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Item 7. Management’s Discussion and Analysis

2025-03-04 compared with 2024-03-11 · 279 added, 326 removed, 564 unchanged (52% of the section changed)

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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.

Currently, our Residential Investments primarily consist of newly originated Non-Agency Loans, Agency-Eligible Loans and Home Equity 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.

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

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

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

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Financial Highlights

• $10.46 Book Value per share and $10.20 Adjusted Book Value per share;

• $1.68 of Net Income/(Loss) Available to Common Stockholders per diluted common share and $0.39 of Earnings Available for Distribution ("EAD") per diluted common share;

• $10.64 Book Value per share;

◦ Book value per common share is calculated using stockholders’ equity less the liquidation preference of $228.0 million on our issued and outstanding preferred stock divided by all outstanding common shares as of quarter-end;

• $1.23 of Net Income/(Loss) Available to Common Stockholders per diluted common share and $0.76 of Earnings Available for Distribution ("EAD") per diluted common share for the year ended December 31, 2024;

◦ 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;

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• $0.75 dividend per common share declared during the year;

Strategic Acquisition

• Completed the WMC acquisition on December 6, 2023, providing meaningful growth in our investment portfolio and scale to support our return profile;

• Issued approximately 9.2 million shares of MITT's common stock to former WMC common stockholders as consideration, increasing our market capitalization by approximately 46%;

• Acquired $1.2 billion of assets consisting primarily of securitized residential mortgage loans, increasing our investment portfolio by approximately 25%;

• Assumed $1.1 billion of liabilities inclusive of securitized debt, financing arrangements, and convertible senior unsecured notes ("Legacy WMC Convertible Notes");

• Increased our equity by $81.4 million and recorded a bargain purchase gain of $30.2 million;

• Added two independent board members from the WMC board of directors.

◦ Increased our quarterly dividend per common share from $0.18 per common share in the first quarter 2024 to $0.19 per common share beginning the second quarter 2024, which represented a 5.6% increase.

Investment Activity

• The table below summarizes the fair value of purchases and proceeds from sales of investments, as well as the fair value of assets acquired through the WMC acquisition, during the year ended December 31, 2023 (in thousands).

Investment Purchases Sales Assets acquired from WMC

Non-Agency Loans $ 587,643 $ 330,742 $ 977,827

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

Investment Purchases Sales

Agency-Eligible Loans $ 1,432,492 $ 73,614

Home Equity Loans 288,885 184,595

Non-Agency Loans 23,796 86,349

Re/Non-Performing Loans — 13,493

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Other Securities(1) — 763

Commercial Loans — — 78,459

Total $ 2,396,812 $ 965,196

(1) Includes sales of $27.3 million, $1.5 million and $0.8 million of Non-Agency RMBS, CMBS and Other Securities, respectively, sold from the legacy portfolio acquired in the WMC acquisition.

(2) During the year, we co-sponsored two rated securitizations collateralized by $729.9 million of Agency-Eligible Loans.

As the co-sponsor, the Company retained an "eligible vertical interest" to comply with risk retention rules which consists of at least 5% of each class of securities issued in the securitizations.

Upon evaluating our retained interest in the securitization trusts, we determined we were not the primary beneficiary and, as a result, did not consolidate the securitization trusts and recorded an investment of $69.1 million of Non-Agency RMBS.

Financing Activity

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

◦ Securitized Non-Agency Loans with a total unpaid principal balance of $677.5 million;

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

• Assumed liabilities of $1.1 billion from the WMC acquisition, which included:

◦ Securitized debt with a fair value of $837.3 million;

◦ Financing arrangements of $171.2 million;

◦ Legacy WMC Convertible Notes with a fair value of $85.2 million;

• Subsequent to December 31, 2023:

◦ Executed a rated securitization of Agency-Eligible Loans with a total unpaid principal balance of $377.5 million;

◦ Completed the issuance of $34.5 million aggregate principal amount of 9.500% senior notes due in 2029 for net proceeds of approximately $32.8 million;

◦ Repurchased $7.1 million aggregate principal amount of the outstanding Legacy WMC Convertible Notes.

Capital Activity

• As of December 31, 2023, we have approximately $16.5 million of capacity remaining under our authorized common stock repurchase programs;

◦ Repurchased 1.1 million shares of common stock for $6.4 million during the year ended December 31, 2023, representing a weighted average cost of $5.72 per share.

Repurchases resulted in approximately 2.7% accretion to December 31, 2022 adjusted book value per share.

• Executed four rated securitizations of Agency-Eligible Loans with a total unpaid principal balance of $1.4 billion, converting recourse financing with mark-to-market margin calls to non-recourse financing without mark-to-market margin calls;

• Repurchased $7.1 million of principal amount of the Legacy WMC Convertible Notes during the first quarter of 2024 and paid off the remaining $79.1 million principal amount outstanding at maturity in September 2024;

• Issued $99.5 million principal amount of Senior Unsecured Notes in public offerings generating net proceeds of approximately $95.2 million.

Market Conditions

Financial markets experienced volatility throughout 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 continued executing on its monetary policy tightening cycle during 2023.

The Federal Reserve raised the short-term federal funds target rate eleven times between March 2022 and July 2023 and has since held rates steady.

Year-to-date through October 2023, the 10-year U.S.

treasury yield increased by approximately 100 basis points to 4.88% and the 30-year fixed rate mortgage increased by 137 basis points peaking at 7.8%.

In November, the Federal Reserve left rates unchanged for the fourth consecutive meeting, spoke increasingly of a more balanced approach to setting policy, and suggested that the recent rise in longer-term interest rates could displace the need to tighten policy rates further.

Although the Federal Reserve cautioned that it was premature to discuss cutting rates, financial markets took this as a dovish shift in sentiment.

At the December meeting, the Federal Reserve confirmed its dovish pivot with an updated Summary of Economic Projections that showed no further rate increases and a faster pace of rate normalization, further driving interest rates lower.

By the end of the year, the 10-year U.S.

treasury yield retraced to 3.88%, where it started the year, and the 30-year fixed rate mortgage declined to 6.6%.

Although market participants began pricing in rate cuts as soon as March 2024, it is not clear when the Federal Reserve will initiate rate cuts and it is possible longer-term rates may remain elevated for longer than anticipated.

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 fourth quarter, the curve inversion was only 37 basis points providing some relief.

While the Federal Reserve’s policy tightening has slowed the U.S economy, growth in GDP, low unemployment and strength in consumer spending persist, leaving the Federal Reserve seeking economic data that will provide greater confidence that inflation is moving sustainably toward the target rate of 2%.

RMBS spreads mostly tightened during the fourth quarter of 2023.

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 were tighter by up to 50 basis points, with tranches at or near investment grade tightening the most during the quarter.

For the full year 2023, CRT experienced impressive gains, particularly for lower credit tranches which were as much as 500 basis points tighter while tranches in the middle part of the capital structure tightened by approximately 300 basis points.

Senior Non-QM spreads tightened by approximately 20 basis points during the quarter while strong demand for BBB-rated Non-QM securities drove spreads in by approximately 50 basis points during the quarter and an additional 25 basis points in the month of January.

The Non-QM sector finished the year with spreads tighter overall however still remaining wide of February 2022 levels, which suggests ample runway for additional upside potential.

RMBS issuance during the fourth quarter was in-line with the prior two quarters at $16 billion.

However, issuance for the full year 2023 totaled only $65 billion, roughly half of the $137 billion of issuance recorded in 2022, and was the slowest year since 2016.

Issuance of nearly every type of RMBS fell, in most cases sharply, except for the second lien and home equity line of credit sector which is still in its infancy.

Issuance of benchmark CRT fell 60% to $8.3 billion amid lighter origination volumes and a shift away from high-cost subordinate tranches by the issuers.

Non-QM was the most active sector with issuance of $28 billion resulting in a relatively modest 25% year-over-year decline.

Various reports from bank research departments estimate 2024 issuance will be $65 to $90 billion, higher than 2023 but still down from $127 billion in 2022 and $213 billion in 2021.

Home prices continued to rise with the S&P CoreLogic Case-Shiller U.S.

National Home Price Index up 5.5% for the full year 2023 which exceeds the prior peak in June 2022 by 0.8%.

A survey of third-party research illustrates varied home price expectations for 2024 ranging from a decline of 5% to an increase of 4%.

Prevailing mortgage rates were considerably lower over the final two months of the year, falling to 6.6% after reaching 7.8% at the end of October 2023, the highest level since 2000.

Nationally, the average effective mortgage rate was 3.7% as of September 2023.

Current interest rates thus leave 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, in force, albeit modestly weaker.

According to the National Association of Realtors, total existing home listings amounted to 1 million in December 2023, in line with most of 2023 but down significantly from pre-pandemic years.

New listings, which offer a timelier view of current supply, have totaled 4.13 million year-to-date through December 2023, which was almost 1.8 million units less than the same period in 2021.

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

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.

The financial markets have been, and will likely continue to remain, volatile given the overall market uncertainty related to inflation, fiscal policies of the incoming administration, and the path of monetary policy and interest rates.

Throughout 2024, markets have displayed a high level of sensitivity to the Federal Reserve’s interest rate decisions.

On December 18, 2024, the Federal Reserve lowered the target range for the Federal Funds Rate by an additional 25 basis points to 4.25% to 4.50%, for a cumulative 100 basis points of reduction in all of 2024.

The Federal Reserve noted that the decrease was supported by their belief that the risks to both price stability and maximum employment are roughly in balance, but the stance of monetary policy remains restrictive.

In its updated Summary of Economic Projections (“SEP”), the Federal Reserve increased its 2025 growth and inflation forecasts, reduced its unemployment rate forecast, and reduced the total amount of policy rate easing it anticipates for all of 2025 from 100 basis points to 50 basis points.

As of December 2024, the Consumer Price Index report indicated headline inflation was 2.9% year over year with the unemployment rate remaining at 4.1%.

During the fourth quarter, the 10-year U.S.

Treasury yield increased by approximately 79 basis points to 4.58% and the 30-year mortgage rate increased by approximately 77 basis points to 6.85%.

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

Treasury yields at approximately 33 basis points positive sloping.

There has been more mixed economic data and increasing policy uncertainty from the new administration as it pertains to inflation and growth, which have continued to drive volatility in benchmark rates so far in the first quarter 2025.

RMBS spreads were mostly tighter and credit curves were relatively flat during the fourth quarter.

Throughout 2024, market participants have sought RMBS and residential mortgage credit exposure to access strong underlying fundamentals such as high quality underwriting, rising home values and a persistently strong supply/demand technical.

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

CRT tranches were up to 20 to 25 basis points tighter during the fourth quarter.

Investment grade prime jumbo RMBS spreads tightened by 30 basis points during the quarter, with spreads on BBB-rated risk finishing the year in the mid-200 basis points.

Senior Non-QM tranches tightened by 10 to15 basis points while non-investment grade Non-QM spreads were 40 to 60 basis points tighter.

Year-to-date, RMBS sectors have seen considerable spread tightening, particularly in the subordinate tranches of structures.

Over the course of the year, non-investment grade prime jumbo spreads were 150 to 300 basis points tighter and non-investment grade Non-QM spreads were 100 to 200 basis points tighter, leaving credit curves sharply flatter in 2024.

Primary RMBS market activity decreased slightly during the fourth quarter, totaling approximately $34 billion, a decline of 6% quarter-over-quarter, however issuance approximately doubled year-over-year.

The annual growth was most pronounced in the Non-QM and Prime Jumbo sectors, which collectively grew by $8 billion year-over-year to nearly $18 billion.

Other growth sectors included second liens and Home Equity Loans, up over 120%.

For the full year 2024, primary RMBS activity rose over 90% to $134 billion.

Most of the growth was again in the Prime Jumbo and Non-QM sectors, which rose 165% and 51% to $26 billion and $43 billion, respectively.

Issuance for the second liens and Home Equity Loans sector grew by an impressive 200% to $13.5 billion as originators and deal sponsors become more focused on this asset class.

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

National Home Price Index seasonally fell, albeit just slightly, from its peak in July.

The Index was higher by 3.9% during 2024.

Regional price variations continue to exist, however, as West Coast, Midwest and Northeast regions recording the highest gains.

Home price growth and available for-sale inventory have had a relatively strong inverse relationship as regions with inventory growth since baseline 2019 have had weaker home price gains, and vice versa.

National home price expectations from third party research currently forecasts 2025 home price appreciation to be approximately 1.5% to 2%, with a range of -2% to +4.4%.

Prevailing mortgage rates rose sharply in the fourth quarter after a brief decline in September with the 30-year fixed rate mortgage ending the quarter at 6.85%, according to the Freddie Mac Primary Mortgage Market Survey.

The effective mortgage rate outstanding was slightly higher, from 3.98% to 4.02% as of December 2024 and remains well below prevailing rates.

However, the “lock-in effect,” or disincentive for existing homeowners to sell their homes because their current mortgage rate is well below current market rates, is starting to show signs of decay as the effective mortgage rate has risen approximately 72 basis points since March 2022 and 23 basis points through 2024.

Total existing home listings ticked down going into the end of the year.

New listings continue to run well short of annual activity in 2015 to 2019 as well as pandemic-affected 2020 to 2022.

Throughout 2024, approximately 4.2 million new listings came to market, a gap of over 1.1 million fewer listings than an average year over 2015 to 2022.

Presentation of investment, financing and hedging activities

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• 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.

◦ "Residential mortgage loans" or "Loans" refer to our Non-Agency Loans, Agency-Eligible Loans, Home Equity 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 Non-Agency RMBS issued by third-parties.

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

Book value and Adjusted book value per share

The below table details book value and adjusted book value per common share.

Book value per share

The below table details book value per common share.

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

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December 31, 2023

Stockholders' Equity $ 543,423 $ 528,368

Liquidation preference of preferred stock (227,991) (227,991)

Book Value 315,432 300,377

Common shares outstanding 29,640 29,437

Book value per common share $ 10.64 $ 10.20

Net proceeds of preferred stock less liquidation preference of preferred stock per common share (1) (0.26) (0.36)

Adjusted book value per common share $ 10.20 $ 11.03

(1) Book value per common share is calculated using stockholders’ equity less net proceeds of $220.5 million on our issued and outstanding preferred stock as the numerator.

Adjusted book value per common share is calculated using stockholders’ equity less the liquidation preference of $228.0 million on our issued and outstanding preferred stock as the numerator.

Results of Operations for the Fiscal Year 2023 and 2022

Results of Operations for the Fiscal Years 2024 and 2023

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

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The table below presents certain information from our consolidated statements of operations for the years ended December 31, 2024 and 2023 (in thousands):

Year Ended Increase/(Decrease)

Years Ended Change

December 31, 2024 December 31, 2023

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

Interest income increased from December 31, 2022 to December 31, 2023 primarily due to an increase in the size of our portfolio resulting from purchases of Non-Agency Loans and Agency-Eligible Loans during the period.

This was coupled with an increase in the weighted average yield of our investment portfolio resulting from purchasing higher yielding assets as interest rates increased during the period.

Interest income increased from December 31, 2023 to December 31, 2024 primarily as a result of an increased investment portfolio resulting from the WMC acquisition in December 2023 along with purchases of residential mortgage loans and real estate securities during the year 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 years ended December 31, 2024 and 2023 ($ in millions).

December 31, 2023 December 31, 2022 Increase/(Decrease)

December 31, 2024 December 31, 2023 Change

Weighted average amortized cost of our GAAP investment portfolio

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Weighted average yield on our GAAP investment portfolio (1) 5.94 % 5.19 % 0.75 %

(1) The weighted average yields are presented based on the amortized cost of the underlying loans.

Interest expense

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

Interest expense increased from December 31, 2022 to December 31, 2023 due to an increase in the weighted average financing rate resulting from rising interest rates during the period, coupled with an increase in the amount of financing on our GAAP investment portfolio primarily resulting from the issuance of securitized debt.

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 December 31, 2023 to December 31, 2024 due to an increase in the GAAP financing balance outstanding resulting from the assumption of financing through the WMC acquisition in December 2023 along with the issuance of securitized debt and Senior Unsecured Notes during the year.

Additionally, there was an increase in the weighted average financing rate.

The following table presents a summary of the weighted average financing balance and the weighted average financing rate for the years ended December 31, 2024 and 2023 ($ in millions).

December 31, 2023 December 31, 2022 Increase/(Decrease)

December 31, 2024 December 31, 2023 Change

Weighted average GAAP financing balance

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Weighted average financing rate (1) 5.34 % 4.58 % 0.76 %

(1) The weighted average financing rates are presented based on the amortized cost of the underlying securities.

Net interest component of interest rate swaps

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

We recorded income on the net interest component of interest rate swaps during the year ended December 31, 2023 as a result of our swap portfolio being in a net receive position during the entire period, compared with an expense for the year ended December 31, 2022 as a result of our swap portfolio being in a net pay position during part of the period.

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

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

December 31, 2023 December 31, 2022 Increase/(Decrease)

December 31, 2024 December 31, 2023 Change

Interest rate swap notional value

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

The realized gain during the year ended December 31, 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 and real estate securities.

The realized loss during the year ended December 31, 2024 was primarily driven by losses from unwinding pay-fix, receive-variable interest rate swaps which were held at unrealized losses.

This was offset by realized gains on sales of residential mortgage loans and real estate securities.

December 31, 2024 December 31, 2023

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

During the year ended December 31, 2023, unrealized gains on real estate securities, residential mortgage loans, and commercial loans and unrealized losses on securitized debt and derivatives were primarily driven by a decrease in interest rates during the fourth quarter of 2023.

During the year ended December 31, 2024, there were unrealized gains on our residential mortgage loans and interest rate swaps offset by unrealized losses on our securitized debt.

December 31, 2024

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Per ASC 805, "Business Combinations," a bargain purchase gain is recognized in current earnings when the aggregate fair value of the consideration transferred is less than the fair value of the identifiable net asset acquired.

In connection with the WMC acquisition, we recorded a bargain purchase gain of $30.2 million, which represents the difference between our consideration transferred of $51.2 million and the fair value of the net assets we acquired of $81.4 million.

In connection with the WMC acquisition in 2023, we recorded a bargain purchase gain of $30.2 million, which represents the amount by which the fair value of the net assets we acquired in the acquisition of $81.4 million exceeded the fair value of the shares of MITT common stock issued as consideration of $51.2 million.

As a result of macroeconomic factors and interest rate volatility, the price per share of common stock of certain companies within the mortgage REIT industry have traded at discounts to book values per share in recent periods, which contributed to the bargain purchase gain recorded on the WMC acquisition.

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See the "Contractual obligations" section of this Part II, Item 7 for further detail on the calculation of our management fee and for the definition of Stockholders’ Equity.

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).

As a result of the transaction closing on December 6, 2023, the base management fee was reduced by $0.6 million during the year ended December 31, 2023.

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

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

As a result of the transaction closing on December 6, 2023, the base management fee was reduced by $0.6 million during the year ended December 31, 2023 and $1.8 million during the year ended December 31, 2024.

Non-investment related expenses

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(1) For the years ended December 31, 2024 and 2023, the Manager agreed to waive its right to receive expense reimbursements of $1.1 million and $1.7 million, respectively.

(2) Estimated excise tax expense of $0.1 million was recognized during the year ended December 31, 2024.

The Company did not recognize any excise tax during the year ended December 31, 2023.

Investment related expenses

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

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.

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Total Investment related expenses $ 13,522 $ 9,808

(1) We incur servicing fees, asset management fees, and trustee and bank fees in connection with our residential mortgage loans.

These expenses increased from the year ended December 31, 2022 to the year ended December 31, 2023 primarily due to an increase in our GAAP residential mortgage loan portfolio.

The weighted average cost of our GAAP residential mortgage loan portfolio increased by $0.9 billion from $3.9 billion for the year ended December 31, 2022 to $4.8 billion for the year ended December 31, 2023 resulting from purchases of Non-Agency Loans and Agency-Eligible Loans.

Transaction related expenses

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.

However, in 2023, we also recorded transaction related expenses in connection with the WMC acquisition.

Transaction related expenses decreased from the prior period as we completed three securitizations during the year ended December 31, 2023, as compared to eight securitizations during the year ended December 31, 2022.

This decrease was partially offset by $6.0 million of transaction related expenses incurred in connection with the WMC acquisition.

During the year ended December 31, 2024 we completed four securitizations as compared to three securitizations during the year ended December 31, 2023.

However, transaction related expenses for the year ended December 31, 2024 decreased primarily due to $6.0 million of transaction related expenses incurred during the year ended December 31, 2023 in connection with the WMC acquisition.

Equity in earnings/(loss) from affiliates

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

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

These investments are comprised of real estate securities, loans, and our investment in AG Arc which holds our investment in Arc Home.

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

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$ 3,141 $ (1,390)

(1) The earnings within MATT for the year ended December 31, 2023 were primarily the result of net interest income of $3.5 million and unrealized gains of $0.7 million offset by expenses of $(0.2) million.

The earnings within MATT for the year ended December 31, 2022 were primarily the result of net interest income of $2.7 million and unrealized gains of $0.1 million offset by realized losses of $(1.2) million and other expenses of $(0.3) million.

(2) Throughout the year ended December 31, 2023, Land Related Financing continued to pay down and paid off in full during the fourth quarter 2023, contributing to the decrease in earnings from the year ended December 31, 2022 to the year ended December 31, 2023.

(1) The earnings within MATT for the year ended December 31, 2024 were primarily the result of net interest income of $2.9 million offset by unrealized losses of $(1.4) million and expenses of $(0.2) million.

The earnings within MATT for the year ended December 31, 2023 were primarily the result of net interest income of $3.5 million and unrealized gains of $0.7 million offset by other expenses of $(0.2) million.

(2) Throughout the year ended December 31, 2023, Land Related Financing continued to pay down and paid off in full during the fourth quarter 2023.

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

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Total Net Interest Income 3,575 5,190

Net realized gain/(loss) — (1,191)

Net unrealized gain/(loss) (1,351) 852

Total Other Income/(Loss) 852 (1,484)

After-tax earnings/(loss) at AG Arc (1) (323) (4,021)

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$ 3,141 $ (1,390)

(1) The earnings/(loss) at AG Arc during the year ended December 31, 2024 were primarily the result of $0.6 million related to changes in the fair value of the MSR portfolio held by Arc Home offset by $(0.9) million of losses related to Arc Home's lending and servicing operations.

The earnings/(loss) at AG Arc during the year ended December 31, 2023 were primarily the result of $(3.8) million related to changes in the fair value of the MSR portfolio held by Arc Home coupled with $(0.2) million of losses related to Arc Home's lending and servicing operations.

The earnings/(loss) at AG Arc during the year ended December 31, 2022 were primarily the result of $(5.5) million of losses related to Arc Home's lending and servicing operations, offset by $3.4 million related to changes in the fair value of the MSR portfolio held by Arc Home.

(2) During the years ended December 31, 2023 and December 31, 2022, we recorded unrealized losses on our investment in AG Arc as a result of the valuation decreasing from 0.94x book value as of December 31, 2022 to 0.89x book value as of December 31, 2023 and from 1.06x book value as of December 31, 2021 to 0.94x book value as of December 31, 2022, respectively.

(2) As of December 31, 2024, the fair value of our investment in Arc Home was calculated using a valuation multiple of 0.95x book value, which increased from 0.89x book value as of December 31, 2023.

As of December 31, 2022, the fair value of our investment in Arc Home was calculated using a valuation multiple of 0.94x book value.

(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 2 and Note 10 to the "Notes to Consolidated Financial Statements" for more information on this accounting policy.

(4) During the year ended December 31, 2023, Other operating expenses included certain expenses incurred related to the Land Related Financing assets held within LOTS which paid off in full during the fourth quarter 2023.

Dividends on Preferred Stock

Holders of our Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock are entitled to receive cumulative cash dividends at their respective rates per annum on the $25.00 per share liquidation preference for each series.

Our Series A Preferred Stock and Series B Preferred Stock have fixed rates of 8.25% and 8.00%, respectively.

The initial dividend rate for our Series C Preferred Stock, from issuance through September 16, 2024, was 8.000%.

On and after September 17, 2024, dividends on the Series C Preferred Stock accumulate at an annual floating rate of three-month CME Term SOFR (plus a tenor spread adjustment of 0.26161%) plus a spread of 6.476%.

Earnings Available for Distribution

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

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

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

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

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, (vi) any bargain purchase gains recognized, and (vii) certain other nonrecurring gains or losses.

Items (i) through (vii) 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.

Transaction related expenses referenced in (ii) above are primarily comprised of costs incurred prior to or at the time of executing our securitizations and acquiring or disposing of residential mortgage loans.

These costs are nonrecurring and may include underwriting fees, legal fees, diligence fees, and other similar transaction related expenses.

Recurring expenses, such as servicing fees, custodial fees, trustee fees and other similar ongoing fees are not excluded from earnings available for distribution.

Management considers the transaction related expenses 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.

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

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EAD from equity method investments (2)(3) 62 (452)

Dollar roll income/(loss) — 1,999

Bargain purchase gain — (30,190)

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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.

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

Net interest margin provides investors visibility into our profitability of interest income versus interest expense including the net effect of our interest rate swaps for insight into earnings available for distribution.

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.

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.

The calculation of weighted average yield is weighted on fair value at quarter-end.

The calculation of weighted average yield is weighted on amortized cost at year end.

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

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

GAAP and non-GAAP cost of funds are weighted by the outstanding financing arrangements on our GAAP investment portfolio and our investment portfolio, respectively, and the amortized cost of securitized debt and senior unsecured notes at year end.

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

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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 December 31, 2023 and a reconciliation of these metrics on our Investment Portfolio to their respective metrics on our GAAP Investment Portfolio ($ in thousands).

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

December 31, 2024

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)

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

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

Residential Investments:

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Securitized Re/Non-Performing Loans 170,986 153,081 6.55 % 109,167 100,554 31,798 4.06 % 20,729 2.49 % 1.5x

Non-Agency Loans 92,868 94,516 7.29 % — — 77,345 5.65 % 17,171 1.64 % 4.5x

Agency-Eligible Loans 102,478 102,145 6.58 % — — 95,688 5.47 % 6,457 1.11 % 14.8x

Home Equity Loans 101,488 103,964 9.89 % — — 87,440 6.50 % 16,524 3.39 % 5.3x

Non-Agency Loans (f) 12,825 12,279 4.72 % — — 7,615 6.23 % 4,664 (1.51) % 1.6x

Residential Whole Loans 848 1,829 103.24 % — — — — % 1,829 103.24 % N/A

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Agency RMBS $ 20,517 $ 20,996 10.35 % $ — $ — $ 2,038 5.33 % $ 18,958 5.02 % 0.1x

Legacy WMC Commercial Investments (e)

Legacy WMC Commercial Investments (g)

Commercial Loans $ 66,641 $ 67,005 10.04 % $ — $ — $ 47,222 7.49 % $ 19,783 2.55 % 2.4x

CMBS 56,533 56,349 21.90 % — — 31,620 7.81 % 24,729 14.09 % 1.2x

CMBS (h) 59,017 52,785 16.74 % — — 20,416 6.30 % 32,369 10.44 % 0.6x

Total Legacy WMC Commercial Investments $ 125,658 $ 119,790 13.19 % $ — $ — $ 67,638 7.13 % $ 52,152 6.06 % 1.3x

Other Securities $ 1,174 $ 1,156 18.16 % $ — $ — $ — — % $ 1,156 18.16 % N/A

Total Investment Portfolio $ 7,063,632 $ 6,702,026 6.03 % $ 5,772,046 $ 5,491,967 $ 742,696 5.24 % $ 467,363 0.79 % 1.4x

Cash and Cash Equivalents (f) 111,534 5.25 %

Interest Rate Swaps (g) 12,146 1.73 %

Arc Home 33,574

Convertible senior unsecured notes (85,266) (8.42) %

Non-Interest Earning Assets, net 11,338

Total Stockholders' Equity $ 528,368 1.5x

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 $ 6,329,311 $ 5,927,862 6.05 % $ 5,026,731 $ 4,711,623 $ 771,197 5.09 % $ 445,042 0.96 % 1.6x

Investments in Debt and Equity of Affiliates 17,451 22,826 31.44 % — — 3,605 8.02 % 19,221 23.42 % (h)

GAAP Investment Portfolio $ 6,311,860 $ 5,905,036 5.95 % $ 5,026,731 $ 4,711,623 $ 767,592 5.09 % $ 425,821 0.86 % 10.5x

(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 December 31, 2023 was 0.16%.

(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) 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.

(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.

(h) 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

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 $ 3,904,841 $ 3,436,201 4.65 % $ 3,470,695 $ 3,078,593 $ 197,937 4.28 % $ 159,671 0.37 % 1.2x

Securitized Re/Non-Performing Loans 288,138 270,945 6.66 % 196,134 183,759 34,151 3.68 % 53,035 2.98 % 0.6x

Non-Agency Loans 398,392 371,161 5.54 % — — 315,915 4.81 % 55,246 0.73 % 5.7x

Agency-Eligible Loans 48,675 46,862 5.99 % — — 44,326 5.08 % 2,536 0.91 % 17.5x

Residential Whole Loans 1,520 3,428 72.78 % — — — — % 3,428 72.78 % N/A

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

Non-Agency RMBS 67,580 63,516 16.41 % — — 35,510 5.42 % 28,006 10.99 % 0.7x

Total Residential Investments $ 4,719,834 $ 4,202,801 5.13 % $ 3,666,829 $ 3,262,352 $ 627,839 4.31 % $ 312,610 0.82 % 1.9x

Agency RMBS $ 19,771 $ 19,124 7.54 % $ — $ — $ 14,163 4.54 % $ 4,961 3.00 % 2.3x

Total Investment Portfolio $ 4,739,605 $ 4,221,925 5.14 % $ 3,666,829 $ 3,262,352 $ 642,002 4.31 % $ 317,571 0.83 % 1.9x

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

Interest Rate Swaps (f) 8,727 1.53 %

Cash and Cash Equivalents (i) 118,662 4.35 %

Interest Rate Swaps (j) 8,974 1.01 %

Arc Home 30,778

Senior Unsecured Notes (95,721) 10.61 %

Non-Interest Earning Assets, net 13,367

Total Stockholders' Equity $ 543,423 11.6x

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)

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

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

Total Investment Portfolio $ 7,063,632 $ 6,702,026 6.03 % $ 5,772,046 $ 5,491,967 $ 742,696 5.24 % $ 467,363 0.79 % 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 11,743 15,766 25.24 % — — 588 7.08 % 15,178 18.16 % (k)

GAAP Investment Portfolio $ 7,051,889 $ 6,686,260 6.00 % $ 5,772,046 $ 5,491,967 $ 742,108 5.24 % $ 452,185 0.76 % 11.6x

(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 December 31, 2022 was 0.13%.

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

(b) As of December 31, 2024, the weighted average yields are presented based on the amortized cost of the underlying loans and securities.

The weighted average yield of the Company's investment portfolio based on the fair value of the underlying loans and securities as of December 31, 2024 was 6.20%.

(c) The cost of funds related to the financing on our investment portfolio inclusive of the benefit of 0.05% from our interest rate hedges was 5.24%.

When including our Senior Unsecured Notes, the total cost of funds was 5.31%.

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

(e) 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.

(f) Substantially all of our Non-Agency Loans were sold during January 2025.

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

(h) As of December 31, 2024, there are Legacy WMC CMBS with an unpaid principal balance of $23.5 million and a fair value of $6.0 million which are on non-accrual or cost recovery status.

(i) 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.

(j) 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 December 31, 2023 and 2022 ($ in thousands).

December 31, 2023

December 31, 2022

Instrument Current Face Amortized Cost Unrealized Mark-to-Market Fair Value (1) Weighted Average

Coupon (2) Weighted

Average Yield Weighted Average

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

Residential Investments

Residential Mortgage Loans

Securitized Non-Agency Loans (4) $ 5,599,960 $ 5,567,710 $ (392,541) $ 5,175,169 5.19 % 5.51 % 10.37 $ 3,436,201

Securitized Re- and Non-Performing Loans 217,098 199,633 (16,521) 183,112 3.88 % 6.30 % 6.10 270,945

Non-Agency Loans 92,033 92,868 1,648 94,516 8.10 % 7.29 % 3.14 371,161

Agency-Eligible Loans 212,350 215,885 4,824 220,709 7.94 % 7.28 % 3.37 46,862

Re- and Non-Performing Loans 2,604 974 1,432 2,406 N/A 112.97 % 1.69 3,428

Land Related Financing — — — — — % — % — 10,688

Total Residential Mortgage Loans 6,124,045 6,077,070 (401,158) 5,675,912 5.28 % 5.68 % 9.86 4,139,285

Non-Agency RMBS

GCAT Non-Agency RMBS (5)

GCAT Non-Agency Securities 43,794 41,513 (8,971) 32,542 4.67 % 5.99 % 10.08 9,859

GCAT Non-Agency RMBS Interest Only (6) N/A 2,541 2,450 4,991 — % 37.74 % 5.21 5,058

MATT Non-QM Securities (6) 4,497 9,906 5,351 15,257 0.34 % 39.76 % 3.64 31,067

Re/Non-Performing Securities (6) 5,516 7,545 24 7,569 0.92 % 14.68 % 1.70 7,854

Total GCAT Non-Agency RMBS 53,807 61,505 (1,146) 60,359 1.01 % 18.24 % 4.42 53,838

Non-Agency Securities 82,390 48,991 2,015 51,006 4.99 % 9.11 % 16.21 9,678

Non-Agency RMBS Interest Only (6) N/A 1,116 (33) 1,083 0.35 % 16.04 % 2.61 —

Total Non-Agency RMBS 136,197 111,612 836 112,448 1.50 % 14.08 % 5.48 63,516

Total Residential Investments 6,260,242 6,188,682 (400,322) 5,788,360 5.08 % 5.84 % 9.41 4,202,801

Agency RMBS Interest Only (6) N/A 16,714 (1,020) 15,694 3.74 % 10.20 % 6.54 19,124

Legacy WMC Commercial Investments (7)

Commercial Loans 67,204 66,208 95 66,303 9.27 % 9.50 % 1.52 —

CMBS 103,458 56,533 (184) 56,349 7.39 % 21.90 % 2.62 —

Total Legacy WMC Commercial Investments 170,662 122,741 (89) 122,652 8.13 % 15.20 % 2.18 —

Other Securities (8) N/A 1,174 (18) 1,156 N/A 18.16 % 7.33 —

Investment Portfolio $ 6,430,904 $ 6,329,311 $ (401,449) $ 5,927,862 5.06 % 6.05 % 9.20 $ 4,221,925

Investments in Debt and Equity of Affiliates

Residential Mortgage Loans $ — $ — $ — $ — — % — % — $ 10,688

Non-Agency RMBS $ 10,013 $ 17,451 $ 5,375 $ 22,826 0.43 % 31.44 % 3.47 $ 38,921

GAAP Investment Portfolio $ 6,420,891 $ 6,311,860 $ (406,824) $ 5,905,036 5.19 % 5.95 % 9.69 $ 4,172,316

(1) Refer to Note 10 to the "Notes of the Consolidated Financial Statements" 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.

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

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

Typically, actual maturities are shorter than stated contractual maturities.

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

(4) 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 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 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, Non-Agency RMBS Interest Only and Agency RMBS Interest Only line items include interest only classes with notional balances of $98.3 million, $310.4 million, $24.3 million, $128.8 million and $92.2 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.

Residential mortgage loans

See Note 3 to the "Notes to Consolidated Financial Statements" 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.

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

Securitized Non-Agency Loans

As noted above, our investment activities primarily include acquiring and securitizing newly-originated residential mortgage loans.

These securitization trusts ("Non-Agency VIEs") are collateralized by Non-Agency and Agency-Eligible Loans.

These securitization trusts ("Non-Agency VIEs"), as defined in Note 2 of the consolidated financial statements, are collateralized by Non-Agency and Agency-Eligible Loans.

In each securitization transaction, we transfer a pool of loans to a wholly-owned subsidiary and the loans are deposited into a newly created securitization trust.

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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).

December 31, 2023 December 31, 2022

Unpaid Principal Balance Fair Value Unpaid Principal Balance Fair Value

December 31, 2024

Unpaid Principal Balance Fair Value

Securitized residential mortgage loans in Non-Agency VIEs $ 6,382,814 $ 6,044,597

Securitized debt in Non-Agency VIEs (1) 5,779,890 5,391,413

Other assets (2) N/A 1,150 N/A —

Other assets (2) N/A 1,133

Retained Certificates from Non-Agency VIEs (3)(4)(5)(6) $ 654,317

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 $ 71,804 $ 72,324

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Subordinate Bonds 508,161 373,819

Interest Only / Excess Servicing Bonds (1)(7) N/A 194,827 N/A 148,230

Interest Only / Excess Servicing Bonds (1)(7) N/A 186,417

Retained Certificates from Non-Agency VIEs (3)(4)(5)(6) $ 654,317

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Retained Certificates from Non-Agency VIEs, net of financing arrangements $ 283,404

(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 December 31, 2023 and 2022, the Securitized debt in Non-Agency VIEs line item includes interest only classes with notional balances of $133.8 million and $144.3 million, respectively.

As of December 31, 2023 and 2022 the notional balance on Interest Only / Excess Servicing Bonds was $11.1 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 December 31, 2024 the Securitized debt in Non-Agency VIEs line item includes interest only classes with notional balances of $1.2 billion.

As of December 31, 2024 the notional balance on Interest Only / Excess Servicing Bonds was $12.2 billion.

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

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

(4) As of December 31, 2023 and 2022, our equity at risk included bonds with a fair value of $389.5 million and $215.1 million, respectively, held in order to comply with Risk Retention Rules.

(4) As of December 31, 2024 our equity at risk included bonds with a fair value of $443.6 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 December 31, 2023 and 2022, a portion of our equity at risk included bonds exposed to the first loss of the securitization with a fair value of $115.1 million and $84.7 million, respectively.

(6) Excludes net other asset/(liabilities) held within the VIEs of $6.9 million and $4.4 million as of December 31, 2023 and 2022, respectively.

(5) As of December 31, 2024, a portion of our equity at risk included bonds exposed to the first loss of the securitization with a fair value of $117.5 million.

(6) Excludes net other asset/(liabilities) held within the VIEs of $7.7 million as of December 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 December 31, 2023, there were three securitizations with an unpaid principal balance of $458.7 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.

As of December 31, 2024, there were four securitizations with an unpaid principal balance of $561.9 million that met the criteria for an Optional Redemption.

Securitized residential mortgage loans and Residential mortgage loans

The following table presents information regarding collateral characteristics of our residential mortgage loans as of December 31, 2024 ($ in thousands).

Unpaid Principal Balance Weighted Average (1)(2)

Loan Count (1) Original LTV Ratio (3) Current FICO (4) Coupon Life (Years) (5)

Securitized residential mortgage loans

Non-Agency Loans $ 6,382,814 16,087 69.62 % 765 5.59 % 8.12

Re- and Non-Performing Loans 182,501 1,259 79.97 % 660 3.43 % 5.53

Total Securitized residential mortgage loans $ 6,565,315 17,346 69.91 % 762 5.53 % 8.05

Residential mortgage loans

Agency-Eligible Loans $ 101,570 214 72.29 % 749 6.89 % 4.95

Home Equity Loans 99,863 1,292 63.46 % 750 10.35 % 4.30

Non-Agency Loans 13,098 24 66.86 % 642 7.54 % 3.76

Re- and Non-Performing Loans (1) 2,016 N/A N/A N/A N/A 1.37

Total Residential mortgage loans $ 216,547 1,530 67.85 % 738 8.54 % 4.54

Total as of December 31, 2024

$ 6,781,862 18,876 69.85 % 761 5.62 % 7.93

(1) Loan count and weighted average excludes the Re- and Non-Performing Loans subcategory of Residential mortgage loans above as there may be limited data available regarding the underlying collateral of these residual positions.

(2) Amounts are weighted based on unpaid principal balance.

(3) Represents the original LTV or, for Re- and Non-Performing Loans and Non-Agency Loans acquired from WMC, the LTV at acquisition.

For Home Equity Loans, represents the combined LTV, which considers the loan balances on a borrower’s first mortgage and related Home Equity Loan.

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

Data is based on the latest available information.

(5) 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.

See Note 3 to the "Notes to Consolidated Financial Statements" for additional 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" 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 December 31, 2023 (in thousands).

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

See Note 3 to the "Notes to Consolidated Financial Statements" for information on the coupons, weighted average life, 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

The following table presents the fair value, coupon, and weighted average life of our Non-Agency RMBS and Legacy WMC CMBS portfolios as of December 31, 2024 ($ in thousands).

Weighted Average

Instrument Current Face Fair Value Coupon (1) Life (Years) (2)

GCAT Non-Agency RMBS

GCAT Non-Agency Securities $ 43,794 $ 36,479 4.94 % 6.74

GCAT Non-Agency RMBS Interest Only (3) N/A 3,836 0.38 % 3.16

MATT Non-QM Securities (3) 4,497 13,304 0.30 % 2.99

Re/Non-Performing Securities (3) 996 2,462 4.47 % 0.87

Total GCAT Non-Agency RMBS 49,287 56,081 1.25 % 3.43

Non-Agency Securities 79,524 74,977 5.94 % 10.77

Non-Agency RMBS Interest Only (3) N/A 12,287 2.28 % 4.65

Total Non-Agency RMBS $ 128,811 $ 143,345 2.39 % 4.44

CMBS (4) 100,896 52,785 5.13 % 1.77

Total Non-Agency RMBS and CMBS $ 229,707 $ 196,130 2.81 % 4.11

Investments in Debt and Equity of Affiliates $ 5,942 $ 15,766 0.36 % 2.98

Total GAAP Non-Agency RMBS and CMBS $ 223,765 $ 180,364 3.48 % 4.66

(1) Equity residual investments with a zero coupon rate are excluded from this calculation.

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

Typically, actual maturities are shorter than stated contractual maturities.

(3) Interest Only securities 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 December 31, 2024, the notional value of interest only classes included in the GCAT Non-Agency RMBS Interest Only, MATT Non-QM Securities, Re/Non-Performing Securities, and Non-Agency RMBS Interest Only line items was $85.6 million, $264.6 million, and $1.0 million, and $242.0 million, respectively.

(4) As of December 31, 2024, there are Legacy WMC CMBS with an unpaid principal balance of $23.5 million and a fair value of $6.0 million which are on non-accrual or cost recovery status and have no coupon.

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

Credit Rating (1) Non-Agency RMBS Legacy WMC CMBS

AAA $ 29,939 $ —

BBB 23,523 5,097

BB 15,817 — —

B 10,817 1,182

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GAAP Basis $ 127,579 $ 52,785

(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.

(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 December 31, 2024 ($ in thousands).

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

Instrument Current Face Fair Value

Non-Agency RMBS

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Prime (1) 58,276 55,400

Credit Risk Transfer 9,044 10,168 4.73

Home Equity Loans (1) 15,526 27,030

Total Non-Agency RMBS $ 128,811 $ 143,345

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Total Legacy WMC CMBS $ 100,896 $ 52,785

(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 balance.

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

As of December 31, 2023, the notional balance on interest only classes included in the Non-QM Loans, Re-and Non-Performing Loans and Prime line items was $408.7 million, $122.2 million and $30.9 million, respectively.

(1) 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 December 31, 2024, the notional value of interest only classes included in the Non-QM Loans, Re-and Non-Performing Loans, Prime, and Home Equity Loans line items was $350.2 million, $1.0 million, $78.7 million, and $163.3 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 December 31, 2024 ($ in thousands).

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Florida 9.0 % 12,918 Minnesota 11.2 % 5,908

New Jersey 3.5 % 3,970 Texas 4.6 % 2,571

Texas 3.4 % 3,853 New York 2.2 % 1,266

Texas 4.5 % 6,398 Texas 5.9 % 3,093

New Jersey 3.2 % 4,530 New York 3.2 % 1,680

Other 40.4 % 57,976 Other 16.4 % 8,737

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

Fair Value CPR (1)

Weighted Average

Fair Value CPR (1) Coupon Life (2)

Agency RMBS Interest Only $ 20,996 5.2 % 4.32 % 6.55

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

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

Typically, actual maturities are shorter than stated contractual maturities.

Financing activities

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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 seven and six counterparties as of December 31, 2023 and 2022, respectively.

We had outstanding financing arrangements with six and seven counterparties as of December 31, 2024 and 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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In addition, some of the financing arrangements contain cross default features, whereby default under an agreement with one lender simultaneously causes default under agreements with other lenders.

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

To the extent that we fail to comply with the covenants contained in these financing arrangements or are 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 December 31, 2024, we are in compliance with all of our financial covenants.

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

During the first quarter of 2024, we repurchased $7.1 million of principal amount of the Legacy WMC Convertible Notes and paid off the remaining $79.1 million principal amount outstanding at maturity in September 2024.

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

Senior Unsecured Notes

During 2024, we issued senior unsecured notes which consist of $34.5 million principal amount 9.500% Senior Notes due February 2029 and $65.0 million principal amount 9.500% Senior Notes due May 2029.

See Note 6 to the "Notes to Consolidated Financial Statements" 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 December 31, 2023 and 2022 (in thousands).

December 31, 2023 December 31, 2022

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

December 31, 2024

Recourse financing - Financing arrangements, including those in Investments in Debt and Equity of Affiliates $ 692,574

Recourse Financing - Legacy WMC Convertible Notes 85,266 —

Non-recourse financing - Securitized debt, at fair value 5,491,967

Non-recourse financing - Financing arrangements 50,122

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

Non-recourse financing - Senior unsecured notes 95,721

Total Financing 6,330,384

Recourse financing - Financing arrangements included in Investments in Debt and Equity of Affiliates 588

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

Total Financing in Investments in Debt and Equity of Affiliates 3,605 20,815

Total GAAP Financing $ 6,329,796

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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, (3) Convertible senior unsecured notes, and (4) 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) our GAAP Financing arrangements, net of any restricted cash posted on such financing arrangements, (3) Senior unsecured notes, and (4) 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 (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).

December 31, 2023 Leverage Stockholders' Equity Leverage Ratio

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)

GAAP Leverage $ 5,562,785 $ 528,368 10.5x

Financing arrangements through affiliated entities 3,605

Non-recourse financing arrangements (1) (4,774,595)

Net TBA (receivable)/payable adjustment (9,163)

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

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

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

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

December 31, 2024 Leverage Stockholders' Equity Leverage Ratio

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GAAP Financing arrangements 742,108

Senior Unsecured Notes 95,721

Restricted cash posted on Financing arrangements (10,569)

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Non-recourse financing arrangements (1) (5,542,089)

Net TBA (receivable)/payable adjustment (39,206)

Economic Leverage $ 777,726 $ 543,423 1.4x

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

(1) Non-recourse financing arrangements include securitized debt, at fair value and $50.1 million of other non-recourse financing arrangements.

Hedging activities

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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.

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 December 31, 2023.

During the twelve months ended December 31, 2023, the Company declared common stock dividends of $0.72 per share.

During the same period, the Company declared preferred stock dividends on its 8.25% Series A, 8.00% Series B, and 8.000% Series C of $2.06252, $2.00, and $2.00, respectively.

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.

As of December 31, 2024, we had estimated undistributed taxable income of approximately $0.38 per share.

During the year ended December 31, 2024, the Company declared common stock dividends of $0.75 per share.

During the same period, the Company declared and paid preferred stock dividends on its Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock of $2.06252, $2.00, and $2.233117, respectively.

Liquidity and capital resources

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

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

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

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

We may also generate liquidity when restricted cash that was pledged as collateral for clearing and executing trades, derivatives, and financing arrangements becomes unrestricted when the related collateral requirements are exceeded or at the maturity of the derivative or financing arrangement.

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

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

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

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

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

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(1) Cash provided by operating activities is primarily attributable to net interest income less operating expenses for the years ended December 31, 2024 and 2023.

(2) Cash used in investing activities for the year ended December 31, 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 year ended December 31, 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.

The increase in net cash provided by operating activities during the year ended December 31, 2024 was a result of a full year of cash flows generated from the net assets acquired from WMC on December 6, 2023.

(2) Cash used in investing activities for the years ended December 31, 2024 and 2023 was primarily attributable to purchases of investments, offset by sales of investments and principal repayments on investments.

The increase in net cash used in investing activities was a result of the Company's increased purchase activity during the year ended December 31, 2024.

(3) Cash provided by financing activities for the years ended December 31, 2024 and 2023 was primarily attributable to the issuance of securitized debt, offset by principal repayments on securitized debt, net repayments of repurchase agreements, and dividend payments.

The increase in net cash provided by financing activities was a result of the Company issuing four securitizations in 2024 as compared to three securitizations in 2023.

During the year ended December 31, 2024, proceeds from the issuance of Senior Unsecured Notes were partially offset by repayments and repurchases of the Legacy WMC Convertible Notes.

Stock repurchase programs

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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See Note 11 in the "Notes to Consolidated Financial Statements" for additional details on the shares repurchased under the 2022 Repurchase Program during the year ended December 31, 2023.

We did not repurchase common stock during the year ended December 31, 2024.

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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This authorization is in addition to the amount remaining under the 2022 Repurchase Program.

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

Series B Preferred Stock, and Series C Preferred Stock having an aggregate value of up to $20.0 million.

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

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

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

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

Equity distribution agreements

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

For the year ended December 31, 2023, we did not issue any shares of common stock

under the Equity Distribution Agreements.

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.

On November 6, 2024, we entered into separate equity distribution agreements (the "2024 Equity Distribution Agreements") with each of BTIG, LLC, JonesTrading Institutional Services LLC, Keefe, Bruyette & Woods, Inc.

and Piper Sandler & Co.

(collectively, the "2024 Sales Agents"), pursuant to which we may sell up to $75.0 million aggregate offering price of shares of our common stock from time to time through an "at-the-market" equity offering program under which the 2024 Sales Agents will act as sales agent.

Prior to entering into the 2024 Equity Distribution Agreements, we terminated the equity distribution agreements related to our prior at-the-market program (the "Equity Distribution Agreements").

At the time of such termination, $51.7 million remained unsold under the prior program.

We did not issue any shares of common stock under the 2024 Equity Distribution Agreements or the Equity Distribution Agreements during the years ended December 31, 2024 and 2023.

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 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.

In connection with the closing of the Merger with WMC, the MITT Management Agreement Amendment became effective, pursuant to which (i) our Manager’s base management fee was reduced by $0.6 million for the first four quarters following the Effective Time, beginning with the fiscal quarter in which the Effective Time occurred (i.e., resulting in an aggregate $2.4 million waiver of base management fees), and (ii) our Manager waived 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 was 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.

Management fee

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Management fee to affiliate (1) $ 7,533 $ 7,711

(1) For the year ended December 31, 2023, 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.

(1) For the years ended December 31, 2024 and 2023, the Manager agreed to waive its right to receive management fees of $1.8 million and $0.6 million pursuant to the MITT Management Agreement Amendment executed in connection with the Merger.

As of December 31, 2024 and 2023, we recorded management fees payable of $2.3 million and $1.5 million, respectively.

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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 would first be payable with respect to the fiscal year ending December 31, 2023.

During the year ended December 31, 2023, we did not incur any incentive fee expense.

During the years ended December 31, 2024 and 2023, we did not incur any incentive fee expense.

Termination fee

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Expense reimbursements to Manager or its affiliates $ 6,800 $ 6,458

(1) For the years ended December 31, 2023 and December 31, 2022, our Manager agreed to waive its right to receive expense reimbursements of $1.7 million million and $1.5 million, respectively.

(1) For the years ended December 31, 2024 and 2023 , our Manager agreed to waive its right to receive expense reimbursements of $1.1 million and $1.7 million, respectively.

As of December 31, 2024 and 2023, we recorded a reimbursement payable to our Manager or its affiliates of $1.7 million and $1.5 million, respectively.

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Since inception of the 2020 Equity Incentive Plan and through December 31, 2024, we have granted an aggregate of 249,284 shares of restricted common stock to our independent directors under our 2020 Equity Incentive Plan, all of which have vested.

In addition, on December 6, 2023, in connection with the WMC acquisition and pursuant to the 2020 Equity Incentive Plan, 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 December 31, 2024, the two independent directors have also been granted an aggregate of 2,410 dividend equivalent units.

These restricted stock units and associated dividend equivalent units vested 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.

Further, on December 18, 2024, we granted an aggregate of 130,000 restricted shares of common stock to certain employees of the Manager, including certain of our executive officers, under the 2020 Equity Incentive Plan.

These awards vest ratably in three annual installments beginning in January 2026, subject to continued employment with the Manager.

The AG Mortgage Investment Trust, Inc.

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As of December 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.

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.

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.

Unfunded commitments

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

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

These retained interests are included in the MATT Non-QM Securities and Re/Non-Performing Securities components of the "Investments in debt and equity of affiliates" line item on the Company's consolidated balance sheets.

See Note 10 to the "Notes to Consolidated Financial Statements" for a discussion of investments i n debt and equity of affiliates.

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For additional information on our commitments as of December 31, 2024, refer to Note 12 of the "Notes to Consolidated Financial Statements." 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

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, (vi) Investment consolidation, and (vii) Accounting for business combinations.

For additional information related to our significant accounting policies, see Note 2 to the "Notes to Consolidated Financial Statements."

Critical accounting estimates

We prepare our consolidated financial statements in conformity with GAAP, which requires the use of estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of income and expenses during the reporting period.

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Although our estimates contemplate conditions as of December 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.

For additional information related to our significant accounting policies, see Note 2 to the "Notes to Consolidated Financial Statements." Our critical accounting estimates are those which require assumptions to be made about matters that are highly uncertain.

The following is a description of our critical accounting estimates that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations:

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However, many of our financial instruments are not traded in an active market.

Therefore, our Manger generally uses third-party valuations when available.

Therefore, our Manager generally uses third-party valuations when available.

If third-party valuations are not available, our Manager uses other valuation techniques, such as the discounted cash flow methodology.

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Changes in the market environment and other events that may occur over the life of our investments may cause the gains or losses ultimately realized to be different than the valuations currently estimated.

The significant unobservable inputs used in the fair value measurement of our financial instruments are yields, prepayment rates, probability of default, and loss severity in the event of default.

The significant unobservable inputs used in the fair value measurement of our financial instruments are market-implied discount rates, default rates, delinquency rates, prepayment rates and loss severity in the event of default.

Significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value measurement.

Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for prepayment rates.

change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for prepayment rates.

The significant unobservable input used in the fair value measurement of our investment in Arc Home is the book value multiple.

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A decrease in the prepayment rate will have a directionally opposite impact on the yield or interest income.

As further discussed in Note 2 of the "Notes to Consolidated Financial Statements," differences between previously estimated cash flows and current actual and anticipated cash flows caused by changes to prepayment or other assumptions are adjusted retrospectively through a "catch up" adjustment for the impact of the cumulative change in the effective yield through the reporting date for securities accounted for under ASC 320-10 (generally, Agency RMBS) or adjusted prospectively through an

adjustment of the yield over the remaining life of the investment for securities accounted for under ASC 325-40 and mortgage loans accounted for under ASC 310-10.

Investment consolidation

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The assets held by the securitization entities are restricted in that they can only be used to fulfill the obligations of the securitization entity.

Our risks associated with our involvement with these VIEs are limited to our risks and rights as a holder of the security we have retained as well as certain risks which may occur when we act as either the sponsor and/or depositor of and the seller to the securitization entities.

Our risks associated with our involvement with these VIEs are limited to

our risks and rights as a holder of the security we have retained as well as certain risks which may occur when we act as either the sponsor and/or depositor of and the seller to the securitization entities.

Our interest in the assets held by consolidated securitization vehicles, which are consolidated on our consolidated balance sheets, is restricted by the structural provisions of these trusts, and a recovery of our investment in the vehicles will be limited by each entity’s distribution provisions.

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Recent accounting pronouncements

Recent accounting pronouncements impacting us include (i) Reference rate reform and (ii) Debt with conversion and other options.

Recent accounting pronouncements impacting us include (i) Debt with conversion and other options, (ii) Segment reporting and (iii) Income Taxes.

For additional information related to these recent accounting pronouncements and their impact on our consolidated financial statements, see Note 2 to the "Notes to Consolidated Financial Statements."

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Even if we qualify for taxation as a REIT, we may be subject to some U.S.

federal, state and local taxes on our income or property.

federal, state and local taxes on

our income or property.

In addition, any income earned by a domestic taxable REIT subsidiary, or TRS, will be subject to corporate income taxation.

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

Both the 40% Test and the requirements of the Section 3(c)(5)(C) exclusion limit the types of businesses

in which we may engage and the types of assets we may hold, as well as the timing of sales and purchases of assets.

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.

Both the 40% Test and the requirements of the Section 3(c)(5)(C) exclusion limit the types of businesses in which we may engage and the types of assets we may hold, as well as the timing of sales and purchases of assets.

For example, these restrictions limit our and our subsidiaries’ ability to invest directly in Agency RMBS 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.

The determination that we qualify for this exemption from being regulated as an investment company depends on various factual matters and circumstances.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis