What changed in this filing

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Item 1. Financial Statements

2023-05-09 compared with 2022-11-02 · 180 added, 351 removed, 620 unchanged (46% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

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

$ in thousands, except share amounts March 31, 2023 December 31, 2022

Mortgage-backed securities, at fair value (including pledged securities of $ 5,085,592 and $ 4,439,583 , respectively)

11 unchanged sentences

Dividends payable 16,658 25,162

Investment related payable 706 —

Accrued interest payable 22,381 20,546

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7.75 % Fixed-to-Floating Series B Cumulative Redeemable Preferred Stock:

4,537,634 and 6,200,000 shares issued and outstanding, respectively ($ 113,441 and $ 155,000 aggregate liquidation preference, respectively)

4,537,634 shares issued and outstanding ($ 113,441 aggregate liquidation preference)

109,679 109,679

7.50 % Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock:

7,816,470 and 11,500,000 shares issued and outstanding, respectively ($ 195,412 and $ 287,500 aggregate liquidation preference, respectively)

7,816,470 shares issued and outstanding ($ 195,412 aggregate liquidation preference)

189,028 189,028

Common Stock, par value $ 0.01 per share;

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

67,000,000 shares authorized;

41,647,244 and 38,710,916 shares issued and outstanding, respectively

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

Three Months Ended March 31,

$ in thousands, except share data 2023 2022

10 unchanged sentences

Gain (loss) on investments, net 51,956 ( 504,388 )

(Increase) decrease in provision for credit losses — — — 1,768

Equity in earnings (losses) of unconsolidated ventures 2 71

7 unchanged sentences

Dividends to preferred stockholders ( 5,862 ) ( 8,394 )

Gain on repurchase and retirement of preferred stock 12,688 — 14,179 —

Issuance and redemption costs of redeemed preferred stock — — — ( 4,682 )

Net income (loss) attributable to common stockholders 15,601 ( 236,816 )

9 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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

Three Months Ended March 31,

$ in thousands 2023 2022

4 unchanged sentences

Currency translation adjustments on investment in unconsolidated venture ( 10 ) ( 200 )

Reclassification of currency translation loss on investment in unconsolidated venture to other investment income (loss), net 123 —

Total other comprehensive income (loss) ( 4,857 ) ( 7,817 )

1 unchanged sentence

Dividends to preferred stockholders ( 5,862 ) ( 8,394 )

Gain on repurchase and retirement of preferred stock 12,688 — 14,179 —

Issuance and redemption costs of redeemed preferred stock — — — ( 4,682 )

Comprehensive income (loss) attributable to common stockholders 10,744 ( 244,633 )

3 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the three months ended March 31, 2022;

June 30, 2022 and September 30, 2022

For the three months ended March 31, 2023 and 2022

Capital Accumulated

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Other comprehensive income (loss) — — — — — — — ( 4,857 ) — ( 4,857 )

Proceeds from issuance of common stock, net of offering costs — — — — 2,930,069 29 35,763 — — 35,792

Stock awards — — — — 6,259 — — — — —

3 unchanged sentences

Balance at March 31, 2023 4,537,634 109,679 7,816,470 189,028 41,647,244 416 3,937,487 5,904 ( 3,408,399 ) 834,115

Net income (loss) — — — — — — — — ( 109,535 ) ( 109,535 )

Other comprehensive income (loss) — — — — — — — ( 6,720 ) — ( 6,720 )

Repurchase and retirement of preferred stock ( 43,820 ) ( 1,059 ) ( 620,141 ) ( 14,997 ) — — — 1,491 ( 14,565 )

Stock awards — — — 32,571 — — —

Payments in lieu of fractional shares in connection with one-for-ten reverse stock split — — — — ( 46 ) — ( 1 ) — — ( 1 )

Common stock dividends — — — — — — ( 29,721 ) ( 29,721 )

Preferred stock dividends — — — — — — — ( 8,100 ) ( 8,100 )

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

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.

INVESCO MORTGAGE CAPITAL INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For the three months ended March 31, 2021;

June 30, 2021 and September 30, 2021

Capital Accumulated

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Stockholders’

Preferred Stock Series B

Preferred Stock Series C

1 unchanged sentence

$ in thousands, except share amounts Common Stock

Shares Amount Shares Amount Shares Amount Shares Amount

Shares Amount Shares Amount Shares Amount

Balance at December 31, 2021 6,200,000 149,860 11,500,000 278,108 32,987,478 330 3,819,375 37,286 ( 2,882,824 ) 1,402,135

1 unchanged sentence

Other comprehensive income (loss) — — — — — — — ( 7,817 ) — ( 7,817 )

