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Item 1. Financial Statements

2022-11-02 compared with 2022-08-04 · 154 added, 149 removed, 817 unchanged (27% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

$ in thousands, except share amounts June 30, 2022 December 31, 2021

$ in thousands, except share amounts September 30, 2022 December 31, 2021

Mortgage-backed securities, at fair value (including pledged securities of $ 4,043,370 and $ 7,326,175 , respectively)

11 unchanged sentences

Dividends payable 22,979 29,689

Investment related payable 706 —

Accrued interest payable 3,766 1,171

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Common Stock, par value $ 0.01 per share;

450,000,000 shares authorized;

67,000,000 and 450,000,000 shares authorized, respectively;

35,352,123 and 32,987,478 shares issued and outstanding, respectively

8 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 data 2022 2021 2022 2021

33 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 2022 2021 2022 2021

14 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the three months ended March 31, 2022 and June 30, 2022

For the three months ended March 31, 2022;

June 30, 2022 and September 30, 2022

Capital Accumulated

25 unchanged sentences

Balance at June 30, 2022 6,156,180 148,801 10,879,859 263,111 33,024,318 330 3,819,670 22,749 ( 3,295,198 ) 959,463

Net income (loss) — — — — — — — — ( 101,428 ) ( 101,428 )

Other comprehensive income (loss) — — — — — — — ( 6,239 ) — ( 6,239 )

Proceeds from issuance of common stock, net of offering costs 2,327,805 23 38,590 38,613

Repurchase and retirement of preferred stock ( 1,618,546 ) ( 39,122 ) ( 3,063,389 ) ( 74,083 ) — — — — 12,688 ( 100,517 )

Common stock dividends — — — — — — — — ( 22,979 ) ( 22,979 )

Preferred stock dividends — — — — — — — — ( 5,862 ) ( 5,862 )

Amortization of equity-based compensation — — — — — — 158 — — 158

Balance at September 30, 2022 4,537,634 109,679 7,816,470 189,028 35,352,123 353 3,858,418 16,510 ( 3,412,779 ) 761,209

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

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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

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Balance at June 30, 2021 — — 6,200,000 149,860 11,500,000 278,108 28,968,076 290 3,696,524 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 — — — — — — 2,206,000 22 67,506 — — 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 31,174,076 312 3,764,152 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 CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

$ in thousands 2022 2021

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Note 3 – Variable Interest Entities ("VIEs")

Our maximum risk of loss in VIEs in which we are not the primary beneficiary at June 30, 2022 is presented in the table below.

Our maximum risk of loss in VIEs in which we are not the primary beneficiary at September 30, 2022 is presented in the table below.

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

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Note 4 – Mortgage-Backed Securities

The following tables summarize our MBS portfolio by asset type as of June 30, 2022 and December 31, 2021.

June 30, 2022

The following tables summarize our MBS portfolio by asset type as of September 30, 2022 and December 31, 2021.

September 30, 2022

$ in thousands Principal/ Notional

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Value Period-

30 year fixed-rate 3,870,377 ( 62,776 ) 3,807,601 ( 5,150 ) 3,802,451 4.07 %

Total Agency RMBS pass-through 3,870,377 ( 62,776 ) 3,807,601 ( 5,150 ) 3,802,451 4.07 %

30 year fixed-rate Agency RMBS 4,451,986 ( 53,352 ) 4,398,634 ( 145,892 ) 4,252,742 4.65 %

Agency-CMO (2)

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Total 5,222,871 ( 723,326 ) 4,499,545 ( 142,554 ) 4,356,991 4.74 %

(1) Period-end weighted average yield is based on amortized cost as of June 30, 2022 and incorporates future prepayment and loss assumptions.

(1) Period-end weighted average yield is based on amortized cost as of September 30, 2022 and incorporates future prepayment and loss assumptions.

(2) All Agency collateralized mortgage obligations (“Agency-CMO”) are interest-only securities (“Agency IO”).

