ADAMAS TRUST, INC. 10-K

Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General 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, as well as more traditional types of fixed-income investments that provide coupon income, such as Agency RMBS. Reverse Stock Split On March 9, 2023, we effected a one-for-four reverse stock split of our common stock (the “Reverse Stock Split”). Accordingly, 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 Beginning in the second quarter of 2023, after significantly curtailing our investment activity and pipeline in 2022 in anticipation of a recession to conserve capital, preserve liquidity and limit what we believed was material credit risk from investments underwritten to peak real estate valuations in 2022, we began stabilizing our investment portfolio holdings through greater investment activity. Since that time, we have focused, in large part, on acquiring assets with less price sensitivity to credit deterioration that could expand our interest income levels, 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 attractive spread levels resulting from volatility in interest rates. 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 in our portfolio. Specifically, we have targeted low duration, high-coupon business purpose loans while remaining selective on credit profile and worked to optimize financing of the loans we acquire. During this time, we continued to drive higher business purpose loan acquisition volumes through ongoing partnerships with numerous originators. Over the course of the past seven quarters, we have experienced solid momentum in our portfolio acquisition activities and increased adjusted interest income, a supplemental non-GAAP financial measure, by more than 60% year-over-year. On a net basis, our investment portfolio increased by approximately $3.6 billion between December 31, 2022 and December 31, 2024, with repayments received from our short-duration business purpose loans, opportunistic sales of residential loans and investment securities, redemptions of our Mezzanine Lending investments, return of capital from our joint venture equity investments and impairments offsetting some of our investment activity. 56 Table of Contents 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 and continuing into 2024, 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 which resulted in significant impairment losses. We exited ten additional joint venture equity investments in multi-family properties in 2024, received net proceeds of $23.0 million and realized $14.3 million of net gains attributable to us. As of December 31, 2024, we have reduced exposure in this disposal group of multi-family investments to $19.5 million over two multi-family properties. We anticipate allocating less capital to multi-family investments going forward. 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) Agency RMBS, (iii) non-Agency RMBS, (iv) structured multi-family property investments such as preferred equity in, and mezzanine loans to, owners of multi-family properties and (v) 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, CMBS, collateralized mortgage obligations, MSRs, 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, 2024, 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 3.0x and 2.9x, respectively, from 1.6x and 1.5x, respectively, as of December 31, 2023, primarily due to the financing of highly liquid U.S. Treasury securities and Agency RMBS. As of December 31, 2024, 62% of our debt, excluding mortgages payable on real estate and Consolidated SLST CDOs, is subject to mark-to-market margin calls, with 44% of that debt collateralized by Agency RMBS, 10% collateralized by U.S. Treasury securities and 8% collateralized by residential credit assets. The remaining 38% has no exposure to collateral repricing by our counterparties. Although we expect our leverage to move higher as we access additional liquidity and grow our investment portfolio further, 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. To this end, we completed a non-Agency RMBS re-securitization and five new, non-recourse securitizations of residential loans and redeemed two existing residential loan securitizations during the year ended December 31, 2024. We also completed the issuance of $60.0 million of our 9.125% Senior Notes due 2029 in an underwritten public offering in the second quarter of 2024. We received $57.5 million in net proceeds from the issuance and utilized the proceeds to purchase Agency RMBS. In January 2025, we completed the issuance of $82.5 million of our 9.125% Senior Notes due 2030 in an underwritten public offering, receiving $79.3 million in net proceeds which were also used to purchase Agency RMBS. In February 2025, we completed a new securitization of residential loans resulting in approximately $74.2 million of net proceeds to us after deducting expenses associated with the transaction and redeemed a residential loan securitization with an outstanding balance of approximatel y $54.4 million a t the time of redemption. We expect to continue to opportunistically dispose of assets from our portfolio and generate higher portfolio turnover in order to pursue investments across the residential housing sector with a focus on acquiring assets capable of growing our interest income. We expect to remain selective in acquiring single-family and multi-family residential credit assets and remain committed to prudently managing our liabilities. 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. 57 Table of Contents Historical Financial Information The following tables set forth our selected historical operating and financial data. The selected historical operating and balance sheet data for the years ended and as of December 31, 2024, 2023, 2022, 2021 and 2020 have been derived from our historical financial statements. Prior year information has been conformed to current year financial statement presentation. The information presented below is only a summary and does not provide all of the information contained in our historical consolidated financial statements, including the related notes. You should read the information below in conjunction with our historical consolidated financial statements, including the related notes (amounts in thousands, except per share data): Selected Statement of Operations Data: For the Years Ended December 31, 2024 2023 2022 2021 2020 Interest income $ 401,280 $ 258,660 $ 258,388 $ 206,866 $ 350,161 Interest expense 317,425 192,134 129,419 79,284 223,068 Net interest income 83,855 66,526 128,969 127,582 127,093 Net loss from real estate (42,841) (31,302) (113,579) (17,583) (344) Other (loss) income (42,236) (39,431) (262,169) 156,511 (360,211) General and administrative expenses 48,672 49,565 52,440 48,908 42,228 Portfolio operating expenses 30,688 23,952 40,888 26,668 11,572 Debt issuance costs 12,335 — — — — Net (loss) income attributable to Company's common stockholders (103,785) (90,035) (340,577) 144,176 (329,696) Basic (loss) earnings per common share $ (1.14) $ (0.99) $ (3.61) $ 1.52 $ (3.55) Diluted (loss) earnings per common share $ (1.14) $ (0.99) $ (3.61) $ 1.51 $ (3.55) Dividends declared per common share $ 0.80 $ 1.20 $ 1.60 $ 1.60 $ 0.92 Weighted average shares outstanding-basic 90,815 91,042 94,322 94,808 92,751 Weighted average shares outstanding-diluted 90,815 91,042 94,322 95,242 92,751 58 Table of Contents Selected Balance Sheet Data: As of December 31, 2024 2023 2022 2021 2020 Residential loans $ 3,841,738 $ 3,084,303 $ 3,525,080 $ 3,575,601 $ 3,049,166 Investment securities available for sale 3,828,544 2,013,817 99,559 200,844 724,726 Multi-family loans 86,192 95,792 87,534 120,021 163,593 Equity investments 113,492 147,116 179,746 239,631 259,095 Real estate, net 623,407 1,131,819 692,968 1,017,583 50,532 Assets of disposal group held for sale 118,613 426,017 1,151,784 — — Total assets (1) 9,217,282 7,401,328 6,240,745 5,658,301 4,655,587 Repurchase agreements 4,012,225 2,471,113 737,023 554,259 405,531 Collateralized debt obligations 2,978,444 1,870,517 2,102,717 1,522,221 1,623,658 Senior unsecured notes 159,196 98,111 97,384 96,704 — Subordinated debentures 45,000 45,000 45,000 45,000 45,000 Convertible notes — — — 137,898 135,327 Mortgages payable on real estate, net 366,606 784,421 394,707 709,356 36,752 Liabilities of disposal group held for sale 97,065 386,024 883,812 — — Total liabilities (1) 7,806,148 5,773,202 4,376,634 3,226,519 2,348,014 Redeemable non-controlling interest in Consolidated VIEs 12,359 28,061 63,803 66,392 — Company's stockholders' equity 1,394,720 1,579,612 1,767,216 2,341,031 2,301,202 Total equity 1,398,775 1,600,065 1,800,308 2,365,390 2,307,573 (1) Our consolidated balance sheets include assets and liabilities of Consolidated VIEs, as the Company is the primary beneficiary of these VIEs. Assets and liabilities of the Company's Consolidated VIEs for each of the balance sheet dates presented are included in the following table (dollar amounts in thousands): As of December 31, 2024 2023 2022 2021 2020 Consolidated VIEs Assets $ 3,988,584 $ 3,816,777 $ 4,261,097 $ 2,940,513 $ 2,150,984 Liabilities $ 3,477,211 $ 3,076,818 $ 3,403,257 $ 2,235,665 $ 1,667,306 59 Table of Contents Portfolio Update During the year ended December 31, 2024, we continued to expand our investment securities and residential loan portfolios. Our investment activity was offset primarily by prepayments, redemptions, distributions and/or sales. The following table presents the activity for our investment portfolio for the year ended December 31, 2024 (dollar amounts in thousands): December 31, 2023 Acquisitions (1) Repayments (2) Sales Transfers (3)(4) Fair Value Changes and Other (5) December 31, 2024 Residential loans $ 2,329,443 $ 1,892,892 $ (1,102,231) $ (162,883) $ — $ (81,155) $ 2,876,066 Investment securities Agency RMBS 1,989,324 1,500,039 (295,325) — — (57,226) 3,136,812 Non-Agency RMBS 24,493 53,286 (1,286) (5,284) — (1,522) 69,687 U.S. Treasury securities — 657,609 — — — (35,564) 622,045 Total investment securities available for sale 2,013,817 2,210,934 (296,611) (5,284) — (94,312) 3,828,544 Consolidated SLST (6) 157,154 9,857 (18,243) — — (260) 148,508 Total investment securities 2,170,971 2,220,791 (314,854) (5,284) — (94,572) 3,977,052 Preferred equity investments, mezzanine loans and equity investments 242,908 — (30,163) — (10,917) (2,144) 199,684 Equity investments in consolidated multi-family properties (7) 211,214 7,611 (25,824) — (9,344) (32,447) 151,210 Equity investments in disposal group held for sale (3) 36,815 1,890 (23,331) 3,515 9,344 (8,729) 19,504 Single-family rental properties 151,885 2,244 — (5,292) — (6,591) 142,246 Mortgage servicing rights — 9,470 — — 10,917 616 21,003 Total investment portfolio $ 5,143,236 $ 4,134,898 $ (1,496,403) $ (169,944) $ — $ (225,022) $ 7,386,765 (1) Includes draws funded for business purpose bridge loans and existing equity investments and capitalized costs for single-family rental properties. (2) Includes principal repayments and return of invested capital. (3) In September 2022, the Company announced a repositioning of its business through the opportunistic disposition over time of the Company's joint venture equity investments in multi-family properties and reallocation of its capital away from such assets to its targeted assets. Accordingly, 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, 2024 and 2023. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—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) Includes in-kind distribution of mortgage servicing rights received from the Company's equity investment in an entity that originates residential loans. (5) 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. (6) Consolidated SLST is primarily presented on our consolidated balance sheets as residential loans, at fair value and collateralized debt obligations, at fair value. A reconciliation to our consolidated financial statements as of December 31, 2024 and 2023, respectively, follows (dollar amounts in thousands): 60 Table of Contents December 31, 2024 December 31, 2023 Residential loans, at fair value $ 965,672 $ 754,860 Deferred interest (a) (5,573) (3,969) Less: Collateralized debt obligations, at fair value (811,591) (593,737) Consolidated SLST investment securities owned by NYMT $ 148,508 $ 157,154 (a) Included in other liabilities on our consolidated balance sheets as of December 31, 2024 and 2023. (7) See "Management's Discussion and Analysis of Financial Condition and Results of Operations—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. 61 Table of Contents Current Market Conditions and Commentar y The results of our business operations are affected by a number of factors, many of which are beyond our control, and primarily depend on, among other things, the level of our net interest income and the market value of our assets, which are 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 markets experienced modest positive performance in the fourth quarter of 2024 and strong positive performance for the full year 2024, spurred in part by economic growth and the Federal Reserve’s first cuts to the target range for the federal funds rate in approximately four and a half years. Mortgage-related markets were challenged in 2024 as borrowers remained sensitive to higher interest rates and origination volumes were down by some measures as compared to 2023, among other considerations. The Dow Jones Industrial Average finished the fourth quarter of 2024 up 0.51% and grew 12.88% for the full year 2024. The Nasdaq Composite Index finished the fourth quarter of 2024 up 6.17% and grew 28.64% for the full year 2024. However, interest rate and monetary policy uncertainty, mixed inflation data and geopolitical instability have cautioned some economic outlooks. We anticipate that due to uncertainty related to inflation, interest rates, monetary policy, the U.S. debt limit and the implementation of the new U.S. presidential administration’s policies, markets and the pricing for many of our assets will continue to experience volatility in 2025. The market conditions discussed below significantly influence our investment strategy and results: Select U.S. Financial and Economic Data . The U.S. economy grew modestly in 2024 with real gross domestic product (“GDP”) increasing by 2.8% for full year 2024, as compared to the GDP growth of 2.9% recorded for full year 2023. GDP grew at a 2.3% annualized rate in the fourth quarter of 2024, as compared to the annualized 3.1% GDP growth in the third quarter of 2024, annualized 3.0% GDP growth in the second quarter of 2024 and annualized 1.6% GDP growth in the first quarter of 2024. The fourth quarter 2024 GDP increase marks eleven straight quarters of GDP growth. While GDP grew in 2024, inflation remains persistently above the Federal Reserve’s target of two percent, and job growth remains robust, uncertainty about how the Federal Reserve may adjust its monetary policy or the target range for the federal funds rate in response to such macroeconomic trends may limit or undermine business activity and the potential for future GDP growth, which could negatively impact the value of credit investments. After moderating in the first half of 2024, the U.S. labor market tightened during the third quarter of 2024 and remained tight in the fourth quarter of 2024 in contrast to many market commentators’ expectations. According to the U.S. Department of Labor, the U.S. unemployment rate was 4.1% at the end of December 2024, finishing flat to the unemployment rate of 4.1% as of the end of September 2024 and up 30 basis points from the unemployment rate of 3.8% as of the end of December 2023. The number of unemployed persons increased by 0.6 million year-over-year to 6.9 million as of December 2024. There continues to be a wide disparity between the number of available job openings, 8.1 million as of the end of November 2024, and the number of unemployed persons, resulting in a competitive labor market and rising wages. As of December 2024, average hourly earnings for all employees on non-farm payrolls rose 3.9% year-over-year. After raising the target range for the federal funds rate a total of 5.25% in 2022 and 2023, bringing the range to its highest level in over 22 years, and holding the range at that target for 14 months, the Federal Reserve cut the target range by 50 basis points in September 2024 (the first such cut since March 2020), 25 basis points in November 2024 and 25 basis points in December 2024. In connection with its cuts to the target range for the federal funds rate, the Federal Reserve acknowledged that inflation has made progress toward the Federal Reserve’s target of two percent but remains somewhat elevated. In considering additional adjustments to the target range for the federal funds rate, the Federal Reserve stated that it will carefully assess incoming data, the evolving outlook, and the balance of risks to the Federal Reserve’s dual mandate of achieving maximum employment and inflation at a rate of two percent over the longer run. Changing expectations with respect to the Federal Reserve’s actions regarding the target range for the federal funds rate after quarter end contributed to an uncertain interest rate environment. Particularly, some market commentators have suggested that persistently elevated inflation and continued robust employment readings in recent months may mean that the Federal Reserve is likely to make fewer or smaller cuts to the target range for the federal funds rate in 2025. Higher interest rates tend to put pressure on our investments, mortgage borrowers, tenants, our operating partners and economic growth generally. 62 Table of Contents The fears of an economic recession in the U.S. that were prevalent in 2023 receded in connection with the consistent U.S. GDP growth seen in 2024, although some economists and market commentators have expressed expectations for U.S. GDP growth to slow in 2025. 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.” 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 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. Throughout 2024, 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 October 2024 showed that, on average, home prices increased 4.2% for the 20-City Composite over October 2023. Additionally, according to the National Association of Realtors (“NAR”), existing home sales in November 2024 increased 4.8% month-over-month and 6.1% year-over-year. NAR also reported that the median existing-home sales price for all housing types in November 2024 was $406,100, up 4.7% from $387,800 in November 2023. According to data provided by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, privately-owned housing starts for single-family homes averaged a seasonally adjusted annual rate of 1,003,000 and 1,009,917 for the three and twelve months ended December 31, 2024, respectively, as compared to 948,500 for the year ended December 31, 2023. Overall, existing home inventory for sale at the end of November 2024 amounted to 3.8 months of supply, down from 4.2 months of supply in October 2024 but up from 3.5 months of supply in November 2023, according to the NAR. According to Freddie Mac, the weekly average 30-year fixed-rate mortgage was up 0.44% year-over-year to 7.04% as of January 16, 2025. Declining single-family housing fundamentals may adversely impact the overall credit profile and value of our existing portfolio of single-family residential credit investments and the value of our single-family rental properties, as well as the availability of certain of our targeted assets. Rental Housing. According to data provided by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, starts on multi-family homes containing five or more units averaged a seasonally adjusted annual rate of 355,667 and 336,583 for the three and twelve months ended December 31, 2024, respectively, as compared to 459,417 for the year ended December 31, 2023. According to RealPage Analytics, rents for professionally managed apartments grew a modest 50 basis points in 2024 as a near-historic number of new apartment units were completed. The CoStar Group notes that the majority of the weakest-performing geographic markets in 2024 from an asking rent growth perspective were located in the Southeast and Texas, where oversupply conditions remain challenging and where a significant amount of our multi-family investments are concentrated. 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. The prior presidential administration issued statements and implemented policies aimed at establishing certain rights and protections for tenants and limiting the actions of real property owners and managers. However, certain political commentators expect that the current administration will reverse or cease the implementation of such positions and policies. Policies, regulations or laws implemented to establish tenant rights and protections and/or limit the actions of real property owners and managers could lead to increased costs, decreased revenue 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 both tightened over the course of the fourth quarter of and full year 2024. At the end of 2024, investment grade spreads tightened 10 basis points and 22 basis points as compared to the start of the fourth quarter of 2024 and the start of 2024, respectively. At the end of 2024, high-yield credit spreads tightened 11 basis points and 47 basis points as compared to the start of the fourth quarter of 2024 and the start of 2024, respectively. 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. 63 Table of Contents Financing Markets. For the first time since June 2022, the Treasury curve uninverted at the end of August 2024, marking the end of the longest inverted Treasury curve on record. This normalization of the Treasury curve was driven in part by investors’ expectations of the Federal Reserve’s cuts to the target range for the federal funds rate. Inversions and subsequent normalizations of this spread are generally considered to be indicators of a recession in the near term, although some market commentators have cautioned against August 2024’s uninversion being such an indicator. Further, a January 2025 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 22%, the lowest probability indicated by the Wall Street Journal’s survey since January 2022. On December 31, 2024, the spread between the 2-Year U.S. Treasury yield and the 10-Year U.S. Treasury yield closed at 33 basis points, as compared to a negative 35 basis point spread on December 29, 2023. This spread is important as it is indicative of opportunities for investing in levered assets. Increases in interest rates raise the costs of many of our liabilities, while overall interest rate volatility generally increases the costs of hedging and may place downward pressure on some of our strategies. Monetary Policy and Recent Regulatory Developments. The Federal Reserve took a number of actions to stabilize markets during the COVID-19 pandemic. From March 2020 until March 2022, the Federal Reserve implemented an asset purchase program aimed at providing liquidity to the U.S. Treasury and Agency RMBS markets. Under the Federal Reserve’s asset purchase program, the Federal Reserve’s balance sheet grew from about $4.2 trillion in assets at the start of March 2020 to about $8.9 trillion in assets at the end of the program in March 2022. On June 1, 2022, the Federal Reserve shifted course and began shrinking its balance sheet by reducing its holdings of U.S. Treasuries and Agency RMBS by $47.5 billion per month. In September 2022, the Federal Reserve increased its efforts to reduce its balance sheet by doubling the amount of U.S. Treasuries and Agency RMBS it rolls off its balance sheet to $95 billion each month. On June 1, 2024, the Federal Reserve reduced from $60 billion to $25 billion the amount of U.S. Treasuries it rolls off its balance sheet each month while continuing to reduce its holdings of Agency RMBS by $35 billion per month. As of January 13, 2025, the Federal Reserve held about $6.8 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. 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 until September 19, 2024 when the Federal Reserve implemented a 50 basis point cut to the target range. When announcing the 50 basis point rate cut in September 2024, the Federal Reserve stated that inflation had made progress toward the Federal Reserve’s objective of achieving an inflation rate of two percent over the longer run and that, in light of this progress on inflation and considering the risks to the Federal Reserve’s second objective of achieving maximum employment, a cut to the target range was appropriate. On each of November 8, 2024 and December 19, 2024, the Federal Reserve again cut the target range to the federal funds rate by 25 basis points, bringing the total cuts to the target range in 2024 to 100 basis points. The Federal Reserve noted in its December 2024 statement that any future cuts to the target range for the federal funds rate will depend on a careful assessment of incoming data, the evolving outlook, and the balance of risks to its dual mandate of achieving maximum employment and an inflation rate of two percent. As reflected on the “dot plot” included in the projection materials from the Federal Reserve’s December 2024 meeting, most Federal Reserve officials indicated that an additional 50 basis points in cuts to the target range for the federal funds rate by the end of 2025 would be appropriate. However, recent economic data along with the Federal Reserve’s December 2024 statement emphasizing the consideration that will be given to evolving economic data has cautioned some market commentators’ expectations of the number and extent of further cuts to the target range for the federal funds rate in 2025. Uncertainty exists regarding the U.S. debt limit, which is the statutory maximum amount of money that the U.S. government may borrow to meet its existing obligations. The U.S. government reached the debt limit in the middle of January 2025 and the U.S. Treasury began taking “extraordinary measures” to keep the U.S. from breaching its obligations. The U.S. Congress must approve any increases to or suspensions of the U.S. debt limit. If the U.S. debt limit is not increased or suspended before the effectiveness of such extraordinary measures is exhausted, which some estimate will be sometime around the middle of 2025, the U.S. government may default on its obligations causing severe economic consequences. A default of the U.S. government on its obligations may also cause yields on U.S. Treasuries, and interest rates broadly, to rise, among other things. A weakened economy and/or higher interest rates 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, any of which could materially adversely affect our results of operations and financial condition. 64 Table of Contents In September 2008, the U.S. Government placed Fannie Mae and Freddie Mac into the conservatorship of the FHFA in order to preserve and conserve their assets and property and restore them to a sound and solvent condition so they can continue to fulfill their statutory missions. In President Trump’s first term, his administration sought to end the conservatorships of Fannie Mae and Freddie Mac, but so far into his second term, President Trump’s administration has not explicitly expressed its intentions with respect to the conservatorships. However, many market and political commentators believe President Trump may seek to end the conservatorships of Fannie Mae and Freddie Mac. Together, Fannie Mae and Freddie Mac guarantee a significant amount of the nearly $13 trillion U.S. Home loan market. If the conservatorships of Fannie Mae and Freddie Mac were ended, Fannie Mae and Freddie Mac may need to hold additional capital against riskier loans which may, in turn, cause Fannie Mae and Freddie Mac to charge borrowers higher mortgage rates or to lessen the amount of their lending, among other things. We invest in Agency RMBS and other mortgage-related assets that may be guaranteed by Fannie Mae or Freddie Mac. Higher interest rates tend to put pressure on our investments, mortgage borrowers, tenants, our operating partners and economic growth generally. For further discussion, please see the risk factor titled “The federal conservatorship of Fannie Mae and Freddie Mac and related efforts, along with any changes in such conservatorship or laws and regulations affecting the relationship between Fannie Mae, Freddie Mac and Ginnie Mae and the U.S. Government, may materially adversely affect our business, financial condition and results of operations, and our ability to pay dividends to our shareholders” in Part I, Item “1A. Risk Factors” in this Annual Report on Form 10-K. The scope and nature of the actions the Federal Reserve and other governmental authorities will ultimately undertake are unknown and will continue to evolve. There can be no assurance as to how, in the long term, these and other actions, as well as the negative impacts from ongoing geopolitical instability and uncertainty surrounding inflation, interest rates and the outlook for the U.S. and global economies, will affect the efficiency, liquidity and stability of the financial, credit and mortgage markets, and thus, our business. Greater uncertainty frequently leads to wider asset spreads or lower prices and higher hedging costs. 65 Table of Contents Full Year 2024 Summary Earnings and Return Metrics The following table presents key earnings and return metrics for the year ended December 31, 2024 (dollar amounts in thousands, except per share data): Year Ended December 31, 2024 Net loss attributable to Company's common stockholders $ (103,785) Net loss attributable to Company's common stockholders per share (basic) $ (1.14) Undepreciated loss (1) $ (91,759) Undepreciated loss per common share (1) $ (1.01) Comprehensive loss attributable to Company's common stockholders $ (103,781) Comprehensive loss attributable to Company's common stockholders per share (basic) $ (1.14) Yield on average interest earning assets (1) (2) 6.54 % Interest income $ 401,280 Interest expense $ 317,425 Net interest income $ 83,855 Net interest spread (1) (3) 1.33 % Book value per common share at the end of the period $ 9.28 Adjusted book value per common share at the end of the period (1) $ 10.35 Economic return on book value (4) (10.88) % Economic return on adjusted book value (5) (11.93) % Dividends per common share $ 0.80 (1) Represents a non-GAAP financial measure. A reconciliation of the Company's non-GAAP financial measures to their most directly comparable GAAP measure is included in "Non-GAAP Financial Measures" elsewhere in this section. (2) Calculated as the quotient of our adjusted interest income and our average interest earning assets and excludes all Consolidated SLST assets other than those securities owned by the Company. (3) Our calculation of net interest spread may not be comparable to similarly-titled measures of other companies who may use a different calculation. (4) Economic return on book value is based on the periodic change in GAAP book value per common share plus dividends declared per common share, if any, during the period. (5) Economic return on adjusted book value is based on the periodic change in adjusted book value per common share, a non-GAAP financial measure, plus dividends declared per common share, if any, during the period. Key Developments During Full Year 2024 Investing Activities • Purchased approximately $2.2 billion of investment securities, including $1.5 billion of Agency RMBS with an average coupon of 5.69%. • Purchased approximately $1.9 billion of residential loans with an average gross coupon of 9.93% . • Sold three multi-family apartment communities held by joint venture equity investments which generated a net gain attributable to the Company's common stockholders of approximately $12.3 million. • Sold or distributed equity interests in joint venture equity investments that owned ten multi-family apartment communities which generated a gain on de-consolidation attributable to the Company's common stockholders of approximately $5.7 million. 66 Table of Contents Financing Activities • Completed five securitizations of residential loans and a re-securitization of our investment in certain subordinated securities issued by Consolidated SLST, resulting in approximately $1.3 billion in net proceeds to us after deducting expenses associated with the transactions. We utilized a portion of the net proceeds to repay approximately $865.4 million on outstanding repurchase agreements related to residential loans and investment securities. We also redeemed two residential loan securitizations with an outstanding balance of approximately $193.3 million at the time of redemption. • Completed the issuance of $60.0 million of 9.125% Senior Notes due 2029 in an underwritten public offering at par, resulting in approximately $57.5 million in net proceeds to us after deducting the underwriters' discount and commissions and offering expenses. • Repurchased 587,347 shares of common stock for approximately $3.5 million at an accretive average repurchase price of $5.95 per common share. Subsequent Developments • On January 14, 2025, we completed the issuance of $82.5 million in aggregate principal amount of our 9.125% Senior Notes due 2030 in an underwritten public offering. The total net proceeds to us from the offering of the notes, after deducting the underwriters' discount and commissions and offering expenses, were approximately $79.3 million. • In February 2025, we completed a new securitization of residential loans resulting in approximately $74.2 million of net proceeds to us after deducting expenses associated with the transaction and redeemed a residential loan securitization with an outstanding balance of approximatel y $54.4 million a t the time of redemption. • On February 19, 2025, we announced that our Board of Directors approved extensions of our common stock repurchase program, under which $189.7 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, 2025 to March 31, 2026. 67 Table of Contents Capital Allocation The following provides an overview of the allocation of our total equity as of December 31, 2024 and 2023, respectively. We fund our investing and operating activities with a combination of cash flow from operations, proceeds from common and preferred equity and debt securities offerings, including senior unsecured notes and subordinated debentures, short-term and longer-term repurchase agreements and CDOs. A detailed discussion of our liquidity and capital resources is provided in “Liquidity and Capital Resources” elsewhere in this section. The following tables set forth our allocated capital by investment category at December 31, 2024 and 2023, respectively (dollar amounts in thousands). At December 31, 2024: Single-Family Multi-Family Corporate/Other Total Residential loans $ 3,841,738 $ — $ — $ 3,841,738 Consolidated SLST CDOs (811,591) — — (811,591) Investment securities available for sale 3,206,499 — 622,045 3,828,544 Multi-family loans — 86,192 — 86,192 Equity investments — 74,774 38,718 113,492 Equity investments in consolidated multi-family properties (1) — 151,210 — 151,210 Equity investments in disposal group held for sale (2) — 19,504 — 19,504 Single-family rental properties 142,246 — — 142,246 Mortgage servicing rights 21,003 — — 21,003 Total investment portfolio carrying value 6,399,895 331,680 660,763 7,392,338 Liabilities: Repurchase agreements (3,377,161) — (635,064) (4,012,225) Collateralized debt obligations Residential loan securitization CDOs (2,096,096) — — (2,096,096) Non-Agency RMBS re-securitization (70,757) — — (70,757) Senior unsecured notes — — (159,196) (159,196) Subordinated debentures — — (45,000) (45,000) Cash, cash equivalents and restricted cash (3) 115,926 — 208,948 324,874 Cumulative adjustment of redeemable non-controlling interest to estimated redemption value — (40,675) — (40,675) Other 138,012 (1,864) (34,691) 101,457 Net Company capital allocated $ 1,109,819 $ 289,141 $ (4,240) $ 1,394,720 Company Recourse Leverage Ratio (4) 3.0 x Portfolio Recourse Leverage Ratio (5) 2.9 x (1) Represents the Company's equity investments in consolidated multi-family properties that are not in disposal group held for sale. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Analysis—Equity Investments in Multi-Family Entities" for a reconciliation of equity investments in consolidated multi-family properties and disposal group held for sale to the Company's consolidated financial statements. (2) Represents the Company's equity investments in consolidated multi-family properties that are held for sale in disposal group. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Analysis—Equity Investments in Multi-Family Entities" for a reconciliation of equity investments in consolidated multi-family properties and disposal group held for sale to the Company's consolidated financial statements. (3) Excludes cash in the amount of $6.6 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 $161.6 million is included in the Company's accompanying consolidated balance sheets in other assets. 68 Table of Contents (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 $11.0 million, Consolidated SLST CDOs amounting to $811.6 million, residential loan securitization CDOs amounting to $2.1 billion, non-Agency RMBS re-securitization CDOs amounting to $70.8 million and mortgages payable on real estate , including mortgages payable on real estate of disposal group held for sale, totaling $460.0 million as they are non-recourse debt. (5) Represents the Company's outstanding recourse repurchase agreement financing divided by the Company’s total stockholders’ equity. At December 31, 2023: Single-Family Multi-Family Corporate/Other Total Residential loans $ 3,084,303 $ — $ — $ 3,084,303 Consolidated SLST CDOs (593,737) — — (593,737) 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 Equity investments in consolidated multi-family properties (1) — 211,214 — 211,214 Equity investments in disposal group held for sale (2) — 36,815 — 36,815 Single-family rental properties 151,885 — — 151,885 Total investment portfolio carrying value 4,656,268 453,783 37,154 5,147,205 Liabilities: Repurchase agreements (2,471,113) — — (2,471,113) Residential loan securitization CDOs (1,276,780) — — (1,276,780) Senior unsecured notes — — (98,111) (98,111) Subordinated debentures — — (45,000) (45,000) Cash, cash equivalents and restricted cash (3) 139,562 — 175,468 315,030 Cumulative adjustment of redeemable non-controlling interest to estimated redemption value — (30,062) — (30,062) Other 74,716 (1,352) (34,921) 38,443 Net Company capital allocated $ 1,122,653 $ 422,369 $ 34,590 $ 1,579,612 Company Recourse Leverage Ratio (4) 1.6 x Portfolio Recourse Leverage Ratio (5) 1.5 x 69 Table of Contents (1) Represents the Company's equity investments in consolidated multi-family properties that are not in disposal group held for sale. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Analysis—Equity Investments in Multi-Family Entities" for a reconciliation of equity investments in consolidated multi-family properties and disposal group held for sale to the Company's consolidated financial statements. (2) Represents the Company's equity investments in consolidated multi-family properties that are held for sale in disposal group. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Analysis—Equity Investments in Multi-Family Entities" for a reconciliation of equity investments in consolidated multi-family properties and disposal group held for sale to the Company's consolidated financial statements. (3) Excludes cash in the amount of $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 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. 70 Table of Contents Results of Operations The following discussion provides information regarding our results of operations for the years ended December 31, 2024 and 2023, including a comparison of year-over-year results and related commentary. A number of the tables contain a “change” column that indicates the amount by which results from the year ended December 31, 2024 are greater or less than the results from the year ended December 31, 2023. Unless otherwise specified, references in this section to increases or decreases in 2024 refer to the change in results for the year ended December 31, 2024 when compared to the year ended December 31, 2023. For a discussion related to our results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, please refer to Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 23, 2024 and is available on the SEC’s website at www.sec.gov. The following table presents the main components of our net loss for the years ended December 31, 2024 and 2023, respectively (dollar amounts in thousands, except per share data): For the Years Ended December 31, 2024 2023 $ Change Interest income $ 401,280 $ 258,660 $ 142,620 Interest expense 317,425 192,134 125,291 Net interest income 83,855 66,526 17,329 Net loss from real estate (42,841) (31,302) (11,539) Total other loss (42,236) (39,431) (2,805) General and administrative expenses 48,672 49,565 (893) Portfolio operating expenses 30,688 23,952 6,736 Debt issuance costs 12,335 — 12,335 Loss from operations before income taxes (92,917) (77,724) (15,193) Income tax expense 1,036 75 961 Net loss attributable to non-controlling interests 31,924 29,134 2,790 Net loss attributable to Company (62,029) (48,665) (13,364) Preferred stock dividends (41,756) (41,837) 81 Gain on repurchase of preferred stock — 467 (467) Net loss attributable to Company's common stockholders (103,785) (90,035) (13,750) Basic loss per common share $ (1.14) $ (0.99) $ (0.15) Diluted loss per common share $ (1.14) $ (0.99) $ (0.15) Interest Income and Interest Expense Interest income increased in 2024 primarily due to increased investments in Agency RMBS and business purpose loans. The increase in interest expense in 2024 was due primarily to an increase in financing obtained to fund investing activity through repurchase agreements and securitizations as well as issuance of the 9.125% Senior Notes due 2029. 71 Table of Contents Net Loss from Real Estate The following table presents the components of net loss from real estate for the years ended December 31, 2024 and 2023, respectively (dollar amounts in thousands): For the Years Ended December 31, 2024 2023 $ Change Income from real estate $ 132,639 $ 171,774 $ (39,135) Expenses related to real estate: Interest expense, mortgages payable on real estate (60,232) (90,221) 29,989 Depreciation expense on operating real estate (37,444) (24,620) (12,824) Amortization of lease intangibles related to operating real estate (2,378) — (2,378) Other real estate expenses (75,426) (88,235) 12,809 Total expenses related to real estate (175,480) (203,076) 27,596 Net loss from real estate $ (42,841) $ (31,302) $ (11,539) The increase in net loss from real estate in 2024 was primarily attributable to a reduction in rental income as a result of the sale or de-consolidation, since December 31, 2023, of certain multi-family real estate assets owned by entities in which we had joint venture equity investments. Expenses related to real estate decreased due to a decrease in interest expense on mortgages payable and a decrease in operating expenses due to the aforementioned sales or de-consolidation of multi-family real estate assets. This decrease was partially offset by an increase in depreciation expense and amortization of lease intangibles as a result of the return of certain multi-family real estate assets owned by entities in which we have joint venture equity investments to held and used since December 2023. Other Loss Realized Losses, Net The following table presents the components of realized losses, net recognized for the years ended December 31, 2024 and 2023, respectively (dollar amounts in thousands ): For the Years Ended December 31, 2024 2023 $ Change Residential loans and real estate owned $ (28,133) $ (12,738) $ (15,395) Investment securities (1,218) (14,321) 13,103 Total realized losses, net $ (29,351) $ (27,059) $ (2,292) Net realized losses related to our residential loan portfolio increased in 2024, primarily as a result of increased losses incurred on foreclosed properties and recognized on the sale of residential loans and a decrease in net realized gain from payoffs of residential loans. We also recognized net realized losses of $1.2 million on write-downs of non-Agency RMBS in 2024 . In 2023, we recognized net realized losses of $14.3 million related to investment securities primarily attributable to the sale of ABS, CMBS and non-Agency RMBS. 72 Table of Contents Unrealized (Losses) Gains, Net The following table presents the components of unrealized (losses) gains, net recognized for the years ended December 31, 2024 and 2023, respectively (dollar amounts in thousands): For the Years Ended December 31, 2024 2023 $ Change Residential loans $ 1,285 $ 69,790 $ (68,505) Consolidated SLST 2,902 (10,016) 12,918 CDOs at fair value (1,484) — (1,484) Senior unsecured notes at fair value (310) — (310) Preferred equity and mezzanine loan investments (4,717) 1,079 (5,796) Investment securities (88,822) 36,343 (125,165) Mortgage servicing rights 616 — 616 Total unrealized (losses) gains, net $ (90,530) $ 97,196 $ (187,726) We recognized net unrealized losses in 2024 primarily due to an increase in interest rates, which impacted the pricing of our investment securities and residential loans. The net unrealized losses on our investment securities were more than offset by unrealized gains on our derivative instruments, as discussed below. The unrealized losses on residential loans were more than offset by the reversal of unrealized losses as a result of foreclosures, payoffs and sales during the year. We recognized net unrealized gains in 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. Gains (Losses) on Derivative Instruments, Net The following table presents the components of gains (losses) on derivative investments, net for the years ended December 31, 2024 and 2023, respectively (dollar amounts in thousands): For the Years Ended December 31, 2024 2023 $ Change Unrealized gains (losses) on derivative instruments $ 83,899 $ (29,373) $ 113,272 Realized gains on derivative instruments 12,097 2,995 9,102 Total gains (losses) on derivative instruments, net $ 95,996 $ (26,378) $ 122,374 We recognized $96.0 million in net gains on derivative instruments in 2024, primarily due to increases in interest rates which resulted in higher valuations of our interest rate swaps. We also recognized net realized gains on derivative instruments resulting from net payments received on instruments, partially offset by losses realized on contract terminations in 2024. We recognized $26.4 million in net losses on derivative instruments in 2023, primarily due to decreases in fair value of interest rate 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. 73 Table of Contents Income from Equity Investments The following table presents the components of income from equity investments for the years ended December 31, 2024 and 2023, respectively (dollar amounts in thousands): For the Years Ended December 31, 2024 2023 $ Change Preferred return on preferred equity investments accounted for as equity $ 12,775 $ 19,308 $ (6,533) Unrealized (losses) gains, net on preferred equity investments accounted for as equity (4,863) 1,154 (6,017) Loss from unconsolidated joint venture equity investments in multi-family properties (4,382) (3,291) (1,091) Income from entity that originates residential loans 12,481 614 11,867 Total income from equity investments $ 16,011 $ 17,785 $ (1,774) The decrease in income from equity investments in 2024 was primarily due to 1) decreases in preferred return on preferred equity investments accounted for as equity as a result of redemptions that have occurred since December 31, 2023 and 2) unrealized losses recognized on preferred equity investments accounted for as equity and unconsolidated joint venture equity investments in multi-family properties as a result of property performance and wider cap rates during the current period. The decrease in total income from equity investments was partially offset by an increase in income from an entity that originates residential loans due to increased origination volume and profitability in 2024. Impairment of Real Estate The following table presents impairment of real estate for the years ended December 31, 2024 and 2023, respectively (dollar amounts in thousands): For the Years Ended December 31, 2024 2023 $ Change Impairment of real estate $ (48,875) $ (89,548) $ 40,673 In 2024, we recognized impairment losses on certain multi-family real estate assets due to lower valuations driven by a decrease in net operating income estimates and wider cap rates. We also recognized impairment losses on certain single-family rental properties transferred to held for sale as a result of the remeasurement of those assets to estimated fair value less costs to sell in 2024. The decrease in impairment of real estate in 2024 can be attributed to slowing cap rate widening as compared to 2023 as well as the sale or de-consolidation of certain multi-family real estate assets since December 31, 2023. 74 Table of Contents Loss on Reclassification of Disposal Group The following table presents loss on reclassification of disposal group for the years ended December 31, 2024 and 2023, respectively (dollar amounts in thousands): For the Years Ended December 31, 2024 2023 $ Change Loss on reclassification of disposal group $ (14,636) $ (16,163) $ 1,527 One joint venture equity investment was reclassified from disposal group held for sale in 2024 . As a result of this transfer, we adjusted the carrying value of the long-lived assets in the Consolidated Real Estate VIE 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 an approximately $14.6 million loss on reclassification of disposal group. In 2023, nine joint venture equity investments were reclassified from disposal group held for sale, resulting in a loss on reclassification of disposal group of approximately $16.2 million. Other Income The following table presents the components of other income for the years ended December 31, 2024 and 2023, respectively (dollar amounts in thousands): For the Years Ended December 31, 2024 2023 $ Change Gain on sale of real estate $ 27,835 $ 4,763 $ 23,072 Gain on de-consolidation of joint venture equity investments in Consolidated VIEs 6,115 — 6,115 Servicing fee income 906 — 906 Preferred equity and mezzanine loan premiums resulting from early redemption 196 390 (194) Loss on extinguishment of collateralized debt obligations and mortgages payable on real estate (2,864) (796) (2,068) Provision for uncollectible receivables (3,207) — (3,207) Miscellaneous income 168 379 (211) Total other income $ 29,149 $ 4,736 $ 24,413 The net increase in other income in 2024 is primarily due to gains recognized on the sales of both certain multi-family properties and our membership interests in consolidated joint venture equity investments. Expenses The following tables present the components of general, administrative and portfolio operating expenses for the years ended December 31, 2024 and 2023, respectively (dollar amounts in thousands): For the Years Ended December 31, 2024 2023 $ Change General and Administrative Expenses Salaries, benefits and directors’ compensation $ 34,798 $ 36,609 $ (1,811) Professional fees 5,891 4,748 1,143 Other 7,983 8,208 (225) Total general and administrative expenses $ 48,672 $ 49,565 $ (893) 75 Table of Contents The decrease in general and administrative expenses in 2024 is primarily related to decreases in salary and stock compensation expenses, partially offset by increases in legal and tax advisory fees. For the Years Ended December 31, 2024 2023 $ Change Portfolio operating expenses $ 30,688 $ 23,952 $ 6,736 The increase in portfolio operating expenses in 2024 is primarily related to the growth in our residential loan portfolio as well as an increase in expenses related to our non-performing residential loan portfolio.. For the Years Ended December 31, 2024 2023 $ Change Securitization transaction costs $ 9,855 $ — $ 9,855 Senior unsecured notes transaction costs 2,480 — 2,480 Total debt issuance costs $ 12,335 $ — $ 12,335 We elected the fair value option with respect to CDOs and senior unsecured notes issued by the Company after January 1, 2024. Accordingly, costs associated with the issuance of debt subject to the fair value election are expensed as they are incurred and are included in debt issuance costs i n 2024. Comprehensive Loss The main components of comprehensive loss for the years ended December 31, 2024 and 2023, respectively, are detailed in the following table (dollar amounts in thousands): For the Years Ended December 31, 2024 2023 $ Change NET LOSS ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS $ (103,785) $ (90,035) $ (13,750) OTHER COMPREHENSIVE INCOME Increase in fair value of available for sale securities Non-Agency RMBS — 144 (144) Total — 144 (144) Reclassification adjustment for net loss included in net loss 4 1,822 (1,818) TOTAL OTHER COMPREHENSIVE INCOME 4 1,966 (1,962) COMPREHENSIVE LOSS ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS $ (103,781) $ (88,069) $ (15,712) 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. Changes in the market values of investment securities where the Company elected the fair value option are reflected in earnings instead of in OCI. As of December 31, 2024 , all of the Company's investment securities are accounted for using the fair value option. 76 Table of Contents Analysis of Changes in GAAP Book Value The following table analyzes the changes in GAAP book value of our common stock for the year ended December 31, 2024 (amounts in thousands, except per share): Year Ended December 31, 2024 Amount Shares Per Share (1) Beginning Balance $ 1,025,502 90,675 $ 11.31 Common stock issuance, net (2) 6,068 487 Common stock repurchases (3,493) (587) Balance after share activity 1,028,077 90,575 11.35 Adjustment of redeemable non-controlling interest to estimated redemption value (10,613) (0.12) Dividends and dividend equivalents declared (73,073) (0.81) Net change in accumulated other comprehensive loss: Investment securities available for sale (3) 4 — Net loss attributable to Company's common stockholders (103,785) (1.14) Ending Balance $ 840,610 90,575 $ 9.28 (1) Outstanding shares used to calculate book value per common share for the year ended December 31, 2024 are 90,574,996. (2) Includes amortization of stock based compensation. (3) The net increase relates to the reclassification of unrealized loss to net loss during the period. The following table analyzes the changes in GAAP book value of our common stock for the year ended December 31, 2023 (amounts in thousands, except per share): Year Ended December 31, 2023 Amount Shares Per Share (1) Beginning Balance $ 1,210,091 91,194 $ 13.27 Common stock issuance, net (2) 8,825 419 Common stock repurchases (8,615) (938) Preferred stock repurchases 109 — 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 Dividends and dividend equivalents declared (111,014) (1.23) Net change in accumulated other comprehensive loss: Investment securities available for sale (3) 1,966 0.02 Net loss attributable to Company's common stockholders (90,035) (0.99) Ending Balance $ 1,025,502 90,675 $ 11.31 (1) Outstanding shares used to calculate book value per common share for the year ended December 31, 2023 are 90,675,403. (2) Includes amortization of stock based compensation. (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. 77 Table of Contents Non-GAAP Financial Measures In addition to the results presented in accordance with GAAP, this Annual Report on Form 10-K includes certain non-GAAP financial measures, including adjusted interest income, adjusted interest expense, adjusted net interest income (loss), yield on average interest earning assets, average financing cost, net interest spread, undepreciated loss and adjusted book value per common share. Our management team believes that these non-GAAP financial measures, when considered with our GAAP financial statements, provide supplemental information useful for investors as it enables them to evaluate our current performance and trends using the metrics that management uses to operate our business. Our presentation of non-GAAP financial measures may not be comparable to similarly-titled measures of other companies, who may use different calculations. Because these measures are not calculated in accordance with GAAP, they should not be considered a substitute for, or superior to, the financial measures calculated in accordance with GAAP. Our GAAP financial results and the reconciliations of the non-GAAP financial measures included in this Annual Report on Form 10-K to the most directly comparable financial measures prepared in accordance with GAAP should be carefully evaluated. Adjusted Net Interest Income (Loss) and Net Interest Spread Financial results for the Company during a given period include the net interest income earned on our investment portfolio of residential loans, investment securities 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 (loss) 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 (loss) 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 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 (loss) – 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 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 and mortgages payable on real estate, and • net interest spread – calculated as the difference between our yield on average interest earning assets and our average financing cost. 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. 78 Table of Contents The following tables set forth certain information about our interest earning assets by category and their related adjusted interest income, adjusted interest expense, adjusted net interest income (loss), yield on average interest earning assets, average financing cost and net interest spread for the years ended December 31, 2024, 2023 and 2022 , respectively (dollar amounts in thousands): Year Ended December 31, 2024 Single-Family (8) Multi- Family Corporate/Other Total Adjusted Interest Income (1) (2) $ 357,481 $ 10,755 $ 6,553 $ 374,789 Adjusted Interest Expense (1) (237,399) — (22,620) (260,019) Adjusted Net Interest Income (Loss) (1) $ 120,082 $ 10,755 $ (16,067) $ 114,770 Average Interest Earning Assets (3) $ 5,484,729 $ 92,421 $ 154,196 $ 5,731,346 Average Interest Bearing Liabilities (4) $ 4,594,623 $ — $ 400,627 $ 4,995,250 Yield on Average Interest Earning Assets (1) (5) 6.52 % 11.64 % 4.25 % 6.54 % Average Financing Cost (1) (6) (5.17) % — (5.65) % (5.21) % Net Interest Spread (1) (7) 1.35 % 11.64 % (1.40) % 1.33 % Year Ended December 31, 2023 Single-Family (8) Multi- Family Corporate/Other Total Adjusted Interest Income (1) (2) $ 220,385 $ 13,707 $ 62 $ 234,154 Adjusted Interest Expense (1) (142,742) — (12,799) (155,541) Adjusted Net Interest Income (Loss) (1) $ 77,643 $ 13,707 $ (12,737) $ 78,613 Average Interest Earning Assets (3) $ 3,692,131 $ 120,687 $ 1,264 $ 3,814,082 Average Interest Bearing Liabilities (4) $ 2,684,304 $ — $ 197,986 $ 2,882,290 Yield on Average Interest Earning Assets (1) (5) 5.97 % 11.36 % 4.91 % 6.14 % Average Financing Cost (1) (6) (5.32) % — (6.46) % (5.40) % Net Interest Spread (1) (7) 0.65 % 11.36 % (1.55) % 0.74 % Year Ended December 31, 2022 Single-Family (8) Multi- Family Corporate/Other Total Adjusted Interest Income (1) (2) $ 213,770 $ 13,499 $ 5,974 $ 233,243 Adjusted Interest Expense (1) (94,664) (152) (9,458) (104,274) Adjusted Net Interest Income (Loss) (1) $ 119,106 $ 13,347 $ (3,484) $ 128,969 Average Interest Earning Assets (3) $ 3,354,923 $ 135,769 $ 13,820 $ 3,504,512 Average Interest Bearing Liabilities (4) $ 2,333,020 $ 5,520 $ 150,194 $ 2,488,734 Yield on Average Interest Earning Assets (1) (5) 6.37 % 9.94 % 43.23 % 6.66 % Average Financing Cost (1) (6) (4.06) % (2.75) % (6.30) % (4.19) % Net Interest Spread (1) (7) 2.31 % 7.19 % 36.93 % 2.47 % (1) Represents a non-GAAP financial measure. (2) Includes interest income earned on cash accounts held by the Company. 79 Table of Contents (3) Average Interest Earning Assets for the respective periods include residential loans, multi-family loans and investment securities and exclude all Consolidated SLST 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 and non-Agency RMBS re-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. (5) Yield on Average Interest Earning Assets is calculated by dividing our adjusted interest income relating to our portfolio of interest earning assets by our Average Interest Earning Assets for the respective periods. (6) Average Financing Cost is calculated by dividing our adjusted interest expense by our Average Interest Bearing Liabilities. (7) Net Interest Spread is the difference between our Yield on Average Interest Earning Assets and our Average Financing Cost. (8) The Company has determined it is the primary beneficiary of Consolidated SLST and has consolidated Consolidated SLST into the Company's consolidated financial statements. Our GAAP interest income includes interest income recognized on the underlying seasoned re-performing and non-performing residential loans held in Consolidated SLST. Our GAAP interest expense includes interest expense recognized on the Consolidated SLST CDOs that permanently finance the residential loans in Consolidated SLST and are not owned by the Company. We calculate adjusted interest income by reducing our GAAP interest income by the interest expense recognized on the Consolidated SLST CDOs and adjusted interest expense by excluding, 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 (loss). Our adjusted net interest income increased in 2024 as compared to the prior year. Adjusted interest income increased by approximately $140.6 million primarily due to 1) an increase in interest earning assets driven by increased investment in Agency RMBS and 2) an increase in yield on residential loans due to continued investment in business purpose loans. Adjusted interest expense increased by approximately $104.5 million as a result of increased financing obtained through repurchase agreements and securitizations as well as the issuance of the 9.125% Senior Notes due 2029 to fund investment activity . Net interest spread increased during 2024, primarily due to an increase in yield on Average Interest Earning Assets resulting from our continued investment in higher yielding business purpose loans. The increase in net spread was also the result of a decrease in the cost of financing due to the benefit of our in-the-money interest rate swaps. 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. 80 Table of Contents A reconciliation of GAAP interest income to adjusted interest income, GAAP interest expense to adjusted interest expense and GAAP total net interest income (loss) to adjusted net interest income (loss) for the years ended December 31, 2024, 2023 and 2022, respectively, is presented below (dollar amounts in thousands): Years Ended December 31, 2024 2023 2022 Single-Family Multi-Family Corporate/Other Total Single-Family Multi-Family Corporate/Other Total Single-Family Multi-Family Corporate/Other Total GAAP interest income $ 383,972 $ 10,755 $ 6,553 $ 401,280 $ 244,891 $ 13,707 $ 62 $ 258,660 $ 238,915 $ 13,499 $ 5,974 $ 258,388 GAAP interest expense (290,483) — (26,942) (317,425) (176,890) — (15,244) (192,134) (119,809) (152) (9,458) (129,419) GAAP total net interest income (loss) $ 93,489 $ 10,755 $ (20,389) $ 83,855 $ 68,001 $ 13,707 $ (15,182) $ 66,526 $ 119,106 $ 13,347 $ (3,484) $ 128,969 GAAP interest income $ 383,972 $ 10,755 $ 6,553 $ 401,280 $ 244,891 $ 13,707 $ 62 $ 258,660 $ 238,915 $ 13,499 $ 5,974 $ 258,388 Adjusted for: Consolidated SLST CDO interest expense (26,491) — — (26,491) (24,506) — — (24,506) (25,145) — — (25,145) Adjusted interest income $ 357,481 $ 10,755 $ 6,553 $ 374,789 $ 220,385 $ 13,707 $ 62 $ 234,154 $ 213,770 $ 13,499 $ 5,974 $ 233,243 GAAP interest expense $ (290,483) $ — $ (26,942) $ (317,425) $ (176,890) $ — $ (15,244) $ (192,134) $ (119,809) $ (152) $ (9,458) $ (129,419) Adjusted for: Consolidated SLST CDO interest expense 26,491 — — 26,491 24,506 — — 24,506 25,145 — — 25,145 Net interest benefit of interest rate swaps 26,593 — 4,322 30,915 9,642 — 2,445 12,087 — — — — Adjusted interest expense $ (237,399) $ — $ (22,620) $ (260,019) $ (142,742) $ — $ (12,799) $ (155,541) $ (94,664) $ (152) $ (9,458) $ (104,274) Adjusted net interest income (loss) (1) $ 120,082 $ 10,755 $ (16,067) $ 114,770 $ 77,643 $ 13,707 $ (12,737) $ 78,613 $ 119,106 $ 13,347 $ (3,484) $ 128,969 (1) Adjusted net interest income (loss) is calculated by subtracting adjusted interest expense from adjusted interest income. Undepreciated Loss Undepreciated loss is a supplemental non-GAAP financial measure defined as GAAP net loss attributable to Company's common stockholders excluding the Company's share in depreciation expense and lease intangible amortization expense, if any, related to operating real estate, net for which an impairment has not been recognized. By excluding these non-cash adjustments from our operating results, we believe that the presentation of undepreciated loss provides a consistent measure of our operating performance and useful information to investors to evaluate the effective net return on our portfolio. In addition, we believe that presenting undepreciated loss enables our investors to measure, evaluate, and compare our operating performance to that of our peers. 81 Table of Contents A reconciliation of net loss attributable to Company's common stockholders to undepreciated loss for the years ended December 31, 2024, 2023 and 2022, respectively, is presented below (amounts in thousands, except per share data). For the Years Ended December 31, 2024 2023 2022 Net loss attributable to Company's common stockholders $ (103,785) $ (90,035) $ (340,577) Add: Depreciation expense on operating real estate 12,026 8,714 28,916 Amortization of lease intangibles related to operating real estate — — 50,083 Undepreciated loss $ (91,759) $ (81,321) $ (261,578) Weighted average shares outstanding - basic 90,815 91,042 94,322 Undepreciated loss per common share $ (1.01) $ (0.89) $ (2.77) Adjusted Book Value Per Common Share Adjusted book value per common share is a supplemental non-GAAP financial measure calculated 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 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 amortized cost 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 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. 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, certain CDOs issued by our residential loan securitizations, certain 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. We believe that the presentation of adjusted book value per common share provides a useful measure for investors and us as it provides a consistent measure of our value, allows management to effectively consider our financial position and facilitates the comparison of our financial performance to that of our peers. 82 Table of Contents A reconciliation of GAAP book value to adjusted book value and calculation of adjusted book value per common share as of December 31, 2024 and 2023, respectively, is presented below (amounts in thousands, except per share data). December 31, 2024 December 31, 2023 Company's stockholders' equity $ 1,394,720 $ 1,579,612 Preferred stock liquidation preference (554,110) (554,110) GAAP book value 840,610 1,025,502 Add: Cumulative depreciation expense on real estate (1) 20,837 21,801 Cumulative amortization of lease intangibles related to real estate (1) 4,620 14,897 Cumulative adjustment of redeemable non-controlling interest to estimated redemption value 40,675 30,062 Adjustment of amortized cost liabilities to fair value 30,619 55,271 Adjusted book value $ 937,361 $ 1,147,533 Common shares outstanding 90,575 90,675 GAAP book value per common share (2) $ 9.28 $ 11.31 Adjusted book value per common share (3) $ 10.35 $ 12.66 (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. (3) Adjusted book value per common share is calculated using the adjusted book value and the common shares outstanding for the periods indicated. 83 Table of Contents Critical Accounting Estimates We prepare our consolidated financial statements in conformity with GAAP, which requires the use of estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based, in part, on our judgment and assumptions regarding various economic conditions that we believe are reasonable based on facts and circumstances existing at the time of reporting. We believe that the estimates, judgments and assumptions utilized in the preparation of our consolidated financial statements are prudent and reasonable. Although our estimates contemplate conditions as of December 31, 2024 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 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. In accordance with SEC guidance, the estimates that we believe are most critical to an investor’s understanding of our financial results and condition and which require complex management judgment are discussed below. Valuation of Financial Instruments Residential Loans The Company’s acquired residential loans are recorded at fair value, which is determined using valuations obtained from a third party that specializes in providing valuations of residential loans. For performing and re-performing loans, estimates of fair value are derived using a discounted cash flow model, where estimates of cash flows are determined from scheduled payments for each loan, adjusted using forecast prepayment rates, default rates and rates for loss upon default. For non-performing loans, asset liquidation cash flows are derived based on the estimated time to liquidate the loan, expected liquidation costs and home price appreciation. Estimated cash flows for both performing and non-performing loans are discounted at yields considered appropriate to arrive at a reasonable exit price for the asset. Indications of loan value such as actual trades, bids, offers and generic market color may be used in determining the appropriate discount yield. The estimation of cash flows used in pricing models is inherently subjective and imprecise. Changes to cash flow model assumptions, including prepayment speeds, default rates, rates for loss upon default, liquidation costs, home price appreciation and discount rates may significantly impact the fair value estimate of residential loans, as well as unrealized gains and losses recognized on these assets. Investment Securities Issued by Consolidated SLST The Company invests in first loss subordinated securities and certain IOs issued by Consolidated SLST. The investment securities that we own in Consolidated SLST are generally illiquid and trade infrequently. The fair valuation of these investment securities is determined based on an internal valuation model that considers expected cash flows from the underlying loans and yields required by market participants. The significant assumptions used in the measurement of these investments are projected losses within the pool of loans and a discount rate. The discount rate used in determining fair value incorporates default rate, loss severity, prepayment rate and current market interest rates. The estimation of cash flows used in pricing models is inherently subjective and imprecise. Significant changes in model assumptions, including projected losses, discount rate, prepayment speeds, default rate and loss severity may significantly impact the fair value estimate of investment securities that we own in Consolidated SLST, as well as unrealized gains and losses recognized on these assets. The Company’s valuation methodologies are described in “Note 17 – Fair Value of Financial Instruments” included in Item 8 of this Annual Report on Form 10-K. Refer to Item 7A., "Quantitative and Qualitative Disclosures about Market Risk—Fair Value Risk" for a quantitative interest rate sensitivity analysis of our investment portfolio. 84 Table of Contents Revenue Recognition Investment Securities Issued by Consolidated SLST Interest income on first loss subordinated securities and certain IOs issued by Consolidated SLST is recognized based on the securities' effective yield. The effective yield on these securities is based on management’s estimate of the projected cash flows from each security, which incorporates assumptions related to fluctuations in interest rates, prepayment speeds and the timing and amount of credit losses. On at least a quarterly basis, management reviews and, if appropriate, adjusts its cash flow projections based on input and analysis received from external sources, internal models, and its judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the yield (or interest income) recognized on these securities. The estimation of cash flows used in determining effective yield is inherently subjective and imprecise. Changes in the underlying cash flow assumptions, including prepayment speeds and timing and amount of credit losses, may significantly impact the calculation of effective yield and the interest income recognized for these securities. Variable Interest Entities and Consolidation Reporting Requirements A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The Company consolidates a VIE when it is the primary beneficiary of such VIE. Determining whether an entity has a controlling financial interest in a VIE requires significant judgment related to assessing the purpose and design of the VIE and determination of the activities that most significantly impact its economic performance. We must also identify explicit and implicit variable interests in the entity and consider our involvement in both the design of the VIE and its ongoing activities. To determine whether consolidation of the VIE is required, we must apply judgment to assess whether we have the power to direct the most significant activities of the VIE and whether we have either the rights to receive benefits or the obligation to absorb losses that could be potentially significant to the VIE. The Company is required to reconsider its evaluation of whether to consolidate a VIE each reporting period, based upon changes in the facts and circumstances pertaining to the VIE. As of December 31, 2024 and 2023, we owned 100% of the first loss subordinated securities of Consolidated SLST. Consolidated SLST represents Freddie Mac-sponsored residential mortgage loan securitizations of which we own the first loss subordinated securities and certain IOs. We determined that the Freddie Mac-sponsored residential loan securitization trusts, which we collectively refer to as Consolidated SLST, are VIEs and that we are the primary beneficiary of Consolidated SLST. As a result, we are required to consolidate Consolidated SLST’s underlying residential loans including their liabilities, income and expenses in our consolidated financial statements. The Company also invests in joint venture equity investments that own multi-family apartment communities, which the Company determined to be VIEs and for which the Company is the primary beneficiary. Accordingly, the Company consolidated the assets, liabilities, income and expenses of these VIEs in the accompanying consolidated financial statements with non-controlling interests for the third-party ownership of the joint ventures' membership interests. The Company accounted for the initial consolidation of the joint venture investments as asset acquisitions, as substantially all of the fair value of the assets within the entities are concentrated in either a single identifiable asset or group of similar identifiable assets. The Company records its initial investments in income-producing real estate at fair value. The purchase price of acquired properties is apportioned to the tangible and identified intangible assets and liabilities acquired at their respective estimated fair values. In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective real estate, its own analysis of recently-acquired and existing comparable properties, property financial results, and other market data. The Company also considers information obtained about the real estate as a result of its due diligence, including marketing and leasing activities, in estimating the fair value of the tangible and intangible assets acquired. The Company considers the value of acquired in-place leases and utilizes an amortization period that is the average remaining term of the acquired leases. 85 Table of Contents The estimation of fair value for purposes of allocating the purchase price of investments in real estate requires significant judgment based on the available sources. The allocation may significantly impact the carrying value of intangible assets and liabilities consolidated as asset acquisitions, as well as the amount and timing of depreciation and amortization expense recognized in relation to these assets and liabilities over time. Real estate held for sale (including real estate in disposal group held for sale) is recorded at the lower of the net carrying amount of the assets or the estimated net fair value. The Company assesses the net fair value of real estate held for sale in each reporting period that the assets remain classified as held for sale. The Company utilizes market assumptions and a discounted cash flow analysis using property financial information and assumptions regarding market rent, revenue and expense growth, capitalization rates and return rates to estimate fair value of real estate assets. The third-party owners of certain of the non-controlling interests in Consolidated VIEs have the ability to sell their ownership interests to the Company, at their election. The Company has classified these third-party ownership interests as redeemable non-controlling interest and determines the fair value of the redeemable non-controlling interest 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. The estimation of fair value requires significant judgment based on the available sources and may affect any impairment recognized on real estate in the Company's statements of operations or, with respect to redeemable non-controlling interest, the Company's book value. A discussion of significant accounting policies is included in “Note 2 — Summary of Significant Accounting Policies” included in Item 8 of this Annual Report on Form 10-K. 86 Table of Contents Balance Sheet Analysis As of December 31, 2024, we had approximately $9.2 billion of total assets. Included in this amount is approximately $969.7 million of assets held in Consolidated SLST and $620.6 million of assets related to Consolidated Real Estate VIEs, both of which we consolidate in accordance with GAAP. As of December 31, 2023, we had approximately $7.4 billion of total assets. 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. For a reconciliation of our actual interests in Consolidated SLST, see “Portfolio Update” above. For a reconciliation of our investments in Consolidated Real Estate VIEs, see “Equity Investments in Multi-Family Entities” below. 87 Table of Contents Residential Loans The following table presents the Company’s residential loans, which include acquired residential loans held by the Company and residential loans held in Consolidated SLST, as of December 31, 2024 and 2023, respectively (dollar amounts in thousands): December 31, 2024 December 31, 2023 Acquired residential loans $ 2,876,066 $ 2,329,443 Consolidated SLST 965,672 754,860 Total $ 3,841,738 $ 3,084,303 Acquired Residential Loans The Company’s acquired residential loans, including performing, re-performing, and non-performing residential loans and business purpose loans, are presented at fair value on our consolidated balance sheets. Subsequent changes in fair value are reported in current period earnings and presented in unrealized (losses) gains, net on the Company’s consolidated statements of operations. The following table details our acquired residential loans by strategy at December 31, 2024 and 2023, respectively (dollar amounts in thousands): December 31, 2024 Number of Loans Unpaid Principal Fair Value Weighted Average FICO Weighted Average LTV (1) Weighted Average Coupon Re-performing residential loan strategy 3,484 $ 461,101 $ 435,674 636 54% 5.2% Performing residential loan strategy 2,630 610,203 525,267 740 58% 4.2% Business purpose bridge loan strategy 2,321 1,176,555 1,157,085 742 65% 10.5% Business purpose rental loan strategy 3,418 769,843 758,040 746 73% 6.8% Total 11,853 $ 3,017,702 $ 2,876,066 December 31, 2023 Number of Loans Unpaid Principal Fair Value Weighted Average FICO Weighted Average LTV (1) Weighted Average Coupon Re-performing residential loan strategy 4,687 $ 626,316 $ 601,239 630 60% 5.1% Performing residential loan strategy 2,803 642,320 548,736 717 62% 4.0% Business purpose bridge loan strategy 1,720 919,990 896,988 735 65% 9.6% Business purpose rental loan strategy 1,111 311,663 282,480 749 68% 5.1% Total 10,321 $ 2,500,289 $ 2,329,443 (1) For second mortgages (included in performing residential loan strategy), the Company calculates the combined loan-to-value ("LTV"). For business purpose bridge loans, the Company calculates LTV as the ratio of the maximum unpaid principal balance of the loan, including unfunded commitments, to the estimated “after repaired” value of the collateral securing the related loan. 88 Table of Contents Characteristics of Our Acquired Residential Loans: Loan to Value at Purchase (1) December 31, 2024 December 31, 2023 50% or less 9.0 % 13.6 % >50% - 60% 9.7 % 10.9 % >60% - 70% 21.7 % 22.4 % >70% - 80% 38.0 % 29.5 % >80% - 90% 12.7 % 11.8 % >90% - 100% 4.7 % 6.0 % > 100% 4.2 % 5.8 % Total 100.0 % 100.0 % (1) For second mortgages, the Company calculates the combined LTV. For business purpose bridge loans, the Company calculates LTV as the ratio of the maximum unpaid principal balance of the loan, including unfunded commitments, to the estimated “after repaired” value of the collateral securing the related loan. FICO Scores at Purchase December 31, 2024 December 31, 2023 550 or less 5.6 % 9.1 % 551 to 600 4.8 % 7.9 % 601 to 650 5.3 % 8.3 % 651 to 700 14.6 % 15.6 % 701 to 750 27.5 % 24.0 % 751 to 800 34.5 % 28.0 % 801 and over 7.7 % 7.1 % Total 100.0 % 100.0 % Current Coupon December 31, 2024 December 31, 2023 3.00% or less 5.4 % 7.6 % 3.01% - 4.00% 11.6 % 16.5 % 4.01% - 5.00% 14.2 % 20.9 % 5.01% - 6.00% 5.9 % 9.3 % 6.01% - 7.00% 7.6 % 7.2 % 7.01% - 8.00% 11.5 % 8.1 % 8.01% and over 43.8 % 30.4 % Total 100.0 % 100.0 % Delinquency Status December 31, 2024 December 31, 2023 Current 91.2 % 88.0 % 31 – 60 days 1.6 % 2.2 % 61 – 90 days 1.1 % 1.0 % 90+ days 6.1 % 8.8 % Total 100.0 % 100.0 % 89 Table of Contents Origination Year December 31, 2024 December 31, 2023 2007 or earlier 13.8 % 22.4 % 2008 - 2016 2.7 % 4.4 % 2017 - 2020 11.3 % 15.7 % 2021 10.9 % 19.3 % 2022 10.5 % 21.4 % 2023 8.2 % 16.8 % 2024 42.6 % — Total 100.0 % 100.0 % As of December 31, 2024 and 2023, the Company had an investment in an entity that originates residential loans. The Company purchased $307.8 million, $80.8 million and $260.6 million of residential loans from the entity during the years ended December 31, 2024, 2023 and 2022, respectively. Consolidated SLST The Company owns first loss subordinated securities and certain IOs issued by Freddie Mac-sponsored residential loan securitizations. In accordance with GAAP, the Company has consolidated the underlying seasoned re-performing and non-performing residential loans of the securitizations and the CDOs issued to permanently finance these residential loans, representing Consolidated SLST. During the year ended December 31, 2024, the Company invested in a subordinated security issued by a Freddie Mac-sponsored residential loan securitization, resulting in the initial consolidation of $285.1 million of residential loans and $275.2 million of CDOs in the VIE. Our investment in Consolidated SLST as of December 31, 2024 and 2023 was limited to the RMBS comprised of first loss subordinated securities and IOs issued by the respective securitizations with an aggregate net carrying value of $148.5 million and $157.2 million, respectively. For more information on investment securities held by the Company within Consolidated SLST, refer to "Investment Securities" section below. 90 Table of Contents The following table details the loan characteristics of the underlying residential loans that back our first loss subordinated securities issued by Consolidated SLST as of December 31, 2024 and 2023, respectively (dollar amounts in thousands, except current average loan size): December 31, 2024 December 31, 2023 Current fair value $ 965,672 $ 754,860 Current unpaid principal balance $ 1,111,633 $ 892,546 Number of loans 7,246 5,813 Current average loan size $ 153,413 $ 153,543 Weighted average original loan term (in months) at purchase 347 352 Weighted average LTV at purchase 62 % 68 % Weighted average credit score at purchase 767 701 Current Coupon: 3.00% or less 5.1 % 2.5 % 3.01% – 4.00% 35.4 % 38.5 % 4.01% – 5.00% 40.6 % 39.5 % 5.01% – 6.00% 11.2 % 11.8 % 6.01% and over 7.7 % 7.7 % Delinquency Status: Current 68.2 % 72.6 % 31 - 60 15.3 % 12.9 % 61 - 90 6.0 % 5.0 % 90+ 10.5 % 9.5 % Origination Year: 2005 or earlier 27.5 % 31.1 % 2006 14.4 % 15.7 % 2007 19.8 % 21.5 % 2008 or later 38.3 % 31.7 % Geographic state concentration (greater than 5.0%): California 11.7 % 10.7 % New York 10.8 % 10.0 % Florida 9.1 % 10.3 % New Jersey 6.8 % 7.6 % Illinois 6.3 % 7.2 % 91 Table of Contents Residential Loans, Real Estate Owned and Single-Family Rental Property Financing Repurchase Agreements As of December 31, 2024, the Company had repurchase agreements with six third-party financial institutions to fund the purchase of residential loans, real estate owned and single-family rental properties. As of December 31, 2024, the Company's only repurchase agreement exposure where the amount of collateral at risk was in excess of 5% of the Company's stockholders’ equity was to Atlas SP at 6.08%. 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, 2024 and 2023, respectively (dollar amounts in thousands): Maximum Aggregate Uncommitted Principal Amount Outstanding Repurchase Agreements (1) Net Deferred Finance Costs (2) Carrying Value of Repurchase Agreements Carrying Value of Assets Pledged (3) Weighted Average Rate Weighted Average Months to Maturity (4) December 31, 2024 $ 2,775,000 $ 496,410 $ (796) $ 495,614 $ 659,183 6.70 % 9.64 December 31, 2023 $ 2,225,000 $ 611,055 $ (2,005) $ 609,050 $ 805,082 7.87 % 13.89 (1) Includes non-mark-to-market repurchase agreements with an aggregate outstanding balance of $15.0 million, a weighted average rate of 7.09%, and weighted average months to maturity of 8 months as of December 31, 2024. 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. (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 over the term of the agreement using the effective interest method, or straight line-method, if the result is not materially different. (3) Includes residential loans and real estate owned with an aggregate fair value of $524.6 million and single-family rental properties with a net carrying value of $134.6 million as of December 31, 2024. 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. (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. 92 Table of Contents The following table details the quarterly average balance, ending balance and maximum balance at any month-end during each quarter in 2024, 2023 and 2022 for our repurchase agreements secured by residential loans (dollar amounts in thousands): Quarter Ended Quarterly Average Balance End of Quarter Balance Maximum Balance at any Month-End December 31, 2024 $ 386,047 $ 496,410 $ 496,410 September 30, 2024 656,976 566,621 812,828 June 30, 2024 521,269 505,542 576,119 March 31, 2024 437,826 456,038 456,038 December 31, 2023 559,118 611,055 611,055 September 30, 2023 469,393 505,477 505,477 June 30, 2023 524,264 481,947 579,475 March 31, 2023 579,271 562,371 609,885 December 31, 2022 833,517 688,487 1,076,747 September 30, 2022 1,324,819 1,163,408 1,554,993 June 30, 2022 1,386,714 1,566,926 1,566,926 March 31, 2022 682,867 783,168 783,168 Collateralized Debt Obligations Included in our portfolio are residential loans that are pledged as collateral for CDOs issued by the Company or by Consolidated SLST. The Company had a net investment in Consolidated SLST and other residential loan securitizations of $149.8 million and $215.2 million, respectively, as of December 31, 2024. As of December 31, 2023, the Company had a net investment in Consolidated SLST and other residential loan securitizations of $158.4 million and $315.2 million, respectively. 93 Table of Contents The following tables present a summary of Consolidated SLST CDOs and CDOs issued by the Company's residential loan securitizations as of December 31, 2024 and 2023, respectively (dollar amounts in thousands): December 31, 2024 Outstanding Face Amount Carrying Value Weighted Average Interest Rate (1) (2) Stated Maturity (3) Consolidated SLST (4) (5) $ 867,004 $ 811,591 3.49 % 2059 - 2064 Residential loan securitizations at fair value (4) $ 1,281,896 $ 1,253,332 5.72 % 2029 - 2069 Residential loan securitizations at amortized cost, net $ 850,547 $ 842,764 4.35 % 2027 - 2062 December 31, 2023 Outstanding Face Amount Carrying Value Weighted Average Interest Rate (1) Stated Maturity (3) Consolidated SLST (4) $ 652,933 $ 593,737 2.75 % 2059 Residential loan securitizations at amortized cost, net $ 1,292,015 $ 1,276,780 4.00 % 2026 - 2062 (1) Weighted average interest rate is calculated using the outstanding face amount and stated interest rate of notes issued by the securitization and not owned by the Company. (2) Certain of the Company's CDOs contain interest rate step-up features whereby the interest rate increases if the outstanding notes are not redeemed by expected redemption dates, as defined in the respective governing documents. As of December 31, 2024, CDOs with an aggregate outstanding face amount of $1.5 billion contain an interest rate step-up feature whereby the interest rate increases by either 1.00%, 1.50%, 2.00%, or 3.00% on defined dates ranging between 24 months and 48 months after issuance, if the notes are not redeemed before such dates. (3) The actual maturity of the Company's CDOs is primarily determined by the rate of principal prepayments on the assets of the issuing entity. The CDOs are also subject to redemption prior to the stated maturity according to the terms of the respective governing documents. As a result, the actual maturity of the CDOs may occur earlier than the stated maturity. (4) The Company has elected the fair value option for CDOs issued by Consolidated SLST and residential loan securitizations completed after January 1, 2024 ( see Note 17 ) . See Note 7 for unrealized gains or losses recognized on CDOs issued by Consolidated SLST. For the year ended December 31, 2024, the Company recognized $1.3 million in net unrealized losses on residential loan securitizations at fair value, which is included in unrealized (losses) gains, net on the accompanying consolidated statements of operations. (5) During the year ended December 31, 2024, the Company invested in a subordinated security issued by a Freddie Mac-sponsored residential loan securitization, resulting in the initial consolidation of $285.1 million of residential loans and $275.2 million of CDOs in the VIE. 94 Table of Contents Investment Securities At December 31, 2024, our investment securities portfolio included Agency RMBS, non-Agency RMBS and U.S. Treasury securities, 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, 2024, 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, 2024 as compared to December 31, 2023 is primarily due to purchases of Agency RMBS, non-Agency RMBS and U.S. Treasury securities during the period partially offset by a decrease in the fair value of a number of our investment securities. The following tables summarize our investment securities portfolio as of December 31, 2024 and 2023, respectively (dollar amounts in thousands): December 31, 2024 Unrealized Weighted Average Investment Securities Current Par Value Amortized Cost Gains Losses Fair Value Coupon (1) Yield (2) Outstanding Repurchase Agreements Available for Sale (“AFS”) Agency RMBS Fixed rate $ 2,943,583 $ 2,949,038 $ 11,733 $ (21,711) $ 2,939,060 5.84 % 5.73 % $ 2,662,475 Adjustable rate 131,817 130,119 285 (822) 129,582 5.47 % 5.40 % 124,096 IO 1,169,330 83,878 843 (16,551) 68,170 0.89 % 11.82 % 44,354 Total Agency RMBS 4,244,730 3,163,035 12,861 (39,084) 3,136,812 4.24 % 5.88 % 2,830,925 Non-Agency RMBS Senior 42,214 42,214 160 (9) 42,365 8.14 % 8.10 % 30,300 Subordinated 11,509 10,869 — (2,605) 8,264 5.19 % 5.95 % 2,940 IO 346,582 13,120 5,938 — 19,058 1.52 % 28.86 % — Total Non-Agency RMBS 400,305 66,203 6,098 (2,614) 69,687 2.01 % 14.02 % 33,240 U.S. Treasury securities 652,792 657,659 — (35,614) 622,045 4.16 % 4.13 % 635,064 Total - AFS $ 5,297,827 $ 3,886,897 $ 18,959 $ (77,312) $ 3,828,544 4.04 % 5.98 % $ 3,499,229 Consolidated SLST Non-Agency RMBS Subordinated $ 242,088 $ 181,716 $ 4,945 $ (52,134) $ 134,527 4.60 % 6.02 % $ 17,382 IO 129,478 14,634 — (653) 13,981 3.50 % 8.54 % — Total Non-Agency RMBS 371,566 196,350 4,945 (52,787) 148,508 4.21 % 6.23 % 17,382 Total - Consolidated SLST $ 371,566 $ 196,350 $ 4,945 $ (52,787) $ 148,508 4.21 % 6.23 % $ 17,382 Total Investment Securities $ 5,669,393 $ 4,083,247 $ 23,904 $ (130,099) $ 3,977,052 4.05 % 5.94 % $ 3,516,611 95 Table of Contents December 31, 2023 Unrealized Weighted Average Investment Securities Current Par Value Amortized Cost Gains Losses Fair Value Coupon (1) Yield (2) Outstanding Repurchase Agreements (3) Available for Sale (“AFS”) Agency RMBS Fixed rate $ 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 IO 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 (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. (3) Outstanding repurchase agreements as of December 31, 2023 do not include $34.7 million of repurchase agreement financing for CDOs repurchased from our residential loan securitizations. Repurchased CDOs are eliminated in consolidation in accordance with GAAP. As of December 31, 2024, Agency RMBS with a fair value of $33.4 million were pledged as initial margin for outstanding interest rate swaps. As of December 31, 2024, Consolidated SLST subordinated bonds with a fair value of $114.0 million were held in a non-Agency RMBS re-securitization (see “Investment Securities Financing—Collateralized Debt Obligations” below). 96 Table of Contents Investment Securities Financing Repurchase Agreements As of December 31, 2024, the Company had $3.5 billion outstanding under repurchase agreements with third-party financial institutions to fund a portion of its investment securities available for sale and certain securities owned in Consolidated SLST. 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, 2024, the Company had no repurchase agreement exposure where the amount of investment securities at risk was in excess of 5% of the Company's stockholders’ equity. As of December 31, 2024, the weighted average interest rate for repurchase agreements secured by investment securities was 4.84%. The following table details the quarterly average balance, ending balance and maximum balance at any month-end during each quarter in 2024, 2023 and 2022 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, 2024 $ 3,328,795 $ 3,516,611 $ 3,516,611 September 30, 2024 2,772,203 3,045,597 3,045,597 June 30, 2024 2,202,770 2,447,851 2,447,851 March 31, 2024 2,078,041 2,057,361 2,126,993 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 Collateralized Debt Obligations During the year ended December 31, 2024, the Company completed a re-securitization of its investment in certain subordinated securities issued by Consolidated SLST, which we refer to as our non-Agency RMBS re-securitization. The Company engaged in the re-securitization transaction primarily for the purpose of obtaining non-recourse, longer-term financing on a portion of its investment in Consolidated SLST. The Company remains economically exposed to the subordinated positions in the portion of Consolidated SLST transferred to the securitization and continues to consolidate Consolidated SLST. 97 Table of Contents The following table presents a summary of CDOs issued by our non-Agency RMBS re-securitization as of December 31, 2024: December 31, 2024 Outstanding Face Amount Carrying Value Interest Rate (1)(2) Stated Maturity (3) Non-Agency RMBS re-securitization at fair value (4) $ 70,867 $ 70,757 7.38 % 2064 (1) Interest rate is calculated using the outstanding face amount and stated interest rate of notes issued by the securitization and not owned by the Company. (2) The Company's non-Agency RMBS re-securitization CDOs contain an interest rate step-up feature whereby the interest rate increases if the outstanding notes are not redeemed by an expected redemption date, as defined in the governing documents. As of December 31, 2024, CDOs with an aggregate outstanding face amount of $70.9 million contain an interest rate step-up feature whereby the interest rate increases by 3.00% beginning July 2027, if the notes are not redeemed before such date. (3) The actual maturity of the Company's CDOs is primarily determined by the rate of principal prepayments on the assets of the issuing entity. The CDOs are also subject to redemption prior to the stated maturity according to the terms of the governing documents. As a result, the actual maturity of the CDOs may occur earlier than the stated maturity. (4) The Company has elected the fair value option for CDOs issued by its non-Agency RMBS re-securitization ( see Note 17 ) . For the year ended December 31, 2024, the Company recognized $0.2 million in net unrealized losses on its non-Agency RMBS re-securitization, which are included in unrealized (losses) gains, net on the accompanying consolidated statements of operations. 98 Table of Contents Mezzanine Lending The Company's Mezzanine Lending strategy may include preferred equity in, and mezzanine loans to, entities that have multi-family real estate assets. A preferred equity investment is an equity investment in the entity that owns the underlying property and mezzanine loans are secured by a pledge of the borrower’s equity ownership in the property. We evaluate our Mezzanine Lending investments for accounting treatment as loans versus equity investments. Mezzanine Lending investments for which the characteristics, facts and circumstances indicate that loan accounting treatment is appropriate are included in multi-family loans on our consolidated balance sheets. Mezzanine Lending investments where the risks and payment characteristics are equivalent to an equity investment are accounted for using the equity method of accounting and are included in equity investments on our consolidated balance sheets. The Company records its equity in earnings or losses from these Mezzanine Lending investments under the hypothetical liquidation of book value method of accounting due to the structures and the preferences it receives on the distributions from these entities pursuant to the respective agreements. Under this method, the Company recognizes income or loss in each period based on the change in liquidation proceeds it would receive from a hypothetical liquidation of its investment. 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. During the year ended December 31, 2024, the Company negotiated a short-term maturity extension on one preferred equity investment that included an increase in preferred return rate to a current market rate. During the year ended December 31, 2024, the Company reduced the fair value of one defaulted preferred equity investment to zero as a result of developments with respect to the property, its financing and market conditions. This investment represents 1.8% of the total investment amount of the Mezzanine Lending portfolio. Also during the year ended December 31, 2024, the Company evaluated the hypothetical liquidation value of one preferred equity investment and its preferred equity investment in a Consolidated VIE and ceased further preferred return accruals. These two investments represent 17.3% of the total investment amount of the Mezzanine Lending portfolio. 99 Table of Contents The following tables summarize our Mezzanine Lending portfolio as of December 31, 2024 and 2023, respectively (dollar amounts in thousands): December 31, 2024 Count Fair Value (1) (2) Investment Amount (2) Weighted Average Preferred Return Rate (3) Weighted Average Remaining Life (Years) Preferred equity investments 18 $ 159,628 $ 169,518 12.80 % 3.8 Preferred equity investment in Consolidated VIE (4) 1 16,967 16,991 13.84 % 7.0 Total 19 $ 176,595 $ 186,509 12.90 % 4.1 December 31, 2023 Count Fair Value (1) (2) Investment Amount (2) Weighted Average Preferred Return Rate (3) Weighted Average Remaining Life (Years) Preferred equity investments 21 $ 200,034 $ 200,690 12.40 % 4.2 Preferred equity investment in Consolidated VIE (4) 1 11,706 11,732 13.50 % 8.0 Total 22 $ 211,740 $ 212,422 12.46 % 4.4 (1) Preferred equity investments in the amounts of $86.2 million and $95.8 million are included in multi-family loans on the accompanying consolidated balance sheets as of December 31, 2024 and 2023, respectively. Preferred equity investments in the amounts of $73.4 million and $104.2 million are included in equity investments on the accompanying consolidated balance sheets as of December 31, 2024 and 2023, respectively. (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, 2024 and 2023, respectively, is shown below (dollar amounts in thousands): December 31, 2024 December 31, 2023 Cash and cash equivalents $ 392 $ 1,300 Real estate, net 53,508 54,439 Lease intangible, net (a) — 2,378 Other assets 4,939 4,722 Total assets 58,839 62,839 Mortgage payable on real estate, net 45,120 45,142 Other liabilities 1,823 2,403 Total liabilities 46,943 47,545 Non-controlling interest in Consolidated VIE (5,071) 3,588 Preferred equity investment in Consolidated VIE $ 16,967 $ 11,706 (a) Included in other assets in the accompanying consolidated balance sheets. 100 Table of Contents Mezzanine Lending Characteristics The following tables present characteristics of our Mezzanine Lending portfolio summarized by geographic concentrations of credit risk exceeding 5% of our total investment amount as of December 31, 2024 and 2023, respectively (dollar amounts in thousands): December 31, 2024 State Count Investment Amount % Total Weighted Average Coupon Weighted Average LTV (1) Weighted Average DSCR (2) Florida 3 $ 54,115 29.0 % 13.1 % 83 % 0.89x (3) Texas 6 49,619 26.6 % 12.4 % 84 % 1.08x Arizona 1 15,201 8.2 % 14.0 % 80 % 1.84x Tennessee 1 13,045 7.0 % 14.0 % 86 % 0.51x (4) South Dakota 1 10,583 5.7 % 15.0 % 85 % 1.80x South Carolina 1 9,645 5.2 % 13.0 % 75 % 1.47x Other 6 34,301 18.3 % 11.7 % 83 % 1.30x Total 19 $ 186,509 100.0 % 12.9 % 83 % 1.18x December 31, 2023 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 % 11.9 % 92 % 1.21x Utah 1 21,970 10.3 % 12.0 % 68 % N/A (5) Arizona 1 17,811 8.4 % 14.0 % 85 % 0.45x (6) Tennessee 1 14,525 6.8 % 11.0 % 90 % 1.27x Other 9 59,509 28.0 % 12.5 % 83 % 1.36x Total 22 $ 212,422 100.0 % 12.5 % 83 % 1.24x (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) DSCR affected by non-recurring expenses during the year ended December 31, 2024. (4) DSCR for this property affected by recent senior loan and Mezzanine Lending modifications. (5) Not applicable as the underlying property is subject to a senior construction loan agreement. (6) DSCR for this property affected by low occupancy as of December 31, 2023. 101 Table of Contents Equity Investments in Multi-Family Entities The Company owns joint venture equity investments in entities that own multi-family properties. The Company determined that these joint venture entities are VIEs and that the Company is the primary beneficiary of all but two of these VIEs, resulting in consolidation of the VIEs where we are the primary beneficiary, including their assets, liabilities, income and expenses, in our consolidated 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. 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 the assets and liabilities of the respective Consolidated VIEs are included in assets and liabilities of disposal group held for sale on the accompanying consolidated balance sheets as of December 31, 2024 and 2023. 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 $153.7 million and $236.3 million as of December 31, 2024 and 2023, respectively. 102 Table of Contents 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, 2024 and 2023, respectively, is shown below (dollar amounts in thousands): December 31, 2024 December 31, 2023 Cash and cash equivalents $ 4,151 $ 15,612 Real estate, net 481,161 979,934 Lease intangible, net (1) — 2,378 Assets of disposal group held for sale (2) 118,613 426,017 Other assets 16,696 34,657 Total assets $ 620,621 $ 1,458,598 Mortgages payable on real estate, net (3) $ 366,606 $ 784,421 Liabilities of disposal group held for sale (2) 97,065 386,024 Other liabilities 10,621 21,797 Total liabilities $ 474,292 $ 1,192,242 Redeemable non-controlling interest in Consolidated VIEs $ 12,359 $ 28,061 Less: Cumulative adjustment of redeemable non-controlling interest to estimated redemption value (40,675) (30,062) Non-controlling interest in Consolidated VIEs 1,887 17,150 Non-controlling interest in disposal group held for sale 2,044 3,178 Net equity investment (4) 170,714 248,029 Less: Net equity in preferred equity investment in Consolidated VIE (5) (16,967) (11,706) Net equity investment in Consolidated JVs and disposal group held for sale $ 153,747 $ 236,323 (1) Included in other assets in the accompanying consolidated balance sheets. (2) See Note 9 in the Notes to Consolidated Financial Statements for further information regarding our assets and liabilities of disposal group held for sale. (3) See Note 15 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, 2024 consists of $151.2 million of net equity investments in consolidated multi-family properties (including its preferred equity investment in a Consolidated VIE) and $19.5 million of net equity investments in disposal group held for sale. 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. (5) See "Mezzanine Lending" above for description of preferred equity investment in Consolidated VIE. 103 Table of Contents Unconsolidated Multi-Family Joint Venture Equity Investments The Company owns equity interests 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 following tables summarize our unconsolidated multi-family joint venture equity investments as of December 31, 2024 and 2023, respectively (dollar amounts in thousands): December 31, 2024 State Property Count Ownership Interest Fair Value Texas 2 70% $ 1,338 December 31, 2023 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, 2024, the Company's net joint venture equity investments in consolidated multi-family properties not in disposal group held for sale of $134.2 million consists of a combined preferred equity and common equity investment in one joint venture entity that does not meet the criteria to be classified as disposal group held for sale. The joint venture entity 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 $12.4 million as of December 31, 2024. 104 Table of Contents 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, 2024 and 2023, respectively, are shown below (dollar amounts in thousands): December 31, 2024 State Property Count Total Equity Ownership Interest Net Equity Investment (1) Percentage of Total Net Equity Investment Texas 5 70% $ 50,505 54.7 % Florida 1 50% $ 15,868 17.2 % Kentucky 1 70% $ 11,310 12.2 % Alabama 1 70% $ 7,106 7.7 % Tennessee 1 65% $ 5,557 6.0 % December 31, 2023 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 % Texas 5 70% $ 49,727 29.4 % Tennessee 2 65% - 70% $ 18,131 10.7 % South Carolina 2 67% - 70% $ 13,561 8.0 % Alabama 2 70% - 80% $ 11,737 6.9 % Kentucky 1 70% $ 10,979 6.5 % (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, 2024. Market Property Count Occupancy % Units Rent per Unit (1) LTV (2) Collierville, TN 1 93.2 % 324 $ 1,545 84.4 % Dallas, TX 2 90.5 % 401 1,908 88.3 % Houston, TX 2 91.8 % 392 1,206 77.5 % Little Rock, AR 1 94.6 % 202 1,377 89.4 % Louisville, KY 1 93.7 % 300 1,491 84.1 % Montgomery, AL 1 94.8 % 252 1,063 71.5 % San Antonio, TX 2 89.2 % 684 1,282 82.4 % St Petersburg, FL 1 99.1 % 326 2,543 77.5 % Webster, TX 1 92.9 % 366 967 78.1 % Total Count/Average 12 92.7 % 3,247 $ 1,483 82.0 % (1) Represents average monthly rent per unit. (2) Represents the weighted average LTV of the underlying properties utilizing combined maximum senior committed mortgage amount and preferred equity balances, if any, and the combined origination appraisal and capital expenditure budget or the most recent appraisal, as applicable. 105 Table of Contents 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, 2024. Market Property Count Occupancy % Units Rent per Unit (1) LTV (2) Fort Myers, FL 1 91.7 % 338 $ 1,560 77.3 % Tampa, FL 1 92.3 % 400 1,581 77.6 % Total Count/Average 2 92.0 % 738 $ 1,571 77.5 % (1) Represents average monthly rent per unit. (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 Investment in Entity that Originates Residential Loans As of December 31, 2024 and 2023, the Company had an investment in an entity that originates residential loans. The Company accounts for this investment using the equity method and has elected the fair value option. The following table summarizes our ownership interest in the entity that originates residential loans as of December 31, 2024 and 2023, respectively (dollar amounts in thousands): December 31, 2024 December 31, 2023 Strategy Ownership Interest Fair Value Ownership Interest Fair Value Constructive Loans, LLC Residential Loans 50% $ 38,718 50% $ 37,154 106 Table of Contents Derivative Assets and Liabilities 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, credit default swaps, 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 Consolidated Real Estate VIEs may be 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 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 the Company pays or receives under its swap agreements has the effect of offsetting the repricing characteristics and cash flows of the Company's financing arrangements. The Company has U.S. Treasury future contracts that obligate the Company to sell or buy U.S. Treasury securities for future delivery. The Company has purchased credit default swap index contracts under which a counterparty, in exchange for a premium, agrees to compensate the Company for the financial loss associated with the occurrence of a credit event in relation to a notional value of an index. The Company may purchase equity index put options that give the Company the right to sell or buy the underlying index at a specified strike price. The Company may also purchase 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-upon strike level. 107 Table of Contents Debt The Company’s debt as of December 31, 2024 included senior unsecured notes and subordinated debentures. 2029 Senior Notes On June 28, 2024, the Company completed the issuance of $60.0 million in aggregate principal amount of its 9.125% Senior Notes due 2029 (the "2029 Senior Notes") in an underwritten public offering. The 2029 Senior Notes were issued at par, bear interest at a rate equal to 9.125% per year and mature on July 1, 2029, unless earlier redeemed. 2026 Senior Notes As of December 31, 2024, the Company had $100.0 million aggregate principal amount of its 5.75% Senior Notes due 2026 (the "2026 Senior Notes") outstanding. The 2026 Senior Notes were issued at par and carry deferred charges resulting in a total cost to the Company of approximately 6.64%. The Company's 2026 Senior Notes, which mature on April 30, 2026, contain various covenants including the maintenance of a minimum net asset value, ratio of unencumbered assets to unsecured indebtedness and senior debt service coverage ratio and limit the amount of leverage the Company may utilize and its ability to transfer the Company’s assets substantially as an entirety or merge into or consolidate with another person. Subordinated Debentures As of December 31, 2024, certain of our wholly-owned subsidiaries had trust preferred securities outstanding of $45.0 million with a weighted average interest rate of 8.54% which are due in 2035. The securities are fully guaranteed by us with respect to distributions and amounts payable upon liquidation, redemption or repayment. These securities are classified as subordinated debentures in the liability section of our consolidated balance sheets. 108 Table of Contents Balance Sheet Analysis - Company ’ s Stockholders’ Equity The following table provides a summary of the Company's stockholders' equity at December 31, 2024 and 2023, respectively (dollar amounts in thousands): December 31, 2024 December 31, 2023 8.000% Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock $ 147,745 $ 147,745 7.875% Series E Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock 177,697 177,697 6.875% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock 138,418 138,418 7.000% Series G Cumulative Redeemable Preferred Stock 71,585 71,585 Common stock 906 907 Additional paid-in capital 2,289,044 2,297,081 Accumulated other comprehensive loss — (4) Accumulated deficit (1,430,675) (1,253,817) Company's stockholders' equity $ 1,394,720 $ 1,579,612 109 Table of Contents Liquidity and Capital Resources General Liquidity is a measure of our ability to meet potential cash requirements. Our short-term (the 12 months ending December 31, 2025) and long-term (beyond December 31, 2025) liquidity requirements include ongoing commitments to repay borrowings, fund and maintain investments, comply with margin requirements, fund our operations, pay dividends to our stockholders and other general business needs. Generally, our short-term and long-term liquidity needs are met by our existing cash balances and our investments and assets which generate liquidity on an ongoing basis through principal and interest payments, prepayments, net earnings retained prior to payment of dividends and distributions from equity investments. In addition, we may satisfy our short-term and/or long-term liquidity needs through the sale of assets from our investment portfolio, securities offerings or the securitization or collateralized financing of our assets. We continue to seek out assets and markets that provide compelling risk-adjusted returns 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. Beginning in 2023 and through the year ended December 31, 2024, we have been expanding our holdings of Agency RMBS, which is more liquid than many if not all of the investments in our portfolio of credit investments. To expand our Agency RMBS portfolio, we have utilized mark-to-market repurchase agreement financing with terms of 30 days to 90 days. As of December 31, 2024, the Company’s portfolio recourse leverage ratio of 2.9x, remains within our target range. As of December 31, 2024, 62% of our debt, excluding mortgages payable on real estate and Consolidated SLST CDOs, is subject to mark-to-market margin calls, with 44% collateralized by Agency RMBS, 10% collateralized by U.S. Treasury securities and 8% collateralized by residential credit assets. The remaining 38% has no exposure to collateral repricing by our counterparties. We expect to continue to opportunistically dispose of assets from our portfolio 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 that are capable of expanding our interest income, like Agency RMBS, and maintaining low duration credit exposure by purchasing high-coupon business purpose loans. We also intend to maintain a solid position in unrestricted cash and remain committed to prudently managing our liabilities. At December 31, 2024, we had $163.3 million of available cash and cash equivalents (excluding cash and cash equivalents held by Consolidated Real Estate VIEs), $170.2 million of unencumbered investment securities (including the securities we own in Consolidated SLST and CDOs repurchased from our residential loan securitizations) and $128.7 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. 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. We have placed a greater emphasis on procuring, where appropriate, 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 continue to move higher as we access additional liquidity and grow our investment portfolio further, 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 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. 110 Table of Contents Cash Flows and Liquidity for the Year Ended December 31, 2024 During the year ended December 31, 2024, net cash, cash equivalents and restricted cash decreased by $1.6 million. Cash Flows from Operating Activities We generated net cash flows from operating activities of $14.1 million during the year ended December 31, 2024. 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 (including impairment of real estate and loss on reclassification of disposal group). Cash Flows Used in Investing Activities During the year ended December 31, 2024, our net cash flows used in investing activities were $2.2 billion, primarily as a result of purchases of investment securities and residential loans. This was partially offset by principal repayments received on residential loans and investment securities, net proceeds from the sale of residential loans and real estate, net variation margin and payments received on derivative instruments and return of capital from equity investments. Although we generally intend to hold our assets as long-term investments, we may sell certain of these assets in order to manage our interest rate risk and liquidity needs, to meet other operating objectives or to adapt to market conditions. We cannot predict the timing and impact of future sales of assets, if any. Because a portion of our assets are financed through repurchase agreements or CDOs, a portion of the proceeds from any sales of or principal repayments on our assets may be used to repay balances under these financing sources. Accordingly, all or a significant portion of cash flows from principal repayments received from residential loans, including residential loans held in Consolidated SLST, and proceeds from sales or principal paydowns received from investment securities available for sale were used to repay CDOs issued by the respective Consolidated VIEs or repurchase agreements (included as cash used in financing activities). Additionally, a significant portion of cash flows from the sale of real estate held in Consolidated VIEs, if any, 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, 2024, our net cash flows provided by financing activities were $2.2 billion. The main sources of cash flows from financing activities were proceeds received from repurchase agreements and proceeds from the issuance of CDOs and senior unsecured notes. This was partially offset by paydowns on and extinguishment of CDOs, payments made on Consolidated SLST CDOs, net payments made on mortgages payable on real estate and dividend payments on both common and preferred stock. 111 Table of Contents Liquidity – Financing Arrangements As of December 31, 2024, 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. Interest rate changes and increased prepayment activity can have a negative impact on the valuation of these securities, reducing the amount we can borrow under these agreements. Moreover, these repurchase agreements allow the counterparties to determine a new market value of the collateral to reflect current market conditions and because these lines of financing are not committed, the counterparty can effectively call the loan at any time. Market value of the collateral represents the price of such collateral obtained from generally recognized sources or the most recent closing bid quotation from such source plus accrued income. If a counterparty determines that the value of the collateral has decreased, the counterparty may initiate a margin call and require us to either post additional collateral to cover such decrease or repay a portion of the outstanding amount financed in cash, on minimal notice, and repurchase may be accelerated upon an event of default under the repurchase agreements. Moreover, in the event an existing counterparty elected to not renew the outstanding balance at its maturity into a new repurchase agreement, we would be required to repay the outstanding balance with cash or proceeds received from a new counterparty or to surrender the securities that serve as collateral for the outstanding balance, or any combination thereof. If we were unable to secure financing from a new counterparty and had to surrender the collateral, we would expect to incur a loss. In addition, in the event a repurchase agreement counterparty defaults on its obligation to “re-sell” or return to us the assets that are securing the financing at the end of the term of the repurchase agreement, we would incur a loss on the transaction equal to the amount of “haircut” associated with the short-term repurchase agreement, which we sometimes refer to as the “amount at risk.” At December 31, 2024, we had longer-term repurchase agreements with initial terms of up to two years with multiple third-party financial institutions that are secured by certain of our residential loans, real estate owned and single-family rental properties. The outstanding financing under five of these repurchase agreements are subject to margin calls to the extent the market value of the collateral falls below specified levels. S ee "Management's Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Analysis—Residential Loans, Real Estate Owned and Single-Family Rental Property Financing—Repurchase Agreements" for further information. During the terms of the repurchase agreements, proceeds from the residential loans, real estate owned and single-family rental properties 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, real estate owned 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, real estate owned 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, 2024, we had an aggregate amount at risk under repurchase agreements secured by residential loans, real estate owned and single-family rental properties of approximately $162.8 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. See “Liquidity and Capital Resources—General” above. As of December 31, 2024, we had assets available to be posted as margin which included liquid assets, such as unrestricted cash and cash equivalents, and unencumbered investment securities that could be monetized to pay down or collateralize a liability immediately. As of December 31, 2024, we had $163.3 million included in cash and cash equivalents and $170.2 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, 2024 included $128.0 million of Agency RMBS and $42.2 million of non-Agency RMBS (including an IO security we own in Consolidated SLST and CDOs repurchased from our residential loan securitizations). At December 31, 2024, the Company had $100.0 million aggregate principal amount of 2026 Senior Notes outstanding. The 2026 Senior Notes were issued at 100% of the principal amount and bear interest at a rate equal to 5.75% per year (subject to adjustment from time to time based on changes in the ratings of the 2026 Senior Notes by one or more nationally recognized statistical rating organizations), payable semi-annually in arrears on April 30 and October 30 of each year, and mature on April 30, 2026, unless earlier redeemed. The Company has the right to redeem the 2026 Senior Notes, in whole or in part, prior to maturity, subject to a "make-whole" premium or other date-dependent multiples of principal amount redeemed. No sinking fund is provided for the 2026 Senior Notes. The Company's 2026 Senior 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. 112 Table of Contents At December 31, 2024, the Company had $60.0 million aggregate principal amount of 2029 Senior Notes outstanding. The 2029 Senior Notes were issued at 100% of the principal amount and bear interest at a rate equal to 9.125% per year, payable quarterly in arrears on January 1, April 1, July 1, and October 1 of each year, beginning on October 1, 2024, and mature on July 1, 2029, unless earlier redeemed. The Company has the right to redeem the 2029 Senior Notes, in whole or in part, at any time on or after July 1, 2026, at a redemption price equal to 100% of the outstanding principal amount redeemed. No sinking fund is provided for the 2029 Senior Notes. At December 31, 2024, we also had other longer-term debt which includes Company-sponsored residential loan securitization CDOs with a carrying value of $2.1 billion and non-Agency RMBS re-securitization CDOs with a carrying value of $70.8 million. We had 14 Company-sponsored securitizations with CDOs outstanding as of December 31, 2024. See Note 14 to our consolidated financial statements included in this report for further discussion. 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, 2024, 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 3.0 to 1. Our Company recourse leverage ratio does not include outstanding non-recourse repurchase agreement financing, debt associated with CDOs or mortgages payable on real estate, including mortgages payable on real estate of disposal group held for sale. As of December 31, 2024, our portfolio recourse leverage ratio, which represents our outstanding recourse repurchase agreement financing divided by our total stockholders' equity, was approximately 2.9 to 1. We monitor all at risk or shorter-term financings to enable us to respond to market disruptions as they arise. Liquidity – Hedging and Other Factors Certain of our hedging instruments may also impact our liquidity. We may use interest rate swaps, interest rate caps, credit default swaps, 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. With respect to interest rate swaps, credit default swaps, futures contracts and TBAs, initial margin deposits, which can be comprised of either cash or investment securities, will be made upon entering into these contracts. During the period these contracts are open, changes in the value of the contract are recognized as unrealized gains or losses by marking to market on a daily basis to reflect the market value of these contracts at the end of each day’s trading. We may be required to satisfy variation margin payments periodically, depending upon whether unrealized gains or losses are incurred. In addition, because delivery of TBAs extend beyond the typical settlement dates for most non-derivative investments, these transactions are more prone to market fluctuations between the trade date and the ultimate settlement date, and thereby are more vulnerable to increasing amounts at risk with the applicable counterparties. As it relates to the variable-rate mortgages payable in our Consolidated Real Estate VIEs, the joint venture entities may be required by the lender to enter into interest rate cap contracts. In addition, with respect to one of the Company's financings under repurchase agreements, the lender has, in the past, required the Company to enter into an interest rate cap contract. 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 gains or losses on derivative instruments. The joint venture entities that own the multi-family properties may 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. Liquidity — Securities Offerings In addition to the financing arrangements described above under the caption “Liquidity—Financing Arrangements,” we also rely on follow-on equity offerings of common and preferred stock, and may utilize from time to time debt securities offerings, as a source of both short-term and long-term liquidity. We also may generate liquidity through the sale of shares of our common stock or preferred stock in “at-the-market” equity offering programs pursuant to equity distribution agreements. The Company had no securities offerings during the year ended December 31, 2024. 113 Table of Contents 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 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. The Company did not repurchase any shares of its preferred stock during the year ended December 31, 2024. As of December 31, 2024, $97.6 million of the approved amount remained available for the repurchase of shares of preferred stock under the preferred stock repurchase program. The preferred stock repurchase program expires on March 31, 2026. In February 2022, the Board of Directors approved a $200.0 million common stock repurchase program. In March 2023, the Board of Directors approved an upsize of the common stock repurchase program to $246.0 million. 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. During the year ended December 31, 2024, the Company repurchased 587,347 shares of its common stock pursuant to the common stock repurchase program for a total cost of approximately $3.5 million, including fees and commissions paid to the broker, representing an average repurchase price of $5.95 per common share. As of December 31, 2024, $189.7 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 expires on March 31, 2026. Dividends For information regarding the declaration and payment of dividends on our common stock and preferred stock for the periods covered by this report, please see Note 18 to our consolidated financial statements included in this report. Our Board of Directors will continue to evaluate our dividend policy each quarter and will make adjustments as necessary, based on our earnings and financial condition, capital requirements, maintenance of our REIT qualification, restrictions on making distributions under Maryland law and such other factors as our Board of Directors deems relevant. Our dividend policy does not constitute an obligation to pay dividends. We intend to make distributions to our stockholders to comply with the various requirements to maintain our REIT status and to minimize or avoid corporate income tax and the nondeductible excise tax. However, differences in timing between the recognition of REIT taxable income and the actual receipt of cash could require us to sell assets or to borrow funds on a short-term basis to meet the REIT distribution requirements and to minimize or avoid corporate income tax and the nondeductible excise tax. In the event we fail to pay dividends on our preferred stock, the Company would become subject to certain limitations on its ability to pay dividends or redeem or repurchase its common stock or preferred stock. Commitment to Fund Business Purpose Loans As of December 31, 2024, the Company had commitments to fund up to $220.8 million of additional advances on existing business purpose loans. These commitments are generally subject to loan agreements with terms that must be met before we fund advances on the commitment. Redeemable Non-Controlling Interest Pursuant to the operating agreement for one of our joint venture equity investments, third party investors in this joint venture have the ability to sell their ownership interests to us, at their election once a year subject to annual minimum and maximum amount limitations, and we are obligated to purchase, subject to certain conditions, such interests for cash. See Note 7 to our consolidated financial statements included in this report for further discussion of redeemable non-controlling interest. Summary of Material Contractual Obligations The Company had the following material contractual obligations at December 31, 2024 (dollar amounts in thousands): 114 Table of Contents Less than 1 year 1 to 3 years 4 to 5 years More than 5 years Total Repurchase agreements (1) $ 4,000,909 $ 48,323 $ — $ — $ 4,049,232 Subordinated debentures (1) 3,972 7,944 7,954 66,894 86,764 Senior unsecured notes (1) 11,225 113,825 68,213 — 193,263 Total contractual obligations (2) $ 4,016,106 $ 170,092 $ 76,167 $ 66,894 $ 4,329,259 (1) Amounts include projected interest payments during the period. Projected interest payments are based on interest rates in effect and outstanding balances as of December 31, 2024. (2) We exclude our CDOs from the contractual obligations disclosed in the table above as this debt is non-recourse and not cross-collateralized and, therefore, must be satisfied exclusively from the proceeds of the residential loans and non-Agency RMBS held in securitization trusts. See Note 14 in the Notes to Consolidated Financial Statements for further information regarding our CDOs. We also exclude mortgages payable on real estate as they are non-recourse debt for which we have no obligation for repayment. See Note 15 in the Notes to Consolidated Financial Statements for further information regarding our mortgages payable on real estate. In addition, pursuant to the operating agreement for one of our joint venture equity investments, subject to certain conditions, third party investors in this joint venture have the ability to sell their ownership interests to us, at their election, and we are obligated to purchase such interests for cash. 115 Table of Contents