What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-05 compared with 2025-05-07 · 329 added, 178 removed, 661 unchanged (43% of the section changed)

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

First Quarter 2025 Executive Summary

Second Quarter 2025 Executive Summary

Financial Highlights

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• 12.8x GAAP Leverage Ratio and 1.3x Economic Leverage Ratio;

• $0.20 dividend per common share declared in the first quarter 2025;

◦ Increased our quarterly dividend from $0.19 per common share in the fourth quarter 2024, which represented a 5.3% increase.

• $0.21 dividend per common share declared in the second quarter 2025;

◦ Increased our quarterly dividend from $0.20 per common share in the first quarter 2025, which represented a 5.0% increase.

Investment Activity

• The table below summarizes the fair value of purchases and proceeds from sales of investments during the quarter ended March 31, 2025 (in thousands).

• The table below summarizes the fair value of purchases and proceeds from sales of investments during the quarter ended June 30, 2025 (in thousands).

Investment Purchases Sales

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Non-Agency RMBS — 558

Non-Agency Loans — 11,336

Re- and Non-Performing Loans — 9,092

Agency RMBS — 1,894

Total $ 444,936 $ 39,850

(1) During the first quarter 2025, we co-sponsored a rated securitization collateralized by $491.8 million of unpaid principal balance of Home Equity Loans.

As the co-sponsor, the Company retained an "eligible vertical interest" to comply with applicable risk retention rules.

Upon evaluating our retained interest in the securitization trust, we determined we were not the primary beneficiary and, as a result, did not consolidate the securitization trust and recorded an investment of $26.0 million of Non-Agency RMBS.

• In April 2025, the Company sold Agency-Eligible Loans for gross proceeds of $37.3 million.

These loans were recorded within the "Residential mortgage loans, at fair value" line item on the consolidated balance sheets as of March 31, 2025.

Financing Activity

• Executed a rated securitization of Agency-Eligible Loans with a total unpaid principal balance of $423.3 million, converting recourse financing with mark-to-market margin calls to non-recourse financing without mark-to-market margin calls.

• Executed a rated securitization of Agency-Eligible Loans with a total unpaid principal balance of $331.4 million.

• Subsequent to quarter end:

• On July 10, 2025, we co-sponsored a rated Non-Agency securitization, in which Home Equity Loans with a total unpaid principal balance of $301.3 million were securitized, converting recourse financing with mark-to-market margin calls to non-recourse financing without mark-to-market margin calls.

• On July 18, 2025, we paid off certain fixed-rate long-term financing arrangements which had an outstanding unpaid principal balance and accrued interest payable of $43.8 million.

The financing was collateralized by certain of our retained interests in securitizations acquired from WMC.

We pledged these assets under a recourse financing arrangement with mark-to-market margin calls with a balance of $82.9 million, providing us with net proceeds of $39.1 million.

• On July 29, 2025, we co-sponsored a rated Non-Agency securitization, in which Home Equity Loans with a total unpaid principal balance of $647.0 million were securitized.

Acquisition of AG Arc LLC

• On August 1, 2025, purchased an additional 21.4% interest in AG Arc LLC (“AG Arc”) from certain private funds managed by TPG Angelo Gordon.

In connection with the acquisition, we issued 2,027,676 restricted shares of our common stock as consideration.

Upon closing of the transaction on August 1, 2025 and giving effect to our acquisition of the additional 21.4% interest, we have an approximate 66.0% interest in AG Arc.

Refer to “Item 5.

Other Information” for additional information related to the transaction.

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

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

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

We obtain our assets through Arc Home, LLC ("Arc Home"), our residential mortgage loan originator in which we owned an approximate 44.6% interest as of June 30, 2025, and through other third-party origination partners.

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

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

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

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

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

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

As of March 31, 2025, our investment portfolio consisted of the following Residential Investments and Agency RMBS:

As of June 30, 2025, our investment portfolio consisted of the following Residential Investments and Agency RMBS:

Asset Class Description

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GSEs or agencies of the U.S.

Non-Agency RMBS are primarily secured by Non-Agency, Agency-Eligible, and Home Equity Loans.

Non-Agency RMBS are primarily secured by Non-QM, Agency-Eligible, Home Equity, and Prime Jumbo Loans.

Agency RMBS (2)

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Accordingly, we generally will not be subject to U.S.

federal income taxes on our taxable income that we distribute to our stockholders as long as we maintain our intended qualification as a REIT, with the exception of business conducted in our domestic taxable REIT subsidiaries ("TRSs") which are

subject to corporate income tax.

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

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Market Conditions

The financial markets had a strong start to 2025 with stock prices rising and risk assets performing well, but remain sensitive to uncertainty surrounding inflation, fiscal policy, and monetary policy.

In 2024, the Federal Reserve reduced the Federal Funds Rate by 100 basis points across three consecutive rate reductions that started in September 2024.

At the March 2025 Federal Open Market Committee (“FOMC”) meeting, the Federal Reserve maintained interest rates at 4.5%, following a January pause.

The economy showed resilience in the first quarter, with a strong labor market and moderating inflation, although it remained above the 2% target.

The March Consumer Price Index reported 2.4% year-over-year inflation, with a slight rise in the unemployment rate to 4.2%.

The Federal Reserve continues to maintain a cautious, yet increasingly dovish stance, employing a “wait-and-see” posture to obtain further confirmation from economic data before adjusting rates.

The updated Summary of Economic Projections (“SEP”) revised the 2025 growth forecasts downwards, increased inflation and unemployment forecasts, and maintained its projection of two rate cuts totaling 50 basis points in 2025.

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

Treasury yield dropped by 37 basis points to 4.21%, and the 30-year mortgage rate decreased by 20 basis points to 6.65%.

The yield spread between the 2-year and 10-year U.S.

Treasuries ended the quarter at a positive 32 basis points, consistent with the previous quarter end.

Late in the first quarter and early April 2025, tariff announcements by the U.S.

presidential administration caused sharp declines in risk assets and U.S.

Treasury prices, pushing the 10-year U.S.

Treasury yield up by nearly 50 basis points.

A subsequent announcement to delay the tariffs for 90 days provided temporary relief, but economic uncertainty remains extremely elevated, with market participants navigating volatility and assessing the potential ongoing impact of recent events.

RMBS spreads were generally wider during the first quarter alongside broader risk markets and an influx of new issuance in March 2025.

Senior Non-QM tranches widened by 25 basis points, while mezzanine and subordinate Non-QM tranches widened by 10 to 25 basis points.

Senior prime jumbo spreads were 20 basis points wider while subordinate tranches tightened by 15 basis points as market participants sought out higher all-in yields available lower in the structure.

In the second quarter of 2025, financial markets generally delivered positive performance with equities rising modestly and bond prices increasing, particularly at the short end of the curve, though uncertainty around inflation, fiscal, and monetary policy persisted.

The 2-year U.S.

Treasury yield declined by 17 basis points to 3.72% and although the 10-year U.S.

Treasury fluctuated, it ended the quarter relatively flat at 4.23%.

Overall, the yield spread between the 2-year and 10-year U.S.

