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Item 7. Management’s Discussion and Analysis

2021-02-26 compared with 2020-02-28 · 936 added, 720 removed, 381 unchanged (81% of the section changed)

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We are a real estate investment trust (“REIT”) for U.S.

federal income tax purposes, in the business of acquiring, investing in, financing and managing mortgage-related and residential housing-related assets.

federal income tax purposes, in the business of acquiring, investing in, financing and managing primarily mortgage-related single-family and multi-family residential assets.

Our objective is to deliver long-term stable distributions to our stockholders over changing economic conditions through a combination of net interest margin and capital gains from a diversified investment portfolio.

Our investment portfolio includes credit assets, including investments sourced from distressed markets that create the potential for capital gains, as well as more traditional types of fixed-income investments that provide coupon income and we believe provide downside protection.

Our investment portfolio includes (i) multi-family credit assets, such as multi-family CMBS (excluding Agency CMBS) and preferred equity in, and mezzanine loans to, owners of multi-family properties, (ii) single-family credit assets, such as residential mortgage loans, including distressed residential mortgage loans, non-QM loans, second mortgages, residential bridge loans and other residential mortgage loans, and non-Agency RMBS, (iii) Agency securities such as Agency RMBS and Agency CMBS and (iv) certain other mortgage-, residential housing- and credit-related assets.

Subject to maintaining our qualification as a REIT and the maintenance of our exclusion from registration as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”), we also may opportunistically acquire and manage various other types of mortgage-, residential housing- and other credit-related assets that we believe will compensate us appropriately for the risks associated with them, including, without limitation, collateralized mortgage obligations, mortgage servicing rights, excess mortgage servicing spreads and securities issued by newly originated securitizations, including credit sensitive securities from these securitizations.

We intend to maintain our focus on expanding our portfolio of single-family and multi-family credit assets, which we believe will benefit from improving credit metrics.

In periods where we have working capital in excess of our short-term liquidity needs, we may invest the excess in more liquid assets such as Agency CMBS and Agency RMBS, until such time as we are able to re-invest that capital in credit assets that meet our underwriting requirements.

Our investment portfolio includes credit sensitive single-family and multi-family assets.

Executive Summary

The global pandemic associated with COVID-19 and its related economic conditions have caused, and continue to cause, a significant disruption in the U.S.

and world economies.

To slow the spread of COVID-19, since mid-March, many countries, including in the U.S., implemented public heath responses that involved social distancing measures that substantially prohibited large gatherings, including at sporting events, religious services and schools, shelter-in-place and stay-at-home orders or other measures designed to limit capacity or services on a number of businesses.

Many businesses have moved to a remote working environment, temporarily suspended operations, laid off a significant percentage of their workforce and/or shut down completely.

The economic fallout caused by the pandemic and certain of the actions taken to reduce its spread have been startling, resulting in lost business revenue, rapid and significant increases in unemployment, changes in consumer behavior and significant volatility in market liquidity and fair value of many assets.

Many of these conditions, or some level thereof, are expected to continue over the near term and may prevail throughout 2021.

Although economic data and markets generally, including those in which we invest, showed signs of improvement beginning in the second quarter and continuing through the end of 2020, these markets and the economy continue to face significant challenges from the impact of the ongoing pandemic.

The exact length and pace of the economic recovery are uncertain at this time.

The global pandemic associated with COVID-19 and related economic conditions caused financial and mortgage-related asset markets to come under extreme duress beginning in mid-March, resulting in credit spread widening, a sharp decrease in interest rates and unprecedented illiquidity in repurchase agreement financing and MBS markets.

These events, in turn, resulted in falling prices of our assets and increased margin calls from our repurchase agreement counterparties in March, particularly with respect to our investment securities portfolio.

In an effort to manage our portfolio through this unprecedented turmoil in the financial markets and improve liquidity, in March 2020, we paused funding of margin calls to our repurchase agreement financing counterparties, sold approximately $2.0 billion of assets, terminated interest rate swap positions with an aggregate notional value of $495.5 million and reduced our outstanding repurchase agreements decreasing our overall leverage to less than one times as of March 31, 2020.

Since the market disruption and through the date hereof, we have continued our deliberate and patient approach to enhancing liquidity and strengthening our balance sheet by completing two non-mark-to-market securitizations of residential loans, a non-mark-to-market re-securitization of non-Agency RMBS, two non-mark-to-market repurchase agreement financings for residential loans and opportunistically selling non-Agency RMBS, CMBS and residential loans in our portfolio.

The proceeds from these transactions were used to further reduce our outstanding mark-to-market repurchase agreements and invest in new single-family and multi-family residential investments.

As of December 31, 2020, we have reduced our portfolio leverage to 0.2 times and reduced our outstanding repurchase agreements that finance investment securities to zero.

Our targeted investments currently include (i) residential loans, second mortgages and business purpose loans, (ii) structured multi-family property investments such as preferred equity in, and mezzanine loans to, owners of multi-family properties, as well as joint venture equity investments in multi-family properties, (iii) non-Agency RMBS, (iv) Agency RMBS (v) CMBS and (vi) certain other mortgage-, residential housing- and credit-related assets.

Subject to maintaining our qualification as a REIT and the maintenance of our exclusion from registration as an investment company, we also may opportunistically acquire and manage various other types of mortgage-, residential housing- and other credit-related assets that we believe will compensate us appropriately for the risks associated with them, including, without limitation, collateralized mortgage obligations, mortgage servicing rights, excess mortgage servicing spreads and securities issued by newly originated securitizations, including credit sensitive securities from these securitizations.

We intend to continue to focus on our core portfolio strengths of single-family and multi-family residential credit assets, which we believe will deliver better risk adjusted returns over time.

In periods where we have working capital in excess of our short-term liquidity needs, we may invest the excess in more liquid assets until such time as we are able to re-invest that capital in credit assets that meet our underwriting and return requirements.

Our investment and capital allocation decisions depend on prevailing market conditions, among other factors, and may change over time in response to opportunities available in different economic and capital market environments.

We seek to achieve a balanced and diverse funding mix to finance our assets and operations.

We currently rely primarily on a combination of short-term borrowings, such as repurchase agreements with terms typically of 30-90 days, longer term repurchase agreement borrowings with terms between one year and 24 months and longer term financings, such as securitizations and convertible notes, with terms longer than one year.

Business Update

Our credit-focused investment portfolio continued to grow in the year ended December 31, 2019 as we funded the acquisition of single-family and multi-family credit assets with proceeds from underwritten public offerings of our common stock and preferred stock, our at-the-market preferred equity offering programs and repurchase agreement financing.

We expect to maintain a defensive posture as it relates to new investments and focus on assets that may benefit from active management in a prolonged, low rate environment.

We also expect to continue to selectively monetize gains from the price recovery experienced by our non-Agency RMBS and Freddie-K mezzanine securities.

We seek to achieve a balanced and diverse funding mix to finance our assets and operations, which has typically included a combination of short-term borrowings, such as repurchase agreements with terms typically of 30-90 days, longer-term repurchase agreement borrowings with terms between one year and 24 months and longer-term financings, such as securitizations and convertible notes, with terms longer than one year.

As a result of the severe market dislocations related to the COVID-19 pandemic and, more specifically, the unprecedented illiquidity in our repurchase agreement financing and MBS markets during March 2020, looking forward, we expect to place a greater emphasis on procuring longer-termed and/or more committed financing arrangements, such as securitizations, term financings and corporate debt securities, that provide less or no exposure to fluctuations in the collateral repricing determinations of financing counterparties or rapid liquidity reductions in repurchase agreement financing markets.

While longer-termed financings may involve greater expense relative to repurchase agreement funding, we believe, over time, this approach may better allow us to manage our liquidity risk and reduce exposures to market events like those caused by the COVID-19 pandemic during March 2020.

We have completed five non-mark-to-market financings since June 2020, including two non-mark-to-market repurchase agreement financings with new and existing counterparties.

We intend to continue in the near term to explore additional financing arrangements to further strengthen our balance sheet and position ourselves for future investment opportunities, including, without limitation, additional issuances of our equity and debt securities and longer-termed financing arrangements;

however, no assurance can be given that we will be able to access any such financing or the size, timing or terms thereof.

We transitioned in March to a fully remote work force, ensuring the safety and well-being of our employees.

Our prior investments in technology, business continuity planning and cyber-security protocols have enabled us to continue working with limited operational impact and we expect to continue our remote work arrangement for the foreseeable future.

Portfolio Update

In March 2020, as a direct result of the negative impact of the COVID-19 pandemic on our markets, we executed an extensive portfolio reduction to improve our liquidity and risk management exposures, including approximately $1.9 billion in sales of investment securities.

In the second quarter of 2020, we sought to further improve our liquidity position by reducing our outstanding repurchase agreements, engaging in opportunistic dispositions and maintaining a defensive posture as it related to new investments.

During the second half of the year, we pursued new single-family and multi-family investments while we opportunistically sold certain investment securities.

The following table presents the activity for our investment portfolio for the year ended December 31, 2020 (dollar amounts in thousands):

December 31, 2018

December 31, 2019 Acquisitions Repayments (1)

Sales Fair Value Changes and Other (2)

December 31, 2020

Residential loans $ 1,632,510 $ 569,557 $ (344,542) $ (96,892) $ 21,748 $ 1,782,381

Preferred equity investments, mezzanine loans and equity investments 370,010 80,500 (45,611) — 17,789 422,688

Investment securities

1 unchanged sentence

Agency RMBS (3)

922,877 199,472 (43,809) (930,364) (8,781) 139,395

Agency CMBS (3) (4)

50,958 — (77) (145,411) 94,530 —

Total Agency securities 973,835 199,472 (43,886) (1,075,775) 85,749 139,395

267,777 72,896 (6,129) (248,741) 100,637 186,440

Non-Agency RMBS

715,314 273,897 (139,717) (433,076) (60,752) 355,666

49,214 — — — (5,989) 43,225

Total investment securities available for sale 2,006,140 546,265 (189,732) (1,757,592) 119,645 724,726

Consolidated SLST (6) (7)

276,770 39,984 (1,152) (62,602) (40,856) 212,144

Consolidated K-Series (8)

1,092,295 — (92,425) (555,218) (444,652) —

Total investment securities

Distressed and other residential mortgage loans

Preferred equity investments, mezzanine loans and investments in unconsolidated entities

3,375,205 586,249 (283,309) (2,375,412) (365,863) 936,870

Other investments (9)

Primarily includes principal repayments, preferred equity redemptions and joint venture investment redemptions.

Primarily includes changes in fair value, net premium amortization/discount accretion, preferred return or interest deferral, payments made on mortgages and notes payable in Consolidated VIEs and losses incurred on real estate under development in a Consolidated VIE.

Agency RMBS and Agency CMBS issued by Consolidated SLST and the Consolidated K-Series, respectively, are included in (4) and (5) below, respectively.

Consolidated SLST is presented on our consolidated balance sheets as of December 31, 2019 as residential loans held in securitization trust, at fair value and residential collateralized debt obligations, at fair value.

A reconciliation to our consolidated financial statements as of December 31, 2019 follows (dollar amounts in thousands):

December 31, 2019

Residential loans held in securitization trust, at fair value

16,870 1,747 — (14,457) 5,274 9,434

Total investment portfolio $ 5,394,595 $ 1,238,053 $ (673,462) $ (2,486,761) $ (321,052) $ 3,151,373

(1) Primarily includes principal repayments.

(2) Primarily includes net realized gains or losses, changes in net unrealized gains or losses (including reversals of previously recognized net unrealized gains or losses on sales), net amortization/accretion and transfers within investment categories.

(3) Agency RMBS issued by Consolidated SLST is included in footnote (6) below.

Agency CMBS issued by the Consolidated K-Series as of December 31, 2019 is included in footnote (7) below.

(4) Includes transfer of Agency CMBS issued by the Consolidated K-Series as a result of the de-consolidation of the Consolidated K-Series and the subsequent sale of these Agency CMBS during the year.

(5) Includes IOs and mezzanine securities transferred from the Consolidated K-Series as a result of de-consolidation with total fair value of $97.6 million as of December 31, 2020.

(6) Consolidated SLST is presented on our consolidated balance sheets as residential loans, at fair value and collateralized debt obligations, at fair value.

A reconciliation to our consolidated financial statements as of December 31, 2020 and 2019, respectively, follows (dollar amounts in thousands):

December 31, 2020 December 31, 2019

Residential loans, at fair value $ 1,266,785 $ 1,328,886

Deferred interest (a)

Residential collateralized debt obligations, at fair value

Collateralized debt obligations, at fair value (1,054,335) (1,052,829)

Consolidated SLST investment securities owned by NYMT $ 212,144 $ 276,770

Included in receivables and other assets on our consolidated balance sheets.

The Consolidated K-Series are presented on our consolidated balance sheets as multi-family loans held in securitization trusts, at fair value and multi-family collateralized debt obligations, at fair value.

A reconciliation to our consolidated financial statements as of December 31, 2018 and 2019 , respectively, follows (dollar amounts in thousands):

December 31, 2018

(a) Included in other liabilities and other assets on our consolidated balance sheets as of December 31, 2020 and 2019, respectively.

(7) In the first quarter of 2020, the Company sold its investment in the senior securities issued by Consolidated SLST for sales proceeds of approximately $62.6 million.

(8) The Consolidated K-Series are presented on our consolidated balance sheets as multi-family loans, at fair value and collateralized debt obligations, at fair value.

A reconciliation to our consolidated financial statements as of December 31, 2019 follows (dollar amounts in thousands):

December 31, 2019

Multi-family loans held in securitization trusts, at fair value

Multi-family collateralized debt obligations, at fair value

Multi-family loans, at fair value $ 17,816,746

Collateralized debt obligations, at fair value (16,724,451)

Consolidated K-Series investment securities owned by NYMT $ 1,092,295

(9) Includes the following balances as of December 31, 2020 and 2019, respectively (dollar amounts in thousands):

December 31, 2018

December 31, 2019

Real estate held for sale in consolidated variable interest entities

Real estate under development in consolidated variable interest entities

Mortgages and notes payable in consolidated variable interest entities

December 31, 2020 December 31, 2019

Preferred equity investment in Consolidated VIE $ 9,434 $ —

Real estate under development in Consolidated VIEs — 14,464

Other loan investments — 2,406

Other investments

Our single-family credit investment strategy is presently focused on mortgage credit and also consists of two primary investment strategies.

We invest in distressed, performing, and other residential mortgage loans and residential bridge loans either in loan form or securities backed by these loans.

Consistent with this strategy, we acquired an aggregate of $829.5 million of residential mortgage loans and $773.4 million of non-Agency RMBS during the year ended December 31, 2019, which includes $251.0 million in first loss subordinated securities and certain IO securities issued by a Freddie Mac-sponsored residential mortgage loan securitization, which we refer to as Consolidated SLST.

To date, we have not pursued vertical integration into a mortgage origination platform to acquire new originations in the residential loan market as we presently believe it is more important to maintain the flexibility to move among markets to better locate compelling opportunities and invest where attractively-priced risk can be sourced from a large selection of sellers.

We feel that a market position where we are not viewed as a competitive threat and instead offer the market liquidity with certain mortgage characteristics, positions us to see unique investment opportunities in the sector.

With a deep credit understanding of the residential loan markets, we can move quickly in various sub-sectors, such as in sub-performing or credit-impaired loans to unlock value.

In multi-family credit investments, we presently focus on two strategies.

We have continued to invest in first loss POs and other securities issued by Freddie Mac-sponsored multi-family loan K-Series securitizations where our asset management team can monitor the performance of the underlying collateral and, if needed, participate in the workouts of problem loans.

In 2019 , we purchased first loss POs and other securities from five K-Series securitizations totaling $346.2 million .

Our second strategy is to source preferred equity and mezzanine loan investments in entities that own multi-family properties in private transactions away from the broader markets through our relationships with developers and owners.

In 2019 , we funded 18 such investments aggregating approximately $113.9 million .

The market experienced general spread tightening in 2019 , which benefited our single-family and multi-family credit portfolios.

While lower interest rates and increased prepayment speeds negatively impacted our Agency RMBS portfolio, it had the opposite effect on our single-family credit loan portfolio as prepayments monetize the discount at which we purchased the loans, providing for higher investment return.

The Company’s relative allocation to Agency Securities declined over the years as the opportunity became less compelling relative to other strategies of focus.

Today, the Company primarily uses Agency Securities as an incubator to redeploy capital into credit assets.

New investment allocation is currently focused on Agency CMBS, as the Company is protected against negative convexity risk.

During 2019 , we successfully accessed the capital markets with six public common stock offerings, one public preferred stock offering and our at-the-market common and preferred equity programs, raising total net proceeds of $1.0 billion .

Our book value per common share increased by $0.13 per common share in the year ended December 31, 2019 while we continued to pay dividends of $0.20 per common share per quarter during 2019 .

As of December 31, 2019 , our $5.4 billion investment portfolio was financed with borrowings representing 1.5 times our total stockholders’ equity.

We believe our utilization of a conservative leverage strategy will enable us to better preserve book value over future quarters and to take advantage of market dislocations.

Total other investments $ 9,434 $ 16,870

Current Market Conditions and Commentar y

The results of our business operations are affected by a number of factors, many of which are beyond our control, and primarily depend on, among other things, the level of our net interest income, the market value of our assets, which is driven by numerous factors including the supply and demand for mortgage, housing and credit assets in the marketplace, the terms and availability of adequate financing, general economic and real estate conditions (both on a national and local level), the impact of government actions on the real estate and mortgage industries, and the credit performance of our credit sensitive assets.

The market conditions discussed below significantly influence our investment strategy and results:

The 2019 fiscal year was marked by continued U.S.

economic growth, continued sluggish growth in several other developed countries, low inflation, continued labor market expansion, easing monetary policy and increased consumer confidence late in the year, which in turn contributed to low inflation, strong labor markets and moderately positive housing sector data.

After experiencing in 2018 their worst annual performance since 2008, U.S.

equity markets bounced back strongly in 2019 with the S&P 500 posting a 28.9% gain over the prior year.

The interest rate environment experienced volatility during of 2019, with the Treasury curve remaining mostly flat during the first half of 2019 before inverting for a short period during the third quarter of 2019 and then increasing sharply during the fourth quarter of 2019 with the spread between the 2-Year U.S.

The results of our business operations are affected by a number of factors, many of which are beyond our control, and primarily depend on, among other things, the level of our net interest income, the market value of our assets, which is driven by numerous factors including the supply and demand for mortgage, housing and credit assets in the marketplace, the ability of our operating partners and borrowers of our loans and those that underlie our investment securities to meet their payment obligations, the terms and availability of adequate financing and capital, general economic and real estate conditions (both on a national and local level), the impact of government actions in the real estate, mortgage, credit and financial markets, and the credit performance of our credit sensitive assets.

Financial and mortgage-related asset markets experienced improving conditions during the fourth quarter of 2020 with the U.S.

economy continuing its recovery.

stocks continued to show signs of recovery during the fourth quarter of 2020 following the sharp sell-off during the back half of the first quarter.

Reflective of abundant liquidity, demand for yield and encouraging signs for growth in 2021, credit-sensitive asset pricing continued to improve during the fourth quarter.

Overall, U.S.

economic activity showed signs of advancement during the fourth quarter of 2020 buoyed by increases in corporate and residential fixed investment, offset in part by a reduction in consumer spending.

While prospects for 2021 remain hopeful with expected gains on the job-front, pent-up consumer demand, elevated household savings and further government stimulus, uncertainty abounds with the discovery of new COVID-19 variants, concerns over vaccine efficacy and the timing for lifting of restrictions designed to mitigate the spread of the virus.

As was the case for credit-sensitive assets generally across markets, pricing for many of the assets in our investment portfolio during the fourth quarter continued to improve due to further credit spread tightening.

Liquidity to MBS and mortgage financing markets was stable and favorably-priced during the fourth quarter, as evidenced by the Company completing a longer-term, securitization financing transaction during the quarter generating approximately $299.3 million of net proceeds to the Company.

Due to the discovery here in the U.S.

of new COVID-19 variants and uncertainty relating to the speed of vaccine distribution, stimulus negotiations and other policy matters, we expect markets to continue to experience volatility in 2021.

The market conditions discussed below significantly influence our investment strategy and results, many of which have been significantly impacted since mid-March by the ongoing COVID-19 pandemic:

Financial and Economic Data.

The 2020 fiscal year was marked by the COVID-19 pandemic and the measures taken in response to contain its spread in the United States and abroad and their impact on the global economy and markets generally.

After experiencing a sharp sell-off during the first quarter with the S&P 500 down approximately 20%, U.S.

stocks recovered throughout the remainder of 2020 with the S&P 500 posting a total return of 18.40% for the full year.

The interest rate environment experienced volatility during 2020 with the Treasury curve steepening as the Federal Reserve held short-term interest rates near zero beginning in March.

On December 31, 2020, the spread between the 2-Year U.S.

Treasury yield and the 10-Year U.S.

Treasury yield closing at 34 basis points on December 31, 2019, up 18 basis points from January 2, 2019.

Economic Data .

Although U.S.

economic data released over the past quarter suggests that the U.S.

economy has continued to expand, the U.S.

economy grew at a slower pace in 2019 as compared to 2018, with real gross domestic product (“GDP”) expanding by 2.3% for full year 2019, versus 2.9% for full year 2018.

According to the minutes of the Federal Reserve’s December 2019 meeting, Federal Reserve policymakers expect the GDP growth rate to slow in 2020 with a median projection for GDP growth at or slightly above 1.9%, while projecting a deceleration in GDP growth in 2021 and 2022.

labor market continued its expansion in 2019.

Treasury yield closed at 80 basis points, up 50 basis points from January 2, 2020.

economy contracted in 2020 as compared to 2019 as a result of the fallout from the COVID-19 pandemic and related economic consequences, with real gross domestic product (“GDP”) decreasing by 3.5% for full year 2020, versus growth of 2.2% for full year 2019.

After the most severe contraction of the GDP since the Great Depression in the second quarter at -31.4%, the third and fourth quarter GDP growth of 33.4% and 4%, respectively, suggests that the U.S.

economy continues to recover.

According to the minutes of the Federal Reserve’s December 2020 meeting, Federal Reserve policymakers expect the GDP growth rate to improve in 2021 with a median projection for GDP growth at or slightly above 4.2%, while projecting a deceleration in GDP growth in 2022 and 2023.

After the effects of the COVID-19 pandemic and efforts to contain it led to a loss of 20.7 million jobs from nonfarm payrolls and an unemployment rate of 14.7% in April, the U.S.

labor market continued to show improvements throughout the second half of 2020.

