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Item 7. Management’s Discussion and Analysis

2024-02-23 compared with 2023-02-24 · 586 added, 482 removed, 865 unchanged (55% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We are a REIT for U.S.

We are an internally-managed 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.

Our investment portfolio includes credit sensitive single-family and multi-family assets, as well as more traditional types of fixed-income investments that provide coupon income, such as Agency RMBS.

Reverse Stock Split

On February 22, 2023, we announced that our Board of Directors had unanimously approved a reverse stock split of our common stock at a ratio of one-for-four (the “Reverse Stock Split”).

The Reverse Stock Split was effected 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 were converted into one share of our common stock.

No fractional shares were issued in connection with the Reverse Stock Split.

Instead, each stockholder that would have held fractional shares as a result of the Reverse Stock Split received cash in lieu of such fractional shares.

The par value per share of our common stock remained unchanged at $0.01 per share after the Reverse Stock Split.

All references made to common share or per common share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect the effects of the Reverse Stock Split.

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.

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.

Since the significant market disruption that occurred in March 2020, we have sought to build out a low-levered, higher-yielding portfolio of credit sensitive single-family and multi-family assets through our proprietary sourcing channels.

Building scale in the portfolio and momentum in investment activity was challenging in the months following the March 2020 market disruption, in large part due to the market's increasing demand for credit assets coupled with our portfolio's elevated prepayment and redemption activity.

We managed to capitalize on more opportunities in our areas of investment focus 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 markets entered into a period of heightened interest rate volatility and credit spread widening due to the Federal Reserve's actions to attempt to subdue inflation.

The Federal Reserve ultimately increased the federal funds target rate by a combined 525 bps during 2022 through July of 2023, which was the fastest pace of increases in history.

In response, we chose to significantly curtail our investment activity and pipeline late in the second quarter of 2022 shortly after the Federal Reserve's first rate hike of this cycle, allowing a significant portion of our portfolio to run-off through the first quarter of 2023.

By adopting this approach, we endeavored to conserve capital, preserve liquidity and limit what we believed was material credit risk from investments underwritten to peak real estate valuations in 2022.

Beginning in the second quarter of 2023, we began stabilizing our investment portfolio holdings through greater investment activity, particularly in assets with less price sensitivity to credit deterioration, like Agency RMBS.

We believe that Agency RMBS is a compelling asset class to invest in over the near term, as the sector is trading at historically wide spread levels resulting from volatility in interest rates and reduced demand from regional banks and the Federal Reserve.

Recognizing that a recession call was premature, but still concerned about market liquidity due to, among other things, growing commercial real estate risks, we also remained selective in adding credit-related assets during the year.

Over the course of the past three quarters, we have experienced solid momentum in our portfolio acquisition activities.

On a net basis, our investment portfolio increased by approximately $1.3 billion during the year, with repayments received from our short-duration business purpose loans, opportunistic sales of residential loans and investment securities and impairments offsetting some of our investment activity.

In September 2022, we announced that our Board of Directors approved a strategic repositioning of our business through the opportunistic disposition over time of our joint venture equity investments in multi-family properties and reallocation of the returned capital from such investments to our targeted assets.

In 2023, joint venture entities in which we held a common equity interest sold five multi-family properties, representing total net equity investments of $43.2 million and recognizing a net gain attributable to the Company totaling $1.7 million.

Throughout most of 2023, certain of the multi-family properties held by our joint venture equity investments experienced declines in estimated fair value primarily due to widening cap rates and lower net operating income driven, in large part, by higher interest and operating expenses at the properties.

As these joint venture equity investments were included in disposal group held for sale during the year ended December 31, 2023, the declines in estimated fair value of multi-family properties held by certain of our joint venture equity investments resulted in recognition of approximately $89.5 million of losses for the year ended December 31, 2023.

In December 2023, we suspended the marketing of nine joint venture equity investments that were held for sale primarily due to unfavorable market conditions and a lack of transactional activity in the multi-family market.

As of December 31, 2023, we continue to market for sale our joint venture equity investments in five multi-family properties.

We can provide no assurance of the timing or success of our ultimate exit from our joint venture equity investments in multi-family properties or that the value of our interests in joint ventures will not decline further.

We intend to focus on our core portfolio strengths of single-family and multi-family residential 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) Agency RMBS, (iv) non-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.

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

As of December 31, 2023, the Company’s Recourse Leverage Ratio and Portfolio Recourse Leverage Ratio (as defined in footnotes 4 and 5 to the table under "— Capital Allocation") increased to 1.6x and 1.5x, respectively, from 0.3x and 0.3x, respectively, as of December 31, 2022.

While our financing leverage remains low relative to historical levels, the increase is primarily due to the financing of newly-acquired, highly liquid Agency RMBS.

As of December 31, 2023, only 58% of our debt, excluding mortgages payable on real estate and Consolidated SLST CDOs, is subject to mark-to-market margin calls, with 45% collateralized by Agency RMBS and 13% collateralized by residential credit assets.

The remaining 42% has no exposure to collateral repricing by our counterparties.

Although we expect our leverage to move higher as we expand our holdings of Agency RMBS, we intend to continue to focus on procuring longer-term and non-mark-to-market financing arrangements for certain parts of our credit portfolio.

We believe that this will allow us to better manage our liquidity risk and better insulate our business from extreme market dislocations.

We expect to continue to opportunistically dispose of assets from our portfolio, including our joint venture equity investments, and generate higher portfolio turnover in order to pursue investments across the residential housing sector with a focus on acquiring assets capable of rebuilding our interest income that have less price sensitivity to credit deterioration, such as Agency RMBS.

We expect to remain selective in acquiring single-family and multi-family residential credit assets in anticipation of near-term market dislocation that may lead to superior total return opportunities and remain committed to prudently managing our liabilities.

We believe these actions, combined with our strong balance sheet and cash position will better position us to deploy capital 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.

11 unchanged sentences

Net interest income 66,526 128,969 127,582 127,093 127,864

Non-interest (loss) income (120,513) 171,741 (359,792) 94,448 66,480

Net loss from real estate

(31,302) (113,579) (17,583) (344) (267)

Other (loss) income

(39,431) (262,169) 156,511 (360,211) 94,233

General, administrative and operating expenses 73,517 93,328 75,576 53,800 49,353

9 unchanged sentences

Residential loans $ 3,084,303 $ 3,525,080 $ 3,575,601 $ 3,049,166 $ 2,961,396

Investment securities available for sale

2,013,817 99,559 200,844 724,726 2,006,140

Multi-family loans 95,792 87,534 120,021 163,593 17,996,791

Investment securities available for sale, at fair value 99,559 200,844 724,726 2,006,140 1,512,252

Equity investments 147,116 179,746 239,631 259,095 189,965

5 unchanged sentences

Collateralized debt obligations 1,870,517 2,102,717 1,522,221 1,623,658 17,817,709

Convertible notes — 137,898 135,327 132,955 130,762

Senior unsecured notes 98,111 97,384 96,704 — —

Subordinated debentures 45,000 45,000 45,000 45,000 45,000

Convertible notes — — 137,898 135,327 132,955

Mortgages and notes payable on real estate, net 784,421 394,707 709,356 36,752 —

3 unchanged sentences

Redeemable non-controlling interest in Consolidated VIEs 28,061 63,803 66,392 — —

Company's stockholders' equity

1,579,612 1,767,216 2,341,031 2,301,202 2,205,733

Total equity 1,600,065 1,800,308 2,365,390 2,307,573 2,205,029

7 unchanged sentences

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.

During the year ended December 31, 2023, we purchased Agency RMBS and selectively pursued new single-family residential loan and multi-family investments.

Our investment activity was partially offset primarily by prepayments, redemptions and distributions in addition to opportunistic sales of certain investment securities.

The following table presents the activity for our investment portfolio for the year ended December 31, 2023 (dollar amounts in thousands):

1 unchanged sentence

Repayments (2)

Sales Transfers to Disposal Group Held for Sale (3)

Sales Transfers from Disposal Group Held for Sale (3)

Fair Value Changes and Other (4)

1 unchanged sentence

Residential loans $ 2,697,498 $ 620,277 $ (1,000,956) $ (25,144) $ — $ 37,768 $ 2,329,443

Preferred equity investments, mezzanine loans and equity investments 359,652 28,086 (89,105) — (9,936) (21,417) 267,280

Investment securities

Agency RMBS — 2,014,385 (52,476) — — 27,415 1,989,324

CMBS 30,133 — (226) (30,419) — 512 —

2 unchanged sentences

856 — — (595) — (261) —

Treasury Securities — 24,879 — (24,848) — (31) —

Total investment securities available for sale 99,559 2,014,385 (56,459) (64,690) — 21,022 2,013,817

3 unchanged sentences

291,092 2,014,385 (74,372) (64,690) — 4,556 2,170,971

Preferred equity investments, mezzanine loans and equity investments 267,280 55,882 (82,735) — 5,720 (3,239) 242,908

Equity investments in consolidated multi-family properties (6)

7 unchanged sentences

(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.

As of December 31, 2023, 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.

In December 2023, the Company determined that certain joint venture equity investments that were previously reported in assets and liabilities of disposal group held for sale no longer met the criteria to be classified as held for sale and transferred either the assets and liabilities of the respective Consolidated VIEs or its equity investment in the joint venture entity to equity investments in consolidated multi-family properties or equity investments, at fair value, respectively.

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.

(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, transfers within investment categories 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.

9 unchanged sentences

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.

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 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 changes in interest rates and the supply and demand for mortgage, housing and credit assets in the marketplace, our ability to identify and acquire assets on favorable terms, our ability to dispose of assets from time to time on favorable terms, 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 markets experienced notable improvement in performance during the fourth quarter of 2023.

After rallying in the first half of 2023 and then moderating in the third quarter, U.S.

stocks surged to post strong gains in the fourth quarter.

The Dow Jones Industrial Average grew 12.5% in the fourth quarter of 2023 and 13.7% for the full year 2023 to finish near a record high.

The Nasdaq Composite Index grew 13.6% in the fourth quarter of 2023 and 43.4% for the full year 2023, it’s best full year performance since 2020.

Interest rate and monetary policy uncertainty, inflation and geopolitical instability cautioned some economic outlooks.

We anticipate that due to uncertainty related to persistent inflation, interest rates, monetary policy, ongoing recession concerns and the upcoming U.S.

presidential election in November 2024, markets, and the pricing for many of our assets, will continue to experience volatility in 2024.

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

Financial and Economic Data .

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.

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.

economy grew modestly in 2023 with real gross domestic product (“GDP”) increasing by 2.5% (advanced estimate) for full year 2023, up from the GDP growth of 1.9% recorded for full year 2022.

GDP grew at a 3.3% (advanced estimate) annualized rate in the fourth quarter of 2023, as compared to the annualized 4.9% GDP growth in the third quarter of 2023, annualized 2.1% GDP growth in the second quarter of 2023 and annualized 2.2% GDP growth in the first quarter of 2023.

The fourth quarter 2023 GDP increase marks six straight quarters of GDP growth, and the full year 2023 GDP growth marks three straight years of GDP growth since contracting in 2020.

Such GDP growth in the fourth quarter and full year 2023 exceeded the expectations of many economists and market commentators.

Throughout 2023 and the fourth quarter of 2023, inflation retreated but remained above the Federal Reserve’s target of two percent.

Uncertainty created by such persistent inflationary pressures and how the Federal Reserve may adjust its monetary policy in response may limit or undermine business activity and the potential for future GDP growth, which could negatively impact the value of credit investments.

However, according to the projection materials of the Federal Reserve’s December 2023 meeting, Federal Reserve policymakers expect GDP to grow modestly for full year 2024.

labor market remained tight and fluctuated little throughout the fourth quarter of 2023.

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.

unemployment rate was 3.7% at the end of December 2023, finishing slightly below the unemployment rate of 3.8% as of the end of September 2023 and up 20 basis points from the unemployment rate of 3.5% as of the end of December 2022.

The number of unemployed persons increased by 0.6 million year-over-year to 6.3 million as of December 2023.

There continues to be a wide disparity between the number of available job openings, 9.0 million as of the end of December 2023, 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.

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.

As of December 2023, average hourly earnings for all employees on non-farm payrolls rose 4.1% year-over-year.

From March 2022 through July 27, 2023, the Federal Reserve raised the target range for the federal funds rate a total of 5.25%, including 100 basis points of increases in 2023.

These rate increases brought the target range for the federal funds rate to 5.25% to 5.50% — the highest level in over 22 years and where it stands as of February 2, 2024.

The Federal Reserve had raised interest rates in an effort to rein in inflation as the Consumer Price Index (the “CPI”) maintained multi-decade highs above 6% throughout 2022 and into February of 2023.

A trend of decelerating inflation emerged at the end of 2022, and a 3.0% rise in the CPI from June 2022 to June 2023 marked the smallest increase in inflation since March 2021.

But, since June 2023, the deceleration in inflation appears to have stalled with the CPI rising 3.4% for the twelve months ended December 2023.

The Federal Reserve remains highly attentive to inflation risks and reaffirmed in January 2024 that its monetary policy seeks to achieve inflation that averages two percent over time.

However, the Federal Reserve has not raised the target range for the federal funds rate at any of its four meetings since July 2023, and the “dot plot” included in the projection materials from the Federal Reserve’s December 2023 meeting implies that most Federal Reserve officials believe that modest decreases to the federal funds rate before the end of 2024 will be appropriate.

But, with inflation persistently elevated above the Federal Reserve’s two percent long run target, some market commentators have suggested that the Federal Reserve will hold the target range for the federal funds rate higher for longer.

Higher interest rates may put pressure on our investments, mortgage borrowers, tenants, our operating partners and economic growth generally.

Fears of an economic recession in the U.S.

have receded somewhat in connection with the consistent U.S.

GDP growth seen in 2023, but some economists and market commentators have continued to express caution with respect to the U.S.

economic outlook.

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 2024 survey of economists by the Wall Street Journal indicated that the respondents believed that the probability of a recession in the next twelve months is at 39%, a figure that is down 22% from the recession probability indicated by the survey taken in January 2023.

The economists surveyed by the Wall Street Journal attribute the diminished likelihood of a recession in the next twelve months to decreases in the prices of certain consumer goods and incomes growing faster than inflation.

However, certain economists surveyed by the Wall Street Journal indicated that, while they believed a recession was less likely in the coming year, they expect economic growth to stagnate.

An economic recession or stagnating economic growth may put pressure on the ability of our operating partners, joint ventures, tenants and borrowers to meet their obligations, including to us, and would likely adversely impact the value of our assets, among other things, any of 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.

Over the course of the fourth quarter and full year 2023, the residential real estate market remained competitive for home buyers.

Data released by the S&P Dow Jones Indices for their S&P CoreLogic Case-Shiller National Home Price NSA Indices for November 2023 showed that, on average, home prices increased 5.4% for the 20-City Composite over November 2022.

Additionally, according to the National Association of Realtors (“NAR”), existing home sales in December 2023 were down 1.0% month-over-month and 6.2% year-over-year.

NAR also reported that the median existing-home sales price for all housing types in December 2023 was $382,600, up 4.4% from $366,500 in December 2022.

According to data provided by the U.S.

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Overall, existing home inventory for sale at the end of December 2023 amounted to 3.2 months of supply, up from 2.9 months of supply in December 2022, 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.

According to Freddie Mac, the average 30-year fixed-rate mortgage was up 0.54% year-over-year to 6.63% as of February 1, 2024.

As interest rates remain at relatively elevated levels for the most recent decade, we expect this 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.

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Department of Housing and Urban Development, starts on multi-family homes containing five or more units averaged a seasonally adjusted annual rate of 396,333 and 458,583 for the three and twelve months ended December 31, 2023, respectively, as compared to 530,500 for the year ended December 31, 2022.

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.

According to RealPage Analytics (“RealPage”), rents fell 1.3% nationally in the fourth quarter of 2023 but achieved a slight 0.2% growth for the full year 2023.

RealPage noted that, while apartment demand remains high, asking rents were likely dampened by the increased supply from the completion of nearly 440,000 apartment units in 2023 that caused apartment supply to jump to a 36-year high.

RealPage further noted that even more apartment units are expected to be completed in 2024 than in 2023.

Weakening multi-family housing fundamentals, including, among other things, increasing supply of apartments and declining rents in the markets or submarkets in which we invest, 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.

Additionally, multi-family investments face growing regulatory and political headwinds.

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”).

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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.

In July 2023, President Biden announced an initiative to promote disclosure and reduction of rental housing fees such as application fees, payment fees, and other mandatory fees.

Further, in August 2023, the White House announced a series of initiatives to build on the Blueprint such as providing funding to support tenant organizing efforts.

Policies, regulations or laws implemented to further the principles discussed in the Blueprint or reduce or limit fees 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.

Investment grade and high-yield credit spreads both tightened over the course of the fourth quarter of 2023 with investment grade spreads finishing 34 basis points lower than the start of 2023 and high-yield spreads finishing 142 basis points lower than the start of 2023.

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.

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.

Driven in part by the Federal Reserve’s increases to the federal funds rate and speculation about the Federal Reserve’s strategy with regard to future rate hikes, the Treasury curve inverted in July 2022 and has remained inverted ever since.

On December 29, 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.

Treasury yield closed at negative 35 basis points, as compared to a negative 53 basis point spread on December 30, 2022.

Inversions of this spread are generally considered to be indicators of a recession in the near term.

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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.

Treasuries and Agency RMBS it rolls off its balance sheet to $95 billion each month.

As of January 31, 2024, the Federal Reserve held about $7.6 trillion in assets.

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.

Then, from March 2022 through July 2023, the Federal Reserve increased the federal funds rate eleven times to bring the target range for the federal funds rate to 5.25% to 5.50% where it remained as of February 2, 2024.

However, even though inflation remained elevated above the Federal Reserve’s target of two percent through December 2023, some Federal Reserve officials have signaled that the current interest rate levels have been sufficient to bring down inflation and that cuts to the federal funds rate may be likely in 2024.

As reflected on the “dot plot” included in the projection materials from the Federal Reserve’s December 2023 meeting, most Federal Reserve officials expect the target range for the federal funds rate to be lowered below its current level by the end of 2024, with many of the officials expecting the target range to reach a level between 4.50% and 4.75% by the end of 2024.

However, this plotting of the Federal Reserve officials’ expected target range for the federal funds rate as of December 2023 indicates divided thoughts among Federal Reserve officials as to how many, if any, decreases to the target range are appropriate.

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.

The directive was spurred by the fact that banks were 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, 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 SOFR 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 administrator of LIBOR, with the support of the Federal Reserve and the United Kingdom’s Financial Conduct Authority, ceased publication of all USD LIBOR tenors on June 30, 2023.

The market’s adoption of SOFR appears to have been strong and generally without disruption.

Additionally, the federal government enacted the Adjustable Interest Rate (LIBOR) Act in March 2022 with the intention of assisting in the transition away from LIBOR, particularly with respect to certain legacy contracts that are difficult to transition off of LIBOR and expire after June 2023.

We continue to carefully integrate this new rate into our operations, as it has become 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.

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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.

• Purchased approximately $2.0 billion of Agency RMBS and approximately $620.3 million in residential loans.

• Sold investment securities for approximately $64.7 million in proceeds and residential loans for approximately $25.1 million in proceeds.

• Funded approximately $55.9 million of Mezzanine Lending investments.

Received approximately $94.6 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.

• 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.

• Sold five multi-family properties held by joint venture equity investments representing total net equity investments of $43.2 million.

• Repurchased $59.9 million par value of our residential loan securitization CDOs for approximately $58.4 million.

• Suspended the marketing of nine multi-family properties held by joint venture equity investments that were in disposal group held for sale primarily due to unfavorable market conditions and a lack of transactional activity in the multi-family market which resulted in a loss upon reclassification of these investments from disposal group held for sale to held and used of approximately $16.2 million.

• Recognized $89.5 million of impairment losses due to declines in estimated fair value of multi-family properties held by joint venture equity investments in disposal group held for sale driven by wider cap rates and lower net operating income at the properties.

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.

• Obtained approximately $84.9 million of financing for residential loans through a repurchase agreement with a new counterparty.

• Obtained approximately $74.3 million of financing for single-family rental properties through a repurchase agreement with an existing counterparty.

• Effected a one-for-four reverse stock split of our issued, outstanding and authorized shares of common stock.

• Announced upsize of common stock repurchase program to $246.0 million and authorized preferred stock repurchase program under which the Company may repurchase up to $100.0 million of the Company’s preferred stock.

• Repurchased 937,850 shares of common stock pursuant to common stock repurchase program for approximately $8.6 million at an average repurchase price of $9.19 per common share and 120,580 shares of preferred stock pursuant to preferred stock repurchase program for approximately $2.4 million at an average repurchase price of $20.29 per preferred share.

Subsequent Developments

• Completed a securitization of business purpose loans, resulting in approximately $223.2 million in net proceeds to us after deducting estimated expenses associated with the transaction.

We utilized the net proceeds to repay approximately $136.6 million on outstanding repurchase agreements related to residential loans.

• On February 21, 2024, we announced that our Board of Directors approved extensions of our common stock repurchase program, under which $193.2 million of the approved amount remained available for repurchase, and our preferred stock repurchase program, under which $97.6 million of the approved amount remained available for repurchase.

The expiration dates of both stock repurchase programs were extended from March 31, 2024 to March 31, 2025.

Capital Allocation

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Consolidated SLST CDOs (593,737) — — (593,737)

Multi-family loans — 87,534 — 87,534

Investment securities available for sale 2,013,817 — — 2,013,817

Multi-family loans — 95,792 — 95,792

Equity investments — 109,962 37,154 147,116

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139,562 — 175,468 315,030

Adjustment of redeemable non-controlling interest to estimated redemption value — (44,237) — (44,237)

Cumulative adjustment of redeemable non-controlling interest to estimated redemption value

— (30,062) — (30,062)

Other 74,716 (1,352) (34,921) 38,443

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(2) Includes both unconsolidated and consolidated equity investments in multi-family properties that are held for sale in disposal group.

(2) Represents the Company's equity investments in consolidated multi-family properties that are held for sale in disposal group.

(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.

(3) Excludes cash in the amount of $21.3 million held in the Company's equity investments in consolidated multi-family properties and equity investments in consolidated multi-family properties in disposal group held for sale.

Restricted cash of $143.5 million 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.

Does not include non-recourse repurchase agreement financing amounting to $149.7 million, Consolidated SLST CDOs amounting to $593.7 million, residential loan securitization CDOs amounting to $1.3 billion and mortgages payable on real estate , including mortgages payable on real estate of disposal group held for sale, totaling $1.2 billion as they are non-recourse debt.

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

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Consolidated SLST CDOs (634,495) — — (634,495)

Multi-family loans — 120,021 — 120,021

Investment securities available for sale 68,570 30,133 856 99,559

Multi-family loans — 87,534 — 87,534

Equity investments — 152,246 27,500 179,746

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— 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

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Residential loan securitization CDOs (1,468,222) — — (1,468,222)

Convertible notes — — (137,898) (137,898)

Senior unsecured notes — — (97,384) (97,384)

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135,401 — 224,403 359,804

Cumulative adjustment of redeemable non-controlling interest to estimated redemption value — (44,237) — (44,237)

Other 61,063 (2,554) (54,659) 3,850

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Portfolio Recourse Leverage Ratio (5)

(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.

(1) Represents the Company's equity investments in consolidated multi-family properties that are not in disposal group held for sale.

(2) Includes both unconsolidated and consolidated equity investments in multi-family properties that are held for sale in disposal group.

(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 of $136.2 million 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 non-recourse 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 , including mortgages payable on real estate of disposal group held for sale, totaling $1.3 billion as they are non-recourse debt.

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

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“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, 2022, which was filed with the SEC on February 24, 2023 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):

The following table presents the main components of our net loss for the years ended December 31, 2023 and 2022, respectively (dollar amounts in thousands, except per share data):

For the Years Ended December 31,

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Net interest income 66,526 128,969 (62,443)

Total non-interest (loss) income (120,513) 171,741 (292,254)

Net loss from real estate

(31,302) (113,579) 82,277

Total other loss

(39,431) (262,169) 222,738

General and administrative expenses 49,565 52,440 (2,875)

Expenses related to real estate 255,235 32,813 222,422

Portfolio operating expenses 23,952 40,888 (16,936)

(Loss) income from operations before income taxes (340,107) 190,934 (531,041)

Loss from operations before income taxes

(77,724) (340,107) 262,383

Income tax expense 75 542 (467)

Net loss attributable to non-controlling interests 29,134 42,044 (12,910)

Net (loss) income attributable to Company (298,605) 193,200 (491,805)

Net loss attributable to Company

(48,665) (298,605) 249,940

Preferred stock dividends (41,837) (41,972) 135

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)

Gain on repurchase of preferred stock

Net loss attributable to Company's common stockholders

(90,035) (340,577) 250,542

Basic loss per common share

$ (0.99) $ (3.61) $ 2.62

Diluted loss per common share

$ (0.99) $ (3.61) $ 2.62

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 ):

Although our average interest earning assets increased in 2023, our interest income remained relatively flat due to a change in composition of interest earning assets resulting from increased investment in lower-yielding Agency RMBS and continued repayments of higher-yielding business purpose loans and multi-family loans.

The decline in net interest income was primarily driven by an increase in interest expense due to increased securitization financings, repurchase agreement financing of our Agency RMBS, residential loan and single-family rental portfolios and an increase in cost of financing due to increases in interest rates.

Net Loss from Real Estate

The following table presents the components of net loss from real estate for the years ended December 31, 2023 and 2022, respectively (dollar amounts in thousands):

For the Years Ended December 31,

2023 2022 $ Change

Income from real estate $ 171,774 $ 141,656 $ 30,118

Expenses related to real estate:

Interest expense, mortgages payable on real estate (90,221) (56,011) (34,210)

Depreciation expense on operating real estate (24,620) (47,179) 22,559

Amortization of lease intangibles related to operating real estate — (79,645) 79,645

Other real estate expenses

(88,235) (72,400) (15,835)

Total expenses related to real estate (203,076) (255,235) 52,159

Net loss from real estate

$ (31,302) $ (113,579) $ 82,277

The decrease in net loss from real estate in 2023 was primarily due to the full year income and expense impact of joint venture equity investments consolidated in 2022 (net of income and expense decreases resulting from sales of multi-family real estate assets by consolidated joint venture equity investments in disposal group held for sale in 2023), a decrease in amortization expense as a result of lease intangibles being fully amortized during the year ended 2022 and a reduction in depreciation expense due to the application of held for sale accounting to real estate in disposal group held for sale beginning in September 2022.

Interest expense on mortgages payable increased in the period despite a reduction in mortgages payable resulting from sales of multi-family real estate assets by consolidated joint venture equity investments in disposal group held for sale in 2023, primarily due to increases in interest rates.

Other (Loss) Income

Realized (Losses) Gains, Net

The following table presents the components of realized (losses) gains, net recognized for the years ended December 31, 2023 and 2022, respectively (dollar amounts in thousands ):

For the Years Ended December 31,

2023 2022 $ Change

Residential loans $ (12,738) $ 8,281 $ (21,019)

Investment securities and derivatives 19,268 5,728 13,540

Total realized gains, net $ 27,549 $ 21,451 $ 6,098

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):

Investment securities

(14,321) 18,344 (32,665)

Total realized (losses) gains, net

$ (27,059) $ 26,625 $ (53,684)

During the year ended December 31, 2023, we recognized net realized losses of $12.7 million related to our residential loan portfolio, a decrease from 2022, primarily as a result of losses recognized on the sale of certain non-performing loans, fewer loan prepayments and losses incurred on foreclosed properties in 2023.

We also recognized net realized losses of $14.3 million primarily attributable to the sales of ABS, CMBS and non-Agency RMBS in 2023.

During the year ended December 31, 2022, we recognized net realized gains of $8.3 million related to our residential loan portfolio, primarily as a result of loan prepayments.

We 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.

Unrealized Gains (Losses), Net

The following table presents the components of unrealized gains (losses), net recognized for the years ended December 31, 2023 and 2022, respectively (dollar amounts in thousands):

For the Years Ended December 31,

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Preferred equity and mezzanine loan investments 1,079 (2,673) 3,752

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.

Investment securities

36,343 (22,617) 58,960

Total unrealized gains (losses), net

$ 97,196 $ (347,363) $ 444,559

We recognized $97.2 million in net unrealized gains for the year ended December 31, 2023, primarily due to credit spread tightening that impacted the pricing of our residential loans.

Net unrealized gains on our investment securities for the year ended December 31, 2023 included unrealized gains recognized on Agency RMBS purchased in 2023.

For the year ended December 31, 2022, we recognized $347.4 million in net unrealized losses, 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.

(Losses) Gains on Derivative Instruments, Net

The following table presents the components of (losses) gains on derivative investments, net for the years ended December 31, 2023 and 2022, respectively (dollar amounts in thousands):

For the Years Ended December 31,

2023 2022 $ Change

Unrealized (losses) gains on derivative instruments

$ (29,373) $ 26,282 $ (55,655)

Realized gains on derivative instruments

2,995 924 2,071

Total (losses) gains on derivative instruments, net

$ (26,378) $ 27,206 $ (53,584)

We recognized $26.4 million in net losses on derivative instruments for the year ended December 31, 2023, primarily due to decreases in fair value of swaps entered into during the year and lower valuations of interest rate caps.

This was offset by gains realized upon termination of interest rate cap contracts in connection with sales of multi-family properties and repayment of related mortgages payable in our joint venture equity investments in disposal group held for sale.

For the year ended December 31, 2022, we recognized $27.2 million in net gains on derivative instruments primarily due to higher valuations of interest rate caps as a result of increases in interest rates.

Total gains on derivative investments in 2022 included realized gains of $0.9 million upon termination of an interest rate cap contract resulting from the sale of a multi-family property and repayment of related mortgage payable in a joint venture equity investment .

Income from Equity Investments

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Preferred return on preferred equity investments accounted for as equity $ 19,308 $ 22,276 $ (2,968)

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)

Unrealized gains (losses), net on preferred equity investments accounted for as equity

1,154 (3,606) 4,760

Loss from unconsolidated joint venture equity investments in multi-family properties

(3,291) (1,430) (1,861)

Income (loss) from entities that invest in or originate residential properties and loans

614 (2,166) 2,780

Total income from equity investments $ 17,785 $ 15,074 $ 2,711

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.

Income from equity investments increased during the year ended December 31, 2023, due to net unrealized gains recognized on preferred equity investments accounted for as equity and an equity investment in an entity that originates residential loans.

The increase in income from equity investments was offset by a $3.0 million decrease in preferred return on preferred equity investments as a result of investment redemptions in 2023.

Impairment of Real Estate

The following table presents impairment of real estate for the years ended December 31, 2023 and 2022, respectively (dollar amounts in thousands):

For the Years Ended December 31,

2023 2022 $ Change

Impairment of real estate $ (89,548) $ (2,449) $ (87,099)

During the year ended December 31, 2023 , we recognized impairment losses on certain multi-family real estate assets in disposal group held for sale due to a decrease in the estimated fair value less costs to sell of the real estate assets held by entities in which we have a joint venture equity investment primarily due to widening cap rates and lower net operating income driven, in large part, by higher interest and operating expenses at the properties.

Loss on Reclassification of Disposal Group

The following table presents loss on reclassification of disposal group for the years ended December 31, 2023 and 2022, respectively (dollar amounts in thousands):

For the Years Ended December 31,

2023 2022 $ Change

Loss on reclassification of disposal group

$ (16,163) $ — $ (16,163)

As a result, we determined that these joint venture equity investments no longer met the criteria to be classified as held for sale and transferred either the assets and liabilities of the respective Consolidated VIEs or its equity investment in the joint venture entity to their respective categories or equity investments, at fair value, respectively, as of December 31, 2023.

Accordingly, we adjusted the carrying value of the long-lived assets in Consolidated VIEs to the lower of the carrying amount before the assets were classified as held for sale adjusted for depreciation and amortization expense that would have been recognized had the assets been continuously classified as held and used and the fair value of the assets at the date of the transfer and recognized a loss on reclassification of disposal group.

The following table presents the components of other income for the years ended December 31, 2023 and 2022, respectively (dollar amounts in thousands):

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Gain on sale of real estate held for sale 4,763 17,132 (12,369)

Miscellaneous (4,793) 221 (5,014)

(Loss) gain on extinguishment of collateralized debt obligations and mortgages payable on real estate

(796) 2,214 (3,010)

Miscellaneous income (loss)

379 (4,558) 4,937

Total other income $ 4,736 $ 18,738 $ (14,002)

(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.

The net decrease in other income in 2023 is primarily due to a greater amount of gains recognized on the sales of certain multi-family properties during 2022, reduced premiums from early redemptions of preferred equity and mezzanine loan investments in 2023 and losses incurred on extinguishment of mortgages payable by joint venture equity investments in disposal group held for sale partially offset by net gains on repurchased CDOs.

The following tables present the components of general, administrative and portfolio operating expenses for the years ended December 31, 2023 and 2022, respectively (dollar amounts in thousands):

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Total general and administrative expenses $ 49,565 $ 52,440 $ (2,875)

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.

The decrease in general and administrative expenses in 2023 is primarily related to a net reduction in compensation expense, specifically decreased stock based compensation due to forfeitures and a decrease in incentive bonus compensation.

For the Years Ended December 31,

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Portfolio operating expenses $ 23,952 $ 40,888 $ (16,936)

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):

The decrease in portfolio operating expenses in 2023 can be attributed primarily to decreased residential loan purchase activity and decreased net servicing fees due to residential loan portfolio runoff.

Comprehensive Loss

The main components of comprehensive loss for the years ended December 31, 2023 and 2022, respectively, are detailed in the following table (dollar amounts in thousands):

For the Years Ended December 31,

2023 2022 $ 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 LOSS ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS

$ (90,035) $ (340,577) $ 250,542

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.

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

OTHER COMPREHENSIVE INCOME (LOSS)

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

Non-Agency RMBS 144 (3,748) 3,892

CMBS — 86 (86)

Total 144 (3,748) 3,892

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.

Reclassification adjustment for net loss included in net loss

1,822 — 1,822

TOTAL OTHER COMPREHENSIVE INCOME (LOSS)

1,966 (3,748) 5,714

COMPREHENSIVE LOSS ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS

$ (88,069) $ (344,325) $ 256,256

The changes in other comprehensive income (loss) ("OCI") in 2023 can be attributed primarily to an increase in the fair value of our investment securities, where the fair value option was not elected, as a result of credit spread tightening in 2023.

Additionally, previously recognized net unrealized losses reported in OCI were reclassified to net realized losses in relation to the sale of certain investment securities during the year ended December 31, 2023.

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”).

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Common stock issuance, net (2)

Preferred stock issuance, net 130

Common stock repurchase (44,399) (16,630)

Common stock repurchases

(8,615) (938)

Preferred stock repurchases

Balance after share activity 1,210,410 90,675 13.35

Adjustment of redeemable non-controlling interest to estimated redemption value 14,175 0.16

Costs associated with non-controlling interest contributions (26) —

Dividends and dividend equivalents declared (111,014) (1.23)

Net change in accumulated other comprehensive income (loss):

Net change in accumulated other comprehensive loss:

Investment securities available for sale (3)

(3,748) (0.01)

Net loss attributable to Company's common stockholders (90,035) (0.99)

2 unchanged sentences

(2) Includes amortization of stock based compensation.

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

(3) The net increase relates to the reclassification of unrealized losses to net loss in relation to the sale of investment securities and unrealized gains on our investment securities resulting from changes in pricing.

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):

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Preferred stock issuance, net 130 —

Preferred stock issuance liquidation preference (218,750)

Preferred stock redemption charge 6,165

Common stock repurchases

(44,399) (4,157)

Balance after share activity 1,751,532 91,194 19.21

Redemption of non-controlling interest in Consolidated VIEs 3,420 0.01

Adjustment of redeemable non-controlling interest to estimated redemption value (44,237) (0.49)

Costs associated with non-controlling interest contributions

Dividends and dividend equivalents declared (152,853) (1.68)

Net change in accumulated other comprehensive income:

Net change in accumulated other comprehensive income (loss):

Investment securities available for sale (3)

Net income attributable to Company's common stockholders 144,176 0.38

(3,748) (0.04)

Net loss attributable to Company's common stockholders

(340,577) (3.73)

Ending Balance $ 1,210,091 91,194 $ 13.27

1 unchanged sentence

(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.

(3) The net decrease relates to unrealized losses on our investment securities resulting from a reduction in pricing.

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.

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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.

Adjusted net interest income and net interest spread (both supplemental non-GAAP financial measures) are impacted by factors such as our cost of financing, including our hedging costs, and the interest rate that our investments bear.

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 interest income – calculated as our GAAP interest income reduced by the interest expense recognized on Consolidated SLST CDOs,

• adjusted interest expense – calculated as our GAAP interest expense reduced by the interest expense recognized on Consolidated SLST CDOs and adjusted to include the net interest component of interest rate swaps,

• 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

• 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 assets other than those securities owned by the Company,

• net interest spread – calculated as the difference between our yield on average interest earning assets and our average financing cost.

These measures remove the impact of Consolidated SLST that we consolidate in accordance with GAAP and include the net interest component of interest rate swaps utilized to hedge the variable cash flows associated with our variable-rate borrowings, which is included in gains (losses) on derivative instruments, net in the Company's consolidated statements of operations.

With respect to Consolidated SLST, we only include the interest income earned by the Consolidated SLST securities that are actually owned by the Company as the Company only receives income or absorbs losses related to the Consolidated SLST securities actually owned by the Company.

We include the net interest component of interest rate swaps in these measures to more fully represent the cost of our financing strategy.

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.

Commencing with the quarter ended December 31, 2022, we 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.

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

(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.

(3) Average Interest Earning Assets for the respective periods include residential loans, multi-family loans and investment securities and exclude all Consolidated SLST 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.

(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 and mortgages payable on real estate as the Company does 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.

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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.

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, among other things, 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.

Our adjusted net interest income decreased in 2023 as compared to the prior year.

While adjusted interest income remained relatively flat, our adjusted interest expense increased in 2023, primarily due to additional repurchase agreement and securitization financings and an increase in the cost of financing due to base interest rate movements partially offset by the benefit of our interest rate swaps.

Net interest spread decreased in 2023 due to a combination of a decrease in yield on average interest earning assets and an increase in our cost of financing.

The decrease in our yield on average interest earning assets was primarily due to 1) portfolio run-off of higher yielding business purpose loans, 2) an increase in business purpose loans held in non-accrual status, 3) the sale of certain higher yielding ABS in the second half of 2022 and 4) investment in lower yielding Agency RMBS in 2023.

The previously described increase in cost of financing combined with the decrease in yield to reduce net interest spread in 2023.

Our adjusted net interest income remained relatively flat in 2022 as compared to the prior year.

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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, 2023, 2022 and 2021, respectively, is presented below (dollar amounts in thousands):

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GAAP interest income $ 244,891 $ 13,707 $ 62 $ 258,660 $ 238,915 $ 13,499 $ 5,974 $ 258,388 $ 180,066 $ 19,900 $ 6,900 $ 206,866

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 for:

Consolidated SLST CDO interest expense (24,506) — — (24,506) (25,145) — — (25,145) (28,135) — — (28,135)

Adjusted interest income $ 220,385 $ 13,707 $ 62 $ 234,154 $ 213,770 $ 13,499 $ 5,974 $ 233,243 $ 151,931 $ 19,900 $ 6,900 $ 178,731

GAAP interest expense $ (176,890) $ — $ (15,244) $ (192,134) $ (119,809) $ (152) $ (9,458) $ (129,419) $ (61,922) $ — $ (17,362) $ (79,284)

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 for:

Consolidated SLST CDO interest expense 24,506 — — 24,506 25,145 — — 25,145 28,135 — — 28,135

Net interest benefit of interest rate swaps 9,642 — 2,445 12,087 — — — — — — — —

Adjusted interest expense $ (142,742) $ — $ (12,799) $ (155,541) $ (94,664) $ (152) $ (9,458) $ (104,274) $ (33,787) $ — $ (17,362) $ (51,149)

17 unchanged sentences

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.

Commencing with the quarter ended December 31, 2022, we discontinued disclosure of undepreciated book value per common share and instead present adjusted book value per common share, also a non-GAAP financial measure.

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.

(i) exclude the Company's share of cumulative depreciation and lease intangible amortization expenses related to real estate held at the end of the period for which an impairment has not been recognized, (ii) exclude the cumulative 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.

By excluding our share of cumulative non-cash depreciation and amortization expenses related to real estate held at the end of the period for which an impairment has not been recognized, adjusted book value reflects the value, at their undepreciated basis, of our single-family rental properties and joint venture equity investments that the Company has determined to be recoverable at the end of the period.

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.

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 cumulative adjustment of the redeemable non-controlling interests to fair value directly affects our GAAP book value.

By excluding the cumulative adjustment of redeemable non-controlling interests to estimated redemption value, adjusted book value more closely aligns the accounting treatment applied to these real estate assets and reflects our joint venture equity investment at its 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.

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 and subordinated debentures 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.

5 unchanged sentences

GAAP book value 1,025,502 1,210,091

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 —

Cumulative depreciation expense on real estate (1)

21,801 31,433

Cumulative amortization of lease intangibles related to real estate (1)

14,897 59,844

Cumulative adjustment of redeemable non-controlling interest to estimated redemption value

30,062 44,237

Adjustment of amortized cost liabilities to fair value 55,271 103,066

5 unchanged sentences

$ 12.66 $ 15.89

(1) Represents cumulative adjustments for the Company's share of depreciation expense and amortization of lease intangibles related to real estate held as of the end of the period presented for which an impairment has not been recognized.

(2) GAAP book value per common share is calculated using the GAAP book value and the common shares outstanding for the periods indicated.

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

Although our estimates contemplate 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.

Although our estimates contemplate conditions as of December 31, 2023 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 (loss) at the date of the consolidated financial statements and the reported amounts of income, expenses and other comprehensive income (loss) during the periods presented.

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

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As of December 31, 2023 and 2022, 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.

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

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

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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 Company has classified these third-party ownership interests as redeemable non-controlling interest and determines the fair value of the redeemable non-controlling interest utilizing market assumptions and 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 allocatable 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.

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As of December 31, 2023, we had approximately $7.4 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.

Included in this amount is approximately $757.8 million of assets held in Consolidated SLST and $1.5 billion of assets related to Consolidated Real Estate VIEs, both of which we consolidate in accordance with GAAP.

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 Consolidated Real Estate VIEs, both of which 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.

For a reconciliation of our investments in Consolidated Real Estate VIEs, see “Equity Investments in Multi-Family Entities” below.

Residential Loans

69 unchanged sentences

2022 21.4 % 33.4 %

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.

The Company exercised its option to purchase 50% of the issued and outstanding interests of an entity that originates residential loans during the year ended December 31, 2023.

The Company purchased $80.8 million and $260.6 million of residential loans from the entity during the years ended December 31, 2023 and 2022, respectively.

Consolidated SLST

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Illinois 7.2 % 7.2 %

Residential Loans Financing

Residential Loans and Single-Family Rental Property 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.

As of December 31, 2023, the Company had repurchase agreements with five third-party financial institutions to fund the purchase of residential loans and single-family rental properties.

As of December 31, 2023, the Company's only repurchase agreement exposure where the amount of residential loans and single-family rental properties at risk was in excess of 5% of the Company's stockholders’ equity was to Atlas SP at 7.93%.

The amount at risk is defined as the fair value of assets pledged as collateral to the financing arrangement in excess of the financing arrangement liability.

The following table presents detailed information about these repurchase agreements and associated assets pledged as collateral at December 31, 2023 and 2022, respectively (dollar amounts in thousands):

2 unchanged sentences

Net Deferred Finance Costs (2)

Carrying Value of Repurchase Agreements Fair Value of Loans Pledged Weighted Average Rate Weighted Average Months to Maturity (3)

Carrying Value of Repurchase Agreements Carrying Value of Assets Pledged (3)

Weighted Average Rate Weighted Average Months to Maturity (4)

December 31, 2023 $ 2,225,000 $ 611,055 $ (2,005) $ 609,050 $ 805,082 7.87 % 13.89

1 unchanged sentence

(1) Includes non-mark-to-market repurchase agreements with an aggregate outstanding balance of $179.1 million, a weighted average rate of 8.19%, and weighted average months to maturity of 14 months as of December 31, 2023.

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.

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 24 months as of December 31, 2022.

(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) Includes residential loans with an aggregate fair value of $658.3 million and single-family rental properties with a net carrying value of $146.7 million as of December 31, 2023.

Includes residential loans with an aggregate fair value of $867.0 million as of December 31, 2022.

(4) 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.

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(3) The Company has elected the fair value option for CDOs issued by Consolidated SLST.

As of December 31, 2023, $399.3 million of the Company's CDOs contained an initial interest rate step-up feature whereby the interest rate increases by 3.00% if the outstanding notes are not redeemed by expected redemption dates, as defined in the respective governing documents, ranging from August 2024 to July 2025.

Also, as of December 31, 2023, $548.6 million of the Company CDOs contained potential additional interest rate step-ups of 1.00% if the outstanding notes are not redeemed by expected redemption dates ranging from October 2024 to July 2026.

As of December 31, 2023, $523.2 million of the Company's CDOs contained a contractual interest rate step-up feature whereby the interest rate increases by either 1.00% or 2.00% at step-up dates, as defined in the respective governing documents, ranging from May 2024 to December 2026.

Investment Securities

At December 31, 2023, our investment securities portfolio included Agency RMBS and non-Agency RMBS, 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, 2023, 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 increase in the carrying value of our investment securities as of December 31, 2023 as compared to December 31, 2022 is primarily due to purchases of Agency RMBS during the period partially offset by sales of non-Agency RMBS, CMBS and ABS during the period and a decrease in the fair value of our first loss subordinated securities that we own in Consolidated SLST.

The following tables summarize our investment securities portfolio as of December 31, 2023 and 2022, respectively (dollar amounts in thousands):

December 31, 2023

Unrealized Weighted Average

Investment Securities Current Par Value Amortized Cost Gains Losses Fair Value Coupon (1)

Outstanding Repurchase Agreements

Available for Sale (“AFS”)

$ 1,756,343 $ 1,761,138 $ 21,581 $ (1,829) $ 1,780,890 5.74 % 5.64 % $ 1,602,695

Adjustable rate

149,052 147,460 1,741 — 149,201 5.48 % 5.35 % 137,084

Interest-only

1,139,828 52,623 6,813 (203) 59,233 0.76 % 14.81 % 31,657

Total Agency RMBS

3,045,223 1,961,221 30,135 (2,032) 1,989,324 4.34 % 5.79 % 1,771,436

Non-Agency RMBS

Senior 35 35 — (4) 31 3.65 % 3.60 % —

Subordinated 8,164 7,526 — (4,281) 3,245 4.61 % 7.39 % —

IO 375,563 14,571 6,646 — 21,217 1.63 % 27.42 % —

Total Non-Agency RMBS 383,762 22,132 6,646 (4,285) 24,493 1.70 % 20.27 % —

Total - AFS $ 3,428,985 $ 1,983,353 $ 36,781 $ (6,317) $ 2,013,817 3.64 % 6.20 % $ 1,771,436

Consolidated SLST

Non-Agency RMBS

Subordinated $ 238,017 $ 189,962 $ — $ (49,684) $ 140,278 4.44 % 4.01 % $ 55,881

IO 139,914 17,937 — (1,061) 16,876 3.50 % 7.43 % —

Total Non-Agency RMBS 377,931 207,899 — (50,745) 157,154 4.09 % 4.32 % 55,881

Total - Consolidated SLST $ 377,931 $ 207,899 $ — $ (50,745) $ 157,154 4.09 % 4.32 % $ 55,881

Total Investment Securities $ 3,806,916 $ 2,191,252 $ 36,781 $ (57,062) $ 2,170,971 3.74 % 5.80 % $ 1,827,317

December 31, 2022

Unrealized Weighted Average

Investment Securities Current Par Value Amortized Cost Gains Losses Fair Value Coupon (1)

Outstanding Repurchase Agreements

Available for Sale (“AFS”)

Non-Agency RMBS

$ 41 $ 41 $ — $ (5) $ 36 2.74 % 2.89 % $ —

30,250 29,325 — (2,153) 27,172 4.77 % 5.58 % —

39,104 28,108 — (13,282) 14,826 9.38 % 8.37 % —

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 % —

26,033 26,033 — (1,662) 24,371 5.43 % 5.42 % —

Subordinated 6,000 6,000 — (238) 5,762 9.29 % 9.29 % —

32,033 32,033 — (1,900) 30,133 6.14 % 6.13 % —

4 797 59 — 856 — 30.19 % —

$ 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

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

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

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

Investment Securities Financing

Repurchase Agreements

As of December 31, 2023, the Company had $1.9 billion outstanding under repurchase agreements with third-party financial institutions to fund a portion of its investment securities available for sale, securities owned in Consolidated SLST and CDOs repurchased from our residential loan securitizations.

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, 2023, the Company's only repurchase agreement exposure where the amount of investment securities at risk was in excess of 5% of the Company's stockholders’ equity was to Bank of America at 5.34%.

The following table details the quarterly average balance, ending balance and maximum balance at any month-end during each quarter in 2023, 2022 and 2021 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, 2023 $ 1,851,577 $ 1,862,063 $ 1,870,941

September 30, 2023 1,184,714 1,490,996 1,490,996

June 30, 2023 492,473 664,459 664,459

March 31, 2023 131,174 226,778 226,778

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 — — —

Mezzanine Lending

6 unchanged sentences

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.

During the year ended December 31, 2023, the Company reconsidered its evaluation of its variable interest in a VIE that owned a multi-family apartment community and in which the Company holds a preferred equity investment.

The Company determined that it gained the power to direct the activities, and became primary beneficiary, of the VIE and consolidated the VIE into its consolidated financial statements.

As of December 31, 2023, one preferred equity investment was greater than 90 days delinquent.

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Preferred equity investments 21 $ 200,034 $ 200,690 12.40 % 4.2

Preferred equity investment in Consolidated VIE (4)

1 11,706 11,732 10.50 % 8.0

22 $ 211,740 $ 212,422 12.24 % 4.4

December 31, 2022

6 unchanged sentences

Preferred equity investments in the amounts of $104.2 million and $152.2 million are included in equity investments on the accompanying consolidated balance sheets as of December 31, 2023 and 2022, 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.

(2) The difference between the fair value and investment amount consists of any unrealized gain or loss.

(3) Based upon investment amount and contractual preferred return rate.

(4) Represents the Company's preferred equity investment in a Consolidated VIE that owns a multi-family apartment community.

A reconciliation of our preferred equity investment in the Consolidated VIE to our consolidated financial statements as of December 31, 2023 is shown below (dollar amounts in thousands):

Cash and cash equivalents

Real estate, net

Lease intangible, net (a)

Other assets 4,722

Total assets 62,839

Mortgage payable on real estate, net

Other liabilities 2,403

Total liabilities 47,545

Non-controlling interest in Consolidated VIE 3,588

Preferred equity investment in Consolidated VIE $ 11,706

(a) Included in other assets in the accompanying consolidated balance sheets.

Mezzanine Lending Characteristics

1 unchanged sentence

December 31, 2023

State Count Investment Amount % Total Weighted Average Coupon Weighted Average LTV Weighted Average DSCR (1)

State Count Investment Amount % Total Weighted Average Coupon Weighted Average LTV (1)

Weighted Average DSCR (2)

Florida 4 $ 55,753 26.3 % 13.0 % 77 % 1.27x

Texas 6 42,854 20.2 % 10.8 % 92 % 1.21x

Alabama 2 33,827 13.9 % 12.3 % 68 % 2.23x

Utah 1 21,970 10.3 % 12.0 % 68 % N/A

Arizona 1 17,811 8.4 % 14.0 % 85 % 0.45x (4)

Tennessee 1 14,525 6.8 % 11.0 % 90 % 1.27x

2 unchanged sentences

December 31, 2022

State Count Investment Amount % Total Weighted Average Coupon Weighted Average LTV Weighted Average DSCR (1)

State Count Investment Amount % Total Weighted Average Coupon Weighted Average LTV (1)

Weighted Average DSCR (2)

Florida 5 $ 82,072 33.8 % 12.6 % 72 % 1.35x

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Alabama 2 33,827 13.9 % 12.3 % 67 % 2.23x

Ohio 3 28,482 9.5 % 11.6 % 88 % 2.05x

North Carolina 3 19,214 6.4 % 12.0 % 74 % 1.50x

Utah 1 20,568 8.5 % 12.0 % 67 % N/A

Tennessee 1 13,731 5.7 % 11.0 % 89 % 1.30x

Other 9 49,654 20.4 % 11.7 % 83 % 1.72x

Total 23 $ 242,970 100.0 % 12.0 % 77 % 1.50x

(1) Represents the weighted average debt service coverage ratio ("DSCR") of the underlying properties.

(2) Not applicable as the underlying property is under construction.

(1) Represents the weighted average LTV utilizing combined senior and mezzanine loans and combined origination appraisal and capital expenditure budget.

(2) Represents the weighted average debt service coverage ratio ("DSCR") of the underlying properties and excludes properties that are subject to a senior construction loan agreement.

(3) Not applicable as the underlying property is subject to a senior construction loan agreement.

(4) DSCR for this property affected by low occupancy.

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.

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 the returned capital from such investments 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):

In December 2023, certain of the joint venture equity investments in multi-family properties were determined to no longer meet held for sale criteria and either the assets and liabilities of the respective Consolidated VIEs or its equity investment in the joint venture entity were transferred to their respective categories or equity investments, at fair value, respectively, on the accompanying consolidated balance sheets.

See Note 9 for additional information.

The Company's net equity in consolidated joint venture equity investments ("Consolidated JVs") and disposal group held for sale totaled $236.3 million and $388.8 million as of December 31, 2023 and 2022, respectively.

A reconciliation of our net equity investments in consolidated JVs and disposal group held for sale, including one preferred equity investment in a Consolidated VIE, to our consolidated financial statements as of December 31, 2023 and 2022, respectively, is shown below (dollar amounts in thousands):

December 31, 2023 December 31, 2022

3 unchanged sentences

Assets of disposal group held for sale (2)

426,017 1,151,784

Other assets 34,657 13,686

3 unchanged sentences

Liabilities of disposal group held for sale (2)

386,024 883,812

Other liabilities 21,797 10,511

1 unchanged sentence

Redeemable non-controlling interest in Consolidated VIEs $ 28,061 $ 63,803

Adjustment of redeemable non-controlling interest to estimated redemption value (44,237) —

Cumulative adjustment of redeemable non-controlling interest to estimated redemption value

(30,062) (44,237)

Non-controlling interest in Consolidated VIEs 17,150 9,040

2 unchanged sentences

248,029 388,774

Net equity in preferred equity investment in Consolidated VIE (5)

Net equity investment in Consolidated JVs and disposal group held for sale

$ 236,323 $ 388,774

(1) Included in other assets in the accompanying consolidated balance sheets.

1 unchanged sentence

(3) See Note 14 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, 2023 consists of $211.2 million of net equity investments in consolidated multi-family properties (including its preferred equity investment in a Consolidated VIE) and $36.8 million of net equity investments in disposal group held for sale.

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):

(5) See "Mezzanine Lending" above for description of preferred equity investment in Consolidated VIE.

Unconsolidated Multi-Family Joint Venture Equity Investments

The Company has invested in two additional joint venture entities that own multi-family apartment communities.

The Company 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.

The Company's investment in the amount of $9.0 million was included in assets of disposal group held for sale as of December 31, 2022.

The following table summarizes our unconsolidated multi-family joint venture equity investments as of December 31, 2023 (dollar amounts in thousands):

State Property Count Ownership Interest Fair Value

Texas 2 70% $ 5,720

Joint Venture Equity Investments in Consolidated Multi-Family Properties not in Disposal Group Held for Sale

As of December 31, 2023, the Company's net joint venture equity investments in consolidated multi-family properties not in disposal group held for sale of $199.5 million consists of nine joint venture equity investments in multi-family properties and a combined preferred equity and common equity investment in one joint venture entity that do not meet the criteria to be classified as held for sale.

One of the joint venture entities 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 $28.1 million.

The geographic concentrations in joint venture equity investments in consolidated multi-family properties exceeding 5% of our joint venture equity investments in consolidated multi-family properties not in disposal group held for sale as of December 31, 2023 and 2022, respectively, are shown below (dollar amounts in thousands):

December 31, 2023

State Property Count Total Equity Ownership Interest Net Equity Investment Percentage of Total Net Equity Investment

$ 40,825 40.7 %

Tennessee 2 65% - 69%

$ 15,959 15.9 %

State Property Count Total Equity Ownership Interest Net Equity Investment (1)

Percentage of Total Net Equity Investment

Florida 5 50% - 95% $ 56,607 33.4 %

$ 14,075 14.0 %

Texas 5 70% $ 49,727 29.4 %

Tennessee 2 65% - 70% $ 18,131 10.7 %

South Carolina 2 67% - 70% $ 13,561 8.0 %

$ 11,935 11.9 %

Kentucky 1 69%

$ 9,257 9.2 %

Alabama 2 70% - 80% $ 11,737 6.9 %

$ 5,812 5.8 %

Kentucky 1 70% $ 10,979 6.5 %

December 31, 2022

State Property Count Total Equity Ownership Interest Net Equity Investment Percentage of Total Net Equity Investment

Florida 6 47% - 100%

$ 81,754 31.2 %

State Property Count Total Equity Ownership Interest Net Equity Investment (1)

Percentage of Total Net Equity Investment

Texas 5 69% $ 40,825 40.7 %

$ 79,527 30.4 %

Alabama 2 80% - 95%

$ 37,162 14.2 %

Tennessee 2 65% - 69% $ 15,959 15.9 %

Florida 1 49% $ 14,075 14.0 %

South Carolina 2 67% - 69% $ 11,935 11.9 %

$ 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.

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.

Kentucky 1 69% $ 9,257 9.2 %

Alabama 1 69% $ 5,812 5.8 %

(1) Represents our joint venture equity investment in consolidated multi-family properties net of redeemable non-controlling interest at its estimated redemption value.

Property Data for Joint Venture Equity Investments in Multi-Family Properties not in Disposal Group Held for Sale

The following table provides summary information regarding our joint venture equity investments in multi-family properties that are not in disposal group held for sale as of December 31, 2023.

Market Property Count Occupancy % Units Rent per Unit (1)

Apopka, FL 1 88.8 % 240 $ 1,718 77.5 %

Beaufort, SC 1 92.7 % 248 1,538 71.5 %

Birmingham, AL 1 95.1 % 429 1,329 75.9 %

Brandon, FL 1 84.2 % 285 1,624 77.8 %

Collierville, TN 1 85.8 % 324 1,555 86.7 %

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Memphis, TN (3)

242 1,106 80.0 %

Montgomery, AL 1 88.5 % 252 990 76.8 %

Oklahoma City, OK 2 89.1 % 957 775 76.0 %

Orlando, FL 1 87.7 % 220 1,588 76.4 %

San Antonio, TX 2 92.1 % 684 1,286 85.2 %

Petersburg, FL 1 96.6 % 326 2,454 71.2 %

Tampa, FL 1 83.5 % 400 1,740 77.6 %

Webster, TX 1 91.0 % 366 973 78.2 %

Total Count/Average 22 89.8 % 6,544 $ 1,364 78.8 %

(1) Represents average monthly rent per unit.

(2) Represents LTV of the underlying properties.

Equity Investments in Disposal Group Held for Sale

(2) Represents the weighted average LTV of the underlying properties utilizing combined senior loan and preferred equity balances and the most recent appraisal.

(3) Property incurred a loss due to fire, affecting occupancy until units are returned to service.

Property Data for Joint Venture Equity Investments in Multi-Family Properties 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, 2023.

Market Property Count Occupancy % Units Rent per Unit (1)

Apopka, FL 1 87.1 % 240 $ 1,553 80.0 %

Birmingham, AL 1 92.0 % 264 $ 1,694 66.7 %

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Fort Myers, FL 1 86.7 % 338 1,529 78.1 %

Fort Worth, TX 1 93.4 % 256 1,143 67.3 %

Houston, TX 1 93.0 % 200 923 83.5 %

Kissimmee, FL 1 94.1 % 320 1,730 77.7 %

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 93.3 % 240 1,421 76.2 %

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 5 85.5 % 2,144 $ 1,557 77.5 %

(1) Represents average monthly rent per unit.

(2) Represents LTV of the underlying properties.

Equity Investments in Entities that Invest in or Originate Residential Properties and Loans

(2) Represents the weighted average LTV of the underlying properties utilizing maximum senior committed mortgage amount and combined origination appraisal and capital expenditure budget.

Equity Investments in Entities that Originate Residential Loans

As of December 31, 2023, 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):

The following table summarizes our ownership interest in the entity that originates residential loans as of December 31, 2023 and 2022, respectively (dollar amounts in thousands):

December 31, 2023 December 31, 2022

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Residential Loans 50% $ 37,154 — $ 27,500

Morrocroft Neighborhood Stabilization Fund II, LP (2)

Single-Family Rental Properties — — 11% 19,143

Total $ 37,154 $ 27,500

(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.

(1) As of December 31, 2022, the Company had the option to purchase 50% of the issued and outstanding interests of this entity.

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.

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)

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 % —

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 % —

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

December 31, 2021

Unrealized Weighted Average

Investment Securities Current Par Value Amortized Cost Gains Losses Fair Value Coupon (1)

Outstanding Repurchase Agreements

Available for Sale (“AFS”)

Non-Agency RMBS

$ 14,055 $ 14,054 $ — $ (6) $ 14,048 5.97 % 5.97 % $ —

40,350 39,243 1,787 (8) 41,022 6.72 % 6.18 % —

63,153 53,386 374 (2,265) 51,495 4.35 % 6.12 % —

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 % —

26,600 26,600 159 (138) 26,621 3.81 % 3.81 % —

Subordinated 6,000 6,000 525 — 6,525 7.69 % 7.69 % —

32,600 32,600 684 (138) 33,146 4.52 % 4.52 % —

117 21,795 17,884 — 39,679 — 24.58 % —

$ 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 % $ —

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.

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.

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

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.

In the year ended December 31, 2023, we contributed approximately $9.0 million to this entity.

The Company accounts for this investment using the equity method and has elected the fair value option.

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 is exposed to certain risks arising from both its business operations and economic conditions.

The Company enters into derivative financial instruments in connection with its risk management activities.

These derivative instruments may include interest rate swaps, interest rate caps, futures and options contracts such as options on credit default swap indices, equity index options, swaptions and options on futures.

The Company may also pursue forward-settling purchases or sales of Agency RMBS where the underlying pools of mortgage loans are “To-Be-Announced,” or TBAs, purchase options on U.S.

Treasury futures or invest in other types of mortgage derivative securities.

The Company elected not to apply hedge accounting for its derivative instruments.

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.

During the period these contracts are open, changes in the value of the contract are recognized as gains or losses on derivative instruments.

The Company uses interest rate swaps to hedge the variable cash flows associated with our variable-rate borrowings.

Interest rate swaps generally involve the receipt of variable-rate amounts from a counterparty, based on SOFR, in exchange for the Company making fixed-rate payments over the life of the interest rate swap without exchange of the underlying notional amount.

Notwithstanding the foregoing, in order to manage its position with regard to its liabilities, the Company may also enter into interest rate swaps which involve the receipt of fixed-rate amounts from a counterparty in exchange for the Company making variable-rate payments, based on SOFR, over the life of the interest rate swap without exchange of the underlying notional amount.

The variable rate we pay or receive under our swap agreements has the effect of offsetting the repricing characteristics and cash flows of the Company's financing arrangements.

The Company may purchase equity index put options that gives the Company the right to sell or buy the underlying index at a specified strike price, as well as credit default swap index options that allow the Company to enter into a fixed rate payor position in the underlying credit default swap index at the agreed strike level.

The Company’s debt as of December 31, 2023 included senior unsecured notes and subordinated debentures.

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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.

Balance Sheet Analysis - Company ’ s Stockholders’ Equity

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Additional paid-in capital 2,297,081 2,282,691

Accumulated other comprehensive (loss) income (1,970) 1,778

Accumulated other comprehensive loss

Accumulated deficit (1,253,817) (1,052,768)

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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.

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.

During the year ended December 31, 2023, we began expanding our holdings of Agency RMBS, which is more liquid than many if not all of the investments in our portfolio of credit investments, and have utilized mark-to-market repurchase agreement financing to fund that expansion.

As of December 31, 2023, the Company’s portfolio recourse leverage ratio of 1.5x, remains low relative to historical levels.

The remaining 42% has no exposure to collateral repricing by our counterparties.

We expect to continue to opportunistically dispose of assets from our portfolio, including our joint venture equity investments, and generate higher portfolio turnover in order to pursue investments across the residential housing sector with a focus on acquiring assets with less price sensitivity to credit deterioration, like Agency RMBS.

We also intend to maintain a solid position in unrestricted cash and remain committed to prudently managing our liabilities.

At December 31, 2023, we had $171.5 million of available cash and cash equivalents (excluding cash and cash equivalents held by consolidated multi-family properties not in disposal group held for sale), $170.6 million of unencumbered investment securities (including the securities we own in Consolidated SLST and CDOs repurchased from our residential loan securitizations) and $169.2 million of unencumbered residential loans.

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.

With respect to the multi-family properties in which we hold joint venture equity investments, the properties are encumbered by a senior mortgage loan.

The type and terms of the ultimate financing used by us depends on the asset being financed and the financing available at the time of the financing.

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 a greater emphasis on procuring longer-termed and/or more committed financing arrangements for our credit investments, 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.

Although we expect our leverage to move higher as we expand our holding of Agency RMBS with the aid of short-term mark-to-market repurchase agreement financing, we intend to continue to focus on procuring longer-term and non-mark-to-market financing arrangements for certain parts of our credit portfolio.

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;

We will continue 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, 2023

During the year ended December 31, 2022, net cash, cash equivalents and restricted cash increased by $43.1 million.

During the year ended December 31, 2023, net cash, cash equivalents and restricted cash decreased by $50.3 million.

Cash Flows from Operating Activities

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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.

During the year ended December 31, 2023, our net cash flows used in investing activities were $1.2 billion, primarily as a result of purchases of investment securities and residential loans, the funding of multi-family preferred equity investments, capital expenditures on real estate and net variation margin paid for derivative instruments.

This was partially offset by principal repayments received on residential loans, investment securities and multi-family loans, net proceeds from the sale of real estate held in Consolidated VIEs, return of capital from equity investments, proceeds from the sale of investment securities and residential loans and net payments received from derivative instruments.

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.

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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).

Additionally, a significant portion of cash flows from the sale of real estate held in Consolidated VIEs were used to repay outstanding mortgages payable on real estate held in Consolidated VIEs.

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.

During the year ended December 31, 2023, our net cash flows provided by financing activities were $1.1 billion.

The main sources of cash flows from financing activities were proceeds from repurchase agreements related to our investment securities, residential loans and single-family rental properties.

This was partially offset by paydowns on CDOs, payments made on mortgages payable on real estate, dividend payments on both common and preferred stock and repurchases of shares of common and preferred 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.

As of December 31, 2023, we have outstanding short-term repurchase agreement financing on our investment securities, a form of collateralized short-term financing, with multiple financial institutions.

The repurchase agreements we use to finance our investment securities 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.

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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.”

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.

At December 31, 2023, we had longer-term repurchase agreements with terms of up to two years with multiple third-party financial institutions that are secured by certain of our residential loans and single-family rental properties.

The outstanding financing under three of these repurchase agreements is subject to margin calls to the extent the market value of the collateral falls below specified levels.

We have entered into or amended repurchase agreements with three new and existing counterparties that are secured by certain of our residential loans and are not subject to margin calls in the event the market value of the collateral declines.

S ee "Management's Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Analysis—Residential Loans and Single-Family Rental Property 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.

Repurchase of the residential loans and single-family rental properties financed by the repurchase agreements may be accelerated upon an event of default.

The repurchase agreements secured by residential loans and single-family rental properties contain various covenants, including among other things, the maintenance of certain amounts of liquidity and stockholders' equity (as defined in the respective agreements).

As of December 31, 2023, we had an aggregate amount at risk under our residential loan and single-family rental property repurchase agreements of approximately $194.0 million, which represents the difference between the carrying value of the collateral 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.

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As of December 31, 2023, we had $171.5 million included in cash and cash equivalents and $170.6 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.

The unencumbered investment securities that we believe may be posted as margin as of December 31, 2023 included $75.3 million of non-Agency RMBS (including an IO security we own in Consolidated SLST and CDOs repurchased from our residential loan securitizations) and $95.3 million of Agency RMBS.

At December 31, 2023, the Company had $100.0 million aggregate principal amount of Senior Unsecured Notes outstanding.

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No sinking fund is provided for the Senior Unsecured Notes.

The Company's Senior Unsecured Notes also 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.

At December 31, 2023, we also had other longer-term debt which includes Company-sponsored residential loan securitization CDOs with a carrying value of $1.3 billion.

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See Note 13 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.

The real estate assets held by our multi-family joint venture equity 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 and our equity investment may be lost or reduced to the extent a lender forecloses on the property.

As of December 31, 2023, one of the joint venture equity investments is one month delinquent on its senior mortgage loan in the amount of $195.6 million as a result of increasing interest rates.

The Company is not exposed to risk of loss outside of its common equity investment in the joint venture as the senior mortgage loan is non-recourse.

As of December 31, 2023, 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 1.6 to 1.

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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.

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.

We may use interest rate swaps, interest rate caps, futures and options contracts such as options on credit default swap indices, equity index options, swaptions and options on futures.

We may also use TBAs or other futures contracts to hedge interest rate and market value risk associated with our investment portfolio.

During the period these contracts are open, changes in the value of the contract are recognized as unrealized gains or losses.

During the period these contracts are open, changes in the value of the contract are recognized as gains or losses on derivative instruments.

The joint venture entities that own the multi-family properties will be required to enter into new interest rate cap contracts upon their expiration and may require the Company to contribute additional capital to the respective joint venture.

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.

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In addition, because delivery of TBAs extend beyond the typical settlement dates for most non-derivative investments, these transactions are more prone to market fluctuations between the trade date and the ultimate settlement date, and thereby are more vulnerable to increasing amounts at risk with the applicable counterparties.

In March 2020, in response to the turmoil in the financial markets, we terminated our interest rate swaps and currently do not have interest rate swaps in place.

Liquidity — Securities Offerings

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The Company had no securities offerings during the year ended December 31, 2023.

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.

Preferred Stock and Common Stock Repurchase Programs

In March 2023, the Board of Directors approved a $100.0 million preferred stock repurchase program.

The program, which is currently set to expire on March 31, 2025, allows the Company to make repurchases of shares of preferred stock, from time to time, in open market transactions, through privately negotiated transactions or block trades or other means, in accordance with applicable securities laws and the rules and regulations of Nasdaq.

During the year ended December 31, 2023, the Company repurchased 16,177 shares of Series D Preferred Stock, 68,348 shares of Series E Preferred Stock, 9,791 shares of Series F Preferred Stock and 26,264 shares of Series G Preferred Stock pursuant to the preferred stock repurchase program for a total cost of approximately $2.4 million, including fees and commissions paid to the broker, representing an average repurchase price of $20.29 per preferred share.

The difference between the consideration transferred and the carrying value of the preferred stock resulted in a gain attributable to common stockholders of approximately $0.5 million during the year ended December 31, 2023.

As of December 31, 2023, $97.6 million of the approved amount remained available for the repurchase of shares of preferred stock under the preferred stock repurchase program.

In February 2022, the Board of Directors approved a $200.0 million common stock repurchase program.

The program allows the Company to make repurchases of shares of common stock, from time to time, in open market transactions, through privately negotiated transactions or block trades or other means, in accordance with applicable securities laws and the rules and regulations of Nasdaq.

In March 2023, the Board of Directors approved an upsize of the common stock repurchase program to $246.0 million.

During the year ended December 31, 2023, the Company repurchased 937,850 shares of its common stock pursuant to the common stock repurchase program for a total cost of approximately $8.6 million, including fees and commissions paid to the broker, representing an average repurchase price of $9.19 per common share.

As of December 31, 2023, $193.2 million of the approved amount remained available for the repurchase of shares of the Company's common stock under the common stock repurchase program.

The common stock repurchase program is currently set to expire on March 31, 2025.

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 17 to our consolidated financial statements included in this report.

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5,750 108,625 — — 114,375

Interest rate swaps (1)

906 1,811 1,688 3,258 7,663

Total contractual obligations (2)

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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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis