Invesco Mortgage Capital (IVR) risk factors, FY2025 10-K

Risks Related to Our Investment and Portfolio Management Activities

1. 01Fluctuations in interest rates could adversely affect the value of our investments and derivative financial instruments and cause our interest expense to increase. This could result in reduced earnings, decreased profitability and dividends, and diminished cash available for distribution to our stockholders100% rewritten
2. 02Interest rate fluctuations present various risks, such as a narrowing of the difference between asset yields and borrowing rates, a decline in the yield on adjustable-rate investments, and a detrimental impact on prepayment rates. These risks may adversely affect our income and book valueNew
3. 03Interest rate volatility represents significant risks to our business, potentially affecting our liquidity, increasing our costs, and impacting our ability to manage risks effectivelyNew
4. 04Spread risk is inherent to investing in MBS and other mortgage-related assets35% rewritten
5. 05Our active portfolio management strategy may expose us to greater losses and lower returns than compared to passive strategies
6. 06The U.S. Federal Reserve’s, GSEs’, or FDIC’s participation in the Agency RMBS market could have an adverse effect on our Agency RMBS investments75% rewritten
7. 07At times, upon a financial institution’s distress or impending failure, the FDIC may take control of a significant portion of the Agency RMBS held by that institution. The FDIC’s actions with respect to those securities can also materially impact the available supply, price and returns on Agency RMBS31% rewritten
8. 08Volatile market conditions for mortgages and mortgage-related assets as well as the broader financial markets can result in a significant contraction in liquidity for mortgages and mortgage-related assets, which may adversely affect the value of the assets in which we invest
9. 09A portion of our RMBS portfolio consists of premium securities. Premium securities may be subject to more risk than par value securities
10. 10Prepayment rates may adversely affect the value of our investment portfolio
11. 11Market conditions may upset the historical relationship between interest rate changes and prepayment trends, which would make it more difficult for us to analyze our investment portfolio
12. 12Our investments may be concentrated and will be subject to risk of default28% rewritten
13. 13The Federal conservatorship of Fannie Mae and Freddie Mac and related efforts, along with any changes in laws and regulations affecting the relationship between these agencies and the U.S. Government, may adversely affect our business57% rewritten
14. 14We operate in a highly competitive market for investment opportunities and competition may limit our ability to acquire desirable investments in our target assets and could also affect the pricing of these securities25% rewritten
15. 15Elevated interest rates may cause a decrease in the availability of certain of our target assets which could adversely affect our ability to acquire target assets that satisfy our investment objectives and to generate income and pay dividends
16. 16We may acquire certain target assets that are subject to defaults, foreclosure timeline extension, fraud, residential and commercial price depreciation, and unfavorable modification of loan principal amount, interest rate and amortization of principal, which could result in losses to us
17. 17A number of factors over which we have no control may impair a borrower’s ability to repay a mortgage loan secured by a residential property, including the income and assets of the borrower. As of December 31, 2025, we do not hold any mortgage loans secured by residential property
18. 18In the event of any default under a mortgage loan held directly by us, we bear a risk of loss of principal to the extent of any deficiency between the value of the collateral and the principal and accrued interest of the mortgage loan, which could have a material adverse effect on our cash flow from operations
19. 19Subordinated MBS assets may be in the “first loss” position, subjecting us to greater risks of loss
20. 20We may not control the special servicing of the mortgage loans included in CMBS in which we invest, and, in such cases, the special servicer may take actions that could adversely affect our interests
21. 21Due diligence of potential assets may not reveal all of the liabilities associated with such assets and may not reveal other weaknesses in such assets, which could lead to losses
22. 22We depend on third-party service providers, including mortgage servicers, for a variety of services related to our investments. We are, therefore, subject to the risks associated with third-party service providers
23. 23A decline in the market value of our mortgage-backed securities may adversely affect our results of operations and financial condition25% rewritten

Risks Related to Financing and Hedging

1. 24Our strategy involves the use of significant leverage, which increases the risk that we may incur substantial losses
2. 25We depend on repurchase agreement financing to acquire our target assets, and our inability to access this funding on acceptable terms could have a material adverse effect on our results of operations, financial condition and business
3. 26The inherent uncertainty of repurchase transactions, including counterparty credit risk, may cause us to incur a loss on our repurchase transactions
4. 27The repurchase agreements and other financing arrangements that we use to finance our investments may require us to provide additional collateral and may restrict us from leveraging our assets as fully as desired
5. 28A failure to comply with covenants in our repurchase agreements and other financing and hedging arrangements would have a material adverse effect on us, and any future financing may require us to provide additional collateral or pay down debt40% rewritten
6. 29Our use or future use of repurchase agreements to finance our target assets may give our lenders greater rights if either we or a lender files for bankruptcy59% rewritten
7. 30We enter into hedging transactions that could expose us to contingent liabilities in the future
8. 31Hedging may adversely affect our earnings, which could reduce our cash available for distribution to our stockholders
9. 32Our hedging strategies may be ineffective
10. 33Clearing facilities or exchanges may expose us to credit risk and may increase the margin requirements we are required to post when entering into derivative instruments, which may negatively impact our ability to hedge and our liquidity
11. 34We may enter into derivative contracts that expose us to contingent liabilities, and those contingent liabilities may not appear on our balance sheet. We may invest in synthetic securities, credit default swaps, and other credit derivatives, which expose us to additional risks
12. 35It may be uneconomical to “roll” Agency MBS TBA holdings, or we may be unable to meet margin calls on TBA contracts, which could negatively affect our financial condition and results of operations33% rewritten

Risks Related to Our Business

1. 36Our business may be adversely affected by unfavorable or changing economic, market, and political conditions
2. 37We conduct our operations so that neither we, nor our operating partnership, IAS Operating Partnership LP (the “Operating Partnership”), nor the subsidiaries of the Operating Partnership are required to register as an investment company under the 1940 Act88% rewritten
3. 38investment companies and are not relying on the exception from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the 1940 ActNew
4. 39The recent advancements in and increased use of artificial intelligence (“AI”) present risks and challenges that may adversely impact our business64% rewritten
5. 40Our Manager utilizes quantitative models to support investment decisions and investment processes, including those related to our portfolio management and risk analysis, which may contain errors
6. 41The preparation of our financial statements involves use of estimates, judgments and assumptions, and our financial statements may be materially affected if our estimates prove to be inaccurate
7. 42Changes in the fair value of our derivatives may result in volatility in our U.S. GAAP earnings

Risks Related to Our Relationship with Our Manager

1. 43We are dependent on our Manager and its key personnel for our success
2. 44There are conflicts of interest in our relationship with our Manager and Invesco, which could result in decisions that are not in the best interests of our stockholders
3. 45Our Manager would have a conflict in recommending our participation in any equity investment it manages
4. 46The management agreement with our Manager was not negotiated on an arm’s-length basis and may not be as favorable to us as if it had been negotiated with an unaffiliated third party, and it may be costly and difficult to terminate
5. 47Our board of directors approved broad investment guidelines for our Manager and does not approve each investment and financing decision made by our Manager

Risks Related to Our Capital Stock

1. 48We have not established a minimum dividend payment level, and we cannot assure our stockholders of our ability to pay dividends in the future
2. 49Future offerings of debt or equity securities that would rank senior to our common stock may adversely affect the market price of our common stock

Risks Related to Our Organization and Structure

1. 50Certain provisions of Maryland law could inhibit changes in control
2. 51Ownership limitations may restrict change of control or business combination opportunities in which our stockholders might receive a premium for their shares
3. 52Our authorized but unissued shares of capital stock may prevent a change in our control
4. 53The change of control conversion feature of our Series C Preferred Stock may make it more difficult for a party to acquire us or discourage a party from acquiring us
5. 54Our rights and the rights of our stockholders to take action against our directors and officers are limited
6. 55We are the sole general partner of our Operating Partnership and could become liable for the debts and other obligations of our Operating Partnership