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Value Period-

30 year fixed-rate 7,514,229 246,183 7,760,412 ( 58,889 ) 7,701,523 2.07 %

Total Agency RMBS pass-through 7,514,229 246,183 7,760,412 ( 58,889 ) 7,701,523 2.07 %

30 year fixed-rate Agency RMBS 7,514,229 246,183 7,760,412 ( 58,889 ) 7,701,523 2.07 %

Agency-CMO (2)

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(5) Non-Agency RMBS includes non-Agency IO which represent 97.7 % of principal/notional balance, 44.8 % of amortized cost and 19.9 % 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, 2022 and December 31, 2021.

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, 2022 and December 31, 2021.

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, 2022 and December 31, 2021, approximately 99 % of our MBS are accounted for under the fair value option.

June 30, 2022 December 31, 2021

As of September 30, 2022 and December 31, 2021, approximately 99 % of our MBS are accounted for under the fair value option.

September 30, 2022 December 31, 2021

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

Fair Value Available-for-sale Securities Securities under Fair Value Option Total

30 year fixed-rate — 3,802,451 3,802,451 — 7,701,523 7,701,523

Total Agency RMBS pass-through — 3,802,451 3,802,451 — 7,701,523 7,701,523

30 year fixed-rate Agency RMBS — 4,252,742 4,252,742 — 7,701,523 7,701,523

Agency-CMO — 59,389 59,389 — 30,757 30,757

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Total 42,975 4,314,016 4,356,991 70,197 7,734,062 7,804,259

The components of the carrying value of our MBS portfolio at June 30, 2022 and December 31, 2021 are presented below.

Accrued interest receivable on our MBS portfolio, which is recorded within investment related receivable on our condensed consolidated balance sheets, was $ 13.8 million at June 30, 2022 (December 31, 2021:

The components of the carrying value of our MBS portfolio at September 30, 2022 and December 31, 2021 are presented below.

Accrued interest receivable on our MBS portfolio, which is recorded within investment related receivable on our condensed consolidated balance sheets, was $ 17.9 million at September 30, 2022 (December 31, 2021:

$ 16.6 million).

June 30, 2022

September 30, 2022

$ 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, 2022 and 2021 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, 2022 and December 31, 2021 .

$ in thousands June 30, 2022 December 31, 2021

Further detail on the components of our total gains (losses) on investments, net for the three and nine months ended September 30, 2022 and 2021 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, 2022 and December 31, 2021 .

$ in thousands September 30, 2022 December 31, 2021

Less than one year 26,951 23,150

2 unchanged sentences

Total 4,356,991 7,804,259

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, 2022 and December 31, 2021.

June 30, 2022

September 30, 2022

Less than 12 Months 12 Months or More Total

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Losses Number

30 year fixed-rate 2,145,400 ( 27,400 ) 19 — — — 2,145,400 ( 27,400 ) 19

Total Agency RMBS pass-through (1)

30 year fixed-rate Agency RMBS (1)

4,040,618 ( 147,512 ) 40 — — — 4,040,618 ( 147,512 ) 40

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Losses Number

30 year fixed-rate 6,838,999 ( 60,741 ) 54 — — — 6,838,999 ( 60,741 ) 54

Total Agency RMBS pass-through (1)

30 year fixed-rate Agency RMBS (1)

6,838,999 ( 60,741 ) 54 — — — 6,838,999 ( 60,741 ) 54

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These losses are not reflected in an allowance for credit losses based on a comparison of discounted expected cash flows to current amortized cost basis.

As of June 30, 2022 and December 31, 2021, we did no t have an allowance for credit losses recorded on our condensed consolidated balance sheets.

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 September 30, 2022 and December 31, 2021, we did no t have an allowance for credit losses recorded on our condensed consolidated balance sheets.

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

Beginning allowance for credit losses ( 1,768 )

Additional increases or decreases to the allowance for credit losses on securities that had an allowance recorded in a previous period 830 1,768

Decrease to the allowance for credit losses on securities that had an allowance recorded in a previous period 1,768

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, 2022 and 2021.