Department of Labor attributed these improvements to the resumption of economic activity that had been curtailed due to the COVID-19 pandemic.

According to the U.S.

Department of Labor, the U.S.

unemployment rate fell from 3.9% as of the end of December 2018 to 3.5% as of the end of December 2019, while total nonfarm payroll employment posted an average monthly increase of 173,000 jobs in 2019, down from an average monthly increase of 223,000 jobs in 2018.

Although the pace of the labor market expansion slowed some in 2019, average hourly earnings for all employees of private nonfarm payrolls increased by 2.9% during 2019.

Federal Reserve and Monetary Policy .

In view of realized and expected labor market conditions, economic activity and inflation, the Federal Reserve decided to lower the target range for the federal funds rate by 25 basis points in each of July 2019, September 2019 and October 2019.

In January 2020 and December 2019, the Federal Reserve decided to leave the federal funds rate unchanged.

The Federal Reserve indicated that in determining the size and timing of future adjustments to the target range for the federal funds rate, it will assess “realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective.” Significant uncertainty with respect to the timing at which the Federal Reserve will adjust the target range for the federal funds rate continues to persist and may result in significant volatility during 2020 and future periods.

Greater uncertainty frequently leads to wider asset spreads or lower prices and higher hedging costs.

unemployment rate rose from 3.5% at the end of December 2019 to 6.7% at the end of December 2020.

Although initial weekly jobless claims remain elevated, there have been more encouraging signs in the labor market recently, with average hourly earnings for all employees of private nonfarm payrolls increasing by 3.7% during 2020.

Single-Family Homes and Residential Mortgage Market.

After experiencing decelerating growth in price increases during most of 2019, the residential real estate market displayed signals of modestly accelerating growth during November 2019.

Data released by S&P Indices for its S&P/Case-Shiller Home Price Indices for November 2019 showed that, on average, home prices increased 2.6% for the 20-City Composite over November 2019, up from 2.2% from the previous month.

The residential real estate market was a bright spot in an otherwise challenging economic environment in 2020.

According to the National Association of Realtors (“NAR”), total existing-home sales, which includes single-family homes, townhomes, condominiums and co-ops, increased 0.7% from November 2020 to a seasonally-adjusted annual rate of 6.76 million in December 2020.

In total, existing-home sales rose 22.2% year-over-year, up from 5.53 million in December 2019.

In addition, NAR reported that the median existing-home price for all housing types in December 2020 was $309,800, up 12.9% from December 2019 ($274,500).

In addition, according to data provided by the U.S.

Department of Commerce, privately-owned housing starts for single-family homes averaged a seasonally adjusted annual rate of 1,237,000 and 1,002,000 for the quarter and year ended December 31, 2020, respectively, as compared to an annual rate of 894,000 for the year ended December 31, 2019.

Declining single-family housing fundamentals may adversely impact the overall credit profile of our existing portfolio of single-family residential credit investments, but also may result in a more attractive new investment environment.

Declining single-family housing fundamentals may adversely impact the overall credit profile of our existing portfolio of single-family residential credit investments.

As of December 31, 2020, approximately 2% of borrowers in our residential loan portfolio remained in an active COVID-19 relief plan.

Multi-family Housing.

Apartments and other residential rental properties continued to perform well in 2019.

According to data provided by the U.S.

Department of Commerce, starts on multi-family homes containing five units or more averaged a seasonally adjusted annual rate of 452,000 and 390,000 for the quarter and year ended December 31, 2019, as compared to 362,000 for the full year 2018.

Although supply expansion remained solid in 2019, vacancy concerns among multi-family industry participants eased during 2019.

According to the Multifamily Vacancy Index (“MVI”), which is produced by the National Association of Home Builders and surveys the multi-family housing industry’s perception of vacancies, the MVI was at 40 for the third quarter of 2019, consistent with the second quarter of 2019.

Department of Commerce, starts on multi-family homes containing five or more units averaged a seasonally adjusted annual rate of 339,000 and 382,000 for the quarter and year ended December 31, 2020, as compared to 390,000 for the full year 2019.

Supply expansion remained solid in 2020, and vacancy concerns among multi-family industry participants eased during the second half of 2020.

According to the Multifamily Vacancy Index (“MVI”), which is produced by the National Association of Home Builders and surveys the multi-family housing industry’s perception of vacancies, the MVI was at 44 for the third quarter of 2020, a decrease from the second quarter score of 62.

The MVI was at 59 for the first quarter of 2020 and 40 for the fourth quarter of 2019.

Strength in the multi-family housing sector has contributed to valuation improvements for multi-family properties and, in turn, many of the structured multi-family investments that we own.

However, with record jobless claims filed during the ongoing COVID-19 pandemic, the financial ability of households to meet their rental payment obligations is a present and ongoing concern.

Data released by the National Multifamily Housing Council shows that 89.8% of professionally-managed apartment households made a full or partial December rent payment by December 20, 2020 in its survey of over 11.1 million professionally-managed apartment units across the country.

This represents a 3.4-percentage point decrease in the share who paid rent through December 20, 2019 and compares to 90.3% that had paid by November 20, 2020.

This data encompasses a wide variety of market-rate rental properties, which can vary by size, type and average rental price.

As of December 31, 2020, the Company had one loan that is delinquent in making its distributions to us and one loan that is in a forbearance arrangement with us.

These loans represent 3.6% of our total preferred equity and mezzanine loan investment portfolio.

Although the multi-family housing sector held up relatively well during 2020, weakening multi-family housing fundamentals, may cause our operating partners to fail to meet their obligations to us and/or contribute to valuation declines for multi-family properties, and in turn, many of the structured multi-family investments that we own.

Credit Spreads.

Although credit spreads generally tightened throughout much of 2019, credit spreads widened during the fourth quarter of 2019.

However, credit spreads for residential and multi-family credit assets generally remained tight during 2019 and this had a positive impact on the value of many of our credit sensitive assets.

Tightening credit spreads generally increase the value of many of our credit sensitive assets while widening credit spreads generally decrease the value of these assets.

Credit spreads tightened from the second quarter onward as the economy experienced a resumption of activity from the beginning of the COVID-19 pandemic.

Tightening credit spreads generally increase the value of many of our credit sensitive assets, while widening credit spreads tend to have a negative impact on the value of many of our credit sensitive assets.

Financial markets.

During 2020, the bond market experienced volatility with the closing yield of the 10-year U.S.

Treasury Note dropping from 2.66% on January 2, 2019 to as low as 1.47% on September 4, 2019, and closing at 1.92% on December 31, 2019.

Treasury Note dropping from 1.88% on January 2, 2020 to as low as 0.52% on August 4, 2020, and closing at 0.93% on December 31, 2020.

Overall interest rate volatility tends to increase the costs of hedging and may place downward pressure on some of our strategies.

During the second half of 2019, the Treasury curve initially decreased and even inverted for a short period during the third quarter of 2019 and then expanded with the spread between the 2-Year U.S.

During 2020, the Treasury curve steepened with the spread between the 2-Year U.S.

Treasury yield and the 10-Year U.S.

Treasury yield closing at 34 basis points on December 31, 2019, up 9 basis points from June 28, 2019.

Treasury yield closing at 80 basis points on December 31, 2020, up 50 basis points from January 2, 2020.

As of January 31, 2021, the spread between the 2-Year U.S.

3 unchanged sentences

Increases in interest rates raises the costs of many of our liabilities, while overall interest rate volatility generally increases the costs of hedging.

Developments at Fannie Mae and Freddie Mac .

Payments on the Agency fixed-rate RMBS, Agency ARMs RMBS and Agency CMBS in which we invest are guaranteed by Fannie Mae and Freddie Mac.

In addition, , all of our multi-family CMBS, except the Agency CMBS, are not guaranteed by Freddie Mac but have been issued by securitization vehicles sponsored by Freddie Mac.

As broadly publicized, Fannie Mae and Freddie Mac are presently under federal conservatorship as the U.S.

Government continues to evaluate the future of these entities and what role the U.S.

Government should continue to play in the housing markets in the future.

On March 27, 2019, President Trump signed a Presidential memorandum directing the Secretary of Treasury to develop a reform plan aimed at ending the conservatorship of Fannie Mae and Freddie Mac and improving regulatory oversight over them.

On September 5, 2019, the U.S.

Treasury Department released its reform plan, which consist of nearly 50 recommended legislative and administrative reforms, aimed at (i) ending the conservatorship of Fannie Mae and Freddie Mac, (ii) increasing competition in the housing finance market and (iii) providing adequate compensation to the federal government for the support it provides to the housing finance market.

Since being placed under federal conservatorship, there have been a number of proposals introduced, both from industry groups and by the U.S.

Congress, relating to changing the role of the U.S.

government in the mortgage market and reforming or eliminating Fannie Mae and Freddie Mac.

It remains unclear how the U.S.

Congress or the executive branch of the U.S.

Government will move forward on such reform at this time and what impact, if any, this reform will have on mortgage REITs.

See “Item 1A.

Risk Factors-Risks Related to Regulatory Matters-The federal conservatorship of Fannie Mae and Freddie Mac and related efforts, along with any changes in laws and regulations affecting the relationship between Fannie Mae, Freddie Mac and Ginnie Mae and the U.S.

Government, may materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our shareholders.”

Key Highlights - Year Ended December 31, 2019

Monetary and Fiscal Policy and Recent Regulatory Developments.

The Federal Reserve has taken a number of actions to stabilize markets as a result of the impact of the COVID-19 pandemic.

To address funding disruptions resulting from the economic crisis and market dislocations resulting from the COVID-19 pandemic, the Federal Reserve has been conducting large scale overnight repo operations in the U.S.

Treasury, Agency debt and Agency RMBS financing markets and substantially increased these operations.

On March 15, 2020, the Federal Reserve announced a $700 billion asset purchase program to provide liquidity to the U.S.

Treasury and Agency RMBS markets.

Specifically, the Federal Reserve stated that it would purchase at least $500 billion of U.S.

Treasuries and at least $200 billion of Agency RMBS.

On January 21, 2021, the Federal Reserve announced it would continue to increase its holdings of U.S.

Treasuries by at least $80 billion per month and of Agency MBS by at least $40 billion per month until “substantial further progress has been made toward the Committee’s maximum employment and price stability goals.” Additionally, in view of the COVID-19 pandemic and to foster maximum employment and price stability, the Federal Reserve decided to lower the target range for the federal funds rate by a total of 150 basis points in March 2020 to a target range of 0% to .25%.

The Federal Reserve indicated that in determining the size and timing of future adjustments to the target range for the federal funds rate, it will assess “realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective.” Since lowering the target range for the federal funds rate in March 2020, the Federal Reserve continues to signal an intention to hold the target range at present levels with Federal Reserve Chairman Jerome Powell stating in January 2021 that the time to raise the target range “is no time soon.”

According to the latest Monetary Policy Report submitted to Congress in June 2020 by the Federal Reserve Board of Governors, trading conditions in U.S.

Treasuries and MBS markets improved gradually since the March 2020 announcement of Federal Reserve policies and the functioning and liquidity of the MBS market have mostly returned to pre-February 2020 standards, though strains continue in less liquid parts of the market.

However, bid-ask spreads for longer-maturity and off-the-run Treasuries remain wider than in mid-February 2020.

An updated assessment of trading conditions in U.S.

Treasuries and MBS markets is expected from the Federal Reserve in its next Monetary Policy Report due to Congress in February 2021.

To address the COVID-19 pandemic and its effects on the economy, the federal government enacted three relief spending bills in 2020 and is considering a fourth such bill that was introduced in January 2021.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law to provide many forms of direct support to individuals and small businesses in order to stem the steep decline in economic activity resulting from the COVID-19 pandemic.

The over $2 trillion relief bill, among other things, provided for direct payments to each American making up to $75,000 a year, increased unemployment benefits for up to four months (on top of state benefits), funding to hospitals and health care providers, loans and investments to businesses, states and municipalities and grants to the airline industry.

On April 24, 2020, President Trump signed a second funding bill into law that provided $484 billion of funding to individuals, small businesses, hospitals, health care providers and additional coronavirus testing efforts.

On December 30, 2020, President Trump signed a third COVID-19 relief package into law.

This relief package included $600 direct payments to Americans making up to $75,000 a year, enhanced unemployment benefits, rental assistance, loans to businesses, and funds for the purchase and distribution of vaccines, among other relief provisions.

In January 2021, President Biden introduced a $1.9 trillion COVID-19 relief bill.

As proposed, President Biden’s relief package includes:

direct payments of $1,400 to Americans;

increased per-week unemployment benefits of $400 through September;

an extension of the eviction and foreclosure moratorium until the end of September;

and $590 billion in aid for local governments, schools, COVID-19 testing and a vaccination program.

Democratic leaders in Congress have indicated a desire to pass President Biden’s proposed stimulus plan by mid-March when emergency unemployment benefits expire.

However, ideological divisions and narrow Democratic majorities in Congress are likely to affect the content and timing of the passage of President Biden’s plan, if it is to pass.

In addition, in response to the economic impact of the COVID-19 pandemic, governors of several states issued executive orders prohibiting evictions and foreclosures for specified periods of time, and many courts enacted emergency rules delaying hearings related to evictions or foreclosures.

While some of these state protections have expired, the Centers for Disease Control and Prevention issued an order to temporarily halt residential evictions under certain circumstances in an effort to prevent the spread of the COVID-19 pandemic, which became effective on September 4, 2020 and has been extended by the Biden administration to March 31, 2021.

To address the severe dislocations experienced in the mortgage and fixed-income markets that resulted from the COVID-19 pandemic, since March 23, 2020, the Federal Housing Finance Agency (“FHFA”) took steps to implement portions of the CARES Act and to support mortgage servicers.

Under the CARES Act, borrowers experiencing hardship from the COVID-19 pandemic are eligible to receive forbearance of up to 12 months.

The FHFA announced that the GSEs will offer such forbearance to qualifying multi-family borrowers through March 31, 2021.

The GSEs will also offer such forbearance arrangements to single-family mortgages indefinitely until the GSEs provide further notice.

In response to such forbearance arrangements and to assist servicers facing revenue losses caused by the COVID-19 pandemic, the FHFA limited the advance payments required to be made to the GSEs.

Specifically, servicers of Agency RMBS are only required to advance four months of missed payments on loans in forbearance.

The government continues to provide enhanced unemployment support as unemployment levels remain precarious.

In February 2021, Federal Reserve Chair Jerome Powell stated that the true level of unemployment in January 2021 was significantly higher than the 6.3% unemployment rate reported by the U.S.

Department of Labor.

Chair Powell said January’s unemployment rate was “close to 10 percent” when accounting for misclassified workers and those that have left the workforce altogether.

With unemployment levels so uncertain, government support programs have aided the broader economy in recovering from the ongoing effects of the COVID-19 pandemic.

The CARES Act provided enhanced unemployment benefits and extended the length of time during which unemployment benefits could be collected.

On December 27, 2020, Congress extended eligibility for certain enhanced unemployment programs until March 14, 2021.

Without such continued unemployment support, we anticipate that the number of our operating partners and borrowers of our residential loans and those that underlie our investment securities that become delinquent or default on their financial obligations could increase significantly.

Such increased levels could materially adversely affect our business, financial condition, results of operations and our ability to make distributions to our stockholders.

In 2017, policymakers announced that LIBOR will be replaced by 2021.

The directive was spurred by the fact that banks are uncomfortable contributing to the LIBOR panel given the shortage of underlying transactions on which to base levels and the liability associated with submitting an unfounded level.

LIBOR will be replaced with a new Secured Overnight Funding Rate (“SOFR”), a rate based on U.S.

repo trading.

The new benchmark rate will be based on overnight Treasury General Collateral repo rates.

The rate-setting process will be managed and published by the Federal Reserve and the Treasury’s Office of Financial Research.

On November 30, 2020, ICE Benchmark Administration (“IBA”), the administrator of LIBOR, with the support of the Federal Reserve and the United Kingdom’s Financial Conduct Authority, announced plans to consult on ceasing publication of USD LIBOR on December 31, 2021 for only the one week and two month USD LIBOR tenors, and on June 30, 2023 for all other USD LIBOR tenors.

While this announcement extends the transition period to June 2023, the Federal Reserve concurrently issued a statement advising banks to stop new USD LIBOR issuances by the end of 2021.

In light of these recent announcements, the future of LIBOR at this time is uncertain and any changes in the methods by which LIBOR is determined or regulatory activity related to LIBOR’s phaseout could cause LIBOR to perform differently than in the past or cease to exist.

We continue to monitor the emergence of this new rate carefully, as it will likely become the new benchmark for hedges and a range of interest rate investments.

The scope and nature of the actions the Federal Reserve and other governmental authorities will ultimately undertake are unknown and will continue to evolve.

There can be no assurance as to how, in the long term, these and other actions, as well as the negative impacts from the ongoing COVID-19 pandemic, will affect the efficiency, liquidity and stability of the financial, credit and mortgage markets, and thus, our business.

Greater uncertainty frequently leads to wider asset spreads or lower prices and higher hedging costs.

Full Year 2020 Summary

Earnings and Return Metrics

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Net interest income $ 127,093

Net income attributable to Company's common stockholders

Net income attributable to Company's common stockholders per share (basic)

Comprehensive income attributable to Company's common stockholders

Comprehensive income attributable to Company's common stockholders per share (basic)

Book value per share

Net loss attributable to Company's common stockholders $ (329,696)

Net loss attributable to Company's common stockholders per share (basic) $ (0.89)

Comprehensive loss attributable to Company's common stockholders $ (353,834)

Comprehensive loss attributable to Company's common stockholders per share (basic) $ (0.95)

Book value per common share $ 4.71

Economic return on book value (1)

Dividends per share

Economic return on book value is based on the change in GAAP book value per share plus dividends declared per common share during the period.

We acquired residential, multi-family and other credit assets totaling $2.4 billion .

We issued 132,940,000 shares of common stock collectively through six underwritten public offerings, resulting in total net proceeds of approximately $790.8 million .

We issued 6,900,000 shares of our 7.875% Series E Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock through an underwritten public offering, resulting in total net proceeds to us of approximately $166.7 million .

We also issued 1,972,888 shares of preferred stock under our at-the-market preferred equity offering program, resulting in net proceeds of approximately $48.4 million .

Subsequent Development

On January 10, 2020 , the Company issued 34,500,000 shares of its common stock through an underwritten public offering resulting in total net proceeds to the Company of approximately $206.7 million after deducting underwriting discounts and commissions and offering expenses.

Additionally, on February 13, 2020 , the Company issued 50,600,000 shares of its common stock through an underwritten public offering resulting in total net proceeds to the Company of approximately $305.3 million after deducting underwriting discounts and commissions and offering expenses.

Dividends per common share $ 0.23

(1) Economic return on book value is based on the periodic change in GAAP book value per common share plus dividends declared per common share during the period.

• During the first half of the first quarter of 2020, we issued 85.1 million shares of common stock collectively through two underwritten public offerings, resulting in total net proceeds of $511.9 million.

• Additionally, in the first quarter of 2020, we acquired single-family and multi-family residential credit assets totaling $531.2 million and Agency RMBS totaling $100.9 million.

• In the latter portion of the first quarter of 2020, we experienced unprecedented market conditions resulting from the COVID-19 pandemic.

In response, we took the following actions to manage our portfolio through the disruption and improved liquidity:

• Sold all of our first loss POs and certain mezzanine CMBS securities issued by the Consolidated K-Series for total sales proceeds of $555.2 million, recognized a net realized loss of $54.1 million and reversed previously recognized net unrealized gains of $168.5 million.

As a result of the sales, we de-consolidated $17.4 billion in multi-family loans held in the Consolidated K-Series and $16.6 billion in collateralized debt obligations issued by the Consolidated K-Series.

• Sold $1.4 billion of investment securities, including $993.0 million of Agency RMBS, $145.4 million of Agency CMBS, $130.9 million of non-Agency RMBS and $114.0 million of CMBS and recognized a net realized loss of $58.7 million.

• Sold residential loans for approximately $50.0 million in proceeds, recognized a realized loss of $16.2 million and reversed previously recognized unrealized gains of $4.5 million.

• Terminated interest rate swaps resulting in a net realized loss of $73.1 million, which was partially offset by the reversal of previously recognized unrealized losses of $29.0 million for a total net loss of $44.1 million.

• Reduced outstanding repurchase agreements for investment securities by $1.6 billion from previous year-end levels.

• Temporarily suspended payment of quarterly dividends on both our common and preferred stock.

• Throughout the remainder of the year, we entered into new financing transactions, repaid or restructured repurchase agreement financings, invested in our targeted assets, opportunistically sold assets and reinstated our quarterly dividend payments on both our common and preferred stock, including as follows:

• Completed a non-mark-to-market re-securitization backed by non-Agency RMBS generating net proceeds of approximately $109.0 million.

• Completed two securitizations of residential loans, resulting in approximately $540.4 million in net proceeds to us.

Portions of the net proceeds were utilized to repay approximately $466.6 million on outstanding repurchase agreements related to residential loans.

• Repaid all outstanding repurchase agreements that financed investment securities.

• Obtained non-mark-to-market financing for residential loans through repurchase agreements with new and existing counterparties.

• Purchased $415.7 million in residential loans and $138.5 million in Agency RMBS and funded $50.0 million in multi-family preferred equity investments.

• Sold non-Agency RMBS for approximately $302.1 million in proceeds, CMBS for approximately $134.7 million in proceeds and residential loans for approximately $46.9 million in proceeds.

• Reinstated the payment of quarterly dividends on both our common and preferred stock and declared and paid preferred stock dividends in arrears for the first quarter of 2020.

Significant Estimates and Critical Accounting Policies

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We believe that the estimates, judgments and assumptions utilized in the preparation of our consolidated financial statements are prudent and reasonable.

Although our estimates contemplate current conditions and how we expect them to change in the future, it is reasonably possible that actual conditions could be different than anticipated in those estimates, which could materially affect reported amounts of assets, liabilities and accumulated other comprehensive income at the date of the consolidated financial statements and the reported amounts of income, expenses and other comprehensive income during the periods presented.

Although our estimates contemplate conditions as of December 31, 2020 and how we expect them to change in the future, it is reasonably possible that actual conditions could be different than anticipated in those estimates, which could materially affect reported amounts of assets, liabilities and accumulated other comprehensive income at the date of the consolidated financial statements and the reported amounts of income, expenses and other comprehensive income during the periods presented.

Moreover, the uncertainty over the ultimate impact that the COVID-19 pandemic will have on the global economy generally, and on our business in particular, makes any estimates and assumptions inherently less certain than they would be absent the current and potential impacts of the COVID-19 pandemic.