Risks Related to our REIT Status and Certain Other Tax Items

1. 56If we do not qualify to be taxed as a REIT, we will be subject to tax as a regular corporation and could face a substantial tax liability
2. 57We may be subject to adverse legislative or regulatory tax changes that could increase our tax liability, reduce our operating flexibility and reduce the price of our stock37% rewritten
3. 58To maintain our REIT status, we may have to borrow funds on a short-term basis during unfavorable market conditions
4. 59Compliance with REIT requirements may cause us to forgo otherwise attractive opportunities, which may hinder or delay our ability to meet our investment objectives and reduce your overall return
5. 60Compliance with REIT requirements may force us to liquidate or restructure otherwise attractive investments50% rewritten
6. 61Limits granted in the future may limit our board of directors’ power to increase the Ownership Limits or grant further exemptionsNew
7. 62Investments outside the United States may subject us to additional taxes and could present additional complications to our ability to satisfy the REIT qualification requirements
8. 63We may incur tax liabilities that would reduce our cash available for distribution to you
9. 64Restrictions on the deduction of all of our interest expense could prevent us from satisfying the REIT distribution requirements and avoiding the incurrence of income or excise taxes
10. 65Our board of directors is authorized to revoke our REIT election without stockholder approval, which may cause adverse consequences to our stockholders
11. 66We may choose to pay dividends in a combination of cash and shares of our common stock, in which case stockholders may be required to pay income taxes in excess of the cash dividends they receive
12. 67Generally, ordinary dividends payable by REITs do not qualify for reduced U.S. federal income tax rates
13. 68The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our ability to qualify as a REIT
14. 69Our taxable REIT subsidiaries are subject to special rules that may result in increased taxes
15. 70If the Operating Partnership failed to qualify as a partnership or is not otherwise disregarded for U.S. federal income tax purposes, we would cease to qualify as a REIT
16. 71Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities
17. 72The “taxable mortgage pool” rules may increase the taxes that we or our stockholders may incur and may limit the manner in which we effect future securitizations
18. 73Liquidation of our assets to repay obligations to our lenders may jeopardize our REIT qualification
19. 74Purchases of mortgages at a discount may affect our ability to satisfy the REIT asset and gross income tests
20. 75Our qualification as a REIT could be jeopardized as a result of our interests in joint ventures or investment funds
21. 76We may be required to report taxable income for certain investments in excess of the economic income we ultimately realize from them
22. 77The failure of assets subject to repurchase agreements to qualify as real estate assets could adversely affect our ability to remain qualified as a REIT
23. 78The tax on prohibited transactions will limit our ability to engage in certain transactions, including certain methods of securitizing mortgage loans, which would be treated as sales for federal income tax purposes
24. 79Changing the nature of our assets may complicate our ability to satisfy the REIT gross income and asset tests
25. 80Uncertainty exists with respect to the treatment of our TBAs for purposes of the REIT asset and income tests
26. 81Our business is subject to extensive regulation
27. 82We may be adversely affected by the current and future economic, regulatory and other actions of government bodies and their agencies
28. 83We may change any of our strategies, policies or procedures without stockholder consent and make investment decisions with which our stockholders may not agree and/or fail to meet our investment criteria
29. 84We may enter into transactions and take certain actions in connection with such transactions that could affect the price of our common stock
30. 85The market price and trading volume of our capital stock may be volatile39% rewritten
31. 86Future issuances of equity securities may dilute your ownership in us and may also negatively affect the market price of our common stockNew
32. 87Investing in our capital stock may involve a high degree of risk
33. 88A change in market interest rates may cause a material decrease in the market price of our capital stock