Proceeds from issuance of common stock, net of offering costs — — — — — — 4,315,000 43 160,938 — — 160,981

Stock awards — — — — 4,315 — — — — —

3 unchanged sentences

Balance at March 31, 2022 6,200,000 149,860 11,500,000 278,108 32,991,793 330 3,819,513 29,469 ( 3,149,333 ) 1,127,947

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

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

Proceeds from issuance of common stock, net of offering costs — — — — — 4,312,500 43 145,836 — — 145,879

Stock awards — — — — — 15,805 1 — — — 1

Common stock dividends — — — — — — — — — — ( 26,071 ) ( 26,071 )

Preferred stock dividends — — — — — — — — — — ( 9,900 ) ( 9,900 )

Redemption of preferred stock ( 5,600,000 ) ( 135,356 ) — — — — — — — — ( 4,682 ) ( 140,038 )

Amortization of equity-based compensation — — — — — — — — 240 — — 240

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.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30,

Three Months Ended March 31,

$ in thousands 2023 2022

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(Gain) loss on investments, net ( 51,956 ) 504,388

Increase (decrease) in provision for credit losses — ( 1,768 )

(Gain) loss from investments in unconsolidated ventures in excess of distributions received ( 2 ) 34

Other amortization ( 4,332 ) ( 5,058 )

Loss on foreign currency translation 123 —

Changes in operating assets and liabilities:

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Proceeds from sale of mortgage-backed securities 783,883 8,754,469

Proceeds from the sale of U.S.

Treasury securities 468,051 —

Settlement (termination) of forwards, swaps, swaptions and TBAs, net 487,538 164,396

Settlement (termination) of forwards, swaps, and TBAs, net ( 91,900 ) 283,429

Net change in due from counterparties and collateral held payable on derivative instruments ( 49 ) ( 38,829 )

2 unchanged sentences

Proceeds from issuance of common stock 35,792 —

Redemption of preferred stock — ( 140,038 )

Repurchase of preferred stock ( 115,082 ) —

Cash paid in lieu of fractional shares in connection with one-for-ten reverse stock split ( 1 ) —

Proceeds from repurchase agreements 9,318,669 23,329,788

13 unchanged sentences

Net change in investment related receivable (payable) ( 723 ) 15

Offering costs not paid 144 351

Change in foreign currency translation adjustment on other investments 434 ( 164 )

Net change in foreign currency translation adjustment recorded in accumulated other comprehensive income ( 113 ) 200

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

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(the “Company” or “we”) is a Maryland corporation primarily focused on investing in, financing and managing mortgage-backed securities ("MBS”) and other mortgage-related assets.

We invest in:

As of March 31, 2023, we were invested in:

• residential mortgage-backed securities (“RMBS”) that are guaranteed by a U.S.

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government agency or a federally chartered corporation (“non-Agency RMBS”);

• Commercial mortgage loans,

• other real estate-related financing arrangements.

During the periods presented in these condensed consolidated financial statements, we also invested in:

• a commercial mortgage loan;

Treasury securities.

• Other real estate-related financing agreements.

We conduct our business through IAS Operating Partnership L.P.

23 unchanged sentences

Significant Accounting Policies

There have been no changes to our accounting policies included in Note 2 to the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2021 other than as detailed below.

Treasury Securities

Treasury securities are classified as trading securities and reported at fair value on our condensed consolidated balance sheets.

Purchases of U.S.

Treasury Securities are recorded on the trade date.

Changes in the fair value of U.S.

Treasury securities are recognized within gain (loss) on investments, net in our condensed consolidated statements of operations.

Coupon interest income is accrued based on the outstanding principal balance of the securities and their contractual terms.

Interest income on U.S.

Treasury securities is recognized within mortgage-backed and other securities interest income on our condensed consolidated statements of operations.

There have been no changes to our accounting policies included in Note 2 to the consolidated financial statements of our Annual Report on Form 10-K for the year ended 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 September 30, 2022 is presented in the table below.

Our maximum risk of loss in VIEs in which we are not the primary beneficiary at March 31, 2023 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 September 30, 2022 and December 31, 2021.

September 30, 2022

The following tables summarize our MBS portfolio by asset type as of March 31, 2023 and December 31, 2022.

March 31, 2023

$ in thousands Principal/ Notional

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Total 6,304,688 ( 979,402 ) 5,325,286 121,857 5,447,143 5.24 %

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

(1) Period-end weighted average yield is based on amortized cost as of March 31, 2023 and incorporates future prepayment and loss assumptions when appropriate.

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

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Total 5,687,505 ( 952,225 ) 4,735,280 56,613 4,791,893 5.35 %

(1) Period-end weighted average yield is based on amortized cost as of December 31, 2021 and incorporates future prepayment and loss assumptions.