Changes in the estimates and assumptions could have a material effect on these financial statements.

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Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the yield (or interest income) recognized on these securities.

A portion of the purchase discount on the Company’s first loss PO multi-family CMBS is designated as non-accretable purchase discount or credit reserve, which estimates the Company’s risk of loss on the mortgages collateralizing such multi-family CMBS, and is not expected to be accreted into interest income.

The amount designated as a credit reserve may be adjusted over time, based on the actual performance of the security, its underlying collateral, actual and projected cash flow from such collateral, economic conditions and other factors.

If the performance of a security with a credit reserve is more favorable than forecasted, a portion of the amount designated as credit reserve may be accreted into interest income over time.

Conversely, if the performance of a security with a credit reserve is less favorable than forecasted, the amount designated as credit reserve may be increased, or impairment charges and write-downs of such securities to a new cost basis could be required.

Interest income on our distressed and other residential mortgage loans, at fair value is accrued based on the outstanding principal balance and their contractual terms.

Premiums and discounts associated with the purchase of distressed and other residential mortgage loans at fair value are amortized or accreted into interest income over the life of the related loan using the effective interest method.

A portion of the purchase discount on the Company’s first loss PO multi-family CMBS was designated as non-accretable purchase discount or credit reserve, which estimated the Company’s risk of loss on the mortgages collateralizing such multi-family CMBS, and was not expected to be accreted into interest income.

The amount designated as a credit reserve could be adjusted over time, based on the actual performance of the security, its underlying collateral, actual and projected cash flow from such collateral, economic conditions and other factors.

If the performance of a security with a credit reserve was more favorable than forecasted, a portion of the amount designated as credit reserve could be accreted into interest income over time.

Conversely, if the performance of a security with a credit reserve was less favorable than forecasted, the amount designated as credit reserve could be increased, or impairment charges and write-downs of such securities to a new cost basis could be required.

Interest income on our residential loans is accrued based on the outstanding principal balance and their contractual terms.

Premiums and discounts associated with the purchase of residential loans are amortized or accreted into interest income over the life of the related loan using the effective interest method.

With respect to interest rate swaps that have not been designated as hedges, any net payments under, or fluctuations in the fair value of, such swaps will be recognized in current earnings.

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If listed prices or quotes are not available, then fair value is based upon internally developed models that primarily use inputs that are market-based or independently sourced market parameters, including interest rate yield curves.

The Company’s investment securities available for sale, multi-family loans held in securitization trusts, certain of its residential mortgage loans held in securitization trust, certain of its distressed and other residential mortgage loans, SLST CDOs and Multi-family CDOs are considered to be the most significant of its fair value estimates.

The Company’s residential loans, multi-family loans, investment securities available for sale, equity investments, Consolidated SLST CDOs and Consolidated K-Series CDOs are considered to be the most significant of its fair value estimates.

The Company’s valuation methodologies are described in “Note 14 – Fair Value of Financial Instruments” included in Item 8 of this Annual Report on Form 10-K.

Fair Value Option – The fair value option provides an election that allows companies to irrevocably elect fair value for financial assets and liabilities on an instrument-by-instrument basis at initial recognition.

Changes in fair value for assets and liabilities for which the election is made will be recognized in earnings as they occur.

The Company has elected the fair value option for the Company’s residential loans, preferred equity and mezzanine loan investments that are accounted for as loans, certain of its investment securities, available for sale and preferred equity investments that are accounted for under the equity method.

Variable Interest Entities – A VIE is an entity that lacks one or more of the characteristics of a voting interest entity.

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The Company is required to reconsider its evaluation of whether to consolidate a VIE each reporting period, based upon changes in the facts and circumstances pertaining to the VIE.

Loan Consolidation Reporting Requirement for Certain Multi-Family K-Series Securitizations and Residential Mortgage Loan Securitizations – We own 100% of the first loss POs of the Consolidated K-Series and 100% of the first loss subordinated securities of Consolidated SLST.

The Consolidated K-Series represents certain Freddie Mac-sponsored multi-family loan K-Series securitizations of which we, or one of our special purpose entities, or SPEs, own the first loss POs, certain IOs and certain senior or mezzanine securities.

We determined that the Consolidated K-Series were VIEs and that we are the primary beneficiary of the Consolidated K-Series.

As a result, we are required to consolidate the Consolidated K-Series’ underlying multi-family loans including their liabilities, income and expenses in our consolidated financial statements.

Consolidated SLST represents a Freddie Mac-sponsored residential mortgage loan securitization, of which we own the first loss subordinated securities and certain IOs and senior securities.

Loan Consolidation Reporting Requirement for Certain Multi-Family K-Series Securitizations and Residential Loan Securitizations – As of December 31, 2020 and 2019, we owned 100% of the first loss subordinated securities of Consolidated SLST.

Consolidated SLST represents a Freddie Mac-sponsored residential mortgage loan securitization, of which we own or owned the first loss subordinated securities and certain IOs and senior securities.

We determined that Consolidated SLST was a VIE and that we are the primary beneficiary of Consolidated SLST.

As a result, we are required to consolidate Consolidated SLST’s underlying residential mortgage loans including their liabilities, income and expenses in our consolidated financial statements.

We have elected the fair value option on the assets and liabilities held within both the Consolidated K-Series and Consolidated SLST, which requires that changes in valuations in the assets and liabilities of the Consolidated K-Series and Consolidated SLST be reflected in our consolidated statement of operations.

Changes in fair value for assets and liabilities for which the election is made will be recognized in earnings as they occur.

The Company elected the fair value option for certain of its investment securities available for sale, certain of its investments in unconsolidated entities, the Consolidated K-Series, Consolidated SLST and certain acquired distressed and other residential mortgage loans, including both first and second mortgages.

Distressed Residential Mortgage Loans, net – Certain of the distressed residential mortgage loans acquired by the Company at a discount, with evidence of credit deterioration since their origination and where it is probable that the Company will not collect all contractually required principal payments, are accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”).

Management evaluates whether there is evidence of credit quality deterioration as of the acquisition date using indicators such as past due or modified status, risk ratings, recent borrower credit scores and recent loan-to-value percentages.

Loans considered credit impaired are recorded at fair value at the date of acquisition, with no allowance for loan losses.

Subsequent to acquisition, the recorded amount for these loans reflects the original investment, plus accretion income, less principal and interest cash flows received.

These distressed residential mortgage loans are presented on the Company's consolidated balance sheets at carrying value, which reflects the recorded amount reduced by any allowance for loan losses established subsequent to acquisition.

Under ASC 310-30, the acquired credit impaired loans may be accounted for individually or aggregated and accounted for as a pool of loans if the loans being aggregated have common risk characteristics.

A pool is accounted for as a single asset with a single composite interest rate and an expectation of aggregate cash flows.

Once a pool is assembled, it is treated as if it was one loan for purposes of applying the accounting guidance.

For each pool established, or on an individual loan basis for loans not aggregated into pools, the Company estimates at the time of acquisition and periodically, the principal and interest expected to be collected.

The difference between the cash flows expected to be collected and the carrying amount of the loans is referred to as the “accretable yield.” This amount is accreted as interest income over the life of the loans using a level yield methodology.

Interest income recorded each period relates to the accretable yield recognized at the pool level or on an individual loan basis, and not to contractual interest payments received at the loan level.

The difference between contractually required principal and interest payments and the cash flows expected to be collected, referred to as the “nonaccretable difference,” includes estimates of both the impact of prepayments and expected credit losses over the life of the individual loan, or the pool (for loans grouped into a pool).

Management monitors actual cash collections against its expectations, and revised cash flow expectations are prepared as necessary.

A decrease in expected cash flows in subsequent periods may indicate that the loan pool or individual loan, as applicable, is impaired, thus requiring the establishment of an allowance for loan losses by a charge to the provision for loan losses.

An increase in expected cash flows in subsequent periods initially reduces any previously established allowance for loan losses by the increase in the present value of cash flows expected to be collected, and results in a recalculation of the amount of accretable yield for the loan pool.

The adjustment of accretable yield due to an increase in expected cash flows is accounted for prospectively as a change in estimate.

The additional cash flows expected to be collected are reclassified from the nonaccretable difference to the accretable yield, and the amount of periodic accretion is adjusted accordingly over the remaining life of the loans in the pool or individual loan, as applicable.

The impacts of (i) prepayments, (ii) changes in variable interest rates, and (iii) any other changes in the timing of expected cash flows are recognized prospectively as adjustments to interest income.

As a result, we are required to consolidate Consolidated SLST’s underlying residential loans including their liabilities, income and expenses in our consolidated financial statements.

As of December 31, 2019, we owned 100% of the first loss POs of the Consolidated K-Series.

The Consolidated K-Series represents certain Freddie Mac-sponsored multi-family loan K-Series securitizations of which we, or one of our special purpose entities, or SPEs, owned the first loss POs, certain IOs and certain senior or mezzanine securities.

We determined that the Consolidated K-Series were VIEs and that we were the primary beneficiary of the Consolidated K-Series.

As a result, we were required to consolidate the Consolidated K-Series’ underlying multi-family loans including their liabilities, income and expenses in our consolidated financial statements.

In March 2020, we sold our entire portfolio of first loss POs within the Consolidated K-Series, which resulted in the de-consolidation of the underlying multi-family loans and their liabilities.

We have elected the fair value option on the assets and liabilities held within both Consolidated SLST and the Consolidated K-Series, which requires that changes in valuations in the assets and liabilities of Consolidated SLST and the Consolidated K-Series be reflected in our consolidated statement of operations.

Recent Accounting Pronouncements

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The following provides an overview of the allocation of our total equity as of December 31, 2020 and 2019, respectively.

We fund our investing and operating activities with a combination of cash flow from operations, proceeds from common and preferred equity and debt securities offerings, including convertible notes, short-term and longer-term repurchase agreements borrowings, CDOs, securitized debt and trust preferred debentures.

A detailed discussion of our liquidity and capital resources is provided in “Liquidity and Capital Resources” elsewhere in this section.

During the year ended December 31, 2019 , we continued to take advantage of repurchase agreement financing available to us and our ability to raise capital through public and at-the-market offerings of both common and preferred stock to fund our investments in single-family and multi-family credit assets, Agency CMBS and Agency RMBS.

The following tables set forth our allocated capital by investment category at December 31, 2020 and 2019, respectively (dollar amounts in thousands).

At December 31, 2020:

Single-Family Credit

Multi-Family Credit

Investment securities, available for sale, at fair value

Distressed and other residential mortgage loans, at fair value

Distressed and other residential mortgage loans, net

Residential collateralized debt obligations

Investments in unconsolidated entities

Preferred equity and mezzanine loan investments

Multi-family loans held in securitization trusts, at fair value

Multi-family collateralized debt obligations, at fair value

Residential mortgage loans held in securitization trust, at fair value

Residential collateralized debt obligations, at fair value

Single-Family Multi-Family Other Total

Residential loans $ 3,049,166 $ — $ — $ 3,049,166

Consolidated SLST CDOs (1,054,335) — — (1,054,335)

Multi-family loans — 163,593 — 163,593

Investment securities available for sale (1)

495,061 186,440 43,225 724,726

Equity investments — 182,765 76,330 259,095

Other investments (2)

Carrying value

— 9,434 — 9,434

Total investment portfolio carrying value 2,489,892 542,232 119,555 3,151,679

Repurchase agreements (405,531) — — (405,531)

Subordinated debentures

Collateralized debt obligations

Residential loan securitizations (554,067) — — (554,067)

Non-Agency RMBS re-securitization (15,256) — — (15,256)

Convertible notes — — (135,327) (135,327)

Hedges (net) (2)

Cash and restricted cash (3)

Subordinated debentures — — (45,000) (45,000)

Cash, cash equivalents and restricted cash (3)

50,687 46,014 207,789 304,490

Other 59,516 (158) (52,773) 6,585

Net capital allocated $ 1,625,241 $ 588,088 $ 94,244 $ 2,307,573

Total Debt Leverage Ratio (4)

Total Leverage Ratio (4)

Portfolio Leverage Ratio (5)

Includes real estate under development in the amount of $14.5 million , other loan investments in the amount of $2.4 million and deferred interest related to residential mortgage loans held in securitization trust, at fair value of $0.7 million , all of which are included in the Company’s accompanying consolidated balance sheets in receivables and other assets.

Includes derivative liabilities of $29.0 million netted against a $44.8 million variation margin.

Restricted cash is included in the Company’s accompanying consolidated balance sheets in receivables and other assets.

Represents total debt divided by the Company’s total stockholders’ equity.

Total debt does not include Multi-family CDOs amounting to $16.7 billion , SLST CDOs amounting to $1.1 billion and Residential CDOs amounting to $40.4 million that are consolidated in the Company’s financial statements as they are non-recourse debt for which the Company has no obligation.

Represents repurchase agreement borrowings divided by the Company’s total stockholders’ equity.

(1) Agency RMBS with a fair value of $139.4 million are included in Single-Family.

(2) Represents the Company's preferred equity investment in a consolidated VIE.

(3) Restricted cash is included in the Company’s accompanying consolidated balance sheets in other assets.

(4) Represents total outstanding repurchase agreement financing, subordinated debentures and Convertible Notes divided by the Company’s total stockholders’ equity.

Does not include Consolidated SLST CDOs amounting to $1.1 billion, residential loan securitizations amounting to $554.1 million and non-Agency RMBS re-securitization amounting to $15.3 million as they are non-recourse debt for which the Company has no obligation.

(5) Represents outstanding repurchase agreement financing divided by the Company’s total stockholders’ equity.

At December 31, 2019:

Single-Family Credit

Multi-Family Credit

Investment securities, available for sale, at fair value

Distressed and other residential mortgage loans, at fair value

Distressed and other residential mortgage loans, net

Residential collateralized debt obligations

Investments in unconsolidated entities

Preferred equity and mezzanine loan investments

Multi-family loans held in securitization trusts, at fair value

Multi-family collateralized debt obligations, at fair value

Single-Family Multi-Family Other Total

Residential loans $ 2,961,396 $ — $ — $ 2,961,396

Consolidated SLST CDOs (1,052,829) — — (1,052,829)

Multi-family loans — 17,996,791 — 17,996,791

Consolidated K-Series CDOs — (16,724,451) — (16,724,451)

Investment securities available for sale (1) (2)

1,638,191 318,735 49,214 2,006,140

Equity investments — 124,392 65,573 189,965

Other investments (3)

Carrying value

3,119 14,464 — 17,583

Total investment portfolio carrying value 3,549,877 1,729,931 114,787 5,394,595

Repurchase agreements (2,160,342) (945,074) — (3,105,416)

Securitized debt and subordinated debentures

Collateralized debt obligations (40,429) — — (40,429)

Convertible notes — — (132,955) (132,955)

Subordinated debentures — — (45,000) (45,000)

Hedges (net) (4)

Cash and restricted cash (3)

15,878 — — 15,878

Cash, cash equivalents and restricted cash (5)

44,604 4,152 72,856 121,612

Goodwill — — 25,222 25,222

Other 55,943 (10,143) (74,278) (28,478)

Net capital allocated $ 1,465,531 $ 778,866 $ (39,368) $ 2,205,029

Total Debt Leverage Ratio (4)

Total Leverage Ratio (6)

Portfolio Leverage Ratio (7)

Includes real estate under development in the amount of $22.0 million and real estate held for sale in consolidated variable interest entities of $29.7 million , net of mortgages and notes payable in consolidated variable interest entities in the amount of $31.2 million and other loan investments in the amount of $5.0 million .

Both real estate under development and other loan investments are included in the Company’s accompanying consolidated balance sheets in receivables and other assets.

Includes derivative assets of $1.8 million and a $8.5 million variation margin.

Restricted cash is included in the Company’s accompanying consolidated balance sheets in receivables and other assets.

Represents total debt divided by the Company’s total stockholders’ equity.

Total debt does not include Multi-family CDOs amounting to $11.0 billion , Residential CDOs amounting to $53.0 million and mortgage debt of The Clusters amounting to $27.2 million that are consolidated in the Company’s financial statements as they are non-recourse debt for which the Company has no obligation.

Represents repurchase agreement borrowings divided by the Company’s total stockholders’ equity.

(1) Agency RMBS with a fair value of $922.9 million are included in Single-Family.

(2) Agency CMBS with a fair value of $51.0 million are included in Multi-Family.

(3) Includes real estate under development in the amount of $14.5 million, other loan investments in the amount of $2.4 million and deferred interest related to residential loans held in Consolidated SLST of $0.7 million, all of which are included in the Company’s accompanying consolidated balance sheets in other assets.

(4) Includes derivative liabilities of $29.0 million netted against a $44.8 million variation margin.

(5) Restricted cash is included in the Company’s accompanying consolidated balance sheets in other assets.

(6) Represents total outstanding repurchase agreement financing, subordinated debentures and Convertible Notes divided by the Company’s total stockholders’ equity.

Does not include Consolidated K-Series CDOs amounting to $16.7 billion, Consolidated SLST CDOs amounting to $1.1 billion and other collateralized debt obligations amounting to $40.4 million that are consolidated in the Company's financial statements as they are non-recourse debt for which the Company has no obligation.

(7) Represents outstanding repurchase agreement financing divided by the Company’s total stockholders’ equity.

Analysis of Changes in Book Value

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Year Ended December 31, 2020

Per Share (1)

Amount Shares Per Share (1)

Beginning Balance $ 1,683,911 291,371 $ 5.78

Cumulative-effect adjustment for implementation of fair value option (2)

Common stock issuance, net (3)

Preferred stock issuance, net

Preferred stock liquidation preference

Balance after share issuance activity

522,012 86,373

Balance after cumulative-effect adjustment and share issuance activity 2,218,207 377,744 5.87

Dividends declared (84,993) (0.23)

Net change in accumulated other comprehensive income:

Net change in accumulated other comprehensive income (loss):

Investment securities available for sale (4)

Net income attributable to Company's common stockholders

(24,138) (0.06)

Net loss attributable to Company's common stockholders (329,696) (0.87)

Ending Balance $ 1,779,380 377,744 $ 4.71

The following table details the adjusted beginning book value of our common stock at January 1, 2020 related to the implementation of Accounting Standards Update (“ASU”) 2016-13, Financial Instruments — Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) (amounts in thousands, except per share):

As of January 1, 2020

Per Share (1)

Beginning Balance

Cumulative-effect adjustment for implementation of fair value option (4)

Adjusted Beginning Balance

Outstanding shares used to calculate book value per share for the year ended December 31, 2019 and as of January 1, 2020 are 291,371,039 .

(1) Outstanding shares used to calculate book value per common share for the year ended December 31, 2020 are 377,744,476.

(2) On January 1, 2020, the Company adopted Accounting Standards Update ("ASU") 2016-13, Financial Instruments — Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments and elected to apply the fair value option provided by ASU 2019-05, Financial Instruments — Credit Losses (Topic 326):

Targeted Transition Relief to our residential loans, net, preferred equity and mezzanine loan investments that are accounted for as loans and preferred equity investments that are accounted for under the equity method, resulting in a cumulative-effect adjustment to beginning book value of our common stock and book value per common share.

(3) Includes amortization of stock based compensation.

The increases relate to unrealized gains in our investment securities due to improved pricing.

On January 1, 2020, the Company adopted ASU 2016-13 and elected to apply the fair value option provided by ASU 2019-05, Financial Instruments — Credit Losses (Topic 326):

Targeted Transition Relief (“ASU 2019-05”) to our distressed and other residential mortgage loans, net, preferred equity and mezzanine loan investments that are accounted for as loans and preferred equity and mezzanine loan investments that are accounted for under the equity method, resulting in a cumulative-effect adjustment to beginning book value of our common stock and book value per share.

(4) The decrease relates to unrealized losses in our investment securities due to reductions in pricing.

The following table analyzes the changes in book value of our common stock for the year ended December 31, 2019 (amounts in thousands, except per share):

Year Ended December 31, 2019

Per Share (1)

Amount Shares Per Share (1)

Beginning Balance $ 879,389 155,590 $ 5.65

Common stock issuance, net (2)

809,752 135,781

Preferred stock issuance, net 215,010

Preferred stock liquidation preference

Balance after share issuance activity 1,682,329 291,371 5.77

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Ending Balance $ 1,683,911 291,371 $ 5.78

Outstanding shares used to calculate book value per share for the year ended December 31, 2018 are 155,589,528 .

(1) Outstanding shares used to calculate book value per common share for the year ended December 31, 2019 are 291,371,039.

(2) Includes amortization of stock based compensation.

The decline relates to unrealized losses in investment securities and is primarily due to a decline in the value of our Agency RMBS portfolio.

(3) The increase relates to unrealized gains in our investment securities due to improved pricing.

Results of Operations

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Unless otherwise specified, references in this section to increases or decreases in 2020 refer to the change in results for the year ended December 31, 2020 when compared to the year ended December 31, 2019.

The following table presents the main components of our net income for the years ended December 31, 2019 and 2018 , respectively (dollar amounts in thousands, except per share data):

Beginning in mid-March and continuing into the second quarter, the global pandemic associated with COVID-19 and related economic conditions caused financial and mortgage-related asset markets to experience significant volatility.

The significant dislocation in the financial markets in March and part of April caused, among other things, credit spread widening, a sharp decrease in interest rates, higher unemployment levels and unprecedented illiquidity in repurchase agreement financing and MBS markets, which in turn materially negatively impacted liquidity and pricing of our assets.

Although we took a number of steps in March 2020 in response to these unprecedented market conditions as discussed above in “—Executive Summary” and “—Full Year 2020 Summary”, the COVID-19 pandemic and related disruptions in the real estate, mortgage and financial markets materially negatively affected our business in the first quarter of 2020.

Market conditions improved and volatility subsided to an extent in the latter part of the second quarter and into the third and fourth quarters as parts of the global and U.S.

economy "re-opened", leading to partial pricing recovery for a number of assets in our portfolio and improved results in each of the final three quarters of 2020.

That said, we expect volatility and markets to continue to fluctuate and that these conditions may continue to negatively affect our business due to the uncertain duration and ongoing impact of the pandemic.

The factors described above and throughout this Annual Report on Form 10-K (particularly as related to the COVID-19 pandemic) have driven the majority of our results of operations for the year ended December 31, 2020, and may impact our results of operations in future periods.

Thus, our results of operations should be read and viewed, in large part, in the context of the unprecedented conditions experienced in March 2020 and subsequent thereto.

