What changed in this filing

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Item 9A. Controls and Procedures

2024-02-23 compared with 2023-02-24 · 737 added, 589 removed, 1846 unchanged (42% of the section changed)

42 unchanged sentences

The exhibits required by Item 601 of Regulation S-K are listed below.

Management contracts or compensatory plans are filed as Exhibits 10.1 through 10.28.

Exhibit Description

Articles of Amendment and Restatement of the Company, as amended (Incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2020).

Articles of Amendment and Restatement of the Company, as amended (Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 5, 2023).

Third Amended and Restated Bylaws of the Company (Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 22, 2022).

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Form of Certificate representing the Series G Preferred Stock (Incorporated by reference to Exhibit 3.11 to the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on November 23, 2021).

Indenture, dated January 23, 2017, between the Company and U.S.

Bank National Association, as trustee (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 23, 2017).

Indenture, dated as of April 27, 2021, between the Company and UMB Bank National Association, as trustee (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 27, 2021).

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The Company’s 2022 Annual Incentive Plan (Incorporated by reference to Exhibit 10.22 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 25, 2022).†

Form of 2023 Restricted Stock Award Agreement (Incorporated by reference to Exhibit 10.23 to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 24, 2023).†

Form of 2023 Performance Stock Unit Award Agreement (Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 5, 2023).†

Form of 2023 Restricted Stock Unit Award Agreement (Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 5, 2023).†

The Company’s 2023 Annual Incentive Plan (Incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 5, 2023).†

Separation and Consulting Agreement, dated as of April 26, 2023, by and between the Company and Nathan R.

Reese (Incorporated by reference to Exhibit 10.4 of the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 5, 2023).†

Form of 2024 Restricted Stock Award Agreement.*†

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1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

Policy Relating to Recovery of Erroneously Awarded Compensation.*†

Equity Distribution Agreement, dated August 10, 2021, by and between the Company and B.

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104 Cover Page Interactive Data File-the cover page XBRL tags are embedded within the Inline XBRL document

† Management contract or compensatory plan or arrangement.

* Filed herewith.

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Signature Title Date

Serrano Chief Executive Officer February 24, 2023

Serrano Chief Executive Officer and Director

February 23, 2024

Serrano (Principal Executive Officer)

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Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive (Loss) Income

Consolidated Statements of Changes in Stockholders' Equity

2 unchanged sentences

Summary of Significant Accounting Policies

Residential Loans, a t Fair Value

Multi-family Loans, a t Fair Value

Residential Loans, at Fair Value

Investment Securities Available For Sale, at Fair Value

Multi-family Loans, at Fair Value

Equity Investments , at Fair Value

2 unchanged sentences

A ssets and Liabilities of Disposal Group Held for Sale

Derivative Instruments and Hedging Activities

Other Assets and Other Liabilities

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The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments.

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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We identified the fair value measurement of Residential Loans as a critical audit matter.

The principal considerations for our determination that the fair value measurement of Residential Loans was a critical audit matter are that the assets are priced using unobservable inputs as they trade infrequently.

The principal considerations for our determination that the fair value measurement of Residential Loans was a critical audit matter are that the assets are priced using unobservable inputs.

As such, the fair value measurement requires management to make complex judgments in order to identify and select the appropriate model and significant assumptions, which may include forecast prepayment rates, default rates, discount rates and rates for loss upon default, collateral values and collateral disposal costs.

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We identified the fair value measurement of these interest only and first loss subordinated securities in Consolidated SLST (“SLST Investments”) as a critical audit matter.

The principal considerations for our determination that the fair value measurement of the SLST Investments is a critical audit matter are that there is limited observable market data available for these SLST Investments as they trade infrequently.

the fair value measurement requires management to make complex judgments in order to identify and select the significant assumptions, which may include the discount rate, prepayment rate, default rate and loss severity.

As such, the fair value measurement requires management to make complex judgments in order to identify and select the significant assumptions, which may include the discount rate, prepayment rate, default rate and loss severity.

In addition, the fair value measurements of the SLST Investments are highly sensitive to changes in the significant assumptions and underlying market conditions and are material to the financial statements.

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Residential loans, at fair value $ 3,084,303 $ 3,525,080

Multi-family loans, at fair value 87,534 120,021

Investment securities available for sale, at fair value 2,013,817 99,559

Multi-family loans, at fair value 95,792 87,534

Equity investments, at fair value 147,116 179,746

9 unchanged sentences

1,870,517 2,102,717

Convertible notes — 137,898

Senior unsecured notes 98,111 97,384

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Stockholders' Equity:

Preferred stock, par value $ 0.01 per share, 31,500,000 and 29,500,000 shares authorized as of December 31, 2022 and December 31, 2021, respectively, 22,284,994 shares issued and outstanding as of December 31, 2022 and December 31, 2021 ($ 557,125 aggregate liquidation preference as of December 31, 2022 and December 31, 2021)

Preferred stock, par value $ 0.01 per share, 31,500,000 shares authorized, 22,164,414 and 22,284,994 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively ($ 554,110 and $ 557,125 aggregate liquidation preference as of December 31, 2023 and December 31, 2022, respectively)

535,445 538,351

1 unchanged sentence

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

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

Accumulated other comprehensive loss ( 4 ) ( 1,970 )

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

17 unchanged sentences

Total net interest income 66,526 128,969 127,582

NON-INTEREST (LOSS) INCOME:

Realized gains (losses), net 27,549 21,451 ( 148,058 )

Realized loss on de-consolidation of Consolidated K-Series — — ( 54,118 )

Unrealized (losses) gains, net ( 321,081 ) 95,649 ( 160,161 )

Income from equity investments 15,074 33,896 26,670

Impairment of goodwill — — ( 25,222 )

Other income 16,289 5,515 678

Income from real estate

NET LOSS FROM REAL ESTATE:

Rental income 141,057 126,293 14,303

1 unchanged sentence

Total income from real estate 171,774 141,656 15,230

Total non-interest (loss) income ( 120,513 ) 171,741 ( 359,792 )

GENERAL, ADMINISTRATIVE AND OPERATING EXPENSES:

General and administrative expenses 52,440 48,908 42,228

Portfolio operating expenses 40,888 26,668 11,572

Expenses related to real estate

Interest expense, mortgages payable on real estate 90,221 56,011 3,964

2 unchanged sentences

Total expenses related to real estate 203,076 255,235 32,813

Total net loss from real estate ( 31,302 ) ( 113,579 ) ( 17,583 )

OTHER (LOSS) INCOME:

Realized (losses) gains, net

( 27,059 ) 26,625 21,451

Unrealized gains (losses), net

97,196 ( 347,363 ) 95,649

(Losses) gains on derivative instruments, net

( 26,378 ) 27,206 —

Income from equity investments 17,785 15,074 33,896

Impairment of real estate

( 89,548 ) ( 2,449 ) —

Loss on reclassification of disposal group

( 16,163 ) — —

Other income 4,736 18,738 5,515

Total other (loss) income

( 39,431 ) ( 262,169 ) 156,511

GENERAL, ADMINISTRATIVE AND OPERATING EXPENSES:

General and administrative expenses 49,565 52,440 48,908

Portfolio operating expenses 23,952 40,888 26,668

Total general, administrative and operating expenses 73,517 93,328 75,576

2 unchanged sentences

NET (LOSS) INCOME ( 77,799 ) ( 340,649 ) 188,476

Net loss (income) attributable to non-controlling interests 42,044 4,724 ( 267 )

Net loss attributable to non-controlling interests

29,134 42,044 4,724

NET (LOSS) INCOME ATTRIBUTABLE TO COMPANY ( 48,665 ) ( 298,605 ) 193,200

Preferred stock dividends ( 41,837 ) ( 41,972 ) ( 42,859 )

Gain on repurchase of preferred stock

Preferred stock redemption charge

— — ( 6,165 )

NET (LOSS) INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS $ ( 90,035 ) $ ( 340,577 ) $ 144,176

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Dollar amounts in thousands)

2 unchanged sentences

NET (LOSS) INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS $ ( 90,035 ) $ ( 340,577 ) $ 144,176

OTHER COMPREHENSIVE (LOSS) INCOME

(Decrease) increase in fair value of available for sale securities ( 3,748 ) 4,749 ( 31,654 )

Reclassification adjustment for net (gain) loss included in net income (loss) — ( 3,965 ) 7,516

TOTAL OTHER COMPREHENSIVE (LOSS) INCOME ( 3,748 ) 784 ( 24,138 )

OTHER COMPREHENSIVE INCOME (LOSS)

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

144 ( 3,748 ) 4,749

Reclassification adjustment for net loss (gain) included in net (loss) income

1,822 — ( 3,965 )

TOTAL OTHER COMPREHENSIVE INCOME (LOSS)

1,966 ( 3,748 ) 784

COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS $ ( 88,069 ) $ ( 344,325 ) $ 144,960

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Balance, December 31, 2020 $ 945 $ 504,765 $ 2,345,766 $ ( 551,268 ) $ 994 $ 2,301,202 $ 6,371 $ 2,307,573

Cumulative-effect adjustment for implementation of fair value option — — — 12,284 — 12,284 — 12,284

Net (loss) income — — — ( 288,510 ) — ( 288,510 ) 267 ( 288,243 )

Common stock issuance, net 851 — 511,239 — — 512,090 — 512,090

Stock based compensation expense, net 12 — 9,910 — — 9,922 — 9,922

Dividends declared on common stock

— — — ( 84,993 ) — ( 84,993 ) — ( 84,993 )

Dividends declared on preferred stock

— — — ( 41,186 ) — ( 41,186 ) — ( 41,186 )

Reclassification adjustment for net loss included in net loss — — — — 7,516 7,516 — 7,516

Decrease in fair value of available for sale securities — — — — ( 31,654 ) ( 31,654 ) — ( 31,654 )

Increase in non-controlling interest related to initial consolidation of VIEs — — — — — — 6,808 6,808

Balance, December 31, 2020 $ 3,777 $ 504,765 $ 2,342,934 $ ( 551,268 ) $ 994 $ 2,301,202 $ 6,371 $ 2,307,573

Net income (loss) ($( 704 ) allocated to redeemable non-controlling interest)

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Balance, December 31, 2022 $ 912 $ 538,351 $ 2,282,691 $ ( 1,052,768 ) $ ( 1,970 ) $ 1,767,216 $ 33,092 $ 1,800,308

Net loss ($( 17,067 ) allocated to redeemable non-controlling interest)

$ — $ — $ — $ ( 48,665 ) $ — $ ( 48,665 ) $ ( 12,067 ) $ ( 60,732 )

Common stock repurchases ( 9 ) — ( 8,606 ) — — ( 8,615 ) — ( 8,615 )

Preferred stock repurchases — ( 2,906 ) — 467 — ( 2,439 ) — ( 2,439 )

Stock based compensation expense, net 4 — 8,821 — — 8,825 — 8,825

Dividends declared on common stock — — — ( 109,279 ) — ( 109,279 ) — ( 109,279 )

Dividends declared on preferred stock — — — ( 41,837 ) — ( 41,837 ) — ( 41,837 )

Dividends attributable to dividend equivalents — — — ( 1,735 ) — ( 1,735 ) — ( 1,735 )

Reclassification adjustment for net loss included in net loss

— — — — 1,822 1,822 — 1,822

Increase in fair value of available for sale securities — — — — 144 144 — 144

Increase in non-controlling interest related to initial consolidation of VIEs — — — — — — 3,790 3,790

Contributions of non-controlling interest in Consolidated VIEs — — — — — — 997 997

Decrease in non-controlling interest related to distributions from Consolidated VIEs — — — — — — ( 5,359 ) ( 5,359 )

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

Balance, December 31, 2023

$ 907 $ 535,445 $ 2,297,081 $ ( 1,253,817 ) $ ( 4 ) $ 1,579,612 $ 20,453 $ 1,600,065

The accompanying notes are an integral part of the consolidated financial statements.

10 unchanged sentences

Depreciation and amortization expense related to operating real estate 24,620 126,824 19,250

Realized (gains) losses, net ( 27,549 ) ( 21,451 ) 148,058

Realized loss on de-consolidation of Consolidated K-Series — — 54,118

Unrealized losses (gains), net 321,081 ( 95,649 ) 160,161

Impairment of goodwill — — 25,222

Realized losses (gains), net

27,059 ( 26,625 ) ( 21,451 )

Unrealized (gains) losses, net

( 97,196 ) 347,363 ( 95,649 )

Losses (gains) on derivative investments, net

26,378 ( 27,206 ) —

(Gain) loss on sale of real estate ( 4,763 ) ( 17,132 ) 157

Impairment of real estate 89,548 2,449 —

(Gain) loss on extinguishment of mortgages payable on real estate and collateralized debt obligations ( 2,214 ) 1,583 —

Loss on reclassification of disposal group 16,163 — —

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

796 ( 2,214 ) 1,583

Income from preferred equity, mezzanine loan and equity investments ( 28,774 ) ( 30,162 ) ( 54,507 )

1 unchanged sentence

Stock based compensation expense, net 8,825 11,895 10,239

Cash reclassified to assets of disposal group held for sale 8,267 ( 13,944 ) —

Changes in operating assets and liabilities ( 16,747 ) ( 14,785 ) ( 3,697 )

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Funding of joint venture investments in Consolidated VIEs — ( 177,570 ) ( 261,162 )

Proceeds from sales resulting in de-consolidation of Consolidated K-Series — — 555,218

Principal repayments received on multi-family loans held in Consolidated K-Series — — 239,796

Net proceeds received from (payments made on) derivative instruments settled during the period 1,881 — ( 28,233 )

Net variation margin paid for derivative instruments

( 27,447 ) — —

Net payments received from derivative instruments

24,215 1,881 —

Cash received from initial consolidation of VIEs 102 6,897 27,907

2 unchanged sentences

Purchases of other assets ( 63 ) ( 100 ) ( 98 )

Net cash (used in) provided by investing activities ( 508,775 ) ( 132,949 ) 2,117,883

Net cash used in investing activities

( 1,219,931 ) ( 508,775 ) ( 132,949 )

Cash Flows from Financing Activities:

Net proceeds received from (payments made on) repurchase agreements 179,033 146,852 ( 2,701,812 )

Net proceeds from repurchase agreements

1,730,366 179,033 146,852

Proceeds from issuance of senior unsecured notes, net — — 96,267

Proceeds from issuance of collateralized debt obligations, net — 969,986 433,241

Common stock issuance, net — — 511,924

Repurchases of common stock ( 8,615 ) ( 44,399 ) —

Preferred stock issuance, net — — 210,738

Repurchases of preferred stock ( 2,439 ) — —

Redemption of preferred stock — — ( 183,447 )

5 unchanged sentences

Payments made on and extinguishment of collateralized debt obligations ( 204,649 ) ( 188,914 ) ( 323,045 )

Payments made on Consolidated K-Series CDOs — — ( 147,376 )

Payments made on Consolidated SLST CDOs ( 46,476 ) ( 114,847 ) ( 160,762 )

Net proceeds received from mortgages payable on real estate 3,197 2,493 —

Net cash provided by (used in) financing activities 460,069 27,408 ( 2,045,760 )

Net Increase in Cash, Cash Equivalents and Restricted Cash 43,077 33,371 182,878

Net (payments made on) proceeds received from mortgages payable on real estate

( 148,948 ) 3,197 2,493

Net cash provided by financing activities

1,139,682 460,069 27,408

Net (Decrease) Increase in Cash, Cash Equivalents and Restricted Cash

( 50,296 ) 43,077 33,371

Cash, Cash Equivalents and Restricted Cash - Beginning of Period 380,938 337,861 304,490

6 unchanged sentences

Consolidation of mortgages payable on real estate held in Consolidated VIEs $ 45,142 $ 524,217 $ 669,647

De-consolidation of multi-family loans held in Consolidated K-Series $ — $ — $ 17,381,483

De-consolidation of Consolidated K-Series CDOs $ — $ — $ 16,612,093

Transfer from residential loans to real estate owned $ 42,485 $ 18,858 $ 4,133

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December 31, 2023

New York Mortgage Trust, Inc., together with its consolidated subsidiaries (“NYMT,” “we,” “our,” or the “Company”), is a real estate investment trust ("REIT") in the business of acquiring, investing in, financing and managing primarily mortgage-related single-family and multi-family residential assets.

New York Mortgage Trust, Inc., together with its consolidated subsidiaries (“NYMT,” “we,” “our,” or the “Company”), is an internally-managed real estate investment trust ("REIT") 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.

The Company conducts its business through the parent company, New York Mortgage Trust, Inc., and several subsidiaries, including taxable REIT subsidiaries (“TRSs”), qualified REIT subsidiaries (“QRSs”) and special purpose subsidiaries established for securitization purposes.

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As such, the Company will generally not be subject to federal income taxes on that portion of its income that is distributed to stockholders if it distributes at least 90% of its REIT taxable income to its stockholders by the due date of its federal income tax return and complies with various other requirements.

In September 2022, the Company announced a repositioning of its business through the opportunistic disposition over time of the Company's joint venture equity investments in multi-family properties and reallocation of its capital away from such assets to its targeted assets.

Accordingly, the Company determined that certain joint venture equity investments met the criteria to be classified as held for sale and transferred either the assets and liabilities of the respective joint venture investments that are consolidated in accordance with GAAP or its equity investment in the joint venture entity to assets and liabilities of disposal group held for sale in the accompanying consolidated balance sheets as of December 31, 2022.

See Note 9 for additional information.

Summary of Significant Accounting Policies

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“CMBS” refers to commercial mortgage-backed securities comprised of commercial mortgage pass-through securities issued by a GSE, as well as PO, IO or mezzanine securities that represent the right to a specific component of the cash flow from a pool of commercial mortgage loans;

“Agency CMBS” refers to CMBS representing interests or obligations backed by pools of mortgage loans guaranteed by a GSE, such as Fannie Mae or Freddie Mac;

“multi-family CMBS” refers to CMBS backed by commercial mortgage loans on multi-family properties;

“CDO” refers to collateralized debt obligation and includes debt that permanently finances the residential loans held in Consolidated SLST, multi-family loans held in the Consolidated K-Series, the Company's residential loans held in securitization trusts and a non-Agency RMBS re-securitization that we consolidate, or consolidated, in our financial statements in accordance with GAAP;

“CDO” refers to collateralized debt obligation and includes debt that permanently finances the residential loans held in Consolidated SLST, the Company's residential loans held in securitization trusts and a non-Agency RMBS re-securitization that we consolidate, or consolidated, in our financial statements in accordance with GAAP;

“business purpose loans” refers to (i) short-term loans that are collateralized by residential properties and are made to investors who intend to rehabilitate and sell the residential property for a profit or (ii) loans that finance (or refinance) non-owner occupied residential properties that are rented to one or more tenants;

“Consolidated SLST” refers to a Freddie Mac-sponsored residential loan securitization, comprised of seasoned re-performing and non-performing residential loans, of which we own or owned the first loss subordinated securities and certain IOs and senior securities that we consolidate in our financial statements in accordance with GAAP.

“Consolidated K-Series” refers to Freddie Mac-sponsored multi-family loan K-Series securitizations, of which we, or one of our “special purpose entities,” or “SPEs,” owned the first loss POs, certain IOs and certain senior or mezzanine securities that we consolidated in our financial statements in accordance with GAAP prior to disposition;

“Consolidated SLST” refers to a Freddie Mac-sponsored residential loan securitization, comprised of seasoned re-performing and non-performing residential loans, of which we own the first loss subordinated securities and certain IOs that we consolidate in our financial statements in accordance with GAAP;

“SOFR” refers to Secured Overnight Funding Rate.

Basis of Presentation – The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in accordance with GAAP.

Basis of Presentation – On March 9, 2023, the Company effected a one-for-four reverse stock split of its issued, outstanding and authorized shares of common stock (the "Reverse Stock Split").

Accordingly, all common share and per common share data for all periods presented in these consolidated financial statements and notes thereto have been adjusted on a retroactive basis to reflect the impact of the Reverse Stock Split.

The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in accordance with GAAP.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Management has made significant estimates in several areas, including fair valuation of its residential loans, multi-family loans, certain equity investments and Consolidated SLST CDOs.

Management has made significant estimates in several areas, including fair valuation of its residential loans, multi-family loans, certain equity investments, Consolidated SLST CDOs, real estate held by Consolidated VIEs and redemption value of redeemable non-controlling interests in Consolidated VIEs.

Although the Company’s estimates contemplate current conditions and how it expects those conditions to change in the future, it is reasonably possible that actual conditions could be different than anticipated in those estimates, which could materially impact the Company’s results of operations and its financial condition.

The COVID-19 pandemic and resulting emergency measures led to significant disruptions in the global supply chain, global capital markets, the economy of the U.S.

and the economies of other countries impacted by COVID-19.

Although the disruptions caused by the COVID-19 pandemic eased in 2022, uncertainty about the future of COVID-19 and variants remain.

The Company believes the estimates and assumptions underlying our consolidated financial statements are reasonable and supportable based on the information available as of December 31, 2022;

however, uncertainty over the ultimate impact COVID-19 will have on the global economy generally, and our business in particular, makes any estimates and assumptions as of December 31, 2022 inherently less certain than they would be absent the current and potential impacts of COVID-19.

Accordingly, it is reasonably possible that actual conditions could be different than anticipated in those estimates, which could materially impact the Company’s results of operations and its financial condition.

Reclassifications – Certain prior period amounts have been reclassified on the accompanying consolidated financial statements to conform to current period presentation.

In particular, prior period disclosures have been conformed to the current period presentation of interest expense, mortgages payable on real estate.

Starting in the fourth quarter of 2022, interest expense, mortgages payable on real estate is presented in expenses related to real estate on the Company's consolidated statements of operations.

Previously, interest expense, mortgages payable on real estate was presented in interest expense and net interest income on the Company's consolidated statements of operations.

In particular, prior period disclosures have been adjusted for the aforementioned Reverse Stock Split.

Additionally, prior period disclosures have been conformed to the current period presentation of net loss from real estate.

Beginning in the third quarter of 2023, the components of net loss from real estate, inclusive of rental income and other real estate income and interest expense, mortgages payable on real estate, depreciation and amortization and other real estate expenses, are presented as total net loss from real estate on the Company's consolidated statements of operations.

Previously, rental income, other real estate income and total income from real estate was presented in other income (loss) and interest expense, mortgages payable on real estate, depreciation and amortization, other real estate expenses and total expenses related to real estate were presented in general, administrative and operating expenses on the Company's consolidated statements of operations.

Prior to the fourth quarter of 2022, interest expense, mortgages payable on real estate was presented in interest expense and net interest income on the Company's consolidated statements of operations.

Also beginning in the third quarter of 2023, unrealized gains (losses) and realized gains (losses) on derivative instruments are presented in gains (losses) on derivative instruments, net on the Company's consolidated statements of operations.

Previously, unrealized gains (losses) on derivative instruments were presented in unrealized gains (losses), net and realized gains (losses) on derivative instruments were presented in realized gains (losses), net on the Company's consolidated statements of operations.

Principles of Consolidation and Variable Interest Entities – The accompanying consolidated financial statements of the Company include the accounts of all its subsidiaries which are majority-owned, controlled by the Company or a variable interest entity (“VIE”) where the Company is the primary beneficiary.

11 unchanged sentences

See " Redeemable Non-Controlling Interest in Consolidated VIEs " below for further discussion of redeemable non-controlling interest in Consolidated VIEs.

Residential Loans – The Company’s acquired residential loans, including performing, re-performing and non-performing residential loans and business purpose loans are presented at fair value on the accompanying consolidated balance sheets pursuant to a fair value option election in accordance with ASC 825, Financial Instruments (“ASC 825”).

Changes in fair value are recorded in current period earnings in unrealized gains (losses), net on the accompanying consolidated statements of operations.

The Company has elected the fair value option for residential loans either at the time of acquisition pursuant to ASC 825, Financial Instruments (“ASC 825”) or following the adoption of Accounting Standards Update ("ASU") 2019-05, Financial Instruments—Credit Losses (Topic 326):

Targeted Transition Relief (“ASU 2019-05”), effective January 1, 2020.

Residential loans include seasoned re-performing and non-performing residential loans held in a Freddie Mac-sponsored residential loan securitization, of which we own or have owned the first loss subordinated securities and certain IOs and senior securities issued by this securitization, and that we consolidate in our financial statements in accordance with GAAP (“Consolidated SLST”).

Residential loans include seasoned re-performing and non-performing residential loans held in a Freddie Mac-sponsored residential loan securitization, of which we own the first loss subordinated securities and certain IOs issued by this securitization, and that we consolidate in our financial statements in accordance with GAAP (“Consolidated SLST”).

Based on a number of factors, management determined that the Company was the primary beneficiary of Consolidated SLST and met the criteria for consolidation and, accordingly, has consolidated the securitization, including its assets, liabilities, income and expenses in our financial statements.

8 unchanged sentences

Any premium amortization or discount accretion is reflected as a component of interest income on the accompanying consolidated statements of operations.

Multi-Family Loans – Multi-family loans include preferred equity investments in, and mezzanine loans to, entities that have multi-family real estate assets.

A preferred equity investment is an equity investment in the entity that owns the underlying property.

Preferred equity is not secured by the underlying property, but holders have priority relative to common equity holders on cash flow distributions and proceeds from capital events.

In addition, preferred equity holders may be able to enhance their position and protect their equity position with covenants that limit the entity’s activities and grant the holder the exclusive right to control the property after an event of default.

Mezzanine loans are secured by a pledge of the borrower’s equity ownership in the property.

Unlike a mortgage, this loan does not represent a lien on the property.

Therefore, it is always junior and subordinate to any first lien as well as second liens, if applicable, on the property.

These loans are senior to any preferred equity or common equity interests in the entity that owns the property.

The Company has evaluated its preferred equity and mezzanine loan investments for accounting treatment as loans versus equity investments utilizing the guidance provided by the Acquisition, Development and Construction Arrangements Subsection of ASC 310, Receivables .

Preferred equity and mezzanine loan investments, for which the characteristics, facts and circumstances indicate that loan accounting treatment is appropriate, are stated at fair value.

The Company elected the fair value option for its preferred equity investments in and mezzanine loan investments because the Company determined that such presentation represents the underlying economics of the respective investment.

Changes in fair value are recorded in current period earnings in unrealized gains (losses), net on the accompanying consolidated statements of operations.

Interest income is accrued and recognized as revenue when earned according to the terms of the loans and when, in the opinion of management, it is collectible.

The accrual of interest on loans is discontinued when, in management’s opinion, the interest is not collectible in the normal course of business, but in all cases when payment becomes greater than 90 days delinquent.

Loans return to accrual status when principal and interest become current and are anticipated to be fully collectible.

The Company accretes or amortizes any discounts or premiums and deferred fees and expenses over the life of the related asset utilizing the effective interest method or straight line-method, if the result is not materially different.

Preferred equity investments where the risks and payment characteristics are equivalent to an equity investment are included in Equity Investments below .

In 2020, the Company, or one of its “special purpose entities” (“SPEs”), owned the first loss POs, certain IOs, and certain senior and mezzanine securities issued by certain Freddie Mac-sponsored multi-family loan K-Series securitizations that we consolidated in our financial statements in accordance with GAAP (the “Consolidated K-Series”).

Based on a number of factors, management determined that the Company was the primary beneficiary of each VIE within the Consolidated K-Series and met the criteria for consolidation and, accordingly, consolidated these securitizations, including their assets, liabilities, income and expenses in the Company's financial statements.

In response to market conditions associated with the COVID-19 pandemic and the Company's intention to improve its liquidity, in March 2020, the Company sold its entire portfolio of first loss POs issued by the Consolidated K-Series which resulted in the de-consolidation of each Consolidated K-Series as of the sale date of each first loss PO ( see Note 7 ).

The Company elected the fair value option on each of the assets and liabilities held within the Consolidated K-Series, which required that changes in valuations be reflected on the accompanying consolidated statements of operations.

In accordance with ASC 810, the Company measured both the financial assets and financial liabilities of a qualifying consolidated CFE using the fair value of either the CFE’s financial assets or financial liabilities, whichever was more observable.

As the Consolidated K-Series were considered qualifying CFEs, the Company determined the fair value of multi-family loans held in the Consolidated K-Series based on the fair value of the multi-family collateralized debt obligations issued by the Consolidated K-Series and the Company's investments in these securitizations (eliminated in consolidation in accordance with GAAP), as the fair value of these instruments was more observable.

Interest income was accrued and recognized as revenue when earned according to the terms of the multi-family loans held in the Consolidated K-Series and when, in the opinion of management, it was collectible.

The accrual of interest on these loans was discontinued when, in management’s opinion, the interest was not collectible in the normal course of business.

Real estate owned property acquired through, or in lieu of, foreclosure of residential loans is initially recorded at fair value, and subsequently reported at the lower of its carrying amount or fair value (less estimated cost to sell).

Changes in the fair value of a real estate owned property that has a fair value at or below its carrying amount are recorded in other (loss) income on our consolidated statements of operations.

Fair values are determined using available market quotes, appraisals, broker price opinions, comparable properties, or other indications of value.

Investment Securities Available for Sale – The Company’s investment securities, where the fair value option has not been elected and which are reported at fair value with unrealized gains and losses reported in Other Comprehensive Income (“OCI”), include non-Agency RMBS (collectively, "CECL Securities").

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Interest income on our investment securities available for sale is accrued based on the outstanding principal balance and their contractual terms.

Purchase premiums or discounts associated with Agency RMBS and Agency CMBS assessed as high credit quality at the time of purchase are amortized or accreted to interest income over the estimated life of these investment securities using the effective yield method.

Purchase premiums or discounts associated with Agency RMBS assessed as high credit quality at the time of purchase are amortized or accreted to interest income over the estimated life of these investment securities using the effective yield method.

Interest income on certain of our credit sensitive securities that were purchased at a premium or discount to par value, such as certain of our non-Agency RMBS, CMBS and ABS that are of less than high credit quality, is recognized based on the security’s effective yield.

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The Company considers information available about the past and expected future performance of underlying collateral, including timing of expected future cash flows, prepayment rates, default rates, loss severities and delinquency rates.