Treasuries ended the quarter 51 basis points positive, steepening 19 basis points from the previous quarter end.

Markets experienced a notable bout of volatility in April as tariff announcements by the U.S.

presidential administration caused sharp declines in risk assets.

The policy shift sparked a temporary risk-off environment, driving credit spreads wider and mark-to-market losses across corporate and structured credit portfolios.

Although credit spreads tightened and asset prices partially recovered throughout the remainder of the quarter, geopolitical and trade policy risks continued to weigh on sentiment and forward visibility.

Throughout the second quarter of 2025, Federal Reserve Chair Jerome Powell emphasized a patient, data-dependent approach to monetary policy as inflation continued to moderate and labor market conditions gradually softened.

The Federal Reserve acknowledged meaningful progress on inflation, with headline Consumer Price Index (“CPI”) declining to 2.7% and core CPI holding near 2.9% by June, however, components of inflation remained somewhat sticky, warranting caution.

At the same time, the Federal Reserve observed certain signs of labor market cooling, with the unemployment rate at 4.2% and continuing weekly jobless claims remaining elevated.

While the Federal Open Market Committee held the federal funds rate steady at 4.25% to

4.50% at its July 2025 meeting, they indicated openness to rate cuts later in the year, assuming continued disinflation and no major re-acceleration in growth, with the June Summary of Economic Projections indicating a median expectation for two rate cuts totaling 50 basis points in 2025.

Changes in RMBS spreads were mixed for the second quarter of 2025 depending on product and priority within the capital structure.

Non-QM spreads were slightly wider for senior and mezzanine tranches while subordinate Non-QM tranches were wider by 35 basis points.

Senior prime jumbo spreads were wider by 5 basis points.

However, investment grade were more varied among the subordinate tranches as A and AA tranches were slightly tighter, BBB prime jumbo credit spreads widened moderately, and lower in the capital structure, non-rated tranches were roughly 35 basis points wider.

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 5 to 35 basis points wider with tranches higher in the structure widening the most.

Compared to year-ago levels, residential credit spreads are mostly tighter, except for AAA Non-QM which is roughly 15 basis points wider.

Credit curves remain relatively flat as the demand for subordinate tranches of credit continue to be robust, particularly amid higher benchmark rates.

Primary RMBS market activity was notably higher during the first quarter, at $39 billion, an increase of 14% compared to the fourth quarter of 2024 and 32% from year-ago levels.

As has often been the case, the Non-QM sector saw the sharpest growth, followed by the Second Lien and Home Equity Lines of Credit sector.

The latter has received a lot of press for its growth potential with estimates of $17 trillion tappable home equity, including $2 trillion belonging to conventional mortgage borrowers.

Issuance of Prime Jumbo RMBS also increased while CRT issuance was little changed year-over-year.

At nearly $14 billion, the Non-QM sector remained the most active sector, followed by Prime Jumbo ($7.9 billion), Second Liens and Home Equity Lines of Credit ($5 billion) and CRT ($2.7 billion).

Primary agency-eligible investor RMBS issuance was approximately $2.1 billion in the first quarter.

This quarter was the most active first quarter since 2022 when almost $55 billion of RMBS was issued, $13 billion of which was Non-QM.

CRT tranches were up to 20 basis points tighter with most of that coming higher in the capital structure.

The CRT sector has benefited from some scarcity value as the GSEs have opted to retain more of the capital structure for their newly issued transactions.

Compared to year-ago levels, residential credit spreads are mixed overall with CRT and senior prime jumbo up to 30 to 50 basis points tighter, Non-QM up to 20 basis points wider and below-investment grade prime jumbo up to 50 to 100 basis points wider.

Some credit curves were steeper during the quarter, but overall residential credit curves remained relatively flat as broad demand for residential credit continues to be robust.

Primary RMBS market activity edged higher during the second quarter of 2025 to $35 billion, a rise of 6% compared to year-ago levels but roughly 11% lower than the first quarter of 2025.

Compared to year-ago levels, primary activity for Non-QM rose 57% to almost $16 billion but was offset by declines across most of the remaining residential market.

Prime jumbo was relatively steady year-over-year at approximately $6 billion and the Second Lien and Home Equity Lines of Credit sector was marginally lower year-over-year at $2.8 billion.

Primary agency-eligible investor RMBS was approximately $1.7 billion and CRT totaled $1.8 billion in the second quarter of 2025.

On a year-to-date basis, primary RMBS activity totaled approximately $75 billion or 19% higher than year-ago levels.

Almost 40% of this activity was in Non-QM, followed by prime jumbo at 18% and home equity at 11%.

The home equity space has received a large amount of industry focus for its growth potential with estimates of $17 trillion tappable home equity, including $2 trillion belonging to conventional mortgage borrowers.

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

National Home Price Index was 3.9% higher year-over-year in February 2025, the latest data available, but has been little changed since establishing a new peak in July 2024.

Regional price variations continued to exist, and on an annual basis, regions in the Northeast and Midwest continued to lead gains.

New York City area home prices grew almost 8% from February 2024 to February 2025, with Chicago, Cleveland and Boston following with increases ranging from 6 to 7%.

On the other hand, regions in California appreciated by a softer 3 to 4%, Dallas increased by only 0.9% and Tampa home prices declined by 1.5% over the same period.

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.

The average of the 2025 home price appreciation forecasts is approximately 1.5% to 2%, with a range of -2% to +3.4%.

Prevailing mortgage rates held steady in January and most of February, hovering around high-6% to 7%, before declining to end the quarter at 6.65%, according to the Freddie Mac Primary Mortgage Market Survey.

Amid market volatility following the April 2nd “Liberation Day” tariff announcements, mortgage rate locks fell to as low as 6.5% before reapproaching 7%, based on third party data.

The effective mortgage rate outstanding continued to steadily inch higher, reaching 4.03% during the fourth quarter of 2024, the latest data available.

This rate, which measures the rate on outstanding mortgage debt, is approximately 70 basis points higher than the low established at the end of the second quarter of 2022 but still remains well below prevailing rates, underscoring the stickiness of the “lock-in effect,” or disincentive for existing homeowners to sell their homes because their current mortgage rate is well below current market rates.

Total existing home inventory was around 1.33 million units in March 2025, the latest data available, and the most available inventory at this point of the year since March 2020.

The growth in inventory is positive for homebuyers, however when evaluating new listings, which are a timelier barometer of activity, inventory is slightly better year-over-year but remains 15% below average year-to-date listings in February from 2015 to 2022.

This reduced level of activity follows an annual shortage of over 1 million new listings in each of 2023 and 2024 compared to annual activity in 2015 to 2019 as well as pandemic-affected 2020 to 2022, underscoring the limited supply theme.

National Home Price Index was 2.3% higher year-over-year in May 2025, the latest data available, establishing a new peak nationally amid decelerating growth overall.

Regional price variations continued to exist, and on an annual basis, regions in the Northeast and Midwest continued to lead gains while regions in Florida, Texas and the Mountain West have been weaker.

New York City area home prices grew over 7% from May 2024 to May 2025, with Chicago, Cleveland and Detroit following in the high-4% to 6% area.

