TPG Mortgage Investment Trust, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS In this quarterly report on Form 10-Q, or this "report," we refer to AG Mortgage Investment Trust, Inc. and its wholly-owned subsidiaries as "we," "us," the "Company," or "our," unless we specifically state otherwise or the context indicates otherwise. We refer to our external manager, AG REIT Management, LLC, as our "Manager," and we refer to the direct parent company of our Manager, Angelo, Gordon & Co., L.P., as "TPG Angelo Gordon." The following discussion contains forward looking statements and should be read in conjunction with our consolidated financial statements and the accompanying notes to our consolidated financial statements, which are included in Item 1 of this report, as well as the information contained in our Annual Report on Form 10-K for the year ended December 31, 2024, and any subsequent filings. 41 Forward-Looking Statements We make forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in this report that are subject to substantial known and unknown risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, returns, results of operations, plans, yields, objectives, the composition of our portfolio, actions by governmental entities, including the Federal Reserve, and the potential effects of actual and proposed legislation on us, and our views on certain macroeconomic trends. When we use the words "believe," "expect," "anticipate," "estimate," "plan," "continue," "remain," "intend," "should," "could," "will," "may" or similar expressions, we intend to identify forward-looking statements. These forward-looking statements are based upon information presently available to our management and are inherently subjective, uncertain and subject to change. There can be no assurance that actual results will not differ materially from our expectations. Some, but not all, of the factors that might cause such a difference include, without limitation: • the persistence of labor shortages, supply chain imbalances, the Middle Eastern conflict, the Russia-Ukraine conflict, inflation, and the potential for an economic recession; • changes in our business and investment strategy; • our ability to predict and control costs; • changes in interest rates and the fair value of our assets, including negative changes resulting in margin calls relating to the financing of our assets; • changes in the yield curve; • changes in prepayment rates on the loans we own or that underlie our investment securities; • regulatory and structural changes in the residential loan market and its impact on non-agency mortgage markets; • increased rates of default or delinquencies and/or decreased recovery rates on our assets; • our ability to obtain and maintain financing arrangements on terms favorable to us or at all; • our ability to enter into, or refinance, securitization transactions on the terms and pace anticipated or at all; • the degree to which our hedging strategies may or may not protect us from interest rate and credit risk volatility; • changes in general economic conditions, in our industry and in the finance and real estate markets, including the impact on the value of our assets; • changes in trade policies and tariffs, and the impact of a prolonged U.S. federal government shutdown, together with any future downturns in the global economy or market disruptions resulting therefrom; • conditions in the market for residential mortgage investments and Agency RMBS; • conditions in the market for commercial investments, including the Company's ability to successfully realize the commercial investments acquired from Western Asset Mortgage Capital Corporation ("WMC") within the timeframe anticipated or at all; • legislative and regulatory actions by the U.S. Congress, U.S. Department of the Treasury, the Federal Reserve and other agencies and instrumentalities; • our ability to make distributions to our stockholders in the future; • our ability to maintain our qualification as a REIT for federal tax purposes; and • our ability to qualify for an exemption from registration under the Investment Company Act of 1940, as amended (the "Investment Company Act"). We caution investors not to rely unduly on any forward-looking statements, which speak only as of the date made, and urge you to carefully consider the risks noted above and identified under the captions "Risk Factors," and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2024 and any subsequent filings. New risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements that we make, or that are attributable to us, are expressly qualified by this cautionary notice. 42 Third Quarter 2025 Executive Summary Financial Highlights • $10.46 Book Value per share; • $0.47 of Net Income/(Loss) Available to Common Stockholders per diluted common share and $0.23 of Earnings Available for Distribution ("EAD") per diluted common share; ◦ Refer to the "Earnings Available for Distribution" section below for further details related to our reconciliation of Net Income/(Loss) Available to Common Stockholders to EAD; • 14.9x GAAP Leverage Ratio and 1.7x Economic Leverage Ratio; and • $0.21 dividend per common share declared in the third quarter 2025. Investment Activity • The table below summarizes the fair value of purchases of investments during the quarter ended September 30, 2025 (in thousands). Investment Purchases Agency-Eligible Loans $ 888,611 Home Equity Loans 830,877 Total $ 1,719,488 • One Legacy WMC CMBS bond paid off at par for $15.0 million, returning capital of $10.7 million. 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 Note 10 to the "Notes to Consolidated Financial Statements (unaudited)" for additional information related to the transaction. Financing Activity • The table below summaries the four rated securitizations executed during the quarter ended September 30, 2025 (in millions). Collateral Month Unpaid Principal Balance Home Equity Loans (1) July 2025 $ 301.3 Home Equity Loans July 2025 647.0 Agency-Eligible Loans August 2025 347.0 Agency-Eligible Loans September 2025 417.1 Total $ 1,712.4 (1) Converted recourse financing with mark-to-market margin calls to non-recourse financing without mark-to-market margin calls. • Paid off certain Legacy WMC fixed-rate long-term financing arrangements, which had an outstanding balance, including unpaid principal balance and accrued interest payable, of $43.8 million. The financing was collateralized by certain retained interests in securitizations acquired from WMC. ◦ Pledged these assets under a recourse financing arrangement with mark-to-market margin calls; ◦ Issued an additional $56.6 million of securitized debt from the securitizations acquired from WMC; ◦ Generated net proceeds of $55.4 million for reinvestment through the payoff of the Legacy WMC fixed-rate long-term financing arrangements and subsequent issuance of securitized debt; • Amended a financing arrangement to convert financing on our residential mortgage loans with a total borrowing capacity of $400 million from financing with mark-to-market margin calls to financing without mark-to-market margin calls; and • Pledged Home Equity Loans with a fair value of $54.0 million under a financing arrangement with the ability to draw on up to $50 million of available contractually committed financing at an advance rate of 87.5% of unpaid principal balance pledged as collateral, which was $50.9 million as of September 30, 2025. 43 Our company 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. mortgage market. Our objective is to provide attractive risk-adjusted returns to our stockholders over the long-term, primarily through dividends and capital appreciation. We focus our investment activities primarily on acquiring and securitizing newly-originated residential mortgage loans within the 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 owned an approximate 66.0% interest as of September 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. Through our ownership in Arc Home, we also have exposure to mortgage banking activities. Arc Home is a multi-channel licensed mortgage originator and servicer primarily engaged in the business of originating and selling residential mortgage loans while retaining the mortgage servicing rights associated with certain loans that it originates. 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. 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. As of September 30, 2025, our investment portfolio consisted of the following Residential Investments and Agency RMBS: Asset Class Description Residential Investments Non-Agency Loans (1) • Non-Agency Loans are loans that do not conform to the underwriting guidelines of a government-sponsored enterprise ("GSE"). Non-Agency Loans consist of Qualified mortgage loans ("QM Loans") and Non-Qualified mortgage loans ("Non-QM Loans"). QM Loans are residential mortgage loans that comply with the Ability-To-Repay rules and related guidelines of the Consumer Financial Protection Bureau. Agency-Eligible Loans (1) • Agency-Eligible Loans are loans that are underwritten in accordance with GSE guidelines and are primarily secured by investment properties, but are not guaranteed by a GSE. Although these loans are underwritten in accordance with GSE guidelines and can be delivered to Fannie Mae and Freddie Mac, we include these loans within our Non-Agency securitizations. Home Equity Loans (1) • Home Equity Loans are revolving lines of credit or closed-end loans secured primarily by a second lien on a residential mortgaged property which provide borrowers access to the equity in their home without the need to pay off their existing mortgage. Home Equity Loans that are structured as revolving lines of credit generally have an initial draw period of 3 to 5 years, and after the initial draw period ends, the loans generally convert to 15- or 25-year amortizing loans. Re- and Non-Performing Loans (1) • Performing, re-performing, and non-performing loans are residential mortgage loans collateralized by a first lien mortgaged property. Non-Agency RMBS (2) • Non-Agency Residential Mortgage-Backed Securities ("RMBS") represent fixed- and floating-rate RMBS issued by entities other than U.S. GSEs or agencies of the U.S. government. Non-Agency RMBS are primarily secured by Non-QM, Agency-Eligible, Home Equity, and Prime Jumbo Loans. Agency RMBS (2) • Agency RMBS represent interests in pools of residential mortgage loans guaranteed by a GSE such as Fannie Mae or Freddie Mac, or an agency of the U.S. Government such as Ginnie Mae. (1) These investments are included in the "Securitized residential mortgage loans, at fair value" or "Residential mortgage loans, at fair value" line items on the consolidated balance sheets. (2) These investments are included in the "Real estate securities, at fair value" line item on the consolidated balance sheets. 44 In addition, our investment portfolio includes commercial loans and commercial-mortgage backed securities ("CMBS") (collectively, the "Legacy WMC Commercial Investments") that were acquired in the WMC acquisition. The Legacy WMC commercial loans include first lien commercial mortgage loan participations and are included in the "Commercial loans, at fair value" line item on the consolidated balance sheets. The Legacy WMC CMBS primarily include fixed-rate and floating-rate CMBS, secured by, or evidencing an ownership interest in, a single commercial mortgage loan or a pool of commercial mortgage loans, and are included in the "Real estate securities, at fair value" line item on the consolidated balance sheets. We expect to either hold the Legacy WMC Commercial Investments until maturity or opportunistically exit these investments. Our sources of income include net interest income from our investment portfolio, changes in the fair value of our investments, and income from our investment in Arc Home. Net interest income consists of the interest income we earn on investments less the interest expense we incur on borrowed funds and any costs or benefits related to hedging. Income from our investment in Arc Home is generated through its mortgage banking activities which represents the origination and subsequent sale of residential mortgage loans and servicing income sourced from its portfolio of mortgage servicing rights. We were incorporated in Maryland on March 1, 2011 and commenced operations in July 2011. We conduct our operations to qualify and be taxed as a REIT for U.S. federal income tax purposes. 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. Our Manager and TPG Angelo Gordon We are externally managed by AG REIT Management, LLC, a Delaware limited liability company (the "Manager"), a wholly-owned subsidiary of TPG Angelo Gordon, a diversified credit and real estate investing platform within TPG Inc. ("TPG"). TPG (Nasdaq: TPG) is a leading global alternative asset management firm. On November 1, 2023, TPG acquired TPG Angelo Gordon (the "TPG Transaction"), pursuant to which TPG Angelo Gordon, including our Manager, became indirect subsidiaries of TPG. Pursuant to the management agreement with our Manager, the closing of the TPG Transaction resulted in an assignment of the management agreement. The independent directors of our Board of Directors unanimously consented to such assignment on July 31, 2023 in advance of the TPG Transaction closing. There were no changes to the management agreement in connection with the TPG Transaction and the assignment of the management agreement became effective upon the closing of the TPG Transaction. Pursuant to the terms of our management agreement, our Manager provides us with our management team, including our officers, along with appropriate support personnel. All of our officers are employees of TPG Angelo Gordon or its affiliates. We do not have any employees. Our Manager is at all times subject to the supervision and oversight of our Board of Directors and has only such functions and authority as our Board of Directors delegates to it. Our Manager has delegated to TPG Angelo Gordon the overall responsibility with respect to our Manager’s day-to-day duties and obligations arising under our management agreement. TPG Angelo Gordon is a registered investment adviser under the Investment Advisers Act of 1940, as amended. Through our relationship with our Manager, we benefit from the expertise and relationships that TPG Angelo Gordon has established which provides us with resources to generate attractive risk-adjusted returns for our stockholders. Our management has significant experience in the mortgage industry and expertise in structured credit investments. We are able to leverage our Manager, along with our ownership interest in Arc Home, a vertically integrated origination platform, to access investment opportunities in the non-agency residential mortgage loan market. This strategic advantage has enabled us to grow our investment portfolio and remain active in the securitization markets, utilizing TPG Angelo Gordon's proprietary securitization platform to deliver non-agency investments to a diverse mix of investors. 45 Market Conditions Throughout the third quarter of 2025, Federal Reserve Chair Jerome Powell maintained a data-dependent stance on monetary policy. The Federal Reserve acknowledged progress on inflation, with both headline and core Consumer Price Index stabilizing around 3%. Nevertheless, achieving the long-term inflation target of 2% remains a key objective. Although the unemployment rate remained relatively low, ongoing labor market weakness supported the case for interest rate cuts. In response, the Federal Open Market Committee reduced the Fed Funds rate by 25 basis points at both its September and October meetings, setting the target range at 3.75% to 4.00%. Overall, the bond market experienced positive returns during the third quarter of 2025, and mortgage rates declined as the Federal Reserve delivered the September rate cut and signaled the potential for additional easing. By quarter-end, the yield spread between 2-year and 10-year U.S. Treasuries widened to 54 basis points, marking a slight steepening from the previous quarter. On October 1, 2025, the U.S. government shut down after Congress failed to pass a funding bill, resulting in delays to critical government data releases and increasing uncertainty for future monetary policy decisions and the broader economic outlook. In the third quarter of 2025, RMBS spreads generally tightened. Non-QM spreads tightened throughout the capital structure, with senior tranches by 20 to 25 basis points, mezzanine tranches by up to 15 basis points, and subordinate tranches by approximately 50 basis points. Senior prime jumbo spreads were slightly tighter while the subordinate stack was more mixed, with investment grade tranches little changed and non-investment grade tranches tightening approximately 30 basis points. Closed-end second lien spreads tightened by up to 25 basis points during the quarter led by higher tranches within the structure. 