# Annaly Capital Management Inc: Form 10-Q for the period ended Mar 31, 2025

- Company: [Annaly Capital Management Inc](/companies/nly.md) (CIK 1043219)
- Form: 10-Q
- Filed: 2025-05-08
- Accepted by EDGAR: May 8, 2025, 16:16 ET
- Period: 2025-03-31
- Accession: 0001628280-25-023811
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1043219/000162828025023811/nly-20250331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1043219/000162828025023811/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Interest expense | 3 months, 2025-01-01 to 2025-03-31 | $1.10bn | us-gaap:InterestExpense |
| Income tax | 3 months, 2025-01-01 to 2025-03-31 | $8.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | $124.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | $0.15 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | $0.15 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 588,420,998 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | −$156.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Dividends paid | 3 months, 2025-01-01 to 2025-03-31 | $421.6m | us-gaap:PaymentsOfDividendsCommonStock |
| Total assets | at 2025-03-31 | $105.12bn | us-gaap:Assets |
| Total liabilities | at 2025-03-31 | $92.03bn | us-gaap:Liabilities |
| Shareholders' equity | at 2025-03-31 | $12.99bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 60,015 characters.

|  | March 31, 2025 | December 31, 2024 | March 31, 2024 |
| --- | ---: | ---: | ---: |
| 30-Year mortgage current coupon | **5.51%** | 5.83% | 5.60% |
| Mortgage basis | **130 bps** | 126 bps | 140 bps |
| 10-Year U.S. Treasury rate | **4.21%** | 4.57% | 4.20% |
| **OIS SOFR Swaps** |  |  |  |
| 1-Month | **4.32%** | 4.32% | 5.32% |
| 6-Month | **4.18%** | 4.25% | 5.24% |

### Results of Operations

The results of our operations are affected by various factors, many of which are beyond our control. Certain of such risks and uncertainties are described herein (see “Special Note Regarding Forward-Looking Statements” above) and in Part I, Item 1A. “Risk Factors” of our most recent Annual Report on Form 10-K and in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q.

This Management Discussion and Analysis section contains analysis and discussion of financial results computed in accordance with U.S. generally accepted accounting principles (“GAAP”) and non-GAAP measurements. To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide non-GAAP financial measures to enhance investor understanding of our period-over-period operating performance and business trends, as well as for assessing our performance versus that of industry peers.

Refer to the “Non-GAAP Financial Measures” section for additional information.

### Net Income (Loss) Summary

The following table presents financial information related to our results of operations as of and for the three months ended March 31, 2025 and 2024.

*(dollars in thousands, except per share data)*

|  | As of and for the Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Interest income | **$1,317,108** | $1,094,488 |
| Interest expense | **1,097,137** | 1,100,939 |
| **Net interest income** | **219,971** | (6,451) |
| Servicing and related income | **140,435** | 115,084 |
| Servicing and related expense | **14,113** | 12,216 |
| **Net servicing income** | **126,322** | 102,868 |
| **Other income (loss)** | **(159,657)** | 406,384 |
| **Less: Total general and administrative expenses** | **48,064** | 38,570 |
| **Income (loss) before income taxes** | **138,572** | 464,231 |
| **Income taxes** | **8,267** | (943) |
| **Net income (loss)** | **130,305** | 465,174 |
| **Less: Net income (loss) attributable to noncontrolling interests** | **6,081** | 2,282 |
| **Net income (loss) attributable to Annaly** | **124,224** | 462,892 |
| **Less: Dividends on preferred stock** | **37,157** | 37,061 |
| **Net income (loss) available (related) to common stockholders** | **$87,067** | $425,831 |
| **Net income (loss) per share available (related) to common stockholders** |  |  |
| **Basic** | **$0.15** | $0.85 |
| **Diluted** | **$0.15** | $0.85 |
| **Weighted average number of common shares outstanding** |  |  |
| **Basic** | **587,149,704** | 500,612,840 |
| **Diluted** | **588,420,998** | 501,182,043 |
| **Other information** |  |  |
| Investment portfolio at period-end | **$101,959,102** | $87,484,541 |
| Average total assets | **$104,335,865** | $92,355,391 |
| Average equity | **$12,890,730** | $11,420,602 |
| GAAP leverage at period-end (1) | **6.8:1** | 6.7:1 |
| GAAP capital ratio at period-end (2) | **12.4%** | 12.6% |
| Annualized return (loss) on average total assets | **0.50%** | 2.01% |
| Annualized return (loss) on average equity (3) | **4.04%** | 16.29% |
| Net interest margin (4) | **0.87%** | (0.03%) |
| Average yield on interest earning assets (5) | **5.18%** | 4.88% |
| Average GAAP cost of interest bearing liabilities (6) | **4.77%** | 5.40% |
| Net interest spread | **0.41%** | (0.52%) |
| Weighted average experienced CPR for the period | **7.1%** | 6.0% |
| Weighted average projected long-term CPR at period-end | **9.5%** | 8.9% |
| Common stock book value per share | **$19.02** | $19.73 |
| **Non-GAAP metrics \*** |  |  |
| Interest income (excluding PAA) | **$1,329,404** | $1,091,475 |
| Economic interest expense (6) | **$892,748** | $770,790 |
| Economic net interest income (excluding PAA) | **$436,656** | $320,685 |
| Premium amortization adjustment cost (benefit) | **$12,296** | $(3,013) |
| Earnings available for distribution (7) | **$461,857** | $357,962 |
| Earnings available for distribution per average common share | **$0.72** | $0.64 |
| Annualized EAD return on average equity (excluding PAA) | **14.43%** | 12.63% |
| Economic leverage at period-end (1) | **5.7:1** | 5.6:1 |
| Economic capital ratio at period-end (2) | **14.6%** | 14.6% |
| Net interest margin (excluding PAA) (4) | **1.69%** | 1.43% |
| Average yield on interest earning assets (excluding PAA) (5) | **5.23%** | 4.87% |
| Average economic cost of interest bearing liabilities (6) | **3.88%** | 3.78% |
| Net interest spread (excluding PAA) | **1.35%** | 1.09% |

