Invesco Mortgage Capital Inc.IVR

Invesco Mortgage Capital Inc. Fair Value Disclosure

10-KFiled Feb 23, 20262 min read
Fair Value of Financial Instruments
A three-level valuation hierarchy exists for disclosure of fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. The three levels are defined as follows:
•Level 1 Inputs – Quoted prices for identical instruments in active markets.
•Level 2 Inputs – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.
•Level 3 Inputs – Instruments with primarily unobservable value drivers.
The following tables present our assets and liabilities measured at fair value on a recurring basis.
As of December 31, 2025
 Fair Value Measurements Using: 
$ in thousandsLevel 1Level 2Level 3 Total at
Fair Value
Assets:
Mortgage-backed securities (1)
— 6,276,609 — 6,276,609 
Derivative assets (2)
2,177 2,235 — 4,412 
Total assets2,177 6,278,844 — 6,281,021 
 
As of December 31, 2024
 Fair Value Measurements Using: 
$ in thousandsLevel 1Level 2Level 3Total at
Fair Value
Assets:
Mortgage-backed securities (1)
— 5,445,508 — 5,445,508 
Derivative assets (2)
3,463 1,570 — 5,033 
Total assets3,463 5,447,078 — 5,450,541 
Liabilities:
Derivative liabilities (2)
— 627 — 627 
Total liabilities— 627 — 627 
(1)For more detail about the fair value of our MBS, refer to Note 3 - “Mortgage-Backed Securities”.
(2)Derivative assets and derivative liabilities include U.S. Treasury futures contracts as Level 1 measurements and interest rate swaps and TBAs as Level 2 measurements.
The following table presents the carrying value and estimated fair value of our financial instruments that are not carried at fair value on the consolidated balance sheets as of December 31, 2025 and December 31, 2024.
As of
 December 31, 2025December 31, 2024
$ in thousandsCarrying
Value		Estimated
Fair Value		Carrying
Value		Estimated
Fair Value
Financial liabilities:
Repurchase agreements5,619,255 5,619,716 4,893,958 4,895,017 
Total5,619,255 5,619,716 4,893,958 4,895,017 
The estimated fair value of repurchase agreements is a Level 3 fair value measurement based on an expected present value technique. This method discounts future estimated cash flows using rates we determined best reflect current market interest rates that would be offered for repurchase agreements with similar characteristics and credit quality.

About Fair Value Disclosures

Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.

Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.

Other Available Disclosures

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