The following table presents the main components of our net (loss) income for the years ended December 31, 2020 and 2019, respectively (dollar amounts in thousands, except per share data):

For the Years Ended December 31,

2020 2019 $ Change

Net interest income $ 127,093 $ 127,864 $ (771)

Total non-interest income

Total non-interest (loss) income (359,792) 94,448 (454,240)

Total general, administrative and operating expenses 54,563 49,835 4,728

Income from operations before income taxes

Income tax benefit

Net income attributable to Company

(Loss) income from operations before income taxes (287,262) 172,477 (459,739)

Income tax expense (benefit) 981 (419) 1,400

Net (loss) income attributable to Company (288,510) 173,736 (462,246)

Preferred stock dividends 41,186 28,901 12,285

Net income attributable to Company's common stockholders

Basic earnings per common share

Diluted earnings per common share

Net (loss) income attributable to Company's common stockholders (329,696) 144,835 (474,531)

Basic (loss) earnings per common share $ (0.89) $ 0.65 $ (1.54)

Diluted (loss) earnings per common share $ (0.89) $ 0.64 $ (1.53)

Net Interest Income

Our results of operations for our investment portfolio during a given period typically reflect, in large part, the net interest income earned on our investment portfolio of RMBS, CMBS, distressed and other residential mortgage loans (including loans accounted for at fair value and loans accounted for under ASC 310-10 and ASC 310-30) and preferred equity investments and mezzanine loans, where the risks and payment characteristics are equivalent to and accounted for as loans (collectively, our “Interest Earning Assets”).

Our results of operations for our investment portfolio during a given period typically reflect, in large part, the net interest income earned on our investment portfolio of RMBS, CMBS, ABS, residential loans and preferred equity investments and mezzanine loans, where the risks and payment characteristics are equivalent to and accounted for as loans (collectively, our “Interest Earning Assets”).

The net interest spread is impacted by factors such as our cost of financing, the interest rate that our investments bear and our interest rate hedging strategies.

Furthermore, the amount of premium or discount paid on purchased portfolio investments and the prepayment rates on portfolio investments will impact the net interest spread as such factors will be amortized over the expected term of such investments.

The increase in net interest income in 2019 was primarily driven by increases in average interest earning assets in our single-family and multi-family credit portfolios resulting from purchase activity since December 31, 2018 .

These increases were partially offset by decreases in net interest income in our Agency investment securities portfolio due to (1) reductions in average interest earning assets caused primarily by paydowns, (2) increased prepayment rates compared to the corresponding periods in 2018 and (3) the impact of our exit from our Agency IO portfolio in 2018.

Comparative Portfolio Net Interest Margin

The following tables set forth certain information about our portfolio by investment category and their related interest income, interest expense, average yield on interest earning assets, average portfolio debt cost and portfolio net interest margin for our average interest earning assets (by investment category) for the years ended December 31, 2019 and 2018 , respectively (dollar amounts in thousands):

The decrease in net interest income in 2020 was primarily driven by a decrease in average Interest Earning Assets due to asset sales largely in response to the impacts of the COVID-19 pandemic.

In particular, we sold our entire portfolio of higher yielding first loss POs within the Consolidated K-Series in March 2020.

This decrease was partially offset by the acquisition of higher-yielding business purpose loans and investment securities and residential loans throughout 2020 and a decrease in financing costs related to both single-family and multi-family assets.

Portfolio Net Interest Margin

The following tables set forth certain information about our portfolio by investment category and their related interest income, interest expense, average yield on interest earning assets, average portfolio financing cost and portfolio net interest margin for our average interest earning assets (by investment category) for the years ended December 31, 2020 and 2019, respectively (dollar amounts in thousands):

Year Ended December 31, 2020

Single-Family Credit (2) (4)

Family Credit (3) (4)

Single-Family (1) (3)

Family (2) (3)

Interest Income (4)

$ 128,287 $ 54,707 $ 5,741 $ 188,735

Interest Expense (41,109) (7,351) (13,182) (61,642)

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Average Interest Earning Assets (3) (5)

$ 2,595,576 $ 656,067 $ 43,855 $ 3,295,498

Average Yield on Interest Earning Assets (6)

Average Portfolio Debt Cost (8)

4.94 % 8.34 % 13.08 % 5.73 %

Average Portfolio Financing Cost (7)

(3.14) % (3.18) % — (3.14) %

Portfolio Net Interest Margin (8)

1.80 % 5.16 % 13.08 % 2.59 %

Year Ended December 31, 2019

Single-Family Credit

Family Credit (3) (4)

Single-Family (1) (3)

Family (2) (3)

Interest Income (4)

$ 119,064 $ 113,419 $ 2,054 $ 234,537

Interest Expense (63,185) (29,810) (13,678) (106,673)

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Average Interest Earning Assets (3) (5)

$ 2,761,428 $ 1,086,266 $ 19,209 $ 3,866,903

Average Yield on Interest Earning Assets (6)

Average Portfolio Debt Cost (8)

4.31 % 10.44 % 10.70 % 6.07 %

Average Portfolio Financing Cost (7)

(3.42) % (4.03) % — (3.59) %

Portfolio Net Interest Margin (8)

Includes Agency RMBS, Agency CMBS and, solely with respect to the year ended December 31, 2018 , Agency IOs.

The Company, through its ownership of certain securities in the year ended December 31, 2019 , has determined it is the primary beneficiary of Consolidated SLST and has consolidated Consolidated SLST into the Company’s consolidated financial statements.

Interest income amounts represent interest earned by securities that are actually owned by the Company.

A reconciliation of our net interest income generated by our single-family credit portfolio to our consolidated financial statements for the year ended December 31, 2019 is set forth below (dollar amounts in thousands):

For the Year Ended December 31, 2019

Interest income, distressed and other residential mortgage loans

Interest income, investment securities, available for sale (a)

Interest expense, SLST CDOs (b)

Interest income, Single-Family Credit, net

Interest expense, repurchase agreements

Interest expense, Residential CDOs (b)

Interest expense, securitized debt

Net interest income, Single-Family Credit

Included in the Company’s accompanying consolidated statements of operations in interest income, investment securities and other interest earning assets.

Included in the Company’s accompanying consolidated statements of operations in interest expense, residential collateralized debt obligations.

The Company, through its ownership of certain securities, has determined it is the primary beneficiary of the Consolidated K-Series and has consolidated the Consolidated K-Series into the Company’s consolidated financial statements.

0.89 % 6.41 % 10.70 % 2.48 %

(1) The Company, through its ownership of certain securities purchased in the fourth quarter of 2019, has determined it is the primary beneficiary of Consolidated SLST and has consolidated Consolidated SLST into the Company’s consolidated financial statements.

Interest income amounts represent interest income earned by securities that are actually owned by the Company.

A reconciliation of our net interest income generated by our multi-family credit portfolio to our consolidated financial statements for the years ended December 31, 2019 and 2018 , respectively, is set forth below (dollar amounts in thousands):

A reconciliation of net interest income generated by our single-family portfolio to our consolidated financial statements for the years ended December 31, 2020 and 2019, respectively, is set forth below (dollar amounts in thousands):

For the Years Ended December 31,

Interest income, multi-family loans held in securitization trusts

Interest income, investment securities, available for sale (a)

Interest income, residential loans $ 81,782 $ 66,253

Interest income, Consolidated SLST 45,194 4,764

Interest income, investment securities available for sale 32,974 50,992

Interest expense, Consolidated SLST CDOs (31,663) (2,945)

Interest income, Single-Family, net 128,287 119,064

Interest expense, repurchase agreements (30,852) (61,503)

Interest expense, residential loan securitizations (6,967) (1,682)

Interest expense, non-Agency RMBS re-securitization (3,290) —

Net interest income, Single-Family $ 87,178 $ 55,879

(2) Prior to the sale of first loss POs in March 2020, the Company had determined it was the primary beneficiary of the Consolidated K-Series and had consolidated the Consolidated K-Series into the Company’s consolidated financial statements.

Interest income amounts represent interest income earned by securities that were owned by the Company.

A reconciliation of net interest income generated by our multi-family portfolio to our consolidated financial statements for the years ended December 31, 2020 and 2019, respectively, is set forth below (dollar amounts in thousands):

For the Years Ended December 31,

Interest income, multi-family loans held in Consolidated K-Series $ 151,841 $ 535,226

Interest income, investment securities available for sale 11,729 14,424

Interest income, preferred equity and mezzanine loan investments 20,899 20,899

Interest expense, multi-family collateralized debt obligations

Interest income, Multi-Family Credit, net

Interest expense, Consolidated K-Series CDOs (129,762) (457,130)

Interest income, Multi-Family, net 54,707 113,419

Interest expense, repurchase agreements (7,351) (29,316)

Interest expense, securitized debt

Net interest income, Multi-Family Credit

Included in the Company’s accompanying consolidated statements of operations in interest income, investment securities and other interest earning assets.

Average Interest Earning Assets for the periods indicated exclude all Consolidated SLST (for the year ended December 31, 2019 ) and Consolidated K-Series assets other than those securities actually owned by the Company.

Interest expense, CMBS re-securitization — (494)

Net interest income, Multi-Family $ 47,356 $ 83,609

(3) Average Interest Earning Assets for the periods indicated exclude all Consolidated SLST assets and all Consolidated K-Series assets other than, in each case, those securities actually owned and deposits held by the Company.

(4) Includes interest income earned on cash accounts held by the Company.

(5) Average Interest Earning Assets is calculated based on daily average amortized cost for the respective periods.

Average Yield on Interest Earning Assets was calculated by dividing our interest income by our Average Interest Earning Assets for the respective periods.

Average Portfolio Debt Cost was calculated by dividing our interest expense relating to our interest earning assets by our average interest bearing liabilities, excluding our subordinated debentures and convertible notes, for the respective periods.

(6) Average Yield on Interest Earning Assets is calculated by dividing our interest income relating to our interest earning assets by our Average Interest Earning Assets for the respective periods.

(7) Average Portfolio Financing Cost is calculated by dividing our interest expense relating to our interest earning assets by our average interest bearing liabilities, excluding our subordinated debentures and convertible notes, for the respective periods.

For the years ended December 31, 2020 and 2019, respectively, interest expense generated by our subordinated debentures and convertible notes is set forth below (dollar amounts in thousands):

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Convertible notes 10,997 10,813

Portfolio Net Interest Margin is the difference between our Average Yield on Interest Earning Assets and our Average Portfolio Debt Cost, excluding the weighted average cost of subordinated debentures and convertible notes.

Non-interest Income

Realized Gains (Losses), Net

The following table presents the components of realized gains (losses), net recognized for the years ended December 31, 2019 and 2018 , respectively (dollar amounts in thousands):

Total $ 13,184 $ 13,678

(8) Portfolio Net Interest Margin is the difference between our Average Yield on Interest Earning Assets and our Average Portfolio Financing Cost, excluding the weighted average cost of subordinated debentures and convertible notes.

Non-interest (Loss) Income

Realized (Losses) Gains, Net

The Company sold approximately $2.5 billion of assets during the year ended December 31, 2020, the majority of which was in response to the disruption of the financial markets caused by the COVID-19 pandemic in the first quarter.

The following table presents the components of realized (losses) gains, net recognized for the years ended December 31, 2020 and 2019, respectively (dollar amounts in thousands):

For the Years Ended December 31,

2020 2019 $ Change

Residential loans $ (13,431) $ 10,827 $ (24,258)

Investment securities and related hedges (134,627) 21,815 (156,442)

Distressed and other residential mortgage loans at carrying value

Distressed and other residential mortgage loans at fair value

Total realized gains (losses), net

Realized gains on investment securities and related hedges increased in 2019 due to sales of certain Freddie Mac-sponsored multi-family loan K-Series first loss POs and IOs resulting in realized gains of $16.8 million and other CMBS and non-Agency RMBS resulting in realized gains of $5.0 million.

Also in 2018 , the Company liquidated its Agency IO portfolio resulting in a $12.4 million realized loss.

Realized gains on distressed and other residential loans at carrying value increased in 2019 as increased sale and payoff activity occurred in 2019 .

Realized gains on distressed and other residential mortgage loans at fair value increased in 2019 primarily due to an increase in loans accounted for at fair value and increased realized gain from sale activity and loan prepayments.

Unrealized Gains (Losses), Net

The following table presents the components of unrealized gains (losses), net recognized for the years ended December 31, 2019 and 2018 , respectively (dollar amounts in thousands):

Total realized (losses) gains, net $ (148,058) $ 32,642 $ (180,700)

During the year ended December 31, 2020, the Company recognized net realized losses of $61.5 million on the sale of Agency RMBS, Agency CMBS, non-Agency RMBS and CMBS and realized losses of $73.1 million on the termination of interest rate swaps.

The Company also recognized net realized losses on residential loans in 2020, primarily as a result of the sale of performing and re-performing loans.

The Company sold residential loans with an aggregate unpaid principal balance of $119.8 million that resulted in net realized losses of $18.1 million during the year ended December 31, 2020, a majority of which was incurred in the first quarter of 2020.

During the year ended December 31, 2019, the Company recognized $21.8 million of net realized gains primarily on sales of certain Freddie Mac-sponsored multi-family loan K-Series first loss POs and IOs and CMBS.

The Company also recognized net realized gains on residential loans during the year ended December 31, 2019, primarily as a result of sale activity and loan prepayments.

Realized Loss on De-consolidation of Consolidated K-Series

In March 2020, the Company sold its entire portfolio of first loss POs and certain mezzanine securities issued by the Consolidated K-Series.

These sales, for total proceeds of approximately $555.2 million, resulted in the de-consolidation of each Consolidated K-Series as of the sale date of each first loss PO and a realized net loss on de-consolidation of Consolidated K-Series of $54.1 million for the year ended December 31, 2020.

The sales also resulted in the de-consolidation of $17.4 billion in multifamily loans held in the Consolidated K-Series and $16.6 billion in Consolidated K-Series CDOs.

Unrealized (Losses) Gains, Net

The disruptions of the financial markets due to the COVID-19 pandemic caused credit spread widening, a sharp decrease in interest rates and unprecedented illiquidity in repurchase agreement financing and MBS markets during the first quarter of 2020.

These conditions put significant downward pressure on the fair value of our assets and resulted in unrealized losses for the first quarter.

Pricing for our investment portfolio during the second, third, and fourth quarters of 2020 rebounded with credit spreads tightening on a majority of our assets, which resulted in a partial reversal of unrealized losses recognized in the first quarter of 2020.

The following table presents the components of unrealized (losses) gains, net recognized for the years ended December 31, 2020 and 2019, respectively (dollar amounts in thousands):

For the Years Ended December 31,

2020 2019 $ Change

Residential loans $ 25,249 $ 42,087 $ (16,838)

Consolidated SLST (32,073) (83) (31,990)

Consolidated K-Series (171,011) 23,962 (194,973)

Preferred equity and mezzanine loan investments (1,542) — (1,542)

Investment securities and related hedges 19,216 (30,129) 49,345

Distressed and other residential mortgage loans at fair value

Residential loans and debt held in securitization trust

Multi-family loans and debt held in securitization trusts

Total unrealized gains (losses), net

Unrealized losses on investment securities and related hedges increased in 2019 due to unrealized losses recognized on our interest rate swaps in 2019 and reversals of unrealized losses upon liquidation of the Agency IO portfolio in 2018 .

The unrealized losses on our interest rate swaps are offset by unrealized gains on our investment securities portfolio (where fair value option was not elected) recorded in other comprehensive income (“OCI”).

The increase in unrealized gains on distressed and other residential mortgage loans at fair value in 2019 is primarily due to an increase in loans accounted for at fair value and credit spread tightening.

Unrealized gains on multi-family loans and debt held in securitization trusts decreased during 2019 due to deceleration in the tightening of credit spreads on the Consolidated K-Series as compared to the previous period as well as lower unrealized gains on certain Consolidated K-Series investments that are nearing maturity.

This decrease was partially offset by unrealized gains on additional Consolidated K-Series investments purchased in 2019 .

The following table presents the components of other income for the years ended December 31, 2019 and 2018 , respectively (dollar amounts in thousands):

Total unrealized (losses) gains, net $ (160,161) $ 35,837 $ (195,998)

For the year ended December 31, 2020, the Company recognized $160.2 million in net unrealized losses.

Included in unrealized losses on both investment securities and related hedges and the Consolidated K-Series are $135.3 million of net unrealized gain reversals primarily due to sales and interest rate swap terminations recognized during the year ended December 31, 2020.

The majority of this activity occurred in the first quarter of 2020 when the Company recognized $168.5 million of net unrealized gain reversals due to the sale of first loss POs issued by the Consolidated K-Series and $29.0 million of net unrealized loss reversals due to interest rate swap terminations.

Income from Equity Investments

The following table presents the components of income from equity investments for the years ended December 31, 2020 and 2019, respectively (dollar amounts in thousands):

For the Years Ended December 31,

2020 2019 $ Change

Income from preferred equity investments accounted for as equity (1)

Income from joint venture equity investments in multi-family properties

$ 16,587 $ 8,539 $ 8,048

(Loss) income from joint venture equity investments in multi-family properties (949) 10,468 (11,417)

Income from entities that invest in residential properties and loans

11,032 4,619 6,413

Total income from equity investments $ 26,670 $ 23,626 $ 3,044

(1) Includes income earned from preferred equity ownership interests in entities that invest in multi-family properties accounted for under the equity method of accounting.

The increase is primarily due to an increase in income from preferred equity investments accounted for as equity due to additional investments made since December 31, 2019 as well as an increase in the income generated by the Company's investment in entities that invest in residential properties and loans resulting from realized gains on sale and unrealized gains recognized by these entities.

The increase in income from equity investments in 2020 was partially offset by a decrease in income from joint venture equity investments in multi-family properties due to the redemption of these investments.

Impairment of Goodwill

In March 2020, the Company sold its entire portfolio of first loss POs issued by the Consolidated K-Series, certain senior and mezzanine securities issued by the Consolidated K-Series, Agency CMBS and CMBS that were held by its multi-family investment reporting unit.

As a result of the sales, the Company re-evaluated its goodwill balance associated with the multi-family investment reporting unit for impairment.

This analysis yielded an impairment of the entire goodwill balance of $25.2 million for the year ended December 31, 2020.

The following table presents the components of other income for the years ended December 31, 2020 and 2019, respectively (dollar amounts in thousands):

For the Years Ended December 31,

2020 2019 $ Change

Preferred equity and mezzanine loan premiums resulting from early redemption (1)

Losses in Consolidated VIEs (3)

$ 1,105 $ 3,858 $ (2,753)

Net losses in Consolidated VIEs (2)

(2,249) (2,209) (40)

Miscellaneous income 2,241 771 1,470

Total other income $ 1,097 $ 2,420 $ (1,323)

Includes income earned from preferred equity ownership interests in entities that invest in multi-family properties accounted for under the equity method of accounting.

(1) Includes premiums resulting from early redemptions of preferred equity and mezzanine loan investments accounted for as loans.

Losses in Consolidated VIEs exclude income or loss from the Consolidated K-Series and Consolidated SLST and are offset by allocations of losses or increased by allocations of income to non-controlling interests in the respective Consolidated VIEs, resulting in net losses to the Company of $2.0 million and $1.5 million for the years ended December 31, 2019 and 2018 , respectively.

The increase in other income in 2019 is primarily due to a $7.1 million increase in income from preferred equity investments accounted for as equity due to additional investments made in 2019 , a $2.5 million increase in unrealized and realized gains related to joint venture equity investments and a $3.5 million increase in income recognized on the Company’s equity investments in entities that invest in residential properties and loans, primarily due to an investment added in 2019 .

The increase is partially offset by a decrease of $2.6 million in income from preferred equity and mezzanine loan premiums resulting from early redemption.

Additionally, realized losses recognized by the Company’s 50% owned real estate development property increased by approximately $0.9 million in 2019 , which is offset by the non-controlling interest share of the increased losses of approximately $0.5 million .

Comparative Expenses

The following table presents the components of general, administrative and operating expenses for the years ended December 31, 2019 and 2018 , respectively (dollar amounts in thousands):

(2) Net losses in Consolidated VIEs exclude income or loss from the Consolidated K-Series and Consolidated SLST and are offset by allocations of losses or increased by allocations of income to non-controlling interests in the respective Consolidated VIEs, resulting in net losses to the Company of $2.2 million and $1.4 million for the years ended December 31, 2020 and 2019, respectively.

The decrease in other income in 2020 is primarily due to a decrease of $2.7 million in income related to the redemptions of preferred equity and mezzanine loan investments as a result of fewer redemptions in 2020.

The following tables present the components of general, administrative and operating expenses for the years ended December 31, 2020 and 2019, respectively (dollar amounts in thousands):

For the Years Ended December 31,

General, Administrative and Operating Expenses:

2020 2019 $ Change

General and Administrative Expenses

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Professional fees 5,394 4,460 934

Base management and incentive fees

Other 7,072 7,328 (256)

Total general and administrative expenses $ 42,228 $ 35,794 $ 6,434

The increase in general and administrative expenses in 2020 is primarily due to an increase in stock-based compensation expense and an increase in employee headcount as part of the expansion of our investment platforms.

Professional fees also increased in 2020 as a result of additional legal expenses incurred in March 2020 in connection with the disruptions in the financial markets.

For the Years Ended December 31,

2020 2019 $ Change

Operating Expenses

Expenses related to distressed and other residential mortgage loans

Expenses related to real estate held for sale in Consolidated VIEs

The increase in general and administrative expenses in 2019 is primarily due to an increase in employee headcount as part of the internalization and expansion of our single-family credit investment platform and overall asset growth.

This change was partially offset by a decrease in base management and incentive fees in 2019 due to the termination of our last management agreement and the end of transition services related to that agreement in the second quarter of 2019.

The increase in expenses related to distressed and other residential mortgage loans in 2019 is due to overall growth in the portfolio resulting from the internalization and expansion of our single-family credit investment platform.

Expenses related to real estate held for sale in consolidated variable interest entities decreased in 2019 as a result of the de-consolidation of the variable interest entities after the sales of the real estate held by these entities.

Comprehensive Income

The main components of comprehensive income for the years ended December 31, 2019 and 2018 , respectively, are detailed in the following table (dollar amounts in thousands):

Operating expenses related to portfolio investments $ 11,573 $ 13,559 $ (1,986)

Operating expenses in Consolidated VIEs 762 482 280

Total operating expenses $ 12,335 $ 14,041 $ (1,706)

The decrease in operating expenses related to portfolio investments in 2020 can be attributed primarily to a reduction in investing activities during the year as compared to the prior year.

Comprehensive (Loss) Income

The main components of comprehensive (loss) income for the years ended December 31, 2020 and 2019, respectively, are detailed in the following table (dollar amounts in thousands):

For the Years Ended December 31,

NET INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS

OTHER COMPREHENSIVE INCOME

Increase (decrease) in fair value of available for sale securities

2020 2019 $ Change

NET (LOSS) INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS $ (329,696) $ 144,835 $ (474,531)

OTHER COMPREHENSIVE (LOSS) INCOME

(Decrease) increase in fair value of available for sale securities

— 38,231 (38,231)

Non-Agency RMBS

Reclassification adjustment for net gain included in net income

TOTAL OTHER COMPREHENSIVE INCOME

COMPREHENSIVE INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS

The changes in OCI in 2019 can be attributed primarily to an increase in the fair value of our investment securities, where fair value option was not elected, due to the expansion of our investment portfolio and general spread tightening.

The changes were partially offset by the reclassification of unrealized gains reported in OCI to net income in relation to the sale of certain multi-family CMBS in 2019 .

(23,599) 13,843 (37,442)

(8,055) 13,302 (21,357)

(31,654) 65,376 (97,030)

Reclassification adjustment for net loss (gain) included in net (loss) income 7,516 (18,109) 25,625

TOTAL OTHER COMPREHENSIVE (LOSS) INCOME (24,138) 47,267 (71,405)

COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS $ (353,834) $ 192,102 $ (545,936)

The changes in other comprehensive income ("OCI") in 2020 can be attributed primarily to a decrease in the fair value of our investment securities, where fair value option was not elected, as a result of significant spread widening during the first quarter of 2020 due to the market turmoil caused by the COVID-19 pandemic.

These losses were partially offset by fair value increases during the second, third and fourth quarters of 2020 as well as the reversal of previously recognized net unrealized losses reported in OCI that were reclassified to net realized loss as a result of the sale of certain investment securities in 2020, mostly occurring in the first quarter.

Beginning in the fourth quarter of 2019, the Company’s newly purchased investment securities are presented at fair value as a result of a fair value election made at the time of acquisition pursuant to ASC 825, Financial Instruments (“ASC 825”).

The fair value option was elected for these investment securities to provide stockholders and others who rely on our financial statements with a more complete and accurate understanding of our economic performance.

Changes in the market values of investment securities where the Company elected the fair value option will be reflected in earnings instead of in OCI.

Changes in the market values of investment securities where the Company elected the fair value option are reflected in earnings instead of in OCI.

Comparison of the Year Ended December 31, 2019 to the Year Ended December 31, 2018

3 unchanged sentences

For the Years Ended December 31,

2019 2018 $ Change

Net interest income $ 127,864 $ 78,728 $ 49,136

2 unchanged sentences

Income from operations before income taxes 172,477 103,738 68,739

Income tax (benefit) expense

Income tax benefit (419) (1,057) 638

Net income attributable to Company 173,736 102,886 70,850

4 unchanged sentences

Net Interest Income

The net interest spread is impacted by factors such as our cost of financing, the interest rate that our investments bear and our interest rate hedging strategies.

The increase in net interest income for 2018 was primarily driven by increases in average interest earning assets in our Agency RMBS and multi-family credit portfolios resulting from purchase activity since December 31, 2017 in addition to an increase in asset yield and reduction in average interest bearing liabilities in our single-family credit portfolio.

Comparative Portfolio Net Interest Margin

The following tables set forth certain information about our portfolio by investment category and their related interest income, interest expense, average yield on interest earning assets, average portfolio debt cost and portfolio net interest margin for our average interest earning assets (by investment category) for the years ended December 31, 2018 and 2017 , respectively (dollar amounts in thousands):

The increase in net interest income in 2019 was primarily driven by increases in average Interest Earning Assets in our single-family and multi-family portfolios resulting from purchase activity since December 31, 2018.

These increases were partially offset by decreases in net interest income in our Agency securities due to (1) reductions in average interest earnings assets caused primarily by paydowns, (2) increased prepayment rates compared to the corresponding period in 2018 and (3) the impact of our exit from our Agency IO portfolio in 2018.

Portfolio Net Interest Margin

The following tables set forth certain information about our portfolio by investment category and their related interest income, interest expense, average yield on interest earning assets, average portfolio financing cost and portfolio net interest margin for our average interest earning assets (by investment category) for the years ended December 31, 2019 and 2018, respectively (dollar amounts in thousands):

Year Ended December 31, 2019

Single-Family Credit

Family Credit (2) (3)

Single-Family (1) (3)

Family (2) (3)

Interest Income (4)

$ 119,064 $ 113,419 $ 2,054 $ 234,537

Interest Expense (63,185) (29,810) (13,678) (106,673)

1 unchanged sentence

Average Interest Earning Assets (3) (5)

$ 2,761,428 $ 1,086,266 $ 19,209 $ 3,866,903

Average Yield on Interest Earning Assets (6)

Average Portfolio Debt Cost (7)

4.31 % 10.44 % 10.70 % 6.07 %

Average Portfolio Financing Cost (7)

(3.42) % (4.03) % — (3.59) %

Portfolio Net Interest Margin (8)

0.89 % 6.41 % 10.70 % 2.48 %

Year Ended December 31, 2018

Single-Family Credit

Family Credit (2) (3)

Single-Family Multi-

Family (2) (3)

Interest Income (4)

$ 65,928 $ 76,769 $ — $ 142,697

Interest Expense (33,421) (17,162) (13,386) (63,969)

1 unchanged sentence

Average Interest Earning Assets (3) (5)

$ 1,807,757 $ 682,148 $ — $ 2,489,905

Average Yield on Interest Earning Assets (6)

Average Portfolio Debt Cost (7)

3.65 % 11.25 % — 5.73 %

Average Portfolio Financing Cost (7)

(2.73) % (4.80) % — (3.20) %

Portfolio Net Interest Margin (8)

Includes Agency RMBS and Agency IOs.

0.92 % 6.45 % — 2.53 %

(1) The Company, through its ownership of certain securities purchased in the year ended December 31, 2019, has determined it is the primary beneficiary of Consolidated SLST and has consolidated Consolidated SLST into the Company’s consolidated financial statements.

Interest income amounts represent interest income earned by securities that are actually owned by the Company.

A reconciliation of our net interest income generated by our multi-family credit portfolio to our consolidated financial statements for the years ended December 31, 2018 and 2017 , respectively, is set forth below (dollar amounts in thousands):

A reconciliation of net interest income generated by our single-family portfolio to our consolidated financial statements for the year ended December 31, 2019 is set forth below (dollar amounts in thousands):

For the Year Ended December 31, 2019

Interest income, residential loans $ 66,253

Interest income, Consolidated SLST 4,764

Interest income, investment securities available for sale 50,992

Interest expense, Consolidated SLST CDOs (2,945)

Interest income, Single-Family, net 119,064

Interest expense, repurchase agreements (61,503)

Interest expense, residential loan securitizations (1,682)

Interest expense, non-Agency RMBS re-securitization —

Net interest income, Single-Family $ 55,879

(2) The Company, through its ownership of certain securities, had determined it was the primary beneficiary of the Consolidated K-Series and had consolidated the Consolidated K-Series into the Company’s consolidated financial statements.

Interest income amounts represent interest income earned by securities that were owned by the Company.

A reconciliation of net interest income generated by our multi-family portfolio to our consolidated financial statements for the years ended December 31, 2019 and 2018, respectively, is set forth below (dollar amounts in thousands):

For the Years Ended December 31,

Interest income, multi-family loans held in securitization trusts

Interest income, investment securities, available for sale (a)

Interest income, multi-family loans held in Consolidated K-Series $ 535,226 $ 358,712

Interest income, investment securities available for sale 14,424 10,123

Interest income, preferred equity and mezzanine loan investments 20,899 21,036

Interest expense, multi-family collateralized debt obligations

Interest income, Multi-Family Credit, net

Interest expense, Consolidated K-Series CDOs (457,130) (313,102)

Interest income, Multi-Family, net 113,419 76,769

Interest expense, repurchase agreements (29,316) (14,252)

Interest expense, securitized debt

Net interest income, Multi-Family Credit

Included in the Company’s accompanying consolidated statements of operations in interest income, investment securities and other interest earning assets.

Average Interest Earning Assets for the periods indicated exclude all Consolidated K-Series assets other than those securities actually owned by the Company.

Interest expense, CMBS re-securitization (494) (2,910)

Net interest income, Multi-Family $ 83,609 $ 59,607

(3) Average Interest Earning Assets for the periods indicated exclude all Consolidated SLST assets (for the year ended December 31, 2019) and all Consolidated K-Series assets other than, in each case, those securities actually owned and deposits held by the Company.

(4) Includes interest income earned on cash accounts held by the Company.

Average Interest Earning Assets is calculated based on daily average amortized cost for the respective periods.

Average Yield on Interest Earning Assets was calculated by dividing our interest income by our Average Interest Earning Assets for the respective periods.

(5) Average Interest Earning Assets was calculated based on daily average amortized cost for the respective periods.

(6) Average Yield on Interest Earning Assets was calculated by dividing our interest income relating to our interest earning assets by our Average Interest Earning Assets for the respective periods.

(7) Average Portfolio Financing Cost was calculated by dividing our interest expense relating to our interest earning assets by our average interest bearing liabilities, excluding our subordinated debentures and convertible notes, for the respective periods.

For the years ended December 31, 2019 and 2018, respectively, interest expense generated by our subordinated debentures and convertible notes is set forth below (dollar amounts in thousands):

2 unchanged sentences

Convertible notes 10,813 10,643

Total $ 13,678 $ 13,386

Non-interest Income

2 unchanged sentences

For the Years Ended December 31,

2019 2018 $ Change

Residential loans $ 10,827 $ 4,495 $ 6,332

Investment securities and related hedges 21,815 (12,270) 34,085

Distressed and other residential mortgage loans at carrying value

Distressed and other residential mortgage loans at fair value

Total realized (losses) gains, net

Realized losses on investment securities and related hedges increased during 2018 primarily due to the liquidation of our Agency IO portfolio in 2018 .

Realized gains on distressed and other residential mortgage loans at carrying value decreased in 2018 primarily due to decreased loan sale activity in 2018 .

Unrealized Gains (Losses), Net

The following table presents the components of unrealized gains (losses), net recognized for the years ended December 31, 2018 and 2017 , respectively (dollar amounts in thousands):

Total realized gains (losses), net $ 32,642 $ (7,775) $ 40,417

Realized gains on residential loans increased in 2019 due to increased sale and payoff activity in 2019.

Realized gains on investment securities and related hedges increased in 2019 due to the sales of certain Freddie Mac-sponsored multi-family loan K-Series first loss POs and IOs resulting in realized gains of $16.8 million and other CMBS and non-Agency RMBS resulting in realized gains of $5.0 million.

Also in 2018, the Company liquidated its Agency IO portfolio resulting in a $12.4 million realized loss.

Unrealized Gains, Net

The following table presents the components of unrealized gains, net recognized for the years ended December 31, 2019 and 2018, respectively (dollar amounts in thousands):

For the Years Ended December 31,

2019 2018 $ Change

Residential loans $ 42,087 $ 4,096 $ 37,991

Consolidated SLST (83) — (83)

Consolidated K-Series 23,962 37,581 (13,619)

Investment securities and related hedges (30,129) 11,104 (41,233)

Distressed and other residential mortgage loans at fair value

Multi-family loans and debt held in securitization trusts

Total unrealized gains (losses), net

Unrealized gains on investment securities and related hedges increased in 2018 primarily due to reversals of unrealized losses upon liquidation of the Agency IO portfolio during the period.

The increase in unrealized gains on distressed and other residential mortgage loans at fair value in 2018 is primarily due to an increase in distressed and other residential mortgage loans accounted for at fair value resulting from purchase activity in 2018 .

The increase in net unrealized gains on multi-family loans and debt held in securitization trusts in 2018 is primarily due to an increase in multi-family CMBS owned by us and tightening of credit spreads.

The following table presents the components of other income for the years ended December 31, 2018 and 2017 , respectively (dollar amounts in thousands):

Total unrealized gains, net $ 35,837 $ 52,781 $ (16,944)

The increase in unrealized gains on residential loans in 2019 was primarily due to an increase in loans accounted for at fair value and credit spread tightening.

Unrealized gains on Consolidated K-Series decreased during 2019 due to deceleration in the tightening of credit spreads as compared to the previous period as well as lower unrealized gains on certain Consolidated K-Series investments that were nearing maturity.

This decrease was partially offset by unrealized gains on additional Consolidated K-Series investments purchased in 2019.

The unrealized losses on our interest rate swaps were offset by unrealized gains on our investment securities portfolio (where fair value option was not elected) recorded in OCI.

Income from Equity Investments

The following table presents the components of income from equity investments for the years ended December 31, 2019 and 2018, respectively (dollar amounts in thousands):

For the Years Ended December 31,

2019 2018 $ Change

Income from preferred equity investments accounted for as equity (1)

$ 8,539 $ 1,437 $ 7,102

Income from joint venture equity investments in multi-family properties 10,468 8,016 2,452

Income from entities that invest in residential properties and loans 4,619 1,132 3,487

Total income from equity investments $ 23,626 $ 10,585 $ 13,041

(1) Includes income earned from preferred equity ownership interests in entities that invest in multi-family properties accounted for under the equity method of accounting.

The increase in income from equity investments in 2019 was primarily due to a $7.1 million increase in income from preferred equity investments accounted for as equity due to additional investments made in 2019.

The increase was also due to a $3.5 million increase in income recognized on the Company’s equity investments in entities that invest in residential properties and loans, primarily due to an investment added in 2019.

Income from joint venture equity investments in multi-family properties increased by $2.5 million in 2019 as a result of increased realized and unrealized gains related to those investments.

The following table presents the components of other income for the years ended December 31, 2019 and 2018, respectively (dollar amounts in thousands):

For the Years Ended December 31,

2019 2018 $ Change

Preferred equity and mezzanine loan premiums resulting from early redemption (1)

Losses in Consolidated VIEs (3)

$ 3,858 $ 6,438 $ (2,580)

Net (loss) income in Consolidated VIEs (2)

(2,209) 5,401 (7,610)

Miscellaneous income 771 307 464

Total other income $ 2,420 $ 12,146 $ (9,726)

Includes income earned from preferred equity ownership interests in entities that invest in multi-family properties accounted for under the equity method of accounting.

(1) Includes premiums resulting from early redemptions of preferred equity and mezzanine loan investments accounted for as loans.

Losses in Consolidated VIEs exclude income or loss from the Consolidated K-Series and are offset by allocations to non-controlling interests in the respective Consolidated VIEs, resulting in net losses to the Company of $1.5 million and $0.1 million for the years ended December 31, 2018 and 2017 , respectively.

The increase in other income during 2018 is primarily due to an increase in income from preferred equity and mezzanine loan premiums resulting from early redemption.

The increase was partially offset by a decrease in income from joint venture equity investments in multi-family properties.

Additionally, Losses in Consolidated VIEs increased due to an increase in realized losses recognized by the Company’s 50% owned real estate development property of approximately $3.0 million in 2018 , which is offset by the non-controlling interest share of the increased losses of approximately $1.5 million .

These losses were offset by a $2.3 million realized gain recognized by one of the Consolidated VIEs upon sale of its real estate in March 2018, which is fully allocated to net income attributable to non-controlling interest in consolidated variable interest entities.

Comparative Expenses

The following table presents the components of general, administrative and operating expenses for the years ended December 31, 2018 and 2017 , respectively (dollar amounts in thousands):

(2) Net (loss) income in Consolidated VIEs excludes income or loss from the Consolidated K-Series and Consolidated SLST and are offset by allocations of losses or increased by allocations of income to non-controlling interests in the respective Consolidated VIEs, resulting in a net loss to the Company of $1.4 million for the year ended December 31, 2019 and net income to the Company of $3.5 million for the year ended December 31, 2018.

The decrease in other income in 2019 is primarily attributable to a decrease of $7.6 million in net income in Consolidated VIEs resulting from sales of real estate held for sale in Consolidated VIEs and realized losses and impairment recognized on real estate under development held in Consolidated VIEs.

The decrease in other income was also due to a decrease of $2.6 million in redemption premiums collected from preferred equity and mezzanine loan investments in 2019.

The following tables present the components of general, administrative and operating expenses for the years ended December 31, 2019 and 2018, respectively (dollar amounts in thousands):

For the Years Ended December 31,

General, Administrative and Operating Expenses:

2019 2018 $ Change

General and Administrative Expenses

1 unchanged sentence

Professional fees 4,460 4,468 (8)

Base management and incentive fees

Other 7,328 9,161 (1,833)

Total general and administrative expenses $ 35,794 $ 27,872 $ 7,922

The increase in general and administrative expenses in 2019 was primarily due to an increase in employee headcount as part of the expansion of our investment platforms.

This change was partially offset by a decrease in base management and incentive fees (included in "Other" category above) in 2019 due to the termination of our last management agreement and the end of transition services related to that agreement in the second quarter of 2019.

For the Years Ended December 31,

2019 2018 $ Change

Operating Expenses

Expenses related to distressed residential mortgage loans

Expenses related to operating real estate and real estate held for sale in Consolidated VIEs

The increase in general and administrative expenses in 2018 was primarily driven by an increase in employee headcount as part of the internalization and expansion of our single-family credit investment platform.

The increase in management fees is primarily due to the Company fully expensing prepaid incentive fees paid to Headlands in 2017 as a result of non-renewal of our management agreement with Headlands.

The overall increase was partially offset by a reduction in expenses related to operating real estate and real estate held for sale in Consolidated VIEs as a result of cessation of depreciation and amortization expense on real estate held for sale in Consolidated VIEs subsequent to the second quarter of 2017 and the de-consolidation of one of the Consolidated VIEs after the sale of the real estate held by this entity in March 2018.

Operating expenses related to portfolio investments $ 13,559 $ 9,270 $ 4,289

Operating expenses in Consolidated VIEs 482 4,328 (3,846)

Total operating expenses $ 14,041 $ 13,598 $ 443

The increase in operating expenses related to portfolio investments in 2019 is primarily due to overall growth in the portfolio resulting from the expansion of our investment platforms.

Operating expenses in Consolidated VIEs decreased in 2019 as a result of the de-consolidation of the VIEs after the sales of the real estate held by these entities.

Comprehensive Income

1 unchanged sentence

For the Years Ended December 31,

2019 2018 $ Change

NET INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS $ 144,835 $ 79,186 $ 65,649

OTHER COMPREHENSIVE (LOSS) INCOME

(Decrease) Increase in fair value of available for sale securities

OTHER COMPREHENSIVE INCOME (LOSS)

Increase (decrease) in fair value of available for sale securities

Agency RMBS 38,231 (23,776) 62,007

Non-Agency RMBS 13,843 (3,134) 16,977

CMBS 13,302 (778) 14,080

Total 65,376 (27,688) 93,064

Reclassification adjustment for net gain included in net income (18,109) — (18,109)

Decrease in fair value of derivative instruments utilized for cash flow hedges

TOTAL OTHER COMPREHENSIVE (LOSS) INCOME

TOTAL OTHER COMPREHENSIVE INCOME (LOSS) 47,267 (27,688) 74,955

COMPREHENSIVE INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS $ 192,102 $ 51,498 $ 140,604

The changes in OCI in 2018 can be attributed primarily to a decrease in the fair value of our investment securities due to general spread widening.

The changes were partially offset by the reclassification of unrealized gains reported in OCI to net income in relation to the sale of certain multi-family CMBS and non-Agency RMBS in 2017 .

The changes in OCI in 2019 can be attributed primarily to an increase in the fair value of our investment securities where fair value option was not elected due to the expansion of our investment portfolio and general spread tightening.

The changes were partially offset by the reclassification of unrealized gains reported in OCI to net income in relation to the sale of certain multi-family CMBS in 2019.

Changes in the market values of investment securities where the Company elected the fair value option are reflected in earnings instead of in OCI.

Balance Sheet Analysis

As of December 31, 2019 , we had approximately $23.5 billion of total assets, as compared to approximately $14.7 billion of total assets as of December 31, 2018 .

A significant portion of our assets represents the assets comprising the Consolidated K-Series and Consolidated SLST, which we consolidate in accordance with GAAP.

As of December 31, 2019 and 2018 , the Consolidated K-Series assets amounted to approximately $17.9 billion and $11.7 billion , respectively.

As of December 31, 2019 , Consolidated SLST assets amounted to approximately $1.3 billion .

As of December 31, 2020, we had approximately $4.7 billion of total assets.

Included in this amount is approximately $1.3 billion of assets held in Consolidated SLST, which we consolidate in accordance with GAAP.

As of December 31, 2019, we had approximately $23.5 billion of total assets, $1.3 billion of which represented Consolidated SLST assets that we consolidate in accordance with GAAP and $17.9 billion of which represented assets comprising the Consolidated K-Series that we consolidated in accordance with GAAP.

The Company sold its first loss POs and certain mezzanine securities issued by the Consolidated K-Series in March 2020 resulting in the de-consolidation of $17.4 billion in multi-family loans.

For a reconciliation of our actual interests in the Consolidated K-Series and Consolidated SLST to our financial statements, see “Capital Allocation” and “Comparative Portfolio Net Interest Margin” above.

Investment Securities

At December 31, 2019 , our securities portfolio includes Agency RMBS, including Agency fixed-rate and Agency ARMs, non-Agency RMBS, Agency CMBS, CMBS and ABS which are classified as investment securities available for sale.

Our securities investments also include the Consolidated K-Series and Consolidated SLST.

The increase in the carrying value of our investment securities as of December 31, 2019 as compared to December 31, 2018 is primarily due to purchases of non-Agency RMBS, CMBS, Agency CMBS, Agency RMBS and ABS as well as investments in Consolidated K-Series and Consolidated SLST and an increase in fair value of our investment securities partially offset by sales of CMBS and paydowns during the period.

The following tables summarize our investment securities portfolio as of December 31, 2019 and 2018 , respectively (dollar amounts in thousands):

December 31, 2019

Weighted Average

Investment Securities

Current Par Value

Amortized Cost

Outstanding Repurchase Agreements

Available for Sale (“AFS”)

Agency Fixed-Rate

Total Agency RMBS

Total Agency CMBS

Non-Agency RMBS

Total Non-Agency RMBS

Consolidated K-Series

Total Agency CMBS

Total - Consolidated K-Series

Consolidated SLST

Total Agency RMBS

Non-Agency RMBS

Total Non-Agency RMBS

Total - Consolidated SLST

Total Investment Securities

Our weighted average coupon was calculated by dividing our annualized coupon income by our weighted average current par value for the respective periods.

Our weighted average yield was calculated by dividing our annualized interest income by our weighted average amortized cost for the respective periods.

December 31, 2018

Weighted Average

Investment Securities

Current Par Value

Amortized Cost

Outstanding Repurchase Agreements

Available for Sale (“AFS”)

Agency Fixed-Rate

Total Agency RMBS

Non-Agency RMBS

Total Non-Agency RMBS

Consolidated K-Series

Total - Consolidated K-Series

Total Investment Securities

Our weighted average coupon was calculated by dividing our annualized coupon income by our weighted average current par value for the respective periods.

Our weighted average yield was calculated by dividing our annualized interest income by our weighted average amortized cost for the respective periods.

Consolidated K-Series and Consolidated SLST

Consolidated K-Series

As of December 31, 2019 and 2018 , we owned 100% of the first loss POs of the Consolidated K-Series.

The Consolidated K-Series are comprised of multi-family mortgage loans held in, and related debt issued by, fourteen and nine Freddie Mac-sponsored multi-family loan K-Series securitizations as of December 31, 2019 and 2018 , respectively, of which we, or one of our SPEs, own the first loss POs and, in certain cases, IOs and/or senior or mezzanine securities issued by these securitizations.

We determined that the securitizations comprising the Consolidated K-Series were VIEs and that we are the primary beneficiary of these securitizations.

Accordingly, we are required to consolidate the Consolidated K-Series’ underlying multi-family loans and related debt, income and expense in our consolidated financial statements.

We do not have any claims to the assets (other than those securities represented by our first loss POs, IOs and certain senior and mezzanine securities owned by the Company) or obligations for the liabilities of the Consolidated K-Series.

Our investment in the Consolidated K-Series is limited to the multi-family CMBS comprised of first loss POs, and, in certain cases, IOs, senior or mezzanine securities, issued by these K-Series securitizations with an aggregate net carrying value of $1.1 billion and $657.6 million as of December 31, 2019 and 2018 , respectively.

Multi-family CMBS - Consolidated K-Series Loan Characteristics:

The following table details the loan characteristics of the underlying multi-family mortgage loans that back our multi-family CMBS first loss POs as of December 31, 2019 and 2018 , respectively (dollar amounts in thousands, except as noted):

December 31, 2019

December 31, 2018

Current balance of loans

Number of loans

Weighted average original LTV

Weighted average underwritten debt service coverage ratio

Current average loan size

Weighted average original loan term (in months)

Weighted average current remaining term (in months)

Weighted average loan rate

First mortgages

Geographic state concentration (greater than 5.0%):

Residential Loans

Acquired Residential Loans

As of December 31, 2020, all of the Company’s acquired residential loans, including performing, re-performing, and non-performing residential loans and business purpose loans, are presented at fair value on its consolidated balance sheets.

Subsequent changes in fair value are reported in current period earnings and presented in unrealized gains (losses), net on the Company’s consolidated statements of operations.

The following table details our acquired residential loans by strategy at December 31, 2020 and 2019, respectively (dollar amounts in thousands):

December 31, 2020 December 31, 2019

Number of Loans Unpaid Principal Fair Value Number of Loans Unpaid Principal Fair Value

Re-performing residential loan strategy (1)

6,453 $ 945,625 $ 945,038 7,713 $ 1,131,855 $ 1,098,867

Performing residential loan strategy (2)

3,452 $ 848,446 $ 837,343 2,700 $ 547,379 $ 533,643

(1) As of December 31, 2019, the Company had 5,696 residential loans within our re-performing residential loan strategy with aggregate unpaid principal of $964.8 million and an aggregate carrying value of $940.1 million accounted for at fair value.

The Company also had 2,017 residential loans with aggregate unpaid principal of $167.0 million and an aggregate carrying value of $158.7 million accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality as of December 31, 2019.

(2) As of December 31, 2019, the Company had 2,534 residential loans within our performing loan strategy with an aggregate unpaid principal balance of $500.1 million and an aggregate carrying value of $489.6 million accounted for at fair value.

The Company also had 166 residential loans held in securitization trusts with an aggregate unpaid principal balance of $47.2 million and an aggregate carrying value of $44.0 million accounted for at amortized cost, net as of December 31, 2019.

Characteristics of Our Acquired Residential Loans:

Loan to Value at Purchase (1)

December 31, 2020 December 31, 2019

50.00% or less 13.9 % 15.4 %

50.01% - 60.00% 12.2 % 12.6 %

60.01% - 70.00% 23.4 % 17.9 %

70.01% - 80.00% 21.0 % 18.5 %

80.01% - 90.00% 11.9 % 14.5 %

90.01% - 100.00% 8.7 % 10.0 %

100.01% and over 8.9 % 11.1 %

Total 100.0 % 100.0 %

(1) For second mortgages, the Company calculates the combined loan to value.

For business purpose loans, the Company calculates as the ratio of the maximum unpaid principal balance of the loan, including unfunded commitments, to the estimated “after repaired” value of the collateral securing the related loan.

FICO Scores at Purchase December 31, 2020 December 31, 2019

550 or less 18.9 % 22.1 %

551 to 600 16.7 % 20.4 %

601 to 650 15.4 % 17.1 %

651 to 700 16.0 % 14.2 %

701 to 750 15.9 % 12.1 %

751 to 800 13.0 % 10.4 %

801 and over 4.1 % 3.7 %

Total 100.0 % 100.0 %

Current Coupon December 31, 2020 December 31, 2019

3.00% or less 6.2 % 5.1 %

3.01% - 4.00% 18.8 % 17.1 %

4.01% - 5.00% 29.6 % 38.4 %

5.01% – 6.00% 11.7 % 18.1 %

6.01% and over 33.7 % 21.3 %

Total 100.0 % 100.0 %

Delinquency Status December 31, 2020 December 31, 2019

Current 85.0 % 80.8 %

31 – 60 days 3.6 % 6.4 %

61 – 90 days 1.9 % 2.6 %

90+ days 9.5 % 10.2 %

Total 100.0 % 100.0 %

Origination Year December 31, 2020 December 31, 2019

2007 or earlier 47.1 % 59.3 %

2008 - 2016 9.3 % 13.8 %

2017 3.8 % 6.1 %

2018 8.0 % 11.0 %

2019 13.4 % 9.8 %

2020 18.4 % —

Total 100.0 % 100.0 %

Consolidated SLST

In the fourth quarter of 2019, the Company invested in first loss subordinated securities and certain IOs and senior securities issued by a Freddie Mac-sponsored residential mortgage loan securitization.

In accordance with GAAP, the Company has consolidated the underlying seasoned re-performing and non-performing residential mortgage loans of the securitization and the SLST CDOs issued to permanently finance these residential mortgage loans, representing Consolidated SLST.

We do not have any claims to the assets (other than those securities represented by our first loss subordinated securities, IOs and senior securities owned by the Company) or obligations for the liabilities of Consolidated SLST.

Our investment in Consolidated SLST is limited to the RMBS comprised of first loss subordinated securities, IOs and senior securities, issued by the securitization with an aggregate net carrying value of $276.8 million as of December 31, 2019 .

The following table details the loan characteristics of the underlying residential mortgage loans that back our first loss subordinated securities of Consolidated SLST as of December 31, 2019 (dollar amounts in thousands, except as noted):

December 31, 2019

The Company owns first loss subordinated securities and certain IOs issued by a Freddie Mac-sponsored residential loan securitization.

In accordance with GAAP, the Company has consolidated the underlying seasoned re-performing and non-performing residential loans of the securitization and the CDOs issued to permanently finance these residential loans, representing Consolidated SLST.

We do not have any claims to the assets or obligations for the liabilities of Consolidated SLST (other than those securities owned by the Company).

Our investment in Consolidated SLST as of December 31, 2020 was limited to the RMBS comprised of first loss subordinated securities and IOs issued by the securitization with an aggregate net carrying value of $212.1 million.

In March 2020, we sold our entire investment in the senior securities issued by Consolidated SLST.

As of December 31, 2019, our investment in Consolidated SLST was limited to the RMBS comprised of first loss subordinated securities, IOs and senior securities with an aggregate carrying value of $276.8 million.

For more information on investment securities held by the Company within Consolidated SLST, refer to "Investment Securities" section below.

The following table details the loan characteristics of the underlying residential loans that back our first loss subordinated securities issued by Consolidated SLST as of December 31, 2020 and 2019, respectively (dollar amounts in thousands, except as noted):

December 31, 2020 December 31, 2019

Current balance of loans $ 1,231,669 $ 1,322,131

11 unchanged sentences

Delinquency Status:

Current 63.3 % 47.6 %

31 - 60 12.4 % 35.5 %

61 - 90 5.1 % 13.1 %

90+ 19.2 % 3.8 %

Origination Year:

2005 or earlier 30.9 % 30.9 %

2006 15.4 % 15.4 %

2007 20.8 % 20.7 %

2008 or later 32.9 % 33.0 %

Geographic state concentration (greater than 5.0%):

Investment Securities Financing

California 10.9 % 11.0 %

Florida 10.5 % 10.6 %

New York 9.3 % 9.1 %

New Jersey 7.1 % 6.9 %

Illinois 6.8 % 6.6 %

Residential Loans Financing

Repurchase Agreements

The Company finances its investment securities primarily through repurchase agreements with third party financial institutions.

These repurchase arrangements are short-term borrowings that bear interest rates typically based on a spread to LIBOR and are secured by the investment securities which they finance.

Upon entering into a financing transaction, our counterparties negotiate a “haircut”, which is the difference expressed in percentage terms between the fair value of the collateral and the amount the counterparty will lend to us.

The size of the haircut represents the lender’s perceived risk associated with holding the investment securities as collateral.

The haircut provides lenders with a cushion for daily market value movements that reduce the need for margin calls or margins to be returned as normal daily changes in investment security market values occur.

At each settlement date, we typically refinance each expiring repurchase agreement at the market interest rate at that time.

The following table details the quarterly average balance, ending balance and maximum balance at any month-end during each quarter in 2019 , 2018 and 2017 for our repurchase agreement borrowings secured by investment securities (dollar amounts in thousands):

Quarter Ended

Quarterly Average

End of Quarter

Maximum Balance at any Month-End

As of December 31, 2020, the Company had repurchase agreements with three third-party financial institutions to fund the purchase of residential loans.

The following table presents detailed information about these repurchase agreements and associated assets pledged as collateral at December 31, 2020 and 2019, respectively (dollar amounts in thousands):

Maximum Aggregate Uncommitted Principal Amount Outstanding

Repurchase Agreements Net Deferred Finance Costs (1)

Carrying Value of Repurchase Agreements Carrying Value of Loans Pledged (2)

Weighted Average Rate Weighted Average Months to Maturity (3)

December 31, 2020 $ 1,301,389 $ 407,213 $ (1,682) $ 405,531 $ 575,380 2.92 % 11.92

December 31, 2019 $ 1,200,000 $ 754,132 $ (818) $ 753,314 $ 961,749 3.67 % 11.20

(1) Costs related to the repurchase agreements which include commitment, underwriting, legal, accounting and other fees are reflected as deferred charges.

Such costs are presented as a deduction from the corresponding debt liability on the Company’s accompanying consolidated balance sheets and are amortized as an adjustment to interest expense using the effective interest method, or straight line-method, if the result is not materially different.

(2) Includes residential loans, at fair value of $575.4 million and $881.2 million at December 31, 2020 and 2019, respectively, and residential loans, net of $80.6 million at December 31, 2019.

(3) The Company expects to roll outstanding amounts under these repurchase agreements into new repurchase agreements or other financings, or to repay outstanding amounts, prior to or at maturity.

The following table details the quarterly average balance, ending balance and maximum balance at any month-end during each quarter in 2020, 2019 and 2018 for our repurchase agreements secured by residential loans (dollar amounts in thousands):

Quarter Ended Quarterly Average

Balance End of Quarter

Balance Maximum Balance

at any Month-End

December 31, 2020 $ 415,625 $ 407,213 $ 425,903

September 30, 2020 651,384 673,787 673,787

9 unchanged sentences

March 31, 2018 150,537 149,535 153,236

Securitized Debt

As of December 31, 2019 , the Company had no Securitized Debt outstanding related to investment securities.

As of December 31, 2018 , the Company had securitized certain of its multi-family CMBS first loss POs and IOs in a multi-family CMBS re-securitization transaction.

The Company’s net investment in this re-securitization was the maximum amount of the Company’s investment that was at risk to loss and represented the difference between the carrying amount of the net assets and liabilities associated with the multi-family CMBS first loss POs and IOs held in the re-securitization.

The Company had a net investment in the re-securitization of $93.1 million as of December 31, 2018 .

The interest rate on the multi-family CMBS re-securitization was 5.35% as of December 31, 2018 .

In March 2019, the Company exercised its option to redeem the notes issued by this multi-family CMBS re-securitization with an outstanding principal balance of $33.2 million resulting in a loss on extinguishment of debt of $2.9 million .

Collateralized Debt Obligations

Included in our portfolio are residential loans that are pledged as collateral for CDOs issued by the Company or by Consolidated SLST.

The Company had a net investment in Consolidated SLST and other residential loan securitizations of $213.7 million and $159.7 million, respectively, as of December 31, 2020.

The following table summarizes Consolidated SLST CDOs and CDOs issued by the Company's residential loan securitizations as of December 31, 2020 (dollar amounts in thousands):

Outstanding Face Amount Carrying Value Weighted Average Interest Rate (1)

Stated Maturity (2)

Consolidated SLST (3)

$ 975,017 $ 1,054,335 2.75 % 2059

Residential loan securitizations $ 557,497 $ 554,067 3.36 % 2025 - 2060

(1) Weighted average interest rate is calculated using the outstanding face amount and stated interest rate of notes issued by the securitization and not owned by the Company.

(2) The actual maturity of the Company's CDOs are primarily determined by the rate of principal prepayments on the assets of the issuing entity.

The CDOs are also subject to redemption prior to the stated maturity according to the terms of the respective governing documents.

As a result, the actual maturity of the CDOs may occur earlier than the stated maturity.

(3) The Company has elected the fair value option for CDOs issued by Consolidated SLST.

Consolidated K-Series

In March 2020, in response to the market turmoil related to the COVID-19 pandemic, the Company elected to sell its entire portfolio of first loss POs and certain mezzanine securities issued by the Consolidated K-Series.

The Consolidated K-Series were comprised of multi-family mortgage loans held in, and related debt issued by, Freddie Mac-sponsored multi-family loan K-Series securitizations of which we, or one of our SPEs, owned the first loss POs and, in certain cases, IOs and/or senior or mezzanine securities issued by these securitizations.

We determined that the securitizations comprising the Consolidated K-Series were VIEs and that we were the primary beneficiary of these securitizations.

Accordingly, we were required to consolidate the Consolidated K-Series’ underlying multi-family loans and related debt, income and expense in our consolidated financial statements.

The sales of the first loss POs and certain mezzanine securities issued by the Consolidated K-Series, for total proceeds of approximately $555.2 million, resulted in the de-consolidation of $17.4 billion in multi-family loans held in the Consolidated K-Series and $16.6 billion in CDOs issued by the Consolidated K-Series.

Also in March 2020, the Company transferred its remaining IOs and mezzanine and senior securities owned in the Consolidated K-Series with a fair value of approximately $237.3 million to investment securities available for sale.

As of December 31, 2019, we owned 100% of the first loss POs of the Consolidated K-Series.

We did not have any claims to the assets (other than those securities owned by the Company) or obligations for the liabilities of the Consolidated K-Series.

Our investment in the Consolidated K-Series was limited to the multi-family CMBS comprised of first loss POs, and, in certain cases, IOs, senior or mezzanine securities, issued by these K-Series securitizations with an aggregate net carrying value of $1.1 billion as of December 31, 2019.

For more information on investment securities held by the Company within the Consolidated K-Series, refer to "Investment Securities" section below.

Multi-family CMBS - Consolidated K-Series Loan Characteristics:

The following table details the loan characteristics of the underlying multi-family mortgage loans that backed our multi-family CMBS first loss POs as of December 31, 2019 (dollar amounts in thousands, except as noted):

December 31, 2019

Current balance of loans $ 16,759,382

Number of loans 828

Weighted average original LTV 68.2 %

Weighted average underwritten debt service coverage ratio 1.48x

Current average loan size $ 20,241

Weighted average original loan term (in months) 125

Weighted average current remaining term (in months) 84

Weighted average loan rate 4.12 %

First mortgages 100 %

Geographic state concentration (greater than 5.0%):

California 15.9 %

Florida 6.2 %

Maryland 5.8 %

Multi-Family Preferred Equity and Mezzanine Loan Investments

The Company invests in preferred equity in, and mezzanine loans to, entities that have significant multi-family real estate assets (referred to in this section as “Preferred Equity and Mezzanine Loans”).

The Company invests in preferred equity in, and mezzanine loans to, entities that have multi-family real estate assets (referred to in this section as “Preferred Equity and Mezzanine Loans”).

A preferred equity investment is an equity investment in the entity that owns the underlying property and mezzanine loans are secured by a pledge of the borrower’s equity ownership in the property.

We evaluate our Preferred Equity and Mezzanine Loans for accounting treatment as loans versus equity investments.

Preferred Equity and Mezzanine Loans for which the characteristics, facts and circumstances indicate that loan accounting treatment is appropriate are included in preferred equity and mezzanine loan investments on our consolidated balance sheets.

Preferred Equity and Mezzanine Loans where the risks and payment characteristics are equivalent to an equity investment are accounted for using the equity method of accounting and are included in investments in unconsolidated entities on our consolidated balance sheets.

As of December 31, 2019 , all Preferred Equity and Mezzanine Loans were paying in accordance with their contractual terms.

Preferred Equity and Mezzanine Loans for which the characteristics, facts and circumstances indicate that loan accounting treatment is appropriate are included in multi-family loans on our consolidated balance sheets.

Preferred Equity and Mezzanine Loans where the risks and payment characteristics are equivalent to an equity investment are accounted for using the equity method of accounting and are included in equity investments on our consolidated balance sheets.

As of December 31, 2020, one preferred equity investment was greater than 90 days delinquent.

In addition, the Company's preferred equity investment in CL Gainesville Associates, LLC ("Campus Lodge") was in forbearance and was subject to a voluntary changeover, where the Company gained the power to direct its activities, resulting in the consolidation of Campus Lodge in our financial statements under GAAP.

These investments collectively represent 3.6% of the total fair value of our Preferred Equity and Mezzanine Loans.

During the year ended December 31, 2019, there were no impairments with respect to our Preferred Equity and Mezzanine Loans.

1 unchanged sentence

December 31, 2020

Carrying Amount (1) (2)

Count Fair Value (1) (2)

Investment Amount (2)

3 unchanged sentences

Mezzanine loans 1 5,092 5,031 11.50 % 31.3

Preferred equity investment in Consolidated VIE (4)

1 9,434 9,939 11.77 % 7.2

Total 47 $ 355,792 $ 355,841 11.54 % 6.7

December 31, 2019

Carrying Amount (1) (2)

Count Carrying Amount (1) (2)

Investment Amount (2)

3 unchanged sentences

Mezzanine loans 3 6,220 6,235 11.95 % 25.8

Preferred equity and mezzanine loan investments in the amounts of $180.0 million and $165.6 million are included in preferred equity and mezzanine loan investments on the accompanying consolidated balance sheets as of December 31, 2019 and 2018 , respectively.

Preferred equity investments in the amounts of $106.1 million and $40.5 million are included in investments in unconsolidated entities on the accompanying consolidated balance sheets as of December 31, 2019 and 2018 , respectively.

The difference between the carrying amount and the investment amount consists of any unamortized premium or discount, deferred fees or deferred expenses.

Total 45 $ 286,128 $ 288,299 11.40 % 8.2

(1) Preferred equity and mezzanine loan investments in the amounts of $163.6 million and $180.0 million are included in multi-family loans on the accompanying consolidated balance sheets as of December 31, 2020 and 2019, respectively.

Preferred equity investments in the amounts of $182.8 million and $106.1 million are included in equity investments on the accompanying consolidated balance sheets as of December 31, 2020 and 2019, respectively.

(2) The difference between the fair value and investment amount as of December 31, 2020 consists of any unamortized premium or discount, deferred fees or deferred expenses, and any unrealized gain or loss.

The difference between the carrying amount and the investment amount as of December 31, 2019 consists of any unamortized premium or discount, deferred fees or deferred expenses.

(3) Based upon investment amount and contractual interest or preferred return rate.

(4) Represents the Company's preferred equity investment in Campus Lodge, a Consolidated VIE that owns a multi-family apartment community.

A reconciliation of our preferred equity investment in Campus Lodge to our consolidated financial statements as of December 31, 2020 is shown below (dollar amounts in thousands):

Operating real estate, net (a)

Lease intangible, net (a)

Other assets 1,611

Total assets 53,983

Mortgage payable, net (b)

Other liabilities 1,426

Total liabilities 38,178

Non-controlling interest in Consolidated VIE 6,371

Preferred equity investment in Consolidated VIE $ 9,434

(a) Included in other assets in the accompanying consolidated balance sheets.

(b) Included in other liabilities in the accompanying consolidated balance sheets.

Preferred Equity and Mezzanine Loans Characteristics:

Combined Loan to Value at Investment

December 31, 2019

December 31, 2018

Combined Loan to Value at Investment December 31, 2020 December 31, 2019

60.01% - 70.00% 16.5 % —

70.01% - 80.00% 19.0 % 23.4 %

Equity Investments in Multi-Family and Residential Entities

Multi-Family Joint Venture Equity Investments

The Company has invested in joint venture equity investments in entities that own multi-family real estate assets.

We receive variable distributions from these investments on a pari passu basis based upon property performance and record our positions at fair value.

The following table summarizes our multi-family joint venture equity investments as of December 31, 2019 and 2018 , respectively (dollar amounts in thousands):

December 31, 2019

December 31, 2018

Property Location

Ownership Interest

Carrying Amount

Ownership Interest

Carrying Amount

The Preserve at Port Royal Venture, LLC

Port Royal, SC

Evergreens JV Holdings, LLC (1)

The Company’s equity investment was redeemed during the year ended December 31, 2019 .

Equity Investments in Entities That Invest In Residential Properties and Mortgage Loans

The Company has ownership interests in entities that invest in residential properties and mortgage loans.

We may receive variable distributions from these investments based upon underlying asset performance and record our positions at fair value.

The following table summarizes our ownership interests in entities that invest in residential properties and mortgage loans as of December 31, 2019 and 2018 , respectively (dollar amounts in thousands):

December 31, 2019

December 31, 2018

Ownership Interest

Carrying Amount

Ownership Interest

Carrying Amount

Morrocroft Neighborhood Stabilization Fund II, LP

Single-Family Rental Properties

Headlands Asset Management Fund III (Cayman), LP (Headlands Flagship Opportunity Fund Series I)

Residential Mortgage Loans

Distressed and Other Residential Mortgage Loans, at Fair Value

Certain of the Company’s acquired residential mortgage loans, including distressed residential mortgage loans, non-QM loans, second mortgages and residential bridge loans, are presented at fair value on its consolidated balance sheets as a result of a fair value election made at the time of acquisition pursuant to ASC 825.

Subsequent changes in fair value are reported in current period earnings and presented in unrealized gains (losses), net on the Company’s consolidated statements of operations.

The following table details our distressed and other residential mortgage loans, at fair value at December 31, 2019 and 2018 , respectively (dollar amounts in thousands):

December 31, 2019

December 31, 2018

Number of Loans

Unpaid Principal

Number of Loans

Unpaid Principal

Distressed Residential Mortgage Loans

Other Residential Mortgage Loans

Characteristics of Our Distressed and Other Residential Mortgage Loans, at Fair Value:

Loan to Value at Purchase (1)

December 31, 2019

80.01% - 90.00% 62.9 % 76.6 %

90.01% - 100.00% 1.6 % —

Total 100.0 % 100.0 %

Investment Securities

At December 31, 2020, our investment securities portfolio included Agency RMBS, non-Agency RMBS, CMBS and ABS, which are classified as investment securities available for sale.

Our securities investments also include first loss subordinated securities and certain IOs issued by Consolidated SLST.

At December 31, 2020, we had no investment securities in a single issuer or entity that had an aggregate book value in excess of 5% of our total assets.

The decrease in the carrying value of our investment securities as of December 31, 2020 as compared to December 31, 2019 is due to our $2.4 billion in asset sales related, in part, to our response to the significant disruption in the financial markets caused by the COVID-19 pandemic and opportunistic dispositions, including $1.1 billion of Agency securities (including Agency RMBS issued by Consolidated SLST), $555.2 million of first loss POs and certain mezzanine securities issued by the Consolidated K-Series, $433.1 million of non-Agency RMBS and $248.7 million of CMBS.

The decrease in carrying value was also due to a decline in the fair value of a number of our investment securities since December 31, 2019 as a result of the ongoing pandemic.

The following tables summarize our investment securities portfolio as of December 31, 2020 and 2019, respectively (dollar amounts in thousands):

December 31, 2020

50.00% or less

Unrealized Weighted Average

Investment Securities Current Par Value Amortized Cost Gains Losses Fair Value Coupon (1)

Outstanding Repurchase Agreements

Available for Sale (“AFS”)

Agency Fixed-Rate

$ 133,231 $ 138,541 $ 854 $ — $ 139,395 2.00 % 1.38 % $ —

Total Agency RMBS

133,231 138,541 854 — 139,395 2.00 % 1.38 % —

Non-Agency RMBS

104,192 104,457 4 (1,822) 102,639 4.13 % 4.27 % —

1 unchanged sentence

48,198 48,196 170 — 48,366 4.63 % 5.33 % —

100.01% and over

For second mortgages, the Company calculates the combined loan to value.

For residential bridge loans, the Company calculates as the ratio of the maximum unpaid principal balance of the loan, including unfunded commitments, to the estimated “after repaired” value of the collateral securing the related loan.

FICO Scores at Purchase

December 31, 2019

December 31, 2018

Current Coupon

December 31, 2019

December 31, 2018

3.00% or less

472,049 25,976 — (9,289) 16,687 0.44 % 5.91 % —

Total Non-Agency RMBS

815,828 367,320 4,506 (16,160) 355,666 1.83 % 4.74 % —

106,153 101,221 5,440 (2,276) 104,385 4.24 % 4.73 % —

6.01% and over

Delinquency Status

December 31, 2019

December 31, 2018

Origination Year

December 31, 2019

December 31, 2018

2005 or earlier

2008 or later

Distressed and Other Residential Mortgage Loans, Net

Distressed Residential Mortgage Loans accounted for under ASC 310-30:

Certain of the distressed residential mortgage loans acquired by the Company at a discount, with evidence of credit deterioration since their origination and where it is probable that the Company will not collect all contractually required principal payments, are accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”).

The following table details our portfolio of distressed residential mortgage loans at carrying value at December 31, 2019 and 2018 , respectively (dollar amounts in thousands):

Number of Loans

Unpaid Principal

Carrying Value

December 31, 2019

December 31, 2018

Characteristics of Distressed Residential Mortgage Loans accounted for under ASC 310-30:

Loan to Value at Purchase

December 31, 2019

December 31, 2018

50.00% or less

Subordinated 6,000 6,000 — (1,080) 4,920 8.00 % 8.00 % —

12,245,039 75,233 2,277 (375) 77,135 0.10 % 4.53 % —

3 unchanged sentences

$ 13,306,364 $ 722,454 $ 22,163 $ (19,891) $ 724,726 0.48 % 5.35 % $ —

100.01% and over

FICO Scores at Purchase

December 31, 2019

December 31, 2018

Current Coupon

December 31, 2019

December 31, 2018

3.00% or less

Consolidated SLST

Non-Agency RMBS

Subordinated $ 256,651 $ 213,593 $ — $ (29,556) $ 184,037 4.66 % 4.92 % $ —

208,932 30,708 — (2,601) 28,107 3.50 % 8.38 % —

4.01 to 5.00%

6.01% and over

Delinquency Status

December 31, 2019

December 31, 2018

Origination Year

December 31, 2019

Total - Non-Agency RMBS 465,583 244,301 — (32,157) 212,144 4.13 % 5.38 % —

Total - Consolidated SLST $ 465,583 $ 244,301 $ — $ (32,157) $ 212,144 4.13 % 5.38 % $ —

Total Investment Securities $ 13,771,947 $ 966,755 $ 22,163 $ (52,048) $ 936,870 0.55 % 5.35 % $ —

(1) Our weighted average coupon was calculated by dividing our annualized coupon income by our weighted average current par value for the respective periods.

(2) Our weighted average yield was calculated by dividing our annualized interest income by our weighted average amortized cost for the respective periods.

December 31, 2019

2005 or earlier

2008 or later

Distressed and Other Residential Loans Financing

Repurchase Agreements

The Company has master repurchase agreements with two third party financial institutions to fund the purchase of distressed and other residential mortgage loans, including both first and second mortgages.

The following table presents detailed information about the Company’s borrowings under repurchase agreements and associated assets pledged as collateral at December 31, 2019 and 2018 (dollar amounts in thousands):

Maximum Aggregate Uncommitted Principal Amount

Unrealized Weighted Average

Investment Securities Current Par Value Amortized Cost Gains Losses Fair Value Coupon (1)

Outstanding Repurchase Agreements

Available for Sale (“AFS”)

Agency Fixed-Rate

$ 836,223 $ 867,236 $ 7,397 $ (6,162) $ 868,471 3.38 % 2.61 % $ 746,834

53,038 55,740 13 (1,347) 54,406 3.21 % 1.68 % 41,765

Total Agency RMBS

889,261 922,976 7,410 (7,509) 922,877 3.37 % 2.55 % 788,599

51,184 51,334 19 (395) 50,958 2.45 % 2.41 % 48,640

Total Agency CMBS

51,184 51,334 19 (395) 50,958 2.45 % 2.41 % 48,640

940,445 974,310 7,429 (7,904) 973,835 3.36 % 2.55 % 837,239

Non-Agency RMBS

260,604 260,741 1,971 (13) 262,699 4.65 % 4.66 % 194,024

285,760 281,743 8,713 — 290,456 5.24 % 5.59 % 179,424

150,961 150,888 2,518 (2) 153,404 5.64 % 5.66 % 70,390

842,577 8,211 1,790 (1,246) 8,755 0.42 % 5.93 % —

Total Non-Agency RMBS

1,539,902 701,583 14,992 (1,261) 715,314 2.68 % 5.26 % 443,838

261,287 254,620 13,300 (143) 267,777 5.00 % 5.37 % 142,230

113 49,902 — (688) 49,214 — 10.70 % —

$ 2,741,747 $ 1,980,415 $ 35,721 $ (9,996) $ 2,006,140 3.25 % 3.71 % $ 1,423,307

Consolidated K-Series

$ 86,355 $ 88,784 $ — $ (425) $ 88,359 2.74 % 2.34 % $ 84,544

Total Agency CMBS

86,355 88,784 — (425) 88,359 2.74 % 2.34 % 84,544

92,926 83,264 12,271 — 95,535 4.21 % 5.70 % 59,579

1,375,874 654,849 169,678 — 824,527 — 13.98 % 571,403

12,364,412 83,960 138 (224) 83,874 0.10 % 4.66 % 38,678

13,833,212 822,073 182,087 (224) 1,003,936 0.13 % 12.10 % 669,660

Total - Consolidated K-Series

$ 13,919,567 $ 910,857 $ 182,087 $ (649) $ 1,092,295 0.13 % 11.92 % $ 754,204

Consolidated SLST

$ 25,902 $ 26,227 $ 11 $ — $ 26,238 2.83 % 2.53 % $ 24,143

Total Agency RMBS

25,902 26,227 11 — 26,238 2.83 % 2.53 % 24,143

Non-Agency RMBS

256,093 215,034 — (275) 214,759 5.62 % 7.23 % 150,448

228,437 35,592 181 — 35,773 3.60 % 8.58 % —

Total Non-Agency RMBS

484,530 250,626 181 (275) 250,532 4.67 % 7.42 % 150,448

Total - Consolidated SLST

$ 510,432 $ 276,853 $ 192 $ (275) $ 276,770 4.58 % 6.96 % $ 174,591

Total Investment Securities

$ 17,171,746 $ 3,168,125 $ 218,000 $ (10,920) $ 3,375,205 0.69 % 6.02 % $ 2,352,102

(1) Our weighted average coupon was calculated by dividing our annualized coupon income by our weighted average current par value for the respective periods.

(2) Our weighted average yield was calculated by dividing our annualized interest income by our weighted average amortized cost for the respective periods.

Investment Securities Financing

Repurchase Agreements

Carrying Value of Loans Pledged (1)

Weighted Average Rate

Weighted Average Months to Maturity

December 31, 2019

December 31, 2018

Includes distressed and other residential mortgage loans at fair value of $881.2 million and $626.2 million and distressed and other residential mortgage loans, net of $80.6 million and $128.1 million at December 31, 2019 and 2018 , respectively.

The Company expects to roll outstanding borrowings under these master repurchase agreements into new repurchase agreements or other financings prior to or at maturity.

The following table details the quarterly average balance, ending balance and maximum balance at any month-end during each quarter in 2019 , 2018 and 2017 for our repurchase agreement borrowings secured by distressed and other residential mortgage loans, including both first and second mortgages (dollar amounts in thousands):

Quarter Ended

Quarterly Average

End of Quarter

Maximum Balance

at any Month-End

In March 2020, in reaction to the market turmoil related to the COVID-19 pandemic, our repurchase agreement providers dramatically changed their risk tolerances, including reducing or eliminating availability to add or roll maturing repurchase agreements, increasing haircuts and reducing security valuations.

In turn, this led to significant disruptions in our financing markets, negatively impacting the Company as well as the entire mortgage REIT industry.

In response, the Company completely eliminated its securities repurchase agreement exposure in 2020.

The Company will continue to evaluate the securities repurchase agreement market before increasing its exposure in the future.

The Company has historically financed its investment securities primarily through repurchase agreements with third-party financial institutions.

These repurchase agreements are short-term financings that bear interest rates typically based on a spread to LIBOR and are secured by the investment securities which they finance.

The size of the haircut represents the counterparty’s perceived risk associated with holding the investment securities as collateral.

The haircut provides counterparties with a cushion for daily market value movements that reduce the need for margin calls or margins to be returned as normal daily changes in investment security market values occur.

Quarter Ended Quarterly Average

Balance End of Quarter

Balance Maximum Balance at any Month-End

December 31, 2020 $ — $ — $ —

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March 31, 2018 1,287,939 1,287,314 1,297,949

Securitized Debt

As of December 31, 2019 , the Company had no Securitized Debt outstanding related to its residential loans.

As of December 31, 2018 , $88.1 million of distressed residential mortgage loans were held in a securitization trust and were pledged as collateral for certain of the securitized debt issued by the Company.

As of December 31, 2018 , the interest rate on the distressed residential mortgage loan securitization trust was 4.0% .

The Company’s net investment in this securitization trust was the maximum amount of the Company’s investment that was at risk to loss and represented the difference between the carrying amount of the net assets and liabilities associated with the distressed residential mortgage loans held in securitization trust.

The Company had a net investment in this securitization trust of $85.7 million as of December 31, 2018 .

In March 2019, the Company repaid $6.5 million in outstanding notes from this securitization and distressed residential mortgage loans with a carrying value of $80.0 million became unencumbered.

Residential Mortgage Loans Held in Securitization Trusts, Net and Residential CDOs

Residential Mortgage Loans Held in Securitization Trusts, Net

Included in our portfolio are prime ARM loans that we originated or purchased in bulk from third parties that met our investment criteria and portfolio requirements and that we subsequently securitized in 2005.

The following table details our residential mortgage loans held in securitization trusts, net at December 31, 2019 and 2018 , respectively (dollar amounts in thousands):

Number of Loans

Unpaid Principal

Carrying Value

December 31, 2019

December 31, 2018

Of the residential mortgage loans held in securitization trusts, net, 100% are traditional ARMs or hybrid ARMs, 81.3% of which were ARM loans that were interest only at the time of origination.

With respect to the hybrid ARMs included in these securitizations, interest rate reset periods were predominately five years or less and the interest-only period is typically nine years.

None of the residential mortgage loans held in securitization trusts, net are pay option-ARMs or ARMs with negative amortization.

As of December 31, 2019 , the interest only period for the interest only ARM loans included in these securitizations has ended.

Characteristics of Our Residential Mortgage Loans Held in Securitization Trusts, Net:

The following table sets forth the composition of our residential mortgage loans held in securitization trusts, net as of December 31, 2019 and 2018 , respectively (dollar amounts in thousands):

December 31, 2019

Non-Agency RMBS Re-Securitization

In June 2020, the Company completed a re-securitization of certain non-Agency RMBS primarily for the purpose of obtaining non-recourse, longer-term financing on a portion of its non-Agency RMBS portfolio.

The Company received net cash proceeds of approximately $109.0 million after deducting expenses associated with the re-securitization transaction.

The Company had a net investment in the re-securitization of $94.3 million as of December 31, 2020.

The following table summarizes the non-Agency RMBS re-securitization as of December 31, 2020 (dollar amounts in thousands):

Outstanding Face Amount Carrying Value (1)

Pass-through Rate of Notes (2)

Stated Maturity Date

Non-Agency RMBS re-securitization $ 15,449 $ 15,256 One-month LIBOR plus 5.25%

(1) Classified as a collateralized debt obligation in the liability section of the Company's accompanying consolidated balance sheets.

The re-securitization is non-recourse debt for which the Company has no obligation.

(2) Represents the pass-through rate through the payment date in December 2021.

Pass-through rate increases to one-month LIBOR plus 7.75% for payment dates in or after January 2022.

Equity Investments in Multi-Family and Residential Entities

Multi-Family Joint Venture Equity Investments

The Company's joint venture equity investment in an entity that owned a multi-family real estate asset was redeemed during the year ended December 31, 2020.

We received variable distributions from this investment on a pari passu basis based upon property performance and recorded our position at fair value.

The following table summarizes our multi-family joint venture equity investment as of December 31, 2019 (dollar amounts in thousands):

December 31, 2019

General Loan Characteristics:

Original Loan Balance

Current Coupon Rate

Original Term (Months)

Remaining Term (Months)

Average Months to Reset

Original FICO Score

Residential Collateralized Debt Obligations

All of the Company’s residential mortgage loans held in securitization trusts, net are pledged as collateral for Residential CDOs issued by the Company.

The Company retained the owner trust certificates, or residual interest, in three securitization trusts.

As of December 31, 2019 and 2018 , we had Residential CDOs outstanding of $ 40.4 million and $ 53.0 million , respectively.

The Company’s net investment in the residential securitization trusts, which is the maximum amount of the Company’s investment that is at risk to loss and represents the difference between (i) the carrying amount of the mortgage loans, real estate owned and receivables held in residential securitization trusts and (ii) the amount of Residential CDOs outstanding, was $4.9 million and $4.8 million as of December 31, 2019 and 2018 , respectively.

As of December 31, 2019 and 2018 , the weighted average interest rate of these Residential CDOs was 2.41% and 3.12% , respectively.

Property Location Ownership Interest Carrying Amount

The Preserve at Port Royal Venture, LLC

Port Royal, SC 77% $ 18,310

Equity Investments in Entities That Invest in Residential Properties and Loans

The Company has ownership interests in entities that invest in residential properties and loans.

We may receive variable distributions from these investments based upon underlying asset performance and record our positions at fair value.

The following table summarizes our ownership interests in entities that invest in residential properties and loans as of December 31, 2020 and 2019, respectively (dollar amounts in thousands):

December 31, 2020 December 31, 2019

Strategy Ownership Interest Carrying Amount Ownership Interest Carrying Amount

Morrocroft Neighborhood Stabilization Fund II, LP

Single-Family Rental Properties

11% $ 13,040 11% $ 11,796

Headlands Asset Management Fund III (Cayman), LP (Headlands Flagship Opportunity Fund Series I)

Residential Loans 49% 63,290 49% 53,776

Total $ 76,330 $ 65,572

Derivative Assets and Liabilities

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These derivative instruments may include interest rate swaps, swaptions, futures, options on futures and mortgage derivatives such as forward-settling purchases and sales of Agency RMBS where the underlying pools of mortgage loans are “To-Be-Announced,” or TBAs.

Our current derivative instruments are comprised of interest rate swaps.

We use interest rate swaps to hedge variable cash flows associated with our variable rate borrowings.

We typically pay a fixed rate and receive a floating rate based on one- or three- month LIBOR, on the notional amount of the interest rate swaps.

The floating rate we receive under our swap agreements has the effect of offsetting the repricing characteristics and cash flows of our financing arrangements.

For the years ended December 31, 2019 and 2018 , we recognized unrealized losses of $30.7 million and unrealized gains of $0.9 million , respectively.

Unrealized gains and losses include the change in market value, period over period, generally as a result of changes in interest rates.

We may or may not ultimately realize these unrealized derivative losses depending upon trade activity, changes in interest rates and the values of the underlying securities.

Our derivative instruments were comprised of interest rate swaps that we used to hedge variable cash flows associated with our variable rate borrowings.

We typically paid a fixed rate and received a floating rate based on one- or three- month LIBOR, on the notional amount of the interest rate swaps.

The floating rate we received under our swap agreements had the effect of offsetting the repricing characteristics and cash flows of our financing arrangements.

Derivative financial instruments may contain credit risk to the extent that the institutional counterparties may be unable to meet the terms of the agreements.

Currently, all of the Company’s interest rate swaps outstanding are cleared through CME Group Inc.

All of the Company’s interest rate swaps were cleared through CME Group Inc.

(“CME Clearing”) which is the parent company of the Chicago Mercantile Exchange Inc.

CME Clearing serves as the counterparty to every cleared transaction, becoming the buyer to each seller and the seller to each buyer, limiting the credit risk by guaranteeing the financial performance of both parties and netting down exposures.

In March 2020, in response to the turmoil in the financial markets, we terminated our interest rate swaps, recognizing a realized loss of $73.1 million which was partially offset by a reversal of $29.0 million in unrealized losses, resulting in a total net loss of $44.1 million for the year ended December 31, 2020.

We did not recognize any realized gains or losses during the year ended December 31, 2019.

We recognized unrealized losses of $30.7 million for the year ended December 31, 2019.

Unrealized gains and losses include the change in market value, period over period, generally as a result of changes in interest rates and reversals of previously recognized unrealized gains or losses upon termination.

The Company’s debt as of December 31, 2020 included Convertible Notes and subordinated debentures.

Convertible Notes

On January 23, 2017 , the Company issued $138.0 million aggregate principal amount of its 6.25% Senior Convertible Notes due 2022 in an underwritten public offering.

The net proceeds to the Company from the sale of the Convertible Notes, after deducting the underwriter’s discounts, commissions and offering expenses, were approximately $127.0 million with the total cost to the Company of approximately 8.24% .

As of December 31, 2020, the Company had $138.0 million aggregate principal amount of its 6.25% Senior Convertible Notes (the "Convertible Notes") outstanding, due on January 15, 2022.

The Convertible Notes were issued at a discount with a total cost to the Company of approximately 8.24%.

Subordinated Debentures

As of December 31, 2019 , certain of our wholly-owned subsidiaries had trust preferred securities outstanding of $ 45.0 million with a weighted average interest rate of 5.79% .

As of December 31, 2020, certain of our wholly-owned subsidiaries had trust preferred securities outstanding of $45.0 million with a weighted average interest rate of 4.07% which are due in 2035.

The securities are fully guaranteed by us with respect to distributions and amounts payable upon liquidation, redemption or repayment.

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Balance Sheet Analysis - Company ’ s Stockholders’ Equity

The Company’s stockholders’ equity at December 31, 2019 was $2.2 billion and included $25.1 million of accumulated other comprehensive income.

The accumulated other comprehensive income at December 31, 2019 consisted primarily of $12.6 million in net unrealized gains related to our CMBS and $12.5 million in net unrealized gains related to non-Agency RMBS.

The Company's stockholders’ equity at December 31, 2018 was $1.2 billion and included $22.1 million of accumulated other comprehensive loss.

The accumulated other comprehensive loss at December 31, 2018 consisted of $38.3 million in unrealized losses related to our Agency RMBS and $1.2 million in net unrealized losses related to our non-Agency RMBS, partially offset by $17.4 million in net unrealized gains related to our CMBS.

The Company’s stockholders’ equity at December 31, 2020 was $2.3 billion and included $1.0 million of accumulated OCI.

The accumulated OCI at December 31, 2020 consisted primarily of $2.0 million in net unrealized gains related to our CMBS partially offset by $1.0 million in net unrealized losses related to our non-Agency RMBS.

The Company's stockholders’ equity at December 31, 2019 was $2.2 billion and included $25.1 million of accumulated OCI.

The accumulated OCI at December 31, 2019 consisted primarily of $12.6 million in net unrealized gains related to our CMBS and $12.5 million in net unrealized gains related to our non-Agency RMBS.

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain investments, comply with margin requirements, fund our operations, pay management and incentive fees, pay dividends to our stockholders and other general business needs.

Our investments and assets, excluding the multi-family CMBS first loss POs we invest in, generate liquidity on an ongoing basis through principal and interest payments, prepayments, net earnings retained prior to payment of dividends and distributions from unconsolidated investments.

Our multi-family CMBS first loss POs are backed by balloon non-recourse mortgage loans that provide for the payment of principal at maturity date, which is typically ten to fifteen years from the date the underlying mortgage loans are originated, and therefore do not directly contribute to monthly cash flows.

In addition, the Company will, from time to time, sell on an opportunistic basis certain assets from its investment portfolio as part of its overall investment strategy and these sales are expected to provide additional liquidity.

We fund our investments and operations through a balanced and diverse funding mix, which includes proceeds from the issuance of common and preferred equity and debt securities, including convertible notes, short-term and longer-term repurchase agreement borrowings, CDOs, securitized debt and trust preferred debentures.

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain investments, comply with margin requirements, fund our operations, pay dividends to our stockholders and other general business needs.

Generally, our investments and assets generate liquidity on an ongoing basis through principal and interest payments, prepayments, net earnings retained prior to payment of dividends and distributions from equity investments.

In addition, we may generate liquidity through the sale of assets from our investment portfolio.

As discussed throughout this Annual Report on Form 10-K, the COVID-19 pandemic-driven disruptions in the real estate, mortgage and financial markets have negatively affected and may negatively affect our liquidity in the future.

In March 2020, we observed a mark-down of a portion of our assets by the counterparties to our repurchase agreements, resulting in us having to pay cash or additional securities to counterparties to satisfy margin calls that were well beyond historical norms.

To conserve capital, protect assets and to pause the escalating negative impacts caused by the market dislocation and allow the markets for many of our assets to stabilize, on March 23, 2020, we notified our repurchase agreement counterparties that we did not expect to fund the existing and anticipated future margin calls under our repurchase agreements and commenced discussions with our counterparties with regard to entering into forbearance agreements.

In response to these conditions, we have focused on improving liquidity and long-term capital preservation by taking the actions described below.

Starting March 23, 2020 and through the period ended June 30, 2020, we sold a total of $2.1 billion in assets, including the sale of 100% of our Agency securities portfolio held at that time, all of our first loss multi-family POs and a portion of our non-Agency RMBS, CMBS and residential loan portfolios for proceeds of $1.1 billion, $555.2 million, $168.8 million, $138.1 million and $93.8 million, respectively.

By April 7, 2020, we were again current with our repurchase payment obligations and no longer in a position to need forbearance agreements from our repurchase agreement counterparties.

During the third and fourth quarters of 2020, we selectively disposed of non-Agency RMBS and CMBS for total proceeds of $375.0 million.

Moreover, during the second, third and fourth quarters of 2020, we completed three securitization transactions generating net proceeds to us of $649.4 million.

We used the proceeds from these sales and securitization transactions to pay down our repurchase agreement financing, reducing our portfolio leverage to 0.2 times as of December 31, 2020.

At December 31, 2020, we had $293.2 million of cash and cash equivalents, $827.7 million of unencumbered securities (including the securities we own in Consolidated SLST), $515.5 million of unencumbered residential loans and $346.4 million of unencumbered preferred equity investment s in and mezzanine loans to owners of multi-family properties.

Both of our residential and multi-family asset management teams have been active in responding to the government assistance programs instituted in response to the impacts of the COVID-19 pandemic providing relief to residential and multi-family loan borrowers.

We have endeavored to work with any of our borrowers or operating partners that require relief because of the pandemic.

As of December 31, 2020, approximately 2% of our residential loan portfolio had an active COVID-19 assistance plan.

We have a long history of dealing with distressed borrowers and currently do not expect these levels of forbearance to have a material impact on our liquidity.

In our multi-family portfolio, one loan is delinquent in making its distributions to us and one loan is in a forbearance arrangement with us.

These loans represent 3.6% of our total preferred equity and mezzanine loan investment portfolio.

Although we did not see a significant increase in forbearance and delinquency rates in our portfolio during the year ended December 31, 2020, we would expect delinquencies, defaults and requests for forbearance arrangements to rise should savings, incomes and revenues of borrowers, operating partners and other businesses become further constrained from the ongoing impacts of the COVID-19 pandemic.

We cannot assure you that any increase in or prolonged period of payment deferrals, forbearance, delinquencies, defaults, foreclosures or losses will not adversely affect our net interest income, the fair value of our assets or our liquidity.

We historically have endeavored to fund our investments and operations through a balanced and diverse funding mix, including proceeds from the issuance of common and preferred equity and debt securities, short-term and longer-term repurchase agreements and CDOs.

The type and terms of financing used by us depends on the asset being financed and the financing available at the time of the financing.

In those cases where we utilize some form of structured financing, be it through CDOs, longer-term repurchase agreements or securitized debt, the cash flow produced by the assets that serve as collateral for these structured finance instruments may be restricted in terms of its use or applied to pay principal or interest on CDOs, repurchase agreements, notes or other securities that are senior to our interests.

At December 31, 2019 , we had cash and cash equivalents balances of $118.8 million , which increased from $103.7 million at December 31, 2018 .

Based on our current investment portfolio, new investment initiatives, leverage ratio and available and future possible borrowing arrangements, we believe our existing cash balances, funds available under our various financing arrangements and cash flows from operations will meet our liquidity requirements for at least the next 12 months.

As discussed above, as a result of the severe market dislocations related to the COVID-19 pandemic and, more specifically, the unprecedented illiquidity in our repurchase agreement financing and MBS markets, we have recently placed and expect in the future to place a greater emphasis on procuring longer-termed and/or more committed financing arrangements, such as securitizations and other term financings, that provide less or no exposure to fluctuations in the collateral repricing determinations of financing counterparties or rapid liquidity reductions in repurchase agreement financing markets.

To this end, we have completed five non-mark-to-market financings since June 2020, including two non-mark-to-market repurchase agreement financings with new and existing counterparties.

Based on current market conditions, our current investment portfolio, new investment initiatives, leverage ratio and available and future possible financing arrangements, we believe our existing cash balances, funds available under our various financing arrangements and cash flows from operations will meet our liquidity requirements for at least the next 12 months.

We have explored and will continue in the near term to explore additional financing arrangements to further strengthen our balance sheet and position ourselves for future investment opportunities, including, without limitation, additional issuances of our equity and debt securities and longer-termed financing arrangements;

however, no assurance can be given that we will be able to access any such financing, or the size, timing or terms thereof.

Cash Flows and Liquidity for the Year Ended December 31, 2020

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Cash Flows from Investing Activities

During the year ended December 31, 2019 , our cash flows used in investing activities was $769.1 million , primarily as a result of purchases of residential mortgage loans and distressed residential mortgage loans, RMBS, including securities in Consolidated SLST, Agency CMBS and CMBS, including securities in the Consolidated K-Series, and funding of preferred equity, equity and mezzanine loan investments, reflecting our continued focus on single-family residential and multi-family investment strategies.

These purchases were partially offset by principal repayments and proceeds from sales and refinancing of distressed and other residential mortgage loans, principal paydowns or repayments of investment securities and preferred equity and mezzanine loan investments and proceeds from sales of investment securities.

Although we generally intend to hold our investment securities as long-term investments, we may sell certain of these securities in order to manage our interest rate risk and liquidity needs, to meet other operating objectives or to adapt to market conditions.

We cannot predict the timing and impact of future sales of investment securities, if any.

Because many of our investment securities are financed through repurchase agreements, a portion of the proceeds from any sales or principal repayments of our investment securities may be used to repay balances under these financing sources.

Similarly, all or a significant portion of cash flows from principal repayments received on multi-family loans held in securitization trusts and principal repayments received from distressed and other residential mortgage loans would generally be used to repay CDOs issued by the respective Consolidated VIEs or repurchase agreements (included as cash used in financing activities).

As presented in the “Supplemental Disclosure - Non-Cash Investment Activities” subsection of our consolidated statements of cash flows, during the year ended December 31, 2019 , we consolidated certain multi-family and residential securitization trusts which represent significant non-cash transactions that were not included in cash flows used in investing activities.

During the year ended December 31, 2020, our net cash flows provided by investing activities were $2.1 billion, primarily as a result of sales of Agency RMBS and Agency CMBS, including securities issued by Consolidated SLST and the Consolidated K-Series, sales of non-Agency RMBS and CMBS, sales of first loss POs and certain mezzanine securities issued by the Consolidated K-Series and sales of residential loans compounded by principal repayments and refinancing of residential loans and principal paydowns or repayments of investment securities and equity, preferred equity and mezzanine loan investments.

These sales and repayments were partially offset by purchases of residential loans, RMBS, CMBS, and funding of preferred equity investments during the period, reflecting our continued focus on single-family residential and multi-family investment strategies.

Although we generally intend to hold our assets as long-term investments, we may sell certain of these assets in order to manage our interest rate risk and liquidity needs, to meet other operating objectives or to adapt to market conditions, as was the case in March 2020.

We cannot predict the timing and impact of future sales of assets, if any.

Because a portion of our assets are financed through repurchase agreements or CDOs, a portion of the proceeds from any sales of or principal repayments on our assets may be used to repay balances under these financing sources.

Accordingly, all or a significant portion of cash flows from principal repayments received on multi-family loans held in the Consolidated K-Series, principal repayments received from residential loans and proceeds from sales or principal paydowns received from investment securities available for sale were used to repay CDOs issued by the respective Consolidated VIEs or repurchase agreements (included as cash used in financing activities).

As presented in the “Supplemental Disclosure - Non-Cash Investment Activities” subsection of our consolidated statements of cash flows, during the year ended December 31, 2020, we de-consolidated certain multi-family securitization trusts which represent significant non-cash transactions that were not included in cash flows provided by investing activities.

Cash Flows from Financing Activities

During the year ended December 31, 2019 , our cash flows provided by financing activities was $746.4 million .

The main sources of cash flows from financing activities were proceeds from repurchase agreements for both our investment securities and distressed and other residential mortgage loans and net proceeds from various issuances of both our common and preferred stock.

During the year ended December 31, 2019 , we paid dividends on both our common and preferred stock, redeemed our multi-family CMBS re-securitization and repaid outstanding notes from our distressed residential mortgage loan securitization.

During the year ended December 31, 2020, our cash flows used in financing activities were $2.0 billion.

The main uses of cash flows with respect to financing activities were primarily payments made on repurchase agreements partially offset by net proceeds from various issuances of our common stock and CDOs.

Liquidity – Financing Arrangements

We rely primarily on short-term repurchase agreements to finance the more liquid assets in our investment portfolio.

Over the last several years, certain repurchase agreement lenders have elected to exit the repo lending market for various reasons, including new capital requirement regulations.

However, as certain lenders have exited the space, other financing counterparties that had not participated in the repo lending market historically have stepped in, offsetting, in part the lenders that have elected to exit.

As of December 31, 2019 , we have outstanding short-term repurchase agreements, a form of collateralized short-term borrowing, with fourteen different financial institutions.

These agreements are secured by certain of our investment securities and bear interest rates that have historically moved in close relationship to LIBOR.

Our borrowings under repurchase agreements are based on the fair value of our investment securities that serve as collateral under these agreements.

As of December 31, 2020, we had no amounts outstanding under short-term repurchase agreements on our investment securities.

These repurchase agreements are typically secured by certain of our investment securities and bear interest rates that have historically moved in close relationship to LIBOR.

Any financings under these repurchase agreements are based on the fair value of the assets that serve as collateral under these agreements.

Interest rate changes and increased prepayment activity can have a negative impact on the valuation of these securities, reducing the amount we can borrow under these agreements.

Moreover, our repurchase agreements allow the counterparties to determine a new market value of the collateral to reflect current market conditions and because these lines of financing are not committed, the counterparty can call the loan at any time.

Market value of the collateral represents the price of such collateral obtained from generally recognized sources or most recent closing bid quotation from such source plus accrued income.

If a counterparty determines that the value of the collateral has decreased, the counterparty may initiate a margin call and require us to either post additional collateral to cover such decrease or repay a portion of the outstanding borrowing in cash, on minimal notice.

Market value of the collateral represents the price of such collateral obtained from generally recognized sources or the most recent closing bid quotation from such source plus accrued income.

Moreover, in the event an existing counterparty elected to not renew the outstanding balance at its maturity into a new repurchase agreement, we would be required to repay the outstanding balance with cash or proceeds received from a new counterparty or to surrender the securities that serve as collateral for the outstanding balance, or any combination thereof.

If we are unable to secure financing from a new counterparty and had to surrender the collateral, we would expect to incur a loss.

In addition, in the event one of our lenders under the repurchase agreement defaults on its obligation to “re-sell” or return to us the securities that are securing the borrowings at the end of the term of the repurchase agreement, we would incur a loss on the transaction equal to the amount of “haircut” associated with the short-term repurchase agreement, which we sometimes refer to as the “amount at risk.” As of December 31, 2019 , we had an aggregate amount at risk under our repurchase agreements of approximately $487.3 million , with no more than approximately $83.2 million at risk with any single counterparty.

At December 31, 2019 , the Company had short-term repurchase agreement borrowings of $2.4 billion as compared to $1.5 billion as of December 31, 2018 .

As of December 31, 2019 , we had assets available to be posted as margin which included liquid assets, such as unrestricted cash and cash equivalents, and unencumbered securities that could be monetized to pay down or collateralize a liability immediately.

We had $118.8 million in cash and cash equivalents, and $535.8 million in unencumbered investment securities to meet additional haircuts or market valuation requirements, which collectively represent 27.8% of our financing arrangements.

The unencumbered securities that we believe may be posted as margin as of December 31, 2019 included $83.4 million of Agency RMBS, $235.2 million of CMBS, $168.1 million of non-Agency RMBS and $49.2 million of ABS.

At December 31, 2019 , the Company also had longer-term master repurchase agreements with terms of up to 18 months with certain third party financial institutions that are secured by certain of our residential mortgage loans.

See “Management's Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Analysis—Distressed and Other Residential Loans Financing—Repurchase Agreements” for further information.

The Company has $138.0 million aggregate principal amount of Convertible Notes outstanding.

If we were unable to secure financing from a new counterparty and had to surrender the collateral, we would expect to incur a loss.

In addition, in the event one of our repurchase agreement counterparties defaults on its obligation to “re-sell” or return to us the assets that are securing the financing at the end of the term of the repurchase agreement, we would incur a loss on the transaction equal to the amount of “haircut” associated with the short-term repurchase agreement, which we sometimes refer to as the “amount at risk.”

At December 31, 2020, we had longer-term repurchase agreements with terms of up to two years with three third-party financial institutions that are secured by certain of our residential loans and that function similar to our short-term repurchase agreements.

The financings under two of these repurchase agreements are subject to margin calls to the extent the market value of the residential loans falls below specified levels and repurchase may be accelerated upon an event of default under the repurchase agreements.

In the third and fourth quarters of 2020, we entered into or amended agreements with new and existing counterparties that are secured by certain of our residential loans and are not subject to margin calls in the event the market value of the collateral declines.

See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Analysis—Residential Loans Financing—Repurchase Agreements" for further information.

During the terms of the repurchase agreements secured by residential loans, proceeds from the residential loans will be applied to pay any price differential, if applicable, and to reduce the aggregate repurchase price of the collateral.

The repurchase agreements secured by residential loans contain various covenants, including among other things, the maintenance of certain amounts of liquidity and total stockholders' equity.

As of December 31, 2020, we had an aggregate amount at risk under our residential loan repurchase agreements of approximately $168.2 million, which represents the difference between the carrying value of the loans pledged and the outstanding balance of our repurchase agreements.

Significant margin calls have had, and could in the future have, a material adverse effect on our results of operations, financial condition, business, liquidity and ability to make distributions to our stockholders.

See “Liquidity and Capital Resources – General” above.

At December 31, 2020, the Company had $138.0 million aggregate principal amount of Convertible Notes outstanding.

The Convertible Notes were issued at 96% of the principal amount, bear interest at a rate equal to 6.25% per year, payable semi-annually in arrears on January 15 and July 15 of each year, and are expected to mature on January 15, 2022, unless earlier converted or repurchased.

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The conversion rate for the Convertible Notes, which is subject to adjustment upon the occurrence of certain specified events, initially equals 142.7144 shares of the Company’s common stock per $1,000 principal amount of Convertible Notes, which is equivalent to a conversion price of approximately $7.01 per share of the Company’s common stock, based on a $1,000 principal amount of the Convertible Notes.

At December 31, 2019 , we also had other longer-term debt, including Residential CDOs outstanding of $40.4 million , SLST CDOs outstanding of $1.1 billion (which represent obligations of Consolidated SLST), Multi-family CDOs outstanding of $16.7 billion (which represent obligations of the Consolidated K-Series), and subordinated debt outstanding of $45.0 million .

The CDOs are collateralized by residential and multi-family loans held in securitization trusts, respectively.

As of December 31, 2019 , our total debt leverage ratio, which represents our total debt divided by our total stockholders’ equity, was approximately 1.5 to 1.

Our total debt leverage ratio does not include debt associated with the Multi-family CDOs, SLST CDOs, Residential CDOs or other non-recourse debt, for which we have no obligation.

As of December 31, 2019 , our portfolio leverage ratio, which represents our repurchase agreement borrowings divided by our total stockholders’ equity, was approximately 1.4 to 1.

We monitor all at risk or short-term borrowings to ensure that we have adequate liquidity to satisfy margin calls and have the ability to respond to other market disruptions.

At December 31, 2020, we also had other longer-term debt, including Consolidated SLST CDOs outstanding of $1.1 billion (which represent obligations of Consolidated SLST) and other CDOs outstanding of $569.3 million.

These CDOs are collateralized by residential loans and non-Agency RMBS.

As of December 31, 2020, our total leverage ratio, which represents our total outstanding repurchase agreement financing, subordinated debentures and Convertible Notes divided by our total stockholders' equity, was approximately 0.3 to 1.

Our overall leverage ratio does not include debt associated with CDOs or other non-recourse debt to the Company.

As of December 31, 2020, our leverage ratio on our shorter-term financings, which represents our outstanding repurchase agreement financing divided by our total stockholders’ equity, was approximately 0.2 to 1.

We monitor all at risk or short-term financings to enable us to respond to market disruptions as they arise.

Liquidity – Hedging and Other Factors

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In addition, because delivery of TBAs extend beyond the typical settlement dates for most non-derivative investments, these transactions are more prone to market fluctuations between the trade date and the ultimate settlement date, and thereby are more vulnerable to increasing amounts at risk with the applicable counterparties.

In March 2020, in response to the turmoil in the financial markets, we terminated our interest rate swaps and currently do not have any hedges in place.

For additional information regarding the Company’s derivative instruments and hedging activities for the periods covered by this report, including the fair values and notional amounts of these instruments and realized and unrealized gains and losses relating to these instruments, please see Note 8 to our consolidated financial statements included in this report.

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Our DRIP provides for the issuance of up to $20,000,000 of shares of our common stock.

The following table details the Company's public and at-the-market offerings of both common and preferred stock during the year ended December 31, 2019 (dollar amounts in thousands):

Offering Type

Shares Issued

Net Proceeds (1)

Amount Remaining Available for Issuance under Offering Program

Public offerings of common stock

At-the-market common stock

Public offering of preferred stock

At-the-market preferred stock

The following table details the Company's public offerings of common stock during the year ended December 31, 2020 (dollar amounts in thousands):

Offering Type Shares Issued Net Proceeds (1)

Public offerings of common stock in January and February 2020 85,100,000 $ 511,924

(1) Proceeds are net of underwriting discounts and commissions and offering expenses, as applicable.

Additionally, on January 10, 2020 , the Company issued 34,500,000 shares of its common stock through an underwritten public offering, resulting in total net proceeds to the Company of $206.7 million after deducting underwriting discounts and commissions and estimated offering expenses.

On February 13, 2020 , the Company issued 50,600,000 shares of its common stock through an underwritten public offering, resulting in total net proceeds to the Company of $305.3 million after deducting underwriting discounts and commissions and estimated offering expenses.

For information regarding the declaration and payment of dividends on our common stock and preferred stock for the periods covered by this report, please see Note 15 to our consolidated financial statements included in this report.

We expect to continue to pay quarterly cash dividends on our common stock during the near term.

However, our Board of Directors will continue to evaluate our dividend policy each quarter and will make adjustments as necessary, based on a variety of factors, including, among other things, the need to maintain our REIT status, our financial condition, liquidity, earnings projections and business prospects.

Our Board of Directors will continue to evaluate our dividend policy each quarter and will make adjustments as necessary, based on our earnings and financial condition, capital requirements, maintenance of our REIT qualification, restrictions on making distributions under Maryland law and such other factors as our Board of Directors deems relevant.

Our dividend policy does not constitute an obligation to pay dividends.

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The Company had the following contractual obligations at December 31, 2020 (dollar amounts in thousands):

Less than 1 year

More than 5 years

Less than 1 year 1 to 3 years 4 to 5 years

More than 5 years Total

Operating leases $ 1,710 $ 3,453 $ 3,152 $ 5,095 $ 13,410

Repurchase agreements (1)

366,489 52,437 — — 418,926

Subordinated debentures (1)

Interest rate swaps (1)

1,860 3,720 3,726 62,709 72,015

Convertible notes (1)

8,625 142,313 — — 150,938

Employment agreements 900 — — — 900

Total contractual obligations (2)

$ 379,584 $ 201,923 $ 6,878 $ 67,804 $ 656,189

(1) Amounts include projected interest payments during the period.

Interest based on interest rates in effect on December 31, 2019 .

We exclude our Residential CDOs from the contractual obligations disclosed in the table above as this debt is non-recourse and not cross-collateralized and, therefore, must be satisfied exclusively from the proceeds of the residential mortgage loans and real estate owned held in our residential mortgage loan securitization trust.

See Note 13 in the Notes to Consolidated Financial Statements for further information regarding our Residential CDOs.

Our Multi-Family CDOs and SLST CDOs, which represent the CDOs issued by the Consolidated K-Series and Consolidated SLST, respectively, are excluded as this debt is non-recourse to us.

Projected interest payments are based on interest rates in effect and outstanding balances as of December 31, 2020.

(2) We exclude our CDOs from the contractual obligations disclosed in the table above as this debt is non-recourse and not cross-collateralized and, therefore, must be satisfied exclusively from the proceeds of the residential loans and non-Agency RMBS held in securitization trusts.

See Note 11 in the Notes to Consolidated Financial Statements for further information regarding our CDOs.

Off-Balance Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis