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Item 2. Management’s Discussion and Analysis

2024-05-07 compared with 2023-11-09 · 325 added, 475 removed, 526 unchanged (60% of the section changed)

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as "we," "us," the "Company," or "our," unless we specifically state otherwise or the context indicates otherwise.

We refer to our external manager, AG REIT Management, LLC, as our "Manager," and we refer to the direct parent company of our Manager, Angelo, Gordon & Co., L.P., as "Angelo Gordon."

We refer to our external manager, AG REIT Management, LLC, as our "Manager," and we refer to the direct parent company of our Manager, Angelo, Gordon & Co., L.P., as "TPG Angelo Gordon."

The following discussion contains forward looking statements and should be read in conjunction with our consolidated financial statements and the accompanying notes to our consolidated financial statements, which are included in Item 1 of this report, as well as the information contained in our Annual Report on Form 10-K for the year ended December 31, 2023, and any subsequent filings.

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We make forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in this report that are subject to substantial known and unknown risks and uncertainties.

These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, returns, results of operations, plans, yields, objectives, the composition of our portfolio, actions by governmental entities, including the Federal Reserve, and the potential effects of actual and proposed legislation on us, and our views on certain macroeconomic trends, and the impact of the novel coronavirus ("COVID-19").

When we use the words "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "may" or similar expressions, we intend to identify forward-looking statements.

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

• the persistence of labor shortages, supply chain imbalances, the Israel-Hamas conflict, Russia’s invasion of Ukraine, inflation, lingering impact of the COVID-19 pandemic, and the potential for an economic recession;

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

• changes in our business and investment strategy;

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

• our ability to close anticipated loan sale transactions on the terms and timing anticipated or at all;

• on the 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;

• our ability to realize all of the expected benefits of the acquisition of Western Asset Mortgage Capital Corporation ("WMC") or that such benefits may take longer to realize than expected (including because we incurred significant costs associated with such acquisition);

• our ability to refinance the remaining portion of the senior convertible notes assumed in the WMC acquisition in the manner anticipated or at all;

• 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 and Agency RMBS;

• conditions in the market for commercial investments, including the Company's ability to successfully realize the commercial investments acquired from WMC within the timeframe anticipated or at all;

• legislative and regulatory actions by the U.S.

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• our ability to qualify for an exemption from registration under the Investment Company Act of 1940, as amended (the "Investment Company Act").

• our ability to successfully complete our proposed merger with Western Asset Mortgage Capital Corporation and/or realize all of the expected benefits or that such benefits may take longer to realize than expected (including because we incur significant costs associated with such merger).

We caution investors not to rely unduly on any forward-looking statements, which speak only as of the date made, and urge you to carefully consider the risks noted above and identified under the captions "Risk Factors," and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 and any subsequent filings.

New risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us.

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All forward-looking statements that we make, or that are attributable to us, are expressly qualified by this cautionary notice.

Third Quarter 2023 Executive Summary

First Quarter 2024 Executive Summary

Financial Highlights

• $10.84 Book Value per share and $10.58 Adjusted Book Value per share;

• $(0.33) of Net Income/(Loss) Available to Common Stockholders per diluted common share and $0.10 of Earnings Available for Distribution per diluted common share;

• $0.55 of Net Income/(Loss) Available to Common Stockholders per diluted common share and $0.21 of Earnings Available for Distribution ("EAD") per diluted common share;

◦ Refer to the "Earnings Available for Distribution" section below for further details related to our reconciliation of Net Income/(Loss) Available to Common Stockholders to EAD;

• 10.8x GAAP Leverage Ratio and 1.4x Economic Leverage Ratio;

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Investment Activity

• Purchased Non-Agency Loans with a fair value of $291.2 million;

• Purchased Agency-Eligible Loans with a fair value of $414.6 million;

• Sold Non-Agency Loans for gross proceeds of $73.8 million;

• Sold Re/Non-Performing Loans for gross proceeds of $68.7 million;

• Sold Agency RMBS for gross proceeds of $149.1 million.

• The table below summarizes the fair value of purchases and proceeds from sales of investments during the quarter ended March 31, 2024 (in thousands).

Investment Purchases Sales

Non-Agency Loans $ 14,214 $ —

Agency-Eligible Loans 271,084 —

Agency RMBS 127,724 —

Non-Agency RMBS (1) — 19,318

Total $ 413,022 $ 19,318

(1) Includes sales of $16.8 million of Non-Agency RMBS sold from the legacy portfolio acquired from Western Asset Mortgage Capital Corporation ("WMC").

Financing Activity

• 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 Agency-Eligible Loans with a total unpaid principal balance of $318.3 million;

◦ Securitized Non-Agency Loans with a total unpaid principal balance of $406.4 million;

• Utilized proceeds from the sale of Re/Non-Performing Loans to pay off $50.6 million of Securitized Debt;

◦ Generated net proceeds of approximately $28.5 million from the sale of Re/Non-Performing Loans, paydown of the associated Securitized Debt, and financing arrangements obtained on the retained interest in the remaining collateral.

Strategic Acquisition

• Entered into an Agreement and Plan of Merger with Western Asset Mortgage Capital Corporation ("WMC"), pursuant to which WMC will merge with and into AGMIT Merger Sub, LLC, a wholly owned subsidiary of ours ("Merger Sub"), with Merger Sub surviving.

The Merger is expected to close in the fourth quarter of 2023.

For additional information, see "—Proposed Western Asset Mortgage Capital Corporation Merger" below.

• Executed a rated securitization of Agency-Eligible Loans with a total unpaid principal balance of $377.5 million, converting recourse financing with mark-to-market margin calls to non-recourse financing without mark-to-market margin calls;

• Issued $34.5 million principal amount of 9.500% senior notes due 2029 in a public offering generating net proceeds of approximately $32.8 million;

• Repurchased $7.1 million of principal amount of outstanding Legacy WMC Convertible Notes.

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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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.

We finance our acquired loans through various financing lines on a short-term basis and utilize Angelo Gordon's proprietary securitization platform to secure long-term, non-recourse, non-mark-to-market financing as market conditions permit.

We finance our acquired loans through various financing lines on a short-term basis and utilize TPG Angelo Gordon's proprietary securitization platform to secure long-term, non-recourse, non-mark-to-market financing as market conditions permit.

Through our ownership in Arc Home, we also have exposure to mortgage banking activities.

Arc Home is a multi-channel licensed mortgage originator and servicer primarily engaged in the business of originating and selling residential mortgage loans while retaining the mortgage servicing rights associated with certain loans that it originates.

Our investment portfolio (which excludes our ownership in Arc Home) includes Residential Investments and Agency RMBS.

On December 6, 2023, we acquired Western Asset Mortgage Capital Corporation, an externally managed mortgage REIT that focused on investing in, financing and managing a portfolio of residential mortgage loans, real estate related securities, and commercial real estate loans.

Through this acquisition, we increased our investment portfolio by $1.2 billion, which primarily consisted of Securitized Non-Agency Loans.

For more information, refer to the "WMC Acquisition" section below.

Our investment portfolio (which excludes our ownership in Arc Home) primarily includes Residential Investments and Agency RMBS.

Currently, our Residential Investments primarily consist of newly originated Non-Agency Loans and Agency-Eligible Loans, which we refer to as our target assets.

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

As of September 30, 2023, the Company's investment portfolio consisted of the following:

As of March 31, 2024, our investment portfolio consisted of the following Residential Investments and Agency RMBS:

Asset Class Description

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

Non-Agency Residential Mortgage-Backed Securities ("RMBS") (2)

• Non-Agency RMBS represent fixed- and floating-rate RMBS issued by entities other than U.S.

GSEs or agencies of the U.S.

The mortgage loan collateral consists of either Non-Agency Loans or Agency-Eligible Loans.

Non-Agency RMBS (2)

• Non-Agency Residential Mortgage-Backed Securities ("RMBS") represent fixed- and floating- rate RMBS issued by entities other than U.S.

GSEs or agencies of he U.S.

Agency RMBS (2)

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Government such as Ginnie Mae.

(1) These investments are included in the "Securitized residential mortgage loans, at fair value," "Residential mortgage loans, at fair value," and "Residential mortgage loans held for sale, at fair value" line items on the consolidated balance sheets.

(1) These investments are included in the "Securitized residential mortgage loans, at fair value" and "Residential mortgage loans, at fair value" line items on the consolidated balance sheets.

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

In addition, our investment portfolio includes commercial loans, commercial-mortgage backed securities ("CMBS") and other securities (collectively, the "Legacy WMC Commercial Investments") that were acquired in the WMC acquisition.

The Legacy WMC commercial loans primarily include first lien commercial mortgage loan participations and are included in the "Commercial loans, at fair value" line item on the consolidated balance sheets.

The Legacy WMC CMBS primarily include fixed-rate and floating-rate CMBS, secured by, or evidencing an ownership interest in, a single commercial mortgage loan or a pool of commercial mortgage loans, and are included in the "Real estate securities, at fair value" line item on the consolidated balance sheets.

We expect to either hold the Legacy WMC Commercial Investments until maturity or opportunistically exit these investments.

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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We also operate our business in a manner that permits us to maintain our exemption from registration under the Investment Company Act.

Proposed Western Asset Mortgage Capital Corporation Merger

On August 8, 2023, we entered into an Agreement and Plan of Merger (the "Merger Agreement") with WMC, Merger Sub and, solely for the purposes set forth in the Merger Agreement, our Manager.

Pursuant to, and subject to the terms and conditions set forth in the Merger Agreement, WMC will merge with and into Merger Sub, with Merger Sub surviving (the "Merger").

On November 7, 2023, our stockholders approved the issuance of our common stock in connection with the Merger with WMC at a special stockholders meeting.

No further approval by our stockholders is required for the Merger.

On November 7, 2023, WMC announced it adjourned its special stockholders meeting relating to the Merger until December 5, 2023, at 9:00 a.m., Pacific Time, online in a virtual-only meeting format, due to a lack of quorum and to allow further solicitation of proxies from WMC common stockholders for the approval of the Merger at such special stockholders meeting.

The Merger is expected to close in the fourth quarter of 2023, subject to the satisfaction of certain customary conditions, including approval of WMC's common stockholders.

Under the terms of the Merger Agreement, at the effective time of the Merger (the "Effective Time"), each outstanding share of WMC common stock will be converted into the right to receive the following (the "Per Share Merger Consideration"):

(i) 1.498 shares, or approximately 9.2 million shares in aggregate, of our common stock;

and (ii) the per share portion of a cash payment from our Manager equal to the lesser of $7.0 million or approximately 9.9% of the aggregate Per Share Merger Consideration.

Cash will be paid in lieu of any fractional shares of our common stock that would otherwise have been received as a result of the Merger.

In addition, on August 8, 2023, we and our Manager entered into an amendment (the “MITT Management Agreement Amendment”) to the existing management agreement, pursuant to which (i) the base management fee will be reduced by $0.6 million for the first four quarters (i.e., resulting in an aggregate $2.4 million waiver of base management fees) following the Effective Time, beginning with the fiscal quarter in which the Effective Time occurs, and (ii) our Manager will waive its right to seek reimbursement from us for any expenses otherwise reimbursable by us under the management agreement in an amount equal to the excess, if any, of $7.0 million over the aggregate cash portion of the Per Share Merger Consideration paid by our Manager to the holders of WMC common stock in the Merger.

The MITT Management Agreement Amendment will become effective automatically upon the closing of the Merger, and will have no force and effect if the Merger does not close.

Further, in the Merger Agreement, we have agreed to take all necessary corporate action so that upon and after the Effective Time, the size of our Board of Directors will be increased by two members, and M.

WMC Acquisition

On December 6, 2023, (the "Closing Date") we completed our acquisition of WMC.

On the Closing Date, WMC merged with and into AGMIT Merger Sub, LLC, a Delaware limited liability company and our wholly owned subsidiary ("Merger Sub"), with Merger Sub continuing as the surviving company (the "Merger").

As contemplated by the Agreement and Plan of Merger,

dated as of August 8, 2023 (the “Merger Agreement”), the certificate of merger was filed with the Secretary of State of the State of Delaware, and the Merger was effective at 8:15 a.m., Eastern Time, on the Closing Date (the "Effective Time").

Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the Effective Time, each outstanding share of WMC common stock, par value $0.01 per share (“WMC Common Stock”), was converted into the right to receive the following (the “Per Share Merger Consideration”):

(i) from us, 1.498 shares of our common stock;

and (ii) from our Manager, a cash amount equal to $0.92 (the “Per Share Additional Manager Consideration”).

No fractional shares of our common stock were issued in the Merger, and the value of any fractional interests to which a former holder of WMC Common Stock was otherwise entitled was paid in cash.

In addition, on August 8, 2023, we and our Manager entered into an amendment (the “MITT Management Agreement Amendment”) to our existing management agreement, pursuant to which (i) the base management fee will be reduced by $0.6 million for the first four quarters following the Effective Time, beginning with the fiscal quarter in which the Effective Time occurs (i.e., resulting in an aggregate $2.4 million waiver of base management fees), and (ii) our Manager will waive its right to seek reimbursement from us for any expenses otherwise reimbursable by us under the management agreement in an amount equal to approximately $1.3 million, which is the excess of $7.0 million over the aggregate Per Share Additional Manager Consideration paid by our Manager to the holders of WMC Common Stock under the Merger Agreement.

Additionally, each outstanding share of WMC’s restricted common stock and each WMC restricted stock unit (each, a “WMC Equity Award”) vested in full immediately prior to the Effective Time and, as of the Effective Time, was considered outstanding for all purposes of the Merger Agreement, including the right to receive the Per Share Merger Consideration, except that WMC Equity Awards granted to certain members of the WMC board of directors at WMC’s 2023 annual stockholders’ meeting (collectively, the “2023 WMC Director Awards”) were treated as follows:

Christian Mitchell and Lisa G.

Quateman (the "WMC Director Designees") will be appointed to our Board of Directors.

We have further agreed to nominate the WMC Director Designees to our Board of Directors at the next annual meeting following the Effective Time.

Concurrently with the execution of the Merger Agreement, WMC terminated its merger agreement (the "TPT Merger Agreement") with Terra Property Trust, Inc.

In connection with such termination, we, on behalf of WMC, paid to TPT a termination fee of $3.0 million as required by the TPT Merger Agreement (the "TPT Termination Fee").

Our Manager and Angelo Gordon

We are externally managed by our Manager, a subsidiary of Angelo Gordon, a diversified credit and real estate investing platform within TPG Inc.

Quateman, who were appointed to the our board of directors as of the Effective Time, the 2023 WMC Director Awards were equitably adjusted effective as of the Effective Time into awards relating to shares of our common stock that have the same value, vesting terms and other terms and conditions as applied to the corresponding WMC restricted stock units immediately prior to the Effective Time and (ii) for the other members of the WMC board of directors, the 2023 WMC Director Awards accelerated and vested pro-rata effective as of immediately prior to the Effective Time based on a fraction, the numerator of which was 166 (the number of days between the grant date and the Closing Date) and the denominator of which was 365, and the remaining unvested portion of such 2023 WMC Director Awards was cancelled without any consideration.

The issuance of shares of our common stock to the former stockholders of WMC was registered under the Securities Act, pursuant to a registration statement on Form S-4 (File No.

333-274319), as amended, filed by MITT with the Securities and Exchange Commission (the “SEC”) and declared effective on September 29, 2023 (the “Registration Statement”).

The joint proxy statement/prospectus included in the Registration Statement contains additional information about the Merger, the Merger Agreement and the transactions contemplated thereby.

Pursuant to the Merger Agreement, approximately 9.2 million shares of our common stock were issued in connection with the Merger to former WMC common stockholders, and former WMC common stockholders owned approximately 31% of the common equity of MITT as the combined company following the consummation of the Merger.

Our Manager and TPG Angelo Gordon

We are externally managed by AG REIT Management, LLC, a Delaware limited liability company (the "Manager"), a wholly-owned subsidiary of TPG Angelo Gordon, a diversified credit and real estate investing platform within TPG Inc.

TPG) is a leading global alternative asset management firm.

On November 1, 2023, TPG completed the previously announced acquisition of TPG Angelo Gordon (the "TPG Transaction"), pursuant to which TPG Angelo Gordon, including our Manager, became indirect subsidiaries of TPG.

Pursuant to the management agreement with our Manager, the closing of the TPG Transaction resulted in an assignment of the management agreement.

The independent directors of our Board of Directors unanimously consented to such assignment on July 31, 2023 in advance of the TPG Transaction closing.

There were no changes to the management agreement in connection with the TPG Transaction and the assignment of the management agreement became effective upon the closing of the TPG Transaction.

Pursuant to the terms of our management agreement, our Manager provides us with our management team, including our officers, along with appropriate support personnel.

All of our officers are employees of Angelo Gordon or its affiliates.

All of our officers are employees of TPG Angelo Gordon or its affiliates.

We do not have any employees.

Our Manager is at all times subject to the supervision and oversight of our Board of Directors and has only such functions and authority as our Board of Directors delegates to it.

Our Manager has delegated to Angelo Gordon the overall responsibility with respect to our Manager’s day-to-day duties and obligations arising under our management agreement.

On November 1, 2023, TPG completed the previously announced acquisition of Angelo Gordon (the "TPG Transaction"), pursuant to which Angelo Gordon, including our Manager, became indirect subsidiaries of TPG.

Pursuant to our management agreement, the closing of the TPG Transaction resulted in an assignment of the management agreement.

Our independent directors unanimously consented to such assignment on July 31, 2023 in advance of the TPG Transaction closing.

There were no changes to the management agreement in connection with the TPG Transaction and the assignment of the management agreement became effective upon the closing of the TPG Transaction.

Through our relationship with our Manager, we benefit from the expertise and relationships that Angelo Gordon has established which provides us with resources to generate attractive risk-adjusted returns for our stockholders.

Our Manager has delegated to TPG Angelo Gordon the overall responsibility with respect to our Manager’s day-to-day duties and obligations arising under our management agreement.

TPG Angelo Gordon is a registered investment adviser under the Investment Advisers Act of 1940, as amended.

Through our relationship with our Manager, we benefit from the expertise and relationships that TPG Angelo Gordon has established which provides us with resources to generate attractive risk-adjusted returns for our stockholders.

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.

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.

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

Market Conditions

Financial markets continued to experience volatility during the third quarter of 2023 due to multiple factors including the impacts of inflation, the path of monetary policy and interest rates, the U.S.

debt ceiling, market uncertainty from the ongoing conflicts in Ukraine and Israel and other geopolitical risks.

The Federal Reserve has continued with monetary policy tightening resulting in benchmark interest rates increasing further during the third quarter.

From June through October, the 10-year U.S.

treasury yield increased more than 100 basis points and the 30-year fixed rate mortgage is currently at 7.8%.

The increase in longer-term U.S.

treasury yields support the restrictive monetary policy of the Federal Reserve, potentially reducing the need

for additional increases in short-term rates;

however, it is possible longer-term rates may remain elevated for much longer.

The second quarter ended with the spread between the 2-year and 10-year U.S.

treasury yields peaking at approximately 106 basis points inverted.

At the end of the third quarter, the curve inversion was only 48 basis points.

While the Federal Reserve’s policy tightening has slowed the U.S economy, growth in GDP, low unemployment and strength in consumer spending persist.

As such, it is unknown how long monetary policy will remain at the current restrictive levels.

RMBS spreads tightened during the third quarter, despite the broader weakness in risk markets.

The first quarter of 2024 experienced a consistent theme of volatility in the financial markets due to the overall market uncertainty related to inflation, the path of monetary policy and interest rates.

The Federal Reserve continued to hold the federal funds target rate steady at the March 2024 Federal Open Market Committee meeting after raising the short-term federal funds rate eleven times between March 2022 and July 2023.

The March Consumer Price Index indicated inflation was 3.5% year over year which increased from prior monthly readings.

In addition, the U.S.

Economy continues to show signs of durability with a strong March employment report issued by the U.S.

Bureau of Labor Statistics and the unemployment rate remaining low at 3.8%.

As a result of the overall strong first quarter inflation and employment reports, the 10-year U.S.

treasury yield increased by approximately 33 basis points from 3.88% as of December 2023 to 4.21% as of the end of the first quarter and the 30-year fixed rate mortgage increased by approximately 20 basis points to 6.8% from the start of the year.

Furthermore, treasury yields continued to increase during April 2024.

Although at the end of 2023 market participants began pricing in rate cuts as soon as March 2024, the recent inflation reading has indicated the timing of any potential rate cuts would likely be pushed towards the back half of 2024 causing market participants to adjust expectations once again.

As a result, it remains unclear when the Federal Reserve will initiate rate cuts and it is possible longer-term rates may remain elevated for longer than anticipated.

The quarter ended with the spread between the 2-year and 10-year U.S.

treasury yields at approximately 43 basis points inverted, a slight increase from 37 basis points to end 2023.

While the Federal Reserve’s policy tightening has slowed, the Federal Reserve has indicated that it will continue to seek economic data that will provide greater confidence that inflation is moving sustainably toward the target rate of 2% to support future rate reductions.

Although benchmark rates increased during the first quarter 2024, RMBS spreads tightened sharply during this period amid strong investor appetite for U.S.

housing and mortgage credit.

Trends in credit spreads on credit risk transfer ("CRT") assets are generally utilized by market participants as a proxy for evaluating credit related assets given the observability of transactions.

CRT tranches tightened sharply, with lower credit tranches tightening as much as 200 basis points while the middle of the capital structure contracted by up to 100 basis points.

Senior Non-QM spreads changed minimally while BBB Non-QM tightened by 25 basis points, and legacy RMBS spreads were approximately 10 basis points tighter.

Spreads are significantly tighter year-to-date as well, mostly by 50 to 100 basis points, though pockets of CRT tightened as much as 200 to 300 basis points or more.

Despite this positive performance over 2023, most of the sector remains up to 50 to 100 basis points wide of February 2022 levels, offering a runway for additional potential price improvement.

Although the third quarter experienced spread tightening, the risk-off sentiment of October 2023 has begun to drive widening across credit spreads.

Compared to the second quarter of 2023, RMBS issuance was roughly flat at $15.5 billion in the third quarter as a decline in CRT issuance was offset by increases in Jumbo 2.0 and Single-Family Rental production.

Year-over-year, issuance fell 47% from $29 billion in the third quarter of 2022.

Year-to-date activity in 2023 totaled $49.5 billion, down approximately 62% year-over-year amid limited origination activity and higher securitization coupons.

Various reports from bank research departments expect issuance for the full year 2023 to be between $60 to $70 billion, down from $127 billion in 2022 and $213 billion in 2021.

Home prices continued to rally as the national S&P/Case-Shiller Home Price Index was up 5.3% through the first seven months of the year, exceeding the prior peak in June 2022 by 0.6%, according to the latest available data.

Of the 20 markets tracked by Case-Shiller, 12 were at their all-time high, with most of the laggards from the west coast, including San Francisco and Seattle, which were below their peaks by 10.8% and 10.1%, respectively.

Prevailing mortgage rates ended October 2023 at 7.8%, reaching the highest level since 2000 and making the strength in home prices all the more remarkable.

That said, sentiment among home builders and home buyers declined off 2023 highs, particularly after the second breach of 7% mortgage rates this year.

The volatile new home sales index gained some share against existing homes throughout the year, however new sales fell from 739,000 to 675,000 in the latest data for August.

The current “lock-in effect”, or disincentive for existing homeowners to sell their homes because their current mortgage rate is well below current market rates, has hampered existing sales volume to 4 million units.

Total listings were 1.1 million in August, in-line with the previous few months but down significantly from pre-pandemic years, such as 1.91 million in 2019.

New listings, which offer a timelier view of current supply, have totaled only 2.95 million through August 2023, that compares to 3.6 to 4.1 million in the first eight months of 2018-2020 and 4.0 to 4.3 million in 2021 and 2022.

CRT tranches were tighter by 50 to 200 basis points and the sector’s credit curve significantly flattened.

Senior Non-QM spreads were around 40 basis points tighter during the first quarter 2024, and BBB- and BB- rated Non-QM spreads were 70 and 120 basis points tighter, respectively.

First quarter 2024 total returns were between 2% and 4% for mezzanine CRT tranches, 4% and 6% for subordinate CRT tranches, and 1% to 2% for legacy RMBS.

Primary RMBS issuance was off to a strong start during the first quarter 2024, totaling nearly $30 billion, an increase of 56% and 73% against the first quarter 2023 and the fourth quarter 2023, respectively.

Securitizations backed by Non-QM and Prime Jumbo collateral collectively comprised over half of the issuances during the quarter.

Second-lien collateral, including closed-end loans and Home Equity Lines of Credit, totaled $2.6 billion, or 9% of new issuance, and CRT made up approximately 11% of the activity.

Primary issuance in 2023 totaled just $69 billion, amid a lull in mortgage origination activity after almost $140 billion of new bonds were issued in 2022.

The S&P CoreLogic Case-Shiller U.S.

National Home Price Index was higher by 6% year over year in January 2024.

However, home prices were little changed over the last several months, with the Index just below its October 2023 peak and in-line with the prior peak in June 2022.

Home price performance remains mixed depending on geography.

Since June 2022, home price appreciation in certain west coast Metropolitan Statistical Areas (“MSAs”) as well as Phoenix, Dallas and Denver, was 6% to 12% lower while home price appreciation in MSAs such as Chicago, Detroit, Miami and New York City were 3% to 6% higher.

A survey of research shows varied home price expectations in 2024 ranging from a decline of 3% to an increase of 5.5%.

Prevailing mortgage rates slightly increased to 6.8% at the end of March 2024 and continued to rise in the first weeks of the second quarter 2024.

This is up from 6.6% at the end of December 2023 however still below the peak of 7.8% at the end of October 2023, the highest level since November 2000.

Nationally, the average effective mortgage rate outstanding was 3.8% as of December 2023, but has crept higher from 3.3% in March 2022, reflecting the inclusion of higher-rate originations in the second half of 2022 and during 2023.

The well-publicized “lock-in effect,” or disincentive for existing homeowners to sell their homes because their current mortgage rate is well below current market rates, remains in full force with most estimates showing a very small share of outstanding mortgages with an economic incentive to refinance.

According to the National Association of Realtors, total existing home listings were 1.07 million in February 2024, remaining in line with most of 2023 but down significantly from pre-pandemic years.

On a national level, new listings were slightly higher in February 2024 against levels in January and February 2023 but remain weak overall.

Despite prevailing mortgage rates at multi-decade highs, sufficient demand continues to exist to support the housing market.

The percentage of listings off the market within two weeks remains elevated at 38%, and the median days on market is within the range established over the last three years.

While homeownership affordability is near all-time lows, housing supply continues to be constrained and demand for housing remains evident as borrowers reset in a higher-rate environment.

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This presentation of our investment portfolio is consistent with how our management team evaluates the business, and we believe this presentation, when considered with the GAAP presentation, provides supplemental information useful for investors in evaluating our investment portfolio and financial condition.

See Note 10 to the "Notes to Consolidated Financial Statements

(unaudited)" for a discussion of investments in debt and equity of affiliates.

See Note 10 to the "Notes to Consolidated Financial Statements (unaudited)" for a discussion of investments in debt and equity of affiliates.

See below for further terms used when describing our investment portfolio.

• Our "Investment portfolio" includes our Residential Investments and Agency RMBS, inclusive of TBAs.

• Our "Investment portfolio" includes our Residential Investments, Agency RMBS, inclusive of TBAs, and Legacy WMC Commercial Investments.

• Our "Residential Investments" refer to our residential mortgage loans and Non-Agency RMBS.

◦ "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 issued under the GCAT shelf, as well as RMBS collateralized by Non-Agency Loans and Agency-Eligible Loans.

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

◦ "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).

• "Real estate securities" refers to our Non-Agency RMBS and Agency RMBS, inclusive of TBAs, as well as Legacy WMC CMBS and Other Securities that were acquired in the WMC acquisition.

• Our "Legacy WMC Commercial Investments" refer to the commercial loans and CMBS that we acquired in the WMC acquisition.

We expect to either hold the Legacy WMC Commercial Investments until maturity or opportunistically exit these investments.

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

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

• Our "GAAP Investment portfolio" includes our GAAP Residential Investments, Agency RMBS, and Legacy WMC Commercial Investments and Other Securities.

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

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Per share amounts for book value are calculated using all outstanding common shares in accordance with GAAP as of quarter-end.

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Book value per common share $ 10.84 $ 10.46

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Our primary source of net income or loss available to common stockholders is our net interest income, inclusive of our cost or benefit 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, 2023 compared to the Three Months Ended September 30, 2022

The table below presents certain information from our consolidated statements of operations for the three months ended September 30, 2023 and 2022 (in thousands).

Three Months Ended March 31, 2024 compared to the Three Months Ended March 31, 2023

The table below presents certain information from our consolidated statements of operations for the three months ended March 31, 2024 and 2023 (in thousands).

Three Months Ended

September 30, 2023 September 30, 2022 Increase/(Decrease)

March 31, 2024 March 31, 2023 Increase/(Decrease)

Statement of Operations Data:

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

Interest income increased from the three months ended September 30, 2022 to the three months ended September 30, 2023 due to an increase in the size of our portfolio resulting from purchases of Non-Agency Loans and Agency-Eligible Loans during the period, as well as an increase in the weighted average yield.

The following table presents a summary of the weighted average amortized cost and the weighted average yield on our GAAP investment portfolio for the three months ended September 30, 2023 and 2022 ($ in millions).

Interest income increased from the three months ended March 31, 2023 to the three months ended March 31, 2024 primarily as a result of an increased investment portfolio resulting from the acquisition of WMC in December 2023 along with purchases of Non-Agency Loans and Agency-Eligible Loans during the period and an increase in the weighted average yield of our investment portfolio.

The following table presents a summary of the weighted average amortized cost of and the weighted average yield on our GAAP investment portfolio for the three months ended March 31, 2024 and 2023 ($ in millions).

Three Months Ended

September 30, 2023 September 30, 2022 Increase/(Decrease)

March 31, 2024 March 31, 2023 Increase/(Decrease)

Weighted average amortized cost of our GAAP investment portfolio

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Interest expense

Interest expense is calculated based on the actual financing rate and the outstanding financing balance, inclusive of our financing arrangements and securitized debt, on our GAAP investment portfolio.

Interest expense increased from the three months ended September 30, 2022 to the three months ended September 30, 2023 due to an increase in the weighted average financing rate during the period resulting from increased interest rates and an increase in the amount of financing on our GAAP investment portfolio primarily resulting from the issuance of securitized debt.

The following table presents a summary of the weighted average financing balance and the weighted average financing rate on our GAAP investment portfolio for the three months ended September 30, 2023 and 2022 ($ in millions).

Interest expense is inclusive of our financing cost related to our financing arrangements on our GAAP investment portfolio, securitized debt, Legacy WMC Convertible Notes, and Senior Unsecured Notes.

Interest expense increased from the three months ended March 31, 2023 to the three months ended March 31, 2024 due to an increase in the GAAP financing balance outstanding resulting from the assumption of financing through the acquisition of WMC in December 2023 along with the issuance of securitized debt during the period and an increase in the weighted average financing rate.

Three Months Ended

September 30, 2023 September 30, 2022 Increase/(Decrease)

March 31, 2024 March 31, 2023 Increase/(Decrease)

Weighted average GAAP financing balance

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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.

We recorded income on the net interest component of interest rate swaps during the three months ended September 30, 2023 as a result of our swap portfolio being in a net receive position during the entire period, compared with an expense for the three months ended September 30, 2022 as a result of our swap portfolio being in a net pay position during part of the period.

The following table presents a summary of our interest rate swap portfolio as of September 30, 2023 and 2022 ($ in millions).

September 30, 2023 September 30, 2022 Increase/(Decrease)

We recorded income on the net interest component of interest rate swaps during the three months ended March 31, 2024 and 2023 as a result of our swap portfolio being in a net receive position.

Interest income increased from the three months ended March 31, 2023 to the three months ended March 31, 2024 primarily as a result of an increase in the net weighted average receive rate during the three months ended March 31, 2024 compared with the three months ended March 31, 2023.

The following table presents a summary of our interest rate swap portfolio as of March 31, 2024 and 2023 ($ in millions).

March 31, 2024 March 31, 2023 Increase/(Decrease)

Interest rate swap notional value

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Net realized gain/(loss)

The following table presents a summary of Net realized gain/(loss) for the three months ended September 30, 2023 and 2022 (in thousands).

The realized gain during the three months ended September 30, 2023 was driven by unwinding pay-fix, receive-variable interest rate swaps which were previously held at unrealized gains as a result of rising interest rates.

The following table presents a summary of Net realized gain/(loss) for the three months ended March 31, 2024 and 2023 (in thousands).

The realized loss during the three months ended March 31, 2024 was primarily driven by unwinding pay-fix, receive-variable interest rate swaps which were held at unrealized losses partially offset by gains on the sale of certain Non-Agency RMBS acquired in the WMC acquisition and gains on the settlement of forward purchase commitments.

Three Months Ended

September 30, 2023 September 30, 2022

March 31, 2024 March 31, 2023

Sales of residential mortgage loans and loans transferred to or sold from Other assets $ 48 $ (9,902)

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Net unrealized gain/(loss)

The following table presents a summary of net unrealized gain/(loss) for the three months ended September 30, 2023 and 2022 (in thousands).

During the three months ended September 30, 2023, unrealized losses on residential mortgage loans and real estate securities and unrealized gains on securitized debt were primarily the result of rising interest rates during the period.

The following table presents a summary of Net unrealized gain/(loss) for the three months ended March 31, 2024 and 2023 (in thousands).

During the three months ended March 31, 2024, there were unrealized gains on residential mortgage loans and derivatives offset by unrealized losses on securitized debt.

Three Months Ended

September 30, 2023 September 30, 2022

March 31, 2024 March 31, 2023

Residential mortgage loans $ 23,079 $ 97,201

Commercial loans 111 —

Real estate securities (116) 4,127

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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 consistent from the three months ended September 30, 2022 to the three months ended September 30, 2023.

In connection with the WMC acquisition, we and our Manager entered into the MITT Management Agreement Amendment pursuant to which the base management fee will be reduced by $0.6 million for the first four quarters following the transaction closing, beginning with the fiscal quarter in which the transaction closing occurs (i.e., resulting in an aggregate $2.4 million waiver of base management fees).

During the three months ended March 31, 2024, the base management fee was reduced by $0.6 million.

This was offset by an increase in stockholders' equity as calculated pursuant to the management agreement as a result of the WMC acquisition.

Non-investment related expenses

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

The following table presents a summary of our non-investment related expenses for the three months ended September 30, 2023 and 2022 (in thousands).

The following table presents a summary of our non-investment related expenses for the three months ended March 31, 2024 and 2023 (in thousands).

Three Months Ended

September 30, 2023 September 30, 2022

March 31, 2024 March 31, 2023

Affiliate reimbursement (1) $ 1,664 $ 1,400

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Total Non-investment related expenses $ 3,114 $ 2,820

(1) For the three months ended March 31, 2024, the Manager agreed to waive its right to receive expense reimbursements of $0.3 million pursuant to the MITT Management Agreement Amendment executed in connection with the Merger.

Investment related expenses

Investment related expenses are primarily comprised of servicing fees, asset management fees, and certain investment related expenses reimbursable to the Manager.

Investment related expenses are primarily comprised of servicing fees, asset management fees, trustee fees, and certain investment related expenses reimbursable to the Manager or its affiliates.

We are required to reimburse our Manager or its affiliates for operating expenses incurred by our Manager or its affiliates on our behalf associated with our investment portfolio.

The following table presents a summary of our investment related expenses for the three months ended September 30, 2023 and 2022 (in thousands).

The following table presents a summary of our investment related expenses for the three months ended March 31, 2024 and 2023 (in thousands).

Three Months Ended

September 30, 2023 September 30, 2022

March 31, 2024 March 31, 2023

Affiliate reimbursement $ 114 $ 102

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Total Investment related expenses $ 3,283 $ 2,326

(1) The acquisition of WMC in December 2023 resulted in an increase in our residential mortgage loan portfolio of $1.1 billion of unpaid principal balance, which contributed to an increase in servicing fees and other residential loan related expenses.

Transaction related expenses

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

On August 8, 2023, we entered into a Merger Agreement with WMC and, as a result, we have incurred certain expenses related to the pending Merger during the current period.

Transaction related expenses increased from the three months ended September 30, 2022 to the three months ended September 30, 2023 primarily due to $4.9 million of expenses recorded related to the pending Merger with WMC, which includes the $3.0 million TPT Termination Fee we paid to TPT on WMC's behalf in connection with its termination of the TPT Merger Agreement.

Historically, transaction related expenses have included expenses primarily associated with purchasing and securitizing residential mortgage loans as well as certain other transaction and performance related fees associated with assets we invest in.

Transaction related expenses decreased from the three months ended March 31, 2023 to the three months ended March 31, 2024 primarily due to less expenses associated with the securitization executed in the first quarter of 2024 compared to the securitization executed in the first quarter of 2023.

Equity in earnings/(loss) from affiliates

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Three Months Ended

September 30, 2023 September 30, 2022

March 31, 2024 March 31, 2023

MATT Non-QM Securities (1) $ 2,205 $ 1,625

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Equity in earnings/(loss) from affiliates

$ 188 $ (1,626)

(1) For the three months ended September 30, 2023, the earnings/(loss) generated from our investment in MATT Non-QM Securities consisted of interest income of $1.1 million, interest expense of $(0.2) million, and net unrealized gains of $1.7 million.

For the three months ended September 30, 2022, the earnings/(loss) generated from our investment in MATT Non-QM Securities consisted of interest income of $1.0 million, interest expense of $(0.3) million, and net unrealized gains of $0.7 million.

(1) For the three months ended March 31, 2024, the earnings/(loss) generated from our investment in MATT Non-QM Securities consisted of interest income of $0.8 million, net unrealized gains of $1.5 million, and other expenses of $(0.1) million.

For the three months ended March 31, 2023, the earnings/(loss) generated from our investment in MATT Non-QM Securities consisted of net interest income of $0.9 million, net unrealized gains of $0.8 million, and other expenses of $(0.1) million.

(2) Refer to the table below for additional detail on the earnings/(loss) generated from our investment in AG Arc.

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Three Months Ended

September 30, 2023 September 30, 2022

Interest income $ 1,410 $ 1,748

Interest expense 239 314

Total Net Interest Income 1,171 1,434

Net unrealized gain/(loss) 1,946 1,355

After-tax earnings/(loss) at AG Arc (1) (109) (1,303)

Net unrealized gain/(loss) on investment in AG Arc (2) (1,911) (1,208)

Elimination of gains on loans sold to MITT (3) (800) (1,755)

Total AG Arc Earnings/(Loss) (2,820) (4,266)

Other operating expenses 109 149

Equity in earnings/(loss) from affiliates

$ 188 $ (1,626)

(1) The earnings/(loss) at AG Arc during the three months ended September 30, 2023 were primarily the result of $(0.4) million of losses related to changes in the fair value of the MSR portfolio held by Arc Home, offset by $0.3 million of income related to Arc Home's lending and servicing operation.

The earnings/(loss) at AG Arc during the three months ended September 30, 2022 were primarily the of $(1.9) million of losses related to Arc Home's lending and servicing operations, offset by $0.6 million related to changes in the fair value of the MSR portfolio held by Arc Home.

(2) As of September 30, 2023, the fair value of our investment in Arc Home was calculated using a valuation multiple of 0.89x of book value, which was reduced from 0.94x of book value as of June 30, 2023.

As of September 30, 2022, the fair value of our investment in Arc Home was calculated using a valuation multiple of 0.94x of book value, which was reduced from 0.96x of book value as of June 30, 2022.

(3) 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 10 to the "Notes to Consolidated Financial Statements (unaudited)" for more information on this accounting policy.

Nine Months Ended September 30, 2023 compared to the Nine Months Ended September 30, 2022

The table below presents certain information from our consolidated statements of operations for the nine months ended September 30, 2023 and 2022 (in thousands).

Nine Months Ended

September 30, 2023 September 30, 2022 Increase/(Decrease)

Statement of Operations Data:

Net Interest Income

Interest income $ 182,802 $ 123,017 $ 59,785

Interest expense 148,309 73,994 74,315

Total Net Interest Income 34,493 49,023 (14,530)

Other Income/(Loss)

Net interest component of interest rate swaps 5,025 (5,849) 10,874

Net realized gain/(loss) 9,171 60,072 (50,901)

Net unrealized gain/(loss) (257) (123,032) 122,775

Total Other Income/(Loss) 13,939 (68,809) 82,748

Management fee to affiliate 6,190 5,984 206

Non-investment related expenses 7,848 7,710 138

Investment related expenses 6,905 6,889 16

Transaction related expenses 9,700 14,939 (5,239)

Total Expenses 30,643 35,522 (4,879)

Income/(loss) before equity in earnings/(loss) from affiliates 17,789 (55,308) 73,097

Equity in earnings/(loss) from affiliates 642 (9,486) 10,128

Net Income/(Loss) 18,431 (64,794) 83,225

Dividends on preferred stock (13,758) (13,758) —

Net Income/(Loss) Available to Common Stockholders $ 4,673 $ (78,552) $ 83,225

Interest income

Interest income increased from the nine months ended September 30, 2022 to the nine months ended September 30, 2023 due to an increase in the size of our portfolio resulting from purchases of Non-Agency Loans and Agency-Eligible Loans during the period, as well as an increase in the weighted average yield.

The following table presents a summary of the weighted average amortized cost and the weighted average yield on our GAAP investment portfolio for the nine months ended September 30, 2023 and 2022 ($ in millions).

Nine Months Ended

September 30, 2023 September 30, 2022 Increase/(Decrease)

Weighted average amortized cost of our GAAP investment portfolio

$ 4,825 $ 3,764 $ 1,061

Weighted average yield on our GAAP investment portfolio 5.05 % 4.36 % 0.69 %

Interest expense

Interest expense increased from the nine months ended September 30, 2022 to the nine months ended September 30, 2023 due to an increase in the weighted average financing rate during the period resulting from increased interest rates and an increase in the amount of financing on our GAAP investment portfolio primarily resulting from the issuance of securitized debt.

The following table presents a summary of the weighted average financing balance of and the weighted average financing rate on our GAAP investment portfolio for the nine months ended September 30, 2023 and 2022 ($ in millions).

Nine Months Ended

September 30, 2023 September 30, 2022 Increase/(Decrease)

Weighted average GAAP financing balance

$ 4,445 $ 3,442 $ 1,003

Weighted average financing rate on our GAAP investment portfolio 4.45 % 2.87 % 1.58 %

Net interest component of interest rate swaps

We recorded income on the net interest component of interest rate swaps during the nine months ended September 30, 2023 as a result of our swap portfolio being in a net receive position during the entire period, compared with an expense for the nine months ended September 30, 2022 as a result of our swap portfolio being in a net pay position during part of the period.

The following table presents a summary of our interest rate swap portfolio as of September 30, 2023 and 2022 ($ in millions).

September 30, 2023 September 30, 2022 Increase/(Decrease)

Interest rate swap notional value

$ 405 $ 684 $ (279)

Weighted average receive-variable rate

5.31 % 2.98 % 2.33 %

Weighted average pay-fix rate

3.99 % 2.65 % 1.34 %

Net weighted average (pay)/receive rate

1.32 % 0.33 % 0.99 %

Net realized gain/(loss)

The following table presents a summary of Net realized gain/(loss) for the nine months ended September 30, 2023 and 2022 (in thousands).

The realized gain during the nine months ended September 30, 2023 was driven by unwinding pay-fix, receive-variable interest rate swaps which were previously held at unrealized gains as a result of rising interest rates.

This was offset by realized losses on sales of residential mortgage loans.

Nine Months Ended

September 30, 2023 September 30, 2022

Sales of residential mortgage loans and loans transferred to or sold from Other assets $ (11,409) $ 696

Sales of real estate securities (38) (34,504)

Settlement of derivatives and other instruments 20,618 93,880

Total Net realized gain/(loss) $ 9,171 $ 60,072

Net unrealized gain/(loss)

The following table presents a summary of net unrealized gain/(loss) for the nine months ended September 30, 2023 and 2022 (in thousands).

During the nine months ended September 30, 2023, unrealized losses on residential mortgage loans and real estate securities and unrealized gains on securitized debt were primarily the result of rising interest rates during the period.

The unrealized losses recorded on derivatives for the nine months ended September 30, 2023 primarily represent the reclassification of unrealized gains to realized gains related to unwinding interest rate swaps during the period.

Nine Months Ended

September 30, 2023 September 30, 2022

Residential mortgage loans $ (13,217) $ (451,532)

Real estate securities (2,282) 3,529

Securitized debt 25,346 306,302

Derivatives (10,104) 18,669

Total Net unrealized gain/(loss) $ (257) $ (123,032)

Management fee to affiliate

Our management fee is based upon a percentage of our Stockholders’ Equity.

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 the nine months ended September 30, 2022 to the nine months ended September 30, 2023 primarily due to an increase in our Stockholder's Equity as calculated pursuant to our Management Agreement.

Non-investment related expenses

The following table presents a summary of our non-investment related expenses for the nine months ended September 30, 2023 and 2022 (in thousands).

Nine Months Ended

September 30, 2023 September 30, 2022

Affiliate reimbursement $ 4,200 $ 4,215

Professional Fees 1,505 1,438

D&O insurance 817 963

Directors' compensation 529 505

Other 797 589

Total Non-investment related expenses $ 7,848 $ 7,710

Investment related expenses

The following table presents a summary of our investment related expenses for the nine months ended September 30, 2023 and 2022 (in thousands).

Nine Months Ended

September 30, 2023 September 30, 2022

Affiliate reimbursement $ 360 $ 637

Servicing fees 3,044 3,005

Residential mortgage loan asset management fees 1,981 1,963

Trustee and bank fees 1,106 636

Other 414 648

Total Investment related expenses $ 6,905 $ 6,889

Transaction related expenses

On August 8, 2023, we entered into the Merger Agreement with WMC and, as a result, we have incurred certain expenses related to the pending Merger during the current period.

Transaction related expenses decreased from the nine months ended September 30, 2022 to the nine months ended September 30, 2023 primarily due to less upfront expenses associated with securitizations.

We completed seven securitizations during the nine months ended September 30, 2022 and three securitizations during the nine months ended September 30, 2023.

This was offset by $4.9 million of expenses recorded during the nine months ended September 30, 2023 related to the pending Merger with WMC, which includes the $3.0 million TPT Termination Fee we paid to TPT on WMC's behalf in connection with its termination of the TPT Merger Agreement.

Equity in earnings/(loss) from affiliates

The below tables summarize the components of the "Equity in earnings/(loss) from affiliates" line item on our consolidated statements of operations (in thousands).

Nine Months Ended

September 30, 2023 September 30, 2022

MATT Non-QM Securities (1) $ 4,580 $ 154

Land Related Financing 805 1,248

Re/Non-Performing Securities 249 758

AG Arc (2) (4,992) (11,646)

Equity in earnings/(loss) from affiliates

$ 642 $ (9,486)

(1) For the nine months ended September 30, 2023, the earnings/(loss) generated from our investment in MATT Non-QM Securities consisted of interest income of $3.2 million, interest expense of $(0.5) million, net unrealized gains of $2.1 million, and other operating expenses of $(0.2) million.

For the nine months ended September 30, 2022, the earnings/(loss) generated from our investment in MATT Non-QM Securities consisted of interest income of $2.6 million, interest expense of $(0.8) million, net unrealized losses of $(1.4) million, and other operating expenses of $(0.2) million.

(2) Refer to the table below for additional detail on the earnings/(loss) generated from our investment in AG Arc.