However, regions in California were weaker, with Los Angeles rising by 1.1% and San Francisco lower by 0.6% year-over-year.

Denver was unchanged, Dallas declined 0.6%, and Tampa fell by 2.4% compared to May 2024 levels.

Overall, home price growth and available for-sale inventory have had a relatively strong inverse relationship as regions with inventory growth since 2019 have had weak performance, and vice versa.

During the second quarter of 2025, prevailing mortgage rates were steady in the high-6% area ending the quarter at 6.77%, according to the Freddie Mac Primary Mortgage Market Survey.

Amid market volatility following the April 2nd “Liberation Day” tariff announcements, mortgage rate locks fell to as low as 6.5% before quickly resetting near 7% through most of the remainder of the quarter, based on third party data.

After a slow climb throughout 2023 and 2024, the effective mortgage rate outstanding held steady at 4.05% as of the first quarter of 2025, the latest data available.

This rate, which measures the rate on outstanding mortgage debt, is 74 basis points higher than the low established at the end of the first quarter of 2022 but remains well below prevailing rates, underscoring the stickiness of the “lock-in effect” or disincentive for existing homeowners to sell their homes because their current mortgage rate is well below current market rates.

Total existing home inventory continues to grow, reaching 1.54 million units in May 2025, the latest data available.

This is the largest level of inventory since June 2020 but only just approaches the typical inventory levels of 1.5 to 2 million units from 2016 through 2019 and well below the range of 1.7 to 2.5 million units from 2000 through 2004.

When evaluating new listings, which are a timelier barometer of activity, year-to-date inventory is just 3% higher year-over-year and is 16% below average year-to-date listings through May from 2015 through 2022.

This reduced level of activity follows an annual shortage of over 1 million new listings in each of 2023 and 2024 compared to annual activity in 2015 through 2019 as well as pandemic-affected 2020 through 2022, underscoring the limited supply theme.

Presentation of investment, financing and hedging activities

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

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Stockholders’ Equity $ 536,407 $ 543,423

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Our primary source of net income or loss available to common stockholders is our net interest income, inclusive of our cost or benefit of hedging, which represents the difference between the interest earned on our investment portfolio and the costs of financing and economic hedges in place on our investment portfolio, as well as any income or losses from our equity investments in affiliates.

Three Months Ended March 31, 2025 compared to the Three Months Ended March 31, 2024

The table below presents certain information from our consolidated statements of operations for the three months ended March 31, 2025 and 2024 (in thousands).

Three Months Ended June 30, 2025 compared to the Three Months Ended June 30, 2024

The table below presents certain information from our consolidated statements of operations for the three months ended June 30, 2025 and 2024 (in thousands).

Three Months Ended

March 31, 2025 March 31, 2024 Change

June 30, 2025 June 30, 2024 Change

Statement of Operations Data:

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

Interest income increased from the three months ended March 31, 2024 to the three months ended March 31, 2025 primarily as a result of purchases of residential mortgage loans and non-agency RMBS during the period and an increase in the weighted average yield of our investment portfolio.

Interest income increased from the three months ended June 30, 2024 to the three months ended June 30, 2025 primarily as a result of purchases of residential mortgage loans and non-agency RMBS during the period and an increase in the weighted average yield of our investment portfolio.

The following table presents a summary of the weighted average amortized cost of and the weighted average yield on our GAAP investment portfolio ($ in millions).

Three Months Ended

March 31, 2025 March 31, 2024 Change

June 30, 2025 June 30, 2024 Change

Weighted average amortized cost of our GAAP investment portfolio

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Interest expense is inclusive of our financing cost related to our financing arrangements on our GAAP investment portfolio, securitized debt, Senior Unsecured Notes, and, for 2024, Legacy WMC Convertible Notes.

Interest expense increased from the three months ended March 31, 2024 to the three months ended March 31, 2025 due to an increase in the GAAP financing balance outstanding resulting from the issuance of securitized debt and Senior Unsecured Notes during the period, offset by the repayment of the Legacy WMC Convertible Notes upon maturity in September 2024.

Interest expense increased from the three months ended June 30, 2024 to the three months ended June 30, 2025 due to an increase in the GAAP financing balance outstanding resulting from the issuance of securitized debt and Senior Unsecured Notes during the period, offset by the repayment of the Legacy WMC Convertible Notes upon maturity in September 2024.

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

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Three Months Ended

March 31, 2025 March 31, 2024 Change

June 30, 2025 June 30, 2024 Change

Weighted average GAAP financing balance

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

We recorded income on the net interest component of interest rate swaps during the three months ended March 31, 2025 and 2024 as a result of our swap portfolio being in a net receive position during the periods.

The decrease in income from the three months ended March 31, 2024 to the three months ended March 31, 2025 was the result of a decrease in the notional balance outstanding during the period and a decrease in the weighted average receive rate.

The following table presents a summary of our interest rate swap portfolio as of March 31, 2025 and 2024 ($ in millions).

March 31, 2025 March 31, 2024 Change

We recorded income on the net interest component of interest rate swaps during the three months ended June 30, 2025 and 2024 as a result of our swap portfolio being in a net receive position during the periods.

The decrease in income from the three months ended June 30, 2024 to the three months ended June 30, 2025 was the result of a decrease in the notional balance outstanding during the period and a decrease in the weighted average receive rate.

The following table presents a summary of our interest rate swap portfolio as of June 30, 2025 and 2024 ($ in millions).

June 30, 2025 June 30, 2024 Change

Interest rate swap notional value

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Net realized gain/(loss)

The following table presents a summary of Net realized gain/(loss) for the three months ended March 31, 2025 and 2024 (in thousands).

During the three months ended March 31, 2025, there were gains on unwinding pay-fix, receive-variable interest rate swaps which were held at unrealized gains, offset by losses on the sales of residential mortgage loans.

The following table presents a summary of Net realized gain/(loss) for the three months ended June 30, 2025 and 2024 (in thousands).

During the three months ended June 30, 2025, net realized losses primarily related to unwinding certain pay-fix, receive-float interest rate swap agreements which were held at unrealized losses.

Three Months Ended

March 31, 2025 March 31, 2024

June 30, 2025 June 30, 2024

Sales of residential mortgage loans and loans transferred to or sold from Other assets $ (697) $ 151

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Net unrealized gain/(loss)

The following table presents a summary of Net unrealized gain/(loss) for the three months ended March 31, 2025 and 2024 (in thousands).

During the three months ended March 31, 2025, there were unrealized gains on our residential mortgage loans and Non-Agency RMBS which were offset by unrealized losses on securitized debt, commercial loans, and interest rate swaps.

The following table presents a summary of Net unrealized gain/(loss) for the three months ended June 30, 2025 and 2024 (in thousands).

During the three months ended June 30, 2025, we recognized unrealized gains on our securitized debt, CMBS, and loan purchase commitments which were offset by unrealized losses on residential mortgage loans, commercial loans, and interest rate swaps.

Three Months Ended

March 31, 2025 March 31, 2024

June 30, 2025 June 30, 2024

Residential mortgage loans $ (11,500) $ (8,747)

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Securitized debt 7,990 6,071

Loan purchase commitments 424 —

Derivatives (158) (1,991)

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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).

