What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-05 compared with 2022-05-06 · 330 added, 187 removed, 528 unchanged (49% of the section changed)

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• 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;

• the persistence of labor shortages, supply chain imbalances, Russia’s invasion of Ukraine, inflation, and the potential for an economic recession;

• 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;

• our ability to enter into securitization transactions on the terms and pace anticipated or at all;

• our ability to enter into, or refinance, securitization transactions on the terms and pace anticipated or at all;

• the degree to which our hedging strategies may or may not protect us from interest rate and credit risk volatility;

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

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Congress, U.S.

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

Department of the Treasury, the Federal Reserve and other agencies and instrumentalities;

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

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Executive Summary

During the first quarter of 2022, we continued to grow our portfolio of newly-originated residential mortgage loans and increase our pace of securitization activity in order to obtain long-term, non-recourse financing without mark-to-market margin calls.

We also reduced our exposure to Agency RMBS and ended the quarter with $137.9 million of liquidity to provide for continued growth and execution of our business strategy.

Total liquidity consisted of $50.5 million of cash, $48.5 million of unencumbered Agency RMBS that we held as of quarter end, and $38.9 million of unencumbered Agency RMBS which we sold during March 2022, but which settled in April 2022.

See below for detail on these activities during the first quarter 2022.

During the second quarter of 2022, we continued to grow our portfolio of newly-originated residential mortgage loans and completed two securitizations in order to obtain long-term, non-recourse financing without mark-to-market margin calls.

We also repurchased shares of our common stock under our repurchase program authorized in 2015 (the "2015 Repurchase Program").

See below for detail on these activities during the second quarter 2022.

Investment Activity

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• Purchased Agency-Eligible Loans with a fair value of $262.1 million, $50.1 million of which were purchased from Arc Home;

• Sold our remaining 30 Year Fixed Rate Agency RMBS for proceeds of $209.2 million.

Financing Activity

• Executed three rated securitizations converting financing from recourse financing with mark-to-market margin calls to non-recourse financing without mark-to-market margin calls;

• Executed two rated securitizations converting financing from recourse financing with mark-to-market margin calls to non-recourse financing without mark-to-market margin calls;

◦ Securitized Non-Agency Loans with a total unpaid principal balance of $524.8 million;

◦ Securitized Agency-Eligible Loans with a total unpaid principal balance of $425.5 million.

• Subsequent to quarter end, executed our second rated securitization of Agency-Eligible Loans, in which loans with an unpaid principal balance of $425.5 million were securitized.

Capital Activity

• Utilized the remaining capacity under our 2015 Repurchase Program to repurchase 1.4 million shares of common stock for $11.0 million, representing a weighted average cost of $7.70 per share;

• Subsequent to quarter end, our Board of Directors authorized a new stock repurchase program (the "2022 Repurchase Program") to repurchase up to $15 million of our outstanding common stock.

We are a residential mortgage REIT with a focus on investing in a diversified risk-adjusted portfolio of residential mortgage-related assets in the U.S.

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Our objective is to provide attractive risk-adjusted returns to our stockholders over the long-term, primarily through dividends and capital appreciation.

We focus our investment activities primarily on acquiring and securitizing newly-originated residential mortgage loans within the growing non-agency segment of the housing market.

We focus our investment activities primarily on acquiring and securitizing newly-originated residential mortgage loans within the non-agency segment of the housing market.

We obtain our assets through Arc Home, LLC ("Arc Home"), our residential mortgage loan originator in which we own an approximate 44.6% interest, and through other third-party origination partners.

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In addition, we may also invest in other types of residential mortgage loans and other mortgage related assets.

As of March 31, 2022, the Company's investment portfolio consisted of the following:

As of June 30, 2022, the Company's investment portfolio consisted of the following:

Asset Class Description

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QM Loans are residential mortgage loans that comply with the Ability-To-Repay rules and related guidelines of the Consumer Finance Protection Bureau ("CFPB").

Non-QM Loans are residential mortgage loans that do not satisfy the requirements for QM Loans and are therefore not deemed to be a "qualified mortgage," under the rules of the CFPB.

◦ Non-Agency Loans are either held directly by us or held indirectly through our investment in Mortgage Acquisition Trust I LLC ("MATT").

◦ Non-Agency Loans held directly are included in the "Residential mortgage loans, at fair value" or the "Securitized residential mortgage loans, at fair value" line items on our consolidated balance sheets.

◦ Non-Agency Loans held indirectly through MATT are included in the "Investments in debt and equity of affiliates" line item on our consolidated balance sheets.

◦ Certain retained tranches from unconsolidated Non-Agency Loan securitizations are included in the "Real estate securities, at fair value" line item on our consolidated balance sheets.

Agency-Eligible Loans (1)(2)

• Agency-Eligible Loans are loans that are underwritten in accordance with GSE guidelines and are primarily secured by investment properties.

◦ Agency-Eligible Loans held directly are included in the "Residential mortgage loans, at fair value" or the "Securitized residential mortgage loans, at fair value" line items on our consolidated balance sheets.

Other Residential Mortgage Related Assets

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• Performing, re-performing, and non-performing loans are residential mortgage loans collateralized by a first lien mortgaged property.

◦ Re/Non-Performing loans are primarily held through interests in certain consolidated trusts.

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

◦ Certain retained tranches from unconsolidated Re/Non-Performing Loan securitizations which we hold alongside other private funds under the management of Angelo Gordon are included in the "Investments in debt and equity of affiliates" line item on our consolidated balance sheets.

Land Related Financing (3)

• First mortgage loans originated to third-party land developers and home builders for purposes of the acquisition and horizontal development of land.

◦ These loans are held through our unconsolidated affiliates and are included in the "Investments in debt and equity of affiliates" line item on our consolidated balance sheets.

Agency RMBS (2)

• Agency RMBS represent interests in pools of residential mortgage loans guaranteed by a GSE such as Fannie Mae or Freddie Mac, or an agency of the U.S.

Government such as Ginnie Mae.

◦ These investments are included in the "Real estate securities, at fair value" line item on our consolidated balance sheets.

(1) Loans held directly are included in the "Securitized residential mortgage loans, at fair value" or the "Residential mortgage loans, at fair value" line items on our consolidated balance sheets.

(2) Non-Agency Loans and Agency-Eligible Loans held in securitized form, as well as Agency RMBS, are included in the "Real estate securities, at fair value" line item on our consolidated balance sheets.

(3) Investments held through our unconsolidated affiliates are included in the "Investments in debt and equity of affiliates" line item on our consolidated balance sheets.

This includes Non-Agency Loans held indirectly through our investment in Mortgage Acquisition Trust I LLC ("MATT"), certain retained tranches from unconsolidated Re/Non-Performing Loan securitizations which we hold alongside other private funds under the management of Angelo Gordon, and Land Related Financing.

Our primary sources of income are net interest income from our investment portfolio, changes in the fair value of our investments, and income from our investment in Arc Home.

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Our management has significant experience in the mortgage industry and expertise in structured credit investments.

We are able to leverage our Manager, along with our ownership interest in Arc Home, a vertically integrated origination platform, to access investment opportunities in the non-agency residential mortgage loan market.

We are able to leverage our

Manager, along with our ownership interest in Arc Home, a vertically integrated origination platform, to access investment opportunities in the non-agency residential mortgage loan market.

This strategic advantage has enabled us to grow our investment portfolio and remain active in the securitization markets, utilizing Angelo Gordon's proprietary securitization platform to deliver non-agency investments to a diverse mix of investors.

Market Conditions

During the first quarter 2022, the financial markets were generally weaker and volatile amid the Federal Reserve rate-hike cycle, high inflation readings, the Ukraine-Russia war and the uncertainty as to whether the Federal Reserve can formulate and implement monetary policy that will avoid recession and generate a so called soft landing for the economy.

Notwithstanding the macro environment, mortgage fundamentals continued to be favorable, and some signs of normalization to pre-pandemic levels continued to emerge.

Prepayment speeds have declined and were 10% to 20% higher than pre-pandemic levels after having been as much as 150% higher.

The overall forbearance rate in the mortgage market continued to fall, and servicers began offering more modifications to cure delinquent statuses.

The latest reading from the S&P/CoreLogic Case-Shiller index showed home prices increased by 19.2% year over year in January 2022, while the CoreLogic Home Price Index rose 20% in February 2022.

Limited availability of homes against fundamentally strong housing demand has been a driving factor for persistent home price appreciation.

During the second quarter 2022, the financial markets were generally weaker due to the impact of and market perceptions about sustained inflation, Federal Reserve rate hikes, and recession, all of which helped to create volatile conditions.

As a result, market liquidity decreased and credit spreads widened across structured credit products driving asset prices down.

As mortgage rates continued to increase, borrower demand and origination volumes began to fall and prepayment rates for pre-pandemic securities continued to decline.

Home price appreciation remained strong during the second quarter as the latest reading from the S&P/CoreLogic Case-Shiller Index showed home prices increased 20.4% year-over-year in April 2022.

The persistently limited availability of homes against fundamentally strong housing demand continued to be a driving factor for these elevated readings, but the present conditions created by 5% and 6% prevailing 30-year fixed mortgage rates may not be reflected in the data until later in the year.

Non-Agency Loans and Securitizations :

Expectations for the Federal Reserve to begin a cycle of tightening drove benchmark rates as well as credit spreads considerably higher throughout the quarter.

Generic new issue AAA Non-QM yields ended the quarter slightly above 4% compared to being just under 2% to at the end of 2021.

Credit spreads began the quarter approximately 100 basis points over benchmark rates and widened out steadily before finding some stability in the final weeks of the quarter, settling in at approximately 175 basis points over benchmark rates.

Originators and whole loan pricing were similarly negatively affected as mortgage rates rose materially where the Freddie Mac Primary Mortgage Market Survey ended 2021 at 3.11% and rose to 4.67% by March 31, 2022.

Some newly originated loan packages transacted in the quarter were priced at a discount as consumers were able to lock in lower interest rates prior to the recent increase experienced in the market.

Non-QM loans were hit particularly hard as securitization remains the primary means for monetization, whereas alternative sources of liquidity exists for other sectors through outlets such as the GSEs or banks.

Agency RMBS :

Nominal spreads on Agency MBS finally capitulated to the Federal Reserve’s recent focus on the rate-hike cycle with the spreads between current coupon and a blend of 5-year and 10-year US Treasury yields widening by roughly 40bps to levels not seen since 2014 outside of March of 2020.

While origination has fallen materially with the move in rates, significant rate volatility and uncertainty over the path of the Federal Reserve’s balance sheet reduction, with talk of outright sales of MBS, has reduced demand sharply from investors.

Spreads now incorporate an elevated risk premium, but continued uncertainty and rate volatility pose headwinds to a recovery near-term.

Market conditions weakened throughout the second quarter with Non-QM AAA credit spreads widening from around 170 basis points over comparable maturity benchmark rates at the end of March 2022 to 220-250 basis points at the end of the second quarter.

This compares with credit spreads of around 100 basis points in December 2021.

Some of this spread widening can be attributed to issuers securitizing loans that are well below the prevailing market rate for comparable products as mortgage rates continue to rise.

Freddie Mac’s Primary Mortgage Market Survey ended the first quarter at 4.67% compared with 5.70% at the end of the second quarter, indicative of how quickly rates have risen as the Federal Reserve continues with its monetary tightening in an effort to slow inflation.

Originators faced considerable margin pressure with the significant reduction in non-cash out refinance activity, resulting in layoffs across the industry.

Reports of closures of mortgage originators in weaker financial positions have begun to surface as well.

Conversely, the increase in mortgage rates on new production should provide for attractive reinvestment opportunities into higher yielding assets for market participants with capital available to deploy.

Non-Agency RMBS :

Spreads for securitized residential debt sectors were wider, sometimes sharply, during the first quarter amid broad-based risk-off sentiment and risk-free rate increase that occupied much of the tone to start the year.

Credit risk transfer ("CRT") tranches were as much 200 to 300 basis points wider to end the quarter.

As the quarter turned, CRT spreads started to reverse course as risk appetite increased with new issuances several times oversubscribed owing to relative value against corporate credit and additional demand generated by new investors to the CRT market.

Other mortgage credit sectors also widened during the quarter.

Seasoned RMBS widened by 80 basis points to around 200 to 230 basis points, and AAA rated tranches of Non-QM transactions also widened by 80 basis points to 170 basis points.

Quarterly new issuance of RMBS rose 24% year-over-year to $51 billion in the first quarter on higher Non-QM, CRT and agency-eligible issuance, and compared to the fourth quarter, RMBS new issuance was a little lower, falling from $64 billion at the end of 2021.

Non-QM and Jumbo

loans were the most active sectors during the first quarter, at $12.6 billion and $11.3 billion, respectively, followed by CRT at $9.1 billion.

Spreads for securitized residential debt sectors also continued to widen during the second quarter, reflecting the broader-market sentiment and the sharp rise in prevailing mortgage rates.

The sharp rise in mortgage rates removed the option for nearly all active borrowers to refinance existing mortgages and extended durations across mortgage sub-sectors.

Credit risk transfer tranches were as much as 100-250 basis points wider to end the second quarter with the most pronounced widening occurring at the bottom of the capital structure.

An abundance of new issuance against declining refinance activity weighed on market participants over concerns that higher prevailing mortgage rates, and ultimately less refinancing activity, would extend durations of recently originated collateral pools.

Quarterly new issuance of RMBS fell to $37 billion, down approximately 28% from the first quarter and 33% from a year ago.

Prime jumbo and Agency-eligible investor loan issuance were each lower by around 60% quarter-over-quarter, falling to $4.7 billion and $2.4 billion, respectively.

Despite the quarterly decline, year-to-date primary RMBS volume fell only around 8% against 2021, the most active year since the great financial crisis, and is up 67% compared to the first half of 2019.

Agency RMBS :

Nominal spreads on Agency mortgage-backed securities continued to widen in the second quarter alongside the Federal Reserve’s pivot to fighting inflation with a 75 basis point increase in policy rates.

While supply slowed materially in response to the sharp rise in borrowing rates, elevated interest rate volatility, low levels of macroeconomic conviction, and fixed income mutual fund outflows all combined to keep buyers sidelined.

The spread between current coupon and a blend of 5-year and 10-year U.S.

Treasury yields widened by an additional 25 basis points during the quarter to levels not seen except during March 2020, since the great financial crisis.

Despite attractive asset valuations, uncertainty in the macroeconomic landscape and interest rate volatility continue to pose headwinds to a recovery near-term.

In light of various market uncertainties, such as uncertainties of the COVID-19 pandemic for the U.S.

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◦ "Residential mortgage loans" or "Loans" refer to our Non-Agency Loans, Agency-Eligible Loans, and Re/Non-Performing Loans (exclusive of retained tranches from unconsolidated securitizations) and Land Related Financing.

◦ "Non-Agency RMBS" refer to the retained tranches from unconsolidated securitizations of Non-Agency Loans and Re/Non-Performing Loans.

◦ "Non-Agency RMBS" refer to the retained tranches from unconsolidated securitizations of Non-Agency Loans and Re/Non-Performing Loans, as well as Agency-Eligible Loans held in securitized form.

• "Real estate securities" refers to our Non-Agency RMBS and Agency RMBS, inclusive of TBAs.

• Our "GAAP Investment portfolio" includes our GAAP Residential Investments and Agency RMBS.

• Our "GAAP Residential Investments" refer to our Residential Investments exclusive of all investments held within affiliated entities.

• Our "GAAP Residential Investments" refer to our Residential Investments excluding investments held within affiliated entities.

For a reconciliation of our Investment portfolio to our GAAP Investment portfolio, see the GAAP Investment Portfolio Reconciliation Table below.

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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 mortgage loans in the marketplace, among other things, which can be impacted by unanticipated credit events, such as defaults, liquidations or delinquencies, experienced by borrowers whose residential 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 March 31, 2022 compared to the Three Months Ended March 31, 2021

The table below presents certain information from our consolidated statements of operations for the three months ended March 31, 2022 and 2021 (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 June 30, 2022 compared to the Three Months Ended June 30, 2021

The table below presents certain information from our consolidated statements of operations for the three months ended June 30, 2022 and 2021 (in thousands).

Three Months Ended

March 31, 2022 March 31, 2021 Increase/(Decrease)

June 30, 2022 June 30, 2021 Increase/(Decrease)

Statement of Operations Data:

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Net unrealized gain/(loss) (46,351) 9,685 (56,036)

Other income/(loss), net — 37 (37)

Total Other Income/(Loss) (48,626) 12,486 (61,112)

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Interest income is calculated using the effective interest method for our GAAP investment portfolio.

Interest income increased from March 31, 2021 to March 31, 2022 primarily due to an increase in the size of our portfolio.

The weighted average amortized cost of our GAAP investment portfolio increased by $2.0 billion from $1.4 billion for the three months ended March 31, 2021 to $3.4 billion for the three months ended March 31, 2022.

Interest income increased from June 30, 2021 to June 30, 2022 primarily due to an increase in the size of our portfolio.

The weighted average amortized cost of our GAAP investment portfolio increased by $1.9 billion from $1.7 billion for the three months ended June 30, 2021 to $3.6 billion for the three months ended June 30, 2022.

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

This increase was coupled with an increase of 0.59% in the weighted average yield of our GAAP investment portfolio from 3.39% for the three months ended March 31, 2021 to 3.98% for the three months ended March 31, 2022.

This increase was coupled with an increase of 1.03% in the weighted average yield of our GAAP investment portfolio from 3.32% for the three months ended June 30, 2021 to 4.35% for the three months ended June 30, 2022.

Interest expense

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

Interest expense increased from March 31, 2021 to March 31, 2022 primarily due to an increase in the amount of financing on our GAAP investment portfolio, inclusive of securitized debt, during the period.

The weighted average financing balance on our GAAP investment portfolio, inclusive of securitized debt, increased by $1.9 billion from $1.2 billion for the three months ended March 31, 2021 to $3.1 billion for the three months ended March 31, 2022.

Interest expense increased from June 30, 2021 to June 30, 2022 primarily due to an increase in the amount of financing on our GAAP investment portfolio, inclusive of securitized debt, during the period.

The weighted average financing balance on our GAAP investment portfolio, inclusive of securitized debt, increased by $1.8 billion from $1.5 billion for the three months ended June 30, 2021 to $3.3 billion for the three months ended June 30, 2022.

The increase was driven by the issuance of securitized debt as well as financing added on purchases of Non-Agency Loans and Agency-Eligible Loans during the period.

This was coupled with an increase of 0.74% in the weighted average financing rate on our GAAP investment portfolio, inclusive of securitized debt, from 1.37% for the three months ended March 31, 2021 to 2.11% for the three months ended March 31, 2022.

This was coupled with an increase of 1.41% in the weighted average financing rate on our GAAP investment portfolio, inclusive of securitized debt, from 1.41% for the three months ended June 30, 2021 to 2.82% for the three months ended June 30, 2022.

Net interest component of interest rate swaps

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

The net interest component of interest rate swap expense increased from March 31, 2021 to March 31, 2022 primarily due to an increase in the size of our interest rate swap portfolio and an increase in the net pay rate.

As of March 31, 2022, we held an interest rate swap portfolio with a notional value of $1.4 billion, a weighted average receive-variable rate of 0.30%, and a weighted average pay-fix rate of 1.27%.

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

The net interest component of interest rate swap expense increased from June 30, 2021 to June 30, 2022 primarily due to an increase in the size of our interest rate swap portfolio as well as an increase in the net pay rate.

As of June 30, 2022, we held an interest rate swap portfolio with a notional value of $1.4 billion, a weighted average receive-variable rate of 1.42%, and a weighted average pay-fix rate of 1.84%.

As of June 30, 2021, we held an interest rate swap portfolio with a notional value of $0.8 billion, a weighted average receive-variable rate of 0.17%, and a weighted average pay-fix rate of 0.74%.

Net realized gain/(loss)

The following table presents a summary of net realized gain/(loss) for the three months ended March 31, 2022 and 2021 (in thousands).

The following table presents a summary of net realized gain/(loss) for the three months ended June 30, 2022 and 2021 (in thousands).

Three Months Ended

March 31, 2022 March 31, 2021

June 30, 2022 June 30, 2021

Sales of residential mortgage loans and loans transferred to or sold from Other assets $ 23 $ 7,859

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Settlement of derivatives and other instruments 18,117 897

Sales of commercial loans — (2,904)

Total Net realized gain/(loss) $ 308 $ 4,374

Net unrealized gain/(loss)

The following table presents a summary of net unrealized gain/(loss) for the three months ended March 31, 2022 and 2021 (in thousands).

The following table presents a summary of net unrealized gain/(loss) for the three months ended June 30, 2022 and 2021 (in thousands).

Three Months Ended

March 31, 2022 March 31, 2021

June 30, 2022 June 30, 2021

Residential mortgage loans $ (138,822) $ 4,341

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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 increased from March 31, 2021 to March 31, 2022 primarily due to an increase in our Stockholder's Equity as calculated pursuant to our Management Agreement resulting from our November 2021 common stock offering.

Management fees increased from June 30, 2021 to June 30, 2022 primarily due to an increase in our Stockholder's Equity as calculated pursuant to our Management Agreement resulting from our November 2021 common stock offering.

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 Other operating expenses broken out between non-investment related expenses and investment related expenses for the three months ended March 31, 2022 and 2021 (in thousands).

Three Months Ended

March 31, 2022 March 31, 2021

June 30, 2022 June 30, 2021

Non Investment Related Expenses

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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 March 31, 2021, $0.2 million of the waived reimbursable expenses is included within the "Affiliated expense reimbursement - Operating expenses" line item above.

