What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-03 compared with 2021-05-07 · 374 added, 388 removed, 565 unchanged (57% of the section changed)

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Some, but not all, of the factors that might cause such a difference include, without limitation:

• the uncertainty and economic impact of the COVID-19 pandemic and of responsive measures implemented by various governmental authorities, businesses and other third parties;

• the uncertainty and economic impact of the COVID-19 pandemic (including the impact of of any significant variants) and of responsive measures implemented by various governmental authorities, businesses and other third parties, and the potential impact of COVID-19 on our personnel;

• changes in our business and investment strategy;

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• changes in prepayment rates on the loans we own or that underlie our investment securities;

• regulatory and structural changes in the residential loan market and its impact on non-agency mortgage markets;

• increased rates of default or delinquencies and/or decreased recovery rates on our assets;

• our ability to obtain and maintain financing arrangements on terms favorable to us or at all;

• whether the Company's legacy commercial loans will be resolved on the terms and within the timeframes anticipated;

• changes in general economic conditions, in our industry and in the finance and real estate markets, including the impact on the value of our assets;

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Special Note Regarding COVID-19 Pandemic

On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus ("COVID-19") a pandemic.

On March 13, 2020, the U.S.

declared a national emergency concerning the COVID-19 pandemic, and several states and municipalities have subsequently declared public health emergencies.

These conditions have caused, and may continue to cause, a significant disruption in the U.S.

and world economies.

Beginning in mid-March 2020, the global pandemic associated with COVID-19 and related economic conditions caused financial and mortgage-related asset markets to come under extreme duress, resulting in credit spread widening, a sharp decrease in interest rates and unprecedented illiquidity in repurchase agreement financing and MBS markets.

The novel coronavirus ("COVID-19") pandemic has and may continue to cause significant disruption in the U.S.

and world economies resulting in lost business revenues, significant increases in unemployment, changes in consumer behavior and significant reductions in liquidity and the fair value of many assets, including those in which we invest in.

Beginning in mid-March 2020, the global pandemic associated with COVID-19 and the related economic conditions caused financial and mortgage-related asset markets to come under extreme duress, resulting in credit spread widening, a sharp decrease in interest rates and unprecedented illiquidity in repurchase agreement financing and MBS markets.

The illiquidity was exacerbated by inadequate demand for MBS among primary dealers due to balance sheet constraints.

These events, in turn, resulted in falling prices of our assets and increased margin calls from our repurchase agreement counterparties.

To conserve capital, protect assets and to pause the escalating negative impacts caused by the market dislocation and allow the markets for many of our assets to stabilize, in April 2020, we entered into forbearance agreements with our repurchase agreement counterparties, which we subsequently exited on June 10, 2020 pursuant to a reinstatement agreement.

These agreements are detailed in the "Financing activities–Forbearance and Reinstatement Agreements" section below.

In an effort to manage our portfolio through this unprecedented turmoil in the financial markets, to improve liquidity, and preserve capital, we reduced the size of our investment portfolio on a GAAP and non-GAAP basis by $2.9 billion and $3.0 billion, respectively, during 2020 through sales, either directly or as a result of financing counterparty seizures.

During 2020, we also reduced our corresponding financing arrangement balance on a GAAP and non-GAAP basis by $2.7 billion and $2.8 billion, respectively.

In doing so, we recognized a significant amount of realized and unrealized losses which were due directly to the disruptions of the financial markets caused by the COVID-19 pandemic.

We do not yet know the full extent of the effects of the COVID-19 pandemic on our business, operations, personnel, or the U.S.

economy as a whole.

We cannot predict future developments, including the scope and duration of the pandemic, the effectiveness of our work from home arrangements, third-party providers' ability to support our operations, the nature and effect of any actions taken by governmental authorities and other third parties in response to the pandemic, and the other factors discussed throughout this report.

Future developments with respect to the COVID-19 pandemic and the actions taken to reduce its spread could continue to materially and adversely affect our business, operations, operating results, financial condition, liquidity or capital levels.

Refer to the "Financing activities–Forbearance and Reinstatement Agreements" section below for further details related to the impact these economic conditions had on us.

Although market conditions have improved in quarters subsequent to March 2020, the full impact of COVID-19 (including the impact of any significant variants) on the mortgage REIT industry, credit markets, and, consequently, on our financial condition and results of operations for future periods remains uncertain.

Future developments with respect to the COVID-19 pandemic, including among others, the emergence of new variants, the effectiveness and durability of current vaccines and government stimulus measures, could materially and adversely affect our business, operations, operating results, financial condition, liquidity, or capital levels.

Executive Summary

During the first quarter of 2021, we focused our efforts on continuing to grow our diversified risk-adjusted portfolio of Residential Credit Investments and Agency RMBS.

In doing so, our primary focus is to invest in residential mortgage loans with the intent to securitize these assets as market conditions permit.

During the quarter, we continued to grow the Non-QM Loans composition of our investment portfolio by purchasing loans from third parties as well as Arc Home.

We also continued to invest in Agency RMBS while reallocating capital from our Commercial Investments and Non-Agency RMBS portfolios into the residential mortgage market.

During the second quarter of 2021, we continued to focus our efforts on growing our portfolio of Residential Credit Investments, investing in residential mortgage loans with the intent to securitize these assets as market conditions permit.

We completed two rated Non-QM securitizations and continued to purchase Non-QM Loans from both third-party originators as well as Arc Home.

During the quarter, we sold Agency RMBS, Non-Agency RMBS, and Commercial Investments to continue reallocating capital to our Non-QM Loan portfolio.

The information presented below provides a summary of investment and capital activity during the current quarter:

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• Purchased $446.2 million of Non-QM Loans, $197.5 million of which were purchased from Arc Home, a licensed mortgage originator we invest in alongside other Angelo Gordon funds;

◦ During the quarter we amended certain financing arrangements to include a maximum uncommitted borrowing capacity to finance the acquisition of Non-QM Loans;

◦ During the quarter we entered into or amended certain financing arrangements to increase the maximum uncommitted borrowing capacity to $800 million to finance the acquisition of Non-QM Loans;

◦ Subsequent to quarter end, we purchased an additional $86.1 million of Non-QM Loans, inclusive of $58.5 million which were purchased from Arc Home, while also increasing our maximum uncommitted borrowing capacity under certain financing arrangements to support our continued growth within the Non-QM Loan market;

• Purchased 30 Year Fixed Rate positions, increasing our Agency RMBS portfolio to $915.4 million;

• Sold two commercial real estate loans for total proceeds of $74.3 million, releasing unfunded commitments of approximately $28.8 million as of December 31, 2020;

• Sold several Non-Agency RMBS and CMBS positions for total proceeds of $40.4 million.

• Net sold 30 Year Fixed Rate Agency RMBS, Non-Agency RMBS, and CMBS positions for total net proceeds of $244.2 million, of which $104.6 million is unsettled as of June 30, 2021;

◦ Subsequent to quarter end, we sold our remaining CMBS portfolio for proceeds of $33.7 million;

• Participated in a rated securitization in which Non-QM Loans with a fair value of $223.9 million were securitized, converting financing from recourse financing with mark-to-market margin calls to non-recourse financing without mark-to-market margin calls;

• Alongside private funds under the management of Angelo Gordon, participated through our unconsolidated ownership interest in MATT, in a rated Non-QM Loan securitization in which Non-QM Loans with a fair value of $171.4 million were securitized.

Certain senior tranches in the securitization were sold to third parties with us and private funds under the management of Angelo Gordon retaining the subordinate tranches, which had a fair value of $25.7 million as of June 30, 2021.

We have a 44.6% interest in the retained subordinate tranches.

Subsequent to this transaction, MATT had securitized a majority of Non-QM Loans previously acquired and its remaining portfolio consisted primarily of the subordinate tranches retained from this securitization and past securitizations.

Capital Activity

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• Entered into a privately negotiated exchange offer with existing holders of the preferred stock, issuing 0.4 million shares of common stock in exchange for 0.2 million shares of preferred stock;

We are a hybrid mortgage REIT that opportunistically invests in a diversified risk adjusted portfolio of Credit Investments and Agency RMBS.

• Implemented a reverse stock split primarily to decrease volatility in trading for our common stock.

The reverse stock split was effective following the close of business on July 22, 2021 (the "Effective Time").

At the Effective Time, every three issued and outstanding shares of our common stock was converted into one share of common stock.

No fractional shares were issued in connection with the reverse stock split.

Instead, each stockholder holding fractional shares was entitled to receive, in lieu of such fractional shares, cash in an amount determined based on the closing price of our common stock on the date of the Effective Time.

We are a mortgage REIT that opportunistically invests in a diversified risk adjusted portfolio of Credit Investments and Agency RMBS.

Our Credit Investments include Residential Investments and Commercial Investments.

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We collectively refer to these investments as our Non-Agency RMBS.

The mortgage loan

collateral for residential Non-Agency RMBS consists of residential mortgage loans that do not generally conform to underwriting guidelines issued by U.S.

The mortgage loan collateral for residential Non-Agency RMBS consists of residential mortgage loans that do not generally conform to underwriting guidelines issued by U.S.

government agencies or U.S.

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Arc Home originates conforming, Government, Jumbo, Non-QM, and other non-conforming residential mortgage loans and retains the mortgage servicing rights associated with the loans that it originates.

From time to time, Arc Home may sell originated loans to us or other private funds under the management of

Angelo Gordon.

From time to time, Arc Home may sell originated loans to us or other private funds under the management of Angelo Gordon.

See Note 10 to the "Notes to Consolidated Financial Statements (unaudited)" for additional financial information regarding transactions with affiliates.

Market conditions

During the first quarter of 2021, the financial markets generally continued their recovery from the unprecedented dislocation caused by the COVID-19 pandemic and the resulting economic shutdown across much of the U.S.

We believe several factors have contributed to the momentum of the ongoing rise in risk asset prices, most notably positive vaccine and reopening related news, demand for fixed income assets, and improving economic data.

During the second quarter of 2021, the financial markets generally continued their recovery from the unprecedented dislocation caused by the COVID-19 pandemic and the resulting economic shutdown across much of the U.S.

We believe several factors have contributed to the momentum of the ongoing rise in risk asset prices, including, most recently, vaccination rates, reopening of businesses, demand for fixed income assets, and improving economic data.

The Federal Reserve has also consistently signaled that it intends to maintain low interest rates for the foreseeable future.

At the end of 2020, home price indices pointed to an annual increase of over 10% for national home prices, and in its first reading of 2021, the Case-Shiller index rose to over 11%.

We expect that the mortgage and consumer sectors will continue to benefit from the unemployment support and stimulus disbursements, which were included in the Bipartisan-Bicameral Omnibus COVID Relief Deal bill, which was passed by Congress in December 2020.

Home price indices continued to point to double-digit growth for national home prices, and in its April 2021 reading, the Case-Shiller index rose almost 15% year-over-year.

We expect that the mortgage and consumer sectors will continue to benefit from the unemployment support, which some states are phasing out, and stimulus disbursements, which were included in the Bipartisan-Bicameral Omnibus COVID Relief Deal bill, which was passed by Congress in December 2020.

Non-QM Whole Loans and Securitizations:

In the first quarter of 2021, there were Non-QM Loan transactions totaling approximately $1.2 billion.

In addition to offers from established sellers, the market saw its first widely syndicated sale of called collateral from a seasoned Non-QM securitization.

We expect sale volumes to continue at this pace throughout the year even as rate increases lower overall mortgage origination volumes.

In general, the price of residential whole loans continued to increase throughout the quarter as aggregators accounted for the decreased cost of funds in securitization, new government stimulus packages, and the demand for Non-QM assets remains outsized compared to originators ability to reach pre-COVID volumes.

Agency RMBS experienced some volatility during the first quarter as 10-year U.S.

Treasury rates increased by 82 basis points.

With the move in higher rates and the market’s expectation of slowing prepayment speeds, specified pool payups came under pressure during the quarter, resulting in better performance in the TBA market.

Overall, strong bank demand and steady buying by the Federal Reserve continue to be broadly supportive of the sector.

In the second quarter of 2021, loan originators shifted their monetization strategies away from broadly syndicated sales in favor of negotiated flow agreements and loan sales targeted towards much smaller audiences.

In the securitization space, we observed over $5 billion of Non-QM transactions price, almost twice the volume observed in the first quarter.

We expect volumes to continue at this pace throughout the year as rates in the Non-QM space have noticeably decreased over the course of this year.

In general, the price of residential whole loans continued to remain high as aggregators accounted for the decreased cost of funds in securitization, new government stimulus packages, and the demand for Non-QM assets remains outsized compared to originators ability to reach pre-COVID volumes.

Nominal spreads on generic Agency RMBS versus benchmark rates continued to experience volatility in the second quarter 2021.

Although there was continued positive momentum in April 2021, spreads began widening during the following two months.

Continued strong bank demand and steady buying by the Federal Reserve remain broadly supportive of the sector, but the Federal Reserve has signaled that it is beginning to prepare for a reduction of its asset purchases in the future.