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

During the three months ended June 30, 2024, the base management fee was reduced by $0.6 million.

Non-investment related expenses

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Three Months Ended

March 31, 2025 March 31, 2024

June 30, 2025 June 30, 2024

Affiliate reimbursement (1) $ 1,304 $ 1,636

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Total Non-investment related expenses $ 2,533 $ 2,746

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

(2) Estimated excise tax expense of $0.1 million was recognized during the three months ended March 31, 2025.

We did not recognize any excise tax during the three months ended March 31, 2024.

(1) For the three months ended June 30, 2024, the Manager agreed to waive its right to receive expense reimbursements of $0.3 million pursuant to the MITT Management Agreement Amendment executed in connection with the WMC acquisition.

(2) Estimated excise tax benefit of $(46) thousand was recognized during the three months ended June 30, 2025 which included $0.1 million related to an excise tax refund.

We did not recognize any excise tax during the three months ended June 30, 2024.

Investment related expenses

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Three Months Ended

March 31, 2025 March 31, 2024

June 30, 2025 June 30, 2024

Affiliate reimbursement $ 95 $ 87

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Transaction related expenses primarily include expenses associated with purchasing and securitizing residential mortgage loans.

Transaction related expenses were relatively consistent from the three months ended March 31, 2024 to the three months ended March 31, 2025 as we executed one securitization in each period.

Transaction related expenses increased from the three months ended June 30, 2024 to the three months ended June 30, 2025 primarily due to increased expenses associated with securitizations.

Equity in earnings/(loss) from affiliates

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Three Months Ended

March 31, 2025 March 31, 2024

June 30, 2025 June 30, 2024

MATT Non-QM Securities (1) $ 268 $ (828)

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Equity in earnings/(loss) from affiliates

$ 1,185 $ 2,037

(1) For the three months ended March 31, 2025, the earnings/(loss) generated from our investment in MATT Non-QM Securities consisted of interest income of $0.6 million and net unrealized losses of $(0.7) million.

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

(1) For the three months ended June 30, 2025, the earnings/(loss) generated from our investment in MATT Non-QM Securities consisted of interest income of $0.7 million, net unrealized losses of $(0.3) million, and expenses of $(0.1) million.

For the three months ended June 30, 2024, the earnings/(loss) generated from our investment in MATT Non-QM Securities consisted of interest income of $0.8 million and net unrealized losses of $(1.6) million.

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

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Three Months Ended

March 31, 2025 March 31, 2024

June 30, 2025 June 30, 2024

Net Interest Income

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After-tax earnings/(loss) at AG Arc (1) (37) 278

Net unrealized gain/(loss) on investment in AG Arc (2) — 1,655

Elimination of gains on loans sold to MITT (3) — (405)

Total AG Arc Earnings/(Loss) (37) 1,528

Other operating expenses 56 47

Equity in earnings/(loss) from affiliates

(1) The earnings/(loss) at AG Arc during the three months ended June 30, 2025 were primarily the result of changes in the fair value of the MSR portfolio held by Arc Home.

The earnings/(loss) at AG Arc during the three months ended June 30, 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 $(0.3) million of losses related to Arc Home's lending and servicing operations.

(2) As of June 30, 2025, the fair value of our investment in Arc Home was calculated using a valuation multiple of 1.00x of book value, which was consistent with the valuation multiple as of March 31, 2025.

As of June 30, 2024, the fair value of our investment in Arc Home was calculated using a valuation multiple of 0.94x of book value which increased from 0.89x of book value as of March 31, 2024.

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

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

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%.

Six Months Ended June 30, 2025 compared to the Six Months Ended June 30, 2024

The table below presents certain information from our consolidated statements of operations for the six months ended June 30, 2025 and 2024 (in thousands).

Six Months Ended

June 30, 2025 June 30, 2024 Increase/(Decrease)

Statement of Operations Data:

Net Interest Income

Interest income $ 219,995 $ 195,387 $ 24,608

Interest expense 183,394 161,827 21,567

Total Net Interest Income 36,601 33,560 3,041

Other Income/(Loss)

Net interest component of interest rate swaps 1,558 4,267 (2,709)

Net realized gain/(loss) (3,484) 860 (4,344)

Net unrealized gain/(loss) 762 788 (26)

Total Other Income/(Loss) (1,164) 5,915 (7,079)

Management fee to affiliate 4,628 3,494 1,134

Non-investment related expenses 5,841 5,860 (19)

Investment related expenses 6,883 6,774 109

Transaction related expenses 4,079 1,480 2,599

Total Expenses 21,431 17,608 3,823

Income/(loss) before equity in earnings/(loss) from affiliates 14,006 21,867 (7,861)

Equity in earnings/(loss) from affiliates 1,416 2,948 (1,532)

Net Income/(Loss) 15,422 24,815 (9,393)

Dividends on preferred stock (10,625) (9,172) (1,453)

Net Income/(Loss) Available to Common Stockholders $ 4,797 $ 15,643 $ (10,846)

Interest income

Interest income increased from the six months ended June 30, 2024 to the six months ended June 30, 2025 primarily as a result of purchases of residential mortgage loans and non-agency RMBS during the period and an increase in the weighted average yield of our investment portfolio.

The following table presents a summary of the weighted average amortized cost of and the weighted average yield on our GAAP investment portfolio ($ in millions).

Six Months Ended

June 30, 2025 June 30, 2024 Increase/(Decrease)

Weighted average amortized cost of our GAAP investment portfolio

$ 7,281 $ 6,631 $ 650

Weighted average yield on our GAAP investment portfolio 6.04 % 5.89 % 0.15 %

Interest expense

Interest expense increased from the six months ended June 30, 2024 to the six months ended June 30, 2025 due to an increase in the GAAP financing balance outstanding resulting from the issuance of securitized debt and Senior Unsecured Notes during the period, offset by the repayment of the Legacy WMC Convertible Notes upon maturity in September 2024.

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 on our GAAP investment portfolio ($ in millions).

Six Months Ended

June 30, 2025 June 30, 2024 Increase/(Decrease)

Weighted average GAAP financing balance

$ 6,829 $ 6,220 $ 609

Weighted average financing rate on our GAAP investment portfolio 5.37 % 5.20 % 0.17 %

Net interest component of interest rate swaps

We recorded income on the net interest component of interest rate swaps during the six months ended June 30, 2025 and 2024 as a result of our swap portfolio being in a net receive position.

The decrease in income from the six months ended June 30, 2024 to the six months ended June 30, 2025 was the result of a decrease in the notional balance outstanding during the period and a decrease in the weighted average receive rate.

The following table presents a summary of our interest rate swap portfolio as of June 30, 2025 and 2024 ($ in millions).

June 30, 2025 June 30, 2024 Increase/(Decrease)

Interest rate swap notional value

$ 345 $ 818 $ (473)

Weighted average receive-variable rate

4.45 % 5.33 % (0.88) %

Weighted average pay-fix rate 3.34 % 3.95 % (0.61) %

Net weighted average (pay)/receive rate

1.11 % 1.38 % (0.27) %

Net realized gain/(loss)

The following table presents a summary of Net realized gain/(loss) for the six months ended June 30, 2025 and 2024 (in thousands).