(1) Period-end weighted average yield is based on amortized cost as of December 31, 2022 and incorporates future prepayment and loss assumptions when appropriate.

(2) All Agency-CMO are Agency IO.

(3) Non-Agency RMBS is 68.6 % fixed rate, 30.6 % variable rate and 0.8 % floating rate based on fair value.

Coupon payments on variable rate investments are based upon changes in the underlying hybrid adjustable-rate mortgage (“ARM”) loan coupons, while coupon payments on floating rate investments are based upon a spread to a reference index.

Coupon payments on variable rate investments are based upon changes in the underlying hybrid ARM loan coupons, while coupon payments on floating rate investments are based upon a spread to a reference index.

(4) Of the total discount in non-Agency RMBS, $ 2.1 million is non-accretable calculated using the principal/notional balance and based on estimated future cash flows of the securities.

(5) Non-Agency RMBS includes non-Agency IO which represent 97.1 % of principal/notional balance, 41.6 % of amortized cost and 35.3 % 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 September 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 March 31, 2023 and December 31, 2022.

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 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

As of March 31, 2023 and December 31, 2022, approximately 99 % of our MBS was accounted for under the fair value option.

March 31, 2023 December 31, 2022

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

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Total 42,262 5,404,881 5,447,143 42,454 4,749,439 4,791,893

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:

The components of the carrying value of our MBS portfolio at March 31, 2023 and December 31, 2022 are presented below.

Accrued interest receivable on our MBS portfolio, which is recorded within investment related receivable on our condensed consolidated balance sheets, was $ 23.2 million as of March 31, 2023 (December 31, 2022:

$ 21.3 million).

September 30, 2022

$ in thousands MBS Interest-Only Securities Total

Principal/notional balance 4,499,427 723,444 5,222,871

Unamortized premium 29,388 — 29,388

Unamortized discount ( 88,604 ) ( 664,110 ) ( 752,714 )

Gross unrealized gains (1)

2,931 4,790 7,721

Gross unrealized losses (1)

( 147,542 ) ( 2,733 ) ( 150,275 )

Fair value 4,295,600 61,391 4,356,991

December 31, 2021

$ in thousands MBS Interest-Only Securities Total

March 31, 2023 December 31, 2022

$ in thousands MBS Interest-Only Securities Total MBS Interest-Only Securities Total

Principal/notional balance 5,404,033 900,655 6,304,688 4,770,175 917,330 5,687,505

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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 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

Further detail on the components of our total gains (losses) on investments, net for the three months ended March 31, 2023 and 2022 is provided below in this Note 4.

The following table summarizes our MBS portfolio according to estimated weighted average life classifications as of March 31, 2023 and December 31, 2022 .

$ in thousands March 31, 2023 December 31, 2022

Less than one year 26,452 26,593

2 unchanged sentences

Total 5,447,143 4,791,893

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 September 30, 2022 and December 31, 2021.

September 30, 2022

March 31, 2023

Less than 12 Months 12 Months or More Total

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45,111 ( 1,959 ) 9 7,270 ( 1,259 ) 2 52,381 ( 3,218 ) 11

Non-Agency CMBS (2)

36,623 ( 847 ) 3 — — — 36,623 ( 847 ) 3

Non-Agency RMBS (3)

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

(2) Unrealized losses on non-Agency CMBS are included in accumulated other comprehensive income.

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.

(3) Includes non-Agency IO with a fair value of $ 1.4 million for which the fair value option has been elected.

Such securities have unrealized losses of $ 1.5 million.

Such securities have unrealized losses of $ 488,000 .

December 31, 2022

13 unchanged sentences

25,417 ( 1,645 ) 6 2,934 ( 496 ) 1 28,351 ( 2,141 ) 7

Non-Agency CMBS (2)

26,592 ( 439 ) 2 — — — 26,592 ( 439 ) 2

Non-Agency RMBS (3)

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

(2) Includes non-Agency IO with a fair value of $ 1.7 million for which the fair value option has been elected.

Such securities have unrealized losses of $ 2.1 million.

The remaining $ 136,000 of unrealized losses on non-Agency RMBS are included in accumulated other comprehensive income.

(2) Unrealized losses on non-Agency CMBS are included in accumulated other comprehensive income.

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 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.

Nine Months Ended September 30,

$ in thousands 2021

Beginning allowance for credit losses ( 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 nine months ended September 30, 2022 and 2021.

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

(3) Includes non-Agency IO with a fair value of $ 1.4 million for which the fair value option has been elected.

Such securities have unrealized losses of $ 561,000 .

The following table summarizes the components of our total gain (loss) on investments, net for the three months ended March 31, 2023 and 2022.

Three Months Ended March 31,

$ in thousands 2023 2022

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Net unrealized gains (losses) on commercial loan — ( 124 )

Net realized gains (losses) on U.S.

Net unrealized gains (losses) on U.S.

Treasury securities — ( 19,827 )

Total gain (loss) on investments, net 51,956 ( 504,388 )

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

The following tables present components of interest income recognized on our mortgage-backed and other securities portfolio for the three months ended March 31, 2023 and 2022.

For the three months ended March 31, 2023

$ in thousands Coupon

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Total 69,116 171 69,287

For the three months ended September 30, 2021

$ in thousands Coupon

Interest Net (Premium

Amortization)/Discount

Accretion Interest

Agency RMBS 50,748 ( 9,548 ) 41,200

Non-Agency CMBS 761 480 1,241

Non-Agency RMBS 483 ( 273 ) 210

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

For the nine months ended September 30, 2022

For the three months ended March 31, 2022

$ in thousands Coupon

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Treasury Securities 560 ( 16 ) 544

Other 482 — 482

Total 48,229 ( 6,592 ) 41,637

For the nine months ended September 30, 2021

$ in thousands Coupon

Interest Net (Premium

Amortization)/Discount

Accretion Interest

Agency RMBS 150,306 ( 31,482 ) 118,824

Non-Agency CMBS 3,102 2,203 5,305

Non-Agency RMBS 1,574 ( 997 ) 577

Other 19 — 19

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

Note 5 – Other Assets

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

The following table summarizes our other assets as of March 31, 2023 and December 31, 2022.

$ in thousands March 31, 2023 December 31, 2022

Investments in unconsolidated ventures 504 552

1 unchanged sentence

Total 1,719 1,731

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.

The unconsolidated ventures invest in our target assets.

Refer to Note 14 - "Commitments and Contingencies" for additional details regarding our commitments to these unconsolidated ventures.

As of December 31, 2022, we were invested in two unconsolidated ventures that were managed by an affiliate of our Manager.

Our joint venture whose net assets were denominated in euros was dissolved during the first quarter of 2023.

Our remaining unconsolidated venture is in liquidation and plans to sell or settle its remaining investments as expeditiously as possible.

Refer to Note 14 - "Commitments and Contingencies" for additional details regarding our commitment to this unconsolidated venture.

Note 6 – Borrowings

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

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

Our repurchase agreements bear interest at a contractually agreed upon rate and generally have maturities ranging from one to six m onths.

We account for our repurchase agreements as secured borrowings since we maintain effective control of the financed assets.

Our repurchase agreements are subject to certain financial covenants.

We were in compliance with all of these covenants as of March 31, 2023.

The following tables summarize certain characteristics of our borrowings at March 31, 2023 and December 31, 2022.

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

$ in thousands September 30, 2022

Weighted Average

Average Remaining

Amount Interest Maturity

Outstanding Rate (days)

Repurchase Agreements - Agency RMBS 3,887,291 3.27 % 60

Total Borrowings 3,887,291 3.27 % 60

$ in thousands December 31, 2021

Weighted Average

Average Remaining

Amount Interest Maturity

Outstanding Rate (days)

$ in thousands March 31, 2023 December 31, 2022

Weighted Weighted

Weighted Average Weighted Average

Average Remaining Average Remaining

Amount Interest Maturity Amount Interest Maturity

Outstanding Rate (days) Outstanding Rate (days)

Repurchase Agreements - Agency RMBS 4,814,700 4.91 % 52 4,234,823 4.24 % 28

Total Borrowings 4,814,700 4.91 % 52 4,234,823 4.24 % 28

Repurchase Agreements

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

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

Repurchase agreements are accounted for as secured borrowings since we maintain effective control of the financed assets.

The repurchase agreements are subject to certain financial covenants.

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 September 30, 2022 and December 31, 2021.

The following table summarizes the fair value of collateral that we pledged and held under our repurchase agreements, interest rate swaps and TBAs as of March 31, 2023 and December 31, 2022.

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, 2022 for a description of how we determine fair value.

Agency RMBS collateral pledged is included in mortgage-backed securities on our condensed consolidated balance sheets.

Cash collateral pledged on centrally cleared interest rate swaps and currency forward contracts is classified as restricted cash on our condensed consolidated balance sheets.

Cash collateral pledged on centrally cleared interest rate swaps is classified as restricted cash on our condensed consolidated balance sheets.

Cash collateral pledged on repurchase agreements and TBAs accounted for as derivatives is classified as due from counterparties on our condensed consolidated balance sheets.

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

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

As of March 31, 2023 and December 31, 2022, we did not recognize any non-cash collateral held on our condensed consolidated balance sheets.

$ in thousands As of

Collateral Pledged September 30, 2022 December 31, 2021

Collateral Pledged March 31, 2023 December 31, 2022

Repurchase Agreements:

10 unchanged sentences

Total collateral pledged 5,215,613 4,544,413

Collateral Held September 30, 2022 December 31, 2021

Collateral Held March 31, 2023 December 31, 2022

Repurchase Agreements:

Cash 221 4,892

Non-cash collateral 17,692 7,216

3 unchanged sentences

Total collateral held:

Cash 1,571 4,892

Non-cash collateral 17,692 7,216

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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 104 % as of September 30, 2022 (December 31, 2021:

The ratio of our total repurchase agreements collateral pledged to our total repurchase agreements outstanding was 106 % as of March 31, 2023 (December 31, 2022:

105 %) based on the fair value of the securities as reported in our condensed consolidated balance sheets.

Interest Rate Swaps

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").

As of March 31, 2023 and December 31, 2022, 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.

2 unchanged sentences

Certain of our FCM agreements include cross default provisions.

TBAs and Currency Forward Contracts

Our TBAs and currency forward contracts provide for bilateral collateral pledging based on market value as determined by our counterparties.

Collateral pledged with our TBA and currency forward counterparties is segregated in our books and records and can be in the form of cash or securities.

Our TBAs provide for bilateral collateral pledging based on market value as determined by our counterparties.

Collateral pledged with our TBA counterparties is segregated in our books and records and can be in the form of cash or securities.

Our counterparties have the right to repledge the collateral posted and have the obligation to return the pledged collateral, or substantially the same collateral, if agreed to by us, as the market value of the contracts changes.

2 unchanged sentences

$ in thousands Notional Amount as of December 31, 2022 Additions Settlement,

or Exercise Notional Amount as of September 30, 2022

or Exercise Notional Amount as of March 31, 2023

Interest Rate Swaps (1) (2)

8,150,000 500,000 ( 525,000 ) 8,125,000

Currency Forward Contracts 13,596 22,027 ( 33,955 ) 1,668

TBA Purchase Contracts 400,000 1,000,000 ( 1,100,000 ) 300,000

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Total 8,150,000 500,000 ( 525,000 ) 8,125,000

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

(1) Does not include interest rate swaps with forward start dates until the date they begin to bear interest.

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.

(2) Notional amount as of March 31, 2023 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.

Notional amount as of December 31, 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 $ 2.4 billion of interest rate swaps whereby we pay interest at a floating rate and receive interest at a fixed rate.

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Interest Rate Swaps

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

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

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

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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.

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 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 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

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 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 $ 4.5 million as a decrease to interest expense for the three months ended March 31, 2023 (March 31, 2022:

$ 5.2 million as a decrease).

As of March 31, 2023, $ 5.9 million (December 31, 2022:

$ 10.4 million) of unrealized gains on discontinued cash flow hedges, net are still included in accumulated other comprehensive income and are expected to be reclassified as a decrease to interest expense, repurchase agreements over a period of time through December 15, 2023.

As of March 31, 2023 and December 31, 2022, 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 March 31, 2023

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

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7 to 10 years 1,425,000 0.55 % 4.30 % 7.8

Greater than 10 years 500,000 1.92 % 4.30 % 19.2

Total 5,800,000 0.45 % 4.30 % 6.3

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

As of March 31, 2023, we held $ 475.0 million notional amount of interest rate swaps with forward start dates that will receive floating interest based on SOFR (December 31, 2022:

$ 975.0 million).

As of March 31, 2023, these interest rate swaps had a weighted average maturity of 30.3 years (December 31, 2022:

16.5 years) and a weighted average fixed pay rate of 1.33 % (December 31, 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

As of March 31, 2023 and December 31, 2022, 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, excluding interest rate swaps with forward start dates.

$ in thousands As of March 31, 2023

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

Less than 3 years 250,000 2.98 % 4.00 % 0.6

3 to 5 years 350,000 4.82 % 2.78 % 4.1

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5 to 7 years 1,125,000 4.30 % 2.66 % 6.0

7 to 10 years 200,000 4.30 % 2.66 % 8.4

Greater than 10 years 375,000 4.30 % 2.67 % 29.5

Total 2,350,000 4.30 % 2.78 % 9.3

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

We periodically purchase interest rate swaptions to help mitigate the potential impact of increases or decreases in interest rates on the performance of our Agency RMBS portfolio (referred to as "convexity risk").

The interest rate swaptions provide us the option to enter into interest rate swap agreements for a predetermined notional amount, stated term and pay and receive interest rates in the future.

The premium paid for interest rate swaptions is reported as a derivative asset in our condensed consolidated balance sheets.

The premium is valued at an amount equal to the fair value of the swaption that would have the effect of closing the position adjusted for nonperformance risk, if any.

The difference between the premium and the fair value of the swaption is reported in gain (loss) on derivative instruments, net in our condensed consolidated statements of operations.

If an interest rate swaption expires unexercised, the loss on the interest rate swaption would equal the premium paid.

If we sell or exercise an interest rate swaption, the realized gain or loss on the interest rate swaption would equal the difference between the cash or the fair value of the underlying interest rate swap received and the premium paid.

We use currency forward contracts to help mitigate the potential impact of changes in foreign currency exchange rates on our investments denominated in foreign currencies.

As of March 31, 2023, we held $ 275.0 million notional amount of interest rate swaps with forward start dates that will pay floating interest based on SOFR (December 31, 2022:

$ 275.0 million).

As of March 31, 2023, these interest rate swaps had a weighted average maturity of 15.8 years (December 31, 2022:

16.0 years) and a weighted average fixed receive rate of 2.63 % (December 31, 2022:

Currency Forward Contracts

We have historically used currency forward contracts to help mitigate the potential impact of changes in foreign currency exchange rates on our investments denominated in foreign currencies.

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 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 did not have any currency forward contracts outstanding as of March 31, 2023 or December 31, 2022.

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 September 30, 2022 and December 31, 2021.

$ in thousands As of September 30, 2022

The following table summarizes certain characteristics of our TBAs accounted for as derivatives as of March 31, 2023 and December 31, 2022.

$ in thousands As of March 31, 2023

Notional Amount Implied Cost Basis Implied Market Value Net Carrying Value

TBA Purchase Contracts (1)

300,000 299,977 303,393 3,416

TBA Sale Contracts (2)

( 300,000 ) ( 299,048 ) ( 303,393 ) ( 4,345 )

Net TBA Derivatives — 929 — ( 929 )

(1) Net carrying value of TBA purchase contracts includes $ 3.4 million of derivative assets.

(2) Net carrying value of TBA sales contract includes $ 4.3 million of derivative liabilities.

$ in thousands As of December 31, 2022

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TBA Purchase Contracts (1)

400,000 404,144 402,237 ( 1,907 )

TBA Sale Contracts (2)

( 400,000 ) ( 402,707 ) ( 402,237 ) 470

Net TBA Derivatives — 1,437 — ( 1,437 )

(1) Net carrying value of TBA purchase contracts includes $ 1.9 million of derivative liabilities.

(2) Net carrying value of TBA sales contract includes $ 642,000 of derivative assets and $ 172,000 of derivative liabilities.

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 September 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 March 31, 2023 and December 31, 2022.

$ in thousands

Derivative Assets Derivative Liabilities

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

As of March 31, 2023 As of December 31, 2022 As of March 31, 2023 As of December 31, 2022

Sheet Fair Value Fair Value Balance

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Interest Rate Swaps Asset — 20 Interest Rate Swaps Liability 7,946 —

Currency Forward Contracts 66 270 Currency Forward Contracts — —

TBAs 3,416 642 TBAs 4,345 2,079

Total Derivative Assets 3,416 662 Total Derivative Liabilities 12,291 2,079

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 nine months ended September 30, 2022 and 2021.

$ in thousands

Three Months Ended September 30, 2022

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 71,862 30,145 36,930 138,937

Currency Forward Contracts 187 — 14 201

TBAs ( 9,172 ) — 3,583 ( 5,589 )

Total 62,877 30,145 40,527 133,549

$ in thousands

Three Months Ended September 30, 2021

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 22,663 ( 4,175 ) 11,997 30,485

Currency Forward Contracts 610 — ( 266 ) 344

TBAs 14,820 — ( 10,367 ) 4,453

Total 38,093 ( 4,175 ) 1,364 35,282

The following tables summarize the effect of interest rate swaps, currency forward contracts and TBAs reported in gain (loss) on derivative instruments, net on the condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022.

$ in thousands

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

not designated as

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Interest Rate Swaps ( 90,949 ) 54,464 ( 7,968 ) ( 44,453 )

Currency Forward Contracts 866 — ( 204 ) 662

TBAs ( 951 ) — 509 ( 442 )

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$ in thousands

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

not designated as

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Interest Rate Swaps 343,309 1,284 ( 11,399 ) 333,194

Interest Rate Swaptions ( 553 ) — — ( 553 )

Currency Forward Contracts 193 — ( 41 ) 152

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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 September 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 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 September 30, 2022

Our derivative liability of $ 7.9 million at March 31, 2023 (December 31, 2022:

asset of $ 20,000 ) 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 March 31, 2023

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

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(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 $ 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 $ 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.

(2) Cash collateral pledged by us on our derivatives was $ 130.0 million as of March 31, 2023 (December 31, 2022:

$ 104.8 million) of which $ 127.0 million relates to initial margin pledged on centrally cleared interest rate swaps (December 31, 2022:

$ 103.2 million).

C entrally cleared interest rate swaps are excluded from the tables above.

We held $ 1.4 million of cash collateral on our derivatives as of March 31, 2023 (December 31, 2022:

(3) The fair value of securities pledged against our borrowings under repurchase agreements was $ 5.1 billion as of March 31, 2023 (December 31, 2022:

$ 4.4 billion).

We held cash collateral of $ 221,000 under repurchase agreements as of March 31, 2023 (December 31, 2022:

$ 4.9 million) .

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.

September 30, 2022

March 31, 2023

Fair Value Measurements Using:

$ in thousands Level 1 Level 2 Level 3 (2)

NAV as a practical expedient (3)

$ in thousands Level 1 Level 2 Level 3 NAV as a practical expedient (2)

Mortgage-backed securities (1)

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Fair Value Measurements Using:

$ in thousands Level 1 Level 2 Level 3 (2)

NAV as a practical expedient (3)

$ in thousands Level 1 Level 2 Level 3 NAV as a practical expedient (2)

Mortgage-backed securities (1)

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(1) For more detail about the fair value of our MBS, refer to Note 4 - “Mortgage-Backed Securities”.

(2) Amounts reflect our commercial loan investment for which we have elected the fair value option and valued using a third party appraisal.

(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 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 September 30, Nine Months Ended September 30,

$ in thousands 2022 2021 2022 2021

Beginning balance 23,478 20,822 23,515 23,098

Unrealized gains (losses) 171 1,446 134 ( 830 )

Ending balance 23,649 22,268 23,649 22,268

Unrealized gains and losses on our commercial loan investment are included in gain (loss) on investments, net in our condensed consolidated statements of operations.

The following table summarizes the significant unobservable input used in the fair value measurement of our commercial loan.

Fair Value at Valuation Unobservable

$ in thousands September 30, 2022 Technique Input Rate

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

Fair Value at Valuation Unobservable

$ in thousands December 31, 2021 Technique Input Rate

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 September 30, 2022 and December 31, 2021.

September 30, 2022 December 31, 2021

As of December 31, 2022, we were invested in two unconsolidated ventures that were managed by an affiliate of our Manager.

One of the unconsolidated ventures was dissolved during the first quarter of 2023.

As of March 31, 2023, the remaining unconsolidated venture was in liquidation and plans to sell or settle its remaining investments as expeditiously as possible.

March 31, 2023 December 31, 2022

$ 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 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.

During the three months ended March 31, 2023, we reimbursed our Manager $ 409,000 (March 31, 2022:

$ 413,000 ) for costs of support personnel.

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 nine months ended September 30, 2022 and 2021.

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

The following table summarizes the costs incurred on our behalf by our Manager for the three months ended March 31, 2023 and 2022.

Three Months Ended March 31,

$ in thousands 2023 2022

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Preferred Stock

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 nine months ended September 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 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.

During the three months ended March 31, 2023, we did not repurchase any shares of preferred stock.

As of March 31, 2023, 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.

After December 27, 2024, holders are entitled to receive dividends at a floating rate equal to three-month LIBOR plus a spread of 5.18 % of the $ 25.00 liquidation preference per annum.

After December 27, 2024, holders are entitled to receive dividends at a floating rate equal to three-month London Interbank Offered Rate (“LIBOR”) plus a spread of 5.18 % of the $ 25.00 liquidation preference per annum.

Dividends are cumulative and payable quarterly in arrears.

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Dividends are cumulative and payable quarterly in arrears.

The United Kingdom Financial Conduct Authority, which regulates LIBOR, announced that it will cease to publish three-month USD LIBOR settings on July 1, 2023.

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

We expect our Series B and Series C Preferred Stock to pay floating rate dividends using a SOFR-based rate in place of three-month LIBOR.

We have the option to redeem shares of our Series B Preferred Stock after December 27, 2024 and shares of our Series C Preferred Stock after September 27, 2027 for $ 25.00 per share, plus any accumulated and unpaid dividends through the date of the redemption.

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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 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.

As of March 31, 2023, we may sell up to 13,069,931 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 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.

The restricted shares will become unrestricted shares of common stock on the first anniversary of the grant date unless forfeited, subject to certain conditions that accelerate vesting.

During the three months ended March 31, 2023, we sold 2,930,069 shares of common stock under our equity distribution agreement for proceeds of $ 35.8 million, net of approximately $ 482,000 in commissions and fees.