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

Transaction related expenses

Transaction related expenses are expenses associated with purchasing and securitizing residential mortgage loans as well as certain other transaction and performance related fees associated with assets we invest in.

These fees increased from the three months ended March 31, 2021 to the three months ended March 31, 2022 primarily as a result of the upfront expenses on the three securitizations transacted in the first quarter of 2022.

No securitizations were transacted during the first quarter of 2021.

These fees increased from the three months ended June 30, 2021 to the three months ended June 30, 2022 primarily as a result of the upfront expenses on the two securitizations completed in the second quarter of 2022, as compared with one completed in the second quarter of 2021.

Servicing fees

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

The weighted average cost of our GAAP residential mortgage loan portfolio increased by $2.5 billion from $0.5 billion for the three months ended March 31, 2021 to $3.0 billion for the three months ended March 31, 2022 resulting from purchases of Non-Agency Loans and Agency-Eligible Loans.

As a result, servicing fees increased from the three months ended March 31, 2021 to the three months ended March 31, 2022.

Servicing fees increased from the three months ended June 30, 2021 to the three months ended June 30, 2022 primarily due to an increase in the weighted average cost of our GAAP residential mortgage loan portfolio.

The weighted average cost of our GAAP residential mortgage loan portfolio increased by $2.8 billion from $0.8 billion for the three months ended June 30, 2021 to $3.6 billion for the three months ended June 30, 2022 resulting from purchases of Non-Agency Loans and Agency-Eligible Loans.

Equity in earnings/(loss) from affiliates

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Three Months Ended

March 31, 2022 March 31, 2021

June 30, 2022 June 30, 2021

MATT Non-QM Loans $ (370) $ 1,275

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$ (5,806) $ 1,278

(1) The earnings/(loss) at AG Arc during the three months ended March 31, 2022 were primarily the result of $3.1 million related to changes in the fair value of the MSR portfolio held by Arc Home, offset by $(2.4) million of losses related to Arc Home's lending and servicing operations.

The below table further disaggregates our "Equity in earnings/(loss) from affiliates" line item on our consolidated statements of operations (in thousands).

Three Months Ended

June 30, 2022 June 30, 2021

Interest income $ 1,702 $ 4,643

Interest expense 282 607

Total Net Interest Income 1,420 4,036

Net realized gain/(loss) — 1,501

Net unrealized gain/(loss) (1,398) (1,052)

Total Other Income/(Loss) (1,398) 449

After-tax earnings/(loss) at AG Arc (1) (1,253) (1,133)

Net unrealized gain/(loss) on investment in AG Arc (2,699) (143)

Elimination of gains on loans sold to MITT (2) (1,758) (1,430)

Total AG Arc Earnings/(Loss) (5,710) (2,706)

Other operating expenses 118 501

Equity in earnings/(loss) from affiliates

$ (5,806) $ 1,278

(1) The earnings/(loss) at AG Arc during the three months ended June 30, 2022 were primarily the result of $(1.6) million of losses related to Arc Home's lending and servicing operations, offset by $0.4 million related to changes in the fair value of the MSR portfolio held by Arc Home.

The earnings/(loss) at AG Arc during the three months ended June 30, 2021 were primarily the result of $(2.8) million related to changes in the fair value of the MSR portfolio held by Arc Home, offset by $1.7 million of net income related to Arc Home's lending and servicing operations.

(2) 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 March 31, 2022 and 2021 , we eliminated $2.4 million and $0.5 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, respectively.

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

Gain on Exchange Offers, net

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

As a result of the exchange offer, we exchanged 153,325 shares of our 8.25% Series A Cumulative Redeemable Preferred Stock ("Series A Preferred Stock") and 350,609 shares of our 8.00% Series B Cumulative Redeemable Preferred Stock ("Series B Preferred Stock") for a total of 937,462 shares of common stock.

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

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

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

There were no exchange offers transacted during the three months ended March 31, 2022.

There were no exchange offers completed during the three months ended June 30, 2022.

Six Months Ended June 30, 2022 compared to the Six Months Ended June 30, 2021

The table below presents certain information from our consolidated statements of operations for the six months ended June 30, 2022 and 2021 (in thousands).

Six Months Ended

June 30, 2022 June 30, 2021 Increase/(Decrease)

Statement of Operations Data:

Net Interest Income

Interest income $ 72,827 $ 26,347 $ 46,480

Interest expense 39,295 9,355 29,940

Total Net Interest Income 33,532 16,992 16,540

Other Income/(Loss)

Net interest component of interest rate swaps (4,853) (2,314) (2,539)

Net realized gain/(loss) 9,091 336 8,755

Net unrealized gain/(loss) (68,771) 29,534 (98,305)

Other income/(loss), net — 37 (37)

Total Other Income/(Loss) (64,533) 27,593 (92,126)

Management fee to affiliate 3,920 3,321 599

Other operating expenses 7,511 7,131 380

Transaction related expenses 9,614 1,718 7,896

Servicing fees 2,019 1,287 732

Total Expenses 23,064 13,457 9,607

Income/(loss) before equity in earnings/(loss) from affiliates (54,065) 31,128 (85,193)

Equity in earnings/(loss) from affiliates (7,860) 27,614 (35,474)

Net Income/(Loss) (61,925) 58,742 (120,667)

Gain on Exchange Offers, net — 472 (472)

Dividends on preferred stock (9,172) (9,613) 441

Net Income/(Loss) Available to Common Stockholders $ (71,097) $ 49,601 $ (120,698)

Interest income

Interest income increased from the six months ended June 30, 2021 to the six months ended June 30, 2022 primarily due to an increase in the size of our portfolio.

The weighted average amortized cost of our GAAP investment portfolio increased by $1.9 billion from $1.6 billion for the six months ended June 30, 2021 to $3.5 billion for the six months ended June 30, 2022.

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

This increase was coupled with an increase of 0.82% in the weighted average yield of our GAAP investment portfolio from 3.35% for the six months ended June 30, 2021 to 4.17% for the six months ended June 30, 2022.

Interest expense

Interest expense increased from the six months ended June 30, 2021 to the six months ended June 30, 2022 primarily due to an increase in the amount of financing on our GAAP investment portfolio, inclusive of securitized debt, during the period.

The weighted average financing balance on our GAAP investment portfolio, inclusive of securitized debt, increased by $1.9 billion from $1.3 billion for the six months ended June 30, 2021 to $3.2 billion for the six months ended June 30, 2022.

The increase was driven by the issuance of securitized debt as well as financing added on purchases of Non-Agency Loans and Agency-

Eligible Loans during the period.

This was coupled with an increase of 1.09% in the weighted average financing rate on our GAAP investment portfolio, inclusive of securitized debt, from 1.39% for the six months ended June 30, 2021 to 2.48% for the six months ended June 30, 2022.

Net interest component of interest rate swaps

As of June 30, 2022, we held an interest rate swap portfolio with a notional value of $1.4 billion, a weighted average receive-variable rate of 1.42%, and a weighted average pay-fix rate of 1.84%.

As of June 30, 2021, we held an interest rate swap portfolio with a notional value of $0.8 billion, a weighted average receive-variable rate of 0.17%, and a weighted average pay-fix rate of 0.74%.

Net realized gain/(loss)

The following table presents a summary of net realized gain/(loss) for the six months ended June 30, 2022 and 2021 (in thousands).

Six Months Ended

June 30, 2022 June 30, 2021

Sales of residential mortgage loans and loans transferred to or sold from Other assets $ (35) $ 7,390

Sales of real estate securities (34,672) (4,882)

Settlement of derivatives and other instruments 43,798 732

Sales of commercial loans — (2,904)

Total Net realized gain/(loss) $ 9,091 $ 336

Net unrealized gain/(loss)

The following table presents a summary of net unrealized gain/(loss) for the six months ended June 30, 2022 and 2021 (in thousands).

Six Months Ended

June 30, 2022 June 30, 2021

Residential mortgage loans $ (296,969) $ 15,170

Real estate securities 6,092 (4,266)

Securitized debt 181,696 (2,902)

Derivatives 40,410 12,686

Commercial loans — 8,954

Excess mortgage servicing rights — (108)

Total Net unrealized gain/(loss) $ (68,771) $ 29,534

Management fee to affiliate

Other operating expenses

The following table presents a summary of Other operating expenses broken out between non-investment related expenses and investment related expenses for the six months ended June 30, 2022 and 2021 (in thousands).

Six Months Ended

June 30, 2022 June 30, 2021

Non Investment Related Expenses

Affiliate expense reimbursement - Operating expenses (1) $ 2,810 $ 2,250

Professional fees 937 1,705

D&O insurance 654 788

Directors' compensation 337 335

Other 471 414

Total Non Investment Related Expenses 5,209 5,492

Investment Related Expenses

Affiliate expense reimbursement - Deal related expenses 376 329

Residential mortgage loan asset management fees 1,182 772

Other 744 538

Total Investment Related Expenses 2,302 1,639

Total Other operating expenses $ 7,511 $ 7,131

(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 waived reimbursable expenses is included within the "Affiliated expense reimbursement - Operating expenses" line item above.

Transaction related expenses

Transaction related expenses increased from the six months ended June 30, 2021 to the six months ended June 30, 2022 primarily as a result of the upfront expenses on the five securitizations completed during the six months ended June 30, 2022, as compared with one completed during the six months ended June 30, 2021.

Servicing fees

Servicing fees increased from the six months ended June 30, 2021 to the six months ended June 30, 2022 primarily due to an increase in the weighted average cost of our GAAP residential mortgage loan portfolio.

The weighted average cost of our GAAP residential mortgage loan portfolio increased by $2.7 billion from $0.6 billion for the six months ended June 30, 2021 to $3.3 billion for the six months ended June 30, 2022 resulting from purchases of Non-Agency Loans and Agency-Eligible Loans.

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, 2022 June 30, 2021

MATT Non-QM Loans $ (1,259) $ 15,921

Land Related Financing 948 1,250

Re/Non-Performing Loans (169) 6,817

AG Arc (7,380) 3,634

Equity in earnings/(loss) from affiliates

$ (7,860) $ 27,614

The below table further disaggregates our "Equity in earnings/(loss) from affiliates" line item on our consolidated statements of operations (in thousands).

Six Months Ended

June 30, 2022 June 30, 2021

Interest income $ 3,151 $ 9,873

Interest expense 574 1,383

Total Net Interest Income 2,577 8,490

Net realized gain/(loss) (7) 1,496

Net unrealized gain/(loss) (2,820) 14,897

Total Other Income/(Loss) (2,827) 16,393

After-tax earnings/(loss) at AG Arc (1) 1,892 5,078

Net unrealized gain/(loss) on investment in AG Arc (5,158) 443

Elimination of gains on loans sold to MITT (2) (4,114) (1,887)

Total AG Arc Earnings/(Loss) (7,380) 3,634

Other operating expenses 230 903

Equity in earnings/(loss) from affiliates

$ (7,860) $ 27,614

(1) The earnings/(loss) at AG Arc during the six months ended June 30, 2022 were primarily the result of $3.5 million related to changes in the fair value of the MSR portfolio held by Arc Home, offset by $(1.6) million of losses related to Arc Home's lending and servicing operations.

The earnings/(loss) at AG Arc during the six months ended June 30, 2021 were primarily the result of $6.3 million of 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.

(2) 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.

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

Gain on Exchange Offers, net

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

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

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

There were no exchange offers completed during the six months ended June 30, 2022.

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.

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Book value per common share (1) $ 11.48 $ 14.64

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

The table below sets forth the net interest margin and leverage ratio on our investment portfolio as of March 31, 2022 and March 31, 2021 and a reconciliation to the net interest margin and leverage ratio on our GAAP investment portfolio.

March 31, 2022

The table below sets forth the net interest margin and leverage ratio on our investment portfolio as of June 30, 2022 and June 30, 2021 and a reconciliation to the net interest margin and leverage ratio on our GAAP investment portfolio.

June 30, 2022

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

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Leverage Ratio (c) 7.0x (d) 2.7x

March 31, 2021

June 30, 2021

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

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

We define Core Earnings, a non-GAAP financial measure, as Net Income/(loss) available to common stockholders excluding (i) (a) unrealized gains/(losses) on loans, real estate securities, 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, disposition, or securitization of our investments, (iii) accrued deal-related performance fees payable to 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, and (vi) any gains/(losses) associated with exchange transactions on our common and preferred stock.

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, and (vi) any gains/(losses) associated with exchange transactions on our common and preferred stock.

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

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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.

A reconciliation of "Net Income/(loss) available to common stockholders" to Core Earnings for the three months ended March 31, 2022 and 2021 is set forth below (in thousands, except per share data).

A reconciliation of "Net Income/(loss) available to common stockholders" to Core Earnings for the three and six months ended June 30, 2022 and 2021 is set forth below (in thousands, except per share data).

Three Months Ended

March 31, 2022

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

June 30, 2022 June 30, 2021

Net Income/(loss) available to common stockholders $ (53,309) $ 10,918 $ (71,097) $ 49,601

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Core Earnings, per Diluted Share (4) $ 0.08 $ — $ 0.06 $ 0.24

(1) For the three months ended March 31, 2022 and 2021, total transaction related expenses and deal related performance fees included $5.9 million and $(0.2) million, respectively, recorded within the "Transaction related expenses" line item and $0.2 million and $0.2 million, respectively, recorded within the "Interest expense" line item, which relates to the amortization of deferred financing costs.

(2) For the three months ended March 31, 2022 and 2021, $4.4 million or $0.18 per share and $2.6 million or $0.18 per share, respectively, of realized and unrealized changes in the fair value of Arc Home's net mortgage servicing rights and corresponding derivatives were excluded from Core Earnings, net of deferred tax expense.

Additionally, for the three months ended March 31, 2022 and 2021, $(2.5) million or $(0.10) per share and $0.6 million or $0.04 per share, respectively, of unrealized changes in the fair value of our investment in Arc Home were excluded from Core Earnings.

(1) For the three months ended June 30, 2022 and 2021, total transaction related expenses and deal related performance fees included $3.8 million and $1.9 million, respectively, recorded within the "Transaction related expenses" line item and $0.2 million and $0.1 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, 2022 and 2021, total transaction related expenses and deal related performance fees included $9.6 million and $1.7 million, respectively, recorded within the "Transaction related expenses" line item and $0.5 million and $0.3 million, 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, 2022 and 2021, $2.3 million or $0.10 per share and $(1.5) million or $(0.10) per share, respectively;

and for the six months ended June 30, 2022 and 2021, $6.8 million or $0.29 per share and $1.1 million or $0.07 per share, respectively, of realized and unrealized changes in the fair value of Arc Home's net mortgage servicing rights and corresponding derivatives were excluded from Core Earnings, net of deferred tax expense.

Additionally, for the three months ended June 30, 2022 and 2021, $(2.7) million or $(0.12) per share and $(0.1) million or $(0.01) per share, respectively;

and for the six months ended June 30, 2022 and 2021, $(5.2) million or $(0.22) per share and $0.4 million or $0.03 per share, respectively, of unrealized changes in the fair value of our investment in Arc Home were excluded from Core Earnings.

(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 months ended March 31, 2022 and 2021, we eliminated $2.4 million or $0.10 per share and $0.5 million or $0.03 per share 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.

For the three months ended June 30, 2022 and 2021, we eliminated $1.8 million or $0.07 per share and $1.4 million or $0.09 per share, and for the six months ended June 30, 2022 and 2021, we eliminated $4.1 million or $0.17 per share and $1.9 million or $0.13 per share 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.

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

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We finance our acquired loans through various financing lines on a short-term basis and securitize the loans to obtain long-term, non-recourse, non-mark-to-market financing as market conditions permit.

We are also currently investing in 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.

We may also invest in 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.

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 deploy capital.

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

The following table presents a summary of the allocated equity of our investment portfolio as of March 31, 2022 and December 31, 2021 ($ in thousands).

The following table presents a summary of the allocated equity of our investment portfolio as of June 30, 2022 and December 31, 2021 ($ in thousands).

Allocated Equity Percent of Equity

March 31, 2022 December 31, 2021 March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021 June 30, 2022 December 31, 2021

Residential Investments $ 451,107 $ 459,058 94.2 % 80.5 %

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Total $ 478,665 $ 570,380 100.0 % 100.0 %

The following table presents a summary of our investment portfolio as of March 31, 2022 and December 31, 2021 and a reconciliation to our GAAP Investment Portfolio ($ in thousands).

The following table presents a summary of our investment portfolio as of June 30, 2022 and December 31, 2021 and a reconciliation to our GAAP Investment Portfolio ($ in thousands).

Fair Value Percent of Investment Portfolio

Fair Value Leverage Ratio (a)

March 31, 2022 December 31, 2021 March 31, 2022 December 31, 2021 March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021 June 30, 2022 December 31, 2021 June 30, 2022 December 31, 2021

Residential Investments $ 3,669,980 $ 2,725,889 89.7 % 84.6 % 2.0x 2.1x

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(b) Refer to the "Financing activities" section below for an aggregate breakout of leverage.

The following table presents a reconciliation of our Investment Portfolio to our GAAP Investment Portfolio as of March 31, 2022 and December 31, 2021 ($ in thousands).

March 31, 2022

The following table presents a reconciliation of our Investment Portfolio to our GAAP Investment Portfolio as of June 30, 2022 and December 31, 2021 ($ in thousands).

June 30, 2022

December 31, 2021

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

(4) As of March 31, 2022 and December 31, 2021, this line item primarily includes retained tranches from securitizations.

(5) As of March 31, 2022 and December 31, 2021, this line item includes Non-QM interest-only bonds.

(4) As of June 30, 2022 and December 31, 2021, this line item primarily includes retained tranches from securitizations.

(5) As of June 30, 2022 and December 31, 2021, this line item includes Non-QM interest-only bonds.

(6) Represents long positions in Fixed Rate 30 Year TBA.

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The following table presents the fair value of the loans and securities in our residential investments and a reconciliation to our GAAP residential portfolio (in thousands).

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Residential mortgage loans (1) $ 3,592,367 $ 2,663,992

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

(2) Includes Non-Agency Loans and Re/Non-Performing Loans held in securitized form.

(2) Includes Non-Agency Loans, Agency-Eligible Loans, and Re/Non-Performing Loans held in securitized form.

Residential mortgage loans

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

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

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

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" and "Securitized residential mortgage loans, at fair value" line items on our consolidated balance sheets.

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 "Securitized residential mortgage loans, at fair value" and "Residential mortgage loans, at fair value" line items on our consolidated balance sheets.

Non-Agency RMBS

The following table presents the fair value of our Non-Agency RMBS by credit rating as of March 31, 2022 and December 31, 2021 (in thousands).

Credit Rating - Non-Agency RMBS (1) March 31, 2022 December 31, 2021

The following table presents the fair value of our Non-Agency RMBS by credit rating as of June 30, 2022 and December 31, 2021 (in thousands).

Credit Rating - Non-Agency RMBS (1) June 30, 2022 December 31, 2021

A $ 4,663 $ —

B 10,207 10,528

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

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

State Fair Value Percentage State Fair Value Percentage

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Florida 5,202 6.7 % Florida 3,661 5.9 %

New Jersey 1,846 3.1 % New Jersey 1,684 2.7 %

Washington 3,214 4.1 % New Jersey 1,684 2.7 %

Texas 3,149 4.1 % Texas 1,511 2.4 %

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Total $ 77,613 100.0 % Total $ 61,897 100.0 %

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

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

Fair Value CPR (1)

Agency RMBS March 31, 2022 December 31, 2021 March 31, 2022 December 31, 2021

Agency RMBS June 30, 2022 December 31, 2021 June 30, 2022 December 31, 2021

30 Year Fixed Rate $ — $ 495,713 — % 6.1 %

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Total/Weighted Average $ 21,474 $ 495,713 14.4 % 6.1 %

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

Investments in debt and equity of affiliates

The below table details our investments in debt and equity of affiliates as of March 31, 2022 and December 31, 2021 (in thousands).

March 31, 2022 December 31, 2021

Assets Liabilities Equity Assets Liabilities Equity

MATT Non-QM Loans (1) $ 41,270 $ (28,086) $ 13,184 $ 45,837 $ (30,471) $ 15,366

Land Related Financing (2) 13,569 — 13,569 16,891 — 16,891

Re/Non-Performing Loans 8,045 (5,408) 2,637 9,298 (5,538) 3,760

Total Investments excluding AG Arc 62,884 (33,494) 29,390 72,026 (36,009) 36,017

AG Arc, at fair value 54,121 — 54,121 53,435 — 53,435

Cash and Other assets/(liabilities) 4,340 (765) 3,575 3,698 (1,127) 2,571

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

Investments in debt and equity of affiliates

(1) As of March 31, 2022 and December 31, 2021, MATT primarily holds retained tranches from past securitizations which continue to reduce in size due to ongoing principal repayments and we do not expect to acquire additional investments within this equity method investment.

(2) Land Related Financing continues to reduce in size due to ongoing principal repayments and we do not expect to originate new loans within this equity method investment.

See Note 10 to the "Notes to Consolidated Financial Statements (unaudited)" for a breakout of the "Investments in debt and equity of affiliates" line item on our consolidated balance sheets.

Financing activities

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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 March 31, 2022 and December 31, 2021.

We had outstanding financing arrangements with six and five counterparties as of June 30, 2022 and December 31, 2021, respectively.

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

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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.

As of March 31, 2022, we are in compliance with all of our financial covenants.

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.

As of June 30, 2022, we are in compliance with all of our financial covenants.

We also use securitized debt to finance our loan portfolio.

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Recourse and non-recourse financing

The below table provides detail on the breakout between recourse and non-recourse financing as of March 31, 2022 and December 31, 2021 (in thousands).

March 31, 2022

The below table provides detail on the breakout between recourse and non-recourse financing as of June 30, 2022 and December 31, 2021 (in thousands).

June 30, 2022

December 31, 2021

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

March 31, 2022 Leverage Stockholders’ Equity Leverage Ratio

June 30, 2022 Leverage Stockholders’ Equity Leverage Ratio

GAAP Securitized debt, at fair value $ 2,467,766

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Restricted cash posted on Financing arrangements (8,202)

Financing arrangements on sales that have not yet settled (66,352)

Purchase price payable on loans 794

GAAP Leverage $ 3,362,529 $ 478,665 7.0x

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Restricted cash posted on Financing arrangements (4,951)

Purchase price payable on Agency-Eligible Loans 87

Purchase price payable on loans 87

GAAP Leverage $ 2,772,094 $ 570,380 4.9x

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

We did not have any undistributed taxable income as of March 31, 2022.

We did not have any undistributed taxable income as of June 30, 2022.

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 three months ended March 31, 2022 and 2021.

The following table details our common stock dividends declared during the six months ended June 30, 2022 and 2021.

Declaration Date Record Date Payment Date Cash Dividend Per Share

3/18/2022 3/31/2022 4/29/2022 $ 0.21

6/15/2022 6/30/2022 7/29/2022 0.21

Declaration Date Record Date Payment Date Cash Dividend Per Share

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

The following tables detail our preferred stock dividends declared and paid during the three months ended March 31, 2022 and 2021.

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

The following tables detail our preferred stock dividends declared and paid during the six months ended June 30, 2022 and 2021.

2022 Cash Dividend Per Share

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2/18/2022 2/28/2022 3/17/2022 $ 0.51563 $ 0.50 $ 0.50

5/2/2022 5/31/2022 6/17/2022 0.51563 0.50 0.50

Total $ 1.03126 $ 1.00 $ 1.00

2021 Cash Dividend Per Share

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

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

Total $ 1.03126 $ 1.00 $ 1.00

Liquidity and capital resources

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

At March 31, 2022, we had $137.9 million of liquidity, which consisted of $50.5 million of cash, $48.5 million of unencumbered Agency RMBS that we held as of quarter end, and $38.9 million of unencumbered Agency RMBS which we sold during March 2022, but which settled in April 2022.

At June 30, 2022, we had $94.2 million of liquidity, which consisted of $88.6 million of cash and $5.6 million of unencumbered Agency RMBS.

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

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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 assets.

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.

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.

There can be no assurance that we will maintain sufficient levels of liquidity to meet any margin calls.

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We may misjudge the appropriate amount of our liquidity by maintaining excessive liquidity, which would lower our investment returns, or by maintaining insufficient liquidity, which may force us to liquidate assets into potentially unfavorable market conditions and harm our results of operations and financial condition.

Further, an unexpected rise in interest rates and a corresponding fall in

the fair value of our securities may also force us to liquidate assets under difficult market conditions, thereby harming our results of operations and financial condition, in an effort to maintain sufficient liquidity to meet increased margin calls.

Further, an unexpected rise in interest rates and a corresponding fall in the fair value of our securities may also force us to liquidate assets under difficult market conditions, thereby harming our results of operations and financial condition, in an effort to maintain sufficient liquidity to meet increased margin calls.

Similar to the margin calls that we receive on our borrowing agreements, we may also receive margin calls on our derivative instruments when their fair value declines.

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Refer to the "Liquidity risk – derivatives" section of Item 3 below for a further discussion on margin.

The below details changes to our cash, cash equivalents, and restricted cash for the three months ended March 31, 2022 and 2021 ($ in thousands).

Three Months Ended

March 31, 2022 March 31, 2021 Change

The below details changes to our cash, cash equivalents, and restricted cash for the six months ended June 30, 2022 and 2021 ($ in thousands).

Six Months Ended

June 30, 2022 June 30, 2021 Change

Cash and cash equivalents and restricted cash, Beginning of Period $ 100,229 $ 62,318 $ 37,911

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Cash and cash equivalents and restricted cash, End of Period $ 140,650 $ 87,715 $ 52,935

(1) Cash provided by operating activities is primarily attributable to net interest income less operating expenses for the three months ended March 31, 2022.

(2) Cash used in investing activities for the three months ended March 31, 2022 was primarily attributable to purchases of investments, offset by sales of investments and principal repayments on investments.

(3) Cash provided by financing activities for the three months ended March 31, 2022 was primarily attributable to issuance of securitized debt, offset by net repayments of financing arrangements and dividend payments.

(1) Cash provided by operating activities is primarily attributable to net interest income less operating expenses for the six months ended June 30, 2022.

(2) Cash used in investing activities for the six months ended June 30, 2022 was primarily attributable to purchases of investments, offset by sales of investments and principal repayments on investments.

(3) Cash provided by financing activities for the six months ended June 30, 2022 was primarily attributable to issuance of securitized debt, offset by net repayments of financing arrangements and dividend payments.

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 did not repurchase any shares under the Repurchase Program during the three months ended March 31, 2022 and 2021.

Approximately $11.0 million of common stock remained authorized for future share repurchases under the Repurchase Program as of March 31, 2022.

On February 22, 2021, our Board of Directors authorized a stock repurchase program pursuant to which our Board of Directors granted a repurchase authorization to acquire shares of our Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock having an aggregate value of up to $20.0 million.

During the three and six months ended June 30, 2022, we repurchased 1.4 million shares for $11.0 million under the 2015 Repurchase Program.

No shares were repurchased under the 2015 Repurchase Program during the three and six months ended June 30, 2021.

As of June 30, 2022, the amount authorized under the 2015 Repurchase Program was fully utilized.

On August 3, 2022, our Board of Directors authorized the 2022 Repurchase Program to repurchase up to $15 million of our outstanding common stock on substantially the same terms as the 2015 Repurchase Program.

The 2022 Repurchase Program does not have an expiration date and permits us to repurchase our shares through various methods, including open market repurchases, privately negotiated block transactions and Rule 10b5-1 plans.

We may repurchase shares of our common stock from time to time in compliance with SEC regulations and other legal requirements.

The extent to which we repurchases our shares, and the timing, manner, price, and amount of any such repurchases, will depend upon a variety of factors including market conditions and other corporate considerations as determined by management, as well as the limits of the 2022 Repurchase Program and our liquidity and business strategy.

The 2022 Repurchase Program does not obligate us to acquire any particular amount of shares and may be modified or discontinued at any time.

As of the date of this report, the full $15 million

authorized amount remains available for repurchase under the 2022 Repurchase Program.

On February 22, 2021, our Board of Directors authorized a stock repurchase program (the "Preferred Repurchase Program") pursuant to which our Board of Directors granted a repurchase authorization to acquire shares of our Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock having an aggregate value of up to $20.0 million.

No share repurchases under the Preferred Repurchase Program have been made since its authorization.

Shares of stock repurchased by us under any repurchase program, if any, will be cancelled and, until reissued by us, will be deemed to be authorized but unissued shares of its stock as required by Maryland law.

The cost of the acquisition by us 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.

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 March 31, 2022, we did not issue any shares of common stock under the Equity Distribution Agreements.

For the three months ended March 31, 2021, we issued 0.7 million shares of common stock under the Equity Distribution Agreements for net proceeds of approximately $10.0 million.

For the three and six months ended June 30, 2022, we did not issue any shares of common stock under the Equity Distribution Agreements.

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.

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

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Management agreement

On June 29, 2011, we entered into a management agreement with our Manager, pursuant to which our Manager is entitled to receive a management fee and the reimbursement of certain expenses.

The management agreement, as amended, provides for payment to the Manager of a management fee, an incentive fee, and reimbursements of certain expenses incurred by the Manager or its affiliates on behalf of us.

Management fee

The management fee is calculated and payable quarterly in arrears in an amount equal to 1.50% of our Stockholders’ Equity, per annum.

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

For the three months ended March 31, 2022 and 2021, we incurred management fees of approximately $2.0 million and $1.7 million, respectively.

As of March 31, 2022 and December 31, 2021, we have recorded management fees payable of $2.0 million and $1.8 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.

We are required to reimburse our Manager or its affiliates for operating expenses incurred by our Manager or its affiliates on our behalf, including certain salary expenses and other expenses relating to legal, accounting, due diligence and other services.

Our reimbursement obligation is not subject to any dollar limitation;

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.

For the three months ended March 31, 2022 and 2021, we have incurred $2.5 million and $1.5 million, respectively, representing a reimbursement of expenses which are recorded within the "Other operating expenses" and "Transaction related expenses" line items on the consolidated statements of operations.

As of March 31, 2022 and December 31, 2021, we recorded a reimbursement payable to the Manager of $1.9 million and $2.1 million, respectively.

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

For the three months ended March 31, 2021, we reduced our expense reimbursement amount by $0.2 million.

For the three and six months ended June 30, 2022, we incurred management fees of $2.0 million and $3.9 million, respectively.

For the three and six months ended June 30, 2021, we incurred management fees of $1.7 million and $3.3 million, respectively.

As of June 30, 2022 and December 31, 2021, we have recorded management fees payable of $2.0 million and $1.8 million, respectively.

Incentive fee

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All other terms and conditions of the management agreement continued without change.

Expense Reimbursement

Our reimbursement obligation is not subject to any dollar limitation;

however, reimbursements are 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.

For the three and six months ended June 30, 2022, we incurred $2.4 million and $4.9 million, respectively, representing reimbursements of expenses which are recorded within the "Other operating expenses" and "Transaction related expenses" line items on the consolidated statements of operations.

For the three and six months ended June 30, 2021, we incurred $1.1 million and $2.7 million, respectively, representing reimbursements of expenses which are recorded within the "Other operating expenses" and "Transaction related expenses" line items on the consolidated statements of operations.

As of June 30, 2022 and December 31, 2021, we recorded reimbursements payable to our Manager or its affiliates of $2.0 million and $2.1 million, respectively.

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

For the three and six months ended June 30, 2021, we reduced our expense reimbursement amount by $0.2 million and $0.4 million, respectively.

Share-based compensation

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

As of March 31, 2022, 591,532 shares of common stock were available to be awarded under the Equity Incentive Plan.

As of March 31, 2022, we have granted an aggregate of 75,134 shares of restricted common stock to our independent directors under our 2020 Equity Incentive Plan, all of which have vested.

As of June 30, 2022, 582,820 shares of common stock were available to be awarded under the Equity Incentive Plan.

Since inception of the 2020 Equity Incentive Plan and through June 30, 2022, we have granted an aggregate of 83,846 shares of restricted common stock to our independent directors under our 2020 Equity Incentive Plan, all of which have vested.

The AG Mortgage Investment Trust, Inc.

2021 Manager Equity Incentive Plan (the "2021 Manager Plan"), which became effective on April 7, 2021 following the approval of our stockholders at our 2021 annual meeting of stockholders, provides for a maximum of 573,425 shares of common stock that may be subject to awards thereunder to our Manager.

As of March 31, 2022, there were no shares or awards issued under the 2021 Manager Plan.

Following the execution of the third amendment to our management agreement in November 2021 related to the incentive fee, the Company's compensation committee no longer expects to continue its historical practice of making periodic equity grants to the Manager pursuant to the 2021 Manager Equity Incentive Plan.

As of June 30, 2022, there were no shares or awards issued under the 2021 Manager Plan.

Following the execution of the third amendment to our management agreement in November 2021 related to the incentive fee, our compensation committee no longer expects to continue its historical practice of making periodic equity grants to the Manager pursuant to the 2021 Manager Equity Incentive Plan.

Unfunded commitments

See Note 12 of the "Notes to Consolidated Financial Statements (unaudited)" for detail on our commitments as of March 31, 2022.

See Note 12 of the "Notes to Consolidated Financial Statements (unaudited)" for detail on our commitments as of June 30, 2022.

Off-balance sheet arrangements

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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.

Refer to Note 7 to the "Notes to Consolidated Financial Statements (unaudited)" for additional detail on TBAs as of March 31, 2022.

For additional information on our commitments as of March 31, 2022 , 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.

Refer to Note 7 to the "Notes to Consolidated Financial Statements (unaudited)" for additional detail on TBAs as of June 30, 2022.

For additional information on our commitments as of June 30, 2022 , refer to Note 12 of the "Notes to Consolidated Financial Statements (unaudited)." Exclusive of our investments in debt and equity of affiliates described above, we do not expect these commitments, taken as a whole, to be significant to, or to have a material impact on, our overall liquidity or capital resources or our operations.

Critical accounting policies

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

Although our estimates contemplate conditions as of March 31, 2022 and how we expect them to change in the future, it is reasonably possible that actual conditions could be different than anticipated in arriving at those estimates, which could materially affect reported amounts of assets, liabilities and accumulated other comprehensive income at the date of the consolidated financial statements and the reported amounts of income, expenses and other comprehensive income during the periods presented.

Although our estimates contemplate conditions as of June 30, 2022 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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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.

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

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)."

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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, 2021 and for the three months ended March 31, 2022, we determined that we maintained compliance with the 40% Test requirements.

We closely monitor our holdings to ensure continuing and ongoing compliance with the 40% Test.

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

Accordingly, in order to maintain our exempt status, we monitor our subsidiaries' compliance with Section 3(c)(5)(C) of the Investment Company Act, which exempts from the definition of "investment company" entities primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.

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" (the "55% Test") and at least another 25% in additional qualifying assets or in "real estate-related" assets (with no more than 20% comprised of miscellaneous assets) (the "80% Test").

As of December 31, 2021 and for the three months ended March 31, 2022, we determined that our subsidiaries maintained compliance with both the 55% Test and the 80% Test requirements.

Accordingly, in order to maintain our exempt status, we closely monitor our subsidiaries' holdings to ensure continuing and ongoing compliance with Section 3(c)(5)(C) of the Investment Company Act, which exempts from the definition of "investment company" entities primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.

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" (the "55% Test") and at least another 25% in additional qualifying assets or in "real estate-related" assets (with no more than 20% comprised of miscellaneous assets) (the "80% Test").

As of December 31, 2021 and June 30, 2022, we determined that our subsidiaries maintained compliance with both the 55% Test and the 80% Test requirements.

We intend to conduct our business so as to maintain our qualification as a REIT under the Code by satisfying the asset, income, distribution and other REIT requirements.

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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