The net realized loss during the six months ended June 30, 2025 was primarily driven by losses from unwinding certain pay-fix, receive-float interest rate swap agreements which were held at unrealized losses and losses recognized on the sale of non-agency loans and re- and non-performing loans.

Six Months Ended

June 30, 2025 June 30, 2024

Sales of residential mortgage loans and loans transferred to or sold from Other assets $ (1,707) $ 199

Sales of real estate securities 169 2,727

Settlement of derivatives and other instruments (1,946) (2,066)

Total Net realized gain/(loss) $ (3,484) $ 860

Net unrealized gain/(loss)

The following table presents a summary of Net unrealized gain/(loss) for the six months ended June 30, 2025 and 2024 (in thousands).

During the six months ended June 30, 2025, we recognized unrealized gains on our residential mortgage loans, CMBS, and non-agency RMBS, which were offset by unrealized losses on securitized debt, interest rate swaps, and commercial loans.

Six Months Ended

June 30, 2025 June 30, 2024

Residential mortgage loans $ 96,257 $ 14,332

Commercial loans (2,455) 250

Real estate securities 5,130 (4,814)

Securitized debt (92,032) (16,358)

Loan purchase commitment 424 —

Derivatives (6,562) 7,378

Total Net unrealized gain/(loss) $ 762 $ 788

Management fee to affiliate

During the six months ended June 30, 2024, the base management fee was reduced by $1.2 million in connection with the WMC acquisition.

Non-investment related expenses

The following table presents a summary of our non-investment related expenses (in thousands).

Six Months Ended

June 30, 2025 June 30, 2024

Affiliate reimbursement (1) $ 3,143 $ 3,300

Professional fees 870 772

D&O insurance 510 668

Directors' fees and equity based compensation 613 644

Tax expense (2) 97 42

Other 608 434

Total Non-investment related expenses $ 5,841 $ 5,860

(1) For the six months ended June 30, 2024, the Manager agreed to waive its right to receive expense reimbursements of $0.6 million pursuant to the MITT Management Agreement Amendment executed in connection with the WMC acquisition.

(2) Estimated excise tax expense of $43 thousand was recognized during the six months ended June 30, 2025, which included $0.1 million related to an excise tax refund.

We did not recognize any excise tax during the six months ended June 30, 2024.

Investment related expenses

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

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

The following table presents a summary of our investment related expenses (in thousands).

Six Months Ended

June 30, 2025 June 30, 2024

Affiliate reimbursement $ 295 $ 201

Servicing fees 3,950 3,774

Residential mortgage loan asset management fees 1,079 1,334

Trustee and bank fees 1,178 1,046

Other 381 419

Total Investment related expenses $ 6,883 $ 6,774

Transaction related expenses

Transaction related expenses increased from the six months ended June 30, 2024 to the six months ended June 30, 2025 primarily due to increased expenses associated with securitizations.

Equity in earnings/(loss) from affiliates

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

Six Months Ended

June 30, 2025 June 30, 2024

MATT Non-QM Securities (1) $ 197 $ 1,377

Re/Non-Performing Securities (120) 316

AG Arc (2) 1,339 1,255

Equity in earnings/(loss) from affiliates

$ 1,416 $ 2,948

(1) For the six months ended June 30, 2025, the earnings/(loss) generated from our investment in MATT Non-QM Securities consisted of interest income of $1.3 million, net unrealized losses of $(1.0) million, and other expenses of $(0.1) million.

For the six months ended June 30, 2024, the earnings/(loss) generated from our investment in MATT Non-QM Securities consisted of interest income of $1.6 million, net unrealized losses of $(0.1) million, and other expenses of $(0.1) million.

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

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

Six Months Ended

June 30, 2025 June 30, 2024

Interest income $ 1,326 $ 2,131

Interest expense 3 144

Total Net Interest Income 1,323 1,987

Net unrealized gain/(loss) (1,149) (178)

After-tax earnings/(loss) at AG Arc (1) 24 162

Net unrealized gain/(loss) on investment in AG Arc (2) 1,403 1,699

Elimination of gains on loans sold to MITT (3) (88) (606)

Total AG Arc Earnings/(Loss) 1,339 1,255

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$ 1,416 $ 2,948

(1) The earnings/(loss) at AG Arc during the three months ended March 31, 2025 were the result of $0.2 million of income related to Arc Home's lending and servicing operations, offset by $(0.1) million of losses related to changes in the fair value of the MSR portfolio held by Arc Home.

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

(1) The earnings/(loss) at AG Arc during the six months ended June 30, 2025 were primarily the result of $0.2 million of income related to Arc Home's lending and servicing operations, offset by $(0.2) million related to changes in the fair value of the MSR portfolio held by Arc Home.

The earnings/(loss) at AG Arc during the six months ended June 30, 2024 were primarily the result of $0.7 million related to changes in the fair value of the MSR portfolio held by Arc Home, offset by $(0.5) million of losses related to Arc Home's lending and servicing operations.

(2) As of June 30, 2025, the fair value of our investment in Arc Home was calculated using a valuation multiple of 1.00x of book value, which increased from 0.95x of book value as of December 31, 2024.

As of June 30, 2024, the fair value of our investment in Arc Home was calculated using a valuation multiple of 0.94x of book value, which increased from 0.89x of book value as of December 31, 2023.

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

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

(3) As of March 31, 2025, the fair value of our investment in Arc Home was calculated using a valuation multiple of 1.00x of book value, which increased from 0.95x of book value as of December 31, 2024.

As of March 31, 2024, the fair value of our investment in Arc Home was calculated using a valuation multiple of 0.89x of book value, which was consistent with the valuation multiple as of December 31, 2023.

Dividends on Preferred Stock

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

We define EAD, a non-GAAP financial measure, as Net Income/(loss) available to common stockholders excluding (i) (a) unrealized gains/(losses) on loans, real estate securities, derivatives and other investments, inclusive of our investment in AG Arc, and (b) net realized gains/(losses) on the sale or termination of such instruments, (ii) any transaction related expenses incurred in connection with the acquisition, disposition, or securitization of our investments as well as transaction related expenses incurred in connection with the 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.

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.

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

A reconciliation of "Net Income/(loss) available to common stockholders" to EAD for three months ended March 31, 2025 and 2024 is set forth below (in thousands, except per share data).

A reconciliation of "Net Income/(loss) available to common stockholders" to EAD for three and six months ended June 30, 2025 and 2024 is set forth below (in thousands, except per share data).

Three Months Ended

March 31, 2025 March 31, 2024

Six Months Ended

June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024

Net Income/(loss) available to common stockholders $ (1,376) $ (661) $ 4,797 $ 15,643

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EAD from equity method investments (2)(3)(4) 456 82 1,118 (172)

Dollar roll income/(loss) (111) — (111) —

Earnings available for distribution $ 5,351 $ 6,276 $ 11,333 $ 12,401

Earnings available for distribution, per Diluted Share $ 0.18 $ 0.21 $ 0.38 $ 0.42

(1) For the three months ended March 31, 2025 and 2024, total transaction related expenses and deal related performance fees included $1.1 million and $1.0 million, respectively, recorded within the "Transaction related expenses" line item and $83 thousand and $24 thousand, respectively, recorded within the "Interest expense" line item, which relates to the amortization of deferred financing costs.

(2) For the three months ended March 31, 2025 and 2024, $(49.0) thousand or $0.00 per share and $0.9 million or $0.03 per share, respectively, of realized and unrealized changes in the fair value of Arc Home's mortgage servicing rights, transaction related expenses, and other asset impairments were excluded from EAD, net of deferred tax expense or benefit.

(3) For the three months ended March 31, 2025 and 2024, $1.4 million or $0.05 per share and $44 thousand or $0.00 per share, respectively, of unrealized changes in the fair value of our investment in Arc Home were excluded from EAD.

(4) EAD recognized by AG Arc does not include our portion of gains recorded by Arc Home in connection with the sale of residential

mortgage loans to us.

For the three months ended March 31, 2025 and 2024, we eliminated $88.0 thousand or $0.00 per share and $0.2 million or $0.01 per share, respectively, of intra-entity profits recognized by Arc Home, and also decreased the cost basis of the underlying loans we purchased by the same amount.

(1) For the three months ended June 30, 2025 and 2024, total transaction related expenses and deal related performance fees included $3.0 million and $0.5 million, respectively, recorded within the "Transaction related expenses" line item and $61 thousand and $22 thousand, respectively, recorded within the "Interest expense" line item, which relates to the amortization of deferred financing costs.

For the six months ended June 30, 2025 and 2024, total transaction related expenses and deal related performance fees included $4.1 million and $1.5 million, respectively, recorded within the "Transaction related expenses" line item and $0.1 million and $46 thousand, respectively, recorded within the "Interest expense" line item, which relates to the amortization of deferred financing costs.

(2) For the three months ended June 30, 2025 and 2024, $0.1 million or $0.00 per share and $0.7 million or $0.02 per share, respectively;

and for the six months ended June 30, 2025 and 2024, $44 thousand or $0.00 per share and $1.6 million or $0.05 per share, respectively, of realized and unrealized changes in the fair value of Arc Home's mortgage servicing rights, transaction related expenses, and other asset impairments were excluded from EAD, net of deferred tax expense or benefit.

(3) For the three months ended June 30, 2025, there were no unrealized changes in the fair value of our investment in Arc Home to exclude from EAD.

For the three months ended June 30, 2024, $1.7 million or $0.06 per share;

and for the six months ended June 30, 2025 and 2024, $1.4 million or $0.05 per share and $1.7 million or $0.06 per share, respectively, of unrealized changes in the fair value of our investment in Arc Home were excluded from EAD.

(4) EAD recognized by AG Arc does not include our portion of gains recorded by Arc Home in connection with the sale of residential mortgage loans to us.

For the three months ended June 30, 2025, there were no intra-entity profits in connection with the sale of residential mortgage loans to us recognized by Arc Home.

For the three months ended June 30, 2024, we eliminated $0.4 million or $0.01 per share of intra-entity profits recognized by Arc Home, and also decreased the cost basis of the underlying loans we purchased by the same amount.

For the six months ended June 30, 2025 and 2024, we eliminated $0.1 million or $0.00 per share and $0.6 million or $0.02 per share, respectively, of intra-entity profits recognized by Arc Home, and also decreased the cost basis of the underlying loans we purchased by the same amount.

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

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Investment portfolio

The following table presents a summary of our Investment Portfolio, inclusive of net interest margin and leverage ratios, as of March 31, 2025 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 June 30, 2025 and a reconciliation of these metrics on our Investment Portfolio to their respective metrics on our GAAP Investment Portfolio ($ in thousands).

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

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Securitized Re/Non-Performing Loans 154,465 138,306 6.01 % 104,290 97,848 27,124 4.05 % 13,334 1.96 % 2.0x

Agency-Eligible Loans 38,919 38,935 6.58 % — — 36,368 6.17 % 2,567 0.41 % 14.2x

Agency-Eligible Loans 1,512 1,509 6.51 % — — 1,424 NM 85 NM 16.8x

Home Equity Loans 312,563 323,930 8.84 % — — 259,275 6.52 % 64,655 2.32 % 4.0x

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Legacy WMC Commercial Investments (f)

Commercial Loans 66,912 65,504 9.80 % — — 41,936 7.72 % 23,568 2.08 % 1.8x

CMBS (g) 60,086 54,291 17.15 % — — 20,559 6.10 % 33,732 11.05 % 0.6x

Commercial Loans (g) 66,975 64,883 2.99 % — — 30,936 7.40 % 33,947 (4.41) % 0.9x

CMBS (h) 59,026 56,205 16.77 % — — 20,164 6.15 % 36,041 10.62 % 0.6x

Total Legacy WMC Commercial Investments 126,001 121,088 9.44 % — — 51,100 6.91 % 69,988 2.53 % 0.7x

Total Investment Portfolio $ 7,541,041 $ 7,277,224 6.01 % $ 6,125,684 $ 5,937,637 $ 843,537 5.29 % $ 496,050 0.72 % 1.2x

Cash and Cash Equivalents (h) 115,549 4.23 %

Interest Rate Swaps (i) 7,979 0.89 %

Cash and Cash Equivalents (i) 88,746 4.23 %

Interest Rate Swaps (j) 5,126 1.11 %

Arc Home 32,205

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GAAP Investment Portfolio $ 7,531,291 $ 7,264,601 5.98 % $ 6,125,684 $ 5,937,637 $ 843,537 5.29 % $ 483,427 0.69 % 12.8x

NM - Not Meaningful

(a) Excludes any net TBA positions.

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

(g) There are Legacy WMC CMBS with an unpaid principal balance of $23.5 million and a fair value of $6.5 million which are on non-accrual or cost recovery status.

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

(g) There are Legacy WMC Commercial Loans with an unpaid principal balance of $45.0 million and a fair value of $42.8 million which are on non-accrual status.

(h) There are Legacy WMC CMBS with an unpaid principal balance of $23.5 million and a fair value of $7.0 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.

(i) 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.

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However, as noted above, our equity at risk represents certain Certificates from each securitization which we retain.

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 as of March 31, 2025 (in thousands).

Unpaid Principal Balance Fair Value

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(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 March 31, 2025, there were seven securitizations with an unpaid principal balance of $1.4 billion that met the criteria for an Optional Redemption.

As of June 30, 2025, there were 8 securitizations with an unpaid principal balance of $1.8 billion 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 March 31, 2025 ($ in thousands).

The following table presents information regarding collateral characteristics of our residential mortgage loans as of June 30, 2025 ($ in thousands).

Unpaid Principal Balance Weighted Average (1)(2)

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Total Residential mortgage loans $ 305,290 $ 327,454 3,888 63.13 % 751 10.03 % 4.03

Total as of March 31, 2025

Total as of June 30, 2025

$ 7,215,762 $ 6,976,442 22,179 70.07 % 763 5.87 % 7.65

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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 March 31, 2025 ($ in thousands).