We did not sell any shares of common stock under equity distribution agreements during the three months ended March 31, 2022.

During the three months ended March 31, 2023 and 2022, we did not repurchase any shares of our common stock.

As of March 31, 2023, we had authority to purchase 1,816,398 shares of our common stock through our common stock share repurchase program.

Accumulated Other Comprehensive Income

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 following tables present the components of total other comprehensive income (loss), net and accumulated other comprehensive income (“AOCI”) for the three months ended March 31, 2023 and 2022.

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

Three Months Ended September 30, 2022

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

Total other comprehensive income (loss)

Unrealized gain (loss) on mortgage-backed securities, net — ( 1,243 ) — ( 1,243 )

Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense — — ( 4,855 ) ( 4,855 )

Currency translation adjustments on investment in unconsolidated venture ( 141 ) — — ( 141 )

Total other comprehensive income (loss) ( 141 ) ( 1,243 ) ( 4,855 ) ( 6,239 )

AOCI balance at beginning of period 131 2,503 20,115 22,749

Total other comprehensive income (loss) ( 141 ) ( 1,243 ) ( 4,855 ) ( 6,239 )

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

Three Months Ended September 30, 2021

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

Total other comprehensive income (loss)

Unrealized gain (loss) on mortgage-backed securities, net — ( 473 ) — ( 473 )

Reclassification of amortization of net deferred (gain) loss on de-designated interest rate swaps to repurchase agreements interest expense — — ( 5,601 ) ( 5,601 )

Currency translation adjustments on investment in unconsolidated venture 187 — — 187

Total other comprehensive income (loss) 187 ( 473 ) ( 5,601 ) ( 5,887 )

AOCI balance at beginning of period 476 8,129 41,316 49,921

Total other comprehensive income (loss) 187 ( 473 ) ( 5,601 ) ( 5,887 )

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

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

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

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Currency translation adjustments on investment in unconsolidated venture ( 10 ) — — ( 10 )

Reclassification of currency translation loss on investment in unconsolidated venture to other investment income (loss), net 123 — — 123

Total other comprehensive income (loss) 113 ( 476 ) ( 4,494 ) ( 4,857 )

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AOCI balance at end of period — ( 7 ) 5,911 5,904

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

$ 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 nine months ended September 30, 2022 and 2021.

The table below summarizes the dividends we declared during the three months ended March 31, 2023 and 2022.

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.

$ in thousands, except per share amounts Dividends Declared

Series A Preferred Stock Per Share In Aggregate Date of Payment

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

(1) On June 16, 2021, we paid a final dividend of $ 0.2691 per share ($ 1.5 million in aggregate) in connection with the redemption of our Series A Preferred Stock.

$ in thousands, except per share amounts Dividends Declared

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 17, 2023 0.4844 2,198 March 27, 2023

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

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

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

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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 17, 2023 0.46875 3,664 March 27, 2023

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

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

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

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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 27, 2023 0.40 16,658 April 27, 2023

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

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

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

Note 13 – Earnings (Loss) per Common Share

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

Earnings (loss) per share for the three months ended March 31, 2023 and 2022 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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

In thousands, except per share amounts 2023 2022

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Diluted 0.39 ( 7.18 )

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).

The following potential weighted average common shares were excluded from diluted earnings per share for the three months ended March 31, 2022 as the effect would be antidilutive:

1,500 for restricted stock awards .

Note 14 – Commitments and Contingencies

1 unchanged sentence

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

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.

The unconsolidated ventures are structured as partnerships, and we invested in the partnerships as a limited partner.

Both of the unconsolidated ventures are in liquidation and plan to sell or settle their remaining investments as expeditiously as possible.

Until the ventures complete their liquidation, we are committed to fund $ 6.0 million in additional capital to cover future expenses should they occur.

Our material off-balance sheet commitments as of March 31, 2023 are discussed below.

As discussed in Note 5 - “Other Assets”, we have invested in an unconsolidated venture that is sponsored by an affiliate of our Manager.

The unconsolidated venture is structured as a partnership, and we invested in the partnership as a limited partner.

The unconsolidated venture is in liquidation and plans to sell or settle its remaining investments as expeditiously as possible.

Until the venture completes its liquidation, we are committed to fund $ 2.9 million in additional capital to cover future expenses should they occur.

Note 15 – Subsequent Events

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.

We declared the following dividends on May 8, 2023:

a Series B Preferred Stock dividend of $ 0.4844 per share payable on June 27, 2023 to our stockholders of record as of June 5, 2023 and a Series C Preferred Stock dividend of $ 0.46875 per share payable on June 27, 2023 to our stockholders of record as of June 5, 2023.

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

What changed 10-Q

Item 1. Financial Statements