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, 2022 and 2021.

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

$ in thousands 2022 2021 2022 2021

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Net unrealized gains (losses) on commercial loan 171 1,446 134 ( 830 )

Net unrealized gains (losses) on U.S.

Treasury securities 19,827 — — —

Net realized gains (losses) on U.S.

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Total gain (loss) on investments, net ( 260,837 ) ( 16,830 ) ( 1,090,101 ) ( 276,067 )

The following tables present components of interest income recognized on our mortgage-backed and other securities portfolio for the three and six months ended June 30, 2022 and 2021.

For the three months ended June 30, 2022

The following tables present components of interest income recognized on our mortgage-backed and other securities portfolio for the three and nine months ended September 30, 2022 and 2021.

For the three months ended September 30, 2022

$ in thousands Coupon

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Non-Agency RMBS 288 ( 139 ) 149

Treasury securities 1,213 ( 25 ) 1,188

Other 376 — 376

Total 49,224 ( 166 ) 49,058

For the three months ended June 30, 2021

For the three months ended September 30, 2021

$ in thousands Coupon

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

For the six months ended June 30, 2022

For the nine months ended September 30, 2022

$ in thousands Coupon

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Total 140,673 ( 5,984 ) 134,689

For the six months ended June 30, 2021

For the nine months ended September 30, 2021

$ in thousands Coupon

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Note 5 – Other Assets

The following table summarizes our other assets as of June 30, 2022 and December 31, 2021.

$ in thousands June 30, 2022 December 31, 2021

The following table summarizes our other assets as of September 30, 2022 and December 31, 2021.

$ in thousands September 30, 2022 December 31, 2021

Commercial loan, held-for-investment 23,649 23,515

2 unchanged sentences

Total 28,979 37,509

In February 2022, we agreed to extend the contractual maturity of our commercial loan investment from February 2022 to June 2022.

In June 2022, we agreed to further extend the contractual maturity to September 2022.

The loan had a principal balance of $ 23.9 million as of June 30, 2022 and December 31, 2021 and a weighted average coupon rate of 9.56 % as of June 30, 2022 and 8.60 % as of December 31, 2021.

We account for this loan under the fair value option and, accordingly, there are no capitalized origination costs or fees associated with the loan.

We recorded an unrealized gain of $ 87,000 and an unrealized loss of $ 37,000 on this loan in our condensed consolidated statements of operations during the three and six months ended June 30, 2022, respectively (June 30, 2021:

unrealized gain $ 822,000 and unrealized loss $ 2.3 million, respectively).

Our commercial loan had a principal balance of $ 23.9 million as of September 30, 2022 and December 31, 2021 and a weighted average coupon rate of 11.06 % as of September 30, 2022 and 8.60 % as of December 31, 2021.

We accounted for this loan under the fair value option and, accordingly, there were no capitalized origination costs or fees associated with the loan.

We recorded unrealized gains of $ 171,000 and $ 134,000 on this loan in our condensed consolidated statements of operations during the three and nine months ended September 30, 2022, respectively.

We recorded unrealized gains of $ 1.4 million and unrealized losses of $ 830,000 on this loan during the three and nine months ended September 30, 2021, respectively.

In September 2022, we extended the contractual maturity of our commercial loan to November 2022;

however, the loan was repaid in full in October 2022.

We have invested in unconsolidated ventures that are managed by an affiliate of our Manager.

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We finance the majority of our investment portfolio through repurchase agreements.

The following tables summarize certain characteristics of our borrowings at June 30, 2022 and December 31, 2021.

The following tables summarize certain characteristics of our borrowings at September 30, 2022 and December 31, 2021.

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

$ in thousands June 30, 2022

$ in thousands September 30, 2022

Weighted Average

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Repurchase Agreements

Our repurchase agreements generally bear interest at a contractually agreed upon rate.

Our repurchase agreements bear interest at a contractually agreed upon rate.

Agency RMBS repurchase agreements generally have maturities ranging from one to six months.

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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, 2022.

We were in compliance with all of these covenants as of September 30, 2022.

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 TBAs as of June 30, 2022 and December 31, 2021.

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, 2021 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, 2022 and December 31, 2021, we did not recognize any non-cash collateral held on our condensed consolidated balance sheets.

As of September 30, 2022 and December 31, 2021, we did not recognize any non-cash collateral held on our condensed consolidated balance sheets.

$ in thousands As of

Collateral Pledged June 30, 2022 December 31, 2021

Collateral Pledged September 30, 2022 December 31, 2021

Repurchase Agreements:

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Total collateral pledged 4,148,982 7,554,078

Collateral Held June 30, 2022 December 31, 2021

Collateral Held September 30, 2022 December 31, 2021

Repurchase Agreements:

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Derivative instruments:

Cash 2,155 280

Total derivative instruments collateral held 10 280

Total collateral held:

Cash 5,728 280

Non-cash collateral 908 248

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

The ratio of our total repurchase agreements collateral pledged to our total repurchase agreements outstanding was 106 % as of June 30, 2022 (December 31, 2021:

The ratio of our total repurchase agreements collateral pledged to our total repurchase agreements outstanding was 104 % as of September 30, 2022 (December 31, 2021:

Interest Rate Swaps

As of June 30, 2022 and December 31, 2021, 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, 2022 and December 31, 2021, 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.

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$ in thousands Notional Amount as of December 31, 2021 Additions Settlement,

or Exercise Notional Amount as of June 30, 2022

or Exercise Notional Amount as of September 30, 2022

Interest Rate Swaps (1) (2)

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Total 9,663,596 8,137,027 ( 9,183,955 ) 8,616,668

(1) Does not include interest rate swaps with forward start dates with a notional amount of $ 1.0 billion and $ 1.3 billion as of June 30, 2022 and December 31, 2021, respectively.

(2) Notional amount as of June 30, 2022 includes $ 5.8 billion of interest rate swaps whereby we pay interest at a fixed rate and receive interest at a floating rate and $ 3.6 billion of interest rate swaps whereby we pay interest at a floating rate and receive interest at a fixed rate.

(1) Does not include interest rate swaps with forward start dates.

See below for additional detail on our interest rate swaps with forward start dates.

(2) Notional amount as of September 30, 2022 includes $ 5.8 billion of interest rate swaps whereby we pay interest at a fixed rate and receive interest at a floating rate and $ 2.7 billion of interest rate swaps whereby we pay interest at a floating rate and receive interest at a fixed rate.

Notional amount as of December 31, 2021 includes $ 6.3 billion of interest rate swaps whereby we pay interest at a fixed rate and receive interest at a floating rate and $ 1.8 billion of interest rate swaps whereby we pay interest at a floating rate and receive interest at a fixed rate.

1 unchanged sentence

Interest Rate Swaps

Our repurchase agreements are usually settled on a short-term basis ranging from one month to six months .

Our repurchase agreements are usually settled on a short-term basis ranging from one to six months .

At each settlement date, we typically refinance each repurchase agreement at the market interest rate at that time.

2 unchanged sentences

Under the terms of the majority of our interest rate swap contracts, we make fixed-rate payments to a counterparty in exchange for the receipt of floating-rate amounts over the life of the agreements without exchange of the underlying notional amount.

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.

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 life of the interest rate swap agreements.

We reclassified $ 4.8 million and $ 10.0 million as a decrease (June 30, 2021:

$ 5.4 million and $ 10.8 million as a decrease) to interest expense for the three and six months ended June 30, 2022, respectively.

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.

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 $ 4.9 million and $ 14.9 million as a decrease (September 30, 2021:

$ 5.6 million and $ 16.4 million as a decrease) to interest expense for the three and nine months ended September 30, 2022, respectively.

During the next 12 months, we estimate that $ 14.4 million will be reclas sified as a decrease to interest expense, repurchase agreements.

As of June 30, 2022, $ 20.1 million (December 31, 2021:

As of September 30, 2022, $ 15.3 million (December 31, 2021:

$ 30.1 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, 2022 and December 31, 2021, we had interest rate swaps whereby we pay interest at a fixed rate and receive floating interest based on the secured overnight financing rate ("SOFR") with the following maturities outstand ing, excluding interest rate swaps with forward start dates.

$ in thousands As of June 30, 2022

As of September 30, 2022 and December 31, 2021, we had interest rate swaps whereby we pay interest at a fixed rate and receive floating interest based on the secured overnight financing rate ("SOFR") with the following maturities outstand ing, excluding interest rate swaps with forward start dates.

$ in thousands As of September 30, 2022

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

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Total 6,300,000 0.30 % 0.05 % 5.7

As of June 30, 2022, we held $ 1.0 billion notional amount of interest rate swaps with forward start dates that will receive floating interest based on SOFR (December 31, 2021:

As of September 30, 2022, we held $ 975.0 million notional amount of interest rate swaps with forward start dates that will receive floating interest based on SOFR (December 31, 2021:

$ 1.3 billion).

As of June 30, 2022, these interest rate swaps had a weighted average maturity of 17.0 years (December 31, 2021:

As of September 30, 2022, these interest rate swaps had a weighted average maturity of 16.7 years (December 31, 2021:

20.8 years) and a weighted average fixed pay rate of 0.89 % (December 31, 2021:

As of June 30, 2022 and December 31, 2021, we had interest rate swaps whereby we pay floating interest based on SOFR and receive interest at a fixed rate with the following maturities outstanding.

$ in thousands As of June 30, 2022

As of September 30, 2022 and December 31, 2021, we had interest rate swaps whereby we pay floating interest based on SOFR and receive interest at a fixed rate with the following maturities outstanding.

$ in thousands As of September 30, 2022

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

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Total 1,750,000 0.05 % 0.98 % 4.9

As of September 30, 2022, we held $ 275.0 million notional amount of interest rate swaps with forward start dates that will pay floating interest based on SOFR.

As of September 30, 2022, these interest rate swaps had a weighted average maturity of 16.3 years and a weighted average fixed receive rate of 2.63 %.

We did not hold any such interest rate swaps as of December 31, 2021.

Swaptions and Currency Forward Contracts

8 unchanged sentences

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, 2022, we had $ 6.2 million (December 31, 2021:

As of September 30, 2022, we had $ 1.7 million (December 31, 2021:

$ 13.6 million) of notional amount of currency forward contracts related to an investment in an unconsolidated venture denominated in Euro.

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, 2022 and December 31, 2021.

$ in thousands As of June 30, 2022

The following table summarizes certain characteristics of our TBAs accounted for as derivatives as of September 30, 2022 and December 31, 2021.

$ in thousands As of September 30, 2022

Notional Amount Implied Cost Basis Implied Market Value Net Carrying Value

TBA Purchase Contracts 140,000 142,842 139,147 ( 3,695 )

1,311,000 1,324,001 1,323,965 ( 36 )

TBA Sale Contracts (2)

( 861,000 ) ( 857,442 ) ( 864,683 ) ( 7,241 )

Net TBA Derivatives 450,000 466,559 459,282 ( 7,277 )

(1) Net carrying value of TBA purchase contracts includes $ 4.2 million of derivative assets and $ 4.3 million of derivative liabilities.

(2) Net carrying value of TBA sale contracts includes $ 7.2 million of derivative liabilities.

$ in thousands As of December 31, 2021

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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, 2022 and December 31, 2021.

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, 2022 and December 31, 2021.

$ in thousands

Derivative Assets Derivative Liabilities

As of June 30, 2022 As of December 31, 2021 As of June 30, 2022 As of December 31, 2021

As of September 30, 2022 As of December 31, 2021 As of September 30, 2022 As of December 31, 2021

Sheet Fair Value Fair Value Balance

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Total Derivative Assets 11,227 270 Total Derivative Liabilities 3,695 14,356

The following tables summarize 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, 2022 and 2021.

$ in thousands

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

not designated as

5 unchanged sentences

$ in thousands

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

not designated as

5 unchanged sentences

$ in thousands

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

not designated as

5 unchanged sentences

$ in thousands

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

not designated as

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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 arrangements (or similar agreements) and can potentially be offset on our condensed consolidated balance sheets at June 30, 2022 and December 31, 2021.

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

Our derivative liability of $ 25.8 million at June 30, 2022 (December 31, 2021:

Our derivative asset of $ 11.2 million at September 30, 2022 (December 31, 2021:

liability of $ 11.4 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, 2022

As of September 30, 2022

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 derivatives was $ 138.8 million and $ 224.4 million as of June 30, 2022 and December 31, 2021, respectively.

(2) Cash collateral pledged by us on our derivatives was $ 105.6 million and $ 224.4 million as of September 30, 2022 and December 31, 2021, 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 $ 2.2 million and $ 280,000 as of June 30, 2022 and December 31, 2021, respectively.

(3) The fair value of securities pledged against our borrowings under repurchase agreements was $ 3.5 billion and $ 7.3 billion at June 30, 2022 and December 31, 2021, respectively.

We pledged no cash collateral and $ 3.5 million of cash collateral under repurchase agreements as of June 30, 2022 and December 31, 2021, respectively.

We held $ 3.6 million of cash collateral under repurchase agreements as of June 30, 2022.

We did not hold cash collateral under repurchase agreements as of December 31, 2021 .

We held cash collateral on our derivatives of $ 10,000 and $ 280,000 as of September 30, 2022 and December 31, 2021, respectively.

(3) The fair value of securities pledged against our borrowings under repurchase agreements was $ 4.0 billion and $ 7.3 billion at September 30, 2022 and December 31, 2021, respectively.

We pledged no cash collateral and $ 3.5 million of cash collateral under repurchase agreements as of September 30, 2022 and December 31, 2021, respectively.

We did not hold any cash collateral under repurchase agreements as of September 30, 2022 or December 31, 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, 2022

September 30, 2022

Fair Value Measurements Using:

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(3) 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, 2022 and December 31, 2021, our unconsolidated ventures were in liquidation and plan to sell or settle their remaining investments as expeditiously as possible.

As of September 30, 2022 and December 31, 2021, our unconsolidated ventures were in liquidation and plan to sell or settle their remaining investments as expeditiously as possible.

The following table shows a reconciliation of the beginning and ending fair value measurements of our commercial loan investment, 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 2022 2021 2022 2021

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Fair Value at Valuation Unobservable

$ in thousands June 30, 2022 Technique Input Rate

$ in thousands September 30, 2022 Technique Input Rate

Commercial Loan 23,649 Discounted Cash Flow Discount rate 20.6 %

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Commercial Loan 23,515 Discounted Cash Flow Discount rate 18.8 %

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, 2022 and December 31, 2021.

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

$ in thousands Carrying

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Total 3,887,291 3,885,463 6,987,834 6,987,806

The following describes our methods for estimating the fair value for financial instruments not carried at fair value on the condensed consolidated balance sheets.

The estimated fair value of repurchase agreements is a Level 3 fair value measurement based on an expected present value technique.

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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, 2022, we reimbursed our Manager $ 337,000 and $ 750,000 , respectively (June 30, 2021:

During the three and nine months ended September 30, 2022, we reimbursed our Manager $ 375,000 and $ 1.1 million, respectively (September 30, 2021:

$ 287,000 and $ 846,000 , respectively) for costs of support personnel.

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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, 2022 and 2021.

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, 2022 and 2021.

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

$ in thousands 2022 2021 2022 2021

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In June 2021, we redeemed all issued and outstanding shares of our Series A Preferred Stock for $ 140.0 million plus accrued and unpaid dividends.

