cash and cash equivalents of $674.0$682.6 million. We generated cash flows of $549.4$1,163.4 million from principal and interest payments on our RMBS and had average repurchase agreements outstanding of $10.4$10.7 billion during the threesix months ended MarchJune 31,30, 2026.

At MarchJune 31,30, 2026, we had no material commitments for capital expenditures.

On October 27, 2025, we entered into an equity distribution agreement (the “October 2025 Equity Distribution Agreement”) with four sales agents pursuant to which we may offer and sell, from time to time, up to an aggregate amount of $500,000,000 of gross proceeds from the sales of shares of our common stock in transactions that are deemed to be “at the market” offerings and privately negotiated transactions. From inception through MarchJune 31,30, 2026, we issued a total of 44,824,64448,824,644 shares under the October 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $332.7$360.9 million, and net proceeds of approximately $327.5$355.2 million, after commissions and fees. For the threesix months ended MarchJune 31,30, 2026, we issued a total of 14,558,68118,558,681 shares under the October 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $109.5$137.7 million, and net proceeds of approximately $107.8$135.5 million, after commissions and fees. Subsequent to March 31, 2026, we issued a total of 4,000,000 shares under the October 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $28.2 million, and net proceeds of approximately $27.8 million, after commissions and fees.

The Fed ended its quantitative tightening program, which reduced its balance sheet via the maturation of its holdings, and began reinvesting them into additional U.S. Treasury holdings on December 1, 2025. Run-off from the Agency RMBS holdings is now directed towardstoward purchasing U.S. Treasuries. The Fed also announced its intention, via Reserve Management Purchases (“RMPs”), to grow its balance sheet over time to maintain a stable relationship between the size of its balance sheet and the economy. These steps will resultresulted in increased purchases of U.S. Treasuries by the Fed going forward, and interest rate swap spreads have widened – or become less negative – as a result.Fed. When the RMP program was first introduced, U.S. Treasury purchases were $40 billion per month, whichalthough hadthey have declined since and are currently $10 billion per month. However, even at the addedlower benefitlevel of purchases the program has been successful at taking pressure off of the overnight funding markets, as market participants such as money-market funds had fewer options to deploy their liquidity and therefore increased the pool of available funds for the overnight repurchase agreement (“repo”) funding markets. As a result, funding levels available to the Company in the repo markets during the quarter – typically expressed as a spread over SOFR,SOFR were– lowerhave thanremained hadstable beenduring the casesecond forquarter, 2025. As is typicallycontinuing the case,trend we saw during the U.S.first Treasury cash balances are elevated around the April 15th filing deadline for individual income taxes. The Fed has reduced its RMP purchases for the balancequarter of the filing period – typically approximately 2 months – to $25 billion per month. The market anticipates the level of purchases will go back to $40 billion per month thereafter. The reduction in monthly RMP purchases during this period is not expected to materially impact the Company’s funding levels.2026.

Within Agency RMBS for the firstsecond quarter of 2026, conventional 30-year mortgages generated a total return of 0.6%, 15-year mortgages generated a total return of 0.3%0.1% and Ginnie Mae 30-year mortgages generated a total return of 0.9%.0.7%. Versus comparable duration swaps, the returns were (0.11%),0.6%, (0.08%)0.0% and 0.29%0.6% for 30-year conventional, 15-year conventional and Ginnie Mae 30-year mortgages, respectively. The Company invests predominantly in 30-year conventional mortgages. Returns with the 30-year stack variedwere greatlylowest byfor coupon,lower coupons and increased for progressively higher coupons, with lowerreturns (3.0%for coupons 4% and lower) between 0.2% and highest0.5%, and above 1.0% for coupons (6.5%of 5% and higher) outperforming middle coupons.higher. This wasis consistent with higher interest rates, lower prepayment expectations and the casedurations forof boththe absolutevarious coupons inversely related to coupon – the lower the coupon the higher the duration, and visa-versa. Conversely, excess returns forwere the first quarter. As interest rates ended the quarter slightly higher than at the end of 2025 prepayment rates – and expectationsbest for prepayment rates going forward – subsided. This led to outperformance for highestmiddle coupons – even higher thanbetween the lowest coupon securities. The Company has the greatest concentration of its holdings in the 5.5%4.5% and 6.0% coupons, whichwith generated absolute returns of 0.4%lower and 0.6%,higher respectively.coupons lagging. Excess returns for thesemiddle coupons were bothbetween -0.2%.0.7% and 1.2%, while the lower and higher coupons ranged between 0.3% and 0.8%.

In response to the deterioration in the markets for U.S. Treasuries, Agency RMBS and other mortgage and fixed income markets resulting from the impacts of the COVID-19 pandemic, the Fed implemented a program of quantitative easing. Through November of 2021, the Fed was committed to purchasing $80 billion of U.S. Treasuries and $40 billion of Agency RMBS each month. In November of 2021, it began tapering its net asset purchases each month, ended net asset purchases by early March of 2022, and ended asset purchases entirely in September of 2022. On May 4, 2022, the FOMC announced a plan for reducing the Fed’s balance sheet. In June of 2022, in accordance with this plan, the Fed began reducing its balance sheet by a maximum of $30 billion of U.S. Treasuries and $17.5 billion of Agency RMBS each month. On September 21, 2022, the FOMC announced the Fed’s decision to continue reducing its balance sheet by a maximum of $60 billion of U.S. Treasuries and $35 billion of Agency RMBS per month. On May 1, 2024, the FOMC announced the Fed’s decision to reduce its balance sheet by a maximum of $25 billion of U.S. Treasury securities and remove the cap on Agency RMBS reduction, with any amounts in excess of $35 billion per month being reinvested in U.S. Treasury securities. On March 19, 2025, the FOMC announced the Fed’s decision to reduce its balance sheet by a maximum of $5 billion of U.S. Treasury securities beginning April 1, 2025. Relatively high interest rates and slow prepayment speeds kept the balance sheet reduction for Agency RMBS below $20 billion per month throughout 2024 and 2025. On December 1, 2025, the Fed ended quantitative tightening and began reinvesting all proceeds from maturing Agency RMBS up to a $35 billion per month cap in U.S. Treasuries and announced that it would begin buying an additional $40 billion per month of U.S. Treasuries via RMPs in order to maintain an ample level of reserves on an ongoing basis. RMPs were reduced to $25 billion per month in April 2026, and further reduced to $10 billion per month in May 2026, As of MarchJune 31,30, 2026, the Fed had reduced its balance sheet for Agency RMBS by approximately $745$792 billion from the peak of approximately $2.7 trillion to approximately $2.0$1.9 trillion ,trillion, shedding approximately 54%58% of the Agency RMBS added during pandemic quantitative easing and representing the lowest level since DecemberAugust 2020.

On September 14, 2021, the U.S. Treasury and the FHFA suspended certain policy provisions in the Enterprise capital framework established in December 2020, including limits on loans acquired for cash consideration, multifamily loans, loans with higher risk characteristics and second homes and investment properties (the "September 2021 Provisions"). Effective April 26, 2022, the FHFA further amended this framework by, among other things, replacing the fixed leverage buffer equal to 1.5% of an Enterprise’s adjusted total assets with a dynamic leverage buffer equal to 50% of an Enterprise’s stability capital buffer, reducing the risk weight floor from 10% to 5%, and removing the requirement that the Enterprises must apply an overall effectiveness adjustment to their credit risk transfer exposures. On June 14, 2022, the Enterprises announced that they would each charge a 50 bps fee for commingled securities issued on or after July 1, 2022 to cover the additional capital required for such securities under the Enterprise capital framework, which was subsequently reduced on January 19, 2023 to 9.375 bps for commingled securities issued on or after April 1, 2023 to address industry concern that the fee posed a risk to the fungibility of the Uniform Mortgage-Backed Security and negatively impacted liquidity and pricing in the market for TBA securities. On November 30, 2023, the FHFA published a final rule, which became effective April 1, 2024, which reduced the risk weight and credit conversion factor for guarantees on commingled securities to 5% and 50%, respectively; replaced the current exposure methodology with the standardized approach for counterparty credit risk as the method for computing exposure and risk-weighted asset amounts for derivatives and cleared transactions; updated the credit score assumption to 680 for single-family mortgage exposures originated without a representative credit score; and introduced a risk weight of 20% for guarantee assets. On January 2, 2025, the U.S. Treasury and FHFA entered into a letter agreement deleting the September 2021 Provisions entirely, as well as providing additional guidance on the process for a potential end to the conservatorship of the Enterprises. Throughout 2025,2025 and early 2026, there was some speculation in the market regarding progress towards an end to the conservatorship, including through an initial public offering, but ano directivedefinitive byaction thehas Trumpbeen administrationtaken inand Januarymany 2026analysts thatbelieve additional capital is needed before the Enterprises purchasecan upsafely toexit $200 billion of Agency RMBS from their accumulated cash reserves will increase the Enterprises’ balance sheets and exposure to mortgage risk and could make a near-term end to the conservatorship unlikely. The announcement of the directive, designed to increase liquidity and compress the spread between mortgage interest rates and the 10-year U.S. Treasury, had the intended effect immediately and significantly increased mortgage application volumes. The longer-term implications of this directive remain to be seen, with some analysts fearing a demand surge in home prices negating any affordability gains, systemic instability due to increased exposure to mortgage risk by the Enterprises, and volatility in the 10-year U.S. Treasury and mortgage interest spreads if the Fed decides to tighten monetary policy while the Trump administration is loosening it through the Enterprises. Further, the Enterprises are quickly approaching their regulatory asset caps, and it is unclear whether the FHFA will raise these caps to signal a long-term commitment to this directive or whether this is a limited intervention.conservatorship.

On March 19, 2026, the OCC, FDIC and the Fed rescinded the 2023 Basel III Endgame proposal and concurrently issued three revised notices of proposed rulemaking. The three proposals include (i) a revised Basel III Endgame proposal that would apply an expanded risk-based approach to Category I and Category II banking organizations, thus narrowing the mandatory scope from the 2023 proposal, with all other banking organizations permitted to opt in; (ii) a revised standardized approach proposal that would reduce risk weights for traditional lending activities for banking organizations not subject to the expanded risk-based approach; and (iii) a revised GSIB capital surcharge proposal. The OCC, FDIC, and the Fed estimate that the revised proposals would decrease aggregate common equity tier 1 capital requirements by approximately 4.8 percent for Category I and Category II banking organizations, in contrast to the significant capital increases that would have resulted under the 2023 Basel III Endgame. Additionally, the revised proposal would eliminate the requirement to deduct mortgage servicing assets from common equity tier 1 capital, instead assigning a 250% risk weight, which is designed to promote mortgage origination and servicing by banking organizations. The Fed voted 6-to-1 to advance all three proposals and the FDIC board voted unanimously in favor of the revised Basel III Endgame and standardized approach proposals. The comment period for the revised proposals is scheduled to closeclosed on June 18, 2026, with the Fed indicating that they hope to release the final rule by the end of 2026.

We leverage our PT RMBS portfolio and a portion of our structured Agency RMBS with principal balances through the use of short-term repurchase agreement transactions. The interest rates on our debt are determined by the short term interest rate markets. Increases in the Fed Funds rate or SOFR typically increase our borrowing costs, which could affect our interest rate spread if there is no corresponding increase in the interest we earn on our assets. The impact of these increases would be most prevalent with respect to our Agency RMBS backed by fixed rate mortgage loans because the interest rate on a fixed-rate mortgage loan does not change even though market rates may change.

The Company invests exclusively in Agency RMBS securities and applies leverage utilizing repurchase agreement funding. The primary drivers of the performance of our assets – both absolute performance and performance relative to our hedges, are interest rates, their impact on both our asset prices and the level of prepayments, interest rate volatility, particularly the level of implied volatility in interest rate swaptions and various interest rate derivatives, and finally our funding levels. Accordingly, we have significant exposure to interest ratesrates, and our performance is driven by our ability to select assets, manage our leverage, and our hedging strategy. InterestAs we entered 2026, interest rates havehad been range bound for severalmore months going back approximatelythan 12 months, withbut the range brieflywas expanding slightlybroken during the first quarter of 2026 as a result of the IranianIran war.War. After a brief respite in the conflict, rates moved higher once again as prospects for a resolution dimmed and a new Fed Chairman, Kevin Warsh, took control of the Fed, immediately expressing his strong conviction in ending the five-year period of inflation running above the Fed’s 2% target. Interest rate volatility, both realized and implied in interest rate options, has remained subdued outside of athe temporary spike at the onset of the warIran in Iran. It seems the economy and the markets generally are caught in a quandary where it is unclear if inflation, which has been running above the Fed’s 2% target level for several years, or growth prospects, now potentially negatively impacted by the war and increased commodity prices, will be the predominant driver of interest rates, monetary policy and the performance of risk assets of all types. The resulting uncertainty has resulted in relative stability in the level and volatility of interest rates, and therefore generally conducive conditions for levered Agency RMBS investors.War.