What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-05 compared with 2021-08-03 · 301 added, 336 removed, 603 unchanged (51% 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 (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;

• the uncertainty and economic impact of the COVID-19 pandemic (including the impact 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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• 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;

• conditions in the market for Residential Investments, Agency RMBS, and Commercial Investments;

• conditions in the market for Residential Investments and Agency RMBS;

• legislative and regulatory actions by the U.S.

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Department of the Treasury, the Federal Reserve and other agencies and instrumentalities in response to the economic effects of the COVID-19 pandemic;

• the forbearance program included in the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act");

• the forbearance program included in the Coronavirus Aid, Relief, and Economic Security Act;

• our ability to make distributions to our stockholders in the future;

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Special Note Regarding COVID-19 Pandemic

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.

In 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.

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.

Although market conditions have improved during 2021, the COVID-19 pandemic is ongoing with new variants emerging despite growing vaccination rates.

As a result, 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 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:

Investment Activity

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

We completed one Non-QM securitization and continued to purchase Non-QM Loans.

In addition, we also began purchasing GSE Non-Owner Occupied Loans.

Our loan purchases have continued to be from both third-party originators as well as Arc Home.

During the quarter, we sold our remaining CMBS portfolio and also received full repayment on our remaining two Commercial Loans, completely exiting our Commercial Investments.

We also opportunistically repurchased shares of our common stock under our existing Repurchase Program.

The information presented below provides a summary of investment and capital activity during the third quarter.

Investment and Capital Activity

• Purchased $396.9 million of Non-QM Loans, $176.6 million of which were purchased from Arc Home, a licensed mortgage originator we invest in alongside other Angelo Gordon funds;

◦ 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;

• 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;

◦ Amended certain financing arrangements to increase the maximum uncommitted borrowing capacity to $1.1 billion to finance the acquisition of Non-QM Loans, of which $641.3 million of the maximum uncommitted borrowing capacity remains available as of September 30, 2021;

◦ Subsequent to quarter end, purchased an additional $281.3 million of Non-QM Loans, inclusive of $80.8 million purchased from Arc Home;

• Purchased $213.4 million of GSE Non-Owner Occupied Loans, $66.1 million of which were purchased from Arc Home;

◦ Entered into a financing arrangement with a maximum uncommitted borrowing capacity of $500 million to finance the acquisition of GSE Non-Owner Occupied Loans, of which $302.6 million of the maximum uncommitted borrowing capacity remains available as of September 30, 2021;

◦ Subsequent to quarter end, purchased an additional $105.1 million of GSE Non-Owner Occupied Loans, inclusive of $50.1 million purchased from Arc Home;

• Participated in a rated securitization in which Non-QM Loans with a fair value of $282.5 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

• Utilized our ATM program to issue 0.2 million shares of common stock, raising net proceeds of approximately $3.1 million;

• 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;

• 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.

• Exited remaining commercial investments

◦ Received total proceeds of $74.1 million from the full repayment of our Commercial Loans, inclusive of all accrued or deferred interest outstanding;

◦ Sold our remaining CMBS portfolio for gross proceeds of $33.7 million;

• Sold remaining directly held Agency Excess MSR portfolio to Arc Home for proceeds of $2.7 million;

• Accretive repurchase of 258,755 shares of common stock for $2.8 million, representing a weighted average cost of $11.00 per share.

◦ Subsequent to quarter end, repurchased 61,104 shares of common stock for $0.7 million, representing a weighted average cost of $11.59 per share.

Approximately $11.0 million of common stock remained authorized for future share repurchases under the Repurchase Program after these repurchases.

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

The Company has an approximate 44.6% interest in Arc Home, an affiliate that originates residential mortgage loans and retains the mortgage servicing rights associated with the loans that it originates.

We are a Maryland corporation and are externally managed by our Manager, a wholly-owned subsidiary of Angelo Gordon, pursuant to a management agreement.

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Our investment portfolio

Our investment portfolio is comprised of our Credit Investments and Agency RMBS.

Our Credit Investments include Residential Investments and Commercial Investments.

These investments are described in more detail below.

Credit Investments

Residential Investments

Credit - Residential Investments

Our Residential Investments include:

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These investments are included in the "Investments in debt and equity of affiliates" line item on our consolidated balance sheets.

• GSE Non-Owner Occupied Loans include loans that are underwritten in accordance with U.S.

government-sponsored entity ("GSE") guidelines and are secured by investment properties.

These investments are included in the "Residential mortgage loans, at fair value" line item on our consolidated balance sheets.

• Re/Non-Performing Loans, which include:

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Our Non-Agency RMBS include investment grade and non-investment grade fixed and floating-rate securities.

Commercial Investments

Our Commercial Investments include:

• Fixed and floating rate commercial mortgage-backed securities ("CMBS") secured by commercial mortgage loans to multiple borrowers ("Conduit") or secured by a single commercial mortgage loan which is backed by a single asset (usually a large commercial property) or by a pool of cross collateralized mortgage obligations to a single borrower or related borrowers ("Single-Asset/Single-Borrower");

• Interest Only securities (CMBS backed by interest-only strips);

• Commercial real estate loans secured by commercial real property, including first mortgages and mezzanine loans for construction or redevelopment of a property;

• CMBS, Interest-Only securities and CMBS principal-only securities which are regularly-issued by Freddie Mac as structured pass-through securities backed by multifamily mortgage loans ("Freddie Mac K-Series" or "K-Series").

Our investment portfolio includes RMBS.

Certain of the assets in our RMBS portfolio have a guarantee of principal and interest by a U.S.

government agency such as the Government National Mortgage Association, or Ginnie Mae, or by a government-sponsored entity such as the Federal National Mortgage Association, or Fannie Mae, or the Federal Home Loan Mortgage Corporation, or Freddie Mac (each, a "GSE").

government agency such as the Government National Mortgage Association, or Ginnie Mae, or by a GSE such as the Federal National Mortgage Association, or Fannie Mae, or the Federal Home Loan Mortgage Corporation, or Freddie Mac.

We refer to these securities as Agency RMBS ("Agency RMBS").

Our Agency RMBS includes fixed rate securities held as mortgage pass-through securities, as well as excess mortgage servicing rights ("Excess MSRs").

Excess MSRs are interests in mortgage servicing rights ("MSR"), representing a portion of the interest payment collected from a pool of mortgage loans, net of a basic servicing fee paid to the mortgage servicer.

An MSR provides a mortgage servicer with the right to service a mortgage loan or a pool of mortgages in exchange for a portion of the interest payments made on the mortgage or the underlying mortgages.

Our Agency RMBS includes fixed rate securities held as mortgage pass-through securities.

Investment classification

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We, alongside private funds under the management of Angelo Gordon, through AG Arc LLC, one of our indirect subsidiaries ("AG Arc"), formed Arc Home LLC ("Arc Home").

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.

Arc Home originates 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.

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Market conditions

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.

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 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.

The mortgage and housing markets remained well-supported during the third quarter of 2021 due to strong fundamentals, demand for risk assets and active new-issue markets.

Delinquency and forbearance rates continued to decline and home prices reached a record high, nearing a 20% rise year-over-year.

We expect that the mortgage and housing sectors will continue to benefit from these factors as well as in part to excess savings accrued from various federal stimulus disbursements.

As various relief programs sunset, the term-driven expiration of mortgage payment forbearance may lead to some near-term headwinds in mortgage and other consumer debt investments.

However we believe this risk should be offset by strong demand for labor, rising collateral prices and persistently tight new mortgage underwriting.

Non-Agency Loans and Securitizations:

Issuance continued to remain strong with almost $6 billion of Non-QM transactions pricing in the third quarter of 2021, on pace for well over $20 billion for 2021.

Agency-eligible mortgage loans backed by investment properties and second homes were also issued into the Private Label Securities ("PLS") market with over $7 billion of transactions pricing, as originators looked for liquidity away from the GSE’s as a result of amendments made to the Preferred Stock Purchase Agreement earlier in the year.

It is highly unlikely for that pace of issuance to continue, as the relevant amendments were subsequently suspended on September 14th allowing originators to sell their production directly to the GSE’s without limitation.

However, given the strength of the PLS execution demonstrated over the course of the quarter, some originators may still look to private capital to diversify their funding sources, leading to issuance volume well above the 2019 and 2020 levels of approximately $2 billion per year.

Appetite for securitized debt continued to remain strong, leading to loan pricing remaining relatively high throughout the quarter.

Nominal spreads on Agency RMBS widened in July as compared to benchmark rates, but stabilized throughout the remainder of the quarter.

While the Federal Reserve has strongly suggested that it will officially initiate the tapering of asset purchases at their November meeting, continued strong bank buying has supported valuations.

Payups on specified pools held up well as banks and money managers purchased specified pools over TBAs with dollar roll beginning to weaken as a result of the anticipated tapering from the Federal Reserve.

Non-Agency RMBS:

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).

Spreads for securitized residential debt sectors were mixed during the third quarter, as most Credit Risk Transfer tranches tightened 10-20 basis points while other assets such as AAA Non-QM tranches and legacy mortgages were mostly unchanged.

Despite relatively minimal spread movement, many of the same themes that have supported the sector persisted during the quarter, including favorable collateral fundamentals, record high home prices, demand for yield, and continued employment gains.

Issuance of new RMBS fell approximately 15% to $46 billion in the third quarter and, for the first nine months of 2021, RMBS issuance totaled $140 billion, rising 66% from year-ago levels and 43% from the first nine months of 2019.

Comparisons to 2020 are considerably skewed by the issuance lull immediately following the outbreak 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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Our operating results can be affected by a number of factors and primarily depend on the size and composition of our investment portfolio, the level of our net interest income, the fair value of our assets and the supply of, and demand for, our investments in residential mortgages in the marketplace, among other things, which can be impacted by unanticipated credit events, such as defaults, liquidations or delinquencies, experienced by borrowers whose mortgage loans are included in our investment portfolio and other unanticipated events in our markets.

Our primary source of net income or loss available to common stockholders is our net interest income, less our cost of hedging, which represents the difference between the interest

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 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):

Our primary source of net income or loss available to common stockholders is our net interest income, less our cost of hedging, which represents the difference between the interest 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 September 30, 2021 compared to the Three Months Ended September 30, 2020

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

Three Months Ended

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

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

Statement of Operations Data:

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Equity in earnings/(loss) from affiliates 6,882 17,187 (10,305)

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

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

Net Income/(Loss) 34,579 20,046 14,533

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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 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 income increased from September 30, 2020 to September 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 $1.3 billion from $0.7 billion for the three months ended September 30, 2020 to $2.0 billion for the three months ended September 30, 2021.

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

This increase was offset by a decrease of 1.24% in the weighted average yield of our GAAP investment portfolio from 5.22% for the three months ended September 30, 2020 to 3.98% for the three months ended September 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 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,

Interest expense increased from September 30, 2020 to September 30, 2021 primarily due to an increase in the amount of financing on our GAAP investment portfolio during the period.

The weighted average financing balance on our GAAP investment portfolio increased by $0.9 billion from $0.3 billion for the three months ended September 30, 2020 to $1.2 billion for the three months ended September 30, 2021.

This was offset by a decrease of 4.49% in the weighted average financing rate on our GAAP investment portfolio from 6.83% for the three months ended September 30, 2020 to 2.34% for the three months ended September 30, 2021.

Net realized gain/(loss)

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

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

Three Months Ended

June 30, 2021 June 30, 2020

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

September 30, 2021 September 30, 2020

Sales of real estate securities $ (4,795) $ (8,477)

Sales of loans and loans transferred to or sold from Other assets 640 (4,795)

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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 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.

Net interest component of interest rate swaps decreased from September 30, 2020 to September 30, 2021 primarily due to an increase in the size of our interest rate swap portfolio.

As of the September 30, 2021, we held an interest rate swap portfolio with a notional value of $720.0 million, a weighted average receive-variable rate of 0.13%, and a weighted average pay-fix rate of 0.73%.

As of the September 30, 2020, we held an interest rate swap portfolio with a notional value of $180.0 million, a weighted average receive-variable rate of 0.13%, and a weighted average pay-fix rate of 0.42%.

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):

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

Three Months Ended

June 30, 2021 June 30, 2020

September 30, 2021 September 30, 2020

Real estate securities $ 5,388 $ 9,281

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$ 29,461 $ 21,465

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

Management fees remained relatively flat from September 30, 2020 to September 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 June 30, 2021 and 2020 (in thousands):

Three Months Ended

June 30, 2021 June 30, 2020

September 30, 2021 September 30, 2020

Non Investment Related Expenses

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Directors' compensation 169 138

Equity based compensation to affiliate — 75

Other 275 118

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Transaction related expenses and deal related performance fees 1,763 1,590

Other (8) 170

Total Investment Expenses 2,749 2,926

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(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.

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

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 three months ended September 30, 2020, restructuring related expenses relate to legal and consulting fees primarily incurred in connection with restructuring our debt and capital structure.

Servicing fees

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

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.

As of September 30, 2021 and September 30, 2020, we owned residential mortgage loans with a fair value of $1.6 billion and $0.4 billion, respectively.

The increase in the fair value of residential mortgage loans was a result of net purchases of Non-QM Loans and GSE Non-Owner Occupied Loans in 2021.

As a result, servicing fees increased from the three months ended September 30, 2020 to the three months ended September 30, 2021.

Equity in earnings/(loss) from affiliates

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Three Months Ended

June 30, 2021 June 30, 2020

September 30, 2021 September 30, 2020

Non-QM Loans $ (644) $ 1,828

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$ 6,882 $ 17,187

(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.

(1) The earnings/(loss) at AG Arc during the three months ended September 30, 2021 were primarily the result of $1.0 million of net income related to Arc Home's lending and servicing operations, offset by $(0.7) million related to changes in the fair value of the MSR portfolio held by Arc Home.

The earnings recognized by AG Arc do 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 September 30, 2021, we eliminated $1.6 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.

(2) The earnings for the three months ended September 30, 2021 were primarily the result of accelerated accretion as a result of paydowns on certain Re/Non-Performing Loans held at discounts.

Gain on Exchange Offers, net

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)

We completed an exchange offer during the third quarter of 2020.

As a result of the exchange offer, we exchanged a total of 42,820 shares of our 8.25% Series A Cumulative Redeemable Preferred Stock ("Series A Preferred Stock"), 31,085 shares of our 8.00% Series B Cumulative Redeemable Preferred Stock ("Series B Preferred Stock"), and 29,355 shares of our 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock ("Series C Preferred Stock") for a total of 172,100 shares of common stock.

We recognized a gain of $0.5 million in connection with the exchange offer, which is net of related expenses.

Nine Months Ended September 30, 2021 compared to the Nine Months Ended September 30, 2020

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

Nine Months Ended

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

Statement of Operations Data:

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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 income decreased from September 30, 2020 to September 30, 2021 primarily due to a decrease in the weighted average yield of our portfolio.

The weighted average yield of our GAAP investment portfolio decreased by 1.16% from 4.72% for the nine months ended September 30, 2020 to 3.56% for the nine months ended September 30, 2021.

This decrease was coupled with a decrease of $0.1 billion in the weighted average amortized cost of our GAAP investment portfolio from $1.8 billion for the nine months ended September 30, 2020 to $1.7 billion for the nine months ended September 30, 2021.

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.

Interest expense decreased from September 30, 2020 to September 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 $0.2 billion from $1.3 billion for the nine months ended September 30,

2020 to $1.1 billion for the nine months ended September 30, 2021.

Additionally, the weighted average financing rate on our GAAP investment portfolio decreased by 1.41% from 3.45% for the nine months ended September 30, 2020 to 2.04% for the nine months ended September 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

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

Nine Months Ended

September 30, 2021 September 30, 2020

Sales/Seizures of real estate securities (1) $ (9,677) $ (131,070)

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Total Net realized gain/(loss) $ (5,124) $ (257,183)

(1) Certain realized losses on real estate securities during the nine months ended September 30, 2020 were a result of financing counterparty seizures.

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%.

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

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

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

Nine Months Ended

September 30, 2021 September 30, 2020

Real estate securities $ 1,122 $ (145,146)

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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.

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

As of September 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.

Management fees decreased from September 30, 2020 to September 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

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 nine months ended September 30, 2021 and 2020 (in thousands):

Nine Months Ended

September 30, 2021 September 30, 2020

Non Investment Related Expenses

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Transaction related expenses and deal related performance fees (2) 3,401 (1,256)

Other 128 428

Total Investment Expenses 6,106 2,315

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(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.

For the nine months ended September 30, 2021, $0.6 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 nine months ended September 30, 2020 to the nine months ended September 30, 2021 is the result of expenses incurred in 2021 in relation to securitizations of Non-QM Loans and the reversal of previously accrued deal related performance fees 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.

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.

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.

During the nine months ended September 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 nine months ended September 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.

Servicing fees increased from the nine months ended September 30, 2020 to the nine months ended September 30, 2021 as a result of net purchases of Non-QM Loans and GSE Non-Owner Occupied 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

Nine Months Ended

September 30, 2021 September 30, 2020

Non-QM Loans (1) $ 15,277 $ (33,016)

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$ 34,496 $ (23,571)

(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.

(1) The earnings within MATT for the nine months ended September 30, 2021 were primarily the result of mark-to-market gains on its Non-QM Loan portfolio and net interest income, offset by expenses.

The losses generated within MATT for the nine months ended September 30, 2020 were primarily the result of mark-to-market losses on its Non-QM Loan portfolio and related financing, offset by net interest income.

(2) The earnings/(loss) at AG Arc during the nine months ended September 30, 2021 were primarily the result of $5.4 million of net income related to Arc Home's lending and servicing operations, offset by $(1.9) million related to changes in the fair value of the MSR portfolio held by Arc Home.

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

For the nine months ended September 30, 2021, we eliminated $3.5 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.

(3) The earnings for the nine months ended September 30, 2021 were primarily the result of accelerated accretion as a result of paydowns on certain Re/Non-Performing Loans held at discounts.

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 completed two privately negotiated exchange offers during the nine months ended September 30, 2021.

As a result of the exchange offers, we exchanged 153,325 shares of our 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.

During the nine months ended September 30, 2020, we completed an exchange offer whereby a total of 42,820 shares of Series A Preferred Stock, 31,085 shares of Series B Preferred Stock, and 29,355 shares of Series C Preferred Stock were exchanged for a total of 172,100 shares of common stock.

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

Book value and Adjusted book value per share

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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 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

As of September 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 September 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 September 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 $16.92 and $12.40, respectively.

As of September 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 $16.45 and $11.81, respectively

Presentation of investment, financing and hedging activities

In the "Investment activities," "Financing activities," "Hedging activities," and "Liquidity and capital resources" sections of this Item 2, where we disclose our investment portfolio and the related financing arrangements, we have presented this information inclusive of (i) unconsolidated ownership interests in affiliates that are accounted for under GAAP using the equity method and (ii) TBAs, which are accounted for as derivatives under GAAP.

inclusive of (i) unconsolidated ownership interests in affiliates that are accounted for under GAAP using the equity method and (ii) TBAs, which are accounted for as derivatives under GAAP.

Our investment portfolio and the related financing arrangements are presented along with a reconciliation to GAAP.

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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.

Net interest margin and leverage ratio are metrics that management believes should be considered when evaluating the performance of our investment portfolio.

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 and 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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The weighted average cost of funds is the sum of the weighted average funding costs on total financing arrangements outstanding at quarter-end, including all non-recourse financing arrangements, and our weighted average hedging cost, which is the weighted average of the net pay rate on our interest rate swaps.

Both elements of cost of funds are weighted by the outstanding financing arrangements on our GAAP investment portfolio or our investment portfolio and securitized debt at quarter-end.

As our capital allocation shifts, our weighted average yields and weighted average cost of funds will also shift.

Our Agency Investments, given their liquidity and high credit quality, are eligible for higher levels of leverage, while our Credit Investments, with less liquidity and/or more exposure to credit risk and prepayment, utilize lower levels of leverage.

As a result, our leverage ratio is determined by our portfolio mix as well as many additional factors, including the liquidity of our portfolio, the availability and price of our financing, the diversification of our counterparties and their available capacity to finance our assets, and anticipated regulatory developments.

Our debt-to-equity ratio is directly correlated to the composition of our portfolio;

specifically, the higher percentage of Agency Investments we hold, the higher our leverage ratio is, while the higher percentage of Credit Investments we hold, the lower our leverage ratio is.

Net interest margin and leverage ratio are metrics that management believes should be considered when evaluating the performance of our investment portfolio.

GAAP and non-GAAP cost of funds are weighted by the outstanding financing arrangements on our GAAP investment portfolio and our investment portfolio, respectively, and the fair value of securitized debt at quarter-end.

Our leverage ratio is determined by our portfolio mix as well as many additional factors, including the liquidity of our portfolio, the availability and price of our financing, the available capacity to finance our assets, and anticipated regulatory developments.

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 June 30, 2021 and June 30, 2020 and a reconciliation to our GAAP investment portfolio:

June 30, 2021

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

September 30, 2021

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

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Leverage Ratio (c) 3.8x (d) 1.8x

June 30, 2020

September 30, 2020

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

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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.

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

Management considers the transaction related expenses referenced in (ii) above to be similar to realized losses incurred at the acquisition or disposition of an asset and does not view them as being part of its core operations.

Management views the exclusion described in (iv) above to be consistent with how it calculates Core Earnings on the remainder of its portfolio.

Management excludes all deferred taxes because it believes deferred taxes are not representative of current operations.

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, 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.

However, management also believes that our definition of Core Earnings has important

limitations as it does not include certain earnings or losses our management team considers in evaluating our financial performance.

Our presentation of Core Earnings may not be comparable to similarly-titled measures of other companies, who may use different calculations.

This non-GAAP measure should not be considered a substitute for, or superior to, the financial measures calculated in accordance with GAAP.

This non-GAAP measure should not be considered a substitute for, or superior to, Net Income/(loss) available to common stockholders or Net income/(loss) per diluted common share calculated in accordance with GAAP.

Our GAAP financial results and the reconciliations from these results should be carefully evaluated.

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

Management views the exclusion described in (iv) above to be consistent with how it calculates Core Earnings on the remainder of its portfolio.

Management excludes all deferred taxes because it believes deferred taxes are not representative of current operations.

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

The below table includes Core Earnings for the three and nine months ended September 30, 2020.

However, during those periods, we determined that Core Earnings 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.

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 and six months ended June 30, 2021 and 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 nine months ended September 30, 2021 and 2020 is set forth below (in thousands, except per share data):

Three Months Ended

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021 June 30, 2020

Nine Months Ended

September 30, 2021

September 30, 2020

September 30, 2021 September 30, 2020

Net Income/(loss) available to common stockholders $ 29,993 $ 15,022 $ 79,594 $ (478,268)

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(Gains) from Exchange Offers, net — (539) (472) (539)

Drop income — — — 322

Dollar roll income/(loss) (1,113) — (1,113) 322

Core Earnings $ 15,481 $ 6,587 $ 18,985 $ 12,933

Core Earnings, per Diluted Share (4) $ 0.96 $ 0.57 $ 1.24 $ 1.16

(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.

(1) For the three months ended September 30, 2021 and 2020, total transaction related expenses and deal related performance fees included $2.0 million and $1.6 million, respectively, recorded within the "Other operating expenses" line item and $0.5 million and $0.6 million, respectively, recorded within the "Interest expense" line item, which relates to the amortization of deferred financing costs.

For the nine months ended September 30, 2021 and 2020, total transaction related expenses and deal related performance fees included $3.7 million and $(1.3) million, respectively, recorded within the "Other operating expenses" line item and $0.8 million and $0.6 million, respectively, recorded

within the "Interest expense" line item, which relates to the amortization of deferred financing costs.

(2) For the three months ended September 30, 2021 and 2020, $0.2 million or $0.01 per share and $1.8 million or $0.16 per share, respectively;

and for the nine months ended September 30, 2021 and 2020, $1.3 million or $0.08 per share and $(3.2) million or $(0.29) 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.

For the three and nine months ended September 30, 2021, we eliminated $1.6 million and $3.5 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 nine months ended September 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 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.

We aim to allocate capital to investment opportunities with attractive risk/return profiles in our target asset classes.

We recently have focused 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 are also currently investing in 30 Year Fixed Rate Agency RMBS to utilize excess liquidity.

Our investment and capital allocation decisions depend on prevailing market conditions and compliance with Investment Company Act and REIT tests, among other factors, and may change over time in response to opportunities available in different economic and capital market environments.

The risk-reward profile of our investment opportunities changes continuously with the market, with labor, housing and economic fundamentals, and with U.S.

monetary policy, among others.

As a result, in reacting to market conditions and taking into account a variety of other factors, including liquidity, duration, interest rate expectations and hedging, the mix of our assets changes over time as we opportunistically deploy capital.

Our credit investments are subject to risk of loss with regard to principal and interest payments.

We evaluate each investment in our credit portfolio based on the characteristics of the underlying collateral, the securitization structure, expected return, geography, collateral type, and the cost and availability of financing, among others.

We maintain a comprehensive portfolio management process that generally includes day-to-day oversight by the portfolio management team and a quarterly credit review process for each investment that examines the need for a potential reduction in accretable yield, missed or late contractual payments, significant declines in collateral performance, prepayments, projected defaults, loss severities and other data that may indicate a potential issue in our ability to recover our capital from the investment.

These processes are designed to enable our Manager to evaluate and proactively to manage asset-specific credit issues and identify credit trends on a portfolio-wide basis.

Nevertheless, we cannot be certain that our review will identify all issues within our portfolio due to, among other things, adverse economic conditions or events adversely affecting specific assets.

Therefore, potential future losses may also stem from issues with our investments that are not identified by our credit reviews.

We evaluate investments in Agency RMBS using factors including, among others, expected future prepayment trends, supply of and demand for Agency RMBS, costs of financing, costs of hedging, liquidity, expected future interest rate volatility and the overall shape of the U.S.

As a result, in reacting to market conditions and taking into account a variety of other factors, including liquidity, duration, and interest rate expectations, the mix of our assets changes over time as we opportunistically deploy capital.

We actively evaluate our investments based on factors including, among others, the characteristics of the underlying collateral, geography, expected return, expected future prepayment trends, supply of and demand for our investments, costs of financing, costs of hedging, expected future interest rate volatility, and the overall shape of the U.S.

Treasury and interest rate swap yield curves.

Prepayment speeds, as reflected by the CPR, and interest rates vary according to the type of investment, conditions in financial markets, competition and other factors, none of which can be predicted with any certainty.

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 June 30, 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 September 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)

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

September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020

Residential Investments $ 1,713,539 $ 691,478 77.2 % 49.5 % 1.1x 0.2x

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

Commercial Investments — 182,296 — % 13.1 % — 0.9x

Agency RMBS 506,526 521,843 22.8 % 37.4 % 4.1x 6.1x

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We allocate our equity by investment using the fair value of our investment portfolio, less any associated leverage, inclusive of any long TBA position (at cost).

We allocate our equity by investment type using the fair value of our investment portfolio, less any associated leverage, inclusive of any long TBA position (at cost).

We allocate all non-investment portfolio related assets and liabilities to our investment portfolio based on the characteristics of such assets and liabilities in order to sum to stockholders' equity per the consolidated balance sheets.

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 June 30, 2021 and December 31, 2020 ($ in thousands):

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

Allocated Equity Percent of Equity

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

September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020

Residential Investments $ 380,817 $ 229,183 77.8 % 56.0 %

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Total $ 489,749 $ 409,705 100.0 % 100.0 %

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

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

September 30, 2021

December 31, 2020

Instrument Current Face Amortized Cost Unrealized Mark-

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Non-QM Loans (4) $ 975,501 $ 1,014,231 $ 15,768 $ 1,029,999 5.02 % 3.64 % 4.10 $ —

GSE Non-Owner Occupied Loans

207,801 212,445 2,188 214,633 3.63 % 3.11 % 6.15 —

MATT Non-QM Loans (5) 921,459 72,606 576 73,182 0.80 % 11.13 % 0.67 153,200

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Total Residential Investments 2,587,741 1,679,979 33,560 1,713,539 3.70 % 5.05 % 3.45 691,478

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

Single-Asset/Single-Borrower 35,500 35,452 (3,838) 31,614 4.03 % 4.39 % 0.67 40,190

Freddie Mac K-Series — — — — — % — % — 9,000

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

Total Commercial Investments — — — — — % — % — 182,296

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30 Year Fixed Rate 497,214 510,011 (3,485) 506,526 2.19 % 1.77 % 7.18 518,352

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

Excess MSR — — — — — % — % — 3,491

Total Agency RMBS 497,214 510,011 (3,485) 506,526 2.19 % 1.77 % 7.18 521,843

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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.

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

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

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):

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Residential loans (1) $ 1,637,165 $ 563,263

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Total GAAP Credit Portfolio $ 1,610,590 $ 656,227

(1) Includes Re/Non-Performing Loans, Non-QM Loans, and Land Related Financing not held in securitized form.

(1) Includes Re/Non-Performing Loans, Non-QM Loans,GSE Non-Owner Occupied Loans, and Land Related Financing not held in securitized form.

(2) Includes Prime, Alt-A/Subprime, Credit Risk Transfer, Non-U.S RMBS, Interest-Only and Excess MSR, Re/Non-Performing Loans, and Non-QM Loans held in securitized form.

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

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

September 30, 2021 December 31, 2020

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

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

Non-QM Loans $ 975,501 $ 1,029,999 68.49 % 738 $ 966,612 $ 6,995 $ 1,192 $ 702 $ —

GSE Non-Owner Occupied Loans 207,801 214,633 64.25 % 757 207,411 390 — — —

MATT Non-QM Loans 11,626 12,245 58.45 % 680 5,715 809 — 5,102 100,264

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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.

Commercial loans

Refer to Note 3 to the "Notes of the Consolidated Financial Statements (unaudited)" section for more detail on what is included in our "Commercial Loans" line item on our consolidated balance sheets.

Credit securities

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)

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

Credit Rating - Credit Securities (1) September 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 June 30, 2021 and December 31, 2020, includes $0.1 million of credit Excess MSRs.

(3) As of September 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

September 30, 2021 December 31, 2020

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

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New Jersey 2,188 2.9 % Texas 4,216 3.4 %

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

Pennsylvania 1,672 2.2 % New Jersey 4,028 3.2 %

Other 17,508 22.8 % Other 50,654 37.9 %

Total $ 76,374 100.0 % Total $ 128,215 100.0 %

(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.

(1) As of September 30, 2021, Non-Agency RMBS fair value includes $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.

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Fair Value CPR (1)

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

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

30 Year Fixed Rate $ 506,526 $ 518,352 5.1 % 2.7 %

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Investments in debt and equity of affiliates

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

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

September 30, 2021 December 31, 2020

Assets Liabilities Equity Assets Liabilities Equity

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Investments in debt and equity of affiliates $ 160,797 $ (51,674) $ 109,123 $ 268,584 $ (117,917) $ 150,667

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

(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.

(1) As of September 30, 2021 and December 31, 2020, Non-QM Loans excluded loans with an unpaid principal balance of $8.2 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.

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

(3) Includes financing arrangements of $(9.4) thousand on real estate owned as of December 31, 2020.

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We use leverage to finance the purchase of our investment portfolio.

In 2021 and 2020, our leverage has primarily been in the form of repurchase agreements, revolving facilities, and securitized debt.

Repurchase agreements involve the sale and a simultaneous agreement to repurchase the transferred assets or similar assets at a future date.

Our leverage has primarily been in the form of repurchase agreements, revolving facilities, and securitized debt.

Repurchase agreements involve the sale and a simultaneous agreement to repurchase the transferred assets or similar assets at a future date and typically have a term 30 to 90 days.

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.

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 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.

If we maintain the beneficial interest in the specific assets pledged during the term of the borrowing, we receive the related principal and interest payments.

If we do not maintain the beneficial interest in the specific assets pledged during the term of the borrowing, the lender will remit to us the related principal and interest payments.

Interest rates on borrowings are fixed based on prevailing rates corresponding to the terms of the borrowings, and interest is paid at the termination of the borrowing at which time we may enter into a new borrowing arrangement at prevailing market rates with the same counterparty or repay that counterparty and negotiate financing with a different counterparty.

We have also entered into revolving facilities to purchase certain loans in our investment portfolio.

These facilities typically have longer stated maturities than repurchase agreements.

We have also used revolving facilities, which are typically longer term in nature than repurchase agreements, to finance loans.

Interest rates on these facilities are based on prevailing rates corresponding to the terms of the borrowings, and interest is paid on a monthly basis.

Repurchase agreements and revolving facilities, which we refer to as our financing arrangements, are generally mark-to-market with respect to margin calls and recourse to us.

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

Our financing arrangements generally include customary representations, warranties, and covenants, but may also contain more restrictive supplemental terms and conditions.

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 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.

Refer to "Liquidity and capital resources" section below for more information.

The balance on our financing arrangements can reasonably be expected to (i) increase as the size of our investment portfolio increases primarily through equity capital raises and as we increase our investment allocation to Non-QM Loans not held in securitized form and Agency RMBS and (ii) decrease as the size of our portfolio decreases through asset sales, principal paydowns, and as we increase our investment allocation to credit investments, excluding Non-QM Loans not held in securitized form.

Due to their risk profile, credit investments generally have lower leverage ratios than Agency RMBS, which restricts our financing counterparties from providing as much financing to us and lowers the balance of our total financing.

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

We also use securitized debt to finance our loan portfolio.

Securitized debt is generally non-mark-to-market with respect to margins calls and non-recourse to us.

Forbearance and Reinstatement Agreements

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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 June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021

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

September 30, 2021

December 31, 2020

Recourse financing $ 1,241,114 $ 580,037

Non-recourse financing 509,051 466,294

Recourse financing - Financing arrangements $ 1,187,539 $ 569,644

Recourse financing - Secured debt — 10,393

Non-recourse financing - Securitized debt, at fair value 708,421 355,159

Non-recourse financing - Financing arrangements included in Investments in Debt and Equity of Affiliates (1) 23,851 111,135

Total 1,919,811 1,046,331

Recourse financing - Investments in Debt and Equity of Affiliates 33,646 5,597

Non-recourse financing - Investments in Debt and Equity of Affiliates (2) 26,518 111,135

Recourse financing - Financing arrangements included in Investments in Debt and Equity of Affiliates 27,020 5,597

Non-recourse financing - Financing arrangements included in Investments in Debt and Equity of Affiliates (1) 23,851 111,135

Total Investments in Debt and Equity of Affiliates 50,871 116,732

GAAP Basis $ 1,868,940 $ 929,599

(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;

$355.2 million of securitized debt, collateralized by Re/Non-Performing Loans;

and $10.4 million of secured debt.

(1) On January 29, 2021, we and private funds under the management of Angelo Gordon entered into an amendment with respect to our Restructured Financing Arrangement in MATT.

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)".

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)."

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 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 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.

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

We define GAAP leverage as the sum of (1) our GAAP financing arrangements, net of any restricted cash posted on such financing arrangements, (2) the amount payable on purchases that have not yet settled less the financing remaining on sales that have not yet settled, and (3) securitized debt, at fair value.

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

June 30, 2021 Leverage Stockholders’ Equity Leverage Ratio

September 30, 2021 Leverage Stockholders’ Equity Leverage Ratio

GAAP Leverage $ 1,864,352 $ 489,749 3.8x

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Specifically, we may seek to hedge our exposure to potential interest rate mismatches between the interest we earn on our investments and our borrowing costs caused by fluctuations in short-term interest rates.

We may utilize interest rate swaps, swaption agreements, and other financial instruments such as short positions in U.S.

We may utilize interest rate swaps, swaption agreements, TBAs, and other financial instruments such as short positions in U.S.

Treasury securities.

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federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service on our financing arrangements and other debt payable.

If our cash available for distribution is less than our net taxable income, we could be required to sell assets or borrow funds to make required cash distributions or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities.

in the form of a taxable stock distribution or distribution of debt securities.

As described above, our distribution requirements are based on taxable income rather than GAAP net income.

Differences between taxable income and GAAP net income include (i) unrealized gains and losses associated with investment and derivative portfolios which are marked-to-market in current income for GAAP purposes, but excluded from taxable income until realized or settled, (ii) temporary differences related to amortization of premiums and discounts paid on investments, (iii) the timing and amount of deductions related to stock-based compensation, (iv) temporary differences related to the recognition of realized gains and losses on sold investments and certain terminated derivatives, (v) taxes and (vi) methods of depreciation.

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 June 30, 2021.

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

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

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On December 22, 2020, our Board of Directors declared a dividend of $0.09 per common share for the fourth quarter 2020 which was paid on January 29, 2021 to shareholders of record at the close of business on December 31, 2020.

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

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

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

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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:

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

Declaration Date Record Date Payment Date Cash Dividend Per Share

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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:

9/15/2021 9/30/2021 10/29/2021 0.21

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

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

2021 Cash Dividend Per Share

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

7/30/2021 8/31/2021 9/17/2021 0.51563 0.50 0.50

Total $ 1.54689 $ 1.50 $ 1.50

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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 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.

Our principal sources of cash as of September 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 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.

At September 30, 2021, we had $143.6 million of liquidity, which consisted of $101.7 million of cash and $41.9 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.

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.

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.

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 six months ended June 30, 2021 and 2020 (in thousands).

Six Months Ended

June 30, 2021 June 30, 2020 Change

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

Nine Months Ended

September 30, 2021 September 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 $ 128,836 $ 49,700 $ 79,136

(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.

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

(2) Cash used in investing activities for the nine months ended September 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 nine months ended September 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 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.

(3) Cash provided by financing activities for the nine months ended September 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 nine months ended September 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.

Stock repurchase programs

On November 3, 2015, our Board of Directors authorized a stock repurchase program ("Repurchase Program") to repurchase up to $25.0 million of our outstanding common stock.

Such authorization does not have an expiration date.

As part of the Repurchase Program, shares may be purchased in open market transactions, including through block purchases, through privately negotiated transactions, or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Exchange Act.

Open market repurchases will be made in accordance with Exchange Act Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of open market stock repurchases.

Subject to applicable securities laws, the timing, manner, price and amount of any repurchases of common stock under the Repurchase Program may be determined by our discretion, using available cash resources.

Shares of common stock repurchased by us under the Repurchase Program, if any, will be cancelled and, until reissued, will be deemed to be authorized but unissued shares of common stock as required by Maryland law.

The Repurchase Program may be suspended or discontinued by us at any time and without prior notice and the authorization does not obligate us to acquire any particular amount of common stock.

The cost of the acquisition of shares of our own stock in excess of the aggregate par value of the shares first reduces additional paid-in capital, to the extent available, with any residual cost applied against retained earnings.

We repurchased 0.3 million shares under the Repurchase Program during the three and nine months ended September 30, 2021.

We did not repurchase shares under the Repurchase Program during the three and nine months ended September 30, 2020.

Approximately $11.8 million of common stock remained authorized for future share repurchases under the Repurchase Program as of September 30, 2021.

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.

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 September 30, 2021, we did not issue any shares of common stock under the Equity Distribution Agreements.

For the nine months ended September 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 nine months ended September 30, 2020, we sold 0.1 million and 0.5 million shares of common stock under the Equity Distribution Agreements for net proceeds of approximately $1.2 million and $4.7 million, respectively.

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.

Exchange Offers

On March 17, 2021, we agreed to issue an aggregate of 937,462 shares of our common stock in exchange for 153,325 shares of Series A Preferred Stock and 350,609 shares of Series B Preferred Stock, pursuant to a privately negotiated exchange agreement with existing holders of the preferred stock.

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.

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.

The below details the privately negotiated exchange agreements with existing holders of our preferred shares exchanged for common shares during the nine months ended September 30, 2021.

Subsequent to each transaction closed, the Preferred Stock exchanged pursuant to the exchange agreement was reclassified as authorized but unissued shares of preferred stock without designation as to class or series ($ in thousands).

Preferred Shares Exchanged

Date Shares of Series A Preferred Stock Shares of Series B Preferred Stock Shares of Series C Preferred Stock Total Preferred Stock Par Value Common Shares Exchanged

March 17, 2021

153,325 350,609 — $ 12,598 937,462

June 14, 2021 — 86,478 154,383 6,022 429,802

As of September 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.

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 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.

For the three and nine months ended September 30, 2021, we incurred management fees of approximately $1.7 million and $5.0 million, respectively.

For the three and nine months ended September 30, 2020, we incurred management fees of approximately $1.7 million and $5.5 million, respectively.

As of September 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 $4.9 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.

Of the $5.0 million and $13.9 million of Other operating expenses for the three and nine months ended September 30, 2021, respectively, we have incurred $1.6 million and $4.2 million, respectively, representing a reimbursement of expenses.

Of the $5.9 million and $11.4 million of Other operating expenses for the three and nine months ended September 30, 2020, respectively, we incurred $2.3 million and $6.2 million, respectively, representing a reimbursement of expenses.

As of September 30, 2021 and December 31, 2020, we recorded a reimbursement payable to the Manager of $1.6 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 June 30, 2021, 612,676 shares of common stock were available to be awarded under the Equity Incentive Plan.

As of September 30, 2021, 606,372 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 60,294 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 June 30, 2021, all shares of restricted common stock granted to our independent directors have vested.

As of September 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.

As of September 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 June 30, 2021.

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

Certain of our investments in debt and equity of affiliates securitize residential mortgage loans and retain interests in the subordinated tranches of the transferred assets.

These retained interests are included in the MATT Non-QM Loans and Re/Non-Performing Loans line items of our investment portfolio.

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

We have entered into TBA positions in connection with purchases of GSE Non-Owner Occupied Loans .

We record TBA purchases and sales on the trade date and present the purchase or receipt net of the corresponding payable or receivable until the settlement date of the transaction.

As of September 30, 2021, we had a net short TBA position with a net receivable amount of $318.3 million and fair market valu e of $316.9 million.

We recorded $1.4 million in the "Other assets" line item on our consolidated balance sheets.

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

For additional information on our commitments as of September 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 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.

Although our estimates contemplate conditions as of September 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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These policies involve decisions and assessments that could affect our reported assets and liabilities, as well as our reported revenues and expenses.

We believe that all of the decisions and assessments upon which our consolidated financial statements are based are reasonable at the time made and based upon information available to us at that time.

We believe that all of the decisions and assessments upon which our consolidated financial statements

are based are reasonable at the time made and based upon information available to us at that time.

We rely upon third-party pricing of our assets at each-quarter end to arrive at what we believe to be reasonable estimates of fair value, whenever available.

For more information on our fair value measurements, see Note 5 to the "Notes to Consolidated Financial Statements (unaudited)".

For a review of our significant accounting policies and the recent accounting pronouncements that may impact our results of operations, see Note 2 to the "Notes to Consolidated Financial Statements (unaudited)."

For more information on our fair value measurements, see Note 5 to the "Notes to Consolidated Financial Statements (unaudited)." For a review of our significant accounting policies and the recent accounting pronouncements that may impact our results of operations, see Note 2 to the "Notes to Consolidated Financial Statements (unaudited)."

Virtually all of our assets and liabilities are interest rate sensitive in nature.

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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 June 30, 2021, we determined that we maintained compliance with the 40% test requirements.

As of December 31, 2020 and for the three months ended September 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 June 30, 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 September 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.

We also calculate that a sufficient portion of our revenue qualifies for the 75% gross income test and for the 95% gross income test rules for the year ended December 31, 2020.

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 believe we are currently in compliance with the REIT income and asset tests as well as 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