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 three and six months ended June 30, 2021.

In May 2022, our board of directors approved a share repurchase program for our Series B and Series C Preferred Stock.

During the three and six months ended June 30, 2022, we repurchased and retired 43,820 shares of Series B Preferred Stock and 620,141 shares of Series C Preferred Stock.

As of June 30, 2022, we had authority to purchase 2,956,180 additional shares of our Series B Preferred Stock and 4,379,859 additional shares of our Series C Preferred Stock under the current share repurchase program.

Refer to Note 15 - “Subsequent Events” for details on repurchases subsequent to June 30, 2022.

During the three and nine months ended September 30, 2022, we repurchased and retired 1,618,546 shares and 1,662,366 shares of Series B Preferred Stock, respectively.

During the three and nine months ended September 30, 2022, we repurchased and retired 3,063,389 shares and 3,683,530 shares of Series C Preferred Stock, respectively.

As of September 30, 2022, we had authority to purchase 1,337,634 additional shares of our Series B Preferred Stock and 1,316,470 additional shares of our Series C Preferred Stock under the current share repurchase program.

Holders of our Series B Preferred Stock are 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 until December 27, 2024.

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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, 2022, 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).

We have not sold any shares of preferred stock under our equity distribution agreements.

In May 2022, our board of directors approved a one-for-ten reverse split of outstanding shares of our common stock.

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The reverse stock split applied to all of our outstanding shares of common stock and did not affect any stockholder’s ownership percentage of our common stock, except for changes resulting from the payment of cash for fractional shares.

As of June 30, 2022, we may sell up to 5,686,598 shares of our common stock from time to time in at-the-market or privately negotiated transactions under our equity distribution agreement with placement agents.

As of September 30, 2022, we may sell up to 3,358,793 shares of our common stock from time to time in at-the-market or privately negotiated transactions under our equity distribution agreement with placement agents.

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

During the three and six months ended June 30, 2022, we did not sell any shares of common stock under the equity distribution agreement.

During the six months ended June 30, 2021, we sold 1,555,000 shares of common stock under an equity distribution agreement for proceeds of $ 57.8 million, net of approximately $ 831,000 in commissions and fees.

During the three and six months ended June 30, 2022 and 2021, we did no t repurchase any shares of our common stock.

As of June 30, 2022, we had authority to purchase 1,816,398 shares of our common stock through our common stock share repurchase program.

During the three and nine months ended September 30, 2022, we sold 2,327,805 shares of common stock under our equity distribution agreement for proceeds of $ 38.6

million, net of approximately $ 603,000 in commissions and fees.

During the three months ended September 30, 2021, we sold 2,206,000 shares of common stock under an 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 3,761,000 shares of common stock under an equity distribution agreement for proceeds of $ 125.4 million, net of approximately $ 1.8 million in commissions and fees.

During the three and nine months ended September 30, 2022 and 2021, we did no t repurchase any shares of our common stock.

As of September 30, 2022, we had authority to purchase 1,816,398 shares of our common stock through our common stock share repurchase program.

In May 2022, we granted 32,571 restricted shares of common stock to our independent directors.

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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, 2022 and 2021.

The following tables present the components of total other comprehensive income (loss), net and AOCI for the three and nine months ended September 30, 2022 and 2021.

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

Three Months Ended June 30, 2022

Three Months Ended September 30, 2022

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

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AOCI balance at end of period ( 10 ) 1,260 15,260 16,510

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

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

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

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AOCI balance at end of period ( 10 ) 1,260 15,260 16,510

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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The table below summarizes the dividends we declared during the six months ended June 30, 2022 and 2021.

The table below summarizes the dividends we declared during the nine months ended September 30, 2022 and 2021.

Dividends declared per share on our common stock have been retroactively adjusted to reflect our one-for-ten reverse stock split that was effected following the close of business on June 3, 2022.

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Series B Preferred Stock Per Share In Aggregate Date of Payment

August 2, 2022 0.4844 2,198 September 27, 2022

May 3, 2022 0.4844 2,991 June 27, 2022

February 16, 2022 0.4844 3,003 March 28, 2022

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

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

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Series C Preferred Stock Per Share In Aggregate Date of Payment

August 2, 2022 0.46875 3,664 September 27, 2022

May 3, 2022 0.46875 5,109 June 27, 2022

February 16, 2022 0.46875 5,391 March 28, 2022

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

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

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Common Stock Per Share In Aggregate Date of Payment

September 28, 2022 0.65 22,979 October 27, 2022

June 27, 2022 0.90 29,721 July 27, 2022

March 28, 2022 0.90 29,693 April 27, 2022

September 28, 2021 0.90 28,057 October 26, 2021

June 23, 2021 0.90 26,071 July 27, 2021

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Note 13 – Earnings (Loss) per Common Share

Earnings (loss) per share for the three and six months ended June 30, 2022 and 2021 is computed as shown in the table below.

Earnings (loss) per share for the three and nine months ended September 30, 2022 and 2021 is computed as shown in the table below.

Common share amounts and earnings (loss) per share have been retroactively adjusted to reflect our one-for-ten reverse stock split that was effected following the close of business on June 3, 2022.

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

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

In thousands, except per share amounts 2022 2021 2022 2021

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Shares available to common stockholders 34,051 29,720 33,346 26,070

Effect of dilutive securities:

Restricted stock awards — 1 — —

Dilutive Shares 34,051 29,721 33,346 26,070

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Diluted ( 2.78 ) 1.66 ( 13.42 ) ( 2.28 )

The following potential weighted average common shares were excluded from diluted earnings per share for three and six months ended June 30, 2022 as the effect would be antidilutive:

1,127 and 1,314 for restricted stock awards, respectively (June 30, 2021:

2,082 and 1,722 for restricted stock awards, respectively).

The following potential weighted average common shares were excluded from diluted earnings per share for three and nine months ended September 30, 2022 as the effect would be antidilutive:

1,127 and 1,248 for restricted stock awards, respectively ( 1,582 for restricted stock awards for nine months ended September 30, 2021).

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, 2022 are discussed below.

Our material off-balance sheet commitments as of September 30, 2022 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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Note 15 – Subsequent Events

We declared the following dividends on August 2, 2022:

a Series B Preferred Stock dividend of $ 0.4844 per share payable on September 27, 2022 to our stockholders of record as of September 5, 2022 and a Series C Preferred Stock dividend of $ 0.46875 per share payable on September 27, 2022 to our stockholders of record as of September 5, 2022.

Repurchase of Series B and Series C Preferred Stock

Between July 1, 2022 and August 4, 2022, we repurchased 1,618,546 shares of our Series B Preferred Stock for $ 35.0 million and 3,063,389 shares of our Series C Preferred Stock for $ 65.6 million.

We will record a gain on the repurchase and retirement of these shares during the three months ended September 30, 2022.

As of August 4, 2022, we had authority to repurchase 1,337,634 additional shares of Series B Preferred Stock and 1,316,470 additional shares of Series C Preferred Stock under our current preferred share repurchase program.

Change in Authorized Common Shares

On August 3, 2022, the Company filed an Articles of Amendment to reduce the number of shares of common stock, par value $ 0.01 per share, that the Company has authority to issue.

Effective upon filing, the Articles of Amendment amended the Charter of the Company to reduce the total authorized number of shares of common stock of the Company from 450,000,000 to 67,000,000 .

We declared the following dividends on November 1, 2022:

a Series B Preferred Stock dividend of $ 0.4844 per share payable on December 27, 2022 to our stockholders of record as of December 5, 2022 and a Series C Preferred Stock dividend of $ 0.46875 per share payable on December 27, 2022 to our stockholders of record as of December 5, 2022.

Commercial Loan

In October 2022, our commercial loan with a principal balance of $ 23.9 million was repaid in full.

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