The following table presents the fair value, coupon, and weighted average life of our Non-Agency RMBS and Legacy WMC CMBS portfolios as of June 30, 2025 ($ in thousands).

Weighted Average

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(4) There are Legacy WMC CMBS with an unpaid principal balance of $23.5 million and a fair value of $7.0 million which are on non-accrual or cost recovery status.

The following table presents the fair value of our Non-Agency RMBS and Legacy WMC CMBS by credit rating as of March 31, 2025 (in thousands).

The following table presents the fair value of our Non-Agency RMBS and Legacy WMC CMBS by credit rating as of June 30, 2025 (in thousands).

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

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(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 the geographic concentration of the underlying collateral for our Non-Agency RMBS and Legacy WMC CMBS portfolios as of March 31, 2025 ($ in thousands).

The following table presents the geographic concentration of the underlying collateral for our Non-Agency RMBS and Legacy WMC CMBS portfolios as of June 30, 2025 ($ in thousands).

Non-Agency RMBS Legacy WMC CMBS

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

The following table presents the fair value, constant prepayment rate (“CPR”), coupon, and weighted average life experienced on our Agency RMBS portfolio as of March 31, 2025 ($ in thousands).

The following table presents the fair value, constant prepayment rate (“CPR”), coupon, and weighted average life experienced on our Agency RMBS portfolio as of June 30, 2025 ($ in thousands).

Weighted Average

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

We had outstanding financing arrangements with six counterparties as of March 31, 2025.

We had outstanding financing arrangements with six counterparties as of June 30, 2025.

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

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To the extent that we fail to comply with the covenants contained in these financing arrangements or 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 March 31, 2025, we are in compliance with all of our financial covenants.

As of June 30, 2025, we are in compliance with all of our financial covenants.

Securitized Debt

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Recourse and non-recourse financing

The below table provides detail on the breakout between recourse and non-recourse financing as of March 31, 2025 (in thousands).

The below table provides detail on the breakout between recourse and non-recourse financing as of June 30, 2025 (in thousands).

Carrying Value

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We use leverage to increase potential returns to our stockholders and to fund the acquisition of our investment portfolio.

Our financing strategy is designed to increase the size of our investment portfolio by borrowing against the fair value of the assets in our portfolio.

financing strategy is designed to increase the size of our investment portfolio by borrowing against the fair value of the assets in our portfolio.

When acquiring residential mortgage loans and other assets, we finance our investments using repurchase agreements or similar financing arrangements, which we refer to collectively as "financing arrangements." Upon accumulating a targeted amount of residential mortgage loans, we finance these assets utilizing long-term, non-recourse, non-mark-to-market securitizations as market conditions permit.

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

March 31, 2025 Leverage Stockholders’ Equity Leverage Ratio

June 30, 2025 Leverage Stockholders’ Equity Leverage Ratio

Securitized debt, at fair value $ 5,937,637

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Restricted cash posted on financing arrangements (2,208)

Payable on unsettled trades 114

GAAP Leverage $ 6,875,160 $ 536,407 12.8x

Non-recourse financing arrangements (1) (5,981,082)

Net TBA (receivable)/payable adjustment (194,855)

Economic Leverage $ 699,223 $ 536,407 1.3x

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

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

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

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

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

During the three months ended March 31, 2025, the Company declared common stock dividends of $0.20 per share.

During the six months ended June 30, 2025, the Company declared common stock dividends of $0.41 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 $1.03126, $1.00, and $1.397926, respectively.

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

At March 31, 2025, we had $132.5 million of liquidity, which consisted of $115.5 million of cash and cash equivalents and $17.0 million of unencumbered Agency RMBS available to support our liquidity needs.

At June 30, 2025, we had $89.7 million of liquidity, which consisted of $88.7 million of cash and cash equivalents and $1.0 million of unencumbered Agency RMBS available to support our liquidity needs.

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

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This typically occurs when prevailing market rates change adversely, with the severity of the change also dependent on the terms of the derivatives involved.

We may also receive margin calls on our

derivatives based on the implied volatility of interest rates.

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

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

Our posting of collateral with our counterparties can be done in cash

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

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

The below details changes to our cash, cash equivalents, and restricted cash for the three months ended March 31, 2025 and 2024 (in thousands).

Three Months Ended

March 31, 2025 March 31, 2024 Change

The below details changes to our cash, cash equivalents, and restricted cash for the six months ended June 30, 2025 and 2024 (in thousands).

Six Months Ended

June 30, 2025 June 30, 2024 Change

Cash and cash equivalents and restricted cash, Beginning of Period $ 138,568 $ 125,573 $ 12,995

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Cash and cash equivalents and restricted cash, End of Period $ 100,169 $ 148,434 $ (48,265)

(1) Cash provided by operating activities is primarily attributable to net interest income less operating expenses for the three months ended March 31, 2025.

(2) Cash used in investing activities for the three months ended March 31, 2025 was primarily attributable to purchases of residential mortgage loans and real estate securities, offset by principal repayments on residential mortgage loans and proceeds from the sale of certain investments.

(3) Cash provided by financing activities for the three months ended March 31, 2025 was primarily attributable to proceeds from the issuance of securitized debt and net borrowings under financing arrangements, offset by principal repayments on securitized debt and dividend payments.

(1) Cash provided by operating activities is primarily attributable to net interest income less operating expenses for the six months ended June 30, 2025.

(2) Cash used in investing activities for the six months ended June 30, 2025 was primarily attributable to purchases of residential mortgage loans and real estate securities, offset by principal repayments on residential mortgage loans and proceeds from the sale of certain investments.

(3) Cash provided by financing activities for the six months ended June 30, 2025 was primarily attributable to proceeds from the issuance of securitized debt and net borrowings under financing arrangements, offset by principal repayments on securitized debt and dividend payments.

Stock repurchase programs

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

There were no shares repurchased during the three months ended March 31, 2025 and 2024.

There were no shares repurchased during the three and six months ended June 30, 2025 and 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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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 any of our equity distribution agreements then in effect during the three months ended March 31, 2025 and 2024.

We did not issue any shares of common stock under any of our equity distribution agreements then in effect during the three and six months ended June 30, 2025 and 2024.

Forward-looking statements regarding liquidity

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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 closing of the with the WMC acquisition, 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.

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

The below table details the management fees incurred during the three months ended March 31, 2025 and 2024 (in thousands).

Three Months Ended

The below table details the management fees incurred during the three and six months ended June 30, 2025 and 2024 (in thousands).

Three Months Ended Six Months Ended

Consolidated statements of operations line item:

March 31, 2025 March 31, 2024

June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024

Management fee to affiliate (1) $ 2,301 $ 1,753 $ 4,628 $ 3,494

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

As of March 31, 2025 and December 31, 2024, we have recorded management fees payable of $2.3 million and $2.3 million, respectively.

(1) For the three and six months ended June 30, 2024, the Manager agreed to waive its right to receive management fees of $0.6 million and $1.2 million, respectively, pursuant to the MITT Management Agreement Amendment executed in connection with the WMC acquisition.

As of June 30, 2025 and December 31, 2024, we have recorded management fees payable of $2.3 million and $2.3 million, respectively.

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

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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.

During the three months ended March 31, 2025 and 2024, we did not incur any incentive fee expense.

During the three and six months ended June 30, 2025 and 2024, we did not incur any incentive fee expense.

Termination fee

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

As of March 31, 2025 and December 31, 2024, no event of termination of the management agreement had occurred.

As of June 30, 2025 and December 31, 2024, no event of termination of the management agreement had occurred.

Expense reimbursement

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however, reimbursements are subject to an annual budget process which combines guidelines from the management agreement with oversight by our Board of Directors and discussions with our Manager.

The below table details the expense reimbursement incurred during the three months ended March 31, 2025 and 2024 (in thousands).

Three Months Ended

The below table details the expense reimbursement incurred during the three and six months ended June 30, 2025 and 2024 (in thousands).

Three Months Ended Six Months Ended

Consolidated statements of operations line item:

March 31, 2025

March 31, 2024

June 30, 2025

June 30, 2024 June 30, 2025 June 30, 2024

Non-investment related expenses (1)

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Investment related expenses

95 87 295 201

Transaction related expenses 109 306 369 374

Expense reimbursements to Manager or its affiliates $ 1,508 $ 2,029 $ 3,807 $ 3,875

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

As of March 31, 2025 and December 31, 2024, we recorded a reimbursement payable to our Manager or its affiliates of $2.3 million and $1.7 million, respectively The reimbursement payable to the Manager or its affiliates is included within the "Due to affiliates" line item within the "Other liabilities" line item on the consolidated balance sheets.

Share-based compensation

The AG Mortgage Investment Trust, Inc.

2020 Equity Incentive Plan, which became effective on April 15, 2020 following the approval of our stockholders at our 2020 annual meeting of stockholders, provides for a maximum of 666,666 shares of common stock that may be issued under the plan.

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

As of March 31, 2025, 239,183 shares of common stock remained available to be awarded under the 2020 Equity Incentive Plan.

Since inception of the 2020 Equity Incentive Plan and through March 31, 2025, we have granted an aggregate of 268,313 shares of restricted common stock to our independent directors under our 2020 Equity Incentive Plan, all of which have vested.

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

Through March 31, 2025, the two independent directors have also been granted an aggregate of 3,208 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 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.

On May 5, 2025, our stockholders approved our Equity Incentive Plan (the “2025 Equity Incentive Plan”) at our 2025 annual meeting of stockholders (the “2025 Annual Meeting”).

The 2025 Equity Incentive Plan replaces the Company’s 2020 Equity Incentive Plan.

Refer to Note 14 to the “Notes to Consolidated Financial Statements (unaudited)” for additional details.

The AG Mortgage Investment Trust, Inc.

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

As of March 31, 2025, 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 Plan.

(1) For the three and six months ended June 30, 2024, the Manager agreed to waive its right to receive expense reimbursements of $0.3 million and $0.6 million, respectively, pursuant to the MITT Management Agreement Amendment executed in connection with the WMC acquisition.

As of June 30, 2025 and December 31, 2024, we recorded a reimbursement payable to our Manager or its affiliates of $1.7 million and $1.7 million, respectively The reimbursement payable to the Manager or its affiliates is included within the "Due to affiliates" line item within the "Other liabilities" line item on the consolidated balance sheets.

Equity Incentive Plans

Effective April 15, 2020 upon the approval of our stockholders at our 2020 annual meeting of stockholders, our 2020 Equity Incentive Plan (the "2020 Equity Incentive Plan") provided for a maximum of 666,666 shares of common stock to be issued.

Under the 2020 Equity Incentive Plan, we granted an aggregate of 285,825 shares of restricted common stock to the independent directors, all of which have vested.

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

Through May 5, 2025, the two independent directors have also been granted an aggregate of 4,098 dividend equivalent units, all of which have vested.

These restricted stock units and associated dividend equivalent units will be settled in shares of our common stock upon each independent director's separation from service with us.

On May 5, 2025, 15,030 restricted stock units and dividend equivalent units previously issued under the 2020 Equity Incentive Plan were settled for shares of our common stock, on a one-for-one basis, in connection with an independent director no longer serving on our Board of Directors as of May 5, 2025.

On May 5, 2025, following approval by stockholders at our annual stockholders meeting, our 2025 Equity Incentive Plan (the “2025 Equity Incentive Plan”) became effective.

The maximum number of shares of our common stock that may be issued under the 2025 Equity Incentive Plan is 800,000 shares of common stock, plus 220,781 shares of common stock (which reflects the number of shares that remained available for issuance under the 2020 Equity Incentive Plan as of May 4, 2025), plus 130,000 shares of common stock that remain subject to outstanding awards under the 2020 Equity Incentive Plan but only to the extent that such shares become forfeited or otherwise lapse.

As a result of the adoption of the 2025 Equity Incentive Plan, no additional awards will be granted under the 2020 Equity Incentive Plan (although awards previously made under the 2020 Equity Incentive Plan will remain in effect subject to the terms of the 2020 Equity Incentive Plan and the applicable award agreement).

As of June 30, 2025, there were no shares or awards issued under the 2025 Equity Incentive Plan.

Unfunded commitments

See Note 12 of the "Notes to Consolidated Financial Statements (unaudited)" for detail on our commitments as of March 31, 2025.

See Note 12 of the "Notes to Consolidated Financial Statements (unaudited)" for detail on our commitments as of June 30, 2025.

Off-balance sheet arrangements

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

Refer to Note 7 to the "Notes to Consolidated Financial Statements (unaudited)" for additional detail on TBAs as of March 31, 2025, if applicable.

For additional information on our commitments as of March 31, 2025 , refer to Note 12 of the "Notes to Consolidated Financial Statements (unaudited)." We do not expect these commitments, taken as a whole, to be significant to, or to have a material impact on, our overall liquidity or capital resources or our operations.

Refer to Note 7 to the "Notes to Consolidated Financial Statements (unaudited)" for additional detail on TBAs as of June 30, 2025, if applicable.

For additional information on our commitments as of June 30, 2025 , refer to Note 12 of the "Notes to Consolidated Financial Statements (unaudited)." We do not expect these commitments, taken as a whole, to be significant to, or to have a material impact on, our overall liquidity or capital resources or our operations.

Critical accounting policies and estimates

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

Although our estimates contemplate conditions as of March 31, 2025 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.

Although our estimates contemplate conditions as of June 30, 2025 and how we expect them to change in the future, it is reasonably possible that actual conditions could be different than anticipated in arriving at those estimates, which could materially affect reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the periods presented.

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

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"Investment securities" do not include, among other things, U.S.

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

government securities, and securities issued by majority-owned subsidiaries

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

We conduct our operations such that we will not be considered an investment company under Section 3(a)(1) of the Investment Company Act by complying with the 40% Test and not engaging primarily (or holding ourselves out as being engaged primarily) in the business of investing, reinvesting, or trading in securities.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis