We enter into derivative transactions to manage our interest rate risk and agency mortgage rate exposures. We have agreements with our derivative counterparties that provide for the posting of collateral based on the fair values of our derivatives. Through this margin process, either we or our counterparties may be required to pledge cash or securities as collateral. Collateral requirements vary by counterparty and change over time based on the fair value, notional amount and remaining term of the contracts. Certain contracts provide for cross collateralization and cross default with repurchase agreements and other contracts with the same counterparty.

Interest rate swap contracts are designed to lock in long-term average funding costs for repurchase agreements associated with our assets in an attempt to maximize earnings from our assets. Such transactions are based on assumptions about prepayments which, if not realized, will cause transaction results to differ from expectations. Interest rate swaptions generally provide us the option to enter into an interest rate swap agreement at a certain point of time in the future with a predetermined notional amount, stated term and stated rate of interest in the fixed leg and interest rate index on the floating leg. Basis swap contracts allow us to exchange one floating interest rate basis for another, thereby allowing us to diversify our floating rate basis exposures.

All of our interest rate contracts have floating leg interest rate indexes of either the Federal Funds Rate or SOFR. The Federal Funds Rate is published daily by the New York Federal Reserve and is a measure of unsecured borrowings by depository institutions from other depository institutions or GSEs. SOFR is published daily by the New York Federal Reserve and is the average overnight rate for borrowings secured by U.S. Treasury securities. We enter into interest rate swap contracts either directly with a counterparty (a “bilateral” contract) or through a centrally-cleared swap contract. In a bilateral contract, we exchange margin collateral with the counterparty and have exposure to counterparty risk. In a centrally-cleared contract, we exchange margin collateral with a Futures Clearing Merchant, with whom we have opened an account. Our counterparty risk is limited to the clearing exchange itself. All of our centrally-cleared swaps are cleared by the CME. In general, centrally-cleared interest rate swap contracts require us to post higher initial margin than bilateral contracts.

Futures contracts are traded on the CME which requires the use of daily mark-to-market collateral and the CME provides substantial credit support. The collateral requirements of the CME require us to pledge assets under a bi-lateral margin arrangement, including either cash or Agency Securities and these requirements may vary and change over time based on the market value, notional amount and remaining term of the futures contracts. In the event we are unable to

meet a margin call under one of our futures contracts, the counterparty to such agreement may have the option to terminate or close-out all of the outstanding futures contracts with us. In addition, any close-out amount due to the counterparty upon termination of the counterparty’s transactions would be immediately payable by us pursuant to the applicable agreement.

TBA Agency Securities are forward contracts for the purchase (“long position”) or sale (“short position”) of Agency Securities at a predetermined price, face amount, issuer, coupon and stated maturity on an agreed-upon future date. The specific Agency Securities delivered into the contract upon the settlement date, published each month by the Securities Industry and Financial Markets Association, are not known at the time of the transaction. We may enter into TBA Agency Securities as a means of hedging against short-term changes in interest rates. We may also enter into TBA Agency Securities as a means of acquiring or disposing of Agency Securities and we may from time to time utilize TBA dollar roll transactions to finance Agency Security purchases. We estimate the fair value of TBA Agency Securities based on similar methods used to value our Agency Securities.

We have netting arrangements in place with all derivative counterparties pursuant to standard documentation developed by ISDA. We are also required to post or hold cash collateral based upon the net underlying market value of our open positions with the counterparty. A decline in the value of the open positions with the counterparty could result in the counterparties demanding additional collateral pledges or liquidation of some of the existing collateral to reduce borrowing levels. We manage this risk by maintaining an adequate balance of available cash and unpledged securities. An event of default or termination event under the standard ISDA agreement would give our counterparty to the applicable agreement the right to terminate the agreement. In addition, certain of our ISDA agreements contain a restriction that prohibits our leverage from exceeding twelve times our stockholders’ equity as well as termination events in the case of significant reductions in equity capital.

The following tables present information about the potential effects of netting our derivatives if we were to offset the assets and liabilities on the accompanying consolidated balance sheets. We currently present these financial instruments at their gross amounts and they are included in Derivatives, at fair value on the accompanying consolidated balance sheets at March 31, 2025 and December 31, 2024.


			Gross Amounts Not Offset
Assets	Gross Amounts(1)		Financial Instruments		Cash Collateral		Total Net
March 31, 2025
Interest rate swap contracts (2)	$	724,324	$	(25,898)	$	(528,602)	$	169,824
Futures contracts	—		(45,088)		87,071		41,983
TBA Agency Securities	503		(311)		447		639
Totals	$	724,827	$	(71,297)	$	(441,084)	$	212,446

December 31, 2024
Interest rate swap contracts (2)	$	894,714	$	—	$	(781,923)	$	112,791
Futures contracts	13,300		(328)		24,702		37,674
TBA Agency Securities	49		(957)		1,578		670
Totals	$	908,063	$	(1,285)	$	(755,643)	$	151,135


			Gross Amounts Not Offset
Liabilities	Gross Amounts(1)		Financial Instruments		Cash Collateral		Total Net
March 31, 2025
Interest rate swap contracts (2)	$	(25,898)	$	25,898	$	—	$	—
Futures contracts	(45,088)		45,088		—		—
TBA Agency Securities	(311)		311		—		—
Totals	$	(71,297)	$	71,297	$	—	$	—

December 31, 2024

Futures contracts	$	(328)	$	328	$	—	$	—
TBA Agency Securities	(957)		957		—		—
Totals	$	(1,285)	$	1,285	$	—	$	—

The following table represents the information regarding our derivatives which are included in Gain on derivatives, net in the accompanying consolidated statements of operations for the three months ended March 31, 2025 and March 31, 2024.


		Income (Loss) Recognized
	For the Three Months Ended March 31,
Derivatives			2025		2024
Interest rate swap contracts (1)			$	(138,916)	$	160,709
Futures contracts			(61,509)		—
TBA Agency Securities			9,207		(4,261)
Total Gain (Loss) on Derivatives, net			$	(191,218)	$	156,448


Interest Rate Swap Contracts (1)	Notional Amount		Weighted Average Remaining Term (Months)	Weighted Average Rate
March 31, 2025
< 3 years	$	2,305,000	27	2.19	%
≥ 3 years and < 5 years	604,000		55	0.49	%
≥ 5 years and < 7 years	3,048,000		70	0.93	%
≥ 7 years	2,425,000		109	3.53	%
Total or Weighted Average (2)	$	8,382,000	68	2.00	%

December 31, 2024
< 3 years	$	1,255,000	24	0.60	%
≥ 3 years and < 5 years	604,000		58	0.49	%
≥ 5 years and < 7 years	2,648,000		71	0.85	%
≥ 7 years	2,725,000		108	3.20	%
Total or Weighted Average (3)	$	7,232,000	76	1.66	%

(2)Of this amount, $3,375,000 notional are SOFR based swaps, the last of which matures in 2035; and $5,007,000 notional are Federal Funds based swaps, the last of which matures in 2032. Of this amount, $3,175,000 notional are centrally-cleared interest rate swap contracts, the last of which matures in 2035.

(3)Of this amount, $2,225,000 notional are SOFR based swaps, the last of which matures in 2034; and $5,007,000 notional are Federal Funds based swaps, the last of which matures in 2032. Of this amount, $2,025,000 notional are centrally-cleared interest rate swap contracts, the last of which matures in 2034.


TBA Agency Securities	Notional Amount		Cost Basis		Fair Value
March 31, 2025




30 Year Long, 6.0%	$	600,000	$	608,734	$	608,649
30 Year Long, 6.5%	300,000		308,969		309,246

Total TBA Agency Securities	$	900,000	$	917,703	$	917,895