What changed in this filing

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Item 1. Financial Statements

2021-11-03 compared with 2021-08-04 · 163 added, 129 removed, 876 unchanged (25% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

$ in thousands, except share amounts June 30, 2021 December 31, 2020

$ in thousands, except share amounts September 30, 2021 December 31, 2020

Mortgage-backed securities, at fair value (including pledged securities of $ 8,264,615 and $ 7,614,935 , respectively;

42 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

$ in thousands, except share amounts 2021 2020 2021 2020

36 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

$ in thousands 2021 2020 2021 2020

14 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the three months ended March 31, 2021 and June 30, 2021

For the three months ended March 31, 2021;

June 30, 2021 and September 30, 2021

Capital Accumulated

11 unchanged sentences

Net income (loss) — — — — — — — — — — ( 9,275 ) ( 9,275 )

Other comprehensive loss — — — — — — — — — ( 3,778 ) — ( 3,778 )

Other comprehensive income (loss) — — — — — — — — — ( 3,778 ) — ( 3,778 )

Proceeds from issuance of common stock, net of offering costs — — — — — — 43,150,000 432 160,549 — — 160,981

5 unchanged sentences

Net income (loss) — — — — — — — — — — ( 73,758 ) ( 73,758 )

Other comprehensive income — — — — — — — — — ( 4,906 ) — ( 4,906 )

Other comprehensive income (loss) — — — — — — — — — ( 4,906 ) — ( 4,906 )

Proceeds from issuance of common stock, net of offering costs — — — — — 43,125,000 431 145,448 — — 145,879

5 unchanged sentences

Balance at June 30, 2021 — — 6,200,000 149,860 11,500,000 278,108 289,680,760 2,897 3,693,917 49,921 ( 2,801,324 ) 1,373,379

Net income (loss) — — — — — — — — — — 57,680 57,680

Other comprehensive income (loss) — — — — — — — — — ( 5,887 ) — ( 5,887 )

Proceeds from issuance of common stock, net of offering costs — — — — — — 22,060,000 220 67,308 — — 67,528

Common stock dividends — — — — — — — — — — ( 28,057 ) ( 28,057 )

Preferred stock dividends — — — — — — — — — — ( 8,394 ) ( 8,394 )

Amortization of equity-based compensation — — — — — — — — 122 — — 122

Balance at September 30, 2021 — — 6,200,000 149,860 11,500,000 278,108 311,740,760 3,117 3,761,347 44,034 ( 2,780,095 ) 1,456,371

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

2 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)

For the three months ended March 31, 2020 and June 30, 2020

For the three months ended March 31, 2020;

June 30, 2020 and September 30, 2020

Capital Accumulated

12 unchanged sentences

Net income (loss) — — — — — — — — — — ( 1,616,192 ) ( 1,616,192 )

Other comprehensive loss — — — — — — — — — ( 159,235 ) — ( 159,235 )

Other comprehensive income (loss) — — — — — — — — — ( 159,235 ) — ( 159,235 )

Proceeds from issuance of common stock, net of offering costs — — — — — — 20,700,000 207 346,819 — — 347,026

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Net income (loss) — — — — — — — — — — ( 288,839 ) ( 288,839 )

Other comprehensive loss — — — — — — — — — ( 23,380 ) — ( 23,380 )

Other comprehensive income (loss) — — — — — — — — — ( 23,380 ) — ( 23,380 )

Stock awards — — — — — — 22,500 — — — — —

3 unchanged sentences

Balance at June 30, 2020 5,600,000 135,356 6,200,000 149,860 11,500,000 278,108 181,327,368 1,813 3,313,801 106,348 ( 2,827,494 ) 1,157,792

Net income (loss) — — — — — — — — — — 107,966 107,966

Other comprehensive income (loss) — — — — — — — — — ( 34,649 ) — ( 34,649 )

Proceeds from issuance of common stock, net of offering costs — — — — — — 25,431 — 78 — — 78

Stock awards — — — — — — 22,500 1 — — — 1

Common stock dividends — — — — — — — — — — ( 9,070 ) ( 9,070 )

Preferred stock dividends — — — — — — — — — — ( 11,107 ) ( 11,107 )

Amortization of equity-based compensation — — — — — — — — 129 — — 129

Balance at September 30, 2020 5,600,000 135,356 6,200,000 149,860 11,500,000 278,108 181,375,299 1,814 3,314,008 71,699 ( 2,739,705 ) 1,211,140

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

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

$ in thousands 2021 2020

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The guidance can be applied as of January 1, 2020.

We are evaluating our contracts that are eligible for modification relief and may apply the elections prospectively as needed.

We are currently evaluating what impact the guidance will have on our consolidated financial statements.

Beginning in the fourth quarter of 2021, we intend to transition our interest rate swaps that are currently indexed to LIBOR to interest rate swaps that are indexed to the Secured Overnight Financing Rate ("SOFR") in a manner that will allow us to qualify for contract modification relief and maintain the same accounting for and presentation of interest rate swaps that was in place prior to modification.

The modifications are not expected to have a material effect on our financial statements.

Our 7.75 % Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock and our 7.50 % Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock each become callable at the time the stock begins to pay a LIBOR-based rate.

We do not currently intend to amend our Series B or Series C Preferred Stock to change the existing LIBOR cessation fallback language.

However, we may seek to apply the guidance if an amendment occurs prior to December 31, 2022.

Note 3 – Variable Interest Entities ("VIEs")

Our maximum risk of loss in VIEs in which we are not the primary beneficiary at June 30, 2021 is presented in the table below.

Our maximum risk of loss in VIEs in which we are not the primary beneficiary at September 30, 2021 is presented in the table below.

$ in thousands Carrying Amount Company's Maximum Risk of Loss

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We resumed investing in Agency RMBS in July 2020.

The following tables summarize our MBS portfolio by asset type as of June 30, 2021 and December 31, 2020.

June 30, 2021

The following tables summarize our MBS portfolio by asset type as of September 30, 2021 and December 31, 2020.

September 30, 2021

$ in thousands Principal/ Notional

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Total 9,193,789 ( 360,991 ) 8,832,798 ( 4,796 ) 8,828,002 2.17 %

(1) Period-end weighted average yield is based on amortized cost as of June 30, 2021 and incorporates future prepayment and loss assumptions.

(1) Period-end weighted average yield is based on amortized cost as of September 30, 2021 and incorporates future prepayment and loss assumptions.

(2) Agency collateralized mortgage obligation ("Agency-CMO") are interest-only securities ("Agency IO").

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(5) Non-Agency RMBS includes non-Agency IO which represent 98.8 % of principal/notional balance, 49.3 % of amortized cost and 41.5 % of fair value.

The following table presents the fair value of our available-for-sale securities and securities accounted for under the fair value option by asset type as of June 30, 2021 and December 31, 2020.

The following table presents the fair value of our available-for-sale securities and securities accounted for under the fair value option by asset type as of September 30, 2021 and December 31, 2020.

We have elected the fair value option for all of our RMBS interest-only securities and our MBS purchased on or after September 1, 2016.

As of June 30, 2021 and December 31, 2020, approximately 99 % of our MBS are accounted for under the fair value option.

June 30, 2021 December 31, 2020

As of September 30, 2021 and December 31, 2020, approximately 99 % of our MBS are accounted for under the fair value option.

September 30, 2021 December 31, 2020

$ in thousands Available-for-sale Securities Securities under Fair Value Option Total

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Total 70,763 8,757,239 8,828,002 116,850 8,055,332 8,172,182

The components of the carrying value of our MBS portfolio at June 30, 2021 and December 31, 2020 are presented below.

Accrued interest receivable on our MBS portfolio, which is recorded within investment related receivable on our condensed consolidated balance sheets, was $ 17.3 million at June 30, 2021 (December 31, 2020:

The components of the carrying value of our MBS portfolio at September 30, 2021 and December 31, 2020 are presented below.

Accrued interest receivable on our MBS portfolio, which is recorded within investment related receivable on our condensed consolidated balance sheets, was $ 18.0 million at September 30, 2021 (December 31, 2020:

$ 15.4 million).

June 30, 2021

September 30, 2021

$ in thousands MBS Interest-Only Securities Total

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Realization occurs upon sale or settlement of such securities.

Further detail on the components of our total gains (losses) on investments, net for the three and six months ended June 30, 2021 and 2020 is provided below in this Note 4.

The following table summarizes our MBS portfolio according to estimated weighted average life classifications as of June 30, 2021 and December 31, 2020 .

$ in thousands June 30, 2021 December 31, 2020

Further detail on the components of our total gains (losses) on investments, net for the three and nine months ended September 30, 2021 and 2020 is provided below in this Note 4.

The following table summarizes our MBS portfolio according to estimated weighted average life classifications as of September 30, 2021 and December 31, 2020 .

$ in thousands September 30, 2021 December 31, 2020

Less than one year 17,227 22,112

2 unchanged sentences

Total 8,828,002 8,172,182

The following tables present the estimated fair value and gross unrealized losses of our MBS by length of time that such securities have been in a continuous unrealized loss position at June 30, 2021 and December 31, 2020.

June 30, 2021

September 30, 2021

Less than 12 Months 12 Months or More Total

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30 year fixed-rate (1)

5,382,665 ( 27,856 ) 47 — — — 5,382,665 ( 27,856 ) 47

Total Agency RMBS pass-through 5,382,665 ( 27,856 ) 47 — — — 5,382,665 ( 27,856 ) 47

Agency-CMO (1)

12,185 ( 286 ) 3 — — — 12,185 ( 286 ) 3

Non-Agency RMBS (2)

2,374 ( 1,905 ) 11 12 ( 23 ) 4 2,386 ( 1,928 ) 15

(1) Fair value option has been elected for all securities in an unrealized loss position.

Total 5,397,224 ( 30,047 ) 61 12 ( 23 ) 4 5,397,236 ( 30,070 ) 65

(1) Fair value option has been elected for all Agency securities in an unrealized loss position.

(2) Includes non-Agency IO with fair value of $ 2.1 million for which the fair value option has been elected.

Such securities have unrealized losses of $ 1.9 million.

December 31, 2020

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As of December 31, 2020, we had recorded an allowance for credit losses of $ 1.8 million on a single non-Agency CMBS on our condensed consolidated balance sheet.

We recorded an $ 830,000 and a $ 1.8 million decrease in the provision for credit losses on our condensed consolidated statement of operations during the three and six months ended June 30, 2021, respectively.

As of June 30, 2021, we do no t have an allowance for credit losses recorded on our condensed consolidated balance sheet.

We did not record any provisions for credit losses during the three and six months ended June 30, 2020.

During the three and six months ended June 30, 2020, we recorded impairments of $ 6.3 million and $ 85.1 million, respectively, on our condensed consolidated statement of operations because we intended to sell or more likely than not would be required to sell the securities before recovery of amortized cost basis.

We recorded a $ 1.8 million decrease in the provision for credit losses on our condensed consolidated statement of operations during the nine months ended September 30, 2021.

As of September 30, 2021, we do no t have an allowance for credit losses recorded on our condensed consolidated balance sheet.

We did not record any provisions for credit losses during the three and nine months ended September 30, 2020.

During the three and nine months ended September 30, 2020, we recorded impairments of $ 9.0 million and $ 94.1 million, respectively, on our condensed consolidated statement of operations because we intended to sell or more likely than not would be required to sell the securities before recovery of amortized cost basis.

The following table presents a roll-forward of our allowance for credit losses.

Three Months Ended June 30, Six Months Ended June 30,

Nine Months Ended September 30,

$ in thousands 2021

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Ending allowance for credit losses —

The following table summarizes the components of our total gain (loss) on investments, net for the three and six months ended June 30, 2021 and 2020.

Three Months Ended June 30, Six Months Ended June 30,

The following table summarizes the components of our total gain (loss) on investments, net for the three and nine months ended September 30, 2021 and 2020.

Three Months Ended September 30, Nine Months Ended September 30,

$ in thousands 2021 2020 2021 2020

6 unchanged sentences

Total gain (loss) on investments, net ( 16,830 ) 65,106 ( 276,067 ) ( 996,743 )

The following tables present components of interest income recognized on our MBS and GSE CRT portfolio for the three and six months ended June 30, 2021 and 2020.

GSE CRT interest income excludes coupon interest associated with embedded derivatives of $ 1.1 million and $ 5.8 million for the three and six months ended June 30, 2020, respectively, that was recorded as realized and unrealized credit derivative income (loss), net.

For the three months ended June 30, 2021

The following tables present components of interest income recognized on our MBS and GSE CRT portfolio for the three and nine months ended September 30, 2021 and 2020.

GSE CRT interest income excludes coupon interest associated with embedded derivatives of $ 478,000 and $ 6.3 million for the three and nine months ended September 30, 2020, respectively, that was recorded as realized and unrealized credit derivative income (loss), net.

For the three months ended September 30, 2021

$ in thousands Coupon

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Total 51,998 ( 9,341 ) 42,657

For the three months ended June 30, 2020

For the three months ended September 30, 2020

$ in thousands Coupon

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GSE CRT 223 ( 274 ) ( 51 )

Other ( 15 ) — ( 15 )

Total 27,466 ( 559 ) 26,907

For the six months ended June 30, 2021

For the nine months ended September 30, 2021

$ in thousands Coupon

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Total 155,001 ( 30,276 ) 124,725

For the six months ended June 30, 2020

For the nine months ended September 30, 2020

$ in thousands Coupon

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Note 5 – Other Assets

The following table summarizes our other assets as of June 30, 2021 and December 31, 2020:

$ in thousands June 30, 2021 December 31, 2020

The following table summarizes our other assets as of September 30, 2021 and December 31, 2020:

$ in thousands September 30, 2021 December 31, 2020

Commercial loan, held-for-investment 22,268 23,098

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The borrower continues to make current interest payments on the loan and posted additional cash reserves in connection with the loan modification.

The loan had a principal balance of $ 23.9 million as of June 30, 2021 and December 31, 2020 and a weighted average coupon rate of 8.59 % as of June 30, 2021 and 8.65 % as of December 31, 2020.

The loan had a principal balance of $ 23.9 million as of September 30, 2021 and December 31, 2020 and a weighted average coupon rate of 8.59 % as of September 30, 2021 and 8.65 % as of December 31, 2020.

We account for this investment using the fair value option.

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We fully repaid our secured loans during the year ended December 31, 2020.

The following tables summarize certain characteristics of our borrowings at June 30, 2021 and December 31, 2020.

The following tables summarize certain characteristics of our borrowings at September 30, 2021 and December 31, 2020.

Refer to Note 7 - "Collateral Positions" for collateral pledged and held under our repurchase agreements.

$ in thousands June 30, 2021

$ in thousands September 30, 2021

Weighted Average

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As of May 7, 2020, we repaid all of our repurchase agreements that may have been in default.

Gains and losses associated with the termination of these repurchase agreements during the three and six months ended June 30, 2020 are reported as net gain (loss) on extinguishment of debt in our condensed consolidated statement of operations.

Gains and losses associated with the termination of these repurchase agreements during the three and nine months ended September 30, 2020 are reported as net gain (loss) on extinguishment of debt in our condensed consolidated statement of operations.

We resumed financing the purchase of Agency RMBS with repurchase agreements in July 2020.

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The repurchase agreements are subject to certain financial covenants.

We were in compliance with all of these covenants as of June 30, 2021.

We were in compliance with all of these covenants as of September 30, 2021.

