Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and notes to those statements included in Item 1 of this Form 10-Q. Certain written statements in this Quarterly Report on Form 10-Q that are not historical facts constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Statements in this report addressing expectations, assumptions, beliefs, projections, future plans and strategies, future events, developments that we expect or anticipate will occur in the future, and future operating results, capital management, and dividend policy are forward-looking statements. Forward-looking statements are based upon management's beliefs, assumptions, and expectations as of the date of this report regarding future events and operating performance, considering all information currently available to us, and are applicable only as of the date of this report. Forward-looking statements generally can be identified by the use of words such as "believe," "expect," "anticipate," "estimate," "plan," "may," "will," "intend," "should," "could," or similar expressions. We caution readers not to place undue reliance on our forward-looking statements, which are not historical facts and may be based on projections, assumptions, expectations, and anticipated events that do not materialize. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements in this Quarterly Report on Form 10-Q may include, but are not limited to, statements about interest rates, inflation, liquidity, pledging of our structured RMBS, funding levels and spreads, prepayment speeds, portfolio composition, positioning and repositioning, hedging levels, leverage ratio, dividends, investment and return opportunities, the supply and demand for Agency RMBS and the performance of the Agency RMBS sector generally, the effect of actual or expected actions of the U.S. government, including the Fed, market expectations, capital raising, future opportunities and prospects of the Company, the stock repurchase program, geopolitical uncertainty and general economic conditions (including the effects of tariffs, trade wars, inflation, the U.S. deficit, and the strength of the U.S. dollar). As a result of many factors, such as those set forth under "Risk Factors" in our most recent Annual Report on Form 10-K, our actual results may differ materially from those anticipated in such forward-looking statements.

Overview

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-through Agency RMBS, such as mortgage pass-through 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.

We operate so as to qualify to be taxed as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). We generally will not be subject to U.S. federal income tax to the extent that we currently distribute all of our REIT taxable income (as defined in the Code) to our stockholders and maintain our REIT qualification.

The Company's common stock trades on the New York Stock Exchange under the symbol "ORC".

Capital Raising Activities

On March 7, 2023, we entered into an equity distribution agreement (the "March 2023 Equity Distribution Agreement") with three sales agents pursuant to which we could 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 were deemed to be "at the market" offerings and privately negotiated transactions. We issued a total of 24,675,497 shares under the March 2023 Equity Distribution Agreement for aggregate gross proceeds of approximately $228.8 million and net proceeds of approximately $225.0 million, after commissions and fees, prior to its termination in June 2024.

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 could 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 were deemed to be "at the market" offerings and privately negotiated transactions. We issued a total of 30,513,253 shares under the June 2024 Equity Distribution Agreement for aggregate gross proceeds of approximately $250.0 million and net proceeds of approximately $245.8 million, after commissions and fees, prior to its termination in February 2025.

On February 24, 2025, we entered into an equity distribution agreement (the "February 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 $350,000,000 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. On July 28, 2025, the February 2025 Equity Distribution Agreement was amended to increase the aggregate amount of gross proceeds from the sales of shares that may be offered by $150,000,000 to a total of $500,000,000. Through September 30, 2025, we issued a total of 56,019,745 shares under the February 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $420.2 million, and net proceeds of approximately $413.5 million, after commissions and fees. Subsequent to September 30, 2025, we issued a total of 3,472,759 shares under the February 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $25.0 million, and net proceeds of approximately $24.6 million, after commissions and fees.

Stock Repurchase Agreement

On July 29, 2015, the Company's Board of Directors authorized the repurchase of up to 400,000 shares of our common stock. The timing, manner, price and amount of any repurchases is determined by the Company in its discretion and is subject to economic and market conditions, stock price, applicable legal requirements and other factors. The authorization does not obligate the Company to acquire any particular amount of common stock, and the program may be suspended or discontinued at the Company's discretion without prior notice. On February 8, 2018, the Board of Directors approved an increase in the stock repurchase program for up to an additional 904,564 shares of the Company's common stock. Coupled with the 156,751 shares remaining from the original 400,000 share authorization, the increased authorization brought the total authorization to 1,061,315 shares, representing 10% of the Company's then outstanding share count.

On December 9, 2021, the Board of Directors approved an increase in the number of shares of the Company's common stock available in the stock repurchase program for up to an additional 3,372,399 shares, bringing the remaining authorization under the stock repurchase program to 3,539,861 shares, representing approximately 10% of the Company's then outstanding shares of common stock.

On October 12, 2022, the Board of Directors approved an increase in the number of shares of the Company's common stock available in the stock repurchase program for up to an additional 4,300,000 shares, bringing the remaining authorization under the stock repurchase program to 6,183,601 shares, representing approximately 18% of the Company's then outstanding shares of common stock. This stock repurchase program has no termination date.

From the inception of the stock repurchase program through September 30, 2025, the Company repurchased a total of 6,257,826 shares at an aggregate cost of approximately $84.8 million, including commissions and fees, for a weighted average price of $13.55 per share. During the nine months ended September 30, 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. During the year ended December 31, 2024, the Company repurchased a total of 396,241 shares at an aggregate cost of approximately $3.3 million, including commissions and fees, for a weighted average price of $8.30 per share. The remaining authorization under the stock repurchase program as of October 23, 2025 was 2,719,137 shares.

Factors that Affect our Results of Operations and Financial Condition

A variety of industry and economic factors may impact our results of operations and financial condition. These factors include:

●

interest rate trends;

	●	changes in our cost of funds, including decreases in the Fed Funds rate that are controlled by the Federal Reserve (the "Fed") that occurred in 2024 and 2025, or potential additional changes in the Fed Funds rate;
	●	the difference between Agency RMBS yields and our funding and hedging costs;

●

competition for, and supply of, investments in Agency RMBS;

●

actions taken by the U.S. government, including the presidential administration, the Fed, the Federal Housing Financing Agency (the "FHFA"), The Federal Deposit Insurance Corporation ("FDIC"), Federal Housing Administration (the "FHA"), the Federal Open Market Committee (the "FOMC") and the U.S. Treasury;

●

prepayment rates on mortgages underlying our Agency RMBS and credit trends insofar as they affect prepayment rates; and

●

other market developments, including bank failures.

In addition, a variety of factors relating to our business may also impact our results of operations and financial condition. These factors include:

●

our degree of leverage;

●

our access to funding and borrowing capacity;

●

our borrowing costs;

●

our hedging activities;

●

the market value of our investments; and

●

the requirements to maintain our qualification as a REIT and the requirements to qualify for a registration exemption under the Investment Company Act.

Results of Operations

Described below are the Company's results of operations for the nine and three months ended September 30, 2025, as compared to the Company's results of operations for the nine and three months ended September 30, 2024.

Net Income Summary

Net income for the nine months ended September 30, 2025was $55.6 million, or $0.48 per share. Net income for the nine months ended September 30, 2024was $32.1 million, or $0.53 per share. Net income for the three months ended September 30, 2025was $72.1 million, or $0.53 per share. Net income for the three months ended September 30, 2024was $17.3 million, or $0.24 per share. The components of net income for the nine and three months ended September 30, 2025 and 2024, along with the changes in those components are presented in the table below:

(in thousands)
		Nine Months Ended September 30,												Three Months Ended September 30,
		2025				2024				Change				2025				2024				Change
Interest income		$	281,813			$	169,581			$	112,232			$	108,434			$	67,646			$	40,788
Interest expense			(212,027	)			(172,428	)			(39,599	)			(81,515	)			(67,306	)			(14,209	)
Net interest income (expense)			69,786				(2,847	)			72,633				26,919				340				26,579
Gains on RMBS and derivative contracts			499				47,351				(46,852	)			50,600				21,249				29,351
Net portfolio income			70,285				44,504				25,781				77,519				21,589				55,930
Expenses			(14,663	)			(12,387	)			(2,276	)			(5,441	)			(4,269	)			(1,172	)
Net income		$	55,622			$	32,117			$	23,505			$	72,078			$	17,320			$	54,758

GAAP and Non-GAAP Reconciliations

In addition to the results presented in accordance with GAAP, our results of operations discussed below include certain non-GAAP financial information, including "Net Earnings Excluding Realized and Unrealized Gains and Losses", "Economic Interest Expense," "Economic Net Interest Income," "Interest Income - Inclusive of Premium Amortization/Discount Accretion" and "Yield on Average RMBS - Inclusive of Premium Amortization/Discount Accretion."

Net Earnings Excluding Realized and Unrealized Gains and Losses

We have elected to account for our Agency RMBS under the fair value option. Securities held under the fair value option are recorded at estimated fair value, with changes in the fair value recorded as unrealized gains or losses through the statements of comprehensive income.

In addition, we have not designated our derivative financial instruments used for hedging purposes as hedges for accounting purposes, but rather hold them for economic hedging purposes. Changes in fair value of these instruments are presented in a separate line item in the Company's statements of comprehensive income and are not included in interest expense. As such, for financial reporting purposes, interest expense and cost of funds are not impacted by the fluctuation in value of the derivative instruments.

Presenting net earnings excluding realized and unrealized gains and losses allows management to: (i) isolate the net interest income and other expenses of the Company over time, free of all fair value adjustments and (ii) assess the effectiveness of our funding and hedging strategies on our capital allocation decisions and our asset allocation performance. Our funding and hedging strategies, capital allocation and asset selection are integral to our risk management strategy, and therefore critical to the management of our portfolio. We believe that the presentation of our net earnings excluding realized and unrealized gains is useful to investors because it provides a means of comparing our results of operations to those of our peers who have not elected the same accounting treatment. Our presentation of net earnings excluding realized and unrealized gains and losses may not be comparable to similarly-titled measures of other companies, who may use different calculations. As a result, net earnings excluding realized and unrealized gains and losses should not be considered as a substitute for our GAAP net income (loss) as a measure of our financial performance or any measure of our liquidity under GAAP. The table below presents a reconciliation of our net income (loss) determined in accordance with GAAP and net earnings excluding realized and unrealized gains and losses.

Described below are the Company's results of operations for the nine months ended September 30, 2025 and 2024, and for each quarter in 2025 to date and 2024.

Net Earnings Excluding Realized and Unrealized Gains and Losses
(in thousands, except per share data)
														Per Share
										Net												Net
										Income (Loss)												Income (Loss)
										Excluding												Excluding
		Net				Realized and				Realized and				Net				Realized and				Realized and
		Income				Unrealized				Unrealized				Income				Unrealized				Unrealized
		(Loss)				Gains and				Gains and				(Loss)				Gains and				Gains and
		(GAAP)				Losses(1)				Losses				(GAAP)				Losses				Losses
Three Months Ended
September 30, 2025		$	72,078			$	50,600			$	21,478			$	0.53			$	0.37			$	0.16
June 30, 2025			(33,578	)			(51,736	)			18,158				(0.29	)			(0.45	)			0.16
March 31, 2025			17,122				1,635				15,487				0.18				0.02				0.16
December 31, 2024			5,545				1,759				3,786				0.07				0.02				0.05
September 30, 2024			17,320				21,249				(3,929	)			0.24				0.29				(0.05	)
June 30, 2024			(4,979	)			98				(5,077	)			(0.09	)			-				(0.09	)
March 31, 2024			19,776				26,004				(6,228	)			0.38				0.50				(0.12	)
Nine Months Ended
September 30, 2025		$	55,622			$	499			$	55,123			$	0.48			$	-			$	0.48
September 30, 2024			32,117				47,351				(15,234	)			0.53				0.78				(0.25	)

(1)	Includes realized and unrealized gains (losses) on RMBS and derivative financial instruments, including net interest income or expense on interest rate swaps.

Economic Interest Expense and Economic Net Interest Income

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

We have not elected to designate our derivative holdings for hedge accounting treatment. Changes in fair value of these instruments are presented in a separate line item in our statements of comprehensive income (loss) and not included in interest expense. As such, for financial reporting purposes, interest expense and cost of funds are not impacted by the fluctuation in value of the derivative instruments.

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 and U.S. Treasury 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.

From time to time, we invest in TBAs, which are forward contracts for the purchase or sale of Agency RMBS at a predetermined price, face amount, issuer, coupon and stated maturity on an agreed-upon future date. The specific Agency RMBS to be delivered into the contract are not known until shortly before the settlement date. We may choose, prior to settlement, to move the settlement of these securities out to a later date by entering into a dollar roll transaction. The Agency RMBS purchased or sold for a forward settlement date are typically priced at a discount to equivalent securities settling in the current month. Consequently, forward purchases of Agency RMBS and dollar roll transactions represent a form of off-balance sheet financing. These TBAs are accounted for as derivatives and marked to market through the income statement. Gains or losses on TBAs are included with gains or losses on other derivative contracts and are not included in interest income for purposes of the discussions below.

We believe that economic interest expense and economic net interest income provide meaningful information to consider, in addition to the respective amounts prepared in accordance with GAAP. The non-GAAP measures help management to evaluate its financial position and performance without the effects of certain transactions and GAAP adjustments that are not necessarily indicative of our current investment portfolio or operations. The unrealized gains or losses on derivative instruments presented in our statements of comprehensive income are not necessarily representative of the total interest rate expense that we will ultimately realize. This is because as interest rates move up or down in the future, the gains or losses we ultimately realize, and which will affect our total interest rate expense in future periods, may differ from the unrealized gains or losses recognized as of the reporting date.

Our presentation of the economic value of our hedging strategy has important limitations. First, other market participants may calculate economic interest expense and economic net interest income differently than the way we calculate them. Second, while we believe that the calculation of the economic value of our hedging strategy described above helps to present our financial position and performance, it may be of limited usefulness as an analytical tool. Therefore, the economic value of our investment strategy should not be viewed in isolation and is not a substitute for interest expense and net interest income computed in accordance with GAAP.

The tables below present a reconciliation of the adjustments to interest expense shown for each period relative to our derivative instruments, and the income statement line item, gains (losses) on derivative instruments, calculated in accordance with GAAP for the nine months ended September 30, 2025 and 2024, and for each quarter in 2025 to date and 2024.

Gains (Losses) on Derivative Instruments
(in thousands)
														Funding Hedges
		Recognized				TBA Securities								Attributed to				Attributed to
		in Income				Gain (Loss)								Current				Future
		Statement				Short				Long				Period				Periods
		(GAAP)				Positions				Positions				(Non-GAAP)				(Non-GAAP)
Three Months Ended
September 30, 2025		$	(8,772	)		$	(4,272	)		$	957			$	21,872			$	(27,329	)
June 30, 2025			(53,286	)			(7,662	)			472				20,937				(67,033	)
March 31, 2025			(74,659	)			3,026				100				20,912				(98,697	)
December 31, 2024			160,412				9,937				(683	)			27,782				123,376
September 30, 2024			(140,825	)			(16,315	)			348				31,924				(156,782	)
June 30, 2024			26,068				3,042				-				29,459				(6,433	)
March 31, 2024			87,899				9,903				105				27,587				50,304
Nine Months Ended
September 30, 2025		$	(136,717	)		$	(8,908	)		$	1,529			$	63,721			$	(193,059	)
September 30, 2024			(26,858	)			(3,370	)			453				88,970				(112,911	)

Economic Interest Expense and Economic Net Interest Income
(in thousands)
						Interest Expense on Borrowings
										Gains
										(Losses) on
										Derivative								Net Interest Income
										Instruments								GAAP
		GAAP				GAAP				Attributed				Economic				Net Interest				Economic
		Interest				Interest				to Current				Interest				Income				Net Interest
		Income				Expense				Period(1)				Expense(2)				(Expense)				Income(3)
Three Months Ended
September 30, 2025		$	108,434			$	81,515			$	21,872			$	59,643			$	26,919			$	48,791
June 30, 2025			92,289				69,135				20,937				48,198				23,154				44,091
March 31, 2025			81,090				61,377				20,912				40,465				19,713				40,625
December 31, 2024			71,996				63,853				27,782				36,071				8,143				35,925
September 30, 2024			67,646				67,306				31,924				35,382				340				32,264
June 30, 2024			53,064				53,761				29,459				24,302				(697	)			28,762
March 31, 2024			48,871				51,361				27,587				23,774				(2,490	)			25,097
Nine Months Ended
September 30, 2025		$	281,813			$	212,027			$	63,721			$	148,306			$	69,786			$	133,507
September 30, 2024			169,581				172,428				88,970				83,458				(2,847	)			86,123

(1)	Reflects the effect of derivative instrument hedges for only the period presented.

(2)	Calculated by adding the effect of derivative instrument hedges attributed to the period presented to GAAP interest expense.

(3)	Calculated by adding the effect of derivative instrument hedges attributed to the period presented to GAAP net interest income.

Net Interest Income (Expense)

During the nine months ended September 30, 2025, we earned net interest income of $69.8 million, consisting of $281.8 million of interest income from RMBS assets, offset by $212.0 million of interest expense on borrowings. For the comparable period ended September 30, 2024, we incurred $2.8 million of net interest expense, consisting of $169.6 million of interest income from RMBS assets offset by $172.4 million of interest expense on borrowings. The $112.2 million increase in interest income was due to a 30 basis point ("bps") increase in the yield on average RMBS, combined with a $2.5 billion increase in average RMBS. The $39.6 million increase in interest expense was due to a $2.4 billion increase in average outstanding borrowings, offset by a 118 bps decrease in the average cost of funds.

During the three months ended September 30, 2025, we earned net interest income of $26.9 million consisting of $108.4 million of interest income from RMBS assets offset by $81.5 million of interest expense on borrowings. For the comparable period ended September 30, 2024, we incurred $0.3 million of net interest income, consisting of $67.6 million of interest income from RMBS assets offset by $67.3 million of interest expense on borrowings. The $40.8 million increase in interest income was due to a 22 bps increase in the yield on average RMBS, combined with a $2.7 billion increase in average RMBS. The $14.2 million increase in interest expense was due to a $2.5 billion increase in average outstanding borrowings, offset by a 117 bps decrease in the average cost of funds.

On an economic basis, our interest expense on borrowings for the nine months ended September 30, 2025and 2024 was $148.3 million and $83.5 million, respectively, resulting in $133.5 million and $86.1 million of economic net interest income, respectively.

On an economic basis, our interest expense on borrowings for the three months ended September 30, 2025 and 2024 was $59.6 million and $35.4 million, respectively, resulting in $48.8 million and $32.3 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 (expense) and net interest spread for the nine months ended September 30, 2025 and 2024, and for each quarter in 2025 to date and 2024 on both a GAAP and economic basis.

($ in thousands)
		Average								Yield on								Interest Expense								Average Cost of Funds
		RMBS				Interest				Average				Average				GAAP				Economic				GAAP				Economic
		Held(1)				Income				RMBS				Borrowings(1)				Basis				Basis(2)				Basis				Basis(3)
Three Months Ended
September 30, 2025		$	7,674,720			$	108,434				5.65	%		$	7,331,428			$	81,515			$	59,643				4.45	%			3.25	%
June 30, 2025			6,865,727				92,289				5.38	%			6,537,260				69,135				48,198				4.23	%			2.95	%
March 31, 2025			5,995,702				81,090				5.41	%			5,722,092				61,377				40,465				4.29	%			2.83	%
December 31, 2024			5,348,057				71,996				5.38	%			5,128,207				63,853				36,071				4.98	%			2.81	%
September 30, 2024			4,984,279				67,646				5.43	%			4,788,287				67,306				35,382				5.62	%			2.96	%
June 30, 2024			4,203,416				53,064				5.05	%			4,028,601				53,761				24,302				5.34	%			2.41	%
March 31, 2024			3,887,545				48,871				5.03	%			3,708,573				51,361				23,774				5.54	%			2.56	%
Nine Months Ended
September 30, 2025		$	6,845,383			$	281,813				5.49	%		$	6,530,260			$	212,027			$	148,306				4.33	%			3.03	%
September 30, 2024			4,358,413				169,581				5.19	%			4,175,154				172,428				83,458				5.51	%			2.67	%

($ in thousands)
		Net Interest Income (Expense)								Net Interest Spread
		GAAP				Economic				GAAP				Economic
		Basis				Basis(2)				Basis				Basis(4)
Three Months Ended
September 30, 2025		$	26,919			$	48,791				1.20	%			2.40	%
June 30, 2025			23,154				44,091				1.15	%			2.43	%
March 31, 2025			19,713				40,625				1.12	%			2.58	%
December 31, 2024			8,143				35,925				0.40	%			2.57	%
September 30, 2024			340				32,264				(0.19	)%			2.47	%
June 30, 2024			(697	)			28,762				(0.29	)%			2.64	%
March 31, 2024			(2,490	)			25,097				(0.51	)%			2.47	%
Nine Months Ended
September 30, 2025		$	69,786			$	133,507				1.16	%			2.46	%
September 30, 2024			(2,847	)			86,123				(0.32	)%			2.52	%

(1)

Portfolio yields and costs of borrowings presented in the tables above and the tables on pages 31-32 are calculated based on the average balances of the underlying investment portfolio/borrowings balances and are annualized for the periods presented. Average balances for quarterly periods are calculated using two data points, the beginning and ending balances.

(2)	Economic interest expense and economic net interest expense presented in the table above and the tables on page 32 includesthe effect of our derivative instrument hedges for only the periods presented.

(3)	Represents interest cost of our borrowings and the effect of derivative instrument hedges attributed to the period divided by average RMBS.

(4)	Economic net interest spread is calculated by subtracting average economic cost of funds from realized yield on average RMBS.

Average Asset Yield

The table below presents the average portfolio size, income and yields of our respective sub-portfolios, consisting of structured RMBS and PT RMBS, for the nine months ended September 30, 2025 and 2024, and for each quarter in 2025 to date and 2024.

($ in thousands)
		Average RMBS Held												Interest Income												Realized Yield on Average RMBS
		PT				Structured								PT				Structured								PT				Structured
		RMBS				RMBS				Total				RMBS				RMBS				Total				RMBS				RMBS				Total
Three Months Ended
September 30, 2025		$	7,660,230			$	14,490			$	7,674,720			$	108,212			$	222			$	108,434				5.65	%			6.13	%			5.65	%
June 30, 2025			6,850,786				14,941				6,865,727				92,030				259				92,289				5.37	%			6.93	%			5.38	%
March 31, 2025			5,980,412				15,290				5,995,702				80,808				282				81,090				5.40	%			7.37	%			5.41	%
December 31, 2024			5,332,441				15,616				5,348,057				71,703				293				71,996				5.38	%			7.51	%			5.38	%
September 30, 2024			4,968,076				16,203				4,984,279				67,328				318				67,646				5.42	%			7.87	%			5.43	%
June 30, 2024			4,186,794				16,622				4,203,416				52,705				359				53,064				5.04	%			8.64	%			5.05	%
March 31, 2024			3,870,794				16,751				3,887,545				48,483				388				48,871				5.01	%			9.27	%			5.03	%
Nine Months Ended
September 30, 2025		$	6,830,476			$	14,907			$	6,845,383			$	281,050			$	763			$	281,813				5.49	%			6.82	%			5.49	%
September 30, 2024			4,341,888				16,525				4,358,413				168,516				1,065				169,581				5.17	%			8.60	%			5.19	%

Interest Expense and the Cost of Funds

We had average outstanding borrowings of $6.5 billion and $4.2 billion and total interest expense of $212.0 million and $172.4 million for the nine months ended September 30, 2025 and 2024, respectively. Our average cost of funds was 4.33% for the nine months ended September 30, 2025, compared to 5.51% for the comparable period in 2024.

We had average outstanding borrowings of $7.3 billion and $4.8 billion and total interest expense of $81.5 million and $67.3 million for the three months ended September 30, 2025 and 2024, respectively. Our average cost of funds was 4.45% for the three months ended September 30, 2025, compared to 5.62% for the comparable period in 2024.

Our economic interest expense was $148.3 million and $83.5 million for the nine months ended September 30, 2025 and 2024, respectively. There was a 36 bps increase in the average economic cost of funds to 3.03% for the nine months ended September 30, 2025, from 2.67% for the nine months ended September 30, 2024.

Our economic interest expense was $59.6 million and $35.4 million for the three months ended September 30, 2025 and 2024, respectively. There was a 29 bps increase in the average economic cost of funds to 3.25% for the three months ended September 30, 2025, from 2.96% for the three months ended September 30, 2024.

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 14 bps above the one-month average SOFR and 8 bps above the six-month average SOFR for the quarter ended September 30, 2025. Our average economic cost of funds was 106 bps below the average one-month SOFR and 112 bps below the average six-month SOFR for the quarter ended September 30, 2025. The average term to maturity of the outstanding repurchase agreements was 39 days at September 30, 2025 and 26 days at December 31, 2024.

The tables below present the average balance of borrowings outstanding, interest expense and average cost of funds, and average one-month and six-month SOFR rates for the nine months ended September 30, 2025 and 2024, and for each quarter in 2025 to date and 2024, on both a GAAP and economic basis.

($ in thousands)
		Average				Interest Expense								Average Cost of Funds
		Balance of				GAAP				Economic				GAAP				Economic
		Borrowings				Basis				Basis				Basis				Basis
Three Months Ended
September 30, 2025		$	7,331,428			$	81,515			$	59,643				4.45	%			3.25	%
June 30, 2025			6,537,260				69,135				48,198				4.23	%			2.95	%
March 31, 2025			5,722,092				61,377				40,465				4.29	%			2.83	%
December 31, 2024			5,128,207				63,853				36,071				4.98	%			2.81	%
September 30, 2024			4,788,287				67,306				35,382				5.62	%			2.96	%
June 30, 2024			4,028,601				53,761				24,302				5.34	%			2.41	%
March 31, 2024			3,708,573				51,361				23,774				5.54	%			2.56	%
Nine Months Ended
September 30, 2025		$	6,530,260			$	212,027			$	148,306				4.33	%			3.03	%
September 30, 2024			4,175,154				172,428				83,458				5.51	%			2.67	%

										Average GAAP Cost of Funds								Average Economic Cost of Funds
										Relative to Average								Relative to Average
		Average SOFR								One-Month				Six-Month				One-Month				Six-Month
		One-Month				Six-Month				SOFR				SOFR				SOFR				SOFR
Three Months Ended
September 30, 2025			4.31	%			4.37	%			0.14	%			0.08	%			(1.06	)%			(1.12	)%
June 30, 2025			4.32	%			4.37	%			(0.09	)%			(0.14	)%			(1.37	)%			(1.42	)%
March 31, 2025			4.33	%			4.55	%			(0.04	)%			(0.26	)%			(1.50	)%			(1.72	)%
December 31, 2024			4.53	%			5.03	%			0.45	%			(0.05	)%			(1.72	)%			(2.22	)%
September 30, 2024			5.16	%			5.37	%			0.46	%			0.25	%			(2.20	)%			(2.41	)%
June 30, 2024			5.34	%			5.39	%			0.00	%			(0.05	)%			(2.93	)%			(2.98	)%
March 31, 2024			5.32	%			5.39	%			0.22	%			0.15	%			(2.76	)%			(2.83	)%
Nine Months Ended
September 30, 2025			4.32	%			4.43	%			0.01	%			(0.10	)%			(1.29	)%			(1.40	)%
September 30, 2024			5.27	%			5.38	%			0.24	%			0.13	%			(2.60	)%			(2.71	)%

Gains or Losses

The table below presents our gains or losses for the nine and three months ended September 30, 2025 and 2024.

(in thousands)
		Nine Months Ended September 30,												Three Months Ended September 30,
		2025				2024				Change				2025				2024				Change
Realized (losses) gains on sales of RMBS		$	(9,288	)		$	510			$	(9,798	)		$	-			$	510			$	(510	)
Unrealized gains on RMBS			146,504				73,699				72,805				59,372				161,564				(102,192	)
Total gains on RMBS			137,216				74,209				63,007				59,372				162,074				(102,702	)
(Losses) gains on interest rate futures			(26,789	)			16,100				(42,889	)			(3,159	)			(14,668	)			11,509
Losses on interest rate swaps			(102,549	)			(39,469	)			(63,080	)			(2,298	)			(110,085	)			107,787
Losses on payer swaptions (long positions)			-				(72	)			72				-				-				-
Losses on dual digital option			-				(500	)			500				-				(105	)			105
Losses on TBA securities (short positions)			(8,908	)			(3,370	)			(5,538	)			(4,272	)			(16,315	)			12,043
Gains on TBA securities (long positions)			1,529				453				1,076				957				348				609
Total losses from derivative instruments		$	(136,717	)		$	(26,858	)		$	(109,859	)		$	(8,772	)		$	(140,825	)		$	132,053

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 nine months ended September 30, 2025, we received proceeds of $733.9 million from sales of RMBS, resulting in losses of approximately $9.3 million. During the nine months ended September 30, 2024, we received proceeds of $288.2 million from sales of RMBS, resulting in gains of approximately $0.5 million. Approximately $221.7 million of the 2024 proceeds consisted of pools that were consolidated into a larger pool and simultaneously acquired by us. No gain or loss was recorded on this resecuritization.

Realized and unrealized gains and losses on RMBS are driven in part by changes in yields and interest rates, the spreads that Agency RMBS trade relative to comparable duration U.S. Treasuries or swaps, as well as varying levels of demand for RMBS, which affect the pricing of the securities in our portfolio. The unrealized gains and losses on RMBS may also include the premium lost as a result of prepayments on the underlying mortgages, decreasing unrealized gains or increasing unrealized losses as prepayment speeds or premiums increase. To the extent RMBS are carried at a discount to par, unrealized gains or losses on RMBS would also include discount accreted as a result of prepayments on the underlying mortgages, increasing unrealized gains or decreasing unrealized losses as speeds on discounts increase. Gains and losses on interest rate futures contracts are affected by changes in implied forward rates during the reporting period. The table below presents historical interest rate data for each quarter end during 2025 to date and 2024.

		5 Year				10 Year				15 Year				30 Year
		U.S.				U.S.				Fixed-Rate				Fixed-Rate				90 Day
		Treasury				Treasury				Mortgage				Mortgage				Average
		Rate(1)				Rate(1)				Rate(2)				Rate(2)				SOFR(3)
September 30, 2025			3.73	%			4.15	%			5.49	%			6.30	%			4.35	%
June 30, 2025			3.80	%			4.23	%			5.89	%			6.77	%			4.34	%
March 31, 2025			3.98	%			4.25	%			5.89	%			6.65	%			4.35	%
December 31, 2024			4.38	%			4.57	%			6.00	%			6.85	%			4.69	%
September 30, 2024			3.58	%			3.80	%			5.16	%			6.08	%			5.31	%
June 30, 2024			4.33	%			4.34	%			6.16	%			6.86	%			5.35	%
March 31, 2024			4.22	%			4.21	%			6.11	%			6.79	%			5.35	%

(1)	Historical 5 and 10 Year U.S. Treasury Rates are obtained from quoted end of day prices on the Chicago Board Options Exchange.

(2)	Historical 30 Year and 15 Year Fixed Rate Mortgage Rates are obtained from Freddie Mac's Primary Mortgage Market Survey.

(3)	Historical SOFR is obtained from the Federal Reserve Bank of New York. The SOFR averages are compounded averages of the SOFR over rolling 30 and 180 calendar day periods.

Unrealized Gains and Losses on PT RMBS

For the purpose of recording income on the Company's investments in PT RMBS, interest income is based on the stated interest rate of the security. Using the fair value accounting method, premiums or discounts to the face value of the PT RMBS present at the date of purchase are not amortized. Premium lost and discount accretion resulting from monthly principal repayments are reflected in unrealized gains (losses) on RMBS in the statements of comprehensive income. The following table adjusts the Company's interest income as reported on the Company's statements of comprehensive income for the periods indicated to show interest income adjusted for premium amortization and discount accretion on its mortgage-backed security investments. The purpose of presenting this non-GAAP measure of interest income is to provide management and investors with an alternative way of evaluating yield on RMBS that may be more comparable to some of the Company's peers who amortize premiums and discounts on their PT RMBS investments.

($ in thousands)
														Unrealized Gains (Losses) on PT RMBS												Inclusive of
																						Price				Premium Amortization/
																		(Premium				Only				Discount Accretion
		Average								Yield on								Amortization)/				Unrealized								Yield on
		RMBS				Interest				Average				As				Discount				Gains				Interest				Average
		Held				Income				RMBS				Reported(1)				Accretion(2)				(Losses)				Income(3)				RMBS(3)
Three Months Ended
September 30, 2025		$	7,674,720			$	108,434				5.65	%		$	59,418			$	(1,412	)		$	60,830			$	107,022				5.58	%
June 30, 2025			6,865,727				92,289				5.38	%			9,264				(1,471	)			10,735				90,818				5.29	%
March 31, 2025			5,995,702				81,090				5.41	%			77,445				2,608				74,837				83,698				5.58	%
December 31, 2024			5,348,057				71,996				5.38	%			(153,880	)			(1,600	)			(152,280	)			70,396				5.27	%
September 30, 2024			4,984,279				67,646				5.43	%			161,919				5,048				156,871				72,694				5.83	%
June 30, 2024			4,203,416				53,064				5.05	%			(26,642	)			4,402				(31,044	)			57,466				5.47	%
March 31, 2024			3,887,545				48,871				5.03	%			(62,111	)			3,037				(65,148	)			51,908				5.34	%

(1)	As reported in the Company's statements of comprehensive income using the fair value accounting method.

(2)

Premium amortization/discount accretion for each period is calculated using the beginning of period market value of all securities. Amounts presented are intended to approximate amortization/accretion using the yield method over the life of the security based on premium/discount present at purchase date.

(3)	Interest Income - Inclusive of Premium Amortization/Discount Accretion and Yield on Average RMBS - Inclusive of Premium Amortization/Discount Accretion are non-GAAP measures. See "-GAAP and Non-GAAP Reconciliations," for a description of our non-GAAP measures.

Expenses

For the nine and three months ended September 30, 2025, the Company's total operating expenses were approximately $14.7 million, and $5.4 million, respectively, compared to approximately $12.4 million and $4.3 million for the nine and three months ended September 30, 2024. The table below presents a breakdown of operating expenses for the nine and three months ended September 30, 2025 and 2024.

(in thousands)
		Nine Months Ended September 30,												Three Months Ended September 30,
		2025				2024				Change				2025				2024				Change
Management fees		$	9,023			$	6,867			$	2,156			$	3,294			$	2,449			$	845
Allocated overhead			2,077				1,967				110				887				637				250
Incentive compensation			242				470				(228	)			221				269				(48	)
Directors fees and liability insurance			1,006				1,015				(9	)			334				343				(9	)
Audit, legal and other professional fees			1,053				1,065				(12	)			300				269				31
Direct REIT operating expenses			783				564				219				309				216				93
Other administrative			479				439				40				96				86				10
Total expenses		$	14,663			$	12,387			$	2,276			$	5,441			$	4,269			$	1,172

As of December 31, 2024 and 2023, the Company had accrued a liability of $0.6 million for bonuses to be paid to the Manager's employees. During the nine months ended September 30, 2025 and 2024, the Company awarded shares of Company common stock with a fair value of $0.2 million and $0.3 million, respectively. Accrued incentive compensation for the nine months ended September 30, 2025 and 2024 includes a reversal of the over accrual of this liability.

We are externally managed and advised by Bimini Advisors, LLC (the "Manager") pursuant to the terms of a management agreement. The management agreement has been renewed through February 20, 2026 and provides for automatic one-year extension options thereafter and is subject to certain termination rights. Under the terms of the management agreement, the Manager is responsible for administering the business activities and day-to-day operations of the Company. The Manager receives a monthly management fee in the amount of:

●

One-twelfth of 1.5% of the first $250 million of the Company's month end equity, as defined in the management agreement,

●

One-twelfth of 1.25% of the Company's month end equity that is greater than $250 million and less than or equal to $500 million, and

●

One-twelfth of 1.00% of the Company's month end equity that is greater than $500 million.

The Company is obligated to reimburse the Manager for any direct expenses incurred on its behalf and to pay the Manager the Company's pro rata portion of certain overhead costs set forth in the management agreement.

On April 1, 2022, pursuant to the third amendment to the management agreement entered into on November 16, 2021, the Manager began providing 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. In consideration for such services, the Company pays the following fees to the Manager:

●

A daily fee equal to the outstanding principal balance of repurchase agreement funding in place as of the end of such day multiplied by 1.5 basis points for the amount of aggregate outstanding principal balance less than or equal to $5 billion, and multiplied by 1.0 basis point for any amount of aggregate outstanding principal balance in excess of $5 billion, and

●

A fee for the clearing and operational services provided by personnel of the Manager equal to $10,000 per month.

Should the Company terminate the management agreement without cause, it will pay the Manager a termination fee equal to three times the average annual management fee, as defined in the management agreement, before or on the last day of the term of the agreement.

The following table summarizes the management fee and overhead allocation expenses for the nine months ended September 30, 2025 and 2024, and for each quarter in 2025 to date and 2024.

($ in thousands)
		Average				Average				Advisory Services
		Orchid				Orchid				Management				Overhead
Three Months Ended		MBS				Equity				Fee				Allocation				Total
September 30, 2025		$	7,674,720			$	1,108,307			$	3,294			$	887			$	4,181
June 30, 2025			6,865,727				1,012,986				2,982				582				3,564
March 31, 2025			5,995,702				902,590				2,747				608				3,355
December 31, 2024			5,348,057				817,241				2,487				677				3,164
September 30, 2024			4,984,279				780,010				2,449				637				3,086
June 30, 2024			4,203,416				699,766				2,257				732				2,989
March 31, 2024			3,887,545				672,057				2,161				598				2,759
Nine Months Ended
September 30, 2025		$	6,845,383			$	1,007,961			$	9,023			$	2,077			$	11,100
September 30, 2024			4,358,413				717,278				6,867				1,967				8,834

Financial Condition:

Mortgage-Backed Securities

As of September 30, 2025, our RMBS portfolio consisted of $8.4 billion of Agency RMBS at fair value and had a weighted average coupon on assets of 5.49%. During the nine months ended September 30, 2025, we received principal repayments of $544.9 million, compared to $310.3 million for the nine months ended September 30, 2024. The average three month prepayment speeds for the quarters ended September 30, 2025 and 2024 were 10.1% and 8.8%, respectively.

The following table presents the 3-month constant prepayment rate ("CPR") experienced on our structured and PT RMBS sub-portfolios, 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.

						Structured
		PT RMBS				RMBS				Total
Three Months Ended		Portfolio (%)				Portfolio (%)				Portfolio (%)
September 30, 2025			10.1				8.1				10.1
June 30, 2025			10.1				6.3				10.1
March 31, 2025			7.8				4.5				7.8
December 31, 2024			10.6				7.0				10.5
September 30, 2024			8.8				6.4				8.8
June 30, 2024			7.6				7.1				7.6
March 31, 2024			6.0				5.9				6.0

The following tables summarize certain characteristics of the Company's PT RMBS and structured RMBS as of September 30, 2025 and December 31, 2024:

($ in thousands)
														Weighted
						Percentage								Average
						of				Weighted				Maturity
		Fair				Entire				Average				in			Longest
Asset Category		Value				Portfolio				Coupon				Months			Maturity
September 30, 2025
Fixed Rate RMBS		$	8,341,899				99.8	%			5.51	%			334		1-Sep-55
Interest-Only Securities			13,975				0.2	%			4.01	%			204		25-Jul-48
Inverse Interest-Only Securities			206				0.0	%			0.00	%			252		15-Jun-42
Total Mortgage Assets		$	8,356,080				100.0	%			5.49	%			333		1-Sep-55
December 31, 2024
Fixed Rate RMBS		$	5,237,812				99.7	%			5.03	%			330		1-Nov-54
Interest-Only Securities			15,308				0.3	%			4.01	%			212		25-Jul-48
Inverse Interest-Only Securities			190				0.0	%			0.00	%			261		15-Jun-42
Total Mortgage Assets		$	5,253,310				100.0	%			4.99	%			328		1-Nov-54

($ in thousands)
		September 30, 2025								December 31, 2024
						Percentage of								Percentage of
Agency		Fair Value				Entire Portfolio				Fair Value				Entire Portfolio
Fannie Mae		$	4,741,967				56.7	%		$	3,693,032				70.3	%
Freddie Mac			3,614,113				43.3	%			1,560,278				29.7	%
Total Portfolio		$	8,356,080				100.0	%		$	5,253,310				100.0	%

		September 30, 2025				December 31, 2024
Weighted Average Pass-through Purchase Price		$	102.33			$	102.45
Weighted Average Structured Purchase Price		$	18.74			$	18.74
Weighted Average Pass-through Current Price		$	101.07			$	96.44
Weighted Average Structured Current Price		$	14.65			$	14.38
Effective Duration (1)			2.991				4.200

(1)

Effective duration is the approximate percentage change in price for a 100 bps change in rates. An effective duration of 2.991 indicates that an interest rate increase of 1.0% would be expected to cause a 2.991% decrease in the value of the RMBS in the Company's investment portfolio at September 30, 2025. An effective duration of 4.200 indicates that an interest rate increase of 1.0% would be expected to cause a 4.200% decrease in the value of the RMBS in the Company's investment portfolio at December 31, 2024. These figures include the structured securities in the portfolio, but 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 nine months ended September 30, 2025 and 2024, including securities purchased during the period that settled after the end of the period, if any.

($ in thousands)
		2025												2024
		Total Cost				Average Price				Weighted Average Yield				Total Cost				Average Price				Weighted Average Yield
Pass-through RMBS		$	4,244,377			$	101.91				5.45	%		$	2,073,150			$	102.34				5.72	%

Borrowings

As of September 30, 2025, 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 26 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 September 30, 2025, we had obligations outstanding under the repurchase agreements of approximately $8.0 billion with a net weighted average borrowing cost of 4.33%. The remaining maturity of our outstanding repurchase agreement obligations ranged from 8 to 356 days, with a weighted average remaining maturity of 39 days. Securing the repurchase agreement obligations as of September 30, 2025 are RMBS with an estimated fair value, including accrued interest, of approximately $8.4 billion, and cash pledged to counterparties of approximately $26.4 million. Through October 24, 2025, we have been able to maintain our repurchase facilities with comparable terms to those that existed at September 30, 2025, with maturities through September 21, 2026.

The table below presents information about our period end, maximum and average balances of borrowings for each quarter in 2025 to date and 2024.

($ in thousands)
														Difference Between Ending
		Ending				Maximum				Average				Borrowings and
		Balance of				Balance of				Balance of				Average Borrowings
Three Months Ended		Borrowings				Borrowings				Borrowings				Amount				Percent
September 30, 2025		$	8,006,978			$	8,024,512			$	7,331,428			$	675,550				9.21	%
June 30, 2025			6,655,879				6,655,879				6,537,260				118,619				1.81	%
March 31, 2025			6,418,641				6,453,905				5,722,092				696,549				12.17	%
December 31, 2024			5,025,543				5,230,871				5,128,207				(102,664	)			(2.00	)%
September 30, 2024			5,230,871				5,252,365				4,788,287				442,584				9.24	%
June 30, 2024			4,345,704				4,354,704				4,028,601				317,103				7.87	%
March 31, 2024			3,711,498				3,774,739				3,708,573				2,925				0.08	%

Leverage

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 as of September 30, 2025 was 7.4 to 1, compared to 7.3 to 1 as of December 31, 2024. Our adjusted leverage as of September 30, 2025 was 7.4 to 1, compared to 7.5 to 1 as of December 31, 2024. The following table presents information related to our historical leverage.

($ in thousands)
		Ending				Ending				Ending				Ending
		Repurchase				Total				Net TBA				Stockholders'				Adjusted		Economic
		Agreements				Liabilities				Positions				Equity				Leverage		Leverage
September 30, 2025		$	8,006,978			$	8,052,944			$	(32,000	)		$	1,086,090			7.4:1		7.4:1
June 30, 2025			6,655,879				6,698,673				-				911,959			7.3:1		7.3:1
March 31, 2025			6,418,641				6,448,404				200,000				855,879			7.5:1		7.8:1
December 31, 2024			5,025,543				5,053,127				(150,000	)			668,500			7.5:1		7.3:1
September 30, 2024			5,230,871				5,260,469				(300,000	)			656,024			8.0:1		7.6:1
June 30, 2024			4,345,704				4,373,973				(400,000	)			555,932			7.8:1		7.1:1
March 31, 2024			3,711,498				3,733,031				(370,700	)			481,632			7.7:1		7.0:1

Liquidity and Capital Resources

Liquidity is our ability to turn non-cash assets into cash, purchase additional investments, repay principal and interest on borrowings, fund overhead, fulfill margin calls and pay dividends. We have both internal and external sources of liquidity. However, our material unused sources of liquidity include cash balances, unencumbered assets and our ability to sell encumbered assets to raise cash. Our balance sheet also generates liquidity on an on-going basis through payments of principal and interest we receive on our RMBS portfolio. Management believes that we currently have sufficient short-term and long-term liquidity and capital resources available for (a) the acquisition of additional investments consistent with the size and nature of our existing RMBS portfolio, (b) the repayments on borrowings and (c) the payment of dividends to the extent required for our continued qualification as a REIT. We may also generate liquidity from time to time by selling our equity or debt securities in public offerings or private placements.

Internal Sources of Liquidity

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.

Our strategy for hedging our funding costs typically involves taking short positions in interest rate futures, interest rate swaps, interest rate swaptions or other instruments. When the market causes these short positions to decline in value we are required to meet margin calls with cash. This can reduce our liquidity position to the extent other securities in our portfolio move in price in such a way that we do not receive enough cash via margin calls to offset the derivative related margin calls. If this were to occur in sufficient magnitude, the loss of liquidity might force us to reduce the size of the levered portfolio, pledge additional structured securities to raise funds or risk operating the portfolio with less liquidity.

External Sources of Liquidity

Our primary external sources of liquidity are our ability to (i) borrow under master repurchase agreements, (ii) use the TBA security market and (iii) sell our equity or debt securities in public offerings or private placements. Our borrowing capacity will vary over time as the market value of our interest earning assets varies. Our master repurchase agreements have no stated expiration but can be terminated at any time at our option or at the option of the counterparty. However, once a definitive repurchase agreement under a master repurchase agreement has been entered into, it generally may not be terminated by either party. A negotiated termination can occur but may involve a fee to be paid by the party seeking to terminate the repurchase agreement transaction.

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 nine months ended September 30, 2025, haircuts on our pledged collateral remained stable and as of September 30, 2025, our weighted average haircut was approximately 4.1% of the value of our collateral.

TBAs represent a form of off-balance sheet financing and are accounted for as derivative instruments. (See Note 5 to our Financial Statements in this Form 10-Q for additional details on our TBAs). Under certain market conditions, it may be uneconomical for us to roll our TBAs into future months and we may need to take or make physical delivery of the underlying securities. If we were required to take physical delivery to settle a long TBA, we would have to fund our total purchase commitment with cash or other financing sources and our liquidity position could be negatively impacted.

Our TBAs are also subject to margin requirements governed by the Mortgage-Backed Securities Division ("MBSD") of the FICC and by our Master Securities Forward Transaction Agreements ("MSFTAs"), which may establish margin levels in excess of the MBSD. Such provisions require that we establish an initial margin based on the notional value of the TBA, which is subject to increase if the estimated fair value of our TBAs or the estimated fair value of our pledged collateral declines. The MBSD has the sole discretion to determine the value of our TBAs and of the pledged collateral securing such contracts. In the event of a margin call, we must generally provide additional collateral on the same business day.

Settlement of our TBA obligations by taking delivery of the underlying securities as well as satisfying margin requirements could negatively impact our liquidity position. However, since we do not use TBA dollar roll transactions as our primary source of financing, we believe that we will have adequate sources of liquidity to meet such obligations.

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 repurchase 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.

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 September 30, 2025, we had cash and cash equivalents of $583.9 million. We generated cash flows of $793.9 million from principal and interest payments on our RMBS and had average repurchase agreements outstanding of $6.5 billion during the nine months ended September 30, 2025.

As described more fully below, we may also access liquidity by selling our equity or debt securities in public offerings or private placements.

Capital Expenditures

At September 30, 2025, we had no material commitments for capital expenditures.

Stockholders'Equity

On March 7, 2023, we entered into an equity distribution agreement (the "March 2023 Equity Distribution Agreement") with three sales agents pursuant to which we could 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 were deemed to be "at the market" offerings and privately negotiated transactions. We issued a total of 24,675,497 shares under the March 2023 Equity Distribution Agreement for aggregate gross proceeds of approximately $228.8 million and net proceeds of approximately $225.0 million, after commissions and fees, prior to its termination in June 2024.

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 could 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 were deemed to be "at the market" offerings and privately negotiated transactions. We issued a total of 30,513,253 shares under the June 2024 Equity Distribution Agreement for aggregate gross proceeds of approximately $250.0 million and net proceeds of approximately $245.8 million, after commissions and fees, prior to its termination in February 2025.

On February 24, 2025, we entered into an equity distribution agreement (the "February 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 $350,000,000 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. On July 28, 2025, the February 2025 Equity Distribution Agreement was amended to increase the aggregate amount of gross proceeds from the sales of shares that may be offered by $150,000,000 to a total of $500,000,000. Through September 30, 2025, we issued a total of 56,019,745 shares under the February 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $420.2 million, and net proceeds of approximately $413.5 million, after commissions and fees. Subsequent to September 30, 2025, we issued a total of 3,472,759 shares under the February 2025 Equity Distribution Agreement for aggregate gross proceeds of approximately $25.0 million, and net proceeds of approximately $24.6 million, after commissions and fees.

Outlook

Economic Summary

The third quarter may prove to be pivotal. Offsetting forces have driven economic activity and outlook since the new U.S. presidential administration took office in January. On the one hand the significant tariffs introduced have clouded the economic outlook and added upward pressure on prices - or at least such upward pressure is anticipated even if it hasn't materialized to the extent expected to date. On the other hand, the administration has a decidedly pro-business agenda and has enacted the One Big Beautiful Bill Act (the "OBBB"), which made permanent most of the tax legislation originally enacted in 2017 as part of the Tax Cuts and Jobs Act of 2017, with minor revisions. The OBBB is likely to be stimulative for the economy yet unlikely to reduce pressure on the fiscal deficit in the near term, itself a source of stimulus for the economy. The net effect of these two opposing forces appears, at least for now, to be leaning in the direction of economic weakness, especially for the labor market, which softened during the third quarter. The Chairman of the Fed, has stated the FOMC views the balance of risks as skewed towards economic and labor market weakness versus inflation, with the effects of tariffs causing only a one-time increase in prices versus a persistent source of inflation. In response to the deterioration in the labor market, the Fed lowered the Fed Funds rate by 25 basis points at their September meeting, and subsequent remarks by the Chairman imply they will do so again at upcoming meetings, consistent with market expectations.

The impact of tariffs on inflation, particularly goods inflation, has yet to meet market expectations although there is evidence of such price pressures emerging. Further, it remains possible, to the extent tariff-induced price increases have been absorbed by other parties along the supply chain, that such pressure could increase in the future to the extent the price increases are not fully absorbed. There is also the possibility that the stimulative effects of the OBBB and numerous other efforts on the part of the administration to reduce regulations, stimulate growth and onshore of production back into the U.S. could prevail and cause economic growth to rebound, perhaps significantly. These considerations are behind the subset of Fed officials and market participants that feel economic and labor market weakness, and the need for the Fed to ease monetary policy, is misplaced or will only prove to be temporary.

On October 1, 2025, the U.S. federal government shut down as Congress was unable to agree on a funding bill to keep the government running. The shutdown of the government prevented most economic data from being released, adding uncertainty to the economic outlook. To the extent the shutdown continues for too long the shutdown itself will become a source of economic weakness as most federal employees go unpaid and the government - the largest consumer in the economy - has limited capacity to spend.

Interest Rates

Interest rate movements during the third quarter were very minor - less than 10 basis points - for all points along the cash U.S. Treasury curve and the SOFR swap curve for maturities longer than 2 years. For shorter maturities rate movements were larger - and as much as 35 to 40 basis points lower - for maturities inside 2 years. The largest declines were around the 6-month maturity, reflecting market expectations of interest rate cuts by the Fed over the next two quarters. One-year maturities, in both cash U.S. Treasuries and SOFR swaps, declined by 30 and 22 basis points, respectively, again reflecting market expectations of Fed Funds rate cuts in the near term. Since the end of the third quarter, interest rates have declined slightly more - approximately 10 basis points in the case of longer maturities - as a result of uncertainty surrounding the government shutdown.

As rates were relatively stable for longer maturity U.S. Treasuries and SOFR swaps and lower for shorter duration instruments, both the cash U.S. Treasury curve and SOFR swap curve remained upward sloping and the steepness of both curves increased modestly. The spread between the 2-year and 10-year U.S. Treasury securities has increased by approximately 5 basis points to approximately 55 basis points at quarter end, and remained in that area since.

While interest rates were relatively unchanged during the quarter, implied volatility in interest rate swaptions declined materially during the quarter. The MOVE index, comprised of a basket of four interest rate swaptions and a widely referenced proxy for interest rate volatility, has been declining since May 2025, when the administration announced reciprocal tariffs. The index peaked in April at nearly 140 and has declined since, reaching a recent low of just under 70 on October 3, 2025. The index was at approximately 90 on June 30, 2025. Declining interest rate volatility is beneficial for Agency RMBS given the prepayment option held by the borrowers of the loans underlying the securities.

The Agency RMBS Market

The market conditions described above - low interest rate volatility and the prospects for reduced funding levels via Fed Funds rate cuts - were generally conducive to Agency RMBS performance. Spreads to comparable duration U.S. Treasuries and SOFR swaps declined, and most securities generated positive absolute and relative returns. However, as prevailing mortgage rates available to borrowers declined over the third quarter and into the fourth quarter prepayments have increased for securities with premium prices and expectations for continued high prepayment rates remain. The Mortgage Bankers Association index of 30-year contract rates declined from 6.79% for the week ended June 27, 2025, to 6.46% for the week ended September 26, 2025. The index has declined slightly more since the end of the third quarter. Secondly, the Trump administration has spoken of privatizing the Enterprises, although it does not appear as if this development is imminent. If it were to occur, an important consideration would be if the implicit government guarantee of the securities issued by the Enterprises would be retained. Comments made by the administration to date indicate that they would likely be maintained, but there can be no assurance that would be the case.

The Agency RMBS index generated a return for the third quarter of 2.4% and a return of 1.2% versus comparable duration swaps, as compared to 2.7% and 1.5%, respectively for these measures, for the investment grade corporate index, and 2.4% and 1.3%, respectively for these measures, for high yield debt. Total returns for U.S. Treasury securities and most sectors of the fixed income markets generated positive total returns and excess returns versus comparable duration swaps for the third quarter.

Within Agency RMBS for the third quarter of 2025, conventional 30-year mortgages generated a total return of 2.6%, 15-year mortgages generated a total return of 1.5% and Ginnie Mae 30-year mortgages generated a total return of 2.2%. Versus comparable duration swaps, the returns were 1.4%, 0.4% and 1.0% for 30-year conventional, 15-year conventional and Ginnie Mae 30-year mortgages, respectively. The Company invests predominantly in 30-year conventional mortgages. Because of the prospect of higher prepayment speeds and their negative effects on realized yields, higher coupon and premium dollar price Agency RMBS generated returns that lagged all lower coupons. Absolute returns within the 30-year stack of coupons ranged between 3.1% and 2.5% for par and lower dollar price Agency RMBS, and generally followed the durations of the Agency RMBS, with high duration/lower coupon Agency RMBS generating the highest returns. Agency RMBS with premium prices ranged from 2.3% to 0.7%, again with the longest duration/lowest coupons generating the highest returns. Versus comparable duration swaps, excess returns followed a similar pattern with the exception of the 4.0 and 4.5% coupons generating excess returns higher than surrounding coupon Agency RMBS - the result of market technical developments (a shortage of available bonds versus demand) that emerged during the third quarter. The range of excess returns across the coupon stack ranged from 1.9% for 2.0% coupons to 0.4% for 6.5% securities, and 7.0% securities had a negative excess return of -0.5%.

Recent Legislative and Regulatory Developments

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 have kept the balance sheet reduction for Agency RMBS below $20 billion per month throughout 2024 and the third quarter of 2025. As of September 30, 2025, the Fed had reduced its balance sheet for Agency RMBS by approximately $654 billion from the peak to $2.1 trillion, shedding approximately 49% of the Agency RMBS added during pandemic quantitative easing and representing the lowest level since February 2021. In remarks on October 14, 2025, Fed Chairman Jerome Powell signaled that the Fed may end its balance sheet runoff in the coming months.

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. In March 2025, the Trump administration's nominee for FHFA director, Bill Pulte, was confirmed and replaced 14 board members at the Enterprises. Although this led to some speculation in the market regarding an end to conservatorship, the new FHFA director signaled a more cautious approach, stating that significant study on the impact to mortgage rates would need to be done prior to any privatization of the Enterprises. During the third quarter of 2025, the Trump administration signaled an intention to begin the privatization of the Enterprises through an initial public offering, but did not announce that they have taken any formal steps towards such an offering.

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. While implementation of the Basel III Endgame has since stalled, Fed Vice Chair for Supervision 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 market expects to be more capital-neutral than the original proposal. On June 27, 2025, the Fed, OCC and FDIC jointly issued a proposed rule to revise the enhanced supplementary leverage ratio for globally systemically important bank holding companies ("GSIBs"), with comments open to the public until August 26, 2025. The proposed rule seeks to promote effective GSIB capital management and remove disincentives for banks to engage in low-risk activities, particularly in the U.S. Treasury market. This shift is expected to free up significant capital, allowing GSIBs greater discretion in asset allocation and potentially fostering increased lending and economic activity.

The scope and nature of the actions the U.S. government or the Fed will ultimately undertake are unknown and will continue to evolve.

Effect on Us

Regulatory developments, movements in interest rates and prepayment rates affect us in many ways, including the following:

Effects on our Assets

A change in or elimination of the guarantee structure of Agency RMBS may increase our costs (if, for example, guarantee fees increase) or require us to change our investment strategy altogether. For example, the elimination of the guarantee structure of Agency RMBS may cause us to change our investment strategy to focus on non-Agency RMBS, which in turn would require us to significantly increase our monitoring of the credit risks of our investments in addition to interest rate and prepayment risks.

If prepayment rates are relatively low (due, in part, to the refinancing problems described above), lower long-term interest rates can increase the value of our Agency RMBS. This is because investors typically place a premium on assets with coupon/yields that are higher than coupon/yields available in the market. To the extent such securities pre-pay slower than would otherwise be the case, we benefit from an above market coupon/yield for longer, enhancing the return from the security. Although lower long-term interest rates may increase asset values in our portfolio, we may not be able to invest new funds in similarly yielding assets.

If prepayment levels increase, the value of any of our Agency RMBS that are carried at a premium to par that are affected by such prepayments may decline. This is because a principal prepayment accelerates the effective term of an Agency RMBS, which would shorten the period during which an investor would receive above-market returns (assuming the yield on the prepaid asset is higher than market yields). Also, prepayment proceeds may not be able to be reinvested in similar-yielding assets. Agency RMBS backed by mortgages with high interest rates are more susceptible to prepayment risk because holders of those mortgages are most likely to refinance to a lower rate. If prepayment levels decrease, the value of any of our Agency RMBS that are carried at a discount to par that are affected by such prepayments may increase. This is because a principal prepayment accelerates the effective term of an Agency RMBS, which would shorten the timeframe over which an investor would receive the principal of the underlying loans. Agency RMBS backed by mortgages with low interest rates are less susceptible to prepayment risk because holders of those mortgages are less likely to refinance to a higher rate. IOs and IIOs, however, may be the types of Agency RMBS most sensitive to increased prepayment rates. Because the holder of an IO or IIO receives no principal payments, the values of IOs and IIOs are entirely dependent on the existence of a principal balance on the underlying mortgages. If the principal balance is eliminated due to prepayment, IOs and IIOs essentially become worthless. Although increased prepayment rates can negatively affect the value of our IOs and IIOs, they have the opposite effect on POs. Because POs act like zero-coupon bonds, meaning they are purchased at a discount to their par value and have an effective interest rate based on the discount and the term of the underlying loan, an increase in prepayment rates would reduce the effective term of our POs and accelerate the yields earned on those assets, which would increase our net income.

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-through Agency RMBS.

Because we base our investment decisions on risk management principles rather than anticipated movements in interest rates, in a volatile interest rate environment we may allocate more capital to structured Agency RMBS with shorter durations. We believe these securities have a lower sensitivity to changes in long-term interest rates than other asset classes. We may attempt to mitigate our exposure to changes in long-term interest rates by investing in IOs and IIOs, which typically have different sensitivities to changes in long-term interest rates than PT RMBS, particularly PT RMBS backed by fixed-rate mortgages.

Effects on our borrowing costs

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.

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 and T-Note futures contracts, dual digital options or interest rate swaptions.

Summary

The path of economic performance, the level of interest rates and the performance of Agency RMBS appear to be at a crossroads. During the third quarter, the path seemed to steer towards slower growth, lower rates and generally solid performance for Agency RMBS. The labor market in particular appears to have weakened significantly over the past two quarters, and the Fed intervened and lowered the Fed Funds rate by 25 basis points in September and appears likely to do so again at their October meeting at least, if not more times at subsequent meetings. The U.S. federal government shut down again on October 1, 2025, and this has only added to the fear the economy will remain weak. However, other measures of economic performance, when available, indicate the economy may not be so weak. Growth, as measured by GDP, remains well above 0%, retail sales and corporate earnings remain strong, developments with artificial intelligence have the potential to materially lift productivity and output, and the administration has a profoundly pro-growth agenda - all of which suggest the current softness may be temporary. The outcome will likely emerge over the next quarter or two.

While it remains to be seen just which path the economy takes going forward, the third quarter was conducive to solid performance for the Agency RMBS market and the Company. The sector generated positive absolute and excess returns, and the Company generated a positive total return for the quarter as well. The Company continued grow its capital through the issuance of shares of common stock through its at the market program. While Agency RMBS generated positive returns for the third quarter of 2025, returns available in the sector remain above historical averages. To the extent such favorable market conditions persist, we expect that new capital can be deployed with the prospects for above average returns.

Critical Accounting Estimates

Our condensed financial statements are prepared in accordance with GAAP. GAAP requires our management to make some complex and subjective decisions and assessments. Our most critical accounting estimates involve decisions and assessments which could significantly affect reported assets, liabilities, revenues and expenses. There have been no changes to our critical accounting estimates as discussed in our annual report on Form 10-K for the year ended December 31, 2024.

Dividends

In addition to other requirements that must be satisfied to continue to qualify as a REIT, we must pay annual dividends to our stockholders of at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding any net capital gains. REIT taxable income (loss) is computed in accordance with the Code and can be greater than or less than our financial statement net income (loss) computed in accordance with GAAP. These book to tax differences primarily relate to the recognition of interest income on RMBS, unrealized gains and losses on RMBS, and the amortization of losses on derivative instruments that are treated as funding hedges for tax purposes.

We intend to pay regular monthly dividends to our stockholders and have declared the following dividends since the completion of our IPO.

(in thousands, except per share amounts)
Year		Per Share Amount				Total
2013		$	6.975			$	4,662
2014			10.800				22,643
2015			9.600				38,748
2016			8.400				41,388
2017			8.400				70,717
2018			5.350				55,814
2019			4.800				54,421
2020			3.950				53,570
2021			3.900				97,601
2022			2.475				87,906
2023			1.800				81,127
2024			1.440				96,309
2025 - YTD(1)			1.200				147,192
Totals		$	69.090			$	852,098

(1)	On October 15, 2025, the Company declared a dividend of $0.12 per share to be paid on November 26, 2025. The effect of this dividend is included in the table above but is not reflected in the Company's financial statements as of September 30, 2025.