40

\* Represents a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for additional information. (1) GAAP leverage is computed as the sum of repurchase agreements, other secured financing, debt issued by securitization vehicles, participations issued and U.S. Treasury securities sold, not yet purchased divided by total equity. Economic leverage is computed as the sum of recourse debt, cost basis of to-be-announced (“TBA”) and CMBX derivatives outstanding, and net forward purchases (sales) of investments divided by total equity. Recourse debt consists of repurchase agreements, other secured financing, and U.S. Treasury securities sold, not yet purchased. Debt issued by securitization vehicles and participations issued are non-recourse to us and are excluded from economic leverage. (2) GAAP capital ratio is computed as total equity divided by total assets. Economic capital ratio is computed as total equity divided by total economic assets. Total economic assets include the implied market value of TBA derivatives and net of debt issued by securitization vehicles. (3) Annualized GAAP return (loss) on average equity annualizes realized and unrealized gains and (losses) which may not be indicative of full year performance, unannualized GAAP return (loss) on average equity is 1.01%, and 4.07% for the three months ended March 31, 2025 and 2024, respectively. (4) Net interest margin represents our interest income less interest expense divided by the average interest earning assets. Net interest margin does not include net interest component of interest rate swaps. Net interest margin (excluding PAA) represents the sum of our interest income (excluding PAA) plus TBA dollar roll income and CMBX coupon income less economic interest expense divided by the sum of average interest earning assets plus average outstanding TBA contract and CMBX balances. (5) Average yield on interest earning assets represents annualized interest income divided by average interest earning assets. Average interest earning assets reflects the average amortized cost of our investments during the period. Average yield on interest earning assets (excluding PAA) is calculated using annualized interest income (excluding PAA). (6) Average GAAP cost of interest bearing liabilities represents annualized interest expense divided by average interest bearing liabilities. Average interest bearing liabilities reflects the average balances during the period. Average economic cost of interest bearing liabilities represents annualized economic interest expense divided by average interest bearing liabilities. Economic interest expense is comprised of GAAP interest expense, the net interest component of interest rate swaps, and, beginning with the quarter ended June 30, 2024, net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss). Prior period results have not been adjusted in accordance with this change as the impact is not material. Net interest on variation margin related to interest rate swaps was previously and is currently included in the Net interest component of interest rate swaps in the Company's Consolidated Statements of Comprehensive Income (Loss) for all periods presented. (7) Excludes dividends on preferred stock.

#### GAAP

Net income (loss) was $130.3 million, which includes $6.1 million attributable to noncontrolling interests, or $0.15 per average basic common share, for the three months ended March 31, 2025, compared to $465.2 million, which includes $2.3 million attributable to noncontrolling interests, or $0.85 per average basic common share, for the same period in 2024. We attribute the majority of the change in net income (loss) to an unfavorable change in net gains (losses) on derivatives, partially offset by favorable changes in net gains (losses) on investments and other, net interest income, and net servicing income. Net gains (losses) on derivatives was ($977.9) million for the three months ended March 31, 2025 compared to $1.4 billion for the same period in 2024. Net gains (losses) on investments and other was $810.8 million for the three months ended March 31, 2025 compared to ($994.1) million for the same period in 2024. Net interest income for the three months ended March 31, 2025 was $220.0 million compared to ($6.5) million for the same period in 2024. Net servicing income for the three months ended March 31, 2025 was $126.3 million compared to $102.9 million for the same period in 2024.

#### Non-GAAP

Earnings available for distribution were $461.9 million, or $0.72 per average common share, for the three months ended March 31, 2025 compared to $358.0 million, or $0.64 per average common share, for the same period in 2024. The change in earnings available for distribution during the three months ended March 31, 2025, compared to the same period in 2024, was primarily due to higher coupon income, resulting from higher residential mortgage loan balances and purchasing securities higher up in the coupon stack, lower interest expense on repurchase agreements resulting from lower average rates and higher net servicing income. This change was partially offset by an unfavorable change in the net interest component of interest rate swaps, higher interest expense resulting from higher securitized debt balances from new securitizations and lower other, net.

### Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide the following non-GAAP financial measures:

- earnings available for distribution (“EAD”);
- earnings available for distribution attributable to common stockholders;
- earnings available for distribution per average common share;
- annualized EAD return on average equity;
- economic leverage;
- economic capital ratio;
- interest income (excluding PAA);
- economic interest expense;
- economic net interest income (excluding PAA);
- average yield on interest earning assets (excluding PAA);
- average economic cost of interest bearing liabilities;
- net interest margin (excluding PAA); and
- net interest spread (excluding PAA).

These measures should not be considered a substitute for, or superior to, financial measures computed in accordance with GAAP. While intended to offer a fuller understanding of our results and operations, non-GAAP financial measures also have limitations. For example, we may calculate our non-GAAP metrics, such as earnings available for distribution, or the PAA, differently than our peers making comparative analysis difficult. Additionally, in the case of non-GAAP measures that exclude the PAA, the amount of amortization expense excluding the PAA is not necessarily representative of the amount of future periodic amortization nor is it indicative of the term over which we will amortize the remaining unamortized premium. Changes to actual and estimated prepayments will impact the timing and amount of premium amortization and, as such, both GAAP and non-GAAP results.

These non-GAAP measures provide additional detail to enhance investor understanding of our period-over-period operating performance and business trends, as well as for assessing our performance versus that of industry peers. Additional information pertaining to our use of these non-GAAP financial measures, including discussion of how each such measure may be useful to investors, and reconciliations to their most directly comparable GAAP results are provided below.

*Earnings Available for Distribution, Earnings Available for Distribution Attributable to Common Stockholders, Earnings Available for Distribution Per Average Common Share and Annualized EAD Return on Average Equity*

Our principal business objective is to generate net income for distribution to our stockholders and optimize our returns through prudent management of our diversified investment strategies. We generate net income by earning a net interest spread on our investment portfolio, which is a function of interest income from our investment portfolio less financing, hedging and operating costs. Earnings available for distribution, which is defined as the sum of (a) economic net interest income, (b) TBA dollar roll income and CMBX coupon income, (c) net servicing income less realized amortization of MSR, (d) other income (loss) (excluding amortization of intangibles, non-EAD income allocated to equity method investments and other non-EAD components of other income (loss)), (e) general and administrative expenses (excluding transaction expenses and non-recurring items), and (f) income taxes (excluding the income tax effect of non-EAD income (loss) items), and excludes (g) the PAA representing the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term prepayment speeds related to our Agency mortgage-backed securities, is used by management and, we believe, used by analysts and investors to measure our progress in achieving our principal business objective.

We seek to fulfill our principal business objective through a variety of factors including portfolio construction, the degree of market risk exposure and related hedge profile, and the use and forms of leverage, all while operating within the parameters of our capital allocation policy and risk governance framework.

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

The following table presents a reconciliation of GAAP financial results to non-GAAP earnings available for distribution for the periods presented:

*(dollars in thousands, except per share data)*

|  | For the Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| GAAP net income (loss) | **$130,305** | $465,174 |
| **Adjustments to exclude reported realized and unrealized (gains) losses** |  |  |
| Net (gains) losses on investments and other (1) | **(810,970)** | 994,120 |
| Net (gains) losses on derivatives (2) | **1,169,412** | (1,046,995) |
| **Other adjustments** |  |  |
| Amortization of intangibles | **673** | 673 |
| Non-EAD (income) loss allocated to equity method investments (3) | **147** | 216 |
| Transaction expenses and non-recurring items (4) | **6,782** | 3,737 |
| Income tax effect of non-EAD income (loss) items | **7,355** | (2,918) |
| TBA dollar roll income and CMBX coupon income (5) | **11,275** | 1,375 |
| MSR amortization (6) | **(62,433)** | (50,621) |
| EAD attributable to noncontrolling interests | **(2,985)** | (3,786) |
| Premium amortization adjustment cost (benefit) | **12,296** | (3,013) |
| **Earnings available for distribution \*** | **461,857** | 357,962 |
| Dividends on preferred stock | **37,157** | 37,061 |
| **Earnings available for distribution attributable to common stockholders \*** | **$424,700** | $320,901 |
| **GAAP net income (loss) per average common share** | **$0.15** | $0.85 |
| **Earnings available for distribution per average common share \*** | **$0.72** | $0.64 |
| **Annualized GAAP return (loss) on average equity (7)** | **4.04%** | 16.29% |
| **Annualized EAD return on average equity \*** | **14.43%** | 12.63% |
| \* Represents a non-GAAP financial measure. Refer to the disclosure within this section above for additional information on non-GAAP financial measures. (1) Includes write-downs or recoveries which are reported in Other, net in the Company's Consolidated Statements of Comprehensive Income (Loss). (2) The adjustment to add back Net (gains) losses on derivatives does not include the net interest component of interest rate swaps which is reflected in earnings available for distribution. The net interest component of interest rate swaps totaled $191.5 million and $330.1 million for the three months ended March 31, 2025 and 2024, respectively. (3) Represents unrealized (gains) losses allocated to equity interests in a portfolio of MSR, which is a component of Other, net in the Consolidated Statements of Comprehensive Income (Loss). (4) Represents costs incurred in connection with securitizations of residential whole loans. (5) TBA dollar roll income and CMBX coupon income each represent a component of Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss). There was no CMBX coupon income for the three months ended March 31, 2025 and 2024. (6) MSR amortization utilizes purchase date cash flow assumptions and actual unpaid principal balances and is calculated as the difference between projected MSR yield income and net servicing income for the period. (7) Annualized GAAP return (loss) on average equity annualizes realized and unrealized gains and (losses) which may not be indicative of full year performance, unannualized GAAP return (loss) on average equity is 1.01%, and 4.07% for the three months ended March 31, 2025 and 2024, respectively. |  |  |

From time to time, we enter into TBA forward contracts as an alternate means of investing in and financing Agency MBS. A TBA contract is an agreement to purchase or sell, for future delivery, an Agency MBS with a specified issuer, term and coupon. A TBA dollar roll represents a transaction where TBA contracts with the same terms but different settlement dates are simultaneously bought and sold. The TBA contract settling in the later month typically prices at a discount to the earlier month contract with the difference in price commonly referred to as the “drop”. The drop is a reflection of the expected net interest income from an investment in similar Agency MBS, net of an implied financing cost, that would be foregone as a result of settling the contract in the later month rather than in the earlier month. The drop between the current settlement month price and the forward settlement month price occurs because in the TBA dollar roll market, the party providing the financing is the party that would retain all principal and interest payments accrued during the financing period. Accordingly, TBA dollar roll income generally represents the economic equivalent of the net interest income earned on the underlying Agency MBS less an implied financing cost.

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

TBA dollar roll income is calculated as the difference in price between two TBA contracts with the same terms but different settlement dates multiplied by the notional amount of the TBA contract. Although accounted for as derivatives, TBA dollar rolls capture the economic equivalent of net interest income, or carry, on the underlying Agency MBS (interest income less an implied cost of financing). TBA dollar roll income is reported as a component of Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss).

The CMBX index is a synthetic tradable index referencing a basket of 25 commercial mortgage-backed securities of a particular rating and vintage. The CMBX index allows investors to take a long position (referred to as selling protection) or short position (referred to as purchasing protection) on the respective basket of commercial mortgage-backed securities and is structured as a “pay-as-you-go” contract whereby the protection seller receives and the protection buyer pays a standardized running coupon on the contracted notional amount. Additionally, the protection seller is obligated to pay to the protection buyer the amount of principal losses and/or coupon shortfalls on the underlying commercial mortgage-backed securities as they occur. We report income (expense) on CMBX positions in Net gains (losses) on derivatives in the Consolidated Statements of Comprehensive Income (Loss). The coupon payments received or paid on CMBX positions is equivalent to interest income (expense) and therefore included in earnings available for distribution.

#### Premium Amortization Expense

In accordance with GAAP, we amortize or accrete premiums or discounts into interest income for our Agency MBS, excluding interest-only securities, multifamily and reverse mortgages, taking into account estimates of future principal prepayments in the calculation of the effective yield. We recalculate the effective yield as differences between anticipated and actual prepayments occur. Using third party models and market information to project future cash flows and expected remaining lives of securities, the effective interest rate determined for each security is applied as if it had been in place from the date of the security’s acquisition. The amortized cost of the security is then adjusted to the amount that would have existed had the new effective yield been applied since the acquisition date. The adjustment to amortized cost is offset with a charge or credit to interest income. Changes in interest rates and other market factors will impact prepayment speed projections and the amount of premium amortization recognized in any given period.

Our GAAP metrics include the unadjusted impact of amortization and accretion associated with this method. Certain of our non-GAAP metrics exclude the effect of the PAA, which quantifies the component of premium amortization representing the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term Constant Prepayment Rate (“CPR”).

The following table illustrates the impact of the PAA on premium amortization expense for our Residential Securities portfolio for the periods presented:

*(dollars in thousands)*

|  | For the Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Premium amortization expense | **$57,412** | $26,732 |
| Less: PAA cost (benefit) | **12,296** | (3,013) |
| **Premium amortization expense (excluding PAA)** | **$45,116** | $29,745 |

#### Economic Leverage and Economic Capital Ratios

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

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

The following table presents a reconciliation of GAAP debt to economic debt for purposes of calculating our economic leverage ratio for the periods presented:

*(dollars in thousands)*

| Economic leverage ratio reconciliation | As of March 31, 2025 | March 31, 2024 |
| --- | ---: | ---: |
| Repurchase agreements | **$61,659,460** | $58,975,232 |
| Other secured financing | **900,000** | 600,000 |
| Debt issued by securitization vehicles | **21,802,193** | 13,690,967 |
| Participations issued | **1,748,273** | 1,161,323 |
| U.S. Treasury securities sold, not yet purchased | **2,519,125** | 2,077,404 |
| **Total GAAP debt** | **$88,629,051** | $76,504,926 |
| **Less Non-recourse debt:** |  |  |
| Debt issued by securitization vehicles | **$(21,802,193)** | $(13,690,967) |
| Participations issued | **(1,748,273)** | (1,161,323) |
| **Total recourse debt** | **$65,078,585** | $61,652,636 |
| **Plus / (Less):** |  |  |
| Cost basis of TBA derivatives | **6,612,755** | 1,136,788 |
| Payable for unsettled trades | **2,304,774** | 2,556,798 |
| Receivable for unsettled trades | **(2,523)** | (941,366) |
| **Economic debt \*** | **$73,993,591** | $64,404,856 |
| **Total equity** | **$13,084,508** | $11,496,113 |
| **Economic leverage ratio \*** | **5.7:1** | 5.6:1 |
| \* Represents a non-GAAP financial measure. Refer to the disclosure within this section above for additional information on non-GAAP financial measures. |  |  |

The following table presents a reconciliation of GAAP total assets to economic total assets for purposes of calculating our economic capital ratio for the periods presented:

*(dollars in thousands)*

| Economic capital ratio reconciliation | As of March 31, 2025 | March 31, 2024 |
| --- | ---: | ---: |
| **Total GAAP assets** | **$105,115,346** | $91,483,546 |
| **Less:** |  |  |
| Gross unrealized gains on TBA derivatives (1) | **(35,095)** | (7,220) |
| Debt issued by securitization vehicles | **(21,802,193)** | (13,690,967) |
| **Plus:** |  |  |
| Implied market value of TBA derivatives | **6,635,383** | 1,133,305 |
| **Total economic assets \*** | **$89,913,441** | $78,918,664 |
| **Total equity** | **$13,084,508** | $11,496,113 |
| **Economic capital ratio (2) \*** | **14.6%** | 14.6% |
| \* Represents a non-GAAP financial measure. Refer to the disclosure within this section above for additional information on non-GAAP financial measures. (1) Included in Derivative assets in the Consolidated Statements of Financial Condition. (2) Economic capital ratio is computed as total equity divided by total economic assets. |  |  |

#### Interest Income (excluding PAA), Economic Interest Expense and Economic Net Interest Income (excluding PAA)

Interest income (excluding PAA) represents interest income excluding the effect of the premium amortization adjustment, and serves as the basis for deriving average yield on interest earning assets (excluding PAA), net interest spread (excluding PAA) and net interest margin (excluding PAA), which are discussed below. We believe this measure provides management and investors with additional detail to enhance their understanding of our operating results and trends by excluding the component of premium amortization expense representing the cumulative effect of quarter-over-quarter changes in estimated long-term prepayment speeds related to our Agency MBS (other than interest-only securities, multifamily and reverse mortgages), which can obscure underlying trends in the performance of the portfolio.

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

Similarly, economic net interest income (excluding PAA), as computed below, provides investors with additional information to enhance their understanding of the net economics of our primary business operations.

The following tables present a reconciliation of GAAP interest income and GAAP interest expense to non-GAAP interest income (excluding PAA), economic interest expense and economic net interest income (excluding PAA), respectively, for the periods presented:

### Interest Income (excluding PAA)

*(dollars in thousands)*

| For the three months ended | GAAP Interest Income | PAA Cost (Benefit) | Interest Income (excluding PAA) \* |
| --- | ---: | ---: | ---: |
| March 31, 2025 | **$1,317,108** | **$12,296** | **$1,329,404** |
| March 31, 2024 | $1,094,488 | $(3,013) | $1,091,475 |
| \* Represents a non-GAAP financial measure. Refer to disclosures within this section above for additional information on non-GAAP financial measures. |  |  |  |

### Economic Interest Expense and Economic Net Interest Income (excluding PAA)

*(dollars in thousands)*

| For the three months ended | GAAP Interest Expense | Add: Net Interest Component of Interest Rate Swaps and Net Interest on Initial Margin | Economic Interest Expense \* (1) | GAAP Net Interest Income | Less: Net Interest Component of Interest Rate Swaps and Net Interest on Initial Margin | Economic Net Interest Income \* | Add: PAA Cost (Benefit) | Economic Net Interest Income (excluding PAA) \* |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| March 31, 2025 | **$1,097,137** | **$(204,389)** | **$892,748** | **$219,971** | **$(204,389)** | **$424,360** | **$12,296** | **$436,656** |
| March 31, 2024 | $1,100,939 | $(330,149) | $770,790 | $(6,451) | $(330,149) | $323,698 | $(3,013) | $320,685 |
| \* Represents a non-GAAP financial measure. Refer to disclosures within this section above for additional information on non-GAAP financial measures. (1) Economic interest expense is comprised of GAAP interest expense, the net interest component of interest rate swaps, and, beginning with the quarter ended June 30, 2024, net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss). Prior period results have not been adjusted in accordance with this change as the impact is not material. Net interest on variation margin related to interest rate swaps was previously and is currently included in the Net interest component of interest rate swaps in the Company's Consolidated Statements of Comprehensive Income (Loss) for all periods presented. |  |  |  |  |  |  |  |  |

#### Experienced and Projected Long-Term CPR

Prepayment speeds, as reflected by the CPR and interest rates vary according to the type of investment, conditions in financial markets, competition and other factors, none of which can be predicted with any certainty. In general, as prepayment speeds and expectations of prepayment speeds on our Agency MBS portfolio increase, related purchase premium amortization increases, thereby reducing the yield on such assets. The following table presents the weighted average experienced CPR and weighted average projected long-term CPR on our Agency MBS portfolio as of and for the periods presented.

| For the three months ended | Experienced CPR (1) | Projected Long-term CPR (2) |
| --- | ---: | ---: |
| March 31, 2025 | **7.1%** | **9.5%** |
| March 31, 2024 | 6.0% | 8.9% |
| (1) For the three months ended March 31, 2025 and 2024, respectively. (2) At March 31, 2025 and 2024, respectively. |  |  |

46

*Average Yield on Interest Earning Assets (excluding PAA), Net Interest Spread (excluding PAA), Net Interest Margin (excluding PAA) and Average Economic Cost of Interest Bearing Liabilities*

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

Disclosure of these measures, which are presented below, provides investors with additional detail regarding how management evaluates our performance.

### Net Interest Spread (excluding PAA)

*(dollars in thousands)*

| For the three months ended | Average Interest Earning Assets (1) | Interest Income (excluding PAA) \* | Average Yield on Interest Earning Assets (excluding PAA) \* | Average Interest Bearing Liabilities (2) | Economic Interest Expense \* (2) | Average Economic Cost of Interest Bearing Liabilities \* (2) | Economic Net Interest Income (excluding PAA) \* | Net Interest Spread (excluding PAA) \* |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| March 31, 2025 | **$101,631,610** | **$1,329,404** | **5.23%** | **$92,001,700** | **$892,748** | **3.88%** | **$436,656** | **1.35%** |
| March 31, 2024 | $89,738,726 | $1,091,475 | 4.87% | $80,682,111 | $770,790 | 3.78% | $320,685 | 1.09% |
| \* Represents a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for additional information. (1) Based on amortized cost. (2) Average interest bearing liabilities reflects the average balances during the period. Average economic cost of interest bearing liabilities represents annualized economic interest expense divided by average interest bearing liabilities. Economic interest expense is comprised of GAAP interest expense, the net interest component of interest rate swaps, and, beginning with the quarter ended June 30, 2024, net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss). Prior period results have not been adjusted in accordance with this change as the impact is not material. Net interest on variation margin related to interest rate swaps was previously and is currently included in the Net interest component of interest rate swaps in the Company's Consolidated Statements of Comprehensive Income (Loss) for all periods presented. |  |  |  |  |  |  |  |  |

### Net Interest Margin (excluding PAA)

*(dollars in thousands)*

| For the three months ended | Interest Income (excluding PAA) \* | TBA Dollar Roll and CMBX Coupon Income (1) | Economic Interest Expense \* (2) | Subtotal | Average Interest Earnings Assets | Average TBA Contract and CMBX Balances | Subtotal | Net Interest Margin (excluding PAA) \* |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| March 31, 2025 | **$1,329,404** | **11,275** | **(892,748)** | **$447,931** | **$101,631,610** | **4,625,212** | **$106,256,822** | **1.69%** |
| March 31, 2024 | $1,091,475 | 1,375 | (770,790) | $322,060 | $89,738,726 | 149,590 | $89,888,316 | 1.43% |
| \* Represents a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for additional information. (1) TBA dollar roll income and CMBX coupon income each represent a component of Net gains (losses) on derivatives. (2) Economic interest expense is comprised of GAAP interest expense, the net interest component of interest rate swaps, and, beginning with the quarter ended June 30, 2024, net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss). Prior period results have not been adjusted in accordance with this change as the impact is not material. Net interest on variation margin related to interest rate swaps was previously and is currently included in the Net interest component of interest rate swaps in the Company's Consolidated Statements of Comprehensive Income (Loss) for all periods presented. |  |  |  |  |  |  |  |  |

47

#### Economic Interest Expense and Average Economic Cost of Interest Bearing Liabilities

Typically, our largest expense is the cost of interest bearing liabilities and the net interest component of interest rate swaps. The following table shows our average interest bearing liabilities and average economic cost of interest bearing liabilities as compared to average one-month and average six-month SOFR for the periods presented.

### Average Economic Cost of Interest Bearing Liabilities

| For the three months ended | Average Interest Bearing Liabilities | Interest Bearing Liabilities at Period End | Economic Interest Expense \* (1) | Average Economic Cost of Interest Bearing Liabilities \* | Average One- Month Term SOFR | Average Six- Month Term SOFR | Average One-Month Term SOFR Relative to Average Six- Month Term SOFR | Average Economic Cost of Interest Bearing Liabilities Relative to Average One- Month Term SOFR | Average Economic Cost of Interest Bearing Liabilities Relative to Average Six-Month Term SOFR |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| March 31, 2025 | **$92,001,700** | **$87,729,051** | **$892,748** | **3.88%** | **4.32%** | **4.24%** | **0.08%** | **(0.44%)** | **(0.36%)** |
| March 31, 2024 | $80,682,111 | $75,904,926 | $770,790 | 3.78% | 5.33% | 5.21% | 0.12% | (1.55%) | (1.43%) |
| \* Represents a non-GAAP financial measure. Refer to the “Non-GAAP Financial Measures” section for additional information. (1) Economic interest expense is comprised of GAAP interest expense, the net interest component of interest rate swaps, and, beginning with the quarter ended June 30, 2024, net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss). Prior period results have not been adjusted in accordance with this change as the impact is not material. Net interest on variation margin related to interest rate swaps was previously and is currently included in the Net interest component of interest rate swaps in the Company's Consolidated Statements of Comprehensive Income (Loss) for all periods presented. |  |  |  |  |  |  |  |  |  |

Economic interest expense increased by $122.0 million for the three months ended March 31, 2025, compared to the same period in 2024, primarily due to the reduction in the net interest component of interest rate swaps, which was $191.5 million for the three months ended March 31, 2025, compared to $330.1 million for the same period in 2024. Additionally, this increase resulted from higher securitized debt balances from new securitizations, offset by lower interest expense on repurchase agreements from lower average rates.

We do not manage our portfolio to have a pre-designated amount of borrowings at quarter or year end. Our borrowings at period end are a snapshot of our borrowings as of a date, and this number may differ from average borrowings over the period for a number of reasons. The mortgage-backed securities we own pay principal and interest towards the end of each month and the mortgage-backed securities we purchase are typically settled during the beginning of the month. As a result, depending on the amount of mortgage-backed securities we have committed to purchase, we may retain the principal and interest we receive in the prior month, or we may use it to pay down our borrowings. Moreover, we generally use interest rate swaps, swaptions and other derivative instruments to hedge our portfolio, and as we pledge or receive collateral under these agreements, our borrowings on any given day may be increased or decreased. Our average borrowings during a quarter may differ from period end borrowings as we implement our portfolio management strategies and risk management strategies over changing market conditions by increasing or decreasing leverage. Additionally, these numbers may differ during periods when we conduct equity capital raises, as in certain instances we may purchase additional assets and increase leverage in anticipation of an equity capital raise. Since our average borrowings and period end borrowings can be expected to differ, we believe our average borrowings during a period provide a more accurate representation of our exposure to the risks associated with leverage than our period end borrowings.

At March 31, 2025 and December 31, 2024, the majority of our debt represented repurchase agreements and other secured financing arrangements collateralized by a pledge of our Residential Securities, residential mortgage loans, and MSR. All of our Residential Securities are currently accepted as collateral for these borrowings. However, we limit our borrowings, and thus our potential asset growth, in order to maintain unused borrowing capacity and maintain the liquidity and strength of our balance sheet.

### Other Income (Loss)

#### For the Three Months Ended March 31, 2025 and 2024

Net Gains (Losses) on Investments and Other

Net gains (losses) on disposal of investments was ($49.4) million for the three months ended March 31, 2025, compared to ($545.9) million for the same period in 2024. For the three months ended March 31, 2025, we disposed of Residential Securities with a carrying value of $5.2 billion for an aggregate net gain (loss) of ($54.6) million. For the same period in 2024, we disposed of Residential Securities, with a carrying value of $8.1 billion for an aggregate net gain (loss) of ($438.2) million.

Realized gains (losses) on U.S. Treasury securities sold, not yet purchased was $43.8 million for the three months ended March 31, 2025, compared to ($77.9) million for the same period in 2024.

Net unrealized gains (losses) on instruments measured at fair value through earnings was $860.2 million for the three months ended March 31, 2025, compared to ($448.2) million for the same period in 2024, primarily due to favorable changes in unrealized gains (losses) on Agency MBS of $1.6 billion, securitized residential whole loans of consolidated VIEs of $287.2 million, and residential whole loans of $38.4 million, partially offset by unfavorable changes in residential securitized debt of consolidated VIEs of ($256.9) million, U.S. Treasury securities sold, not yet purchased of ($245.9) million, Non-Agency MBS of ($48.5) million, MSR of ($40.2) million, and CRT securities of ($25.9) million.

Net Gains (Losses) on Derivatives

Net gains (losses) on interest rate swaps for the three months ended March 31, 2025 was ($605.8) million compared to $1.2 billion for the same period in 2024, primarily attributable to unfavorable changes in unrealized gains (losses) on interest rate swaps, net interest component of interest rate swaps and realized gains (losses) on termination or maturity of interest rate swaps. Unrealized gains (losses) on interest rate swaps was ($753.6) million for the three months ended March 31, 2025, compared to $900.9 million for the same period in 2024. Net interest component on interest rate swaps was $191.5 million for the three months ended March 31, 2025, compared to $330.1 million for the same period in 2024. Realized gains (losses) on termination or maturity of interest rate swaps was ($43.8) million for the three months ended March 31, 2025, compared to ($21.2) million for the same period in 2024, which reflected our termination or maturity of fixed-rate payer and receiver interest rate swaps with notional amounts of $11.7 billion and $3.2 billion, compared to fixed-rate payer and receiver interest rate swaps with notional amounts of $2.3 billion and $220.0 million, respectively, for the same period in 2024.

Net gains (losses) on other derivatives was ($372.0) million for the three months ended March 31, 2025, compared to $167.3 million for the same period in 2024. The change in net gains (losses) on other derivatives was primarily due to unfavorable changes in net gains (losses) on futures, which was ($403.5) million for the three months ended March 31, 2025, compared to $137.0 million for the same period in 2024, and net gains (losses) on interest rate swaptions, which was ($8.6) million for the three months ended March 31, 2025, compared to $30.6 million for the same period in 2024, partially offset by a favorable change in net gains (losses) on TBA derivatives, which was $30.2 million for the three months ended March 31, 2025, compared to $6.3 million for the same period in 2024.

Other, Net

Other, net includes brokerage and commission fees, due diligence costs, securitization expenses, and interest on custodial balances. We also report in Other, net items whose amounts, either individually or in the aggregate, would not, in the opinion of management, be meaningful to readers of the financial statements. Given the nature of certain components of this line item, balances may fluctuate from period to period. Other, net for the three months ended March 31, 2025 was $7.4 million compared to $23.4 million for the same period in 2024, primarily attributable to a decrease in sponsored securitization fees and net interest on initial margin related to interest rate swaps, an increase in securitization related costs and MSR financing expenses, partially offset by an increase in interest on custodial balances and conduit transaction fees.

### General and Administrative Expenses

General and administrative (“G&A”) expenses consist of compensation and other expenses. The following table shows our total G&A expenses as compared to average total assets and average equity for the periods presented.

### G&A Expenses and Operating Expense Ratios

*(dollars in thousands)*

| For the three months ended | Total G&A Expenses | Total G&A Expenses/Average Assets | Total G&A Expenses/Average Equity |
| --- | ---: | ---: | ---: |
| March 31, 2025 | **$48,064** | **0.18%** | **1.49%** |
| March 31, 2024 | $38,570 | 0.17% | 1.35% |

G&A expenses were $48.1 million for the three months ended March 31, 2025, an increase of $9.5 million compared to the same period in 2024. The change in the period was primarily due to an increase in compensation expense and higher expenses related to rent, technology, and professional fees.

### Return on Average Equity

The following table shows the components of our annualized return on average equity for the periods presented.

### Components of Annualized Return on Average Equity

| For the three months ended | Economic Net Interest Income/ Average Equity (1) | Net Servicing Income/Average Equity | Other Income (Loss)/Average Equity (2) | G&A Expenses/ Average Equity | Income Taxes/ Average Equity | Return on Average Equity |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| March 31, 2025 | **12.77%** | **3.92%** | **(10.90%)** | **(1.49%)** | **(0.26%)** | **4.04%** |
| March 31, 2024 | 11.34% | 3.60% | 2.67% | (1.35%) | 0.03% | 16.29% |
| (1) Economic net interest income includes the net interest component of interest rate swaps and, beginning with the quarter ended June 30, 2024, net interest on initial margin related to interest rate swaps, which is reported in Other, net in the Company’s Consolidated Statements of Comprehensive Income (Loss). Prior period results have not been adjusted in accordance with this change as the impact is not material. Net interest on variation margin related to interest rate swaps was previously and is currently included in the Net interest component of interest rate swaps in the Company's Consolidated Statements of Comprehensive Income (Loss) for all periods presented. (2) Other income (loss) excludes the net interest component of interest rate swaps. |  |  |  |  |  |  |

### Unrealized Gains and Losses - Available-for-Sale Investments

The unrealized fluctuations in market values of our available-for-sale Agency MBS, for which the fair value option is not elected, do not impact our GAAP net income (loss) but rather are reflected on our balance sheet by changing the carrying value of the asset and stockholders’ equity under accumulated other comprehensive income (loss). As a result of this fair value accounting treatment, our book value and book value per share are likely to fluctuate far more than if we used amortized cost accounting. As a result, comparisons with companies that use amortized cost accounting for some or all of their balance sheet may not be meaningful.

The following table shows cumulative unrealized gains and losses on our available-for-sale investments reflected in the Consolidated Statements of Financial Condition.

*(dollars in thousands)*

|  | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Unrealized gain | **$4,827** | $4,221 |
| Unrealized loss | **(792,229)** | (1,021,903) |
| **Accumulated other comprehensive income (loss)** | **$(787,402)** | $(1,017,682) |

Unrealized changes in the estimated fair value of available-for-sale investments may have a direct effect on our potential earnings and dividends: positive changes will increase our equity base and allow us to increase our borrowing capacity while negative changes tend to reduce borrowing capacity. A very large negative change in the net fair value of our available-for-sale Residential Securities might impair our liquidity position, requiring us to sell assets with the potential result of realized losses upon sale.

The fair value of these securities being less than amortized cost at March 31, 2025 is solely due to market conditions and not the quality of the assets. Substantially all of the Agency MBS have an actual or implied credit rating that is the same as that of the U.S. government. The investments do not require an allowance for credit losses because we currently have the ability and intent to hold the investments to maturity or for a period of time sufficient for a forecasted market price recovery up to or beyond the cost of the investments, and it is not more likely than not that we will be required to sell the investments before recovery of the amortized cost bases, which may be maturity. Also, we are guaranteed payment of the principal and interest amounts of the securities by the respective issuing Agency.

### Financial Condition

Total assets were $105.1 billion and $103.6 billion at March 31, 2025 and December 31, 2024, respectively. The change was primarily due to increases in securitized residential whole loans of consolidated VIEs of $2.5 billion, securities of $604.9 million, mortgage servicing rights of $363.8 million, cash and cash equivalents of $345.5 million, and residential mortgage loans of $313.7 million, partially offset by decreases in receivables for unsettled trades of $2.2 billion and principal and interest receivable of $232.1 million. Our portfolio composition, net equity allocation and debt-to-net equity ratio by asset class were as follows at March 31, 2025.

*(dollars in thousands)*

| Assets | Agency MBS | Residential Credit (1) | MSR | Total |
| --- | ---: | ---: | ---: | ---: |
| Fair value | **$68,329,720** | **$30,356,480** | **$3,272,902** | **$101,959,102** |
| Implied market value of derivatives (2) | **6,635,383** | **—** | **—** | **6,635,383** |
| **Debt** |  |  |  |  |
| Repurchase agreements | **57,180,117** | **4,479,343** | **—** | **61,659,460** |
| Implied cost basis of derivatives (2) | **6,612,755** | **—** | **—** | **6,612,755** |
| Other secured financing | **—** | **—** | **900,000** | **900,000** |
| Debt issued by securitization vehicles | **—** | **21,802,193** | **—** | **21,802,193** |
| Participations issued | **—** | **1,748,273** | **—** | **1,748,273** |
| U.S. Treasury securities sold, not yet purchased | **2,497,649** | **47,984** | **(26,508)** | **2,519,125** |
| Net forward purchases | **2,217,970** | **—** | **84,281** | **2,302,251** |
| **Other** |  |  |  |  |
| Net other assets / liabilities | **1,511,467** | **162,290** | **360,323** | **2,034,080** |
| **Net equity allocated** | **$7,968,079** | **$2,440,977** | **$2,675,452** | **$13,084,508** |
| **Net equity allocated (%)** | **61%** | **18%** | **21%** | **100%** |
| Debt/net equity ratio (3) | **7.5:1** | **11.5:1** | **0.3:1** | **6.8:1** |
| (1) Fair value includes residential loans held for sale, commercial assets and liabilities and assets and liabilities associated with non-controlling interests. (2) Derivatives include TBA contracts under Agency MBS. (3) Represents the debt/net equity ratio as determined using amounts in the Consolidated Statements of Financial Condition. |  |  |  |  |

### Residential Securities

Substantially all of our Agency MBS at March 31, 2025 and December 31, 2024 were backed by single-family residential mortgage loans and were secured with a first lien position on the underlying single-family properties. Our mortgage-backed securities were largely Fannie Mae, Freddie Mac or Ginnie Mae pass through certificates or CMOs, which have an actual or implied credit rating that is the same as that of the U.S. government. We carry all of our Agency MBS at fair value in the Consolidated Statements of Financial Condition.

We accrete discount balances as an increase to interest income over the expected life of the related interest earning assets and we amortize premium balances as a decrease to interest income over the expected life of the related interest earning assets. At March 31, 2025 and December 31, 2024 we had in our Consolidated Statements of Financial Condition a total of $1.3 billion and $1.3 billion, respectively, of unamortized discount (which is the difference between the remaining principal value and current amortized cost of our Residential Securities acquired at a price below principal value) and a total of $2.5 billion and $2.5 billion, respectively, of unamortized premium (which is the difference between the remaining principal value and the current amortized cost of our Residential Securities acquired at a price above principal value).

The weighted average experienced prepayment speed on our Agency MBS portfolio for the three months ended March 31, 2025 and 2024 was 7.1% and 6.0%, respectively. The weighted average projected long-term prepayment speed on our Agency MBS portfolio as of March 31, 2025 and 2024 was 9.5% and 8.9%, respectively.

Given our current portfolio composition, if mortgage principal prepayment rates were to increase over the life of our mortgage-backed securities, all other factors being equal, our net interest income would decrease during the life of these mortgage-backed securities as we would be required to amortize our net premium balance into income over a shorter time period. Similarly, if mortgage principal prepayment rates were to decrease over the life of our mortgage-backed securities, all other factors being equal, our net interest income would increase during the life of these mortgage-backed securities as we would amortize our net premium balance over a longer time period.

The following table presents our Residential Securities that were carried at fair value at March 31, 2025 and December 31, 2024.

| Agency | March 31, 2025 Estimated Fair Value | December 31, 2024 |
| --- | ---: | ---: |
| Fixed-rate pass-through | **$63,553,893** | $63,049,674 |
| Adjustable-rate pass-through | **141,397** | 162,238 |
| CMO | **73,808** | 73,684 |
| Interest-only | **469,481** | 380,732 |
| Multifamily | **4,065,874** | 3,741,765 |
| Reverse mortgages | **25,267** | 25,975 |
| **Total agency securities** | **$68,329,720** | $67,434,068 |
| **Residential credit** |  |  |
| Credit risk transfer | **$521,059** | $754,915 |
| Alt-A | **197,554** | 164,892 |
| Prime | **46,697** | 45,790 |
| Subprime | **216,702** | 245,583 |
| NPL/RPL | **830,275** | 878,608 |
| Prime jumbo (\>= 2010 vintage) | **160,296** | 158,313 |
| **Total residential credit securities** | **$1,972,583** | $2,248,101 |
| **Total Residential Securities** | **$70,302,303** | $69,682,169 |

The following table summarizes certain characteristics of our Residential Securities (excluding interest-only mortgage-backed securities) and interest-only mortgage-backed securities at March 31, 2025 and December 31, 2024.

*(dollars in thousands)*

| Residential Securities (1) | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Principal amount | **$70,239,170** | $70,783,559 |
| Net premium | **28,057** | 110,212 |
| Amortized cost | **70,267,227** | 70,893,771 |
| Amortized cost / principal amount | **100.04%** | 100.16% |
| Carrying value | **69,213,327** | 68,717,038 |
| Carrying value / principal amount | **98.54%** | 97.08% |
| Weighted average coupon rate | **5.03%** | 5.02% |
| Weighted average yield | **4.98%** | 4.96% |
| **Adjustable-rate Residential Securities (1)** |  |  |
| Principal amount | **$714,932** | $951,400 |
| Weighted average coupon rate | **8.22%** | 8.41% |
| Weighted average yield | **7.44%** | 7.59% |
| Weighted average term to next adjustment (2) | **6 Months** | 6 Months |
| Weighted average lifetime cap (3) | **9.40%** | 9.33% |
| Principal amount at period end as % of total residential securities | **1.02%** | 1.34% |
| **Fixed-rate Residential Securities (1)** |  |  |
| Principal amount | **$69,524,238** | $69,832,159 |
| Weighted average coupon rate | **5.00%** | 4.97% |
| Weighted average yield | **4.95%** | 4.93% |
| Principal amount at period end as % of total residential securities | **98.98%** | 98.66% |
| **Interest-only Residential Securities** |  |  |
| Notional amount | **$42,598,447** | $38,352,812 |
| Net premium | **1,173,717** | 1,091,361 |
| Amortized cost | **1,173,717** | 1,091,361 |

52

## Market risk

As filed, 216 characters.

Quantitative and qualitative disclosures about market risk are contained within the section titled “Risk Management” of Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

## Controls and procedures

As filed, 1,307 characters.

Our management, including our Chief Executive Officer (the CEO) and Chief Financial Officer (the CFO), reviewed and evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act) as of the end of the period covered by this report. Based on that review and evaluation, the CEO and CFO have concluded that our current disclosure controls and procedures, as designed, (1) were effective in ensuring that information required to be disclosed by the Company in reports it files or submits under the Securities Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure and (2) were effective in ensuring that information required to be disclosed by the Company in reports it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

There have been no changes in our internal controls over financial reporting that occurred during the three months ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

## Risk factors

As filed, 743 characters.

There have been no material changes to the risk factors disclosed in Item 1A. “Risk Factors” of our most recent annual report on Form 10-K. The materialization of any risks and uncertainties identified in our Special Note Regarding Forward-Looking Statements contained in this report together with those previously disclosed in our most recent annual report on Form 10-K or those that are presently unforeseen could result in significant adverse effects on our financial condition, results of operations and cash flows. See Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Special Note Regarding Forward-Looking Statements” in this quarterly report or our most recent annual report on Form 10-K.

Filed May 8, 2025.
Source: SEC EDGAR, the filing index for accession 0001628280-25-023811. Last ingested by Listed: Nov 3, 2026, 19:29 ET. No prices; not investment advice.