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

Nine Months Ended

September 30, 2023 September 30, 2022

March 31, 2024 March 31, 2023

Interest income $ 1,081 $ 1,760

1 unchanged sentence

Total Net Interest Income 1,009 1,496

Net realized gain/(loss) — (7)

Net unrealized gain/(loss) 1,370 794

Total Other Income/(Loss) 1,861 (1,472)

After-tax earnings/(loss) at AG Arc (1) (116) (2,315)

4 unchanged sentences

Equity in earnings/(loss) from affiliates

$ 642 $ (9,486)

(1) The earnings/(loss) at AG Arc during the nine months ended September 30, 2023 were primarily the result of $(1.6) million of losses related to changes in the fair value of the MSR portfolio held by Arc Home, coupled with $(0.5) million of losses related to Arc Home's lending and servicing operations.

The earnings/(loss) at AG Arc during the nine months ended September 30, 2022 were primarily the result of $4.1 million related to changes in the fair value of the MSR portfolio held by Arc Home, offset by $(3.5) million of losses related to Arc Home's lending and servicing operations.

As of September 30, 2022, the fair value of our investment in Arc Home was calculated using a valuation multiple of 0.94x of book value, which was reduced from 1.06x of book value as of December 31, 2021.

(1) The earnings/(loss) at AG Arc during the three months ended March 31, 2024 were primarily the result of $(0.2) million of losses related to Arc Home's lending and servicing operations, offset by $0.1 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 March 31, 2023 were primarily the result of $(1.6) million related to changes in the fair value of the MSR portfolio held by Arc Home, along with $(0.7) million of losses 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.

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Earnings Available for Distribution

One of our objectives is to generate net income from net interest margin on the portfolio, and management uses Earnings Available for Distribution ("EAD"), as one of several metrics, to help measure our performance against this objective.

One of our objectives is to generate net income from net interest margin on the portfolio, and management uses EAD, 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.

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

We define EAD, 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 as well as transaction related expenses incurred in connection with the pending Merger with WMC, (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 EAD, 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.

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

affiliated entities.

We define EAD, 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 as well as transaction related expenses incurred in connection with the WMC acquisition, (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 EAD, 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 bargain purchase gains recognized.

Items (i) through (vi) 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, disposition, or securitization of an asset and does not view them as being part of its core operations.

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EAD includes 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 EAD for the three and nine months ended September 30, 2023 and 2022 is set forth below (in thousands, except per share data).

A reconciliation of "Net Income/(loss) available to common stockholders" to EAD for the three months ended March 31, 2024 and 2023 is set forth below (in thousands, except per share data).

Three Months Ended

Nine Months Ended

September 30, 2023

September 30, 2022

September 30, 2023 September 30, 2022

March 31, 2024 March 31, 2023

Net Income/(loss) available to common stockholders $ 16,304 $ 7,954

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EAD from equity method investments (2)(3) (254) (339)

Dollar roll income/(loss) — 633 — 1,999

Earnings available for distribution $ 6,125 $ 582

Earnings available for distribution, per Diluted Share $ 0.21 $ 0.03

(1) For the three months ended September 30, 2023 and 2022, total transaction related expenses and deal related performance fees included $7.6 million and $5.3 million, respectively, recorded within the "Transaction related expenses" line item and $9.4 thousand and $0.2 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, 2023 and 2022, total transaction related expenses and deal related performance fees included $9.7 million and $14.9 million, respectively, recorded within the "Transaction related expenses" line item and $0.2 million and $0.7 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, 2023 and 2022, $0.4 million or $0.02 per share and $2.4 million or $0.11 per share, respectively;

and for the nine months ended September 30, 2023 and 2022, $1.2 million or $0.06 per share and $9.2 million or $0.40 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 EAD, net of deferred tax expense or benefit.

Additionally, for the three months ended September 30, 2023 and 2022, $(1.9) million or $(0.09) per share and $(1.2) million or $(0.05) per share, respectively;

and for the nine months ended September 30, 2023 and 2022, $(1.7) million or $(0.08) per share and $(6.4) million or $(0.28) per share, respectively, of unrealized changes in the fair value of our investment in Arc Home were excluded from EAD.

(1) For the three months ended March 31, 2024 and 2023, total transaction related expenses and deal related performance fees included $1.0 million and $1.7 million, respectively, recorded within the "Transaction related expenses" line item and $24 thousand and $0.1 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, 2024 and 2023, $0.9 million or $0.03 per share and $(0.6) million or $(0.03) 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 EAD, net of deferred tax expense or benefit.

Additionally, for the three months ended March 31, 2024 and 2023, $44 thousand or $0.00 per share and $0.2 million or $0.01 per share, respectively, of unrealized changes in the fair value of our investment in Arc Home were excluded from EAD.

(3) EAD 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 September 30, 2023 and 2022, we eliminated $0.8 million or $0.04 per share and $1.8 million or $0.08 per share, respectively;

and for the nine months ended September 30, 2023 and 2022, we eliminated $1.1 million or $0.06 per share and $5.9 million or $0.25 per share, respectively, of intra-entity profits recognized by Arc Home, and also decreased the cost basis of the underlying loans we purchased by the same amount.

For the three months ended March 31, 2024, we eliminated $0.2 million or $0.01 per share of intra-entity profits recognized by Arc Home, and also decreased the cost basis of the underlying loans we purchased by the same amount.

For the three months ended March 31, 2023 we did not eliminate any intra-entity profits recognized by Arc Home as we did not purchase any loans from Arc during the quarter.

Refer to Note 10 to the "Notes to Consolidated Financial Statements (unaudited)" for more information on this accounting policy.

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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.

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.

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.

In December 2023, through our acquisition of WMC, we increased our investment portfolio by $1.2 billion, which primarily consisted of Securitized Non-Agency Loans.

For more information on the WMC acquisition, refer to "WMC Acquisition" above and the section entitled "WMC Acquisition" in Note 1 to the "Notes to Consolidated Financial Statements (unaudited)."

Net interest margin and leverage ratio

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.

portfolio, respectively.

The weighted average yield represents an effective interest rate on our cost basis, 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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Investment portfolio

The following tables present a summary of our investment portfolio, inclusive of net interest margin and leverage ratios, as of September 30, 2023 and a reconciliation of these metrics on our Investment Portfolio to their respective metrics on our GAAP Investment Portfolio ($ in thousands).

September 30, 2023

Investment Securitized Debt Cost of Funds (b) Allocated Equity (c) Net Interest Margin

Instrument Amortized Cost Fair Value Yield (a) Amortized Cost Fair Value Financing Arrangements Leverage Ratio (d)

Residential Investments:

Securitized Non-Agency Loans $ 4,666,088 $ 4,161,749 5.14 % $ 4,135,273 $ 3,718,992 $ 242,865 4.80 % $ 199,892 0.34 % 1.2x

Securitized Re/Non-Performing Loans 204,349 181,622 6.34 % 126,064 112,523 46,568 4.38 % 22,531 1.96 % 2.0x

Non-Agency Loans 90,227 89,649 7.44 % — — 78,300 5.84 % 11,349 1.60 % 6.9x

Agency-Eligible Loans 46,985 46,894 7.10 % — — 43,907 4.83 % 2,987 2.27 % 14.7x

Residential Whole Loans 1,092 2,740 105.46 % — — — — % 2,740 105.46 % N/A

Land Related Financing 493 493 14.50 % — — — — % 493 14.50 % N/A

Non-Agency RMBS 77,090 74,889 17.29 % — — 38,543 5.36 % 36,346 11.93 % 0.7x

Total Residential Investments $ 5,086,324 $ 4,558,036 5.52 % $ 4,261,337 $ 3,831,515 $ 450,183 4.81 % $ 276,338 0.71 % 1.6x

Agency RMBS $ 137,933 $ 135,002 6.31 % $ — $ — $ 132,304 5.00 % $ 2,698 1.31 % 15.3x

Total Investment Portfolio $ 5,224,257 $ 4,693,038 5.54 % $ 4,261,337 $ 3,831,515 $ 582,487 4.81 % $ 279,036 0.73 % 1.9x

Cash and Cash Equivalents (e) 118,735 5.20 %

Interest Rate Swaps (f) 11,176 1.32 %

Arc Home 35,203

Non-Interest Earning Assets, net 6,272

Total Stockholders' Equity $ 450,422 1.2x

Investment Securitized Debt Cost of Funds (b) Allocated Equity (c) Net Interest Margin

Amortized Cost Fair Value Yield (a) Amortized Cost Fair Value Financing Arrangements Leverage Ratio (d)

Total Investment Portfolio $ 5,224,257 $ 4,693,038 5.54 % $ 4,261,337 $ 3,831,515 $ 582,487 4.81 % $ 279,036 0.73 % 1.9x

Investments in Debt and Equity of Affiliates 39,294 40,171 23.35 % — — 16,574 5.54 % 23,597 17.81 % (g)

GAAP Investment Portfolio $ 5,184,963 $ 4,652,867 5.39 % $ 4,261,337 $ 3,831,515 $ 565,913 4.81 % $ 255,439 0.58 % 9.7x

(a) Excludes any net TBA positions.

(b) Includes the cost (interest expense) or benefit (interest income) from our interest rate swap hedges.

The benefit of hedging as of September 30, 2023 was 0.12%.

(c) Allocated equity represents the investment fair value less the associated securitized debt at fair value and financing arrangements, where applicable.

(d) The leverage ratio on each asset class and on our investment portfolio represents Economic Leverage as defined below in the "Financing Activities" section and is calculated by dividing each investment type's total recourse financing arrangements less any cash posted as collateral by its equity invested inclusive of any cash collateral posted on financing arrangements.

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

The leverage ratio on our GAAP Investment Portfolio represents GAAP leverage as defined below in the "Financing Activities" section.

(e) Cash and cash equivalents may include a portion of cash invested in money market funds.

The yield represents the interest earned on money market funds as of period end.

(f) Interest rate swaps represents the sum of the net fair value of interest rate swaps and the margin posted on interest rate swaps as of period end.

Yield on interest rate swaps represents the weighted average net receive/(pay) rate as of period end.

The impact of the net interest component of interest rate swaps on the cost of funds is included within the respective investment portfolio asset line items.

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

The following tables present a summary of our investment portfolio, inclusive of net interest margin and leverage ratios, as of December 31, 2022 and a reconciliation of these metrics on our Investment Portfolio to their respective metrics on our GAAP Investment Portfolio ($ in thousands).

December 31, 2022

The following tables present a summary of our investment portfolio, inclusive of net interest margin and leverage ratios, as of March 31, 2024 and a reconciliation of these metrics on our Investment Portfolio to their respective metrics on our GAAP Investment Portfolio ($ in thousands).

March 31, 2024

Investment Securitized Debt Cost of Funds (b) Allocated Equity (c) Net Interest Margin

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Residential Whole Loans 920 2,252 116.45 % — — — — % 2,252 116.45 % N/A

Land Related Financing 10,688 10,688 14.50 % — — — — % 10,688 14.50 % N/A

Non-Agency RMBS 92,433 97,336 15.54 % — — 39,998 6.04 % 57,338 9.50 % 0.7x

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Agency RMBS 143,935 142,783 6.24 % — — 98,371 3.75 % 44,412 2.49 % 2.2x

Legacy WMC Commercial Investments (e)

Commercial Loans 66,267 66,474 10.06 % — — 47,222 8.33 % 19,252 1.73 % 2.5x

CMBS 57,372 54,389 20.97 % — — 21,348 7.28 % 33,041 13.69 % 0.6x

Total Legacy WMC Commercial Investments 123,639 120,863 14.97 % — — 68,570 8.00 % 52,293 6.97 % 1.3x

Other Securities 1,120 1,220 19.45 % — — — — % 1,220 19.45 % N/A

Total Investment Portfolio $ 6,588,561 $ 6,211,557 6.09 % $ 5,273,622 $ 4,980,942 $ 737,584 5.17 % $ 493,031 0.92 % 1.4x

Cash and Cash Equivalents (e) 84,621 4.11 %

Interest Rate Swaps (f) 8,727 1.53 %

Cash and Cash Equivalents (f) 100,287 5.20 %

Interest Rate Swaps (g) 13,354 1.60 %

Arc Home 33,190

Convertible senior unsecured notes (78,530) (8.42) %

Senior unsecured notes (32,810) (10.80) %

Non-Interest Earning Assets, net 11,043

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Total Investment Portfolio $ 6,588,561 $ 6,211,557 6.09 % $ 5,273,622 $ 4,980,942 $ 737,584 5.17 % $ 493,031 0.92 % 1.4x

Investments in Debt and Equity of Affiliates 50,592 49,609 18.05 % — — 20,815 5.19 % 28,794 12.86 % (g)

Investments in Debt and Equity of Affiliates 17,113 23,860 34.84 % — — 3,583 7.97 % 20,277 26.87 % (h)

GAAP Investment Portfolio $ 6,571,448 $ 6,187,697 5.98 % $ 5,273,622 $ 4,980,942 $ 734,001 5.17 % $ 472,754 0.81 % 10.8x

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(b) Includes the cost (interest expense) or benefit (interest income) from our interest rate swap hedges.

The benefit of hedging as of December 31, 2022 was 0.13%.

The benefit of hedging as of March 31, 2024 was 0.12%.

(c) Allocated equity represents the investment fair value less the associated securitized debt at fair value and financing arrangements, where applicable.

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The leverage ratio on our GAAP Investment Portfolio represents GAAP leverage as defined below in the "Financing Activities" section.

(e) Cash and cash equivalents may include a portion of cash invested in money market funds.

(e) We expect to either hold the Legacy WMC Commercial Investments until maturity or opportunistically exit these investments.

(f) Cash and cash equivalents may include a portion of cash invested in money market funds.

The yield represents the interest earned on money market funds as of period end.

(f) Interest rate swaps represents the sum of the net fair value of interest rate swaps and the margin posted on interest rate swaps as of period end.

(g) Interest rate swaps represents the sum of the net fair value of interest rate swaps and the margin posted on interest rate swaps as of period end.

Yield on interest rate swaps represents the weighted average net receive/(pay) rate as of period end.

The impact of the net interest component of interest rate swaps on the cost of funds is included within the respective investment portfolio asset line items.

(g) 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 September 30, 2023 and December 31, 2022 ($ in thousands).

September 30, 2023

(h) 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, 2024 and December 31, 2023 ($ in thousands).

March 31, 2024

December 31, 2023

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Re- and Non-Performing Loans 2,439 920 1,332 2,252 N/A 116.45 % 1.62 2,406

Land Related Financing 493 493 — 493 14.50 % 14.50 % 0.01 10,688

Total Residential Mortgage Loans 6,267,316 6,227,434 (378,079) 5,849,355 5.36 % 5.75 % 9.30 5,675,912

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Non-Agency Securities 40,930 31,074 3,059 34,133 6.21 % 8.41 % 12.93 51,006

Non-Agency RMBS Interest Only (6) N/A 176 4 180 0.21 % 26.83 % 5.47 1,083

Total Non-Agency RMBS 94,737 92,433 4,903 97,336 1.86 % 15.54 % 5.14 112,448

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30 Year Fixed Rate 121,708 121,831 (111) 121,720 5.50 % 5.48 % 9.26 —

Interest Only (7) N/A 16,365 (299) 16,066 3.93 % 10.13 % 7.21 19,124

Agency RMBS Interest Only (6) N/A 22,104 (1,041) 21,063 4.01 % 10.59 % 6.74 15,694

Total Agency RMBS 121,708 143,935 (1,152) 142,783 4.77 % 6.24 % 8.04 15,694

Legacy WMC Commercial Investments (7)

Commercial Loans 67,204 66,267 207 66,474 9.25 % 10.06 % 1.27 66,303

CMBS 103,399 57,372 (2,983) 54,389 7.38 % 20.97 % 2.28 56,349

Total Legacy WMC Commercial Investments 170,603 123,639 (2,776) 120,863 8.12 % 14.97 % 1.88 122,652

Other Securities (8) N/A 1,120 100 1,220 N/A 19.45 % 7.06 1,156

Investment Portfolio $ 6,654,364 $ 6,588,561 $ (377,004) $ 6,211,557 5.24 % 6.09 % 8.77 $ 5,927,862

Investments in Debt and Equity of Affiliates

Residential Mortgage Loans $ 493 $ 493 $ — $ 493 14.50 % 14.50 % 0.01 $ 10,688

Non-Agency RMBS $ 10,013 $ 17,113 $ 6,747 $ 23,860 0.84 % 34.84 % 3.50 $ 22,826

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(1) Refer to Note 10 to the "Notes of the Consolidated Financial Statements (unaudited)" for more detail on what is included in our "Investments in debt and equity of affiliates" line item on our consolidated balance sheets.

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

Our assets held through Investments in debt and equity of affiliates are included in the "MATT Non-QM Securities" and "Re/Non-Performing Securities" line items above.

(2) Equity residuals with a zero coupon rate are excluded from this calculation.

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(4) Securitized Non-Agency Loans include loans that were considered to be Agency-Eligible prior to our securitization.

(5) GCAT Non-Agency RMBS are securities issued under Gold Creek Asset Trust ("GCAT"), which is the Angelo Gordon securitization shelf under which we or private funds under the management of Angelo Gordon securitize loans.

(6) Includes Non-Agency Securities collateralized by non-QM loans and agency-eligible loans.

(7) Interest Only have no principal balances and bear interest based on a notional balance.

The notional balance is used solely to determine interest distributions on the interest only classes of securities.

The GCAT Non-Agency RMBS Interest Only, MATT Non-QM Securities, Re/Non-Performing Securities, and Agency RMBS Interest Only line items include interest only classes with notional balances of $98.9 million, $299.4 million, $25.2 million, and $79.9 million, respectively.

Residential mortgage loans

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

(5) GCAT Non-Agency RMBS are securities issued under Gold Creek Asset Trust ("GCAT"), which is the TPG Angelo Gordon securitization shelf under which we or private funds under the management of TPG Angelo Gordon securitize loans.

(6) Interest Only have no principal balances and bear interest based on a notional value.

The notional value is used solely to determine interest distributions on the interest only classes of securities.

The GCAT Non-Agency RMBS Interest Only, MATT Non-QM Securities, Re/Non-Performing Securities, Non-Agency RMBS Interest Only, and Agency RMBS Interest Only line items include interest only classes with notional values of $93.9 million, $302.5 million, $23.2 million, $30.6 million, and $114.8 million, respectively.

(7) We expect to either hold the Legacy WMC Commercial Investments until maturity or opportunistically exit these investments.

(8) Other securities include residual interests in asset-backed securities which have no principal balance.

Securitized Non-Agency Loans

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The following table summarizes our Securitized residential mortgage loans and Securitized debt, as well as the economic interest on retained Certificates related to our Non-Agency VIEs (in thousands).

September 30, 2023 December 31, 2022

Unpaid Principal Balance Fair Value Unpaid Principal Balance Fair Value

March 31, 2024

Unpaid Principal Balance Fair Value

Securitized residential mortgage loans in Non-Agency VIEs $ 5,854,878 $ 5,467,555

Securitized debt in Non-Agency VIEs (1) 5,311,289 4,871,205

Other assets (2) N/A 1,423 N/A —

Other assets (2) N/A 1,007

Retained Certificates from Non-Agency VIEs (3)(4)(5)(6) $ 597,357

Retained interests in Non-Agency VIEs Current Face Fair Value Current Face Fair Value

Retained interests in Non-Agency VIEs Current Face Fair Value

Senior Bonds $ 30,822 $ 30,630

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Subordinate Bonds 489,583 347,864

Interest Only / Excess Servicing Bonds (1)(7) N/A 152,208 N/A 148,230

Interest Only / Excess Servicing Bonds (1)(7) N/A 197,357

Retained Certificates from Non-Agency VIEs (3)(4)(5)(6) $ 597,357

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Retained Certificates from Non-Agency VIEs, net of financing arrangements $ 282,350

(1) Interest Only have no principal balances and bear interest based on a notional balance.

The notional balance is used solely to determine interest distributions on the interest only classes of securities.

As of September 30, 2023 and December 31, 2022, the Securitized debt in Non-Agency VIEs line item includes interest only classes with notional balances of $135.7 million and $144.3 million, respectively.

As of September 30, 2023 and December 31, 2022, the notional balance on Interest Only / Excess Servicing Bonds was $9.3 billion and $8.0 billion, respectively.

(1) Interest Only have no principal balances and bear interest based on a notional value.

The notional value is used solely to determine interest distributions on the interest only classes of securities.

As of March 31, 2024, the Securitized debt in Non-Agency VIEs line item includes interest only classes with notional values of $131.3 million.

As of March 31, 2024, the notional values of Interest Only / Excess Servicing Bonds was $11.8 billion.

(2) Represents the fair value of real estate owned within Non-Agency VIEs.

We record real estate owned at the lower of cost or fair value less estimated costs to sell.

As of September 30, 2023, we recorded real estate owned within our Non-Agency VIEs at $1.2 million.

As of March 31, 2024, we recorded real estate owned within our Non-Agency VIEs at $0.9 million.

(3) Maximum loss exposure from our involvement with VIEs pertains to the fair value of the Certificates retained from the VIEs.

We have no obligation to provide any other explicit or implicit support to the securitization trusts.

(4) As of September 30, 2023 and December 31, 2022, our equity at risk included bonds with a fair value of $257.6 million and $215.1 million, respectively, held in order to comply with Risk Retention Rules.

(4) As of March 31, 2024, our equity at risk included bonds with a fair value of $405.0 million held in order to comply with Risk Retention Rules.

We are generally required to hold the Required Credit Risk until the later of (i) the fifth anniversary of the securitization closing date and (ii) the date on which the aggregate unpaid principal balance of the mortgage loans has been reduced to 25% of the aggregate unpaid principal balance of the mortgage loans as of the securitization closing date, but no longer than the seventh anniversary of the closing date.

(5) As of September 30, 2023 and December 31, 2022, a portion of our equity at risk included bonds exposed to the first loss of the securitization with a fair value of $87.5 million and $84.7 million, respectively.

(6) Excludes net other asset/(liabilities) held within the VIEs of $7.2 million and $4.4 million as of September 30, 2023 and December 31, 2022, respectively.

(5) As of March 31, 2024, a portion of our equity at risk included bonds exposed to the first loss of the securitization with a fair value of $119.7 million.

(6) Excludes net other asset/(liabilities) held within the VIEs of $7.2 million as of March 31, 2024.

(7) As the sponsor and depositor of each securitization, we may purchase all of the outstanding Certificates (an "Optional Redemption") following the earlier of (1) an applicable anniversary date (typically two or three years) of the respective securitization or (2) the date at which the unpaid principal balance of the applicable collateral has declined below a certain percentage (typically 10% to 30%) of the principal balance originally contributed to the securitization.

As of September 30, 2023, there was one securitization with an unpaid principal balance of $125.7 million that met the criteria for an Optional Redemption.

As of December 31, 2022, there were no securitizations which met the criteria for an Optional Redemption.

Non-Agency RMBS

The following table presents the fair value of our Non-Agency RMBS by credit rating as of September 30, 2023 and December 31, 2022 (in thousands).

Credit Rating - Non-Agency RMBS (1) September 30, 2023 December 31, 2022

A $ 6,167 $ —

As of March 31, 2024, there were three securitizations with an unpaid principal balance of $0.4 billion that met the criteria for an Optional Redemption.

Residential mortgage loans

See Note 3 to the "Notes to Consolidated Financial Statements (unaudited)" for information on credit quality and 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.

Legacy WMC Commercial loans

See Note 3 to the "Notes to Consolidated Financial Statements (unaudited)" for information on the geographic concentration, collateral characteristics, LTV, and maturities of the loans we include in the "Commercial loans, at fair value" line item on our consolidated balance sheets.

Non-Agency RMBS and Legacy WMC CMBS & Other Securities

The following table presents the fair value of our Non-Agency RMBS and Legacy WMC CMBS and Other Securities by credit rating as of March 31, 2024 (in thousands).

Credit Rating (1) Non-Agency RMBS CMBS Other Securities

AAA $ 180 $ — $ —

BBB 14,579 4,505 —

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B 9,341 20,364 —

Below B — 11,174 —

Not Rated 53,646 18,346 1,220

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GAAP Basis $ 73,476 $ 54,389 $ 1,220

(1) Represents the minimum rating for rated assets of S&P, Moody, Morningstar, and Fitch credit ratings, stated in terms of the S&P equivalent.

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

September 30, 2023 December 31, 2022

State Fair Value Percentage State Fair Value Percentage

(1) Represents the minimum rating for rated assets of S&P, Moody's, Morningstar, and Fitch credit ratings, stated in terms of the S&P equivalent.

The following table presents certain characteristics of our Non-Agency RMBS and Legacy WMC CMBS portfolio as of March 31, 2024 (in thousands).

Instrument Current Face Fair Value Weighted Average Life (Years) (1)

Non-Agency RMBS

Non-QM Loans (2) $ 54,013 $ 60,439 4.76

Re- and Non-Performing Loans (2) 5,516 7,337 0.64

Prime (2) 26,165 19,134 10.56

Credit Risk Transfer 9,043 10,426 4.48

Total Non-Agency RMBS $ 94,737 $ 97,336 5.14

Legacy WMC CMBS

Single-Asset/Single-Borrower - Fixed Rate $ 53,900 $ 25,503 2.71

Single-Asset/Single-Borrower - Floating Rate 34,450 19,278 1.16

Conduit - Fixed Rate 15,049 9,608 3.33

Total Legacy WMC CMBS $ 103,399 $ 54,389 2.28

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

Typically, actual maturities are shorter than stated contractual maturities.

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

(2) The current face on our Non-Agency RMBS excludes interest only classes which have no principal balances and bear interest based on a notional value.

The notional value is used solely to determine interest distributions on the interest only classes of securities.

As of March 31, 2024, the notional value of interest only classes included in the Non-QM Loans, Re-and Non-Performing Loans, and Prime line items was $396.4 million, $23.2 million, and $30.6 million, respectively.

The following table presents the geographic concentration of the underlying collateral for our Non-Agency RMBS and Legacy WMC CMBS portfolios as of March 31, 2024 ($ in thousands).

Non-Agency RMBS Legacy WMC CMBS

Geographic Location Concentration Fair Value Geographic Location Concentration Fair Value

California 43.4 % $ 42,215 California 31.4 % $ 17,104

New York 11,096 14.8 % New York 9,733 15.3 %

Florida 4,706 6.3 % Florida 3,955 6.2 %

Texas 2,725 3.6 % Texas 2,248 3.5 %

New Jersey 2,362 3.2 % New Jersey 1,912 3.0 %

New York 15.5 % 15,058 Bahamas 27.6 % 15,013

Florida 4.8 % 4,697 Minnesota 8.9 % 4,861

New Jersey 2.4 % 2,376 New York 7.2 % 3,911

Texas 2.4 % 2,296 Florida 3.6 % 1,980

Other 31.5 % 30,694 Other 21.3 % 11,520

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Although our investment activities primarily include acquiring and securitizing newly-originated residential mortgage loans, from time to time we invest excess liquidity into Agency RMBS.

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

The following table presents the fair value and the Constant Prepayment Rate ("CPR") experienced on our Agency RMBS portfolio as of March 31, 2024 ($ in thousands).

Fair Value CPR (1)

Agency RMBS September 30, 2023 December 31, 2022 September 30, 2023 December 31, 2022

30 Year Fixed Rate $ 121,720 (0.1) %

Interest Only 16,066 19,124 5.7 % 11.0 %

Agency RMBS Interest Only 21,063 1.2 %

Total/Weighted Average $ 142,783 0.3 %

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Financing activities

In December 2023, through our acquisition of WMC, we assumed liabilities of $1.1 billion, which primarily consisted of securitized debt, financing arrangements, and convertible senior unsecured notes.

For more information on the acquisition of WMC, refer to "WMC Acquisition" above and the section entitled "WMC Acquisition" in Note 1 to the "Notes to Consolidated Financial Statements (unaudited)."

Financing Arrangements

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

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Repurchase agreements are generally mark-to-market with respect to margin calls and recourse to us.

We had outstanding financing arrangements with six counterparties as of September 30, 2023 and December 31, 2022.

We had outstanding financing arrangements with six and seven counterparties as of March 31, 2024 and December 31, 2023, 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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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 September 30, 2023, we are in compliance with all of our financial covenants.

As of March 31, 2024, 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 margin calls and non-recourse to us.

Legacy WMC Convertible Notes

Through our acquisition of WMC, we assumed the Legacy WMC Convertible Notes.

See Note 6 to the "Notes to Consolidated Financial Statements (unaudited)" for additional information on the Legacy WMC Convertible Notes.

Senior Unsecured Notes

On January 26, 2024, we issued $34.5 million principal amount of 9.500% senior notes due 2029.

See Note 6 to the "Notes to Consolidated Financial Statements (unaudited)" for additional information on the Senior Unsecured Notes.

Recourse and non-recourse financing

The below table provides detail on the breakout between recourse and non-recourse financing as of September 30, 2023 and December 31, 2022 (in thousands).

September 30, 2023

The below table provides detail on the breakout between recourse and non-recourse financing as of March 31, 2024 and December 31, 2023 (in thousands).

March 31, 2024

December 31, 2023

Recourse financing - Financing arrangements, including those in Investments in Debt and Equity of Affiliates $ 677,908 $ 708,225

Recourse Financing - Legacy WMC Convertible Notes 78,530 85,266

Recourse Financing - Senior Unsecured Notes 32,810 —

Non-recourse financing - Securitized debt, at fair value 4,980,942 4,711,623

Non-recourse financing - Financing arrangements included in Investments in Debt and Equity of Affiliates 12,940 16,409

Non-recourse financing - Financing arrangements 59,676 62,972

Total Financing 5,829,866 5,568,086

Recourse financing - Financing arrangements included in Investments in Debt and Equity of Affiliates 3,583 3,605

Non-recourse financing - Financing arrangements included in Investments in Debt and Equity of Affiliates 12,940 16,409

Total Financing in Investments in Debt and Equity of Affiliates 3,583 3,605

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

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

We define GAAP leverage as the sum of (1) GAAP Securitized debt, at fair value, (2) GAAP Financing arrangements, net of any restricted cash posted on such financing arrangements, (3) Convertible senior unsecured notes, (4) Senior unsecured notes, and (5) the amount payable on purchases that have not yet settled less the financing remaining on sales that have not yet settled.

We define Economic Leverage, a non-GAAP metric, as the sum of:

(i) our GAAP leverage, exclusive of any fully non-recourse financing arrangements, (ii) financing arrangements held through affiliated entities, net of any restricted cash posted on such financing arrangements, exclusive of any financing utilized through AG Arc, any adjustment related to unsettled trades as described in (2) in the previous sentence, and any non-recourse financing arrangements and (iii) our net TBA position (at cost), if any.

described in (4) in the previous sentence, and any non-recourse financing arrangements and (iii) our net TBA position (at cost), if any.

The calculations in the tables below divide GAAP leverage and Economic Leverage by our GAAP stockholders’ equity to derive our leverage ratios.

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

September 30, 2023 Leverage Stockholders’ Equity Leverage Ratio

GAAP Securitized debt, at fair value $ 3,831,515

March 31, 2024 Leverage Stockholders’ Equity Leverage Ratio

Securitized debt, at fair value $ 4,980,942

GAAP Financing arrangements 734,001

Convertible senior unsecured notes 78,530

Senior unsecured notes 32,810

Restricted cash posted on financing arrangements (2,109)

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Non-recourse financing arrangements (1) (5,040,618)

Net TBA (receivable)/payable adjustment (32,552)

Economic Leverage $ 754,587 $ 539,565 1.4x

(1) Non-recourse financing arrangements include securitized debt and other non-recourse financing held within MATT.

(1) Non-recourse financing arrangements include securitized debt and other non-recourse financing arrangements.

December 31, 2023 Leverage Stockholders' Equity Leverage Ratio

GAAP Securitized debt, at fair value $ 3,262,352

Securitized debt, at fair value $ 4,711,623

GAAP Financing arrangements 767,592

Convertible senior unsecured notes 85,266

Restricted cash posted on financing arrangements (1,696)

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Economic Leverage $ 782,632 $ 528,368 1.5x

(1) Non-recourse financing arrangements include securitized debt and other non-recourse financing held within MATT.

(1) Non-recourse financing arrangements include securitized debt and other non-recourse financing arrangements.

Hedging activities

Subject to maintaining our qualification as a REIT and our Investment Company Act exemption, to the extent leverage is deployed, we may utilize derivative instruments in an effort to hedge the interest rate risk associated with the financing of our portfolio.

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.

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 to-be-announced securities.

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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, (vi) methods of depreciation and (vii) differences between GAAP income or losses in our TRSs’ and taxable income resulting from dividend distributions to the REIT from our TRSs'.

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) differences between GAAP income or losses in our TRSs’ and taxable income resulting from dividend distributions to the REIT from our TRSs'.

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 September 30, 2023.

The following table details our common stock dividends declared during the nine months ended September 30, 2023 and 2022.

Nine Months Ended September 30, 2023

Nine Months Ended September 30, 2022

Declaration Date Record Date Payment Date Cash Dividend Per Share Declaration Date Record Date Payment Date Cash Dividend Per Share

3/15/2023 3/31/2023 4/28/2023 $ 0.18 3/18/2022 3/31/2022 4/29/2022 $ 0.21

6/15/2023 6/30/2023 7/31/2023 0.18 6/15/2022 6/30/2022 7/29/2022 0.21

9/15/2023 9/29/2023 10/31/2023 0.18 9/15/2022 9/30/2022 10/31/2022 0.21

Total $ 0.54 Total $ 0.63

We announced that on October 24, 2023, our Board of Directors declared an interim fourth quarter 2023 common stock dividend on our common stock of $0.08 per share, made pursuant to the terms of the Merger Agreement in connection with the Merger with WMC.

The dividend was paid on November 8, 2023 to stockholders of record as of November 3, 2023.

The following tables detail the dividends declared and paid on our 8.25% Series A Cumulative Redeemable Preferred Stock ("Series A Preferred Stock"), 8.00% Series B Cumulative Redeemable Preferred Stock ("Series B Preferred Stock"), and 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock ("Series C Preferred Stock") (collectively, "preferred stock") during the nine months ended September 30, 2023 and 2022.

2023 Cash Dividend Per Share

Declaration Date Record Date Payment Date 8.25% Series A

8.00% Series B

8.000% Series C

2/16/2023 2/28/2023 3/17/2023 $ 0.51563 $ 0.50 $ 0.50

5/4/2023 5/31/2023 6/20/2023 0.51563 0.50 0.50

7/31/2023 8/31/2023 9/18/2023 0.51563 0.50 0.50

Total $ 1.54689 $ 1.50 $ 1.50

2022 Cash Dividend Per Share

Declaration Date Record Date Payment Date 8.25% Series A

8.00% Series B

8.000% Series C

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

8/3/2022 8/31/2022 9/19/2022 0.51563 0.50 0.50

Total $ 1.54689 $ 1.50 $ 1.50

We announced that on November 3, 2023, our Board of Directors declared fourth quarter 2023 preferred stock dividends on our Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock in the amount of $0.51563, $0.50 and $0.50 per share, respectively.

The dividends will be paid on December 18, 2023 to holders of record on November 30, 2023.

We did not have any undistributed taxable income as of March 31, 2024.

During the three months ended March 31, 2024, the Company declared common stock dividends of $0.18.

During the same period, the Company declared and paid preferred stock dividends on its 8.25% Series A Preferred Stock, 8.00% Series B Preferred Stock, and 8.000% Series C Preferred Stock of $0.51563, $0.50, and $0.50, respectively.

Liquidity and capital resources

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Refer to "—Margin requirements" below discussing instances where we may use liquidity to meet margin requirements.

At September 30, 2023, we had $118.7 million of liquidity, all of which was cash and cash equivalents.

At March 31, 2024, we had $140.3 million of liquidity, which consisted of $100.3 million of cash and cash equivalents and $40.0 million of unencumbered Agency RMBS 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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If our haircuts increase, our liquidity will proportionately decrease.

In addition, if we increase our borrowings, our liquidity will decrease by the amount of additional haircut on the increased level of

indebtedness.

In addition, if we increase our borrowings, our liquidity will decrease by the amount of additional haircut on the increased level of indebtedness.

We intend to maintain a level of liquidity in relation to our assets that enables us to meet reasonably anticipated margin calls but that also allows us to be substantially invested in the residential mortgage market.

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We may also receive margin calls on our derivatives based on the implied volatility of interest rates.

Our posting of collateral with our counterparties can be done in cash or assets, and is generally bilateral, which means that if the fair value of our interest rate hedges increases, our counterparty will be required to post collateral with us.

be required to post collateral with us.

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 nine months ended September 30, 2023 and 2022 ($ in thousands).

Nine Months Ended

September 30, 2023 September 30, 2022 Change

The below details changes to our cash, cash equivalents, and restricted cash for the three months ended March 31, 2024 and 2023 ($ in thousands).

Three Months Ended

March 31, 2024 March 31, 2023 Change

Cash and cash equivalents and restricted cash, Beginning of Period $ 125,573 $ 98,803 $ 26,770

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Cash and cash equivalents and restricted cash, End of Period $ 116,634 $ 102,422 $ 14,212

(1) Cash provided by operating activities is primarily attributable to net interest income less operating expenses for the nine months ended September 30, 2023.

(2) Cash used in investing activities for the nine months ended September 30, 2023 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 nine months ended September 30, 2023 was primarily attributable to the issuance of securitized debt, offset by principal repayments on securitized debt, net repayments of repurchase agreements, dividend payments, and common share repurchases.

(1) Cash provided by operating activities is primarily attributable to net interest income less operating expenses for the three months ended March 31, 2024.

(2) Cash used in investing activities for the three months ended March 31, 2024 was primarily attributable to purchases of investments, offset by principal repayments on investments and sales of investments.

(3) Cash provided by financing activities for the three months ended March 31, 2024 was primarily attributable to proceeds from the issuance of securitized debt and our Senior Unsecured Notes, offset by principal repayments on securitized debt, net repayments of financing arrangements, repurchases of the Convertible Senior Unsecured Notes, and dividend payments.

Stock repurchase programs

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

As of June 30, 2022, the $25.0 million maximum repurchase amount authorized under the 2015 Repurchase Program was fully utilized.

On August 3, 2022, our Board of Directors authorized a stock repurchase program (the "2022 Repurchase Program") to repurchase up to $15.0 million of our outstanding common stock on substantially the same terms as the 2015 Repurchase Program.

On August 3, 2022, our Board of Directors authorized a stock repurchase program (the "2022 Repurchase Program") to repurchase up to $15.0 million of our outstanding common stock.

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.

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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 filing, approximately $1.5 million of common stock remained authorized for future share repurchases under the 2022

Repurchase Program.

See Note 11 in the "Notes to Consolidated Financial Statements (unaudited)" for additional details on the shares repurchased under the 2022 Repurchase Program during the three and nine months ended September 30, 2023.

As of the date of this filing, approximately $1.5 million of common stock remained authorized for future share repurchases under the 2022 Repurchase Program.

On May 4, 2023, our Board of Directors authorized a stock repurchase program (the "2023 Repurchase Program") to repurchase up to $15.0 million of our outstanding common stock on substantially the same terms as the 2022 Repurchase Program.

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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.

We did not issue any shares of common stock under the Equity Distribution Agreements during the three and nine months ended September 30, 2023.

We did not issue any shares of common stock under the Equity Distribution Agreements during the three months ended March 31, 2024.

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.

Forward-looking statements regarding liquidity

Based upon our current portfolio, leverage and available borrowing arrangements, we believe the net proceeds of our common equity offerings, preferred equity offerings, and private placements, combined with cash flow from operating activities, financing activities, and our available borrowing capacity will be sufficient to enable us to meet our anticipated liquidity requirements, including funding our investment activities, paying fees under our management agreement, funding our distributions to stockholders and paying general corporate expenses.

Based upon our current portfolio, leverage and available borrowing arrangements, we believe the net proceeds of our common equity offerings, preferred equity offerings, senior unsecured note issuances, and private placements, combined with cash flow from operating activities, financing activities, and our available borrowing capacity will be sufficient to enable us to meet our anticipated liquidity requirements, including funding our investment activities, paying fees under our management agreement, funding our distributions to stockholders, funding financing maturities, and paying general corporate expenses.

Contractual obligations

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There were no changes to the management agreement in connection with the TPG Transaction and the assignment of the management agreement became effective upon the closing of the TPG Transaction.

In connection with the pending Merger with WMC, we and our Manager entered into the MITT Management Agreement Amendment, pursuant to which (i) the base management fee will be reduced by $0.6 million for the first four quarters (i.e., resulting in an aggregate $2.4 million waiver of base management fees) following the Effective Time, beginning with the fiscal quarter in which the Effective Time occurs, and (ii) our Manager will waive its right to seek reimbursement from us for any expenses otherwise reimbursable by us under the management agreement in an amount equal to the excess, if any, of $7.0 million over the aggregate cash portion of the Per Share Merger Consideration paid by our Manager to the holders of WMC common stock in the Merger.

The MITT Management Agreement Amendment will become effective automatically upon the closing of the Merger, and will have no force and effect if the Merger does not close.

In connection with the Merger with WMC, which was completed on December 6, 2023, and contemporaneously with the execution of the Merger Agreement, on August 8, 2023, we and our Manager entered into the MITT Management Agreement Amendment, pursuant to which (i) our Manager’s base management fee will be reduced by $0.6 million for the first four quarters following the Effective Time, beginning with the fiscal quarter in which the Effective Time occurs (i.e., resulting in an aggregate $2.4 million waiver of base management fees), and (ii) our Manager will waive its right to seek reimbursement from us for any expenses otherwise reimbursable by us under the management agreement in an amount equal to approximately $1.3 million, which is the excess of $7.0 million over the aggregate Per Share Additional Merger Consideration paid by our Manager to the holders of WMC Common Stock under the Merger Agreement.

The MITT Management Agreement Amendment became effective automatically upon the closing of the Merger.

Management fee

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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.

The below table details the management fees incurred during the three and nine months ended September 30, 2023 and 2022 (in thousands).

Three Months Ended Nine Months Ended

The below table details the management fees incurred during the three months ended March 31, 2024 and 2023 (in thousands).

Three Months Ended

Consolidated statements of operations line item:

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

March 31, 2024 March 31, 2023

Management fee to affiliate (1) $ 1,741 $ 2,075

As of September 30, 2023 and December 31, 2022, we have recorded management fees payable of $2.1 million and $2.1 million, respectively.

The management fee payable is included within the "Due to affiliates" item within the "Other liabilities" line item on the consolidated balance sheets.

(1) For the three months ended March 31, 2024, the Manager agreed to waive its right to receive management fees of $0.6 million pursuant to the MITT Management Agreement Amendment executed in connection with the Merger.

As of March 31, 2024 and December 31, 2023, we have recorded management fees payable of $1.7 million and $1.5 million, respectively.

The management fee payable is included within the "Due to affiliates" line item within the "Other liabilities" line item on the consolidated balance sheets.

Incentive fee

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The annual incentive fee will be payable in cash, or, at the option of our Board of Directors, shares of common stock or a combination of cash and shares.

The Manager waived the annual incentive fee with respect to the fiscal years ending December 31, 2021 and December 31, 2022, and the annual incentive fee will first be payable with respect to the fiscal year ending December 31, 2023.

During the three and nine months ended September 30, 2023, we did not incur any incentive fee expense.

During the three months ended March 31, 2024 and 2023, we did not incur any incentive fee expense.

Termination fee

Upon the occurrence of (i) our termination of the management agreement without cause or (ii) the Manager’s termination of the management agreement upon a breach by the Company of any material term of the management agreement, the Manager will be entitled to a termination fee equal to three times the average annual management fee during the 24-month period prior to such termination, calculated as of the end of the most recently completed fiscal quarter.

As of March 31, 2024 and December 31, 2023, no event of termination of the management agreement had occurred.

Expense reimbursement

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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.

The below table details the expense reimbursement incurred during the three and nine months ended September 30, 2023 and 2022 (in thousands).

Three Months Ended Nine Months Ended

The below table details the expense reimbursement incurred during the three months ended March 31, 2024 and 2023 (in thousands).

Three Months Ended

Consolidated statements of operations line item:

September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022

March 31, 2024

March 31, 2023

Non-investment related expenses (1)

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Investment related expenses

148 261 360 637

Transaction related expenses 68 63

Expense reimbursements to Manager or its affiliates $ 1,846 $ 1,565

As of September 30, 2023 and December 31, 2022, we recorded a reimbursement payable to our Manager or its affiliates of $2.3 million and $1.3 million, respectively The reimbursement payable to the Manager or its affiliates is included within the "Due to affiliates" item within the "Other liabilities" line item on the consolidated balance sheets.

As of March 31, 2024 and December 31, 2023, we recorded a reimbursement payable to our Manager or its affiliates of $1.8 million and $1.5 million, respectively The reimbursement payable to the Manager or its affiliates is included within the "Due to affiliates" line item within the "Other liabilities" line item on the consolidated balance sheets.

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 September 30, 2023, 505,933 shares of common stock were available to be awarded under the 2020 Equity Incentive Plan.

Since inception of the 2020 Equity Incentive Plan and through September 30, 2023, we have granted an aggregate of 160,733 shares of restricted common stock to our independent directors under our 2020 Equity Incentive Plan, all of which have vested.

As of March 31, 2024, 448,397 shares of common stock were available to be awarded under the 2020 Equity Incentive Plan.

Since inception of the 2020 Equity Incentive Plan and through March 31, 2024, we have granted an aggregate of 192,101 shares of restricted common stock to our independent directors under our 2020 Equity Incentive Plan, all of which have vested.

On December 6, 2023, in connection with the WMC acquisition, we granted an aggregate 25,962 restricted stock units to the two independent directors added to our Board of Directors who previously served on WMC's board of directors.

Through March 31, 2024, the two independent directors have also been granted an aggregate of 206 dividend equivalent units.These restricted stock units and associated dividend equivalent units will vest in full on June 23, 2024, and will be settled in shares of our common stock upon each of the independent director's separation from service with our Board of Directors.

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 September 30, 2023, there were no shares or awards issued under the 2021 Manager Plan.

As of March 31, 2024, 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 September 30, 2023.

See Note 12 of the "Notes to Consolidated Financial Statements (unaudited)" for detail on our commitments as of March 31, 2024.

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 September 30, 2023, if applicable.

For additional information on our commitments as of September 30, 2023 , refer to Note 12 of the "Notes to Consolidated Financial Statements (unaudited)." 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 March 31, 2024, if applicable.

For additional information on our commitments as of March 31, 2024 , refer to Note 12 of the "Notes to Consolidated Financial Statements (unaudited)." 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 and estimates

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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 September 30, 2023 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 and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the periods presented.

Our most critical accounting policies include (i) Valuation of financial instruments, (ii) Accounting for loans, (iii) Accounting for real estate securities, (iv) Interest income recognition, (v) Financing arrangements, and (vi) Investment consolidation.

Although our estimates contemplate conditions as of March 31, 2024 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 and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the periods presented.

Our critical accounting estimates are those which require assumptions to be made about matters that are highly uncertain and include (i), (iv), and (vi) above.

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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.

Conducting our operations so as not to be considered an investment company under the Investment Company Act and the rules and regulations promulgated under the Investment Company Act and SEC staff interpretive guidance limits our ability to make certain investments.

certain investments.

For example, these restrictions limit our and our subsidiaries’ ability to invest directly in Agency RMBS mortgage-related securities that represent less than the entire ownership in a pool of mortgage loans or debt and equity tranches of Non-Agency RMBS (in each case to the extent such interest are not retained interest in securitizations consisting of mortgage loans that were owned by us and such securitizations were not sponsored by us in order to obtain financing to acquire additional mortgage loans), certain real estate companies and assets not related to real estate.

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