Payups on specified pools also saw significant volatility during the second quarter 2021, initially falling sharply in response to market participants selling higher coupon pools and a slowing of collateralized mortgage obligation activity, then partially recovering late in the quarter as lower yields forced accounts to refocus on prepayment protection.

Non-Agency RMBS:

Overall, the factors discussed above contributed to increasingly tighter spreads over the course of the quarter, particularly with regard to the lower tranches of credit-related assets.

Assets with more credit risk, which are generally those with the widest spreads, outperformed during the quarter.

New-issue volume was notably stronger compared to the fourth quarter of 2020.

The supply was well-absorbed by the market as offerings were often oversubscribed, particularly to start the year.

Compared to the prior quarter, RMBS new issues grew 38% to nearly $30 billion.

A continued recovery in the CMBS market was experienced in the first quarter of 2021.

In addition to the factors that typically push CMBS spreads tighter, such as the need to invest newly allocated capital amounts into the market, we believe overall market dynamics in the first quarter were supplemented by a few additional considerations.

One factor being that the recovery of CMBS has tended to lag other product types.

Additionally, with the vaccination rollout picking up momentum, property valuation uncertainty has been mitigated to some degree.

Finally, given a limited amount of maturities in 2021, issuance volumes are expected to remain below historical levels.

The overall CMBS delinquency rate continues to trend lower with March becoming the 9th consecutive month of improved loan performance.

Not surprisingly the hardest hit sectors in 2020, which included hotel and retail, led the recovery during the current quarter and, in our opinion, the greatest area of uncertainly in the commercial real estate markets relates to the office sector and the long-term impacts of more remote or home working options for employees.

Spread tightening for most securitized residential debt sectors extended through the second quarter supported by strong collateral fundamentals, sharply higher home prices, demand for yield, and the ongoing employment recovery.

Spreads for most mortgage sub-asset classes narrowed to levels below February 2020 levels, including AAA tranches of re-performing and non-qualified mortgage securitizations and mezzanine Credit Risk Transfer ("CRT") tranches.

Issuance of new RMBS rose 35% from the first quarter to over $40 billion, largely due to prime and agency-eligible issuance, which nearly doubled to $16.5 billion.

Issuance of non-QM loans and CRT rose 36% to $6 billion and 20% to $6.7 billion, respectively.

RMBS volume in the first half of 2021 totaled $70 billion and was around 11% higher than the same period in 2019 (comparison provided to 2019 as volumes in 2020 were impacted as a result of the COVID-19 pandemic).

In light of various market uncertainties, in particular the pervasive uncertainties of the COVID-19 pandemic for the U.S.

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earned on our investment portfolio and the costs of financing and economic hedges in place on our investment portfolio, as well as any income or losses from our equity investments in affiliates.

Three Months Ended March 31, 2021 compared to the Three Months Ended March 31, 2020

The table below presents certain information from our consolidated statements of operations for the three months ended March 31, 2021 and March 31, 2020 (in thousands):

Three Months Ended June 30, 2021 compared to the Three Months Ended June 30, 2020

The table below presents certain information from our consolidated statements of operations for the three months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended

March 31, 2021 March 31, 2020 Increase/(Decrease)

June 30, 2021 June 30, 2020 Increase/(Decrease)

Statement of Operations Data:

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Net interest component of interest rate swaps (1,573) — (1,573)

Unrealized gain/(loss) on real estate securities and loans, net (6,658) (313,897) 307,239

Unrealized gain/(loss) on derivative and other instruments, net 26,507 5,686 20,821

Foreign currency gain/(loss), net 14 1,649 (1,635)

Other income 23 3 20

Unrealized gain/(loss), net 9,685 100,179 (90,494)

Other income/(loss), net — (155) 155

Total Other Income/(Loss) 12,486 8,415 4,071

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Restructuring related expenses — 7,104 (7,104)

Excise tax — (815) 815

Servicing fees 672 566 106

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Equity in earnings/(loss) from affiliates 1,278 3,434 (2,156)

Net Income/(Loss) from Continuing Operations 15,493 2,700 12,793

Net Income/(Loss) from Discontinued Operations — 361 (361)

Net Income/(Loss) 15,493 3,061 12,432

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Interest income is calculated using the effective interest method for our GAAP investment portfolio and calculated based on the actual coupon rate.

Interest income decreased from March 31, 2020 to March 31, 2021 primarily due to a decrease in the weighted average cost of our portfolio.

The weighted average cost of our GAAP investment portfolio decreased by $2.2 billion from $3.6 billion for the three months ended March 31, 2020 to $1.4 billion for the three months ended March 31, 2021.

The decrease was driven by sales and seizures which occurred primarily during the first and second quarters of 2020 due to market volatility caused by the

COVID-19 pandemic.

Additionally, the weighted average yield of our GAAP investment portfolio decreased by 1.09% from 4.48% for the three months ended March 31, 2020 to 3.39% for the three months ended March 31, 2021.

Interest income increased from June 30, 2020 to June 30, 2021 primarily due to an increase in the size of our portfolio.

The weighted average amortized cost of our GAAP investment portfolio increased by $0.7 billion from $1.0 billion for the three months ended June 30, 2020 to $1.7 billion for the three months ended June 30, 2021.

The increase was primarily driven by purchases of Non-QM Loans and Agency RMBS during the period.

This increase was offset by a decrease in the weighted average yield of our GAAP investment portfolio by 1.82% from 5.14% for the three months ended June 30, 2020 to 3.32% for the three months ended June 30, 2021.

Interest expense

Interest expense is calculated based on the actual financing rate and the outstanding financing balance of our GAAP investment portfolio.

Interest expense decreased from March 31, 2020 to March 31, 2021 primarily due to a decrease in the weighted average financing balance on our GAAP investment portfolio during the period.

The weighted average financing balance on our GAAP investment portfolio during the period decreased by $2.2 billion from $3.0 billion for the three months ended March 31, 2020 to $0.8 billion for the three months ended March 31, 2021.

The decrease was driven by financing removed on sales and seizures which occurred primarily during the first and second quarters of 2020 due to market volatility caused by the COVID-19 pandemic.

Additionally, the weighted average financing rate on our GAAP investment portfolio decreased by 0.70% from 2.64% for the three months ended March 31, 2020 to 1.94% for the three months ended March 31, 2021.

For the three months ended March 31, 2021 and March 31, 2020, interest expense includes $0.2 million and $(0.2) million, respectively, of deferred financing costs that were excluded from core earnings in the "Transaction related expenses and deal related performance fees" line item.

Refer to the "Financing activities" section below for a discussion of the material changes in our cost of funds.

Interest expense decreased from June 30, 2020 to June 30, 2021 primarily due to a decrease in the weighted average financing rate on our GAAP investment portfolio during the period.

The weighted average financing rate on our GAAP investment portfolio decreased by 4.44% from 6.25% for the three months ended June 30, 2020 to 1.81% for the three months ended June 30, 2021.

This was offset by an increase in the weighted average financing balance on our GAAP investment portfolio during the period of $0.6 billion from $0.6 billion for the three months ended June 30, 2020 to $1.2 billion for the three months ended June 30, 2021.

Additionally,

Net realized gain/(loss)

Net realized gain/(loss) represents the net gain or loss recognized on any (i) sales and seizures, if any, of real estate securities out of our GAAP investment portfolio, including any associated deficiencies recognized, if any, (ii) sales of loans out of our GAAP investment portfolio, transfers of loans from our GAAP investment portfolio to real estate owned included in Other assets, and sales of Other assets, and (iii) settlement of derivatives and other instruments.

The following table presents a summary of Net realized gain/(loss) for the three months ended March 31, 2021 and March 31, 2020 (in thousands):

The following table presents a summary of Net realized gain/(loss) for the three months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended

March 31, 2021 March 31, 2020

June 30, 2021 June 30, 2020

Sales/Seizures of real estate securities $ (4,382) $ (36,288)

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Net interest component of interest rate swaps represents the net interest income received or expense paid on our interest rate swaps.

Net interest component of interest rate swaps decreased from March 31, 2020 to March 31, 2021, primarily due to the difference in terms on the outstanding interest rate swaps during the periods.

As of the March 31, 2021, we held an interest rate swap portfolio of $1.1 billion of notional with a weighted average receive-variable rate of 0.20% and a weighted average pay-fix rate of 0.80%.

Unrealized gain/(loss) on real estate securities and loans, net

During the three months ended March 31, 2021, we recognized $6.7 million in net unrealized losses comprised of unrealized losses on securities and unrealized gains on loans of $24.0 million and $17.3 million, respectively.

The unrealized losses on securities primarily relates to losses on our Agency RMBS portfolio and the unrealized gains on loans primarily relates to gains on our Re/Non-performing loan portfolio.

During the three months ended March 31, 2020, we recognized $313.9 million net unrealized losses comprised of unrealized losses on securities and unrealized losses on loans of $203.4 million and $110.5 million, respectively.

These losses were due directly to the disruptions of the financial markets caused by the COVID-19 pandemic and our response thereto, including $2.4 billion in asset sales and a significant decrease in asset valuations in March 2020.

Unrealized gain/(loss) on derivative and other instruments, net

For the three months ended March 31, 2021, the gains of $26.5 million were comprised of unrealized gains of $28.5 million, primarily related to mark-to-market changes on our interest rate swap portfolio, offset by unrealized losses of $2.0 million on securitized debt.

For the three months ended March 31, 2020, the gain of $5.7 million was comprised of unrealized gains on securitized debt offset by unrealized losses on excess MSRs and derivatives.

Foreign currency gain/(loss), net

Foreign currency gain/(loss), net pertains to the effects of remeasuring the monetary assets and liabilities of our foreign investments into U.S.

Net interest component of interest rate swaps decreased from June 30, 2020 to June 30, 2021.

As of the June 30, 2021, we held an interest rate swap portfolio of $806.0 million of notional with a weighted average receive-variable rate of 0.17% and a weighted average pay-fix rate of 0.74%.

We did not hold any interest rate swaps during the three months ended June 30, 2020.

Unrealized gain/(loss), net

The following table presents a summary of Unrealized gain/(loss), net for the three months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended

June 30, 2021 June 30, 2020

Real estate securities $ 19,693 $ 48,924

Loans 6,823 60,708

Excess mortgage servicing rights (176) (888)

Derivatives (15,798) (186)

Securitized debt (857) (8,379)

Total Unrealized gain/(loss), net

$ 9,685 $ 100,179

Other income/(loss), net

Other income/(loss), net includes gains or losses on foreign currency pertaining to the effects of remeasuring the monetary assets and liabilities of our foreign investments into U.S.

dollars using foreign currency exchange rates at the end of the reporting period.

During the three months ended March 31, 2020, the value of GBP relative to USD decreased, resulting in a gain on the liabilities held in foreign currencies.

The decrease in gains from March 31, 2020 to March 31, 2021 is primarily as a result of a decreased foreign currency denominated portfolio throughout the current period.

As of March 31, 2021, the Company no longer held any foreign currency denominated positions.

During the three months ended June 30, 2021, we did not hold any positions denominated in foreign currencies.

Management fee to affiliate

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See the "Contractual obligations" section of this Item 2 for further detail on the calculation of our management fee and for the definition of Stockholders’ Equity.

Management fees decreased from March 31, 2020 to March 31, 2021 primarily due to a decrease in our Stockholders' Equity as calculated pursuant to our Management Agreement.

Management fees remained relatively flat from June 30, 2020 to June 30, 2021.

Other operating expenses

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Refer to the "Contractual obligations" section below for more detail on certain expenses reimbursable to the Manager.

The following table presents a summary of expenses within Other operating expenses broken out between non-investment related expenses and investment related expenses for the three months ended March 31, 2021 and March 31, 2020 (in thousands):

Three Months Ended

March 31, 2021 March 31, 2020

June 30, 2021 June 30, 2020

Non Investment Related Expenses

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Other 258 198

Total Corporate Expenses 3,193 3,133

Total Non Investment Related Expenses 2,299 2,965

Investment Related Expenses

Affiliate expense reimbursement - Deal related expenses 48 162

Professional fees 28 47

Affiliate expense reimbursement - Transaction related expenses 80 —

Residential mortgage loan related expenses 642 887

Transaction related expenses and deal related performance fees (2) 1,805 373

Other (8) 170

Total Investment Expenses 2,567 1,592

Total Other operating expenses $ 4,866 $ 4,557

(1) For the year ended December 31, 2021, the Manager agreed to waive its right to receive expense reimbursements of

$0.8 million.

For the three months ended March 31, 2021, $0.2 million of the reduction in reimbursable expenses is included within the "Affiliated expense reimbursement - Operating expenses" line item above.

(2) The increase in Transaction related expenses and deal related performance fees from the three months ended March 31, 2020 to the three months ended March 31, 2021 is primarily a result of accrued deal related performance fees being reversed in the period ended March 31, 2020 due to a decline in the price of the related assets, as well as the seizure of such assets by financing counterparties.

(3) In computing core earnings, transaction related expenses and deal related performance fees are added back to Net Income/(Loss).

For the three months ended March 31, 2021, total transaction related expenses and deal related performance fees excluded from core earnings were $(12) thousand, consisting of $(167) thousand recorded within the "Other operating expenses" line item, as detailed above, and $155 thousand recorded within the "Interest expense" line item, which relates to the amortization of deferred financing costs.

For the three months ended March 31, 2020, total transaction related expenses and deal related performance fees excluded from core earnings were $(3.4) million, consisting of $(3.2) million recorded within the "Other operating expenses" line item, as detailed above, and $(0.2) million recorded within the "Interest expense" line item, which relates to the amortization of deferred financing costs.

(1) For the year ended December 31, 2021, the Manager agreed to waive its right to receive expense reimbursements of $0.8 million.

For the three months ended June 30, 2021, $0.2 million of the reduction in reimbursable expenses is included within the "Affiliated expense reimbursement - Operating expenses" line item above.

(2) The increase in Transaction related expenses and deal related performance fees from the three months ended June 30, 2020 to the three months ended June 30, 2021 is primarily a result of expenses incurred in relation to the settlement of the June 2021 securitization of Non-QM Loans.

Restructuring related expenses

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Refer to the "Financing activities" section below for more information regarding the Forbearance Agreement and the Reinstatement Agreement.

Excise tax represents a four percent tax on the required amount of any ordinary income and net capital gains not distributed during the year.

The expense is calculated in accordance with applicable tax regulations.

During the three months ended March 31, 2020, we reversed previously accrued excise taxes primarily as a result of losses associated with COVID-19.

We did not record any excise taxes for the three months ended March 31, 2021.

Servicing fees

We incur servicing fee expenses in connection with the servicing of our Residential mortgage loans.

As of March 31, 2021 and March 31, 2020, we owned Residential mortgage loans with a fair value of $643.0 million and $767.0 million, respectively.

This decrease in the fair value of the Residential mortgage loans was a result of net sales of Residential mortgage loan pools in 2020 and 2021.

For the three months ended March 31, 2021 and March 31, 2020, our servicing fees remained relatively consistent.

As of June 30, 2021 and June 30, 2020, we owned Residential mortgage loans with a fair value of $1.0 billion and $379.8 million, respectively.

This increase in the fair value of the Residential mortgage loans was a result of net purchases of Non-QM Loans in 2021.

For the three months ended June 30, 2021 and 2020, our servicing fees increased as a result of these net purchases.

Equity in earnings/(loss) from affiliates

Equity in earnings/(loss) from affiliates represents our share of earnings and profits of investments held within affiliated entities.

A majority of these investments are comprised of real estate securities, loans, and our investment in AG Arc.

Substantially all of these investments are comprised of real estate securities, loans, and our investment in AG Arc.

The below table reconciles the net income/(loss) to the "Equity in earnings/(loss) from affiliates" line item on our consolidated statements of operations (in thousands).

Three Months Ended

March 31, 2021 March 31, 2020

June 30, 2021 June 30, 2020

Non-QM Loans (1) $ 1,275 $ (8,115)

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$ 1,278 $ 3,434

(1) The increase in earnings within MATT was the primarily the result of mark-to-market gains on the Non-QM Loan portfolio and related financing.

(2) The earnings at AG Arc during the three months ended March 31, 2021 were primarily the result of $4.2 million of net income related to Arc Home's lending and servicing operations and $1.5 million related to changes in the fair value of the MSR portfolio held by Arc Home.

(1) The increase in earnings within MATT for the three months ended June 30, 2020 to the three months ended June 30, 2021 was the primarily the result of mark-to-market gains on the Non-QM Loan portfolio.

(2) The loss at AG Arc during the three months ended June 30, 2021 was primarily the result of losses on the fair value of the MSR portfolio held by Arc Home.

The loss recognized by AG Arc also does not include our portion of gains recorded by Arc Home in connection with the sale of residential mortgage loans to us.

For the three months ended June 30, 2021, we eliminated $1.4 million of intra-entity profits recognized by Arc Home and also decreased the cost basis of the underlying loans we purchased by the same amount.

Refer to Note 2 to the "Notes to Consolidated Financial Statements (unaudited)" for more information on this accounting policy.

Gain on Exchange Offers, net

We completed a privately negotiated exchange offer during the three months ended March 31, 2021.

As a result of the exchange offer, we exchanged 153,325 shares of our 8.25% Series A Cumulative Redeemable Preferred Stock ("Series A Preferred Stock") and 350,609 shares of our 8.00% Series B Cumulative Redeemable Preferred Stock ("Series B Preferred Stock") for a total of 2,812,388 shares of common stock.

We completed a privately negotiated exchange offer during the three months ended June 30, 2021.

As a result of the exchange offer, we exchanged 86,478 shares of our 8.00% Series B Cumulative Redeemable Preferred Stock ("Series B Preferred Stock") and 154,383 shares of our 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock ("Series C Preferred Stock") for a total of 429,802 shares of common stock.

We recognized a gain of $0.1 million in connection with the offer.

Refer to the "Liquidity and capital resources" section below for more information on the exchange offer.

Six Months Ended June 30, 2021 compared to the Six Months Ended June 30, 2020

The table below presents certain information from our consolidated statements of operations for the six months ended June 30, 2021 and 2020 (in thousands):

Six Months Ended

June 30, 2021 June 30, 2020 Increase/(Decrease)

Statement of Operations Data:

Net Interest Income

Interest income $ 26,347 $ 53,637 $ (27,290)

Interest expense 9,355 28,584 (19,229)

Total Net Interest Income 16,992 25,053 (8,061)

Other Income/(Loss)

Net realized gain/(loss) 336 (242,752) 243,088

Net interest component of interest rate swaps (2,314) 923 (3,237)

Unrealized gain/(loss), net 29,534 (208,032) 237,566

Other income/(loss), net 37 1,497 (1,460)

Total Other Income/(Loss) 27,593 (448,364) 475,957

Management fee to affiliate 3,321 3,827 (506)

Other operating expenses 8,849 5,487 3,362

Restructuring related expenses — 8,604 (8,604)

Excise tax — (815) 815

Servicing fees 1,287 1,145 142

Total Expenses 13,457 18,248 (4,791)

Income/(loss) before equity in earnings/(loss) from affiliates 31,128 (441,559) 472,687

Equity in earnings/(loss) from affiliates 27,614 (40,758) 68,372

Net Income/(Loss) from Continuing Operations 58,742 (482,317) 541,059

Net Income/(Loss) from Discontinued Operations — 361 (361)

Net Income/(Loss) 58,742 (481,956) 540,698

Gain on Exchange Offers, net 472 — 472

Dividends on preferred stock (9,613) (11,334) 1,721

Net Income/(Loss) Available to Common Stockholders $ 49,601 $ (493,290) $ 542,891

Interest income

Interest income decreased from June 30, 2020 to June 30, 2021 primarily due to a decrease in the size of our portfolio.

The weighted average amortized cost of our GAAP investment portfolio decreased by $0.7 billion from $2.3 billion for the six months ended June 30, 2020 to $1.6 billion for the six months ended June 30, 2021.

The decrease was driven by sales and seizures which occurred primarily during the first and second quarters of 2020 due to market volatility caused by the COVID-19 pandemic.

Interest expense

Interest expense decreased from June 30, 2020 to June 30, 2021 primarily due to a decrease in the amount of financing on our GAAP investment portfolio during the period.

The weighted average financing balance on our GAAP investment portfolio during the period decreased by $0.8 billion from $1.8 billion for the six months ended June 30, 2020 to $1.0 billion for the six

months ended June 30, 2021.

The decrease was driven by financing removed on sales and seizures which occurred primarily during the first and second quarters of 2020 due to market volatility caused by the COVID-19 pandemic.

This was offset by a decrease in the weighted average financing rate on our GAAP investment portfolio of 1.34% from 3.20% for the six months ended June 30, 2020 to 1.86% for the six months ended June 30, 2021.

Net realized gain/(loss)

The following table presents a summary of Net realized gain/(loss) for the six months ended June 30, 2021 and 2020 (in thousands):

Six Months Ended

June 30, 2021 June 30, 2020

Sales/Seizures of real estate securities $ (4,882) $ (122,593)

Sales of loans and loans transferred to or sold from Other assets 4,486 (58,765)

Settlement of derivatives and other instruments 732 (61,394)

Total Net realized gain/(loss) $ 336 $ (242,752)

Net interest component of interest rate swaps

We recognized losses on net interest component of interest rate swaps for the six months ended June 30, 2021 compared with gains for the six months June 30, 2020 primarily due to the difference in terms on the outstanding interest rate swaps during the periods coupled with our exiting our interest rate swap portfolio in the first quarter of 2020.

As of the June 30, 2021, we held an interest rate swap portfolio of $806.0 million of notional with a weighted average receive-variable rate of 0.17% and a weighted average pay-fix rate of 0.74%.

Unrealized gain/(loss), net

The following table presents a summary of Unrealized gain/(loss), net for the six months ended June 30, 2021 and 2020 (in thousands):

Six Months Ended

June 30, 2021 June 30, 2020

Real estate securities $ (4,266) $ (154,427)

Loans 24,124 (49,838)

Excess mortgage servicing rights (108) (3,524)

Derivatives 12,686 (12,079)

Securitized debt (2,902) 11,836

Total Unrealized gain/(loss), net

$ 29,534 $ (208,032)

Other income/(loss), net

During the six months ended June 30, 2020, the value of GBP relative to USD decreased, resulting in a gain on the liabilities held in foreign currencies.

As of June 30, 2021, we did not hold any positions denominated in foreign currencies.

Management fee to affiliate

Management fees decreased from June 30, 2020 to June 30, 2021 primarily due to a decrease in our Stockholders' Equity as calculated pursuant to our Management Agreement.

Other operating expenses

The following table presents a summary of expenses within Other operating expenses broken out between non-investment related expenses and investment related expenses for the six months ended June 30, 2021 and 2020 (in thousands):

Six Months Ended

June 30, 2021 June 30, 2020

Non Investment Related Expenses

Affiliate expense reimbursement - Operating expenses (1) $ 2,250 $ 3,576

Professional fees 1,705 1,193

D&O insurance 788 348

Directors' compensation 335 391

Equity based compensation to affiliate — 163

Other 414 427

Total Non Investment Related Expenses 5,492 6,098

Investment Related Expenses

Affiliate expense reimbursement - Deal related expenses $ 329 $ 324

Affiliate expense reimbursement - Transaction related expenses 80 —

Residential mortgage loan related expenses 1,250 1,579

Transaction related expenses and deal related performance fees (2) 1,638 (2,846)

Total Investment Expenses 3,357 (611)

Total Other operating expenses $ 8,849 $ 5,487

(1) For the year ended December 31, 2021, the Manager agreed to waive its right to receive expense reimbursements of $0.8 million.

For the six months ended June 30, 2021, $0.4 million of the reduction in reimbursable expenses is included within the "Affiliated expense reimbursement - Operating expenses" line item above.

(2) The increase in Transaction related expenses and deal related performance fees from the six months ended June 30, 2020 to the six months ended June 30, 2021 is the result of accrued deal related performance fees being reversed in the period ended March 31, 2020 due to a decline in the price of the related assets, as well as the seizure of such assets by financing counterparties, coupled with expenses incurred in relation to the settlement of the June 2021 securitization of Non-QM Loans in Q2 2021.

Restructuring related expenses

Restructuring related expenses relate to legal and consulting fees primarily incurred in connection with executing the Forbearance Agreement and subsequent Reinstatement Agreement in 2020.

Refer to the "Financing activities" section below for more information regarding the Forbearance Agreement and the Reinstatement Agreement.

During the six months ended June 30, 2020, we reversed previously accrued excise taxes primarily as a result of losses associated with COVID-19.

We did not record any excise taxes for the six months ended June 30, 2021.

Servicing fees

For the six months ended June 30, 2021 and 2020, our servicing fees increased as a result of net purchases of Non-QM Loans during 2021.

Equity in earnings/(loss) from affiliates

The below table reconciles the net income/(loss) to the "Equity in earnings/(loss) from affiliates" line item on our consolidated statements of operations (in thousands).

Six Months Ended

June 30, 2021 June 30, 2020

Non-QM Loans (1) $ 15,921 $ (34,844)

AG Arc (2) 3,634 (516)

Land Related Financing 1,250 1,137

Other 6,809 (6,535)

Equity in earnings/(loss) from affiliates

$ 27,614 $ (40,758)

(1) The increase in earnings within MATT for the six months ended June 30, 2020 to the six months ended June 30, 2021 was the primarily the result of mark-to-market gains on the Non-QM Loan portfolio and related financing.

(2) The earnings at AG Arc during the six months ended June 30, 2021 were primarily the result of $4.4 million net income related to Arc Home's lending and servicing operations, offset by $(1.2) million related to changes in the fair value of the MSR portfolio held by Arc Home.

The loss recognized by AG Arc also does not include our portion of gains recorded by Arc Home in connection with the sale of residential mortgage loans to us.

For the six months ended June 30, 2021, we eliminated $1.9 million of intra-entity profits recognized by Arc Home and also decreased the cost basis of the underlying loans we purchased by the same amount.

Refer to Note 2 to the "Notes to Consolidated Financial Statements (unaudited)" for more information on this accounting policy.

Gain on Exchange Offers, net

We completed two privately negotiated exchange offers during the six months ended June 30, 2021.

As a result of the exchange offers, we exchanged 153,325 shares of our 8.25% Series A Cumulative Redeemable Preferred Stock ("Series A Preferred Stock"), 437,087 shares of our Series B Preferred Stock, and 154,383 shares of our Series C Preferred Stock for a total of 1,367,264 shares of common stock.

We recognized a gain of $0.5 million in connection with the offers.

Refer to the "Liquidity and capital resources" section below for more information on the exchange offers.

Book value and Adjusted book value per share

On July 12, 2021, we announced a one-for-three reverse stock split of our outstanding shares of common stock.

The reverse stock split was effected following the close of business on July 22, 2021.

All per share amounts and common shares outstanding for all periods presented have been adjusted on a retroactive basis to reflect the one-for-three reverse stock split.

Per share amounts for book value are calculated using all outstanding common shares in accordance with GAAP, including all vested shares issued to our Manager, and our independent directors under our equity incentive plans as of quarter-end.

As of March 31, 2021, the net proceeds for the Series A Preferred Stock, Series B Preferred Stock, and our 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock ("Series C Preferred Stock") were $40.1 million, $92.3 million, and $93.9 million, respectively.

As of March 31, 2021, the liquidation preference for the issued and outstanding Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock was $41.6 million , $95.4 million, and $97.1 million, respectively.

As of March 31, 2021 and December 31, 2020, our book value per common share calculated using stockholders’ equity less net proceeds on our preferred stock as the numerator was $4.92 and $4.13, respectively.

As of March 31, 2021 and December 31, 2020, our adjusted book value per common share calculated using stockholders’ equity less the liquidation preference of our preferred stock as the numerator was $4.76 and $3.94, respectively

As of June 30, 2021, the net proceeds for the Series A Preferred Stock, Series B Preferred Stock, and our Series C Preferred Stock were $40.1 million, $90.2 million, and $90.2 million, respectively.

As of June 30, 2021, the liquidation preference for the issued and outstanding Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock was $41.6 million, $93.2 million, and $93.2 million, respectively.

As of June 30, 2021 and December 31, 2020, our book value per common share calculated using stockholders’ equity less net proceeds on our preferred stock as the numerator was $15.18 and $12.40, respectively.

As of June 30, 2021 and December 31, 2020, our adjusted book value per common share calculated using stockholders’ equity less the liquidation preference of our preferred stock as the numerator was $14.72 and $11.81, respectively

Presentation of investment, financing and hedging activities

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Net interest margin and leverage ratio

GAAP net interest margin and non-GAAP net interest margin, a non-GAAP financial measure, are calculated by subtracting the weighted average cost of funds from the weighted average yield for our GAAP investment portfolio or our investment portfolio, respectively, both of which exclude cash held by us and any net TBA position.

GAAP net interest margin and non-GAAP net interest margin, a non-GAAP financial measure, are calculated by subtracting the

weighted average cost of funds from the weighted average yield for our GAAP investment portfolio or our investment portfolio, respectively, both of which exclude cash held by us and any net TBA position.

The weighted average yield on our credit portfolio and our Agency RMBS portfolio represents an effective interest rate, which utilizes all estimates of future cash flows and adjusts for actual prepayment and cash flow activity as of quarter-end.

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See the "Financing activities" section below for more detail on our leverage ratio.

The chart below sets forth the net interest margin and leverage ratio from our investment portfolio as of March 31, 2021 and March 31, 2020 and a reconciliation to our GAAP investment portfolio:

March 31, 2021

The chart below sets forth the net interest margin and leverage ratio from our investment portfolio as of June 30, 2021 and June 30, 2020 and a reconciliation to our GAAP investment portfolio:

June 30, 2021

Weighted Average GAAP Investment Portfolio Investments in Debt and Equity of Affiliates Investment Portfolio (a)

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Leverage Ratio (c) 3.4x (d) 2.2x

March 31, 2020

June 30, 2020

Weighted Average GAAP Investment Portfolio Investments in Debt and Equity of Affiliates Investment Portfolio (a)

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Leverage Ratio (c) 1.3x (d) 0.8x

(a) Excludes any net TBA position.

(a) Excludes net TBA position, if any.

(b) Includes cost of non-recourse financing arrangements.

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Core Earnings

We define Core Earnings, a non-GAAP financial measure, as Net Income/(loss) available to common stockholders excluding (i) (a) unrealized gains/(losses) on real estate securities, loans, derivatives and other investments, inclusive of our investment in AG Arc, and (b) net realized gains/(losses) on the sale or termination of such instruments, (ii) any transaction related expenses incurred in connection with the acquisition or disposition of our investments, (iii) accrued deal-related performance fees payable to Arc Home and third party operators to the extent the primary component of the accrual relates to items that are excluded from Core Earnings, such as unrealized and realized gains/(losses), (iv) realized and unrealized changes in the fair value of Arc Home's net mortgage servicing rights and the derivatives intended to offset changes in the fair value of those net mortgage servicing rights, (v) deferred taxes recognized at our taxable REIT subsidiaries, if any, (vi) any foreign currency gain/(loss) relating to monetary assets and liabilities, (vii) income from discontinued operations, and (viii) any gains/(losses) associated with exchange transactions on our common and preferred stock.

associated with exchange transactions on our common and preferred stock.

Items (i) through (viii) above include any amount related to those items held in affiliated entities.

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As defined, Core Earnings include the net interest income and other income earned on our investments on a yield adjusted basis, including TBA dollar roll income or any other investment activity that may earn or pay net interest or its economic equivalent.

One of our objectives is to generate net income from net interest margin on the portfolio, and management uses Core Earnings to help measure our performance against this objective.

Management believes that this non-GAAP measure, when considered with our GAAP financial statements, provides supplemental information useful for investors as it enables them to evaluate our current core performance using the same methodology that management uses to operate the business.

One of our objectives is to generate net income from net interest margin on the portfolio, and management uses Core Earnings, as one of several metrics, to help measure our performance against this objective.

Management believes that this non-GAAP measure, when considered with our GAAP financial statements, provides supplemental information useful for investors to help evaluate our financial performance.

This metric, in conjunction with related GAAP measures, provides greater transparency into the information used by our management team in its financial and operational decision-making.

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Refer to the "Results of Operations" section above for a detailed discussion of our GAAP financial results.

A reconciliation of "Net Income/(loss) available to common stockholders" to Core Earnings for the three months ended March 31, 2021 and March 31, 2020 is set forth below (in thousands, except per share data):

A reconciliation of "Net Income/(loss) available to common stockholders" to Core Earnings for the three and six months ended June 30, 2021 and 2020 is set forth below (in thousands, except per share data):

Three Months Ended

March 31, 2021

March 31, 2020

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021 June 30, 2020

Net Income/(loss) available to common stockholders $ 10,918 $ (2,606) $ 49,601 $ (493,290)

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Net realized (gain)/loss (4,374) 91,609 (336) 242,752

Unrealized (gain)/loss on real estate securities and loans, net 6,658 313,897

Unrealized (gain)/loss on derivative and other instruments, net (26,507) (5,686)

Unrealized (gain)/loss, net (9,685) (100,179) (29,534) 208,032

Transaction related expenses and deal related performance fees (1) 2,024 572 2,012 (2,840)

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Net interest income and expenses from equity method investments (2)(3) 2,539 11,233 9,861 12,466

Foreign currency (gain)/loss, net (14) (1,649)

(Gains) from Exchange Offer, net (358) —

Net (income)/loss from discontinued operations — (361) — (361)

Other (income)/loss, net — 156 (14) (1,493)

(Gains) from Exchange Offers, net (114) — (472) —

Drop income — — — 322

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Core Earnings, per Diluted Share (4) $ — $ (0.27) $ 0.24 $ 0.58

(1) Refer to changes in Interest expense and Other operating expenses in our "Results of Operations" section above for a breakout of transaction related expenses and deal related performance fees for the three months ended March 31, 2021 and March 31, 2020.

(2) For the three months ended March 31, 2021 and March 31, 2020, $2.6 million or $0.06 per share and $(4.6 million) or $(0.14) per share, respectively, of realized and unrealized changes in the fair value of Arc Home's net mortgage servicing rights and corresponding derivatives net of taxes were excluded from Core Earnings per diluted share.

(3) The three months ended March 31, 2021 included a cumulative retrospective adjustment of $0.5 million or $0.01 per diluted share on the premium amortization for investments accounted for under ASC 320-10.

We did not disclose Core Earnings during the first three quarters of 2020 as we determined that this measure, as we have historically calculated it, did not appropriately capture our business, liquidity, results of operations, financial condition, or our ability to make distributions to our stockholders.

During the fourth quarter of 2020, we began disclosing Core Earnings in conjunction with the reinstatement of our dividends on our common stock and preferred stock.

(1) For the three months ended June 30, 2021 and 2020, total transaction related expenses and deal related performance fees included $1.9 million and $0.4 million, respectively, recorded within the "Other operating expenses" line item and $0.1 million and $0.2 million, respectively, recorded within the "Interest expense" line item, which relates to the amortization of deferred financing costs.

For the six months ended June 30, 2021 and 2020, total transaction related expenses and deal related performance fees included $1.7 million and $(2.8) million, respectively, recorded within the "Other operating expenses" line item and $0.3 million and a de minimis amount, respectively, recorded within the "Interest expense" line item, which relates to the amortization of deferred financing costs.

(2) For the three months ended June 30, 2021 and 2020, $(1.5) million or $(0.10) per share and $(0.4) million or $(0.04) per share, respectively;

and for the six months ended June 30, 2021 and 2020, $1.1 million or $0.07 per share and $(5.0) million or $(0.46) per share, respectively, of realized and unrealized changes in the fair value of Arc Home's net mortgage servicing rights and corresponding derivatives net of taxes were excluded from Core Earnings per diluted share.

(3) Core income or loss recognized by AG Arc does not include our portion of gains recorded by Arc Home in connection with the sale of residential mortgage loans to us.

For the three and six months ended June 30, 2021, we eliminated $1.4 million and $1.9 million of intra-entity profits recognized by Arc Home, respectively, and also decreased the cost basis of the underlying loans we purchased by the same amount.

We did not eliminate any intra-entity profits for the three and six months ended June 30, 2020.

Refer to Note 2 to the "Notes to Consolidated Financial Statements (unaudited)"

for more information on this accounting policy.

(4) All per share amounts for all periods presented have been adjusted to reflect the one-for-three reverse stock split.

For the first three quarters of 2020, we determined that Core Earnings, as we have historically calculated it, did not appropriately capture our business, liquidity, results of operations, financial condition, or our ability to make distributions to our stockholders due to the impact of COVID-19 on our business.

Investment activities

Overall, our intention is to allocate capital to investment opportunities with attractive risk/return profiles in our target asset classes.

Historically, our investment portfolio has consisted of Residential Investments, Agency RMBS, and Commercial Investments.

Historically, our investment portfolio has consisted of Residential Investments, Agency RMBS, and Commercial Investments however, we have focused our efforts more recently on growing our portfolio of Residential Credit Investments, investing in residential mortgage loans with the intent to securitize these assets as market conditions permit.

Our capital allocation to each of these investments is set forth in more detail below.

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In general, as prepayment speeds on our Agency RMBS portfolio increase, the related purchase premium amortization increases, thereby reducing the net yield on such assets.

The following table presents a detailed break-down of our investment portfolio as of March 31, 2021 and December 31, 2020 and a reconciliation to our GAAP Investment Portfolio ($ in thousands):

The following table presents a detailed break-down of our investment portfolio as of June 30, 2021 and December 31, 2020 and a reconciliation to our GAAP Investment Portfolio ($ in thousands):

Fair Value Percent of Investment Portfolio

Fair Value Leverage Ratio (a)

March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020

Agency RMBS $ 918,753 $ 521,843 48.4 % 37.4 % 7.8x 6.1x

June 30, 2021 December 31, 2020 June 30, 2021 December 31, 2020 June 30, 2021 December 31, 2020

Residential Investments $ 1,172,851 $ 691,478 59.6 % 49.5 % 0.9x 0.2x

Commercial Investments 93,893 182,296 4.8 % 13.1 % 0.8x 0.9x

Agency RMBS 699,568 521,843 35.6 % 37.4 % 6.6x 6.1x

Investment Portfolio $ 1,966,312 $ 1,395,617 100.0 % 100.0 % 2.2x 1.5x

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Cash posted as collateral has been allocated pro-rata by each respective asset class's Economic Leverage amount.

The Economic Leverage Ratio excludes any fully non-recourse financing arrangements.

The leverage ratio on our Agency RMBS includes any net receivables on TBA.

The Economic Leverage Ratio excludes any fully non-recourse financing arrangements and includes any net receivables or payables on TBA.

The leverage ratio on our GAAP Investment Portfolio represents GAAP leverage.

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Our equity allocation method is a non-GAAP methodology and may not be comparable to the similarly titled measure or concepts of other companies, who may use different calculations and allocation methodologies.

The following table presents a summary of the allocated equity of our investment portfolio as of March 31, 2021 and December 31, 2020 ($ in thousands):

The following table presents a summary of the allocated equity of our investment portfolio as of June 30, 2021 and December 31, 2020 ($ in thousands):

Allocated Equity Percent of Equity

March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020

Agency RMBS $ 110,986 $ 80,854 24.4 % 19.7 %

June 30, 2021 December 31, 2020 June 30, 2021 December 31, 2020

Residential Investments $ 313,133 $ 229,183 67.2 % 56.0 %

Commercial Investments 53,269 99,668 11.4 % 24.3 %

Agency RMBS 99,475 80,854 21.4 % 19.7 %

Total $ 465,877 $ 409,705 100.0 % 100.0 %

The following table presents a reconciliation of our Investment Portfolio to our GAAP Investment Portfolio as of March 31, 2021 ($ in thousands):

The following table presents a reconciliation of our Investment Portfolio to our GAAP Investment Portfolio as of June 30, 2021 and December 31, 2020 ($ in thousands):

June 30, 2021 December 31, 2020

Instrument Current Face Amortized Cost Unrealized Mark-

Fair Value (1) Weighted Average

Average Yield

Weighted Average

Life (Years) (3)

30 Year Fixed Rate $ 906,892 $ 944,627 $ (29,204) $ 915,423 2.15 % 1.62 % 9.23

Excess MSR 552,192 4,734 (1,404) 3,330 N/A 4.13 % 6.17

Total Agency RMBS 1,459,084 949,361 (30,608) 918,753 2.15 % 1.63 % 8.07

to-Market Fair Value (1) Weighted Average

Coupon (2) Weighted

Average Yield Weighted Average

Life (Years) (3) Fair Value (1)

Credit Investments:

Residential Investments

Prime 6,816 2,187 390 2,577 3.50 % 14.20 % 10.86

Alt-A/Subprime 16,282 6,903 4,542 11,445 4.25 % 14.16 % 9.50

Credit Risk Transfer 420 420 7 427 5.61 % 5.61 % 7.91

Interest Only and Excess MSR 173,638 269 81 350 0.51 % 2.16 % 2.12

Re/Non-Performing Loans 566,760 460,086 20,809 480,895 3.45 % 7.03 % 6.42

Non-QM Loans (4) $ 621,095 $ 647,651 $ 7,501 $ 655,152 4.86 % 3.61 % 3.85 $ —

MATT Non-QM Loans (5) 1,082,974 75,316 2,367 77,683 0.68 % 14.49 % 0.82 153,200

Re/Non-Performing Loans 490,424 400,663 18,713 419,376 3.74 % 7.63 % 6.21 478,565

Land Related Financing 17,857 17,857 — 17,857 14.50 % 14.50 % 0.86 22,824

Total Residential Investments 2,144,561 845,982 30,776 876,758 2.75 % 7.38 % 2.94

Commercial Investments

Single-Asset/Single-Borrower 35,500 35,419 (5,981) 29,438 4.07 % 4.45 % 0.43

Freddie Mac K-Series 22,327 10,618 1,609 12,227 3.83 % 9.23 % 10.06

CMBS Interest Only (5) 685,961 4,009 164 4,173 0.10 % 7.02 % 4.00

Commercial Real Estate Loans (6) 68,220 67,883 (9,674) 58,209 2.52 % 3.10 % 2.77

Total Commercial Investments 812,008 117,929 (13,882) 104,047 0.52 % 4.36 % 3.91

Total Credit Investments 2,956,569 963,911 16,894 980,805 1.97 % 4.68 % 3.20

Investment Portfolio $ 4,415,653 $ 1,913,272 $ (13,714) $ 1,899,558 2.02 % 4.44 % 4.81

Investments in Debt and Equity of Affiliates $ 1,341,627 $ 206,574 $ 11,184 $ 217,758 1.79 % 13.09 % 1.35

GAAP Investment Portfolio $ 3,074,026 $ 1,706,698 $ (24,898) $ 1,681,800 2.09 % 3.31 % 6.32

(1) Refer to Note 2 to the "Notes of the Consolidated Financial Statements (unaudited)" for more detail on what is included in our "Investments in debt and equity of affiliates" line item on our consolidated balance sheets.

Our assets held through Investments in debt and equity of affiliates are included in the "Excess MSR," "Re/Non-Performing Loans," "MATT Non-QM Loans," and "Land Related Financing" line items above.

(2) Equity residuals, principal only securities and Excess MSRs with a zero coupon rate are excluded from this calculation.

(3) Weighted average life is based on projected life.

Typically, actual maturities are shorter than stated contractual maturities.

Maturities are affected by the contractual lives of the underlying mortgages, periodic payments of principal, and prepayments of principal.

(4) Prior to 2021, we acquired Non-QM Loans through our equity method investment in MATT.

This line item represents direct purchases of Non-QM Loans, which began in Q1 2021.

(5) Comprised of Freddie Mac K-Series interest-only bonds.

(6) Yield on Commercial Real Estate Loans includes any exit fees.

The following table presents a reconciliation of our Investment Portfolio to our GAAP Investment Portfolio as of December 31, 2020 ($ in thousands):

Instrument Current Face Amortized Cost Unrealized Mark-

Fair Value (1) Weighted Average

Average Yield

Weighted Average

Life (Years) (3)

30 Year Fixed Rate $ 494,307 $ 516,675 $ 1,677 $ 518,352 2.10 % 1.17 % 5.55

Excess MSR 642,377 4,986 (1,495) 3,491 N/A 3.80 % 6.08

Total Agency RMBS 1,136,684 521,661 182 521,843 2.10 % 1.19 % 5.85

Credit Investments:

Residential Investments

Prime 6,874 2,228 467 2,695 3.50 % 15.21 % 10.48 8,665

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RMBS — — — — — % — % — 3,100

Interest Only and Excess MSR 191,362 265 55 320 0.53 % 3.44 % 0.70

Re/Non-Performing Loans 582,329 470,440 8,125 478,565 3.62 % 6.49 % 6.17

MATT Non-QM Loans 1,271,998 156,109 (2,909) 153,200 1.08 % 4.95 % 1.29

Land Related Financing 22,824 22,824 — 22,824 14.59 % 14.59 % 0.84

Interest Only and Excess MSR 28,711 188 (100) 88 N/A 8.71 % 3.78 320

Total Residential Investments 2,247,935 1,143,903 28,948 1,172,851 3.23 % 5.96 % 2.90 691,478

Commercial Investments

Commercial Real Estate Loans (6) 69,809 69,472 (7,193) 62,279 2.69 % 3.77 % 2.29 125,508

Conduit — — — — — % — % — 3,295

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CMBS Interest Only (7) — — — — — % — % — 4,303

Commercial Real Estate Loans (5) 142,167 141,655 (16,147) 125,508 4.60 % 4.96 % 2.33

Total Commercial Investments 105,309 104,924 (11,031) 93,893 3.15 % 3.98 % 1.74 182,296

Total Credit Investments 2,353,244 1,248,827 17,917 1,266,744 3.22 % 4.13 % 2.85 873,774

30 Year Fixed Rate 677,514 701,843 (5,139) 696,704 2.26 % 1.73 % 7.81 518,352

Excess MSR 489,643 4,491 (1,627) 2,864 N/A 0.58 % 5.62 3,491

Total Agency RMBS 1,167,157 706,334 (6,766) 699,568 2.26 % 1.72 % 6.89 521,843

Investment Portfolio $ 3,520,401 $ 1,955,161 $ 11,151 $ 1,966,312 2.96 % 4.36 % 4.19 $ 1,395,617

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Our assets held through Investments in debt and equity of affiliates are included in the "Excess MSR," "Re/Non-Performing Loans," "MATT Non-QM Loans," and "Land Related Financing" line items above.

Our assets held through Investments in debt and equity of affiliates are included in the "MATT Non-QM Loans," "Re/Non-Performing Loans," "Land Related Financing," and "Excess MSR" line items above.

(2) Equity residuals, principal only securities and Excess MSRs with a zero coupon rate are excluded from this calculation.

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Maturities are affected by the contractual lives of the underlying mortgages, periodic payments of principal, and prepayments of principal.

(4) Comprised of Freddie Mac K-Series interest-only bonds.

(4) Prior to 2021, we acquired Non-QM Loans through our equity method investment in MATT.

This line item represents direct purchases of Non-QM Loans, which began in Q1 2021.

(5) As of June 30, 2021, this line item primarily includes retained tranches from securitizations.

(6) Yield on Commercial Real Estate Loans includes any exit fees.

The following table presents the fair value ($ in thousands) and the Constant Prepayment Rate ("CPR") experienced on our GAAP Agency RMBS portfolio for the periods presented.

Fair Value CPR (1)(2)

Agency RMBS March 31, 2021 December 31, 2020 March 31, 2021 December 31, 2020

30 Year Fixed Rate $ 915,423 $ 518,352 3.3 % 2.7 %

(1) Represents the weighted average monthly CPRs published during the period for our in-place portfolio.

(7) Comprised of Freddie Mac K-Series interest-only bonds.

Credit Investments

The following table presents the fair value of the securities and loans in our credit portfolio, and a reconciliation to our GAAP credit portfolio (in thousands):

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Residential loans (1) $ 1,061,732 $ 563,263

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The following tables present certain information regarding credit quality for certain categories within our Residential loan portfolio ($ in thousands):

March 31, 2021 Weighted Average (1)(2) Aging by Unpaid Principal Balance (1)(2)

Unpaid Principal Balance Fair Value Current LTV Ratio Current FICO (3) Current 30-59 Days 60-89 Days 90+ Days

Re/Non-Performing Loans (4) $ 493,197 $ 438,783 79.06 % 631 $ 311,279 $ 37,526 $ 13,642 $ 112,242

June 30, 2021 December 31, 2020

Weighted Average (1)(2) Aging by Unpaid Principal Balance (1)(2)

Unpaid Principal Balance Fair Value Current LTV Ratio Current FICO (3) Current 30-59 Days 60-89 Days 90+ Days Fair Value

Non-QM Loans $ 621,095 $ 655,152 68.60 % 734 $ 612,436 $ 8,659 $ — $ — $ —

MATT Non-QM Loans 12,005 12,327 58.36 % 690 2,980 874 1,338 6,813 100,264

Land Related Financing 22,718 22,718 N/A N/A N/A N/A N/A N/A

Total Residential loans $ 804,110 $ 764,969 74.22 % 669 $ 582,618 $ 41,571 $ 14,848 $ 123,847

Investments in Debt and Equity of Affiliates 118,284 122,010 61.27 % 713 75,536 4,360 1,387 14,283

Total GAAP Residential Loans $ 685,826 $ 642,959 76.10 % 663 $ 507,082 $ 37,211 $ 13,461 $ 109,564

(1) Weighted average and aging data excludes residual positions where we consolidate a securitization and the positions are recorded on our balance sheet as Re/Non-Performing Loans.

There may be limited data available regarding the underlying collateral of the residual positions.

(2) Weighted average and aging data excludes Land Related Financing.

(3) Weighted average current FICO excludes borrowers where FICO scores were not available.

(4) In our Re/Non-Performing Loan portfolio, 30% of the population has requested COVID-19-related assistance as of March 31, 2021;

approximately 59% of the population requesting assistance is being reported as contractually current as of period end as this population no longer owes any past due payments.

(5) In our Non-QM Loan portfolio, 11% of the population has requested COVID-19-related assistance as of March 31, 2021;

the entire population requesting assistance is being reported as contractually current as of period end as this population no longer owes any past due payments.

(6) MATT Non-QM Loans includes Non-QM Loans not held in securitized form.

In our MATT Non-QM Loan portfolio, 53% of the population has requested COVID-19-related assistance as of March 31, 2021;

approximately 75% of the population requesting assistance is being reported as contractually current as of period end as this population no longer owes any past due payments.

December 31, 2020 Weighted Average (1)(2) Aging by Unpaid Principal Balance (1)(2)

Unpaid Principal Balance Fair Value Current LTV Ratio Current FICO (3) Current 30-59 Days 60-89 Days 90+ Days

Re/Non-Performing Loans 418,829 376,396 80.41 % 634 269,914 36,398 11,993 92,403 440,175

MATT Non-QM Loans (5) 98,204 100,264 59.57 % 707 73,285 4,856 651 19,412

Land Related Financing 17,857 17,857 N/A N/A N/A N/A N/A N/A 22,824

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(3) Weighted average current FICO excludes borrowers where FICO scores were not available.

(4) In our Re/Non-Performing Loan portfolio, 28% of the population has requested COVID-19-related assistance as of December 31, 2020;

approximately 48% of the population requesting assistance is being reported as contractually current as of period end as this population no longer owes any past due payments.

(5) MATT Non-QM Loans includes Non-QM Loans not held in securitized form.

In our MATT Non-QM Loan portfolio, 34% of the population has requested COVID-19-related assistance as of December 31, 2020;

approximately 67% of the population requesting assistance is being reported as contractually current as of period end as this population no longer owes any past due payments.

See Note 3 to the "Notes to Consolidated Financial Statements (unaudited)" for a breakout of geographic concentration of credit risk within loans we include in the "Residential mortgage loans, at fair value" line item on our consolidated balance sheets.

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Credit securities

The following table presents the fair value of our credit securities portfolio by credit rating as of March 31, 2021 and December 31, 2020 (in thousands):

Credit Rating - Credit Securities (1) March 31, 2021 (2)(3) December 31, 2020 (2)(3)

The following table presents the fair value of our credit securities portfolio by credit rating as of June 30, 2021 and December 31, 2020 (in thousands):

Credit Rating - Credit Securities (1) June 30, 2021 (2)(3) December 31, 2020 (2)(3)

AAA $ — $ 630

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(2) Certain Re/Non-Performing Loans held in securitized form are presented net of non-recourse securitized debt.

(3) As of March 31, 2021 and December 31, 2020, includes $0.1 million of credit Excess MSRs.

The following tables present the geographic concentration of the underlying collateral for our credit securities portfolio ($ in thousands).

March 31, 2021

Non-Agency RMBS CMBS

(3) As of June 30, 2021 and December 31, 2020, includes $0.1 million of credit Excess MSRs.

The following tables present the geographic concentration of the underlying collateral for our Non-Agency RMBS portfolio ($ in thousands).

June 30, 2021 December 31, 2020

State Fair Value (1) Percentage (1) State Fair Value (2) Percentage (2)

California $ 37,317 33.4 % Texas $ 5,588 12.2 %

New York 18,347 16.4 % California 4,774 10.4 %

California $ 40,538 32.8 % California $ 40,593 32.5 %

New York 19,544 17.9 % New York 17,742 14.2 %

Florida 8,971 8.5 % Florida 10,982 8.8 %

New Jersey 3,839 3.4 % New Jersey 2,566 5.6 %

Maryland 3,489 3.1 % Missouri 2,473 5.4 %

New Jersey 3,438 3.3 % Texas 4,216 3.4 %

Maryland 3,310 3.3 % New Jersey 4,028 3.2 %

Other 35,318 34.2 % Other 50,654 37.9 %

Total $ 111,119 100.0 % Total $ 128,215 100.0 %

(1) Non-Agency RMBS fair value includes $0.1 million of credit Excess MSRs where there was no data regarding the underlying collateral.

(1) As of June 30, 2021, Non-Agency RMBS fair value includes $0.1 million of credit Excess MSRs where there was no data regarding the underlying collateral.

These positions were excluded from the percent calculation.

December 31, 2020

Non-Agency RMBS CMBS

State Fair Value (1) Percentage (1) State Fair Value Percentage

California $ 40,593 32.5 % Texas $ 6,454 11.4 %

New York 17,742 14.2 % New York 6,264 11.0 %

Florida 10,982 8.8 % California 4,801 8.5 %

Texas 4,216 3.4 % Florida 4,014 7.1 %

New Jersey 4,028 3.2 % Missouri 2,753 4.8 %

Other 50,654 37.9 % Other 32,502 57.2 %

Total $ 128,215 100.0 % Total $ 56,788 100.0 %

(1) Non-Agency RMBS fair value includes $3.2 million of investments where there was no data regarding the underlying collateral, including $0.1 million of credit Excess MSRs.

(2) As of December 31, 2020, Non-Agency RMBS fair value includes $3.2 million of investments where there was no data regarding the underlying collateral, including $0.1 million of credit Excess MSRs.

These positions were excluded from the percent calculation.

The following tables present certain information regarding credit quality for certain categories within our Non-Agency RMBS and CMBS portfolios ($ in thousands):

March 31, 2021

Category Fair Value Weighted Average 60+ Days Delinquent Weighted Average

Loan Age (Months) Weighted Average Credit Enhancement

Non-Agency RMBS (1)

Prime $ 2,577 12.0 % 185.0 10.3 %

Alt-A/Subprime 11,445 5.9 % 164.0 — %

Credit Risk Transfer 427 0.2 % 30.0 0.9 %

Single-Asset/Single-Borrower $ 29,438 — % 25.1 5.2 %

Freddie Mac K Series CMBS 12,227 0.1 % 28.9 — %

December 31, 2020

Category Fair Value Weighted Average 60+ Days Delinquent Weighted Average

Loan Age (Months) Weighted Average Credit Enhancement

Non-Agency RMBS (1)

Prime $ 8,665 4.0 % 26.4 2.9 %

Alt-A/Subprime 11,496 9.5 % 95.0 0.1 %

Credit Risk Transfer 13,308 6.8 % 5.3 0.4 %

RMBS 3,100 2.4 % 41.4 1.3 %

Conduit $ 3,295 10.6 % 81.0 8.7 %

Single-Asset/Single-Borrower 40,190 — % 29.2 6.1 %

Freddie Mac K Series CMBS 9,000 0.2 % 25.9 — %

The following table presents the fair value ($ in thousands) and the Constant Prepayment Rate ("CPR") experienced on our GAAP Agency RMBS portfolio for the periods presented.

Fair Value CPR (1)(2)

Agency RMBS June 30, 2021 December 31, 2020 June 30, 2021 December 31, 2020

30 Year Fixed Rate $ 696,704 $ 518,352 4.4 % 2.7 %

(1) Represents the weighted average monthly CPRs published during the period for our in-place portfolio.

Investments in debt and equity of affiliates

The below table details our investments in debt and equity of affiliates as of March 31, 2021 and December 31, 2020 (in thousands):

March 31, 2021 December 31, 2020

The below table details our investments in debt and equity of affiliates as of June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021 December 31, 2020

Assets Liabilities Equity Assets Liabilities Equity

Excess MSR $ 399 $ — $ 399 $ 417 $ — $ 417

Total Agency RMBS 399 — 399 417 — 417

Re/Non-Performing Loans (1) 45,602 (13,236) 32,366 41,523 (5,588) 35,935

MATT Non-QM Loans (2) $ 77,683 $ (48,813) $ 28,870 $ 153,200 $ (111,135) $ 42,065

Re/Non-Performing Loans (1) 44,101 (11,351) 32,750 41,523 (5,588) 35,935

Land Related Financing 17,857 — 17,857 22,824 — 22,824

Total Residential Investments 139,641 (60,164) 79,477 217,547 (116,723) 100,824

Total Credit Investments 217,359 (113,998) 103,361 217,547 (116,723) 100,824

Excess MSR 344 — 344 417 — 417

Total Investments excluding AG Arc 139,985 (60,164) 79,821 217,964 (116,723) 101,241

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(1) Certain Re/Non-Performing Loans held in securitized form are presented net of non-recourse securitized debt.

(2) As of March 31, 2021 and December 31, 2020, Non-QM Loans excluded loans with an unpaid principal balance of $14.2 million and $17.3 million, respectively, whereby an affiliate of MATT has the right, but not the obligation, to repurchase loans from a trust that are 90 days or more delinquent at its discretion.

(2) As of June 30, 2021 and December 31, 2020, Non-QM Loans excluded loans with an unpaid principal balance of $11.2 million and $17.3 million, respectively, whereby an affiliate of MATT has the right, but not the obligation, to repurchase loans from a trust that are 90 days or more delinquent at its discretion.

These loans, which are eligible to be repurchased, would be recorded on the balance sheet of MATT, an unconsolidated equity method investee of the Company, with a corresponding and offsetting liability.

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The amount borrowed generally is equal to the fair value of the assets pledged less an agreed-upon discount, referred to as a "haircut." The size of the haircut reflects the perceived risk associated with the pledged asset.

Haircuts may change as our financing arrangements mature or roll

and are sensitive to governmental regulations.

Haircuts may change as our financing arrangements mature or roll and are sensitive to governmental regulations.

We experienced fluctuations in our haircuts that caused us to alter our business and financing strategies for the year ended December 31, 2020.

As previously described, this resulted in us raising liquidity and reducing the risk within our portfolio.

We had outstanding financing arrangements with five counterparties as of March 31, 2021 and December 31, 2020.

We had outstanding financing arrangements with 5 counterparties as of June 30, 2021 and December 31, 2020.

Our repurchase agreements are accounted for as financings and require the repurchase of the transferred securities or loans or repayment of the advance at the end of each agreement’s term, typically 30 to 90 days.

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Although specific to each financing arrangement, typical supplemental terms include requirements of minimum equity and liquidity, leverage ratios, and performance triggers.

In addition, some of the financing arrangements contain cross default features, whereby default under an agreement with one lender simultaneously causes default under agreements with other lenders.

In addition, some of the

financing arrangements contain cross default features, whereby default under an agreement with one lender simultaneously causes default under agreements with other lenders.

To the extent that we fail to comply with the covenants contained in these financing arrangements or is otherwise found to be in default under the terms of such agreements, the counterparty has the right to accelerate amounts due under the associated agreement.

Financings pursuant to repurchase agreements and revolving facilities are generally recourse to us.

As of March 31, 2021, we are in compliance with all of our financial covenants.

As of June 30, 2021, we are in compliance with all of our financial covenants.

In response to declines in fair value of pledged assets due to changes in market conditions, lenders typically require us to post additional assets as collateral, pay down borrowings or establish cash margin accounts with the counterparties in order to re-establish the agreed-upon collateral requirements, referred to as margin calls.

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Forbearance and Reinstatement Agreements

On March 20, 2020, we notified our financing counterparties that we did not expect to be in a position to fund the anticipated volume of future margin calls under our financing arrangements in the near term as a result of market disruptions created by the COVID-19 pandemic.

Subsequent to March 23, 2020, we received notifications of alleged events of default and deficiency notices from several of our financing counterparties.

Subject to the terms of the applicable financing arrangement, if we had failed to deliver additional collateral or otherwise meet margin calls when due, the financing counterparties may have been able to demand immediate payment by us of the aggregate outstanding financing obligations owed to such counterparties, and if such financing obligations were not paid, may have been permitted to sell the financed assets and apply the proceeds to our financing obligations and/or take ownership of the assets securing our financing obligations.

During this period of market upheaval, we engaged in discussions with our financing counterparties with regard to entering into forbearance agreements pursuant to which each counterparty would agree to forbear from exercising its rights and remedies with respect to an event of default under the applicable financing arrangement for an agreed-upon period.

On April 10, 2020, we entered into a forbearance agreement for an initial 15 day period, on April 27, 2020, a second forbearance agreement for an extended period ending on June 1, 2020, and a third forbearance agreement on June 1, 2020 for an additional period ending June 15, 2020 (collectively, the "Forbearance Agreement") with certain of our financing counterparties (the "Participating Counterparties").

Pursuant to the terms of the Forbearance Agreement, the Participating Counterparties agreed to forbear from exercising any of their rights and remedies in respect of events of default and any and all other defaults under the applicable financing arrangement with us for the duration of the forbearance period specified in the Forbearance Agreement (the "Forbearance Period").

On June 10, 2020, we and the Participating Counterparties entered into a Reinstatement Agreement, pursuant to which the parties agreed to terminate the Forbearance Agreement and each Participating Counterparty agreed to permanently waive all existing and prior events of default under its financing agreements with us (each, a "Bilateral Agreement" and to reinstate each Bilateral Agreement, as it may be amended by agreement between the Participating Counterparty and us.

As a result of the termination of the Forbearance Agreement and entry into the Reinstatement Agreement, default interest on our outstanding borrowings under each Bilateral Agreements has ceased to accrue as of June 10, 2020 and the interest rate was the non-default rate of interest or pricing rate, as set forth in the applicable Bilateral Agreements, all cash margin has been applied to outstanding balances owed by us, and the DTC repo tracker coding for each Bilateral Agreement has been reinstated, thereby allowing principal and interest payments on the underlying collateral to flow to and be used by us, just as it was before the prior forbearance agreements were put in place.

In addition, pursuant to the terms of the Reinstatement Agreement, the security interests granted to Participating Counterparties as additional collateral under the various forbearance agreements have been terminated and released.

In connection with the market disruption created by the COVID-19 pandemic, in March 2020, we received notifications of alleged events of default and deficiency notices from several of our financing counterparties.

We engaged in discussions with our financing counterparties and, as a result, entered into a series of forbearance agreements (collectively, the "Forbearance Agreement") with certain of our financing counterparties (the "Participating Counterparties") pursuant to which each Participating Counterparty agreed to forbear from exercising its rights and remedies with respect to events of default and any and all other defaults under the applicable financing arrangement (each, a "Bilateral Agreement") for the period ending June 15, 2020.

On June 10, 2020, we and the Participating Counterparties entered into a reinstatement agreement (the "Reinstatement Agreement"), pursuant to which the Forbearance Agreement was terminated and each Participating Counterparty permanently waived all existing and prior events of default under the applicable Bilateral Agreements.

Pursuant to the Reinstatement Agreement, the Bilateral Agreements were reinstated with certain amendments to reflect current market terms (i.e., increased haircuts and higher coupons), updated financial covenants, and various reporting requirements from us to the Participating Counterparties, releases, certain netting obligations and cross-default provisions.

As a result of the Reinstatement Agreement, default interest on our outstanding borrowings under the Bilateral Agreements ceased to accrue as of June 10, 2020, all cash margin was applied to outstanding balances owed by us, and principal and interest payments on the underlying collateral were permitted to flow to and be used by us, just as it was prior to the Forbearance Agreements.

In addition, pursuant to the terms of the Reinstatement Agreement, the security interests granted to Participating Counterparties as additional collateral under the Forbearance Agreement have been terminated and released.

We also agreed to pay the reasonable fees and out-of-pocket expenses of counsel and other professional advisors for the Participating Counterparties and the collateral agent.

Additionally, the Reinstatement Agreement provided a set of financial covenants that override and replace the financial covenants in each Bilateral Agreement and sets forth various reporting requirements from us to the Participating Counterparties, releases, certain netting obligations and cross-default provisions.

In connection with the negotiation and execution of the Reinstatement Agreement, we entered into certain amendments to the Bilateral Agreements with certain of the Participating Counterparties to reflect current market terms.

In general, the amendments reflect increased haircuts and higher coupons.

On June 10, 2020, we also entered a separate reinstatement agreement with JPMorgan Chase Bank (the "JPM Reinstatement Agreement") on substantially the same terms as those set forth in the Reinstatement Agreement.

The Reinstatement Agreement and the JPM Reinstatement Agreement collectively cover all of our existing financing arrangements as of the date of this report.

Concurrently, on June 10, 2020, We entered a separate reinstatement agreement with one of our financing counterparties on substantially the same terms as those set forth in the Reinstatement Agreement.

Refer to Note 12 in the "Notes to Consolidated Financial Statements (unaudited)" for more information on deficiencies that are now settled.

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Recourse financing includes the secured debt from our Manager, as further described in the "Contractual obligations–Secured debt" section below, and other recourse financing.

The below table provides detail on the breakout between recourse and non-recourse financing as of March 31, 2021 and December 31, 2020 (in thousands):

March 31, 2021

The below table provides detail on the breakout between recourse and non-recourse financing as of June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021

December 31, 2020

6 unchanged sentences

GAAP Basis $ 1,690,001 $ 929,599

(1) As of March 31, 2021, total financing includes $1.2 billion of financing arrangements, collateralized by various asset types in our investment portfolio and $344.4 million of securitized debt, collateralized by Re/Non-Performing Loans.

(1) As of June 30, 2021, total financing includes $1.3 billion of financing arrangements, collateralized by various asset types in our investment portfolio, and $482.5 million of securitized debt, collateralized by Non-QM and Re/Non-Performing Loans.

As of December 31, 2020, total financing includes $680.8 million of financing arrangements, collateralized by various asset types in our investment portfolio;

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The amendment serves to convert the existing financing to a mark-to-market facility with respect to margin calls that is recourse to us and the private funds managed by Angelo Gordon that invest in MATT up to our and each funds' allocation of the $50.0 million commitment to MATH, which is further described in the "Contractual Obligations–MATT Financing Arrangement Restructuring" section below and Note 12 to the "Notes of the Consolidated Financial Statements (unaudited)".

The following table presents a summary of the financing arrangements on our investment portfolio as of March 31, 2021 and December 31, 2020 ($ in thousands).

March 31, 2021

December 31, 2020

Weighted Average Collateral (1)(2)(3)

Carrying Value Stated Maturity Funding Cost Life (Years) Amortized Cost Basis Fair Value Carrying Value

Repurchase Agreements

Repurchase Agreements on Agency RMBS

30 Year Fixed Rate $ 874,612 Apr 2021 0.14 % 0.04 $ 944,627 $ 915,423 $ 435,893

Repurchase Agreements on Credit Investments

Non-Agency RMBS (4) 46,249 Apr 2021 2.40 % 0.10 80,402 92,579 37,744

Residential Loans (5)(6)(7) 205,326 Jun 2021 - Jan 2022 2.65 % 0.74 253,098 257,844 25,590

251,575 2.60 % 0.62 333,500 350,423 63,334

CMBS (8) 18,081 Apr 2021 2.29 % 0.02 35,419 29,439 24,881

Total Repurchase Agreements 1,144,268 0.71 % 0.17 1,313,546 1,295,285 524,108

Revolving Facilities (9)

Commercial Real Estate Loans (10)(11) 25,950 Aug 2023 3.23 % 2.36 50,663 41,489 63,133

Residential Loans (5)(12)(13) 75,980 Jul 2021 - Jan 2022 2.84 % 0.82 97,252 98,555 93,528

Real Estate Owned — N/A — % — — — 9

Total Revolving Facilities 101,930 2.94 % 1.21 147,915 140,044 156,671

Non-GAAP Basis $ 1,246,198 0.90 % 0.25 $ 1,461,461 $ 1,435,329 $ 680,779

Investments in Debt and Equity of Affiliates $ 113,998 2.73 % 0.58 $ 167,554 $ 176,383 $ 116,732

GAAP Basis $ 1,132,200 0.71 % 0.22 $ 1,293,907 $ 1,258,946 $ 564,047

(1) We also had $6.1 million of cash pledged under repurchase agreements as of March 31, 2021, which included $44.2 thousand pledged under repurchase agreements held at Investments in Debt and Equity of Affiliates.

(2) Under the terms of our financing agreements, our financing counterparties may, in certain cases, sell or re-hypothecate the pledged collateral.

(3) Amounts pledged as collateral under Residential Loans include certain of our retained interests in securitizations.

Refer to Note 4 to the "Notes to Consolidated Financial Statements (unaudited)" for more information on the August 2019 VIE and September 2020 VIE.

(4) Includes repurchase agreements on Prime, Alt-A/Subprime, Credit Risk Transfer, Interest-Only and Excess MSR, Re/Non-Performing Loans, and Non-QM Loans held in securitized form.

(5) Includes financing on Re/Non-Performing Loans, and Non-QM Loans not held in securitized form.

(6) Our Residential Loan financing arrangements include a maximum uncommitted borrowing capacity of $250 million on a facility used to finance Non-QM Loans.

Subsequent to quarter end, we amended this financing arrangement to increase the maximum uncommitted borrowing capacity to $400 million.

(7) The funding cost includes deferred financing costs.

The stated rate on the Residential Loans repurchase agreements was 2.58% as of March 31, 2021.

(8) Includes repurchase agreements on Conduit, Single-Asset/Single-Borrower, Freddie Mac K-Series, and Interest-Only investments.

(9) All revolving facilities listed are interest only until maturity.

(10) The funding cost includes deferred financing costs.

The stated rate on the Commercial Real Estate Loans revolving facility was 2.19% as of March 31, 2021.

(11) The maximum uncommitted borrowing capacity on the Commercial Real Estate Loans revolving facility is $100 million.

(12) The funding cost includes deferred financing costs.

The stated rate on the Residential Loans revolving facilities was 2.73% as of March 31, 2021.

(13) The maximum uncommitted borrowing capacity on the Residential Loans revolving facility is $111.6 million.

See Note 6 to the "Notes to Consolidated Financial Statements (unaudited)" for a breakout of the "Financing arrangements" line item on our consolidated balance sheets.

Other financing transactions

In addition to our financing arrangements, we also finance our Re/Non-performing loans with securitized debt.

From time to time, we enter into securitization transactions of certain Re/Non-performing loans where special purpose entities ("SPEs") are created to facilitate the transactions.

In addition to our financing arrangements, we also finance our Re/Non-performing loans and certain Non-QM Loans with securitized debt.

From time to time, we enter into securitization transactions of certain Re/Non-performing loans and certain Non-QM Loans where special purpose entities ("SPEs") are created to facilitate the transactions.

These SPEs are considered variable interest entities ("VIEs"), which should be consolidated under ASC 810-10.

As of March 31, 2021 and December 31, 2020, we have recorded secured financing in connection with these VIEs of $344.4 million and $355.2 million, respectively, on the consolidated balance sheets in the "Securitized debt, at fair value" line item.

As of June 30, 2021 and December 31, 2020, we have recorded secured financing in connection with these VIEs of $482.5 million and $355.2 million, respectively, on the consolidated balance sheets in the "Securitized debt, at fair value" line item.

See Note 2 and Note 3 to the "Notes to Consolidated Financial Statements (unaudited)" for more detail on securitized debt and our consolidated VIEs.

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The following tables present a reconciliation of our Economic Leverage ratio back to GAAP ($ in thousands).

March 31, 2021 Leverage Stockholders’ Equity Leverage Ratio

June 30, 2021 Leverage Stockholders’ Equity Leverage Ratio

GAAP Leverage $ 1,590,715 $ 465,877 3.4x

1 unchanged sentence

Non-recourse financing arrangements (509,051)

Net TBA (receivable)/payable adjustment (134,239)

Economic Leverage $ 1,007,463 $ 465,877 2.2x

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See Note 7 in the "Notes to Consolidated Financial Statements (unaudited)" for more information.

Federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT ordinary taxable income, without regard to the deduction for dividends paid and excluding net capital gains and that it pay tax at regular corporate rates

to the extent that it annually distributes less than 100% of its net taxable income.

Before we pay any dividend, whether for U.S.

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Undistributed taxable income is based on current estimates and is not finalized until we file our annual tax return for that tax year, typically in October of the following year.

We did not have any undistributed taxable income as of March 31, 2021.

We did not have any undistributed taxable income as of June 30, 2021.

Refer to the "Results of operations" section above for more detail.

On March 27, 2020, we announced that our Board of Directors approved a suspension of our quarterly dividends on our Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock, beginning with the preferred dividend that would have been declared in May 2020, in order to conserve capital and improve its liquidity position during the market volatility due to the COVID-19 pandemic, as well as a suspension of the quarterly dividend on the common stock, beginning with the dividend that normally would have been declared in March 2020.

On March 27, 2020, we announced that our Board of Directors approved a suspension of our quarterly dividends on our Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock, beginning with the preferred dividend that would have been declared in May 2020, as well as a suspension of the quarterly dividend on the common stock, beginning with the dividend that normally would have been declared in March 2020, in order to conserve capital and improve its liquidity position during the market volatility due to the COVID-19 pandemic.

Under the terms of the Articles Supplementary governing our series of preferred stock, we cannot pay cash dividends with respect to our common stock if dividends on our preferred stock are in arrears.

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During the first quarter of 2021, we declared its preferred and common dividends in the ordinary course of business.

The following table details our common stock dividends declared during the three months ended March 31, 2021:

On July 12, 2021, we announced a one-for-three reverse stock split of our outstanding shares of common stock.

The reverse stock split was effected following the close of business on July 22, 2021.

All per share amounts and common shares outstanding for all periods presented have been adjusted on a retroactive basis to reflect the one-for-three reverse stock split.

The following table details our common stock dividends declared during the six months ended June 30, 2021:

Declaration Date Record Date Payment Date Cash Dividend Per Share

3/22/2021 4/1/2021 4/30/2021 $ 0.18

We did not declare any common stock dividends during the three months ended March 31, 2020.

The following tables detail our preferred stock dividends declared and paid during the three months ended March 31, 2021 and March 31, 2020:

6/15/2021 6/30/2021 7/30/2021 0.21

We did not declare any common stock dividends during the three months ended June 30, 2020.

The following tables detail our preferred stock dividends declared and paid during the six months ended June 30, 2021 and 2020:

2021 Cash Dividend Per Share

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2/16/2021 2/26/2021 3/17/2021 $ 0.51563 $ 0.50 $ 0.50

5/17/2021 5/28/2021 6/17/2021 0.51563 0.50 0.50

Total $ 1.03126 $ 1.00 $ 1.00

2020 Cash Dividend Per Share

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Our liquidity determines our ability to meet our cash obligations, including distributions to our stockholders, payment of our expenses, financing our investments and satisfying other general business needs.

Our principal sources of cash as of March 31, 2021 consisted of borrowings under financing arrangements, principal and

interest payments we receive on our investment portfolio, cash generated from our operating results, and proceeds from capital market transactions.

Our principal sources of cash as of June 30, 2021 consisted of borrowings under financing arrangements, principal and interest payments we receive on our investment portfolio, cash generated from our operating results, and proceeds from capital market transactions.

We typically use cash to repay principal and interest on our financing arrangements, to purchase real estate securities, loans and other real estate related assets, to make dividend payments on our capital stock, and to fund our operations.

At March 31, 2021, we had $51.6 million of liquidity, which consisted entirely of cash.

At June 30, 2021, we had $70.8 million of liquidity, which consisted of $64.0 million of cash and $6.8 million of unencumbered assets available to support our liquidity needs.

Refer to the "Contractual obligations" section of this Item 2 for additional obligations that could impact our liquidity.

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In seeking to manage effectively the margin requirements established by our lenders, we maintain a position of cash and, when owned, unpledged Agency RMBS.

We refer to this position as our "liquidity." The level of liquidity we have available to meet margin calls is directly affected by our leverage levels, our haircuts and the price changes on our securities.

to this position as our "liquidity." The level of liquidity we have available to meet margin calls is directly affected by our leverage levels, our haircuts and the price changes on our securities.

Typically, if interest rates increase or if credit spreads widen, then the prices of our collateral (and our unpledged assets that constitute our liquidity) will decline, we will experience margin calls, and we will need to use our liquidity to meet the margin calls.

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Refer to the "Financing activities–Forbearance and Reinstatement Agreements" section above for information on the impact of COVID-19 on margin calls in 2020.

The below details changes to our cash, cash equivalents, and restricted cash for the three months ended March 31, 2021 and March 31, 2020 (in thousands).

Three Months Ended

March 31, 2021 March 31, 2020 Change

The below details changes to our cash, cash equivalents, and restricted cash for the six months ended June 30, 2021 and 2020 (in thousands).

Six Months Ended

June 30, 2021 June 30, 2020 Change

Cash and cash equivalents and restricted cash, Beginning of Period $ 62,318 $ 125,369 $ (63,051)

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Cash and cash equivalents and restricted cash, End of Period $ 87,715 $ 69,234 $ 18,481

(1) Cash provided by operating activities is primarily attributable to net interest income less operating expenses for the three months ended March 31, 2021 and 2020, respectively.

(2) Cash used in investing activities for the three months ended March 31, 2021 was primarily attributable to purchases of investments less sales of investments and principal repayments of investments.

Cash provided by investing activities for the three months ended March 31, 2020 was primarily attributable to sales of investments and principal repayments of investments, offset by purchases of investments.

(1) Cash provided by operating activities is primarily attributable to net interest income less operating expenses for the six months ended June 30, 2021 and 2020, respectively.

(2) Cash used in investing activities for the six months ended June 30, 2021 was primarily attributable to purchases of investments less sales of investments and principal repayments of investments.

Cash provided by investing activities for the six months ended June 30, 2020 was primarily attributable to sales of investments and principal repayments of investments, offset by purchases of investments.

The difference period over period is primarily due to significant sales in 2020 as a result of the global COVID-19 pandemic.

(3) Cash provided by financing activities for the three months ended March 31, 2021 was primarily attributable to borrowings under financing arrangements offset by repayments of financing arrangements and dividend payments.

Cash used in financing activities for the three months ended March 31, 2020 was primarily attributable to repayments of financing arrangements offset by borrowings under financing arrangements.

(3) Cash provided by financing activities for the six months ended June 30, 2021 was primarily attributable to borrowings under financing arrangements offset by repayments of financing arrangements and dividend payments.

Cash used in financing activities for the six months ended June 30, 2020 was primarily attributable to repayments of financing arrangements offset by borrowings under financing arrangements.

The difference period over period is primarily due to a reduction in financing arrangements as a result of significant sales in 2020 due to the global COVID-19 pandemic.

Equity distribution agreements

On May 5, 2017, we entered into an equity distribution agreement with each of Credit Suisse Securities (USA) LLC and JMP Securities LLC (collectively, the "Sales Agents"), which we refer to as the "Equity Distribution Agreements," pursuant to which we may sell up to $100.0 million aggregate offering price of shares of our common stock from time to time through the Sales Agents, under the Securities Act of 1933.

The Equity Distribution Agreements were amended on May 2, 2018 in conjunction with the filing of our shelf registration statement registering up to $750.0 million of our securities, including capital stock (the "2018 Registration Statement").

For the three months ended March 31, 2021, we issued 2.2 million shares of common stock under the Equity Distribution Agreements for net proceeds of approximately $10.0 million.

For the three months ended March 31, 2020, we did not issue any shares of common stock under the Equity Distribution Agreements.

On May 5, 2017, we entered into an equity distribution agreement with each of Credit Suisse Securities (USA) LLC and JMP

Securities LLC (collectively, the "Sales Agents"), which we refer to as the "Equity Distribution Agreements," pursuant to which we may sell up to $100.0 million aggregate offering price of shares of our common stock from time to time through the Sales Agents, under the Securities Act of 1933.

For the three months ended June 30, 2021, we issued 0.2 million shares of common stock under the Equity Distribution Agreements for net proceeds of approximately $3.1 million.

For the six months ended June 30, 2021, we issued 1.0 million shares of common stock under the Equity Distribution Agreements for net proceeds of approximately $13.1 million.

For the three and six months ended June 30, 2020, we issued 0.3 million shares of common stock under the Equity Distribution Agreements for net proceeds of approximately $3.5 million.

Since inception of the program, we have issued approximately 2.2 million shares of common stock under the Equity Distribution Agreements for gross proceeds of $48.3 million.

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After the transaction closed, the Series A Preferred Stock and Series B Preferred Stock exchanged pursuant to the exchange agreement were reclassified as authorized but unissued shares of preferred stock without designation as to class or series.

As of March 31, 2021, we had outstanding 1,663,193 shares of Series A Preferred Stock, 3,814,119 shares of Series B Preferred Stock, and 3,883,178 shares of Series C Preferred Stock outstanding.

On June 14, 2021, we agreed to issue an aggregate of 429,802 shares of our common stock in exchange for 86,478 shares of Series B Preferred Stock and 154,383 shares of Series C Preferred Stock, pursuant to privately negotiated exchange agreements with certain existing holders of the preferred stock.

After the transaction closed, the Series B Preferred Stock and Series C Preferred Stock exchanged pursuant to the exchange agreements were reclassified as authorized but unissued shares of preferred stock without designation as to class or series.

As of June 30, 2021, we had outstanding 1,663,193 shares of Series A Preferred Stock, 3,727,641 shares of Series B Preferred Stock, and 3,728,795 shares of Series C Preferred Stock outstanding.

Common stock issuance to the Manager

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Stockholders’ Equity, for purposes of calculating the management fee, could be greater or less than the amount of stockholders’ equity shown on our financial statements.

For the three months ended March 31, 2021 and 2020, we incurred management fees of approximately $1.7 million and $2.1 million, respectively.

As of March 31, 2021 and December 31, 2020, we have recorded management fees payable of $1.7 million.

For the three and six months ended June 30, 2021, we

incurred management fees of approximately $1.7 million and $3.3 million, respectively.

For the three and six months ended June 30, 2020, we incurred management fees of approximately $1.7 million and $3.8 million, respectively.

As of June 30, 2021 and December 31, 2020, we have recorded management fees payable of $1.7 million and $1.7 million, respectively.

Our Manager uses the proceeds from its management fee in part to pay compensation to its officers and personnel, who, notwithstanding that certain of them also are our officers, receive no compensation directly from us.

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however, the reimbursement is subject to an annual budget process which combines guidelines from the Management Agreement with oversight by our Board of Directors and discussions with our Manager.

Of the $4.0 million and $0.9 million of Other operating expenses for the three months ended March 31, 2021 and 2020, respectively, we have incurred $1.5 million and $2.0 million, respectively, representing a reimbursement of expenses.

As of March 31, 2021 and December 31, 2020, we recorded a reimbursement payable to our Manager of $1.5 million and $1.8 million, respectively.

Of the $4.9 million and $8.8 million of Other operating expenses for the three and six months ended June 30, 2021, respectively, we have incurred $1.1 million and $2.7 million, respectively, representing a reimbursement of expenses.

Of the $4.6 million and $5.5 million of Other operating expenses for the three and six months ended June 30, 2020, respectively, we incurred $1.9 million and $3.9 million, respectively, representing a reimbursement of expenses.

As of June 30, 2021 and December 31, 2020, we recorded a reimbursement payable to the Manager of $1.5 million and $1.8 million, respectively.

For the year ended December 31, 2021, the Manager agreed to waive its right to receive expense reimbursements of $0.8 million.

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The maximum number of shares of common stock granted during a single fiscal year to any non-employee director, taken together with any cash fees paid to such non-employee director during any fiscal year, shall not exceed $300,000 in total value (calculating the value of any such awards based on the grant date fair value).

As of March 31, 2021, 1,857,350 shares of common stock were available to be awarded under the Equity Incentive Plan.

As of June 30, 2021, 612,676 shares of common stock were available to be awarded under the Equity Incentive Plan.

Since our IPO, we have granted an aggregate of 35,264 and 53,990 shares of restricted common stock to our independent directors under our equity incentive plans, dated July 6, 2011 (the "2011 Equity Incentive Plans") and our 2020 Equity Incentive Plan, respectively.

As of March 31, 2021, all shares of restricted common stock granted to our independent directors have vested.

As of June 30, 2021, all shares of restricted common stock granted to our independent directors have vested.

Following approval of our stockholders at our 2021 annual meeting of stockholders, the AG Mortgage Investment Trust, Inc.

2021 Manager Equity Incentive Plan (the "2021 Manager Plan") became effective on April 7, 2021 and provides for a maximum of 573,425 shares of common stock to be issued to our Manager.

As of June 30, 2021, there were no shares or awards issued under the 2021 Manager Plan.

Further, since our IPO, we have issued 13,416 shares of restricted common stock and 40,000 restricted stock units to our Manager under our 2011 Equity Incentive Plans.

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Unfunded commitments

See Note 12 of the "Notes to Consolidated Financial Statements (unaudited)" for detail on our commitments as of March 31, 2021.

See Note 12 of the "Notes to Consolidated Financial Statements (unaudited)" for detail on our commitments as of June 30, 2021.

MATT Financing Arrangement Restructuring

See Note 10 and Note 12 of the "Notes to Consolidated Financial Statements (unaudited)" for detail on the MATT Restructured Financing Arrangement and our commitments as of March 31, 2021.

See Note 10 and Note 12 of the "Notes to Consolidated Financial Statements (unaudited)" for detail on the MATT Restructured Financing Arrangement and our commitments as of June 30, 2021.

Off-balance sheet arrangements

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Investments in debt and equity of affiliates are accounted for using the equity method of accounting.

MATT performs securitizations of Non-QM Loans and retains tranches from these securitizations which are included in the MATT Non-QM Loans line item of our investment portfolio.

See Note 2 to the "Notes to Consolidated Financial Statements (unaudited)" for a discussion of investments in debt and equity of affiliates.

In addition to our investments in debt and equity of affiliates described above, we also have commitments outstanding on certain loans.

For additional information on our commitments as of March 31, 2021, refer to Note 12 of the "Notes to Consolidated Financial Statements (unaudited)." Exclusive of our investments in debt and equity of affiliates described above, we do not expect these commitments, taken as a whole, to be significant to, or to have a material impact on, our overall liquidity or capital resources or our operations.

For additional information on our commitments as of June 30, 2021, refer to Note 12 of the "Notes to Consolidated Financial Statements (unaudited)." Exclusive of our investments in debt and equity of affiliates described above, we do not expect these commitments, taken as a whole, to be significant to, or to have a material impact on, our overall liquidity or capital resources or our operations.

Critical accounting policies

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We believe that the estimates, judgments and assumptions utilized in the preparation of our consolidated financial statements are prudent and reasonable.

Although our estimates contemplate

conditions as of March 31, 2021 and how we expect them to change in the future, it is reasonably possible that actual conditions could be different than anticipated in arriving at those estimates, which could materially affect reported amounts of assets, liabilities and accumulated other comprehensive income at the date of the consolidated financial statements and the reported amounts of income, expenses and other comprehensive income during the periods presented.

Although our estimates contemplate conditions as of June 30, 2021 and how we expect them to change in the future, it is reasonably possible that actual conditions could be different than anticipated in arriving at those estimates, which could materially affect reported amounts of assets, liabilities and accumulated other comprehensive income at the date of the consolidated financial statements and the reported amounts of income, expenses and other comprehensive income during the periods presented.

Our consolidated financial statements are prepared in accordance with GAAP, which requires the use of estimates that involve the exercise of judgment and the use of assumptions as to future uncertainties.

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government securities, and securities issued by majority-owned subsidiaries that (i) are not investment companies and (ii) are not relying on the exceptions from the definition of investment company provided by Section 3(c)(1) or 3(c)(7) of the Investment Company Act (the so called "private investment company" exemptions).

As of December 31, 2020 and for the three months ended March 31, 2021, we determined that we maintained compliance with the 40% test requirements.

As of December 31, 2020 and for the three months ended June 30, 2021, we determined that we maintained compliance with the 40% test requirements.

If we failed to comply with the 40% Test or another exemption under the Investment Company Act and became regulated as an investment company, our ability to, among other things, use leverage would be substantially reduced and, as a result, we would be unable to conduct our business as described in this Report.

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The staff of the Securities and Exchange Commission, or the SEC, generally requires an entity relying on Section 3(c)(5)(C) to invest at least 55% of its portfolio in "qualifying assets" and at least another 25% in additional qualifying assets or in "real estate-related" assets (with no more than 20% comprised of miscellaneous assets).

As of December 31, 2020 and for the three months ended March 31, 2021, we determined that our subsidiaries maintained compliance with both the 55% Test and the 80% Test requirements.

As of December 31, 2020 and for the three months ended June 30, 2021, we determined that our subsidiaries maintained compliance with both the 55% Test and the 80% Test requirements.

We calculate that at least 75% of our assets were real estate assets, cash and cash items and government securities for the year ended December 31, 2020.

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Overall, we believe that we met the REIT income and asset tests.

We also believe that we met all other REIT requirements, including the ownership of our stock and the

distribution of our taxable income.

We also believe that we met all other REIT requirements, including the ownership of our stock and the distribution of our taxable income.

Therefore, for the year ended December 31, 2020, we believe that we qualified as a REIT under the Code.

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 2. Management’s Discussion and Analysis