ADAMAS TRUST, INC. 10-K

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General We are a REIT for U.S. 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 spread and capital gains from a diversified investment portfolio. Our investment portfolio includes credit sensitive single-family and multi-family assets. Executive Summary Since the significant market disruption that occurred in March 2020, we have endeavored to build out a low-levered, higher-yielding portfolio of credit sensitive single-family and multi-family assets through proprietary sourcing channels while reducing our exposure to investment securities. Building scale in the portfolio and momentum in investment activity has proven challenging throughout much of the period since the March 2020 market disruption, with initial challenges driven in large part by robust demand for credit assets and elevated prepayment and redemption levels. Market opportunities in our areas of investment focus did become more abundant from the fourth quarter of 2021 through May of 2022, allowing us to expand our total investment portfolio to approximately $4.6 billion as of June 30, 2022, up from $3.6 billion as of December 31, 2021. However, the improved investment environment was short-lived, as the Federal Reserve's actions to increase the fed funds target rate by 425 bps during 2022 in an effort to curtail inflation created extreme interest rate volatility and credit spread widening, which caused us to significantly curtail our investment activity and pipeline late in the second quarter of 2022. In light of current market conditions, which includes increased volatility in interest rate, credit, mortgage and financial markets and the increasing risk of the U.S. economy experiencing a recession within the next 12 months, in the second half of 2022, we were selective in pursuing investments across the residential housing sector, choosing instead to focus on further enhancing our liquidity, strengthening our balance sheet, protecting our book value and enhancing our asset management platform. During the second half of 2022, we opportunistically disposed of assets in our portfolio generating $32.4 million of net gains and, as further discussed below, also announced a repositioning of our business through the opportunistic disposition over time of our joint venture equity investments in multi-family properties. The mortgage industry, and the U.S. economy more generally, experienced significant headwinds throughout most of 2022, as rising bond yields, an inverted yield curve, Federal Reserve interest rate hikes and expectations for future interest rate hikes and tightening monetary policy, combined with elevated inflation data, geopolitical instability and growing concerns over the likelihood of an economic recession in the U.S. sometime in the next 12 months contributed to widening credit spreads that caused price declines for many of the residential credit assets in our portfolio. In our residential loan portfolio alone, we recorded approximately $289.7 million of unrealized losses for the year ended December 31, 2022 as compared to unrealized gains of $55.3 million for the year ended December 31, 2021. Consistent with our efforts to further strengthen our balance sheet, we completed four securitizations of residential loans, resulting in approximately $970.0 million in net proceeds to us, which we used to repay outstanding financings related to residential loans. With the completion of these securitizations, as of December 31, 2022, only 13% of the total outstanding balance on our financing arrangements (including Company sponsored CDOs) is subject to mark-to-market margin call risk, down from 93% at December 31, 2019. In September 2022, we announced that our Board of Directors had approved a strategic repositioning of our business pursuant to which we will opportunistically dispose of our joint venture equity interests in multi-family properties over time and, following disposition, we will reallocate the capital associated with such assets to our targeted assets. As a result, we are considering various opportunities to monetize what we believe is appreciated value within our portfolio of multi-family joint venture equity investments. We believe that through a well-navigated disposition process, we can rotate the portfolio over time to more attractive investments in a higher rate environment. We expect to continue to invest in multi-family Mezzanine Lending going forward, which remains one of our targeted assets. We intend 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. Our targeted investments include (i) residential loans, including business purpose loans, (ii) structured multi-family property investments such as preferred equity in, and mezzanine loans to, owners of multi-family properties, (iii) non-Agency RMBS, (iv) Agency RMBS, (v) CMBS and (vi) certain other mortgage-, residential housing- and credit-related assets and strategic investments in companies from which we purchase, or may in the future purchase, our targeted assets. 54 Table of Contents We expect to continue to place a greater emphasis on procuring longer-termed and non-mark-to-market financing arrangements 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. We still expect to utilize some level of repurchase agreement financing as we do currently, but expect repurchase agreement financing, particularly short-term agreements, to represent a smaller percentage of our financing relative to historic levels. While longer-termed and non-mark-to-market financings may incur a greater expense relative to repurchase agreement financings that exposes us to mark-to-market risks, we believe that, over time, this weighting towards longer-termed financings may better allow us to manage our liquidity risk and reduce the impact of market events like those caused by the COVID-19 pandemic during March 2020. In light of our patient approach in this current environment, we intend to continue to pursue selective investments across the residential housing sector with a focus on acquiring assets with shorter duration, significant discount to par pricing and less price sensitivity to credit deterioration. We will also consider the opportunistic disposition of assets from our portfolio, including our joint venture equity investments, and focus on generating higher portfolio turnover while we prudently manage our liabilities. We believe these actions, combined with our strong balance sheet and cash position, will help to protect our adjusted book value per common share during the expected continued volatile periods in the near future and will better enable us to rapidly reposition our portfolio in a higher interest rate environment and position us to deploy capital and seize on superior market opportunities in the market cycles ahead. 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. 55 Table of Contents Historical Financial Information The following tables set forth our selected historical operating and financial data. The selected historical operating and balance sheet data for the years ended and as of December 31, 2022, 2021, 2020, 2019 and 2018 have been derived from our historical financial statements. Prior year information has been conformed to current year financial statement presentation. The information presented below is only a summary and does not provide all of the information contained in our historical consolidated financial statements, including the related notes. You should read the information below in conjunction with our historical consolidated financial statements, including the related notes (amounts in thousands, except per share data): Selected Statement of Operations Data: For the Years Ended December 31, 2022 2021 2020 2019 2018 Interest income $ 258,388 $ 206,866 $ 350,161 $ 694,614 $ 455,799 Interest expense 129,419 79,284 223,068 566,750 377,071 Net interest income 128,969 127,582 127,093 127,864 78,728 Non-interest (loss) income (120,513) 171,741 (359,792) 94,448 66,480 General, administrative and operating expenses 348,563 108,389 54,563 49,835 41,470 Net (loss) income attributable to Company's common stockholders (340,577) 144,176 (329,696) 144,835 79,186 Basic (loss) earnings per common share $ (0.90) $ 0.38 $ (0.89) $ 0.65 $ 0.62 Diluted (loss) earnings per common share $ (0.90) $ 0.38 $ (0.89) $ 0.64 $ 0.61 Dividends declared per common share $ 0.40 $ 0.40 $ 0.23 $ 0.80 $ 0.80 Weighted average shares outstanding-basic 377,287 379,232 371,004 221,380 127,243 Weighted average shares outstanding-diluted 377,287 380,968 371,004 242,596 147,450 Selected Balance Sheet Data: As of December 31, 2022 2021 2020 2019 2018 Residential loans $ 3,525,080 $ 3,575,601 $ 3,049,166 $ 2,961,396 $ 1,022,784 Multi-family loans 87,534 120,021 163,593 17,996,791 11,845,402 Investment securities available for sale, at fair value 99,559 200,844 724,726 2,006,140 1,512,252 Equity investments 179,746 239,631 259,095 189,965 73,466 Real estate, net 692,968 1,017,583 50,532 — 29,704 Assets of disposal group held for sale 1,151,784 — — — — Total assets (1) 6,240,745 5,658,301 4,655,587 23,843,369 14,737,638 Repurchase agreements 737,023 554,259 405,531 3,105,416 2,131,505 Collateralized debt obligations 2,102,717 1,522,221 1,623,658 17,817,709 11,117,623 Convertible notes — 137,898 135,327 132,955 130,762 Senior unsecured notes 97,384 96,704 — — — Subordinated debentures 45,000 45,000 45,000 45,000 45,000 Mortgages and notes payable on real estate, net 394,707 709,356 36,752 — 31,227 Liabilities of disposal group held for sale 883,812 — — — — Total liabilities (1) 4,376,634 3,226,519 2,348,014 21,278,340 13,557,345 Redeemable non-controlling interest in Consolidated VIEs 63,803 66,392 — — — Total equity 1,800,308 2,365,390 2,307,573 2,205,029 1,180,293 (1) Our consolidated balance sheets include assets and liabilities of Consolidated VIEs, as the Company is the primary beneficiary of these VIEs. Assets and liabilities of the Company's Consolidated VIEs for each of the balance sheet dates presented are included in the following table (dollar amounts in thousands): 56 Table of Contents As of December 31, 2022 2021 2020 2019 2018 Consolidated VIEs Assets $ 4,261,097 $ 2,940,513 $ 2,150,984 $ 19,270,384 $ 11,984,374 Liabilities $ 3,403,257 $ 2,235,665 $ 1,667,306 $ 17,878,314 $ 11,191,736 57 Table of Contents Portfolio Update During the year ended December 31, 2022, we pursued new single-family residential loan and multi-family investments while we opportunistically sold certain investment securities and received common equity investment repayments from sales of consolidated multi-family properties. The following table presents the activity for our investment portfolio for the year ended December 31, 2022 (dollar amounts in thousands): December 31, 2021 Acquisitions (1) Repayments (2) Sales Transfers to Disposal Group Held for Sale (3) Fair Value Changes and Other (4) December 31, 2022 Residential loans $ 2,504,719 $ 1,733,265 $ (1,247,230) $ — $ — $ (293,256) $ 2,697,498 Preferred equity investments, mezzanine loans and equity investments 359,652 28,086 (89,105) — (9,936) (21,417) 267,280 Investment securities CMBS 33,146 — (567) — — (2,446) 30,133 Non-Agency RMBS 128,019 — (24,113) (24,374) — (10,962) 68,570 ABS 39,679 — — (36,215) — (2,608) 856 U.S. Treasury Securities — 24,879 — (24,848) — (31) — Total investment securities available for sale 200,844 24,879 (24,680) (85,437) — (16,047) 99,559 Consolidated SLST (5) 230,344 — (652) — — (38,159) 191,533 Total investment securities 431,188 24,879 (25,332) (85,437) — (54,206) 291,092 Equity investments in consolidated multi-family properties (6) 261,639 198,802 (50,834) — (237,655) (27,217) 144,735 Equity investments in disposal group held for sale (3) — 1,100 (284) — 247,591 (4,368) 244,039 Single-family rental properties 38,749 112,949 — — — (2,468) 149,230 Total investment portfolio $ 3,595,947 $ 2,099,081 $ (1,412,785) $ (85,437) $ — $ (402,932) $ 3,793,874 (1) Includes draws funded for business purpose bridge loans and existing joint venture equity investments and capitalized costs for single-family rental properties. (2) Includes principal repayments and return of invested capital. (3) In September 2022, the Company announced a repositioning of its business through the opportunistic disposition over time of the Company's joint venture equity investments in multi-family properties and reallocation of its capital away from such assets to its targeted assets. Accordingly, as of December 31, 2022, the assets and liabilities related to certain joint venture equity investments in multi-family properties are included in assets and liabilities of disposal group held for sale on the accompanying consolidated balance sheets. See "Balance Sheet Analysis—Equity Investments in Multi-Family Entities" for a reconciliation of equity investments in consolidated multi-family properties and disposal group held for sale to the Company's consolidated balance sheets. (4) 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 or redemptions), net amortization/accretion/depreciation and net loss from real estate attributable to the Company. (5) Consolidated SLST is primarily 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, 2022 and 2021, respectively, follows (dollar amounts in thousands): 58 Table of Contents December 31, 2022 December 31, 2021 Residential loans, at fair value $ 827,582 $ 1,070,882 Deferred interest (a) (1,554) (1,119) Less: Collateralized debt obligations, at fair value (634,495) (839,419) Consolidated SLST investment securities owned by NYMT $ 191,533 $ 230,344 (a) Included in other liabilities on our consolidated balance sheets as of December 31, 2022 and 2021. (6) See "Balance Sheet Analysis—Equity Investments in Multi-Family Entities" for a reconciliation of equity investments in consolidated multi-family properties and disposal group held for sale to the Company's consolidated balance sheets. 59 Table of Contents 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 ability of our operating partners, tenants 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 market conditions declined further during the fourth quarter of 2022, continuing a trend seen throughout 2022 of softening financial and mortgage-related asset market conditions. Following three quarters of declines in 2022, stocks began to move upward during the fourth quarter, although this momentum did not overcome the declines incurred earlier in the year. The Dow Jones Industrial Average finished the fourth quarter of 2022 up 15.4% but was still down 8.8% for full year 2022. The Nasdaq Composite Index realized its smallest quarterly decline of the year when it closed the fourth quarter of 2022 down 1.0% but was still down 33.1% for full year 2022. U.S. economic activity continued to be pressured in the fourth quarter by rising interest rates, concerns over tightening monetary policy, inflation and geopolitical instability. 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 declined. In 2022, equity markets were challenged with investors absorbing the Federal Reserve’s combined 4.25% in interest rate hikes, taking the federal funds rate to its highest point since 2007, expected additional future rate hikes in 2023 and ongoing concerns of the potential for a U.S. economic recession within the next 12 months. Fixed-income markets were accordingly impacted with the yield on the 2-year U.S. Treasury note increasing to 4.41% on December 30, 2022 from a yield of 0.73% on December 31, 2021, an increase of 368 basis points. In December 2022, a divergence from the overall trends experienced in 2022 began to emerge with the annualized inflation rate, as measured by the Consumer Price Index (“CPI”), increasing at its slowest pace of growth since October 2021 and the Federal Reserve implementing a smaller 0.50% federal funds rate hike following a string of four straight 0.75% rate hikes. However, due to persistently high inflation, expected increases in the federal funds rate, the Federal Reserve’s reduction of its balance sheet and ongoing recession concerns, we anticipate markets, and the pricing for many of our assets, will continue to experience volatility in 2023. The market conditions discussed below significantly influence our investment strategy and results: Select U.S. Financial and Economic Data . The U.S. economy grew modestly in 2022 with real gross domestic product (“GDP”) increasing by 2.1% (advanced estimate) for full year 2022, down from the more robust GDP growth of 5.9% recorded for full year 2021. GDP grew at a 2.9% (advanced estimate) annualized rate in the fourth quarter of 2022 and at a 3.2% annualized rate in the third quarter of 2022 after beginning the year with two quarters of GDP contraction. As inflationary pressures appear to slightly ebb and markets attempt to anticipate how the Federal Reserve may respond to slower growth in inflation, the uncertainty created by these macroeconomic trends may limit or undermine business activity and the potential for future GDP growth. However, according to the minutes of the Federal Reserve’s December 2022 meeting, Federal Reserve policymakers expect GDP to grow modestly in 2023, although at a slower rate of growth than was seen in the second half of 2022. The U.S. labor market remained tight throughout the fourth quarter of 2022 and did not cool to the extent that some market commentators had expected or the Federal Reserve hoped for. According to the U.S. Department of Labor, the U.S. unemployment rate ticked up to begin the fourth quarter of 2022 before erasing those gains and finishing flat to the start of the quarter at 3.5%. The unemployment rate at the end of December 2022 marks a 40 basis point decrease from the unemployment rate of 3.9% at the end of December 2021. The number of unemployed persons decreased by 0.6 million year-over-year to 5.7 million as of December 2022. There continues to be a wide disparity between the number of available job openings, 11.0 million as of the end of December 2022, and the number of unemployed persons, resulting in a competitive labor market and rising wages. The interest rate environment remained turbulent as the Federal Reserve raised interest rates again in February 2023 by 25 basis points following a total of 425 basis points in interest rate increases in 2022 in an effort to rein in inflation as the CPI maintained multi-decade highs above 6% throughout 2022. Higher interest rates may put pressure on our mortgage borrowers, rents and operating partners. These rate hikes and the anticipation of future rate hikes by the Federal Reserve contributed to the Treasury curve inverting in July 2022. On December 30, 2022, the spread between the 2-Year U.S. Treasury yield and the 10-Year U.S. Treasury yield closed at negative 53 basis points, as compared to a 79 basis point spread on December 31, 2021. The 2-year and 10-year yield curve has remained inverted since July 2022 with the yield curve spread closing at negative 69 basis points as of January 31, 2023. 60 Table of Contents As noted above, fears of an economic recession in the U.S. remain steady. The National Bureau of Economic Research defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.” A January 2023 survey of economists by the Wall Street Journal indicated that the probability of a recession in the next twelve months is at 61%, a figure that has changed little since October 2022 but is up 43% from the recession probability indicated by the survey taken in January 2022. The economists surveyed by the Wall Street Journal attribute the likelihood of a recession in the next twelve months to persistent high inflation and the Federal Reserve’s efforts to tame inflation through interest rate hikes. An economic recession may put pressure on the ability of our operating partners, tenants and borrowers to meet their obligations to us, and would likely adversely impact the value of our assets, among other things, which could materially adversely affect our results of operations and financial condition. Single-Family Homes and Residential Mortgage Market. The residential real estate market declined in 2022, due, at least in part, to the impacts of higher interest rates. As of December 2022, existing-home sales were down 14.6% from September 2021 and down 34.0% from December 2021. Although there has been a decline in home sales, data released by the S&P Dow Jones Indices for their S&P CoreLogic Case-Shiller National Home Price NSA Indices for November 2022 showed that, on average, home prices increased 6.8% for the 20-City Composite over November 2021, although the rate of price increases has slowed since the spring of 2022. According to the National Association of Realtors (“NAR”), the median existing-home price for all housing types in December 2022 was $366,900, up 2.3% from $358,800 in December 2021. Despite 130 consecutive months of year-over-year increases in median home prices, the longest streak on NAR’s records, the median sales price declined for the sixth month in a row in December 2022 after reaching a record high of $413,800 in June 2022, suggesting that homebuilding and pricing may be starting to moderate. According to data provided by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, privately-owned housing starts for single-family homes averaged a seasonally adjusted annual rate of 862,000 and 1,010,000 for the three and twelve months ended December 31, 2022, respectively, as compared to 1,131,000 for the year ended December 31, 2021. Overall, existing home inventory for sale at the end of December amounted to 2.9 months of supply, up from 1.7 months of supply in December 2021, according to the NAR. As interest rates continue to move higher, we expect this to continue to put downward pressure on home prices and borrowers. Declining single-family housing fundamentals may adversely impact the overall credit profile and value of our existing portfolio of single-family residential credit investments and the value of our single-family rental properties, as well as the availability of certain of our targeted assets. Rental Housing. According to data provided by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, starts on multi-family homes containing five or more units averaged a seasonally adjusted annual rate of 529,000 and 529,000 for the three and twelve months ended December 31, 2022, respectively, as compared to 462,000 for the year ended December 31, 2021. Demand for new apartments will likely remain strong in the near term, particularly in the South and Southeastern U.S. where in recent years demand has outpaced supply. Nationally, rents continued to grow throughout 2022, albeit at a slower pace than seen in 2021. Weakening multi-family housing fundamentals, including, among other things, increasing interest rates, widening capitalization rates and reduced liquidity for owners of multi-family properties, may cause our operating partners to fail to meet their obligations to us and/or contribute to reduced cash flows from and/or valuation declines for multi-family properties, and in turn, many of the multi-family investments that we own. In January 2023, the White House Domestic Policy Council and National Economic Council released a white paper entitled the “Blueprint for a Renters Bill of Rights” (the “Blueprint”). The Blueprint discusses potential tenant protections regarding leasing and management of rental properties, tenant organizing, evictions and rent increases, among other potential protections. Although the Blueprint is non-binding, several federal agencies, including Fannie Mae and Freddie Mac, have announced actions that seek to further some of the principles set forth in the Blueprint. Policies, regulations or laws implemented to further the principles discussed in the Blueprint could lead to increased costs and reduced operational flexibility for multi-family and single-family rental properties, which could contribute to reduced cash flows from and/or valuation declines for multi-family and single-family rental properties, and in turn, many of the multi-family investments and single-family rentals that we own. Credit Spreads. Investment grade and high-yield credit spreads widened in 2022 despite a modest narrowing of both spreads in the fourth quarter amid slowing inflation and optimism that the Federal Reserve might soften its aggressive stance regarding interest rate increases. 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. 61 Table of Contents Financing Markets. The Treasury curve began 2022 with the spread between the 2-Year U.S. Treasury yield and the 10-Year U.S. Treasury yield continuing to flatten before ultimately inverting near mid-year and remaining inverted through year-end and into 2023. The spread between the 2-Year U.S. Treasury yield and the 10-Year U.S. Treasury yield was 79 basis points on December 31, 2021 and ended 2022 with a spread of negative 53 basis points. Inversions of this spread are generally considered to be indicators of a recession in the near term. This spread is important as it is indicative of opportunities for investing in levered assets. Increases in interest rates raise the costs of many of our liabilities, while overall interest rate volatility generally increases the costs of hedging and may place downward pressure on some of our strategies. Monetary Policy and Recent Regulatory Developments. The Federal Reserve took a number of actions to stabilize markets during the COVID-19 pandemic. From March 2020 until March 2022, the Federal Reserve implemented an asset purchase program aimed at providing liquidity to the U.S. Treasury and Agency RMBS markets. Under the Federal Reserve’s asset purchase program, the Federal Reserve’s balance sheet grew from about $4.2 trillion in assets at the start of March 2020 to about $8.9 trillion in assets at the end of the program in March 2022. On June 1, 2022, the Federal Reserve shifted course and began shrinking its balance sheet by reducing its holdings of U.S. Treasuries and Agency RMBS by $47.5 billion per month. In September 2022, the Federal Reserve increased its efforts to reduce its balance sheet by doubling the amount of U.S. Treasuries and Agency RMBS it plans to roll off to $95 billion each month. Sales or reductions in the pace of purchasing of Agency RMBS by the Federal Reserve could create headwinds in the market for Agency RMBS where increased supply could drive prices lower and interest rates higher. From March 2020 to March 2022, the Federal Reserve maintained a target range for the federal funds rate of 0% to 0.25% in view of the COVID-19 pandemic and to foster maximum employment and price stability. With inflation well above the 2% objective in 2022 and into 2023 and a strong labor market, the Federal Reserve approved a 0.25% increase to the target range for the federal funds rate on March 16, 2022, a 0.50% increase on May 4, 2022, a 0.75% increase on June 15, 2022, a 0.75% increase on July 27, 2022, a 0.75% increase on September 21, 2022, a 0.75% increase on November 2, 2022, a 0.50% increase on December 14, 2022 and a 0.25% increase on February 1, 2023. With additional increases to the Federal Reserve’s target range possible in 2023, some Federal Reserve officials expect the target range for the federal funds rate to reach a level between 5.25% and 5.50% by the end of 2023. In 2017, policymakers announced that LIBOR would 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. The Alternative Reference Rates Committee (“ARRC”), which was convened by the Federal Reserve Board and the Federal Reserve Bank of New York to help ensure a successful transition from LIBOR, proposed that the Secured Overnight Funding Rate (“SOFR”) would replace LIBOR. SOFR is based on overnight Treasury General Collateral repo rates. The administrator of LIBOR, with the support of the Federal Reserve and the United Kingdom’s Financial Conduct Authority, ceased publication of USD LIBOR on December 31, 2021, for only the one week and two month USD LIBOR tenors, and plans to cease publication of USD LIBOR on June 30, 2023 for all other USD LIBOR tenors. While the transition period was extended to June 2023, the Federal Reserve issued a statement advising banks to stop new USD LIBOR issuances by the end of 2021. In 2022 and thus far into 2023, the market’s adoption of SOFR appears to be strong and growing. Additionally, the federal government enacted the Adjustable Interest Rate Act in March 2022 with the intention of assisting in the transition away from LIBOR. Nevertheless, uncertainty about the transition away from LIBOR and the future of the alternative reference rate remains. We continue to monitor the emergence of this new rate carefully, as it has in many cases, and will likely become in other cases, the new benchmark for hedges and a range of interest rate investments and financing arrangements. 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 ongoing geopolitical instability and uncertainty surrounding inflation, interest rates and the outlook for the U.S. and global economies, 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. 62 Table of Contents Full Year 2022 Summary Earnings and Return Metrics The following table presents key earnings and return metrics for the year ended December 31, 2022 (dollar amounts in thousands, except per share data): Year Ended December 31, 2022 Net loss attributable to Company's common stockholders $ (340,577) Net loss attributable to Company's common stockholders per share (basic) $ (0.90) Undepreciated loss (1) $ (261,578) Undepreciated loss per common share (1) $ (0.69) Comprehensive loss attributable to Company's common stockholders $ (344,325) Comprehensive loss attributable to Company's common stockholders per share (basic) $ (0.91) Yield on average interest earning assets (1) (2) 6.66 % Interest income $ 258,388 Interest expense $ 129,419 Net interest income $ 128,969 Net interest spread (1) (3) 2.47 % Book value per common share at the end of the period $ 3.32 Adjusted book value per common share at the end of the period (1) $ 3.97 Economic return on book value (4) (20.85) % Economic return on adjusted book value (5) (7.42) % Dividends per common share $ 0.40 (1) Represents a non-GAAP financial measure. A reconciliation of the Company's non-GAAP financial measures to their most directly comparable GAAP measure is included in "Non-GAAP Financial Measures" elsewhere in this section. (2) Calculated as the quotient of our adjusted interest income and our average interest earning assets and excludes all Consolidated SLST assets other than those securities owned by the Company. (3) Our calculation of net interest spread may not be comparable to similarly-titled measures of other companies who may use a different calculation. (4) Economic return on book value is based on the periodic change in GAAP book value per common share plus dividends declared per common share, if any, during the period. (5) Economic return on adjusted book value is based on the periodic change in adjusted book value per common share, a non-GAAP financial measure, plus dividends declared per common share, if any, during the period. Key Developments During Full Year 2022 Investing Activities • Purchased approximately $1.7 billion in residential loans and $112.9 million in single-family rental properties. • Sold investment securities for approximately $85.4 million and recognized a realized gain of approximately $18.3 million. • Funded approximately $199.9 million of multi-family joint venture equity investments and approximately $28.1 million of Mezzanine Lending investments. Received approximately $99.1 million in proceeds from redemptions of Mezzanine Lending investments. • Announced a repositioning of our business through the opportunistic disposition over time of our joint venture equity investments in multi-family properties. 63 Table of Contents • A joint venture in which we held a common equity investment sold its multi-family apartment community for approximately $48.0 million. The sale generated a net gain attributable to the Company's common stockholders of approximately $14.4 million. • Repurchased $50.0 million par value of our residential loan securitization CDOs for approximately $46.5 million. Financing Activities • Redeemed our Convertible Notes at maturity for $138.0 million. • Completed four securitizations of business purpose, performing and re-performing residential loans, resulting in approximately $970.0 million in net proceeds to the Company after deducting expenses associated with the transactions. The Company utilized the net proceeds to repay approximately $793.6 million on outstanding repurchase agreement financing related to residential loans. • Obtained approximately $1.6 billion of financing for residential loans through recourse and non-recourse repurchase agreements with new and existing counterparties. • Repurchased 16.6 million shares of common stock pursuant to a stock repurchase program for approximately $44.4 million at an average repurchase price of $2.67 per share. Subsequent D evelopments • On February 22, 2023, we announced that our Board of Directors approved a one-for-four reverse stock split of our issued, outstanding and authorized shares of common stock (the “Reverse Stock Split”). The Reverse Stock Split is expected to take effect as of 12:01 a.m., New York City time, on March 9, 2023 (the “Effective Time”). Accordingly, at the Effective Time, every four issued and outstanding shares of our common stock will be converted into one share of our common stock, with a proportionate reduction in our authorized shares of common stock, outstanding equity awards and number of shares remaining available for issuance under our 2017 Equity Incentive Plan. The par value of each share of common stock will remain unchanged. No fractional shares will be issued in connection with the Reverse Stock Split. Instead, each stockholder that would hold fractional shares as a result of the Reverse Stock Split will be entitled to receive, in lieu of such fractional shares, cash in an amount based on the closing price of our common stock on the Nasdaq Global Select Market on March 8, 2023. See Note 21 in the Notes to Consolidated Financial Statements for pro forma information regarding the Reverse Stock Split. • On February 22, 2023, we announced that our Board of Directors approved an extension of the previously announced share repurchase program under which we may repurchase up to $200.0 million of our common stock. Our Board of Directors extended the stock repurchase program expiration from March 31, 2023 to March 31, 2024. • Repurchase d $60.3 million par value of our residential loan securitization CDOs for approximately $58.7 million in February 2023. 64 Table of Contents Capital Allocation The following provides an overview of the allocation of our total equity as of December 31, 2022 and 2021, 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, senior unsecured notes and subordinated debentures, short-term and longer-term repurchase agreements and CDOs. A detailed discussion of our liquidity and capital resources is provided in “Liquidity and Capital Resources” elsewhere in this section. The following tables set forth our allocated capital by investment category at December 31, 2022 and 2021, respectively (dollar amounts in thousands). At December 31, 2022: Single-Family Multi-Family Corporate/Other Total Residential loans $ 3,525,080 $ — $ — $ 3,525,080 Consolidated SLST CDOs (634,495) — — (634,495) Multi-family loans — 87,534 — 87,534 Investment securities available for sale 68,570 30,133 856 99,559 Equity investments — 152,246 27,500 179,746 Equity investments in consolidated multi-family properties (1) — 144,735 — 144,735 Equity investments in disposal group held for sale (2) — 244,039 — 244,039 Single-family rental properties 149,230 — — 149,230 Total investment portfolio carrying value 3,108,385 658,687 28,356 3,795,428 Liabilities: Repurchase agreements (737,023) — — (737,023) Residential loan securitization CDOs (1,468,222) — — (1,468,222) Senior unsecured notes — — (97,384) (97,384) Subordinated debentures — — (45,000) (45,000) Cash, cash equivalents and restricted cash (3) 135,401 — 224,403 359,804 Adjustment of redeemable non-controlling interest to estimated redemption value — (44,237) — (44,237) Other 61,063 (2,554) (54,659) 3,850 Net Company capital allocated $ 1,099,604 $ 611,896 $ 55,716 $ 1,767,216 Company Recourse Leverage Ratio (4) 0.3x Portfolio Recourse Leverage Ratio (5) 0.3x (1) Represents the Company's equity investments in consolidated multi-family properties that are not in disposal group held for sale. See "Balance Sheet Analysis—Equity Investments in Multi-Family Entities" for a reconciliation of equity investments in consolidated multi-family properties and disposal group held for sale to the Company's consolidated financial statements. (2) Includes both unconsolidated and consolidated equity investments in multi-family properties that are held for sale in disposal group. See "Balance Sheet Analysis—Equity Investments in Multi-Family Entities" for a reconciliation of equity investments in consolidated multi-family properties and disposal group held for sale to the Company's consolidated financial statements. (3) Excludes cash in the amount of $35.1 million held in the Company's equity investments in consolidated multi-family properties and consolidated equity investments in disposal group held for sale. Restricted cash is included in the Company's accompanying consolidated balance sheets in other assets. (4) Represents the Company's total outstanding recourse repurchase agreement financing, subordinated debentures and senior unsecured notes divided by the Company’s total stockholders’ equity. Does not include certain repurchase agreement financing amounting to $291.2 million, Consolidated SLST CDOs amounting to $634.5 million, residential loan securitization CDOs amounting to $1.5 billion and mortgages payable on real estate amounting to $394.7 million as they are non-recourse debt. 65 Table of Contents (5) Represents the Company's outstanding recourse repurchase agreement financing divided by the Company’s total stockholders’ equity. At December 31, 2021: Single-Family Multi-Family Corporate/Other Total Residential loans $ 3,575,601 $ — $ — $ 3,575,601 Consolidated SLST CDOs (839,419) — — (839,419) Multi-family loans — 120,021 — 120,021 Investment securities available for sale 128,019 33,146 39,679 200,844 Equity investments — 191,238 48,393 239,631 Equity investments in consolidated multi-family properties (1) — 261,639 — 261,639 Single-family rental properties 38,749 — — 38,749 Total investment portfolio carrying value 2,902,950 606,044 88,072 3,597,066 Liabilities: Repurchase agreements (554,259) — — (554,259) Residential loan securitization CDOs (682,802) — — (682,802) Convertible notes — — (137,898) (137,898) Senior unsecured notes — — (96,704) (96,704) Subordinated debentures — — (45,000) (45,000) Cash, cash equivalents and restricted cash (2) 39,366 — 260,279 299,645 Other 29,612 (13,205) (55,424) (39,017) Net Company capital allocated $ 1,734,867 $ 592,839 $ 13,325 $ 2,341,031 Company Recourse Leverage Ratio (3) 0.4x Portfolio Recourse Leverage Ratio (4) 0.2x (1) Represents the Company's equity investments in consolidated multi-family apartment properties. See "Balance Sheet Analysis—Equity Investments in Multi-Family Entities" for a reconciliation of equity investments in consolidated multi-family properties to the Company's consolidated financial statements. (2) Excludes cash in the amount of $30.1 million and restricted cash in the amount of $8.1 million held in the Company's equity investments in consolidated multi-family properties. Restricted cash is included in the Company’s accompanying consolidated balance sheets in other assets. (3) Represents the Company's total outstanding recourse repurchase agreement financing, subordinated debentures, convertible notes and senior unsecured notes divided by the Company’s total stockholders’ equity. Does not include Consolidated SLST CDOs amounting to $839.4 million, residential loan securitization CDOs amounting to $682.8 million and mortgages payable on real estate amounting to $709.4 million as they are non-recourse debt. (4) Represents the Company's outstanding recourse repurchase agreement financing divided by the Company’s total stockholders’ equity. 66 Table of Contents Results of Operations The following discussion provides information regarding our results of operations for the years ended December 31, 2022 and 2021, including a comparison of year-over-year results and related commentary. A number of the tables contain a “change” column that indicates the amount by which results from the year ended December 31, 2022 are greater or less than the results from the year ended December 31, 2021. Unless otherwise specified, references in this section to increases or decreases in 2022 refer to the change in results for the year ended December 31, 2022 when compared to the year ended December 31, 2021. For a discussion related to our results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020, please refer to Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on February 25, 2022 and is available on the SEC’s website at www.sec.gov. The following table presents the main components of our net (loss) income for the years ended December 31, 2022 and 2021, respectively (dollar amounts in thousands, except per share data): For the Years Ended December 31, 2022 2021 $ Change Interest income $ 258,388 $ 206,866 $ 51,522 Interest expense 129,419 79,284 50,135 Net interest income 128,969 127,582 1,387 Total non-interest (loss) income (120,513) 171,741 (292,254) General and administrative expenses 52,440 48,908 3,532 Expenses related to real estate 255,235 32,813 222,422 Portfolio operating expenses 40,888 26,668 14,220 (Loss) income from operations before income taxes (340,107) 190,934 (531,041) Income tax expense 542 2,458 (1,916) Net loss attributable to non-controlling interests 42,044 4,724 37,320 Net (loss) income attributable to Company (298,605) 193,200 (491,805) Preferred stock dividends 41,972 42,859 (887) Preferred stock redemption charge — 6,165 (6,165) Net (loss) income attributable to Company's common stockholders (340,577) 144,176 (484,753) Basic (loss) earnings per common share $ (0.90) $ 0.38 $ (1.28) Diluted (loss) earnings per common share $ (0.90) $ 0.38 $ (1.28) Interest Income and Interest Expense Interest income increased in 2022 primarily due to the increase in our average interest earning assets as the Company continued to invest in residential loans, particularly higher-yielding business purpose loans. This increase was offset by an increase of interest expense due to 1) increased securitization financings and borrowings on repurchase agreements and 2) an increase in cost of financing due to an increase in base interest rates. Non-interest Income (Loss) Realized Gains, Net The following table presents the components of realized gains, net recognized for the years ended December 31, 2022 and 2021, respectively (dollar amounts in thousands ): For the Years Ended December 31, 2022 2021 $ Change Residential loans $ 8,281 $ 15,723 $ (7,442) Investment securities and derivatives 19,268 5,728 13,540 Total realized gains, net $ 27,549 $ 21,451 $ 6,098 67 Table of Contents During the year ended December 31, 2022, the Company recognized net realized gains of $8.3 million related to our residential loan portfolio, primarily as a result of loan prepayments. The Company also recognized net realized gains of $18.3 million on the sale of ABS and non-Agency RMBS as part of our strategy to selectively and opportunistically dispose of certain of our investment securities. During the year ended December 31, 2021, the Company recognized net realized gains of $15.7 million related to our residential loan portfolio primarily as a result of loan prepayments and sales activity during the year. The Company also recognized net realized gains of $5.7 million related to our investment securities, which consisted of $11.2 million of net realized gains on the sale of Agency RMBS, non-Agency RMBS and CMBS, offset by a write-down of $5.5 million recognized on the Company's investments in non-Agency RMBS. Unrealized (Losses) Gains, Net The following table presents the components of unrealized (losses) gains, net recognized for the years ended December 31, 2022 and 2021, respectively (dollar amounts in thousands): For the Years Ended December 31, 2022 2021 $ Change Residential loans $ (289,670) $ 55,335 $ (345,005) Consolidated SLST (32,403) 23,832 (56,235) Preferred equity and mezzanine loan investments (2,673) 1,016 (3,689) Investment securities and derivatives 3,665 15,466 (11,801) Total unrealized (losses) gains, net $ (321,081) $ 95,649 $ (416,730) The Company recognized $321.1 million in net unrealized losses for the year ended December 31, 2022, primarily due to credit spread widening and increases in interest rates that impacted the pricing of our credit assets, particularly our residential loans and investment in Consolidated SLST. Net unrealized losses on our investment securities for the year ended December 31, 2022 included a reversal of previously recognized unrealized gains amounting to $15.9 million o n ABS that were sold during the year as well as additional unrealized losses on non-Agency RMBS and CMBS due to credit spread widening. Unrealized losses on investment securities for the year ended December 31, 2022 were partially offset by unrealized gains recognized on certain non-Agency IOs during the period as a result of an increase in interest rates. During the year ended December 31, 2022, the Company recognized $26.3 million of unrealized gains related to interest rate cap agreements, also as a result of an increase in interest rates during the period. For the year ended December 31, 2021, the Company recognized $95.6 million in net unrealized gains, primarily due to improved pricing on our credit assets driven largely by tightening credit spreads, particularly our residential loans, investment in Consolidated SLST and our non-Agency RMBS. 68 Table of Contents Income from Equity Investments The following table presents the components of income from equity investments for the years ended December 31, 2022 and 2021, respectively (dollar amounts in thousands): For the Years Ended December 31, 2022 2021 $ Change Preferred return on preferred equity investments accounted for as equity $ 22,276 $ 24,256 $ (1,980) Unrealized (losses) gains, net on preferred equity investments accounted for as equity (3,606) 377 (3,983) (Loss) income from unconsolidated joint venture equity investments in multi-family properties (1,430) 150 (1,580) (Loss) income from entities that invest in or originate residential properties and loans (2,166) 9,113 (11,279) Total income from equity investments $ 15,074 $ 33,896 $ (18,822) Income from equity investments decreased during the year ended December 31, 2022, due in part to the redemption of a residential equity investment in the first quarter of 2022. Income from equity investments also decreased due to net unrealized losses recognized on preferred equity, unconsolidated joint venture equity and residential equity investments during the year ended December 31, 2022 due to rising interest rates that negatively impacted valuations and credit spread widening. Preferred return on preferred equity investments decreased during the period as a result of investment redemptions since December 31, 2021. Other Income The following table presents the components of other income for the years ended December 31, 2022 and 2021, respectively (dollar amounts in thousands): For the Years Ended December 31, 2022 2021 $ Change Preferred equity and mezzanine loan premiums resulting from early redemption (1) $ 3,950 $ 5,294 $ (1,344) Gain on sale of real estate held for sale 17,132 — 17,132 Miscellaneous (4,793) 221 (5,014) Total other income $ 16,289 $ 5,515 $ 10,774 (1) Includes premiums resulting from early redemptions of preferred equity and mezzanine loan investments accounted for as loans. The net increase in other income in 2022 is primarily due to gain recognized on the sale of a multi-family property in which we held a joint venture equity interest during the year ended December 31, 2022. This increase was partially offset by impairment losses related to certain equity and joint venture equity investments recognized during the year ended December 31, 2022. 69 Table of Contents Expenses The following tables present the components of general, administrative and portfolio operating expenses for the years ended December 31, 2022 and 2021, respectively (dollar amounts in thousands): For the Years Ended December 31, 2022 2021 $ Change General and Administrative Expenses Salaries, benefits and directors’ compensation $ 39,689 $ 36,970 $ 2,719 Professional fees 4,771 3,468 1,303 Other 7,980 8,470 (490) Total general and administrative expenses $ 52,440 $ 48,908 $ 3,532 The increase in general and administrative expenses in 2022 is primarily related to an increase in salary and stock-based compensation expenses due, in part, to an increase in employee headcount, and an increase in legal and audit fees. For the Years Ended December 31, 2022 2021 $ Change Portfolio operating expenses $ 40,888 $ 26,668 $ 14,220 The increase in portfolio operating expenses in 2022 can be attributed primarily to increased servicing fees related to business purpose loans as a result of increased investment activity in those assets during the first half of 2022 . Net (Loss) Income from Real Estate The following table presents the components of net (loss) income from real estate for the years ended December 31, 2022 and 2021, respectively (dollar amounts in thousands): For the Years Ended December 31, 2022 2021 $ Change Income from real estate $ 141,656 $ 15,230 $ 126,426 Expenses related to real estate: Interest expense, mortgages payable on real estate (56,011) (3,964) (52,047) Depreciation expense on operating real estate (47,179) (5,662) (41,517) Amortization of lease intangibles related to operating real estate (79,645) (13,588) (66,057) Other expenses (72,400) (9,599) (62,801) Total expenses related to real estate (255,235) (32,813) (222,422) Net gain (1) 40,821 157 40,664 Net loss from real estate (72,758) (17,426) (55,332) Net loss attributable to non-controlling interest 42,044 4,724 37,320 Net loss from real estate attributable to Company $ (30,714) $ (12,702) $ (18,012) (1) Includes $17.1 million of gain on sale, $1.1 million of loss on extinguishment of mortgages payable on real estate and $2.4 million impairment of real estate included in other income, $0.9 million included in realized gains, net related to derivatives and $26.3 million of unrealized gains on derivatives included in unrealized gains, net in the Company's consolidated statements of operations for the year ended December 31, 2022. 70 Table of Contents Beginning in the second half of 2021, we significantly grew our portfolio of joint venture equity investments in multi-family properties, the assets and liabilities of which are consolidated in our consolidated financial statements in accordance with GAAP. The increase in net loss from real estate in 2022 was primarily related to a full year of activity from the consolidated joint venture equity investments in multi-family properties. A significant portion of the net loss is attributable to depreciation expense and amortization of lease intangibles related to the operating real estate. The Company recognized depreciation and amortization expenses totaling $47.2 million and $79.6 million, respectively, during the year ended December 31, 2022. This increase was partially offset by unrealized gains recognized on interest rate cap agreements related to mortgages payable as a result of an increase in interest rates as well as gain recognized on the sale of real estate held for sale . Comprehensive (Loss) Income The main components of comprehensive (loss) income for the years ended December 31, 2022 and 2021, respectively, are detailed in the following table (dollar amounts in thousands): For the Years Ended December 31, 2022 2021 $ Change NET (LOSS) INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS $ (340,577) $ 144,176 $ (484,753) OTHER COMPREHENSIVE (LOSS) INCOME (Decrease) increase in fair value of available for sale securities Non-Agency RMBS (3,748) 4,663 (8,411) CMBS — 86 (86) Total (3,748) 4,749 (8,497) Reclassification adjustment for net gain included in net (loss) income — (3,965) 3,965 TOTAL OTHER COMPREHENSIVE (LOSS) INCOME (3,748) 784 (4,532) COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS $ (344,325) $ 144,960 $ (489,285) The changes in other comprehensive (loss) income ("OCI") in 2022 can be attributed primarily to a decrease in the fair value of our investment securities, where the fair value option was not elected, as a result of credit spread widening in 2022. During the year ended December 31, 2021, the net fair value of our investment securities where fair value option was not elected increased as a result of general credit spread tightening during the period. Additionally, previously recognized net unrealized gains reported in OCI were reclassified to net realized gains in relation to the sale of certain investment securities during the year ended December 31, 2021. 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 are reflected in earnings instead of in OCI. As of December 31, 2022 , the majority of the Company's investment securities are accounted for using the fair value option. 71 Table of Contents Analysis of Changes in GAAP Book Value The following table analyzes the changes in GAAP book value of our common stock for the year ended December 31, 2022 (amounts in thousands, except per share): Year Ended December 31, 2022 Amount Shares Per Share (1) Beginning Balance $ 1,783,906 379,405 $ 4.70 Common stock issuance, net (2) 11,895 2,000 Preferred stock issuance, net 130 Common stock repurchase (44,399) (16,630) Balance after share activity 1,751,532 364,775 4.80 Adjustment of redeemable non-controlling interest to estimated redemption value (44,237) (0.12) Costs associated with non-controlling interest contributions (26) — Dividends and dividend equivalents declared (152,853) (0.42) Net change in accumulated other comprehensive income (loss): Investment securities available for sale (3) (3,748) (0.01) Net loss attributable to Company's common stockholders (340,577) (0.93) Ending Balance $ 1,210,091 364,775 $ 3.32 (1) Outstanding shares used to calculate book value per common share for the year ended December 31, 2022 are 364,774,752. (2) Includes amortization of stock based compensation. (3) The net decrease relates to unrealized losses on our investment securities due to reductions in pricing. The following table analyzes the changes in GAAP book value of our common stock for the year ended December 31, 2021 (amounts in thousands, except per share): Year Ended December 31, 2021 Amount Shares Per Share (1) Beginning Balance $ 1,779,380 377,744 $ 4.71 Common stock issuance, net (2) 10,239 1,661 Preferred stock issuance, net 210,738 Preferred stock issuance liquidation preference (218,750) Preferred stock redemption charge 6,165 Balance after share activity 1,787,772 379,405 4.71 Redemption of non-controlling interest in Consolidated VIEs 3,420 0.01 Dividends and dividend equivalents declared (152,246) (0.40) Net change in accumulated other comprehensive income: Investment securities available for sale (3) 784 — Net income attributable to Company's common stockholders 144,176 0.38 Ending Balance $ 1,783,906 379,405 $ 4.70 (1) Outstanding shares used to calculate book value per common share for the year ended December 31, 2021 are 379,405,240. (2) Includes amortization of stock based compensation. (3) The net increase relates to the reclassification of unrealized gains and losses to net income in relation to the sale of investment securities and net unrealized gains on our investment securities due to improved pricing. 72 Table of Contents Non-GAAP Financial Measures In addition to the results presented in accordance with GAAP, this Annual Report on Form 10-K includes certain non-GAAP financial measures, including adjusted interest income, adjusted interest expense, adjusted net interest income, yield on average interest earning assets, average financing cost, net interest spread, undepreciated earnings and adjusted book value per common share. Our management team believes that these non-GAAP financial measures, when considered with our GAAP financial statements, provide supplemental information useful for investors as it enables them to evaluate our current performance and trends using the metrics that management uses to operate our business. Our presentation of non-GAAP financial measures may not be comparable to similarly-titled measures of other companies, who may use different calculations. Because these measures are not calculated in accordance with GAAP, they should not be considered a substitute for, or superior to, the financial measures calculated in accordance with GAAP. Our GAAP financial results and the reconciliations of the non-GAAP financial measures included in this Annual Report on Form 10-K to the most directly comparable financial measures prepared in accordance with GAAP should be carefully evaluated. Adjusted Net Interest Income and Net Interest Spread Financial results for the Company during a given period include the net interest income earned on our investment portfolio of residential loans, RMBS, CMBS, ABS 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”). Adjusted net interest income and net interest spread (both supplemental non-GAAP financial measures) are 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 investments and the prepayment rates on investments will impact adjusted net interest income as such factors will be amortized over the expected term of such investments. We provide the following non-GAAP financial measures, in total and by investment category, for the respective periods: • adjusted interest income – calculated by reducing our GAAP interest income by the interest expense recognized on Consolidated SLST CDOs and Consolidated K-Series CDOs, • adjusted interest expense – calculated by reducing our GAAP interest expense by the interest expense recognized on Consolidated SLST CDOs and Consolidated K-Series CDOs, • adjusted net interest income – calculated by subtracting adjusted interest expense from adjusted interest income, • yield on average interest earning assets – calculated as the quotient of our adjusted interest income and our average interest earning assets and excludes all Consolidated SLST and Consolidated K-Series assets other than those securities owned by the Company, • average financing cost – calculated as the quotient of our adjusted interest expense and the average outstanding balance of our interest bearing liabilities, excluding Consolidated SLST CDOs, Consolidated K-Series CDOs and mortgages payable on real estate, and • net interest spread – calculated as the difference between our yield on average interest earning assets and our average financing cost. We provide the non-GAAP financial measures listed above because we believe these non-GAAP financial measures provide investors and management with additional detail and enhance their understanding of our interest earning asset yields, in total and by investment category, relative to the cost of our financing and the underlying trends within our portfolio of interest earning assets. In addition to the foregoing, our management team uses these measures to assess, among other things, the performance of our interest earning assets in total and by asset, possible cash flows from our interest earning assets in total and by asset, our ability to finance or borrow against the asset and the terms of such financing and the composition of our portfolio of interest earning assets, including acquisition and disposition determi nations. These measures remove the impact of Consolidated SLST and the Consolidated K-Series that we consolidate or consolidated in accordance with GAAP by only including the interest income earned by the Consolidated SLST and Consolidated K-Series securities that are or were actually owned by the Company, as the Company only receives or received income or absorbs or absorbed losses related to the Consolidated SLST and Consolidated K-Series securities actually owned by the Company. Prior to the quarter ended December 31, 2022, we also reduced GAAP interest expense by the interest expense on mortgages payable on real estate. Commencing with the quarter ended December 31, 2022, we have reclassified the interest expense on mortgages payable on real estate to expenses related to real estate on our consolidated statements of operations and, as such, it is no longer included in GAAP interest expense. Prior period disclosures have been conformed to the current period presentation. 73 Table of Contents The following tables set forth certain information about our interest earning assets by category and their related adjusted interest income, adjusted interest expense, adjusted net interest income, yield on average interest earning assets, average financing cost and net interest spread for the years ended December 31, 2022, 2021 and 2020 , respectively (dollar amounts in thousands): Year Ended December 31, 2022 Single-Family (8) Multi- Family Corporate/Other Total Adjusted Interest Income (1) (2) $ 213,770 $ 13,499 $ 5,974 $ 233,243 Adjusted Interest Expense (1) (94,664) (152) (9,458) (104,274) Adjusted Net Interest Income (1) $ 119,106 $ 13,347 $ (3,484) $ 128,969 Average Interest Earning Assets (3) $ 3,354,923 $ 135,769 $ 13,820 $ 3,504,512 Average Interest Bearing Liabilities (4) $ 2,333,020 $ 5,520 $ 150,194 $ 2,488,734 Yield on Average Interest Earning Assets (1) (5) 6.37 % 9.94 % 43.23 % 6.66 % Average Financing Cost (1) (6) (4.06) % (2.75) % (6.30) % (4.19) % Net Interest Spread (1) (7) 2.31 % 7.19 % 36.93 % 2.47 % Year Ended December 31, 2021 Single-Family (8) Multi- Family Corporate/Other Total Adjusted Interest Income (1) (2) $ 151,931 $ 19,900 $ 6,900 $ 178,731 Adjusted Interest Expense (1) (33,787) — (17,362) (51,149) Adjusted Net Interest Income (1) $ 118,144 $ 19,900 $ (10,462) $ 127,582 Average Interest Earning Assets (3) $ 2,559,713 $ 238,273 $ 28,025 $ 2,826,011 Average Interest Bearing Liabilities (4) $ 1,039,145 $ — $ 250,778 $ 1,289,923 Yield on Average Interest Earning Assets (1) (5) 5.94 % 8.35 % 24.62 % 6.32 % Average Financing Cost (1) (6) (3.25) % — (6.92) % (3.97) % Net Interest Spread (1) (7) 2.69 % 8.35 % 17.70 % 2.35 % Year Ended December 31, 2020 Single-Family (8) Multi- Family (9) Corporate/Other Total Adjusted Interest Income (1) (2) $ 128,287 $ 54,708 $ 5,741 $ 188,736 Adjusted Interest Expense (1) (41,109) (7,352) (13,182) (61,643) Adjusted Net Interest Income (1) $ 87,178 $ 47,356 $ (7,441) $ 127,093 Average Interest Earning Assets (3) $ 2,595,576 $ 656,067 $ 43,855 $ 3,295,498 Average Interest Bearing Liabilities (4) $ 1,292,958 $ 227,692 $ 183,000 $ 1,703,650 Yield on Average Interest Earning Assets (1) (5) 4.94 % 8.34 % 13.08 % 5.73 % Average Financing Cost (1) (6) (3.14) % (3.18) % (7.10) % (3.57) % Net Interest Spread (1) (7) 1.80 % 5.16 % 5.98 % 2.16 % (1) Represents a non-GAAP financial measure. (2) Includes interest income earned on cash accounts held by the Company. 74 Table of Contents (3) Average Interest Earning Assets for the respective periods include residential loans, multi-family loans and investment securities and exclude all Consolidated SLST and Consolidated K-Series assets other than those securities owned by the Company. Average Interest Earning Assets is calculated based on the daily average amortized cost for the respective periods. (4) Average Interest Bearing Liabilities for the respective periods include repurchase agreements, residential loan securitization CDOs, Convertible Notes, senior unsecured notes and subordinated debentures and exclude Consolidated SLST CDOs, Consolidated K-Series CDOs and mortgages payable on real estate as the Company does or did not directly incur interest expense on these liabilities that are consolidated for GAAP purposes. Average Interest Bearing Liabilities is calculated based on the daily average outstanding balance for the respective periods. (5) Yield on Average Interest Earning Assets is calculated by dividing our adjusted interest income relating to our portfolio of interest earning assets by our Average Interest Earning Assets for the respective periods. (6) Average Financing Cost is calculated by dividing our adjusted interest expense by our Average Interest Bearing Liabilities. (7) Net Interest Spread is the difference between our Yield on Average Interest Earning Assets and our Average Financing Cost. (8) The Company has determined it is the primary beneficiary of Consolidated SLST and has consolidated Consolidated SLST into the Company's consolidated financial statements. Our GAAP interest income includes interest income recognized on the underlying seasoned re-performing and non-performing residential loans held in Consolidated SLST. Our GAAP interest expense includes interest expense recognized on the Consolidated SLST CDOs that permanently finance the residential loans in Consolidated SLST and are not owned by the Company. We calculate adjusted interest income by reducing our GAAP interest income by the interest expense recognized on the Consolidated SLST CDOs and adjusted interest expense by excluding the interest expense recognized on the Consolidated SLST CDOs, thus only including the interest income earned by the SLST securities that are actually owned by the Company in adjusted net interest income. (9) 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. Our GAAP interest income included interest income recognized on the underlying multi-family loans held in the Consolidated K-Series. Our GAAP interest expense included interest expense recognized on the Consolidated K-Series CDOs that permanently financed the multi-family loans in the Consolidated K-Series and were not owned by the Company. We calculate adjusted interest income by reducing our GAAP interest income by the interest expense recognized on the Consolidated K-Series CDOs and adjusted interest expense by excluding the interest expense recognized on the Consolidated K-Series CDOs, thus only including the interest income earned by the K-Series securities that were actually owned by the Company in adjusted net interest income. 75 Table of Contents Our adjusted net interest income remained relatively flat in 2022 as compared to the prior year. Adjusted interest expense increased as a result of increased borrowings pursuant to repurchase agreements and securitization financings and an increase in the cost of financing due to base interest rate movements. Our average interest earning assets also increased in 2022, primarily due to additional investment in higher-yielding business purpose loans, which partially offset the increases in repurchase agreement financing obtained on residential loans and investment securities, securitization financings related to residential loans and the associated increased financing costs. Multi-family adjusted net interest income decreased by approximately $6.6 million in 2022 primarily as a result of multi-family loan redemptions that moved multi-family average interest earning assets lower, while a reduction in corporate/other adjusted interest expense resulting from redemption of our Convertible Notes (defined below) in the first quarter of 2022 caused corporate/other adjusted net interest income to increase by approximately $7.0 million. Net interest spread increased during 2022, primarily due to an increase in yield on average interest earning assets resulting from our continued investment in higher-yielding business purpose loans. The increase was partially offset by an increase in the cost of financing due to base interest rate movements in 2022. Our adjusted net interest income remained relatively flat in 2021 as compared to the prior year. Adjusted interest income decreased as a result of a decrease in average interest earning assets due to asset sales in 2020, largely in response to the impacts of the COVID-19 pandemic during the first half of 2020, opportunistic asset sales in 2020 and 2021 and higher prepayment speeds in 2021. In particular, we sold our entire portfolio of higher-yielding first loss POs within the Consolidated K-Series in March 2020 and continued to reduce our portfolio of remaining investment securities through the sale of non-Agency RMBS and CMBS in 2021. The decrease in adjusted interest income was partially offset by the acquisition of higher-yielding business purpose loans in 2021. Adjusted interest expense also decreased in 2021 as compared to the prior year due to a decrease in average interest bearing liabilities, which was largely driven by reduced borrowings from repurchases agreements secured by investment securities. Net interest spread for the year ended December 31, 2021 increased from the prior year period primarily due to continued investment in higher-yielding business purpose loans. The change was partially offset by increased average borrowing costs associated with the non-mark-to-market financings (including securitizations) completed in 2020 and 2021 that replaced repurchase agreement financings that had lower interest costs. A reconciliation of GAAP interest income to adjusted interest income, GAAP interest expense to adjusted interest expense and GAAP total net interest income to adjusted net interest income for the years ended December 31, 2022, 2021 and 2020, respectively, is presented below (dollar amounts in thousands): 76 Table of Contents Years Ended December 31, 2022 2021 2020 Single-Family Multi-Family Corporate/Other Total Single-Family Multi-Family Corporate/Other Total Single-Family Multi-Family Corporate/Other Total GAAP interest income $ 238,915 $ 13,499 $ 5,974 $ 258,388 $ 180,066 $ 19,900 $ 6,900 $ 206,866 $ 159,950 $ 184,470 $ 5,741 $ 350,161 GAAP interest expense (119,809) (152) (9,458) (129,419) (61,922) — (17,362) (79,284) (72,772) (137,114) (13,182) (223,068) GAAP total net interest income $ 119,106 $ 13,347 $ (3,484) $ 128,969 $ 118,144 $ 19,900 $ (10,462) $ 127,582 $ 87,178 $ 47,356 $ (7,441) $ 127,093 GAAP interest income $ 238,915 $ 13,499 $ 5,974 $ 258,388 $ 180,066 $ 19,900 $ 6,900 $ 206,866 $ 159,950 $ 184,470 $ 5,741 $ 350,161 Remove interest expense from: Consolidated SLST CDOs (25,145) — — (25,145) (28,135) — — (28,135) (31,663) — — (31,663) Consolidated K-Series CDOs — — — — — — — — — (129,762) — (129,762) Adjusted interest income $ 213,770 $ 13,499 $ 5,974 $ 233,243 $ 151,931 $ 19,900 $ 6,900 $ 178,731 $ 128,287 $ 54,708 $ 5,741 $ 188,736 GAAP interest expense $ (119,809) $ (152) $ (9,458) $ (129,419) $ (61,922) $ — $ (17,362) $ (79,284) $ (72,772) $ (137,114) $ (13,182) $ (223,068) Remove interest expense from: Consolidated SLST CDOs 25,145 — — 25,145 28,135 — — 28,135 31,663 — — 31,663 Consolidated K-Series CDOs — — — — — — — — — 129,762 — 129,762 Adjusted interest expense $ (94,664) $ (152) $ (9,458) $ (104,274) $ (33,787) $ — $ (17,362) $ (51,149) $ (41,109) $ (7,352) $ (13,182) $ (61,643) Adjusted net interest income (1) $ 119,106 $ 13,347 $ (3,484) $ 128,969 $ 118,144 $ 19,900 $ (10,462) $ 127,582 $ 87,178 $ 47,356 $ (7,441) $ 127,093 (1) Adjusted net interest income is calculated by subtracting adjusted interest expense from adjusted interest income. Undepreciated (Loss) Earnings Undepreciated (loss) earnings is a supplemental non-GAAP financial measure defined as GAAP net (loss) income attributable to Company's common stockholders excluding the Company's share in depreciation expense and lease intangible amortization expense related to operating real estate, net. By excluding these non-cash adjustments from our operating results, we believe that the presentation of undepreciated (loss) earnings provides a consistent measure of our operating performance and useful information to investors to evaluate the effective net return on our portfolio. In addition, we believe that presenting undepreciated (loss) earnings enables our investors to measure, evaluate, and compare our operating performance to that of our peers. A reconciliation of net (loss) income attributable to Company's common stockholders to undepreciated (loss) earnings for the years ended December 31, 2022, 2021 and 2020, respectively, is presented below (amounts in thousands, except per share data). 77 Table of Contents For the Years Ended December 31, 2022 2021 2020 Net (loss) income attributable to Company's common stockholders $ (340,577) $ 144,176 $ (329,696) Add: Depreciation expense on operating real estate 28,916 4,381 — Amortization of lease intangibles related to operating real estate 50,083 11,324 — Undepreciated (loss) earnings $ (261,578) $ 159,881 $ (329,696) Weighted average shares outstanding - basic 377,287 379,232 371,004 Undepreciated (loss) earnings per common share $ (0.69) $ 0.42 $ (0.89) Adjusted Book Value Per Common Share Previously, we presented undepreciated book value per common share as a non-GAAP financial measure. Commencing with the quarter ended December 31, 2022, we have discontinued disclosure of undepreciated book value per common share and instead present adjusted book value per common share, also a non-GAAP financial measure. When presented in prior periods, undepreciated book value was calculated by excluding from GAAP book value the Company's share of cumulative depreciation and lease intangible amortization expenses related to operating real estate, net held at the end of the period. Since we began disclosing undepreciated book value, we identified additional items as materially affecting our book value and believe they should also be incorporated in order to provide a more useful non-GAAP measure for investors to evaluate our current performance and trends and facilitate the comparison of our financial performance and adjusted book value per common share to that of our peers. Accordingly, we calculate adjusted book value per common share by making the following adjustments to GAAP book value: (i) exclude the Company's share of cumulative depreciation and lease intangible amortization expenses related to operating real estate, net held at the end of the period, (ii) exclude the adjustment of redeemable non-controlling interests to estimated redemption value and (iii) adjust our liabilities that finance our investment portfolio to fair value. Our rental property portfolio includes fee simple interests in single-family rental homes and joint venture equity interests in multi-family properties owned by Consolidated Real Estate VIEs. By excluding our share of non-cash depreciation and amortization expenses, adjusted book value reflects the value of our single-family rental properties and joint venture equity investments at their undepreciated basis. Additionally, in connection with third party ownership of certain of the non-controlling interests in certain of the Consolidated Real Estate VIEs, we record redeemable non-controlling interests as mezzanine equity on our consolidated balance sheets. The holders of the redeemable non-controlling interests may elect to sell their ownership interests to us at fair value once a year, subject to annual minimum and maximum amount limitations, resulting in an adjustment of the redeemable non-controlling interests to fair value that is accounted for by us as an equity transaction in accordance with GAAP. A key component of the estimation of fair value of the redeemable non-controlling interests is the estimated fair value of the multi-family apartment properties held by the applicable Consolidated Real Estate VIEs, which valuation is performed once a year by obtaining third party valuations in accordance with underlying agreements. However, because the corresponding real estate assets are not reported at fair value and thus not adjusted to reflect unrealized gains or losses in our consolidated financial statements, the adjustment of the redeemable non-controlling interests to fair value directly affects our GAAP book value. By excluding the adjustment of redeemable non-controlling interests to estimated redemption value, adjusted book value more closely aligns the accounting treatment applied to our real estate assets and reflects the value of our joint venture equity investments at their undepreciated basis. The substantial majority of our remaining assets are financial or similar instruments that are carried at fair value in accordance with the fair value option in our consolidated financial statements. However, unlike our use of the fair value option for the assets in our investment portfolio, the CDOs issued by our residential loan securitizations, senior unsecured notes, subordinated debentures and Convertible Notes that finance our investment portfolio assets are carried at amortized cost in our consolidated financial statements. By adjusting these financing instruments to fair value, adjusted book value reflects the Company's net equity in investments on a comparable fair value basis. 78 Table of Contents We believe that the presentation of adjusted book value per common share provides a more useful measure for investors and us than undepreciated book value as it provides a more consistent measure of our value, allows management to effectively consider our financial position and facilitates the comparison of our financial performance to that of our peers. A reconciliation of GAAP book value to adjusted book value and calculation of adjusted book value per common share as of December 31, 2022 and 2021, respectively, is presented below (amounts in thousands, except per share data). December 31, 2022 December 31, 2021 Company's stockholders' equity $ 1,767,216 $ 2,341,031 Preferred stock liquidation preference (557,125) (557,125) GAAP book value 1,210,091 1,783,906 Add: Cumulative depreciation expense on operating real estate 31,433 4,381 Cumulative amortization of lease intangibles related to operating real estate 59,844 11,324 Adjustment of redeemable non-controlling interest to estimated redemption value 44,237 — Adjustment of amortized cost liabilities to fair value 103,066 (8,237) Adjusted book value $ 1,448,671 $ 1,791,374 Common shares outstanding 364,775 379,405 GAAP book value per common share (1) $ 3.32 $ 4.70 Adjusted book value per common share (2) $ 3.97 $ 4.72 (1) GAAP book value per common share is calculated using the GAAP book value and the common shares outstanding for the periods indicated. (2) Adjusted book value per common share is calculated using the adjusted book value and the common shares outstanding for the periods indicated. 79 Table of Contents Critical Accounting Estimates We prepare our consolidated financial statements in conformity with GAAP, which requires the use of estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based, in part, on our judgment and assumptions regarding various economic conditions that we believe are reasonable based on facts and circumstances existing at the time of reporting. 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 conditions as of December 31, 2022 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. Accounting policies and estimates related to specific components of our consolidated financial statements are disclosed in the notes to our consolidated financial statements. In accordance with SEC guidance, the estimates that we believe are most critical to an investor’s understanding of our financial results and condition and which require complex management judgment are discussed below. Valuation of Financial Instruments Residential Loans The Company’s acquired residential loans are recorded at fair value, which is determined using valuations obtained from a third party that specializes in providing valuations of residential loans. For performing and re-performing loans, estimates of fair value are derived using a discounted cash flow model, where estimates of cash flows are determined from scheduled payments for each loan, adjusted using forecast prepayment rates, default rates and rates for loss upon default. For non-performing loans, asset liquidation cash flows are derived based on the estimated time to liquidate the loan, expected liquidation costs and home price appreciation. Estimated cash flows for both performing and non-performing loans are discounted at yields considered appropriate to arrive at a reasonable exit price for the asset. Indications of loan value such as actual trades, bids, offers and generic market color may be used in determining the appropriate discount yield. The estimation of cash flows used in pricing models is inherently subjective and imprecise. Changes to cash flow model assumptions, including prepayment speeds, default rates, rates for loss upon default, liquidation costs, home price appreciation and discount rates may significantly impact the fair value estimate of residential loans, as well as unrealized gains and losses recognized on these assets. Investment Securities Issued by Consolidated SLST The Company invests in first loss subordinated securities and certain IOs issued by Consolidated SLST. The investment securities that we own in Consolidated SLST are generally illiquid and trade infrequently. The fair valuation of these investment securities is determined based on an internal valuation model that considers expected cash flows from the underlying loans and yields required by market participants. The significant assumptions used in the measurement of these investments are projected losses within the pool of loans and a discount rate. The discount rate used in determining fair value incorporates default rate, loss severity, prepayment rate and current market interest rates. The estimation of cash flows used in pricing models is inherently subjective and imprecise. Significant changes in model assumptions, including projected losses, discount rate, prepayment speeds, default rate and loss severity may significantly impact the fair value estimate of investment securities that we own in Consolidated SLST, as well as unrealized gains and losses recognized on these assets. The Company’s valuation methodologies are described in “Note 15 – Fair Value of Financial Instruments” included in Item 8 of this Annual Report on Form 10-K. Refer to Item 7A., "Quantitative and Qualitative Disclosures about Market Risk—Fair Value Risk" for a quantitative interest rate sensitivity analysis of our investment portfolio. 80 Table of Contents Revenue Recognition Investment Securities Issued by Consolidated SLST Interest income on first loss subordinated securities and certain IOs issued by Consolidated SLST is recognized based on the securities' effective yield. The effective yield on these securities is based on management’s estimate of the projected cash flows from each security, which incorporates assumptions related to fluctuations in interest rates, prepayment speeds and the timing and amount of credit losses. On at least a quarterly basis, management reviews and, if appropriate, adjusts its cash flow projections based on input and analysis received from external sources, internal models, and its judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. 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. The estimation of cash flows used in determining effective yield is inherently subjective and imprecise. Changes in the underlying cash flow assumptions, including prepayment speeds and timing and amount of credit losses, may significantly impact the calculation of effective yield and the interest income recognized for these securities. Variable Interest Entities and Consolidation Reporting Requirements A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The Company consolidates a VIE when it is the primary beneficiary of such VIE. Determining whether an entity has a controlling financial interest in a VIE requires significant judgment related to assessing the purpose and design of the VIE and determination of the activities that most significantly impact its economic performance. We must also identify explicit and implicit variable interests in the entity and consider our involvement in both the design of the VIE and its ongoing activities. To determine whether consolidation of the VIE is required, we must apply judgment to assess whether we have the power to direct the most significant activities of the VIE and whether we have either the rights to receive benefits or the obligation to absorb losses that could be potentially significant to the VIE. 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. As of December 31, 2022 and 2021, 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 loans including their liabilities, income and expenses in our consolidated financial statements. The Company also invests in joint venture equity investments that own multi-family apartment communities, which the Company determined to be VIEs and for which the Company is the primary beneficiary. Accordingly, the Company consolidated the assets, liabilities, income and expenses of these VIEs in the accompanying consolidated financial statements with non-controlling interests for the third-party ownership of the joint ventures' membership interests. The Company accounted for the initial consolidation of the joint venture investments as asset acquisitions, as substantially all of the fair value of the assets within the entities are concentrated in either a single identifiable asset or group of similar identifiable assets. The Company records its initial investments in income-producing real estate at fair value. The purchase price of acquired properties is apportioned to the tangible and identified intangible assets and liabilities acquired at their respective estimated fair values. In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective real estate, its own analysis of recently-acquired and existing comparable properties, property financial results, and other market data. The Company also considers information obtained about the real estate as a result of its due diligence, including marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired. The Company considers the value of acquired in-place leases and utilizes an amortization period that is the average remaining term of the acquired leases. 81 Table of Contents The estimation of fair value for purposes of allocating the purchase price of investments in real estate requires significant judgement based on the available sources. The allocation may significantly impact the carrying value of intangible assets and liabilities consolidated as asset acquisitions, as well as the amount and timing of depreciation and amortization expense recognized in relation to these assets and liabilities over time. Real estate held for sale (including real estate in disposal group held for sale) is recorded at the lower of the net carrying amount of the assets or the estimated net fair value. The Company assesses the net fair value of real estate held for sale in each reporting period that the assets remain classified as held for sale. The Company utilizes market assumptions and a discounted cash flow analysis using property financial information and assumptions regarding market rent, revenue and expense growth, capitalization rates and return rates to estimate fair value of real estate assets. The third-party owners of certain of the non-controlling interests in Consolidated VIEs have the ability to sell their ownership interests to the Company, at their election. The Company has classified these third-party ownership interests as redeemable non-controlling interest and determines the fair value of the redeemable non-controlling interest on a non-recurring basis utilizing discounted cash flows. The Company applies a discount rate to the estimated future cash flows from the multi-family apartment properties held by the applicable Consolidated VIEs that are allocable to the redeemable non-controlling interest. The estimation of cash flows used in pricing models for real estate held for sale and redeemable non-controlling interest is inherently subjective and imprecise. The estimation of fair value requires significant judgment based on the available sources and may affect any impairment recognized on real estate in the Company's statements of operations or, with respect to redeemable non-controlling interest, the Company's book value. A discussion of significant accounting policies is included in “Note 2 — Summary of Significant Accounting Policies” included in Item 8 of this Annual Report on Form 10-K. 82 Table of Contents Balance Sheet Analysis As of December 31, 2022, we had approximately $6.2 billion of total assets. Included in this amount is approximately $830.8 million of assets held in Consolidated SLST and $1.7 billion of assets related to equity investments in multi-family properties that we consolidate in accordance with GAAP. As of December 31, 2021, we had approximately $5.7 billion of total assets, approximately $1.1 billion of which represented Consolidated SLST and $1.0 billion of which related to equity investments in multi-family properties that we consolidate in accordance with GAAP. For a reconciliation of our actual interests in Consolidated SLST, see “Portfolio Update” above. For a reconciliation of our equity investments in consolidated multi-family properties, see “Equity Investments in Multi-Family Entities” below. 83 Table of Contents Residential Loans The following table presents the Company’s residential loans, which include acquired residential loans held by the Company and residential loans held in Consolidated SLST, as of December 31, 2022 and 2021, respectively (dollar amounts in thousands): December 31, 2022 December 31, 2021 Acquired residential loans $ 2,697,498 $ 2,504,719 Consolidated SLST 827,582 1,070,882 Total $ 3,525,080 $ 3,575,601 Acquired Residential Loans 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 our 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, 2022 and 2021, respectively (dollar amounts in thousands): December 31, 2022 Number of Loans Unpaid Principal Fair Value Weighted Average FICO Weighted Average LTV (1) Weighted Average Coupon Re-performing residential loan strategy 5,001 $ 677,229 $ 610,595 631 62% 4.9% Performing residential loan strategy 2,937 682,449 557,665 719 64% 3.9% Business purpose bridge loan strategy 1,964 1,253,704 1,236,303 732 65% 8.5% Business purpose rental loan strategy 1,163 329,299 292,935 748 69% 5.1% Total 11,065 $ 2,942,681 $ 2,697,498 December 31, 2021 Number of Loans Unpaid Principal Fair Value Weighted Average FICO Weighted Average LTV (1) Weighted Average Coupon Re-performing residential loan strategy 5,515 $ 769,779 $ 818,900 628 65% 4.8% Performing residential loan strategy 2,807 616,763 606,711 722 65% 4.0% Business purpose bridge loan strategy 2,028 988,963 992,870 728 65% 8.7% Business purpose rental loan strategy 266 83,071 86,238 747 68% 4.8% Total 10,616 $ 2,458,576 $ 2,504,719 84 Table of Contents (1) For second mortgages (included in performing residential loan strategy), the Company calculates the combined loan-to-value ("LTV"). For business purpose bridge loans, the Company calculates LTV 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. Characteristics of Our Acquired Residential Loans: Loan to Value at Purchase (1) December 31, 2022 December 31, 2021 50% or less 14.6 % 11.8 % >50% - 60% 12.3 % 11.9 % >60% - 70% 24.4 % 27.9 % >70% - 80% 27.9 % 26.8 % >80% - 90% 10.0 % 9.0 % >90% - 100% 5.5 % 6.3 % > 100% 5.3 % 6.3 % Total 100.0 % 100.0 % (1) For second mortgages, the Company calculates the combined LTV. For business purpose bridge loans, the Company calculates LTV 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, 2022 December 31, 2021 550 or less 8.4 % 11.3 % 551 to 600 7.3 % 10.0 % 601 to 650 8.1 % 11.0 % 651 to 700 16.5 % 16.1 % 701 to 750 25.6 % 23.4 % 751 to 800 27.3 % 22.1 % 801 and over 6.8 % 6.1 % Total 100.0 % 100.0 % Current Coupon December 31, 2022 December 31, 2021 3.00% or less 7.4 % 10.0 % 3.01% - 4.00% 15.8 % 15.5 % 4.01% - 5.00% 19.8 % 19.7 % 5.01% - 6.00% 7.9 % 7.5 % 6.01% - 7.00% 7.7 % 5.9 % 7.01% - 8.00% 16.4 % 13.2 % 8.01% and over 25.0 % 28.2 % Total 100.0 % 100.0 % Delinquency Status December 31, 2022 December 31, 2021 Current 90.6 % 92.6 % 31 – 60 days 2.2 % 2.5 % 61 – 90 days 1.8 % 0.8 % 90+ days 5.4 % 4.1 % Total 100.0 % 100.0 % 85 Table of Contents Origination Year December 31, 2022 December 31, 2021 2007 or earlier 20.6 % 28.2 % 2008 - 2016 4.1 % 5.6 % 2017 1.3 % 1.9 % 2018 2.5 % 3.6 % 2019 4.0 % 6.0 % 2020 8.0 % 16.1 % 2021 26.1 % 38.6 % 2022 33.4 % — Total 100.0 % 100.0 % As of December 31, 2022, the Company had the option to purchase 50% of the issued and outstanding interests of an entity that originates residential loans. After acquiring this investment in November 2021, the Company purchased $260.6 million and $94.0 million of residential loans from the entity for the years ended December 31, 2022 and 2021, respectively. In February 2023, the Company exercised its option in full related to this investment. Consolidated SLST 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. Our investment in Consolidated SLST as of December 31, 2022 and 2021 was limited to the RMBS comprised of first loss subordinated securities and IOs issued by the securitization with an aggregate net carrying value of $191.5 million and $230.3 million, respectively. For more information on investment securities held by the Company within Consolidated SLST, refer to "Investment Securities" section below. 86 Table of Contents 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, 2022 and 2021, respectively (dollar amounts in thousands, except current average loan size): December 31, 2022 December 31, 2021 Current fair value $ 827,582 $ 1,070,882 Current unpaid principal balance $ 955,579 $ 1,071,228 Number of loans 6,160 6,802 Current average loan size $ 155,126 $ 157,487 Weighted average original loan term (in months) at purchase 351 351 Weighted average LTV at purchase 68 % 67 % Weighted average credit score at purchase 703 710 Current Coupon: 3.00% or less 3.0 % 2.8 % 3.01% – 4.00% 38.0 % 37.2 % 4.01% – 5.00% 39.3 % 39.9 % 5.01% – 6.00% 11.9 % 12.1 % 6.01% and over 7.8 % 8.0 % Delinquency Status: Current 69.5 % 70.3 % 31 - 60 11.1 % 12.3 % 61 - 90 4.4 % 4.7 % 90+ 15.0 % 12.7 % Origination Year: 2005 or earlier 31.1 % 30.9 % 2006 15.6 % 15.4 % 2007 21.4 % 21.1 % 2008 or later 31.9 % 32.6 % Geographic state concentration (greater than 5.0%): California 10.6 % 10.5 % Florida 10.3 % 10.5 % New York 9.8 % 9.8 % New Jersey 7.4 % 7.3 % Illinois 7.2 % 7.1 % 87 Table of Contents Residential Loans Financing Repurchase Agreements As of December 31, 2022, the Company had repurchase agreements with four third-party financial institutions to fund the purchase of residential loans. As of December 31, 2022, the Company had no residential loan repurchase agreement exposure where the amount at risk was in excess of 5% of the Company's stockholders’ equity. The following table presents detailed information about these repurchase agreements and associated assets pledged as collateral at December 31, 2022 and 2021, respectively (dollar amounts in thousands): Maximum Aggregate Uncommitted Principal Amount Outstanding Repurchase Agreements (1) Net Deferred Finance Costs (2) Carrying Value of Repurchase Agreements Fair Value of Loans Pledged Weighted Average Rate Weighted Average Months to Maturity (3) December 31, 2022 $ 2,030,879 $ 688,487 $ (1,541) $ 686,946 $ 867,033 6.65 % 16.69 December 31, 2021 $ 1,252,352 $ 554,784 $ (525) $ 554,259 $ 729,649 2.79 % 4.38 (1) Includes non-mark-to-market repurchase agreements with an aggregate outstanding balance of $446.8 million, a weighted average rate of 6.77%, and weighted average months to maturity of 23.96 months as of December 31, 2022. Includes a non-mark-to-market repurchase agreement with an outstanding balance of $15.6 million, a rate of 4.00%, and months to maturity of 2.03 months as of December 31, 2021. (2) 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. (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 2022, 2021 and 2020 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, 2022 $ 833,517 $ 688,487 $ 1,076,747 September 30, 2022 1,324,819 1,163,408 1,554,993 June 30, 2022 1,386,714 1,566,926 1,566,926 March 31, 2022 682,867 783,168 783,168 December 31, 2021 397,651 554,784 554,784 September 30, 2021 337,295 335,434 345,620 June 30, 2021 401,466 341,791 506,750 March 31, 2021 441,006 538,632 538,632 December 31, 2020 415,625 407,213 425,903 September 30, 2020 651,384 673,787 673,787 June 30, 2020 892,422 876,923 905,776 March 31, 2020 731,245 715,436 744,522 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 $192.9 million and $232.6 million, respectively, as of December 31, 2022. 88 Table of Contents The following table summarizes Consolidated SLST CDOs and CDOs issued by the Company's residential loan securitizations as of December 31, 2022 (dollar amounts in thousands): Outstanding Face Amount Carrying Value Weighted Average Interest Rate (1) Stated Maturity (2) Consolidated SLST (3) $ 699,408 $ 634,495 2.75 % 2059 Residential loan securitizations $ 1,498,198 $ 1,468,222 3.54 % 2026 - 2062 (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. 89 Table of Contents Mezzanine Lending The Company's Mezzanine Lending strategy may include preferred equity in, and mezzanine loans to, entities that have multi-family real estate assets. 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 Mezzanine Lending investments for accounting treatment as loans versus equity investments. Mezzanine Lending investments 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. Mezzanine Lending investments 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. The Company records its equity in earnings or losses from these Mezzanine Lending investments under the hypothetical liquidation of book value method of accounting due to the structures and the preferences it receives on the distributions from these entities pursuant to the respective agreements. Under this method, the Company recognizes income or loss in each period based on the change in liquidation proceeds it would receive from a hypothetical liquidation of its investment. As of December 31, 2022, one preferred equity investment was greater than 90 days delinquent. This investment represents 1.9% of the total fair value of our Mezzanine Lending portfolio. The following tables summarize our Mezzanine Lending portfolio as of December 31, 2022 and 2021, respectively (dollar amounts in thousands): December 31, 2022 Count Fair Value (1) (2) Investment Amount (2) Weighted Average Preferred Return Rate (3) Weighted Average Remaining Life (Years) Preferred equity investments 23 $ 239,780 $ 242,970 11.98 % 3.4 December 31, 2021 Count Fair Value (1) (2) Investment Amount (2) Weighted Average Preferred Return Rate (3) Weighted Average Remaining Life (Years) Preferred equity investments 33 $ 300,819 $ 298,330 11.80 % 4.6 (1) Preferred equity investments in the amounts of $87.5 million and $120.0 million are included in multi-family loans on the accompanying consolidated balance sheets as of December 31, 2022 and 2021, respectively. Preferred equity investments in the amounts of $152.2 million and $180.8 million are included in equity investments on the accompanying consolidated balance sheets as of December 31, 2022 and 2021, respectively. (2) The difference between the fair value and investment amount consists of any unamortized premium or discount, deferred fees or deferred expenses, and any unrealized gain or loss. (3) Based upon investment amount and contractual preferred return rate. 90 Table of Contents Mezzanine Lending Characteristics The following tables present characteristics of our Mezzanine Lending portfolio summarized by geographic concentrations of credit risk exceeding 5% of our total investment amount as of December 31, 2022 and 2021, respectively (dollar amounts in thousands): December 31, 2022 State Count Investment Amount % Total Weighted Average Coupon Weighted Average LTV Weighted Average DSCR (1) Florida 5 $ 82,072 33.8 % 12.6 % 72 % 1.35x Texas 5 43,118 17.7 % 11.2 % 84 % 1.27x Alabama 2 33,827 13.9 % 12.3 % 68 % 2.23x Utah 1 20,568 8.5 % 12.0 % 67 % N/A (2) Tennessee 1 13,731 5.7 % 11.0 % 93 % 1.30x Other 9 49,654 20.4 % 11.7 % 86 % 1.72x Total 23 $ 242,970 100.0 % 12.0 % 79 % 1.50x December 31, 2021 State Count Investment Amount % Total Weighted Average Coupon Weighted Average LTV Weighted Average DSCR (1) Florida 6 $ 83,786 28.1 % 12.5 % 72 % 2.43x Texas 9 70,523 23.6 % 11.2 % 84 % 2.13x Alabama 3 40,960 13.7 % 12.2 % 73 % 2.12x Ohio 3 28,482 9.5 % 11.6 % 88 % 2.05x North Carolina 3 19,214 6.4 % 12.0 % 74 % 1.50x Other 9 55,365 18.7 % 11.2 % 84 % 1.91x Total 33 $ 298,330 100.0 % 11.8 % 79 % 2.05x (1) Represents the weighted average debt service coverage ratio ("DSCR") of the underlying properties. (2) Not applicable as the underlying property is under construction. 91 Table of Contents Equity Investments in Multi-Family Entities The Company owns joint venture equity investments in entities that own multi-family properties. The Company determined that these joint venture entities are VIEs and that the Company is the primary beneficiary of all but two of these VIEs, resulting in consolidation of the VIEs where we are the primary beneficiary, including their assets, liabilities, income and expenses, in our financial statements in accordance with GAAP. We receive a preferred return and/or pro rata variable distributions from these investments and, in certain cases, management fees based upon property performance. We also will participate in allocation of excess cash upon sale of the multi-family real estate assets. As noted above, the Company owns joint venture equity investments in two entities that own multi-family properties where the Company has determined that these joint venture entities are VIEs but that the Company is not the primary beneficiary, resulting in the Company recording its equity investments at fair value. We receive variable distributions from these investments on a pro rata basis and management fees based upon property performance. We also will participate in allocation of excess cash upon sale of the multi-family real estate assets. In September 2022, the Company announced a repositioning of its business through the opportunistic disposition over time of the Company's joint venture equity investments in multi-family properties and reallocation of its capital away from such assets to its targeted assets. Accordingly, the Company determined that certain joint venture equity investments met the criteria to be classified as held for sale and transferred the assets and liabilities of the respective Consolidated VIEs and its unconsolidated multi-family joint venture equity investments to assets and liabilities of disposal group held for sale. The Company's net equity in consolidated multi-family properties and disposal group held for sale totaled $388.8 million as of December 31, 2022. The Company's net equity in consolidated multi-family properties totaled $261.6 million as of December 31, 2021. As of December 31, 2021, a wholly-owned subsidiary of the Company owned a multi-family property and the Company's net equity in this entity totaled $14.6 million. During the year ended December 31, 2022, the entity completed the sale of its multi-family property. A reconciliation of our net equity investments in consolidated multi-family properties and disposal group held for sale to our consolidated financial statements as of December 31, 2022 and 2021, respectively, is shown below (dollar amounts in thousands): December 31, 2022 December 31, 2021 Cash and cash equivalents $ 21,129 $ 30,130 Real estate, net 543,739 978,834 Lease intangible, net (1) — 39,769 Assets of disposal group held for sale (2) 1,151,784 — Other assets 13,686 31,006 Total assets $ 1,730,338 $ 1,079,739 Mortgages payable on real estate, net (3) $ 394,707 $ 709,356 Liabilities of disposal group held for sale (2) 883,812 — Other liabilities 10,511 17,993 Total liabilities $ 1,289,030 $ 727,349 Redeemable non-controlling interest in Consolidated VIEs $ 63,803 $ 66,392 Less: Adjustment of redeemable non-controlling interest to estimated redemption value (44,237) — Non-controlling interest in Consolidated VIEs 9,040 24,359 Non-controlling interest in disposal group held for sale 23,928 — Net equity investment (4) $ 388,774 $ 261,639 (1) Included in other assets in the accompanying consolidated balance sheets. 92 Table of Contents (2) See Note 9 in the Notes to Consolidated Financial Statements for further information regarding our assets and liabilities of disposal group held for sale. (3) See Note 13 in the Notes to Consolidated Financial Statements for further information regarding our mortgages payable on real estate. (4) The Company's net equity investment as of December 31, 2022 consists of $144.7 million of net equity investments in consolidated multi-family properties and $244.0 million of net equity investments in disposal group held for sale. Equity Investments in Consolidated Multi-Family Properties not in Disposal Group Held for Sale As of December 31, 2022, the Company's net equity investment in consolidated multi-family properties not in disposal group held for sale of $144.7 million primarily consists of two investments in one joint venture entity that do not meet the criteria to be classified as held for sale: a preferred equity investment of approximately $137.7 million earning a preferred return of 11% and a common equity investment of approximately $6.9 million. This joint venture entity also has third-party investors that have the ability to sell their ownership interests to us, at their election once a year subject to annual minimum and maximum amount limitations, and we are obligated to purchase, subject to certain conditions, such interests for cash, representing redeemable non-controlling interests of approximately $63.8 million. The geographic concentrations in consolidated multi-family properties exceeding 5% of our combined common and preferred net equity investments in consolidated multi-family properties not in disposal group held for sale as of December 31, 2022 and 2021, respectively, are shown below (dollar amounts in thousands): December 31, 2022 State Property Count Total Equity Ownership Interest Net Equity Investment Percentage of Total Net Equity Investment Texas 5 69% $ 40,825 40.7 % Tennessee 2 65% - 69% $ 15,959 15.9 % Florida 1 49% $ 14,075 14.0 % South Carolina 2 67% - 69% $ 11,935 11.9 % Kentucky 1 69% $ 9,257 9.2 % Alabama 1 69% $ 5,812 5.8 % December 31, 2021 (1) State Property Count Total Equity Ownership Interest Net Equity Investment Percentage of Total Net Equity Investment Florida 6 47% - 100% $ 81,754 31.2 % Texas 9 66% - 95% $ 79,527 30.4 % Alabama 2 80% - 95% $ 37,162 14.2 % South Carolina 2 63% - 66% $ 16,540 6.3 % (1) Information shown as of December 31, 2021 includes certain consolidated multi-family properties transferred to disposal group held for sale in September 2022. 93 Table of Contents The following table provides summary information regarding our consolidated multi-family properties that are not in disposal group held for sale as of December 31, 2022. Market Property Count Occupancy % Units Rent per Unit (1) LTV (2) Beaufort, SC 1 92.3 % 248 $ 1,421 69.8 % Collierville, TN 1 94.8 % 324 1,502 76.7 % Columbia, SC 1 89.9 % 276 1,060 72.2 % Dallas, TX 2 91.8 % 401 1,831 83.4 % Houston, TX 1 91.1 % 192 1,392 90.9 % Little Rock, AR 1 95.5 % 202 1,254 90.2 % Louisville, KY 1 82.7 % 300 1,336 85.8 % Memphis, TN 1 86.0 % 242 1,103 101.3 % Montgomery, AL 1 83.7 % 252 965 94.7 % San Antonio, TX 2 90.8 % 684 1,258 78.5 % St. Petersburg, FL 1 97.5 % 326 2,357 60.9 % Total Count/Average 13 90.7 % 3,447 $ 1,441 79.0 % (1) Represents average monthly rent per unit. (2) Represents LTV of the underlying properties. Equity Investments in Disposal Group Held for Sale The following table provides summary information regarding the multi-family properties in the disposal group held for sale as of December 31, 2022. Market Property Count Occupancy % Units Rent per Unit (1) LTV (2) Apopka, FL 1 87.1 % 240 $ 1,553 80.0 % Birmingham, AL 2 94.4 % 693 1,411 72.9 % Brandon, FL 2 85.2 % 1,267 1,386 84.7 % Fort Myers, FL 1 91.1 % 338 1,439 59.8 % Fort Worth, TX 1 93.4 % 256 1,143 67.3 % Houston, TX 1 93.0 % 200 923 83.5 % Kissimmee, FL 1 90.3 % 320 1,530 84.3 % Oklahoma City, OK 2 90.3 % 957 767 85.7 % Orlando, FL 1 93.6 % 220 1,510 85.7 % Pearland, TX 2 92.7 % 234 1,560 61.0 % Pensacola, FL 1 95.0 % 240 1,461 84.2 % Plano, TX 2 91.2 % 702 1,476 75.2 % Tampa, FL 1 95.5 % 400 1,650 55.5 % Webster, TX 1 90.4 % 366 965 78.1 % Total Count/Average 19 90.7 % 6,433 $ 1,305 76.7 % (1) Represents average monthly rent per unit. (2) Represents LTV of the underlying properties. 94 Table of Contents Equity Investments in Entities that Invest in or Originate Residential Properties and Loans As of December 31, 2022, the Company had an investment in an entity that originates residential loans. In addition, the Company's ownership interest in an entity that invested in residential loans was redeemed during the year ended December 31, 2022. The following table summarizes our ownership interests in entities that originate residential loans and invest in residential properties as of December 31, 2022 and 2021, respectively (dollar amounts in thousands): December 31, 2022 December 31, 2021 Strategy Ownership Interest Fair Value Ownership Interest Fair Value Constructive Loans, LLC (1) Residential Loans — $ 27,500 — $ 29,250 Morrocroft Neighborhood Stabilization Fund II, LP (2) Single-Family Rental Properties — — 11% 19,143 Total $ 27,500 $ 48,393 (1) As of December 31, 2022, the Company had the option to purchase 50% of the issued and outstanding interests of an entity that originates residential loans. The Company accounts for this investment using the equity method and has elected the fair value option. In February 2023, the Company exercised its option in full related to this investment. (2) The Company's equity investment was redeemed as a result of a sale transaction initiated by the general partner during the year ended December 31, 2022. 95 Table of Contents Investment Securities At December 31, 2022, our investment securities portfolio included non-Agency RMBS, CMBS and ABS, which are classified as investment securities available for sale. Our investment securities also include first loss subordinated securities and certain IOs issued by Consolidated SLST. At December 31, 2022, 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, 2022 as compared to December 31, 2021 is primarily due to sales and paydowns of non-Agency RMBS and ABS and a decrease in the fair value of a number of our investment securities during the year due to spread widening. The following tables summarize our investment securities portfolio as of December 31, 2022 and 2021, respectively (dollar amounts in thousands): December 31, 2022 Unrealized Weighted Average Investment Securities Current Par Value Amortized Cost Gains Losses Fair Value Coupon (1) Yield (2) Outstanding Repurchase Agreements Available for Sale (“AFS”) Non-Agency RMBS Senior $ 41 $ 41 $ — $ (5) $ 36 2.74 % 2.89 % $ — Mezzanine 30,250 29,325 — (2,153) 27,172 4.77 % 5.58 % — Subordinated 39,104 28,108 — (13,282) 14,826 9.38 % 8.37 % — IO 524,726 17,100 9,436 — 26,536 1.44 % 20.79 % — Total Non-Agency RMBS 594,121 74,574 9,436 (15,440) 68,570 2.09 % 10.38 % — CMBS Mezzanine 26,033 26,033 — (1,662) 24,371 5.43 % 5.42 % — Subordinated 6,000 6,000 — (238) 5,762 9.29 % 9.29 % — Total CMBS 32,033 32,033 — (1,900) 30,133 6.14 % 6.13 % — ABS Residuals 4 797 59 — 856 — 30.19 % — Total ABS 4 797 59 — 856 — 30.19 % — Total - AFS $ 626,158 $ 107,404 $ 9,495 $ (17,340) $ 99,559 2.45 % 9.33 % $ — Consolidated SLST Non-Agency RMBS Subordinated $ 256,155 $ 210,733 $ — $ (40,182) $ 170,551 4.47 % 4.92 % $ 50,077 IO 149,873 21,528 — (546) 20,982 3.50 % 3.01 % — Total Non-Agency RMBS 406,028 232,261 — (40,728) 191,533 4.10 % 4.73 % 50,077 Total - Consolidated SLST $ 406,028 $ 232,261 $ — $ (40,728) $ 191,533 4.10 % 4.73 % $ 50,077 Total Investment Securities $ 1,032,186 $ 339,665 $ 9,495 $ (58,068) $ 291,092 3.09 % 6.19 % $ 50,077 96 Table of Contents December 31, 2021 Unrealized Weighted Average Investment Securities Current Par Value Amortized Cost Gains Losses Fair Value Coupon (1) Yield (2) Outstanding Repurchase Agreements Available for Sale (“AFS”) Non-Agency RMBS Senior $ 14,055 $ 14,054 $ — $ (6) $ 14,048 5.97 % 5.97 % $ — Mezzanine 40,350 39,243 1,787 (8) 41,022 6.72 % 6.18 % — Subordinated 63,153 53,386 374 (2,265) 51,495 4.35 % 6.12 % — IO 633,530 21,246 575 (367) 21,454 1.01 % 12.08 % — Total Non-Agency RMBS 751,088 127,929 2,736 (2,646) 128,019 1.80 % 6.86 % — CMBS Mezzanine 26,600 26,600 159 (138) 26,621 3.81 % 3.81 % — Subordinated 6,000 6,000 525 — 6,525 7.69 % 7.69 % — Total CMBS 32,600 32,600 684 (138) 33,146 4.52 % 4.52 % — ABS Residuals 117 21,795 17,884 — 39,679 — 24.58 % — Total ABS 117 21,795 17,884 — 39,679 — 24.58 % — Total - AFS $ 783,805 $ 182,324 $ 21,304 $ (2,784) $ 200,844 5.49 % 9.36 % $ — Consolidated SLST Non-Agency RMBS Subordinated $ 256,807 $ 212,254 $ 1,514 $ — $ 213,768 4.57 % 4.88 % $ — IO 174,483 26,415 — (9,839) 16,576 3.50 % 8.48 % — Total Non-Agency RMBS 431,290 238,669 1,514 (9,839) 230,344 4.11 % 5.30 % — Total - Consolidated SLST $ 431,290 $ 238,669 $ 1,514 $ (9,839) $ 230,344 4.11 % 5.30 % $ — Total Investment Securities $ 1,215,095 $ 420,993 $ 22,818 $ (12,623) $ 431,188 4.90 % 6.97 % $ — (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. 97 Table of Contents Investment Securities Financing Repurchase Agreements In March 2020, in reaction to the market turmoil related to the COVID-19 pandemic, our investment securities 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, generally. In response, the Company completely eliminated its securities repurchase agreement exposure in 2020, which continued throughout 2021. As of December 31, 2022, the Company had $50.1 million outstanding under repurchase agreements with third-party financial institutions to fund a portion of its investment securities portfolio. These repurchase agreements are short-term financings that bear interest rates typically based on a spread to SOFR 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 advance to us. 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. The Company expects to roll outstanding amounts under its repurchase agreements into new repurchase agreements or other financings, or to repay outstanding amounts, prior to or at maturity. As of December 31, 2022, the Company's only repurchase agreement exposure where the amount at risk was in excess of 5% of the Company's stockholders’ equity was to Bank of America at 6.82%. The following table details the quarterly average balance, ending balance and maximum balance at any month-end during each quarter in 2022, 2021 and 2020 for our repurchase agreements secured by investment securities (dollar amounts in thousands): Quarter Ended Quarterly Average Balance End of Quarter Balance Maximum Balance at any Month-End December 31, 2022 $ 50,077 $ 50,077 $ 50,077 September 30, 2022 53,159 53,159 53,159 June 30, 2022 132,712 129,331 138,301 March 31, 2022 116,766 144,852 144,852 December 31, 2021 — — — September 30, 2021 — — — June 30, 2021 — — — March 31, 2021 — — — December 31, 2020 — — — September 30, 2020 29,190 — 87,571 June 30, 2020 108,529 87,571 150,445 March 31, 2020 1,694,933 713,364 2,237,399 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. In February 2021, the Company exercised its right to an optional redemption of its non-Agency RMBS re-securitization with an outstanding principal balance of $14.7 million at the time of redemption, returning the non-Agency RMBS held by the re-securitization trust to the Company. 98 Table of Contents Derivative Assets and Liabilities The Company enters into derivative instruments in connection with its risk management activities. These derivative instruments may include interest rate caps, 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. The Company and the entities that own multi-family properties in which the Company owns joint venture equity investments are required by lenders on certain repurchase agreement financing and variable-rate mortgages payable on real estate to enter into interest rate cap contracts. These interest rate cap contracts are with a counterparty that involve the receipt of variable-rate amounts from the counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. During the period these contracts are open, changes in the value of the contract are recognized as unrealized gains or losses. During the year ended December 31, 2022, the Company recognized $26.3 million of unrealized gains and $0.9 million of realized gains related to interest rate cap agreements. We may use interest rate swaps to hedge any variable cash flows associated with our borrowings. Pursuant to these arrangements, the Company typically agrees to pay a fixed rate of interest and receive a variable interest rate based on one- or three-month LIBOR, or an index that it expected over time to be closely correlated to changes in one- or three-month LIBOR, or SOFR, 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. 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 had no outstanding interest rate swaps as of December 31, 2022. 99 Table of Contents Debt The Company’s debt as of December 31, 2022 included senior unsecured notes and subordinated debentures. Senior Unsecured Notes As of December 31, 2022, the Company had $100.0 million aggregate principal amount of its 5.75% Senior Unsecured Notes (the "Senior Unsecured Notes") outstanding, due on April 30, 2026. The Senior Unsecured Notes were issued at par and carry deferred charges resulting in a total cost to the Company of approximately 6.64%. The Company's Senior Unsecured Notes contain various covenants including the maintenance of a minimum net asset value, ratio of unencumbered assets to unsecured indebtedness and senior debt service coverage ratio and limit the amount of leverage the Company may utilize and its ability to transfer the Company’s assets substantially as an entirety or merge into or consolidate with another person. Subordinated Debentures As of December 31, 2022, certain of our wholly-owned subsidiaries had trust preferred securities outstanding of $45.0 million with a weighted average interest rate of 8.43% which are due in 2035. The securities are fully guaranteed by us with respect to distributions and amounts payable upon liquidation, redemption or repayment. These securities are classified as subordinated debentures in the liability section of our consolidated balance sheets. Convertible Notes As of December 31, 2021, the Company had $138.0 million aggregate principal amount of its 6.25% Senior Convertible Notes (the "Convertible Notes") outstanding. The Company redeemed the Convertible Notes at maturity for $138.0 million in January 2022. None of the Convertible Notes were converted prior to maturity. 100 Table of Contents Balance Sheet Analysis - Company ’ s Stockholders’ Equity The following table provides a summary of the Company's stockholders' equity at December 31, 2022 and 2021, respectively (dollar amounts in thousands): December 31, 2022 December 31, 2021 8.000% Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock $ 148,134 $ 148,134 7.875% Series E Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock 179,349 179,349 6.875% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock 138,650 138,650 7.000% Series G Cumulative Redeemable Preferred Stock 72,218 72,088 Common stock 3,648 3,794 Additional paid-in capital 2,279,955 2,356,576 Accumulated other comprehensive (loss) income (1,970) 1,778 Accumulated deficit (1,052,768) (559,338) Company's stockholders' equity $ 1,767,216 $ 2,341,031 101 Table of Contents Liquidity and Capital Resources General Liquidity is a measure of our ability to meet potential cash requirements. Our short-term (the 12 months ending December 31, 2023) and long-term (beyond December 31, 2023) liquidity requirements include 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 short-term and long-term liquidity needs are met by our existing cash balances and our investments and assets which 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 satisfy our short-term and/or long-term liquidity needs through the sale of assets from our investment portfolio, securities offerings or the securitization or collateralized financing of our assets. In response to the difficult conditions encountered in March and April 2020 resulting from the COVID-19 pandemic, since late March 2020, we have focused on strengthening our balance sheet and long-term capital preservation primarily by focusing on assets and markets that provide compelling risk-adjusted returns through either an unlevered strategy or through residential loan repurchase agreement financing with terms of one year or more or sustainable non-mark-to-market financing arrangements, including securitizations and non-mark-to-market repurchase agreement financing. By executing this strategy, as of December 31, 2022, we reduced our financings subject to mark-to-market margin call by 93% from December 31, 2019 levels, which has resulted in a portfolio recourse leverage ratio for the Company of 0.3 times. Beginning in the three months ended March 31, 2022, we re-commenced the use of short term repurchase agreement financing that is subject to mark-to-market margin calls to fund a portion of our investment securities portfolio, ending December 2022 with $50.1 million of outstanding repurchase agreement financing secured by investment securities. Subject to market conditions, we intend to employ a prudent amount of leverage to conduct our business that may be in excess of current leverage levels. However, in light of current market conditions, which includes increased volatility in interest rate, credit, mortgage and financial markets and the increasing risk of the U.S. economy experiencing a recession within the next 12 months, we currently expect to pursue selective investments across the residential housing sector and consider opportunistic dispositions. We also intend to maintain a solid position in unrestricted cash and a conservative approach to leverage based on current market conditions until we believe market conditions have sufficiently improved for the reasonable and prudent use of more substantial amounts of leverage. At December 31, 2022, we had $244.7 million of cash and cash equivalents, $120.5 million of unencumbered investment securities (including the securities we own in Consolidated SLST), $214.4 million of unencumbered residential loans and $239.8 million of unencumbered preferred equity investments in owners of multi-family properties. 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. 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 short-term repurchase agreement financing and MBS markets during that time, we have placed and expect to continue 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. To this end, we have completed nine non-mark-to-market securitizations and three non-mark-to-market repurchase agreement financings with new and existing counterparties since March 2020 . During the year ended December 31, 2022, we completed three securitizations of certain performing and re-performing residential loans and a securitization of business purpose loans and received $949.9 million of proceeds from our non-mark-to-market repurchase agreements with new and existing counterparties. Based on current market conditions, our current investment portfolio, new investment initiatives, expectations to dispose of assets from time to time on terms favorable to us, 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, 2022 During the year ended December 31, 2022, net cash, cash equivalents and restricted cash increased by $43.1 million. 102 Table of Contents Cash Flows from Operating Activities We generated net cash flows from operating activities of $91.8 million during the year ended December 31, 2022. Our cash flow provided by operating activities differs from our net income due to these primary factors: (i) differences between (a) accretion, amortization, depreciation and recognition of income and losses recorded with respect to our investments and (b) the cash received therefrom and (ii) unrealized gains and losses on our investments. Cash Flows from Investing Activities During the year ended December 31, 2022, our net cash flows used in investing activities were $508.8 million, primarily as a result of purchases of residential loans, the funding of multi-family joint venture and preferred equity investments and the purchases of and capital expenditures on single-family residential properties. This was partially offset by principal repayments and refinancing of residential loans, proceeds from the sale of real estate and sales of non-Agency RMBS and ABS, repayments of investment securities and preferred equity and mezzanine loan investments and returns of capital from equity investments. 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. 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 from residential loans, including residential loans held in Consolidated SLST, 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). Cash Flows from Financing Activities During the year ended December 31, 2022, our cash flows provided by financing activities were $460.1 million. The main sources of cash flows from financing activities were proceeds from the issuance of residential CDOs and proceeds from repurchase agreements related to our residential loans and investment securities. This was partially offset by the repayment of the Convertible Notes, paydowns on CDOs, dividend payments on both common and preferred stock and repurchases of shares of our common stock. Liquidity – Financing Arrangements As of December 31, 2022, we have outstanding short-term repurchase agreement financing on our investment securities, a form of collateralized short-term financing, with one financial institution. Repurchase agreements we have historically used to finance our investment securities, including the one repurchase agreement we currently have, are secured by certain of our investment securities and bear interest rates that move in close relationship to SOFR. 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, these 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 effectively call the loan at any time. 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. 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 amount financed in cash, on minimal notice, and repurchase may be accelerated upon an event of default under the repurchase agreements. 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 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 a repurchase agreement counterparty 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.” 103 Table of Contents At December 31, 2022, we had longer-term repurchase agreements with terms of up to three years with four third-party financial institutions that are secured by certain of our residential loans. The outstanding financing under one of these repurchase agreements is subject to margin calls to the extent the market value of the residential loans falls below specified levels. We have entered into or amended repurchase agreements with three new or 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. S ee "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. Repurchase of the residential loans financed by the repurchase agreements may be accelerated upon an event of default. The repurchase agreements secured by residential loans contain various covenants, including among other things, the maintenance of certain amounts of liquidity and total adjusted stockholders' equity. As of December 31, 2022, we had an aggregate amount at risk under our residential loan repurchase agreements of approximately $178.5 million, which represents the difference between the fair 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. As of December 31, 2022, we had assets available to be posted as margin which included liquid assets, such as unrestricted cash and cash equivalents, and unencumbered investment securities that could be monetized to pay down or collateralize a liability immediately. As of December 31, 2022, we had $223.6 million included in cash and cash equivalents and $120.5 million in unencumbered investment securities available to meet additional haircuts or market valuation requirements. The unencumbered investment securities that we believe may be posted as margin as of December 31, 2022 included $89.6 million of non-Agency RMBS (including an IO security we own in Consolidated SLST), $30.1 million of CMBS and $0.9 million of ABS. At December 31, 2022, the Company had $100.0 million aggregate principal amount of Senior Unsecured Notes outstanding. The Senior Unsecured Notes were issued at 100% of the principal amount and bear interest at a rate equal to 5.75% per year (subject to adjustment from time to time based on changes in the ratings of the Senior Unsecured Notes by one or more nationally recognized statistical rating organizations), payable semi-annually in arrears on April 30 and October 30 of each year, and are expected to mature on April 30, 2026, unless earlier redeemed. The Company has the right to redeem the Senior Unsecured Notes, in whole or in part, prior to maturity, subject to a "make-whole" premium or other date-dependent multiples of principal amount redeemed. No sinking fund is provided for the Senior Unsecured Notes. At December 31, 2022, we also had other longer-term debt which includes Company-sponsored residential loan securitization CDOs with a carrying value of $1.5 billion. We had ten Company-sponsored securitizations with CDOs outstanding as of December 31, 2022. See Note 12 to our consolidated financial statements included in this report for further discussion. The real estate assets held by our multi-family joint venture investments are subject to mortgages payable. We have no obligation for repayment of the mortgages payable but, with respect to certain of the mortgages payable, we may execute a guaranty related to commitment of bad acts. As of December 31, 2022, our Company recourse leverage ratio, which represents our total outstanding recourse repurchase agreement financing, subordinated debentures and Senior Unsecured Notes divided by our total stockholders' equity, was approximately 0.3 to 1. Our Company recourse leverage ratio does not include outstanding non-recourse repurchase agreement financing, debt associated with CDOs or mortgages payable on real estate. As of December 31, 2022, our portfolio recourse leverage ratio, which represents our outstanding recourse repurchase agreement financing divided by our total stockholders’ equity, was approximately 0.3 to 1. We monitor all at risk or shorter-term financings to enable us to respond to market disruptions as they arise. Liquidity – Hedging and Other Factors Certain of our hedging instruments may also impact our liquidity. We may use interest rate caps, interest rate swaps, swaptions, TBAs or other futures contracts to hedge interest rate and market value risk associated with our investment portfolio. 104 Table of Contents With respect to interest rate caps, the Company and the entities that own multi-family properties in which the Company owns joint venture equity investments are required by lenders on certain repurchase agreement financing and variable-rate mortgages payable on real estate to enter into interest rate cap contracts. These interest rate cap contracts are with a counterparty that involve the receipt of variable-rate amounts from the counterparty if interest rates rise above the strike rate on the contract in exchange for an up-front premium. During the period these contracts are open, changes in the value of the contract are recognized as unrealized gains or losses. With respect to interest rate swaps, futures contracts and TBAs, initial margin deposits, which can be comprised of either cash or securities, will be made upon entering into these contracts. During the period these contracts are open, changes in the value of the contract are recognized as unrealized gains or losses by marking to market on a daily basis to reflect the market value of these contracts at the end of each day’s trading. We may be required to satisfy variable margin payments periodically, depending upon whether unrealized gains or losses are incurred. 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 interest rate swaps in place. Liquidity — Securities Offerings In addition to the financing arrangements described above under the caption “Liquidity—Financing Arrangements,” we also rely on follow-on equity offerings of common and preferred stock, and may utilize from time to time debt securities offerings, as a source of both short-term and long-term liquidity. We also may generate liquidity through the sale of shares of our common stock or preferred stock in “at-the-market” equity offering programs pursuant to equity distribution agreements, as well as through the sale of shares of our common stock pursuant to our Dividend Reinvestment Plan (“DRIP”), which provides for the issuance of up to $20.0 million of shares of our common stock. The Company had no securities offerings during the year ended December 31, 2022. Stock Repurchase Program In February 2022, the Board of Directors approved a $200.0 million stock repurchase program. In February 2023, the Board of Directors extended the stock repurchase program expiration from March 31, 2023 to March 31, 2024. The stock repurchase program allows the Company to make repurchases of shares of common stock from time to time in open market transactions, including through block purchases, through privately negotiated transactions or pursuant to any Rule 10b-18 or 10b5-1 plans. During the year ended December 31, 2022 , the Company repurchased 16,629,615 shares of its common stock pursuant to the stock repurchase program for a total cost of approximately $44.4 million, including fees and commissions paid to the broker of approximately $0.2 million, representing an average repurchase price of $2.67 per common share. As of December 31, 2022 , $155.8 million of the approved amount remained available for the repurchase of shares of the Company's common stock under the stock repurchase program. Dividends 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 16 to our consolidated financial statements included in this report. 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. We intend to make distributions to our stockholders to comply with the various requirements to maintain our REIT status and to minimize or avoid corporate income tax and the nondeductible excise tax. However, differences in timing between the recognition of REIT taxable income and the actual receipt of cash could require us to sell assets or to borrow funds on a short-term basis to meet the REIT distribution requirements and to minimize or avoid corporate income tax and the nondeductible excise tax. In the event we fail to pay dividends on our preferred stock, the Company would become subject to certain limitations on its ability to pay dividends or redeem or repurchase its common stock or preferred stock. 105 Table of Contents Redeemable Non-Controlling Interest Pursuant to the operating agreement for one of our joint venture equity investments, third party investors in this joint venture have the ability to sell their ownership interests to us, at their election once a year subject to annual minimum and maximum amount limitations, and we are obligated to purchase, subject to certain conditions, such interests for cash. See Note 7 to our consolidated financial statements included in this report for further discussion of redeemable non-controlling interest. Summary of Material Contractual Obligations The Company had the following material contractual obligations at December 31, 2022 (dollar amounts in thousands): Less than 1 year 1 to 3 years 4 to 5 years More than 5 years Total Repurchase agreements (1) $ 331,409 $ 421,865 $ — $ — $ 753,274 Subordinated debentures (1) 3,927 7,865 7,854 74,512 94,158 Senior unsecured notes (1) 5,750 11,500 102,875 — 120,125 Total contractual obligations (2) $ 341,086 $ 441,230 $ 110,729 $ 74,512 $ 967,557 (1) Amounts include projected interest payments during the period. Projected interest payments are based on interest rates in effect and outstanding balances as of December 31, 2022. (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 held in securitization trusts. See Note 12 in the Notes to Consolidated Financial Statements for further information regarding our CDOs. We also exclude mortgages payable on real estate as they are non-recourse debt for which we have no obligation for repayment. See Note 13 in the Notes to Consolidated Financial Statements for further information regarding our mortgages payable on real estate. In addition, pursuant to the operating agreement for one of our joint venture equity investments, subject to certain conditions, third party investors in this joint venture have the ability to sell their ownership interests to us, at their election, and we are obligated to purchase such interests for cash. We have also entered into an agreement with certain third party investors in this joint venture to fund future joint venture equity investments in multi-family properties totaling $40.0 million, to the extent investment opportunities meet defined investment standards. The commitment expires on December 7, 2023 and we have not funded any joint venture equity investments per the agreement as of February 24, 2023. 106 Table of Contents