Secured Loans

1 unchanged sentence

Note 7 - Collateral Positions

The following table summarizes the fair value of collateral that we pledged and held under our repurchase agreements, interest rate swaps, currency forward contracts and to-be-announced securities forward contracts ("TBAs") as of June 30, 2021 and December 31, 2020.

Refer to Note 2 - "Summary of Significant Accounting Policies - Fair Value Measurements" of our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 for a description of how we determine fair value.

4 unchanged sentences

Non-cash collateral held is only recognized if the counterparty defaults or if we sell the pledged collateral.

As of June 30, 2021 and December 31, 2020, we did not recognize any non-cash collateral held on our condensed consolidated balance sheets.

As of September 30, 2021 and December 31, 2020, we did not recognize any non-cash collateral held on our condensed consolidated balance sheets.

$ in thousands As of

Collateral Pledged June 30, 2021 December 31, 2020

Collateral Pledged September 30, 2021 December 31, 2020

Repurchase Agreements:

Agency RMBS 8,264,615 7,614,935

Cash 1,095 700

Total repurchase agreements collateral pledged 8,265,710 7,615,635

Interest Rate Swaps, Currency Forward Contracts and TBAs:

Cash 8,915 378

Restricted cash 296,721 244,573

5 unchanged sentences

Total collateral pledged 8,571,346 7,860,586

Collateral Held June 30, 2021 December 31, 2020

Collateral Held September 30, 2021 December 31, 2020

Repurchase Agreements:

2 unchanged sentences

Interest Rate Swaps, Currency Forward Contracts and TBAs:

Cash 310 1,630

Total interest rate swaps, currency forward contracts and TBAs collateral held — 1,630

Total collateral held:

Cash 310 3,546

Non-cash collateral — 4,226

6 unchanged sentences

We intend to maintain a level of liquidity that will enable us to meet margin calls.

Our repurchase agreement collateral pledged ratio (MBS pledged as collateral/amount outstanding) was 105 % as of June 30, 2021 (December 31, 2020:

Our repurchase agreement collateral pledged ratio (MBS pledged as collateral/amount outstanding) was 105 % as of September 30, 2021 (December 31, 2020:

Interest Rate Swaps

As of June 30, 2021 and December 31, 2020, all of our interest rate swaps were centrally cleared by a registered clearing organization such as the Chicago Mercantile Exchange ("CME") and LCH Limited ("LCH") through a Futures Commission Merchant ("FCM").

As of September 30, 2021 and December 31, 2020, all of our interest rate swaps were centrally cleared by a registered clearing organization such as the Chicago Mercantile Exchange ("CME") and LCH Limited ("LCH") through a Futures Commission Merchant ("FCM").

We are required to pledge initial margin and daily variation margin for our centrally cleared interest rate swaps that is based on the fair value of our contracts as determined by our FCM.

9 unchanged sentences

$ in thousands Notional amount as of December 31, 2020 Additions Settlement,

or Exercise Notional Amount as of June 30, 2021

or Exercise Notional amount as of September 30, 2021

Interest Rate Swaps (1)

5 unchanged sentences

Total 8,033,084 3,351,683 ( 2,567,953 ) 8,816,814

(1) Notional amount as of June 30, 2021 excludes $ 1.3 billion of interest rate swaps with forward start dates.

(1) Notional amount as of September 30, 2021 excludes $ 1.3 billion of interest rate swaps with forward start dates.

Refer to Note 7 - "Collateral Positions" for further information regarding our collateral pledged to and received from our derivative counterparties.

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To a lesser extent, we also enter into interest rate swap contracts whereby we make floating-rate payments to a counterparty in exchange for the receipt of fixed-rate amounts as part of our overall risk management strategy.

consolidated statements of operations as interest is accrued and paid on the related repurchase agreements over the remaining life of the interest rate swap agreements.

We reclassified $ 5.4 million and $ 10.8 million as a decrease (June 30, 2020:

$ 4.5 million and $ 14.6 million as a decrease) to interest expense for the three and six months ended June 30, 2021, respectively.

We increased the amount of gains and losses reclassified as a decrease to interest expense during the three and six months ended June 30, 2020 by $ 2.7 million because it was probable that the original forecasted repurchase agreement transactions would not occur by the end of the originally specified time period .

Amounts recorded in accumulated other comprehensive income ("AOCI") before we discontinued cash flow hedge accounting for our interest rate swaps are reclassified to interest expense on repurchase agreements on the condensed consolidated statements of operations as interest is accrued and paid on the related repurchase agreements over the remaining life of the interest rate swap agreements.

We reclassified $ 5.6 million and $ 16.4 million as a decrease (September 30, 2020:

$ 3.2 million and $ 17.8 million as a decrease) to interest expense for the three and nine months ended September 30, 2021, respectively.

During the next 12 months, we estimate that $ 20.5 million will be reclas sified as a decrease to interest expense, repurchase agreements.

As of June 30, 2021, $ 41.3 million (December 31, 2020:

As of September 30, 2021, $ 35.7 million (December 31, 2020:

$ 52.1 million) of unrealized gains on discontinued cash flow hedges, net are still included in accumulated other comprehensive income and will be reclassified as a decrease to interest expense, repurchase agreements over a period of time through December 15, 2023.

As of June 30, 2021 and December 31, 2020, we had interest rate swaps whereby we pay interest at a fixed rate and receive floating interest based on 1-month LIBOR with the following maturities outstand ing, excluding interest rate swaps with forward start dates.

$ in thousands As of June 30, 2021

As of September 30, 2021 and December 31, 2020, we had interest rate swaps whereby we pay interest at a fixed rate and receive floating interest based on 1-month LIBOR with the following maturities outstand ing, excluding interest rate swaps with forward start dates.

$ in thousands As of September 30, 2021

Maturities Notional Amount Weighted Average Fixed Pay Rate Weighted Average Floating Receive Rate Weighted Average Years to Maturity

Less than 3 years 1,000,000 0.16 % 0.09 % 2.8

3 to 5 years 1,250,000 0.23 % 0.08 % 3.9

8 unchanged sentences

Total 6,300,000 0.41 % 0.15 % 6.7

As of June 30, 2021, we held $ 1.3 billion notional amount of interest rate swaps with forward start dates that will receive floating interest based on 1-month LIBOR with a weighted average maturity of 21.2 years and a weighted average fixed pay rate of 1.29 %.

As of September 30, 2021, we held $ 1.3 billion notional amount of interest rate swaps with forward start dates that will receive floating interest based on 1-month LIBOR with a weighted average maturity of 21.0 years and a weighted average fixed pay rate of 1.13 %.

We did not hold any interest rate swaps with forward start dates as of December 31, 2020.

As of June 30, 2021, we had interest rate swaps whereby we pay floating interest based on 1-month LIBOR and receive interest at a fixed rate with the following maturities outstanding.

As of September 30, 2021, we had interest rate swaps whereby we pay floating interest based on 1-month LIBOR and receive interest at a fixed rate with the following maturities outstanding.

We did not hold any such interest rate swaps as of December 31, 2020.

$ in thousands As of June 30, 2021

$ in thousands As of September 30, 2021

Maturities Notional Amount Weighted Average Floating Pay Rate Weighted Average Fixed Receive Rate Weighted Average Years to Maturity

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We recognize realized and unrealized gains and losses associated with the purchases or sales of currency forward contracts in gain (loss) on derivative instruments, net in our condensed consolidated statements of operations.

As of June 30, 2021, we had $ 18.0 million (December 31, 2020:

As of September 30, 2021, we had $ 16.8 million (December 31, 2020:

$ 33.1 million) of notional amount of currency forward contracts related to an investment in an unconsolidated venture denominated in Euro.

3 unchanged sentences

We primarily use TBAs that we do not intend to physically settle on the contractual settlement date as an alternative means of investing in and financing Agency RMBS.

The following table summarizes certain characteristics of our TBAs accounted for as derivatives as of June 30, 2021 and December 31, 2020.

$ in thousands As of June 30, 2021

The following table summarizes certain characteristics of our TBAs accounted for as derivatives as of September 30, 2021 and December 31, 2020.

$ in thousands As of September 30, 2021

Notional Amount Implied Cost Basis Implied Market Value Net Carrying Value

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Tabular Disclosure of the Effect of Derivative Instruments on the Balance Sheet

The table below presents the fair value of our derivative financial instruments, as well as their classification on the condensed consolidated balance sheets as of June 30, 2021 and December 31, 2020.

The table below presents the fair value of our derivative financial instruments, as well as their classification on the condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020.

$ in thousands

Derivative Assets Derivative Liabilities

As of June 30, 2021 As of December 31, 2020 As of June 30, 2021 As of December 31, 2020

As of September 30, 2021 As of December 31, 2020 As of September 30, 2021 As of December 31, 2020

Sheet Fair Value Fair Value Balance

5 unchanged sentences

Tabular Disclosure of the Effect of Derivative Instruments on the Income Statement

The table below presents the effect of our credit derivatives on the condensed consolidated statements of operations for the three and six months ended June 30, 2020.

The table below presents the effect of our credit derivatives on the condensed consolidated statements of operations for the three and nine months ended September 30, 2020.

$ in thousands

Three months ended June 30, 2020

Three months ended September 30, 2020

not designated as

2 unchanged sentences

$ in thousands

Six months ended June 30, 2020

Nine months ended September 30, 2020

not designated as

1 unchanged sentence

GSE CRT Embedded Derivatives ( 31,354 ) 6,323 ( 10,281 ) ( 35,312 )

The following tables summarizes the effect of interest rate swaps, interest rate swaptions, currency forward contracts and TBAs reported in gain (loss) on derivative instruments, net on the condensed consolidated statements of operations for the three and six months ended June 30, 2021 and 2020:

$ in thousands

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

not designated as

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$ in thousands

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

not designated as

hedging instrument Realized gain (loss) on derivative instruments, net Contractual net interest income (expense) Unrealized gain (loss), net Gain (loss) on derivative instruments, net

Interest Rate Swaps ( 4,662 ) ( 555 ) 5,266 49

Currency Forward Contracts ( 1,643 ) — 675 ( 968 )

TBAs 1,227 — 2,578 3,805

Total ( 5,078 ) ( 555 ) 8,519 2,886

$ in thousands

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

not designated as

6 unchanged sentences

$ in thousands

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

not designated as

2 unchanged sentences

Currency Forward Contracts ( 1,297 ) — 519 ( 778 )

TBAs 1,227 — 2,578 3,805

Total ( 909,436 ) 11,369 ( 10,169 ) ( 908,236 )

2 unchanged sentences

Assets and liabilities subject to such arrangements are presented on a gross basis in the condensed consolidated balance sheets.

The following tables present information about the assets and liabilities that are subject to master netting agreements (or similar agreements) and can potentially be offset on our condensed consolidated balance sheets at June 30, 2021 and December 31, 2020.

The daily variation margin payment for centrally cleared interest rate swaps is characterized as settlement of the derivative itself rather than collateral.

As of June 30, 2021, our derivative liability of $ 17.2 million (December 31, 2020:

As of September 30, 2021, our derivative liability of $ 5.2 million (December 31,

derivative liability of $ 5.5 million) related to centrally cleared interest rate swaps is not included in the table below as a result of this characterization of daily variation margin.

As of June 30, 2021

As of September 30, 2021

Gross Amounts Not Offset with Financial Assets (Liabilities) in the Balance Sheets

32 unchanged sentences

(1) Amounts represent derivative assets and derivative liabilities which could potentially be offset against other derivative assets, derivative liabilities and cash collateral pledged or received.

(2) Cash collateral pledged by us on our currency forward contracts, TBAs and centrally cleared interest rate swaps was $ 353.4 million and $ 245.0 million as of June 30, 2021 and December 31, 2020, respectively.

(2) Cash collateral pledged by us on our currency forward contracts, TBAs and centrally cleared interest rate swaps was $ 305.6 million and $ 245.0 million as of September 30, 2021 and December 31, 2020, respectively.

Cash collateral pledged on our centrally cleared interest rate swaps is settled against the fair value of these swaps and is therefore excluded from the tables above.

We held cash collateral on our derivatives of $ 310,000 and $ 1.6 million at June 30, 2021 and December 31, 2020, respectively.

(3) The fair value of securities pledged against our borrowings under repurchase agreements was $ 8.2 billion and $ 7.6 billion at June 30, 2021 and December 31, 2020, respectively.

We pledged cash collateral of $ 300,000 and $ 700,000 under repurchase agreements as of June 30, 2021 and December 31, 2020, respectively.

We held cash collateral on our derivatives of $ 1.6 million at December 31, 2020.

We did no t hold cash collateral on our derivatives as of September 30, 2021.

(3) The fair value of securities pledged against our borrowings under repurchase agreements was $ 8.3 billion and $ 7.6 billion at September 30, 2021 and December 31, 2020, respectively.

We pledged cash collateral of $ 1.1 million and $ 700,000 under repurchase agreements as of September 30, 2021 and December 31, 2020, respectively.

We held cash collateral of $ 1.9 million under repurchase agreements as of December 31, 2020.

We did no t hold cash collateral under repurchase agreements as of June 30, 2021.

We did no t hold cash collateral under repurchase agreements as of September 30, 2021.

Note 10 – Fair Value of Financial Instruments

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The following tables present our assets and liabilities measured at fair value on a recurring basis.

June 30, 2021

September 30, 2021

Fair Value Measurements Using:

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(2) Investments in unconsolidated ventures are valued using the net asset value ("NAV") as a practical expedient and are not subject to redemption, although investors may sell or transfer their interest at the approval of the general partner of the underlying funds.

As of June 30, 2021 and December 31, 2020, the weighted average remaining term of our investments in unconsolidated ventures was 1.2 years and 1.5 years, respectively.

(3) Includes $ 20.8 million and $ 23.1 million of a commercial loan as of June 30, 2021 and December 31, 2020, respectively.

As of September 30, 2021 and December 31, 2020, the weighted average remaining term of our investments in unconsolidated ventures was 1.1 years and 1.5 years, respectively.

(3) Includes $ 22.3 million and $ 23.1 million of a commercial loan as of September 30, 2021 and December 31, 2020, respectively.

We value the loan based on a third party appraisal.

The following table shows a reconciliation of the beginning and ending fair value measurements of our GSE CRT embedded derivatives, which we have valued utilizing Level 3 inputs:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

$ in thousands 2020 2020

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Unrealized credit derivative gains (losses), net 17,223 ( 10,281 )

12,549 ( 27,504 )

Ending balance — —

(1) Includes $ 4.8 million and $ 17.6 million for the three and six months ended June 30, 2020, respectively, of unrealized losses attributable to GSE CRT embedded derivatives that were still held as of June 30, 2020.

The following table shows a reconciliation of the beginning and ending fair value measurements of our loan participation interest, which we have valued utilizing Level 3 inputs:

Three Months Ended June 30, Six Months Ended June 30,

Nine Months Ended September 30,

$ in thousands 2020

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The following table shows a reconciliation of the beginning balance of our commercial loan and ending balance at fair value, which we have valued utilizing Level 3 inputs:

Three Months Ended June 30, Six Months Ended June 30,

Three Months Ended September 30, Nine Months Ended September 30,

$ in thousands 2021 2020 2021 2020

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Fair Value at Valuation Unobservable

$ in thousands June 30, 2021 Technique Input Rate

$ in thousands September 30, 2021 Technique Input Rate

Commercial Loan 22,268 Discounted Cash Flow Discount rate 26.3 %

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Commercial Loan 23,098 Discounted Cash Flow Discount rate 29.9 %

The following table presents the carrying value and estimated fair value of our financial instruments that are not carried at fair value on the condensed consolidated balance sheets at June 30, 2021 and December 31, 2020:

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

$ in thousands Carrying

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Our Manager is not obligated to dedicate any of its employees exclusively to us, nor is our Manager obligated to dedicate any specific portion of time to our business.

During the three and six months ended June 30, 2021, we reimbursed our Manager $ 261,000 and $ 559,000 (June 30, 2020:

During the three and nine months ended September 30, 2021, we reimbursed our Manager $ 287,000 and $ 846,000 (September 30, 2020:

$ 281,000 and $ 839,000 ) for costs of support personnel, respectively.

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The investments are reported as cash and cash equivalents on our condensed consolidated balance sheets as they are highly liquid and have original or remaining maturities of three months or less when purchased.

We did not have any investments in money market of mutual funds managed by affiliates of our Manager as of June 30, 2021.

We did not have any investments in money market of mutual funds managed by affiliates of our Manager as of September 30, 2021.

During the three and nine months ended September 30, 2020, we sold non-Agency CMBS to affiliates of our Manager for cash proceeds of $ 40.0 million and recognized a realized gain of $ 4.1 million.

Management Fee

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Our reimbursement obligation is not subject to any dollar limitation.

The following table summarizes the costs incurred on our behalf by our Manager for the three and six months ended June 30, 2021 and 2020.

Three Months Ended June 30, Six Months Ended June 30,

The following table summarizes the costs incurred on our behalf by our Manager for the three and nine months ended September 30, 2021 and 2020.

Three Months Ended September 30, Nine Months Ended September 30,

$ in thousands 2021 2020 2021 2020

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The cash redemption price for each share of Series A Preferred Stock was $ 25.00 .

The excess of the consideration transferred over carrying value is accounted for as a deemed dividend and resulted in a reduction of $ 4.7 million in net income (loss) attributable to common stockholders during the three and six months ended June 30, 2021.

The excess of the consideration transferred over carrying value was accounted for as a deemed dividend and resulted in a reduction of $ 4.7 million in net income (loss) attributable to common stockholders during the nine months ended September 30, 2021.

Prior to redemption, holders of our Series A Preferred Stock were entitled to receive dividends at an annual rate of 7.75 % of the liquidation preference of $ 25.00 per share or $ 1.9375 per share per annum.

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Shares of Series B and Series C Preferred Stock are not redeemable, convertible into or exchangeable for any other property or any other securities of the Company before those times, except under circumstances intended to preserve our qualification as a REIT or upon the occurrence of a change in control.

As of June 30, 2021, we may sell up to 5,500,000 shares of our preferred stock from time to time in at-the-market or privately negotiated transactions under an equity distribution agreement with a placement agent.

As of September 30, 2021, we may sell up to 5,500,000 shares of our preferred stock from time to time in at-the-market or privately negotiated transactions under an equity distribution agreement with a placement agent.

These shares are registered with the SEC under our shelf registration statement (as amended and/or supplemented).

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Total net proceeds were approximately $ 145.9 million after deducting offering expenses.

As of June 30, 2021, we may sell up to 22,060,000 shares of our common stock from time to time in at-the-market or privately negotiated transactions under an equity distribution agreement with a placement agent.

These shares are registered with the SEC under our shelf registration statement (as amended and/or supplemented).

During the six months ended June 30, 2021, we sold 15,500,000 shares under our equity distribution agreement for proceeds of $ 57.8 million, net of approximately $ 831,000 in commissions and fees.

We did no t sell any shares of common stock under equity distribution agreements during the three months ended June 30, 2021 or the three and six months ended June 30, 2020.

As of September 30, 2021, we sold all of the shares of common stock that we registered with the SEC under our shelf registration statement in at-the-market or privately negotiated transactions through our equity distribution agreement with a placement agent.

During the three months ended September 30, 2021, we sold 22,060,000 shares of common stock under our equity distribution agreement for proceeds of $ 67.5 million, net of approximately $ 1.0 million in commissions and fees.

During the nine months ended September 30, 2021, we sold 37,610,000 shares of common stock under our equity distribution agreement for proceeds of $ 125.4 million, net of approximately $ 1.8 million in commissions and fees.

During three and nine months ended September 30, 2020, we sold 25,431 shares of common stock under our equity distribution agreement for proceeds of $ 80,000 , net of approximately $ 2,000 in commissions and fees.

In May 2021, we granted 127,115 restricted shares of common stock to our independent directors.

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Share Repurchase Program

During the three and six months ended June 30, 2021 and 2020, we did no t repurchase any shares of our common stock.

As of June 30, 2021, we had authority to purchase 18,163,982 shares of our common stock through our share repurchase program.

During the three and nine months ended September 30, 2021 and 2020, we did no t repurchase any shares of our common stock.

As of September 30, 2021, we had authority to purchase 18,163,982 shares of our common stock through our share repurchase program.

Accumulated Other Comprehensive Income

The following tables present the components of total other comprehensive income (loss), net and accumulated other comprehensive income ("AOCI") for the three and six months ended June 30, 2021 and 2020.

The following tables present the components of total other comprehensive income (loss), net and accumulated other comprehensive income ("AOCI") for the three and nine months ended September 30, 2021 and 2020.

The tables exclude gains and losses on MBS and GSE CRTs that are accounted for under the fair value option.

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

$ in thousands Equity method investments Available-for-sale securities Derivatives and hedging Total

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AOCI balance at end of period 663 7,656 35,715 44,034

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

$ in thousands Equity method investments Available-for-sale securities Derivatives and hedging Total

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AOCI balance at end of period ( 156 ) 13,761 58,094 71,699

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

$ in thousands Equity method investments Available-for-sale securities Derivatives and hedging Total

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AOCI balance at end of period 663 7,656 35,715 44,034

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

$ in thousands Equity method investments Available-for-sale securities Derivatives and hedging Total

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Amounts recorded in AOCI before we discontinued cash flow hedge accounting for our interest rate swaps are reclassified to interest expense on repurchase agreements on the condensed consolidated statements of operations as interest is accrued and paid on the related repurchase agreements over the remaining original life of the interest rate swap agreements.

The table below summarizes the dividends we declared during the six months ended June 30, 2021 and 2020:

The table below summarizes the dividends we declared during the nine months ended September 30, 2021 and 2020:

$ in thousands, except per share amounts Dividends Declared

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February 19, 2021 0.4844 2,713 April 26, 2021

September 10, 2020 0.4844 2,713 October 26, 2020

June 17, 2020 0.4844 2,712 July 27, 2020

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Series B Preferred Stock Per Share In Aggregate Date of Payment

August 3, 2021 0.4844 3,003 September 27, 2021

May 4, 2021 0.4844 3,004 June 28, 2021

February 19, 2021 0.4844 3,003 March 29, 2021

August 5, 2020 0.4844 3,003 September 28, 2020

May 9, 2020 0.4844 3,004 June 29, 2020

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Series C Preferred Stock Per Share In Aggregate Date of Payment

August 3, 2021 0.46875 5,391 September 27, 2021

May 4, 2021 0.46875 5,390 June 28, 2021

February 19, 2021 0.46875 5,391 March 29, 2021

August 5, 2020 0.46875 5,391 September 28, 2020

May 9, 2020 0.46875 5,390 June 29, 2020

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Common Stock Per Share In Aggregate Date of Payment

September 28, 2021 0.09 28,057 October 26, 2021

June 23, 2021 0.09 26,071 July 27, 2021

March 26, 2021 0.09 22,176 April 27, 2021

September 30, 2020 0.05 9,070 October 27, 2020

June 17, 2020 0.02 3,626 July 28, 2020

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Note 13 – Earnings (Loss) per Common Share

Earnings (loss) per share for the three and six months ended June 30, 2021 and 2020 is computed as follows:

Three Months Ended June 30, Six Months Ended June 30,

Earnings (loss) per share for the three and nine months ended September 30, 2021 and 2020 is computed as follows:

Three Months Ended September 30, Nine Months Ended September 30,

In thousands, except per share amounts 2021 2020 2021 2020

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Shares available to common stockholders 297,196 181,350 260,699 168,402

Effect of dilutive securities:

Restricted stock awards 17 11 — —

Dilutive Shares 297,213 181,361 260,699 168,402

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Diluted 0.17 0.53 ( 0.23 ) ( 10.87 )

The following potential weighted average common shares were excluded from diluted earnings per share for the three and six months ended June 30, 2021 as the effect would be antidilutive:

20,826 and 17,225 for restricted stock awards, respectively (June 30, 2020:

10,672 and 11,366 for restricted stock awards, respectively).

The following potential weighted average common shares were excluded from diluted earnings per share for the nine months ended September 30, 2021 as the effect would be antidilutive:

15,822 for restricted stock awards ( 11,131 for restricted stock awards for nine months ended September 30, 2020).

Note 14 – Commitments and Contingencies

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Commitments and contingencies may arise in the ordinary course of business.

Our material off-balance sheet commitments as of June 30, 2021 are discussed below.

Our material off-balance sheet commitments as of September 30, 2021 are discussed below.

As discussed in Note 5 - "Other Assets", we have invested in unconsolidated ventures that are sponsored by an affiliate of our Manager.

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The entities are structured such that capital commitments are to be drawn down over the life of the partnership as investment opportunities are identified.

As of June 30, 2021 and December 31, 2020, our undrawn capital and purchase commitments were $ 6.7 million and $ 6.8 million, respectively.

As of September 30, 2021 and December 31, 2020, our undrawn capital and purchase commitments were $ 6.6 million and $ 6.8 million, respectively.

Note 15 – Subsequent Events

We declared the following dividends on August 3, 2021:

a Series B Preferred Stock dividend of $ 0.4844 per share payable on September 27, 2021 to our stockholders of record as of September 5, 2021 and a Series C Preferred Stock dividend of $ 0.46875 per share payable on September 27, 2021 to our stockholders of record as of September 5, 2021.

We declared the following dividends on November 2, 2021:

a Series B Preferred Stock dividend of $ 0.4844 per share payable on December 27, 2021 to our stockholders of record as of December 5, 2021 and a Series C Preferred Stock dividend of $ 0.46875 per share payable on December 27, 2021 to our stockholders of record as of December 5, 2021.

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

What changed 10-Q

Item 1. Financial Statements