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. Lower rated CRT tranches were up to 10 basis points tighter as the CRT sector has benefitted from scarcity value as the GSEs have opted to retain more of the capital structure for their newly issued transactions amid favorable underlying collateral fundamentals. Non-QM credit curves flattened during the quarter as the difference in yields for Non-QM BB and AAA tranches was only 165 basis points at the end of September 2025, amid robust demand for residential credit. Primary RMBS market activity increased sharply during the third quarter of 2025, rising to $47 billion, an increase of 33% compared to the second quarter of 2025 and 23% against year-ago levels. Non-QM drove the annual change, increasing approximately $9 billion, or 81%, to almost $21 billion, followed by gains in Home Equity which increased over $5 billion, or 156%. Prime Jumbo decreased by almost $2 billion to $6.5 billion, and the remainder of the cohorts within the residential market experienced relatively minor changes. On a year-to-date basis, primary RMBS activity totaled approximately $122 billion, or 23% more than year-ago levels driven by activity in Non-QM, Prime Jumbo, and Home Equity loans. As we have noted previously, the home equity sector has received significant 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 1.7% higher year-over-year in July 2025, the latest data available, near the peak established in June 2025. Regional price variations continued to exist, and on an annual basis, metropolitan areas 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 led annual gains, rising 6.4% from July 2024 to July 2025, with Chicago following nearby at 6.2%. Cleveland, Detroit and Boston rose 4 to 4.5% as well. Meanwhile, regions in California were mixed with Los Angeles roughly flat and other areas up to 2% lower. Additionally, Denver fell by 0.6% and Dallas by 1.2%. In Florida, Miami and Tampa were 1.3% and 2.8% lower, respectively, against July 2024 readings. 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 weaker home price gains, and vice versa. During the third quarter of 2025, prevailing mortgage rates fell over 30 basis points to end the quarter at approximately 6.3%, according to the Freddie Mac Primary Mortgage Market Survey. Prevailing mortgage rates were last at this level in the fourth quarter of 2024 after touching the low 6% range in September 2024. After a slow climb throughout 2023 and 2024, the effective mortgage rate outstanding has just inched higher to 4.11% as of the second quarter of 2025, the latest data available, up from only 4.03% to end 2024. This rate, which measures the rate on outstanding mortgage debt, is 80 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 steadied during the third quarter of 2025, sitting at 1.53 million units in August 2025, the latest data available, little changed since May 2025. This is the highest level of inventory since June 2020 but hardly breaches the typical inventory levels of 1.5 to 2 million units from 2016 to 2019 and well below the range of 1.7 to 2.5 million units from 2000 to 2004, periods with a smaller count of U.S. households. When evaluating new listings, which are a timelier barometer of 46 activity, year-to-date inventory is 1% lower year-over-year and is 22% below average year-to-date listings through August 2025 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 In the "Investment activities," "Financing activities," "Hedging activities," and "Liquidity and capital resources" sections of this Item 2, we present information on our investment portfolio and the related financing arrangements inclusive of unconsolidated ownership interests in affiliates that are accounted for under GAAP using the equity method. Our investment portfolio excludes our investment in Arc Home. Our investment portfolio and the related financing arrangements are presented along with a reconciliation to GAAP. This presentation of our investment portfolio is consistent with how our management team evaluates the business, and we believe this presentation, when considered with the GAAP presentation, provides supplemental information useful for investors in evaluating our investment portfolio and financial condition. See Note 10 to the "Notes to Consolidated Financial Statements (unaudited)" for a discussion of investments in debt and equity of affiliates. See below for further terms used when describing our investment portfolio. • Our "Investment portfolio" includes our Residential Investments, Agency RMBS, inclusive of TBAs, and Legacy WMC Commercial Investments. • Our "Residential Investments" refer to our residential mortgage loans and Non-Agency RMBS. ◦ "Residential mortgage loans" or "Loans" refer to our Non-Agency Loans, Agency-Eligible Loans, Home Equity Loans, and Re/Non-Performing Loans (exclusive of retained tranches from unconsolidated securitizations). ◦ "Non-Agency RMBS" refer to the retained tranches from unconsolidated securitizations of Non-QM Loans, Agency-Eligible Loans, Home Equity Loans, Prime Jumbo Loans, and Re/Non-Performing Loans issued either under the Gold Creek Asset Trust ("GCAT") shelf or from third-parties. • "Real estate securities" refers to our Non-Agency RMBS and Agency RMBS, inclusive of TBAs, as well as Legacy WMC CMBS that were acquired in the WMC acquisition. • Our "Legacy WMC Commercial Investments" refer to the commercial loans and CMBS that we acquired in the WMC acquisition. We expect to either hold the Legacy WMC Commercial Investments until maturity or opportunistically exit these investments. • Our "GAAP Residential Investments" refer to our Residential Investments excluding investments held within affiliated entities. • Our "GAAP Investment portfolio" includes our GAAP Residential Investments, Agency RMBS, and Legacy WMC Commercial Investments. For a reconciliation of our Investment portfolio to our GAAP Investment portfolio, see the Investment Portfolio section below. 47 Book value per share The below table details book value per common share (in thousands, except per share data). Per share amounts for book value are calculated using all outstanding common shares in accordance with GAAP as of quarter-end. September 30, 2025 December 31, 2024 Stockholders’ Equity $ 559,843 $ 543,423 Less: Liquidation preference of preferred stock (227,991) (227,991) Book Value $ 331,852 $ 315,432 Common shares outstanding 31,732 29,640 Book value per common share $ 10.46 $ 10.64 Results of Operations Our operating results can be affected by a number of factors and primarily depend on the size and composition of our investment portfolio, the level of our net interest income, the fair value of our assets and the supply of, and demand for, our investments in residential mortgage loans in the marketplace, among other things, which can be impacted by unanticipated credit events, such as defaults, liquidations or delinquencies, experienced by borrowers whose residential mortgage loans are included in our investment portfolio and other unanticipated events in our markets. Our primary source of net income or loss available to common stockholders is our net interest income, 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. 48 Three Months Ended September 30, 2025 compared to the Three Months Ended September 30, 2024 The table below presents certain information from our consolidated statements of operations for the three months ended September 30, 2025 and 2024 (in thousands). Three Months Ended September 30, 2025 September 30, 2024 Change Statement of Operations Data: Net Interest Income Interest income $ 124,714 $ 107,456 $ 17,258 Interest expense 105,232 92,506 12,726 Total Net Interest Income 19,482 14,950 4,532 Other Income/(Loss) Net interest component of interest rate swaps 1,108 2,180 (1,072) Net realized gain/(loss) (3,578) (10,788) 7,210 Net unrealized gain/(loss) 13,199 19,700 (6,501) Total Other Income/(Loss) 10,729 11,092 (363) Expenses Management fee to affiliate 2,319 1,708 611 Non-investment related expenses 2,603 2,734 (131) Investment related expenses 4,322 3,411 911 Transaction related expenses 1,962 684 1,278 Total Expenses 11,206 8,537 2,669 Income/(loss) before equity in earnings/(loss) from affiliates 19,005 17,505 1,500 Equity in earnings/(loss) from affiliates 1,645 (849) 2,494 Income/(Loss) before Income Taxes 20,650 16,656 3,994 Income tax expense 689 16 673 Net Income/(Loss) 19,961 16,640 3,321 Dividends on preferred stock 5,344 4,716 628 Net Income/(Loss) Available to Common Stockholders $ 14,617 $ 11,924 $ 2,693 Interest income Interest income is calculated using the effective interest method for our GAAP investment portfolio. Interest income increased from the three months ended September 30, 2024 to the three months ended September 30, 2025 primarily due to a higher weighted average amortized cost of our GAAP investment portfolio as a result of purchases of residential mortgage loans and Non-Agency RMBS 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 September 30, 2025 September 30, 2024 Change Weighted average amortized cost of our GAAP investment portfolio $ 8,185 $ 7,244 $ 941 Weighted average yield on our GAAP investment portfolio 6.09 % 5.93 % 0.16 % 49 Interest expense 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 September 30, 2024 to the three months ended September 30, 2025 due to a higher weighted average GAAP financing balance outstanding resulting from the issuance of securitized debt 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). Three Months Ended September 30, 2025 September 30, 2024 Change Weighted average GAAP financing balance $ 7,739 $ 6,965 $ 774 Weighted average financing rate on our GAAP investment portfolio 5.44 % 5.31 % 0.13 % 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 three months ended September 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 September 30, 2024 to the three months ended September 30, 2025 was the result of a decrease in the weighted average receive rate and weighted average notional balance. The following table presents a summary of our interest rate swap portfolio as of September 30, 2025 and 2024 ($ in millions). Three Months Ended September 30, 2025 September 30, 2024 Change Net weighted average interest rate swap notional value $ 425 $ 522 $ (97) Net weighted average (pay)/receive rate 1.04 % 1.67 % (0.63) % Net realized gain/(loss) The following table presents a summary of Net realized gain/(loss) for the three months ended September 30, 2025 and 2024 (in thousands). During the three months ended September 30, 2025, net realized losses primarily related to short TBAs and unwinding certain pay-fix, receive-float interest rate swap agreements, which were held at unrealized losses. Three Months Ended September 30, 2025 September 30, 2024 Sales of residential mortgage loans and loans transferred to or sold from Other assets $ (240) $ 124 Loan purchase commitment 356 — Sales of real estate securities — 10,297 Settlement of derivatives and other instruments (3,694) (21,209) Total Net realized gain/(loss) $ (3,578) $ (10,788) 50 Net unrealized gain/(loss) The following table presents a summary of Net unrealized gain/(loss) for the three months ended September 30, 2025 and 2024 (in thousands). During the three months ended September 30, 2025, we recognized unrealized gains on residential mortgage loans and Non-Agency RMBS, offset by unrealized losses on securitized debt, CMBS, commercial loans, short TBAs, interest rate swaps, and loan purchase commitments. Three Months Ended September 30, 2025 September 30, 2024 Residential mortgage loans $ 66,980 $ 192,918 Commercial loans (7,151) 72 Real estate securities 1,741 4,108 Securitized debt (45,710) (172,421) Loan purchase commitment (834) — Derivatives (1,827) (4,977) Total Net unrealized gain/(loss) $ 13,199 $ 19,700 Management fee to affiliate Our management fee is based upon a percentage of our Stockholders’ Equity. See the "Contractual obligations" section of this Item 2 for further detail on the calculation of our management fee and for the definition of Stockholders’ Equity. 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 September 30, 2024, the base management fee was reduced by $0.6 million. Non-investment related expenses Non-investment related expenses are primarily comprised of professional fees, directors’ and officers’ ("D&O") insurance, directors’ compensation, and certain non-investment related expenses reimbursable to our 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, including certain compensation expenses and other expenses relating to legal, accounting, and other services. Refer to the "Contractual obligations" section below for more detail on certain expenses reimbursable to our Manager or its affiliates. The following table presents a summary of our non-investment related expenses (in thousands). Three Months Ended September 30, 2025 September 30, 2024 Affiliate reimbursement (1) $ 1,544 $ 1,636 Professional fees 374 341 D&O insurance 255 335 Directors' fees and equity based compensation 253 259 Excise tax expense 34 — Other 143 163 Total Non-investment related expenses $ 2,603 $ 2,734 (1) For the three months ended September 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. 51 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. These expenses increased from the three months ended September 30, 2024 to the three months ended September 30, 2025 primarily due to an increase in our GAAP residential mortgage loan portfolio. The following table presents a summary of our investment related expenses (in thousands). Three Months Ended September 30, 2025 September 30, 2024 Affiliate reimbursement $ 256 $ 194 Servicing fees 2,529 1,827 Residential mortgage loan asset management fees 614 660 Trustee and bank fees 684 548 Other 239 182 Total Investment related expenses $ 4,322 $ 3,411 Transaction related expenses Transaction related expenses primarily include expenses associated with purchasing and securitizing residential mortgage loans. During the three months ended September 30, 2025, the expenses primarily consisted of $0.8 million related to refinancing our fixed-rate long-term financing arrangements and $0.9 million related to our acquisition of an additional 21.4% interest in AG Arc. During the three months ended September 30, 2024, transaction related expenses were related to one rated securitization. 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. The below tables summarize the components of the "Equity in earnings/(loss) from affiliates" line item on our consolidated statements of operations (in thousands). Three Months Ended September 30, 2025 September 30, 2024 MATT Non-QM Securities $ (581) $ (1,070) Re/Non-Performing Securities (17) 6 AG Arc (1) 2,243 215 Equity in earnings/(loss) from affiliates $ 1,645 $ (849) (1) Effective August 1, 2025, our allocation of AG Arc’s earnings is 66.0%. For all prior periods, our allocation of AG Arc’s earnings was 44.6%. 52 The below table breaks out the components in the "Equity in earnings/(loss) from affiliates" line item on our consolidated statements of operations (in thousands). Three Months Ended September 30, 2025 September 30, 2024 Interest income $ 594 $ 924 Interest expense — 72 Total Net Interest Income (1) 594 852 Net unrealized gain/(loss) (1,156) (1,883) Other operating expenses (1) 36 33 Total MATT Non-QM Securities and Re/Non Performing Securities (2) (598) (1,064) Net operating income/(loss) from AG Arc (1) (3) 1,204 (154) Other income/(loss) from AG Arc (3) (118) (32) Unrealized gain/(loss) on investment in AG Arc (4) 1,251 760 Elimination of gains on loans sold from AG Arc to MITT (1) (5) (94) (359) Total AG Arc Earnings/(Loss) 2,243 215 Equity in earnings/(loss) from affiliates $ 1,645 $ (849) (1) Represents items included in Earnings Available for Distribution. Refer to the “Earnings Available for Distribution” section below for further detail. (2) Primarily represents earnings from our investment in MATT Non-QM Securities. (3) Net operating income/(loss) from AG Arc represents income/(loss) related to Arc Home's lending and servicing operations, net of operating expenses and related current tax expense or benefit. Other income/(loss) from AG Arc represents realized and unrealized changes in the fair value of Arc Home's mortgage servicing rights, transaction related expenses, and other asset impairments, net of related tax expense or benefit. (4) As of September 30, 2025, the fair value of our investment in Arc Home was calculated using a valuation multiple of 1.025x of book value, which increased from 1.00x of book value as of June 30, 2025. As of September 30, 2024, the fair value of our investment in Arc Home was calculated using a valuation multiple of 0.95x of book value which increased from 0.94x of book value as of June 30, 2024. (5) 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. Income tax expense Income tax expense for the three months ended September 30, 2025 resulted from an increase in taxable income within our taxable REIT subsidiary primarily related to gains on residential mortgage loan securitization activity. During the three months ended September 30, 2024, income tax expense represented minimum state and local tax filing fees. 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%. 53 Nine Months Ended September 30, 2025 compared to the Nine Months Ended September 30, 2024 The table below presents certain information from our consolidated statements of operations for the nine months ended September 30, 2025 and 2024 (in thousands). Nine Months Ended September 30, 2025 September 30, 2024 Change Statement of Operations Data: Net Interest Income Interest income $ 344,709 $ 302,843 $ 41,866 Interest expense 288,626 254,333 34,293 Total Net Interest Income 56,083 48,510 7,573 Other Income/(Loss) Net interest component of interest rate swaps 2,666 6,447 (3,781) Net realized gain/(loss) (7,062) (9,928) 2,866 Net unrealized gain/(loss) 13,961 20,488 (6,527) Total Other Income/(Loss) 9,565 17,007 (7,442) Expenses Management fee to affiliate 6,947 5,202 1,745 Non-investment related expenses 8,390 8,552 (162) Investment related expenses 11,205 10,185 1,020 Transaction related expenses 6,041 2,164 3,877 Total Expenses 32,583 26,103 6,480 Income/(loss) before equity in earnings/(loss) from affiliates 33,065 39,414 (6,349) Equity in earnings/(loss) from affiliates 3,061 2,099 962 Income/(Loss) before Income Taxes 36,126 41,513 (5,387) Income tax expense 743 58 685 Net Income/(Loss) 35,383 41,455 (6,072) Dividends on preferred stock 15,969 13,888 2,081 Net Income/(Loss) Available to Common Stockholders $ 19,414 $ 27,567 $ (8,153) Interest income Interest income increased from the nine months ended September 30, 2024 to the nine months ended September 30, 2025 primarily due to a higher weighted average amortized cost of our GAAP investment portfolio as a result of purchases of residential mortgage loans and Non-Agency RMBS 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). Nine Months Ended September 30, 2025 September 30, 2024 Change Weighted average amortized cost of our GAAP investment portfolio $ 7,586 $ 6,837 $ 749 Weighted average yield on our GAAP investment portfolio 6.06 % 5.91 % 0.15 % 54 Interest expense Interest expense increased from the nine months ended September 30, 2024 to the nine months ended September 30, 2025 due to a higher weighted average 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). Nine Months Ended September 30, 2025 September 30, 2024 Change Weighted average GAAP financing balance $ 7,136 $ 6,470 $ 666 Weighted average financing rate on our GAAP investment portfolio 5.39 % 5.24 % 0.15 % Net interest component of interest rate swaps We recorded income on the net interest component of interest rate swaps during the nine months ended September 30, 2025 and 2024 as a result of our swap portfolio being in a net receive position. The decrease in income from the nine months ended September 30, 2024 to the nine months ended September 30, 2025 was the result of a decrease in the weighted average receive rate and weighted average notional balance. The following table presents a summary of our interest rate swap portfolio as of September 30, 2025 and 2024 ($ in millions). Nine Months Ended September 30, 2025 September 30, 2024 Change Net weighted average interest rate swap notional value $ 388 $ 527 $ (139) Net weighted average (pay)/receive rate 0.92 % 1.63 % (0.71) % Net realized gain/(loss) The following table presents a summary of Net realized gain/(loss) for the nine months ended September 30, 2025 and 2024 (in thousands). The net realized loss during the nine months ended September 30, 2025 was primarily driven by losses from unwinding certain pay-fix, receive-float interest rate swap agreements and short TBAs, which were held at unrealized losses, and losses recognized on the sale of non-agency loans and re- and non-performing loans. Nine Months Ended September 30, 2025 September 30, 2024 Sales of residential mortgage loans and loans transferred to or sold from Other assets $ (1,947) $ 323 Loan purchase commitment 356 — Sales of real estate securities 169 13,024 Settlement of derivatives and other instruments (5,640) (23,275) Total Net realized gain/(loss) $ (7,062) $ (9,928) 55 Net unrealized gain/(loss) The following table presents a summary of Net unrealized gain/(loss) for the nine months ended September 30, 2025 and 2024 (in thousands). During the nine months ended September 30, 2025, we recognized unrealized gains on our residential mortgage loans, non-agency RMBS, and CMBS, which were offset by unrealized losses on securitized debt, interest rate swaps, and commercial loans. Nine Months Ended September 30, 2025 September 30, 2024 Residential mortgage loans $ 163,237 $ 207,250 Commercial loans (9,606) 322 Real estate securities 6,871 (706) Securitized debt (137,742) (188,779) Loan purchase commitment (410) — Derivatives (8,389) 2,401 Total Net unrealized gain/(loss) $ 13,961 $ 20,488 Management fee to affiliate During the nine months ended September 30, 2024, the base management fee was reduced by $1.8 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). Nine Months Ended September 30, 2025 September 30, 2024 Affiliate reimbursement (1) $ 4,687 $ 4,936 Professional fees 1,244 1,113 D&O insurance 765 1,003 Directors' fees and equity based compensation 866 903 Excise tax expense (2) 77 — Other 751 597 Total Non-investment related expenses $ 8,390 $ 8,552 (1) For the nine months ended September 30, 2024, the Manager agreed to waive its right to receive expense reimbursements of $0.9 million pursuant to the MITT Management Agreement Amendment executed in connection with the WMC acquisition. (2) During the nine months ended September 30, 2025, we recorded a reduction in excise tax expense of $0.1 million related to an excise tax refund. 56 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. These expenses increased from the nine months ended September 30, 2024 to the nine months ended September 30, 2025 primarily due to an increase in our GAAP residential mortgage loan portfolio. The following table presents a summary of our investment related expenses (in thousands). Nine Months Ended September 30, 2025 September 30, 2024 Affiliate reimbursement $ 551 $ 395 Servicing fees 6,479 5,601 Residential mortgage loan asset management fees 1,693 1,994 Trustee and bank fees 1,862 1,594 Other 620 601 Total Investment related expenses $ 11,205 $ 10,185 Transaction related expenses Transaction related expenses increased from the nine months ended September 30, 2024 to the nine months ended September 30, 2025 primarily due to increased expenses associated with securitizations in 2025 compared with 2024, along with expenses of $0.8 million related to refinancing our fixed-rate long-term financing arrangements and $0.9 million related to our acquisition of an additional 21.4% interest in AG Arc. 57 Equity in earnings/(loss) from affiliates The below tables summarize the components of the "Equity in earnings/(loss) from affiliates" line item on our consolidated statements of operations (in thousands). Nine Months Ended September 30, 2025 September 30, 2024 MATT Non-QM Securities $ (384) $ 307 Re/Non-Performing Securities (137) 322 AG Arc (1) 3,582 1,470 Equity in earnings/(loss) from affiliates $ 3,061 $ 2,099 (1) Effective August 1, 2025, our allocation of AG Arc’s earnings is 66.0%. For all prior periods, our allocation of AG Arc’s earnings was 44.6%. The below table breaks out the components in the "Equity in earnings/(loss) from affiliates" line item on our consolidated statements of operations (in thousands). Nine Months Ended September 30, 2025 September 30, 2024 Interest income $ 1,920 $ 3,055 Interest expense 3 216 Total Net Interest Income (1) 1,917 2,839 Net unrealized gain/(loss) (2,305) (2,061) Other operating expenses (1) 133 149 Total MATT Non-QM Securities and Re/Non Performing Securities (2) (521) 629 Net operating income/(loss) from AG Arc (1) (3) 1,184 (1,591) Other income/(loss) from AG Arc (3) (74) 1,567 Unrealized gain/(loss) on investment in AG Arc (4) 2,654 2,459 Elimination of gains on loans sold from AG Arc to MITT (1) (5) (182) (965) Total AG Arc Earnings/(Loss) 3,582 1,470 Equity in earnings/(loss) from affiliates $ 3,061 $ 2,099 (1) Represents items included in Earnings Available for Distribution. Refer to the “Earnings Available for Distribution” section below for further detail. (2) Primarily represents earnings from our investment in MATT Non-QM Securities. (3) Net operating income/(loss) from AG Arc represents income/(loss) related to Arc Home's lending and servicing operations, net of operating expenses and related current tax expense or benefit. Other income/(loss) from AG Arc represents realized and unrealized changes in the fair value of Arc Home's mortgage servicing rights, transaction related expenses, and other asset impairments, net of related tax expense or benefit. (4) As of September 30, 2025, the fair value of our investment in Arc Home was calculated using a valuation multiple of 1.025x of book value, which increased from 0.95x of book value as of December 31, 2024. As of September 30, 2024, the fair value of our investment in Arc Home was calculated using a valuation multiple of 0.95x of book value, which increased from 0.89x of book value as of December 31, 2023. (5) 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. Income tax expense Income tax expense for the nine months ended September 30, 2025 resulted from an increase in taxable income within our taxable REIT subsidiary primarily related to gains on residential mortgage loan securitization activity. During the nine months ended September 30, 2024, tax expense represented minimum state and local tax filing fees. 58 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 One of our objectives is to generate net income from net interest margin on the portfolio, and management uses EAD, as one of several metrics, to help measure our performance against this objective. Management believes that this non-GAAP measure, when considered with our GAAP financial statements, provides supplemental information useful for investors to help evaluate our financial performance. However, management also believes that our definition of EAD has important limitations as it does not include certain earnings or losses our management team considers in evaluating our financial performance. 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. 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. Items (i) through (vii) above include any amount related to those items held in affiliated entities. 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. Management excludes all deferred taxes because it believes deferred taxes are not representative of current operations. EAD includes the net interest income and other income earned on our investments on a yield adjusted basis, including the net interest component of interest rate swaps, TBA dollar roll income/(loss), or any other investment activity that may earn or pay net interest or its economic equivalent. Additionally, EAD includes the net operating income/(loss) from Arc Home. 59 A reconciliation of "Net Income/(loss) available to common stockholders" to EAD for three and nine months ended September 30, 2025 and 2024 is set forth below (in thousands, except per share data). Three Months Ended Nine Months Ended September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 Net Income/(loss) available to common stockholders $ 14,617 $ 11,924 $ 19,414 $ 27,567 Add (Deduct): Net realized (gain)/loss 3,578 10,788 7,062 9,928 Net unrealized (gain)/loss (13,199) (19,700) (13,961) (20,488) Transaction related expenses and deal related performance fees (1) 2,504 709 6,727 2,235 Equity in (earnings)/loss from affiliates (1,645) 849 (3,061) (2,099) EAD from equity method investments (2) 1,668 306 2,786 134 Dollar roll income/(loss) (432) — (543) — Earnings available for distribution $ 7,091 $ 4,876 $ 18,424 $ 17,277 Earnings available for distribution, per Diluted Share $ 0.23 $ 0.17 $ 0.61 $ 0.59 (1) The following table presents additional detail related to transaction related expenses and deal related performance fees excluded from EAD (in thousands). The interest expense line item relates to the amortization of deferred financing costs and the income tax expense line item relates to taxes incurred on items excluded from EAD, as defined above. Three Months Ended Nine Months Ended Consolidated statements of operations line item: September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 Transaction related expenses $ 1,962 $ 684 $ 6,041 $ 2,164 Interest expense 99 25 243 71 Income tax expense 443 — 443 — Transaction related expenses and deal related performance fees $ 2,504 $ 709 $ 6,727 $ 2,235 (2) The following table presents additional detail related to EAD from equity method investments (in thousands). Refer to the “Equity in earnings/(loss) from affiliates” section within the “Results of Operations” above for additional detail. Three Months Ended Nine Months Ended September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 Net interest income $ 594 $ 852 $ 1,917 $ 2,839 Other operating expenses (36) (33) (133) (149) Net operating income/(loss) from AG Arc 1,204 (154) 1,184 (1,591) Elimination of gains on loans sold from AG Arc to MITT (94) (359) (182) (965) EAD from equity method investments $ 1,668 $ 306 $ 2,786 $ 134 Investment activities Investment activities We aim to allocate capital to investment opportunities with attractive risk/return profiles in our target asset classes. Our investment activities primarily include acquiring and securitizing newly-originated residential mortgage loans. We finance our acquired loans through various financing lines on a short-term basis and securitize the loans to obtain long-term, non-recourse, non-mark-to-market financing as market conditions permit. We may also invest in Agency RMBS to utilize excess liquidity. Our investment and capital allocation decisions depend on prevailing market conditions and compliance with Investment Company Act and REIT tests, among other factors, and may change over time in response to opportunities available in different economic and capital market environments. As a result, in reacting to market conditions and taking into account a variety of other factors, including liquidity, duration, and interest rate expectations, the mix of our assets changes over time as we deploy capital. We actively evaluate our investments based on factors including, among others, the characteristics of the underlying collateral, geography, expected return, expected future prepayment trends, supply of and demand for our investments, costs of financing, costs of hedging, expected future interest rate volatility, and the overall shape of the U.S. Treasury and interest rate swap yield curves. 60 Net interest margin and leverage ratio Net interest margin and leverage ratio are metrics that management believes should be considered when evaluating the performance of our investment portfolio. 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 amortized cost at quarter-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 amortized cost of securitized debt and senior unsecured notes at quarter-end. Our leverage ratio is determined by our portfolio mix as well as many additional factors, including the liquidity of our portfolio, the availability and price of our financing, the available capacity to finance our assets, and anticipated regulatory developments. See the "Financing activities" section below for more detail on our leverage ratio. 61 Investment portfolio The following table presents a summary of our Investment Portfolio, inclusive of net interest margin and leverage ratios, as of September 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 Instrument Amortized Cost Fair Value Yield (a)(b) Amortized Cost Fair Value Financing Arrangements Leverage Ratio (e) Residential Investments Securitized Non-Agency Loans $ 7,350,818 $ 7,142,686 5.76 % $ 6,613,928 $ 6,469,626 $ 439,020 5.35 % $ 234,040 0.41 % 1.8x Securitized Home Equity Loans 985,292 1,007,911 7.73 % 855,544 861,727 68,851 5.78 % 77,333 1.95 % 0.9x Securitized Re/Non-Performing Loans 151,387 138,386 5.97 % 100,975 96,758 26,992 4.01 % 14,636 1.96 % 1.8x Agency-Eligible Loans 95,207 95,671 6.25 % — — 89,845 4.85 % 5,826 1.40 % 15.4x Home Equity Loans 127,861 129,004 7.90 % — — 59,623 5.71 % 69,381 2.19 % 0.9x Non-Agency Loans 571 572 3.65 % — — — — % 572 3.65 % N/A Residential Whole Loans 460 1,257 NM — — — — % 1,257 NM N/A Non-Agency RMBS 153,998 161,020 9.64 % — — 98,130 4.91 % 62,890 4.73 % 1.5x Total Residential Investments 8,865,594 8,676,507 6.09 % 7,570,447 7,428,111 782,461 5.37 % 465,935 0.72 % 1.7x Agency RMBS 17,220 16,546 7.67 % — — 11,000 4.60 % 5,546 3.07 % 2.0x Legacy WMC Commercial Investments (f) Commercial Loans (g) 66,980 57,738 — % — — 27,436 7.16 % 30,302 (7.16) % 0.9x CMBS (h) 45,076 40,683 17.52 % — — 17,348 5.55 % 23,335 11.97 % 0.7x Total Legacy WMC Commercial Investments 112,056 98,421 7.05 % — — 44,784 6.54 % 53,637 0.51 % 0.8x Total Investment Portfolio $ 8,994,870 $ 8,791,474 6.11 % $ 7,570,447 $ 7,428,111 $ 838,245 5.37 % $ 525,118 0.74 % 1.6x Cash and Cash Equivalents (i) 59,000 4.06 % Interest Rate Swaps (j) 11,155 0.90 % Arc Home 49,244 Senior Unsecured Notes (96,267) 10.61 % Non-Interest Earning Assets, net 11,593 Total Stockholders' Equity $ 559,843 1.7x 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 $ 8,994,870 $ 8,791,474 6.11 % $ 7,570,447 $ 7,428,111 $ 838,245 5.37 % $ 525,118 0.74 % 1.6x Investments in Debt and Equity of Affiliates 9,586 11,305 21.69 % — — — — % 11,305 21.69 % N/A GAAP Investment Portfolio $ 8,985,284 $ 8,780,169 6.09 % $ 7,570,447 $ 7,428,111 $ 838,245 5.37 % $ 513,813 0.72 % 14.9x NM - Not Meaningful (a) Excludes any net TBA positions. (b) The weighted average yields are calculated based on the amortized cost of the underlying loans and securities. (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 5.37%. When including our Senior Unsecured Notes, the total cost of funds was 5.43%. (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. (f) We expect to either hold the Legacy WMC Commercial Investments until maturity or opportunistically exit these investments. (g) The Legacy WMC Commercial Loans are on non-accrual status or cost-recovery status. (h) There are Legacy WMC CMBS with an unpaid principal balance of $23.5 million and a fair value of $7.1 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. (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. 62 Securitized Non-Agency Loans and Home Equity Loans As noted above, our investment activities primarily include acquiring and securitizing newly-originated residential mortgage loans. Non-Agency VIEs are collateralized by Non-Agency and Agency-Eligible Loans. Home Equity VIEs are collateralized by revolving lines of credit and closed-end loans secured primarily by a second lien on a residential mortgaged property. Refer to Notes 2 and 3 to the “Notes to Consolidated Financial Statements (unaudited)” for additional information on the assets and liabilities of our consolidated Non-Agency VIEs and Home Equity VIEs. In each securitization transaction, a pool of loans is transferred into a newly formed securitization trust. The securitization trust issues various classes of mortgage pass-through certificates backed by the cash flows from the underlying residential mortgage loans (the "Certificates"). When we sponsor a residential mortgage loan securitization, we are generally required to retain at least 5% of the fair value of the Certificates issued in the securitization ("Risk Retention Rules"). We can retain either an "eligible vertical interest" (which consists of at least 5% of each class of securities issued in the securitization), an "eligible horizontal residual interest" (which is the most subordinate class of securities with a fair value of at least 5% of the aggregate credit risk) or a combination of both totaling 5% (the "Required Credit Risk") . We typically sell the senior classes of Certificates to unrelated third parties. When we choose to retain an eligible horizontal residual interest , we generally purchase the most subordinated classes of Certificates and the excess cash flow Certificates. When we choose to retain an eligible vertical interest , we purchase a 5% interest in each class of Certificates issued. We also may purchase the Certificates entitled to excess servicing fees and other Certificates not required to meet Risk Retention Rules. If we are determined to be the primary beneficiary of these securitization transactions, we consolidate the respective VIE created to facilitate the transaction and record "Securitized residential mortgage loans" and "Securitized debt" on the consolidated balance sheets in accordance with U.S. GAAP. However, our equity at risk represents certain Certificates from each securitization which we retain. 63 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 and Home Equity VIEs as of September 30, 2025 (in thousands). Non-Agency VIEs Home Equity VIEs Unpaid Principal Balance Fair Value Unpaid Principal Balance Fair Value Securitized residential mortgage loans in VIEs $ 7,298,543 $ 7,142,686 $ 921,111 $ 1,007,911 Securitized debt in VIEs (1) 6,676,720 6,469,626 828,954 861,727 Other assets (2) N/A 2,259 N/A 1,055 Retained Certificates from VIEs (3)(4)(5)(6) $ 675,319 $ 147,239 Retained interests in VIEs Current Face Fair Value Current Face Fair Value Senior Bonds $ 129,304 $ 131,573 $ 38,886 $ 39,091 Mezzanine Bonds 23,348 21,894 1,117 1,119 Subordinate Bonds 470,769 350,972 52,153 49,739 Interest Only / Excess Servicing Bonds (1)(7) N/A 170,880 N/A 57,290 Retained Certificates from VIEs (3)(4)(5)(6) $ 675,319 $ 147,239 Financing arrangements on retained Certificates from VIEs 439,020 68,851 Retained Certificates from VIEs, net of financing arrangements $ 236,299 $ 78,388 (1) 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. The Securitized debt in the Non-Agency VIEs and Interest Only/Excess Servicing Bonds line items include interest only classes with a notional value of $3.4 billion and $12.1 billion, respectively. The Securitized debt in the Home Equity VIEs and Interest Only/Excess Servicing Bonds line items include interest only classes with a notional value of $310.9 million and $610.2 million, respectively. (2) For Non-Agency VIEs, represents the fair value of real estate owned within the VIEs. We record real estate owned at the lower of cost or fair value less estimated costs to sell. We recorded real estate owned within our Non-Agency VIEs at $2.1 million. For Home Equity VIEs, represents cash held in reserve accounts within the Home Equity VIEs and included within our restricted cash. (3) Maximum loss exposure from our involvement with VIEs pertains to the fair value of the Certificates retained from the VIEs. We have no obligation to provide any other explicit or implicit support to the securitization trusts. (4) Our equity at risk included bonds in our Non-Agency VIEs and Home Equity VIEs with a fair value of $457.2 million and $50.5 million, respectively, 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) A portion of our equity at risk included bonds exposed to the first loss of the securitization in the Non-Agency VIEs and Home Equity VIEs with a fair value of $110.9 million and $57.3 million, respectively. (6) Excludes net other asset/(liabilities) held within the Non-Agency VIEs and Home Equity VIEs of $7.7 million and $3.8 million, respectively. (7) As the sponsor and depositor of each securitization, we may purchase all of the outstanding Certificates (an "Optional Redemption") following the earlier of (1) an applicable anniversary date (typically two or three years) of the respective securitization or (2) the date at which the unpaid principal balance of the applicable collateral has declined below a certain percentage (typically 10% to 30%) of the principal balance originally contributed to the securitization. As of September 30, 2025, there were 10 Non-Agency securitizations with an unpaid principal balance of $2.4 billion that met the criteria for an Optional Redemption. 64 Securitized residential mortgage loans and Residential mortgage loans The following table presents information regarding collateral characteristics of our residential mortgage loans as of September 30, 2025 ($ in thousands). Unpaid Principal Balance Weighted Average (1)(2) Fair Value Loan Count (1) Original LTV Ratio (3) Current FICO (4) Coupon Life (Years) (5) Securitized residential mortgage loans Non-Agency Loans $ 7,298,543 $ 7,142,686 18,795 70.80 % 765 5.86 % 7.44 Home Equity Loans 921,111 1,007,911 11,056 65.49 % 746 9.81 % 5.01 Re- and Non-Performing Loans 160,916 138,386 1,095 80.45 % 671 4.25 % 5.53 Total Securitized residential mortgage loans $ 8,380,570 $ 8,288,983 30,946 71.01 % 763 6.26 % 7.14 Residential mortgage loans Agency-Eligible Loans $ 95,124 $ 95,671 228 73.80 % 772 6.58 % 5.95 Home Equity Loans 121,535 129,004 1,506 65.84 % 749 9.42 % 4.77 Non-Agency Loans 555 572 2 65.60 % 639 6.77 % 3.48 Re- and Non-Performing Loans (1) 1,314 1,257 N/A N/A N/A N/A 1.17 Total Residential mortgage loans $ 218,528 $ 226,504 1,736 69.33 % 759 8.17 % 5.26 Total as of September 30, 2025 $ 8,599,098 $ 8,515,487 32,682 70.37 % 761 6.31 % 7.09 (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 (unaudited)" 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 As of September 30, 2025, the borrowers of the Legacy WMC Commercial loans were in maturity default. The lender parties (including us) are evaluating with the borrowers consensual sales of the underlying properties collateralizing the loans and/or transferring title of all or certain of the properties to the lender parties via a deed-in-lieu of foreclosure. See Note 3 to the "Notes to Consolidated Financial Statements (unaudited)" for information on the status of the Legacy WMC Commercial loans, as well as 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. 65 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 September 30, 2025 ($ in thousands). Weighted Average Instrument Current Face Fair Value Coupon (1) Life (Years) (2) Non-Agency RMBS by collateral type: Non-QM Loans (3) $ 53,458 $ 57,311 1.56 % 2.84 Agency-Eligible Loans (3) 46,431 45,955 3.53 % 6.78 Home Equity Loans (3) 37,950 52,268 6.04 % 6.65 Prime Jumbo Loans (3) 6,345 4,795 1.03 % 7.68 Re- and Non-Performing Loans (3) N/A 691 — % 2.92 Total Non-Agency RMBS $ 144,184 $ 161,020 2.45 % 4.70 Legacy WMC CMBS Single-Asset/Single-Borrower - Fixed Rate $ 48,498 $ 21,301 6.11 % 1.71 Single-Asset/Single-Borrower - Floating Rate 19,421 6,526 9.16 % 0.57 Conduit - Fixed Rate 15,043 12,856 4.20 % 2.44 Legacy WMC CMBS (4) $ 82,962 $ 40,683 6.47 % 1.58 Total Non-Agency RMBS and Legacy WMC CMBS $ 227,146 $ 201,703 3.19 % 4.36 Less: Investments in Debt and Equity of Affiliates $ 4,497 $ 11,305 0.54 % 2.31 Total GAAP Non-Agency RMBS and Legacy WMC CMBS $ 222,649 $ 190,398 4.19 % 5.31 (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. The notional value of interest only classes included in the Non-QM Loans, Agency-Eligible Loans, Home Equity Loans, Prime Jumbo Loans, and Re- and Non-Performing Loans line items was $308.2 million, $43.4 million, $163.2 million, $25.5 million, and $0.8 million, respectively. (4) There are Legacy WMC CMBS with an unpaid principal balance of $23.5 million and a fair value of $7.1 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 September 30, 2025 (in thousands). Credit Rating (1) Non-Agency RMBS Legacy WMC CMBS AAA $ 45,588 $ — AA 6,669 — A 12,062 — BBB 22,765 — BB 15,055 5,769 B 11,938 1,151 Below B — 33,705 Not Rated 46,943 58 Total Non-Agency RMBS and Legacy WMC CMBS $ 161,020 $ 40,683 Less: Investments in Debt and Equity of Affiliates $ 11,305 $ — Total GAAP Non-Agency RMBS and Legacy WMC CMBS $ 149,715 $ 40,683 (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. 66 The following table presents the geographic concentration of the underlying collateral for our Non-Agency RMBS and Legacy WMC CMBS portfolios as of September 30, 2025 ($ in thousands). Non-Agency RMBS Legacy WMC CMBS Geographic Location Concentration Fair Value Geographic Location Concentration Fair Value California 32.4 % $ 52,167 California 43.9 % $ 17,859 Florida 9.1 % 14,655 Minnesota 16.4 % 6,672 New York 8.6 % 13,928 Texas 8.9 % 3,602 Texas 4.6 % 7,419 New York 6.1 % 2,465 New Jersey 3.6 % 5,807 Ohio 4.7 % 1,923 Other 41.7 % 67,044 Other 20.0 % 8,162 Total 100.0 % $ 161,020 Total 100.0 % $ 40,683 Agency RMBS 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 September 30, 2025 ($ in thousands). Weighted Average Fair Value CPR (1) Coupon Life (Years) (2) Agency RMBS Interest Only $ 16,546 9.1 % 4.56 % 5.35 (1) Represents the weighted average monthly CPRs published during the period 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 Financing Arrangements We use leverage to finance the purchase of our investment portfolio. Our leverage has primarily been in the form of repurchase agreements and similar financing arrangements (which we refer to collectively as financing arrangements). Repurchase agreements involve the sale and a simultaneous agreement to repurchase the transferred assets or similar assets at a future date. The amount borrowed generally is equal to the fair value of the assets pledged less an agreed-upon discount, referred to as a "haircut." The size of the haircut reflects the perceived risk associated with the pledged asset. Haircuts may change as our financing arrangements mature or roll and are sensitive to governmental regulations. Interest rates for our financing arrangements are determined based on prevailing rates (typically a spread over a base rate) corresponding to the terms of the borrowings, and interest is paid on a monthly basis or, for shorter term arrangements, at the end of the term. Repurchase agreements typically have a term of up to one year for loans and a term of 30 to 90 days for securities. Repurchase agreements are generally mark-to-market with respect to margin calls and recourse to us. We also have certain financing arrangements collateralized by residential mortgage loans which are recourse to us, but are not subject to mark-to-market margin calls. We had outstanding financing arrangements with six counterparties as of September 30, 2025. Our financing arrangements generally include customary representations, warranties, and covenants, but may also contain more restrictive supplemental terms and conditions. Although specific to each financing arrangement, typical supplemental terms include requirements of minimum equity and liquidity, leverage ratios, and performance triggers. In addition, some of the financing arrangements contain cross default features, whereby default under an agreement with one lender simultaneously causes default under agreements with other lenders. 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 September 30, 2025, we are in compliance with all of our financial covenants. Securitized Debt We also utilize securitized debt to finance our loan portfolio. As explained in the “Investment Activities” section above, our investment strategy focuses on acquiring and securitizing newly originated residential mortgage loans. In each securitization 67 transaction, a pool of loans is transferred into a newly formed securitization trust. This trust issues Certificates, and we typically sell the senior classes of these Certificates to unrelated third parties. We record “Securitized debt" on our consolidated balance sheet in accordance with U.S. GAAP when we determine that we are the primary beneficiary of the securitization transaction. The proceeds from securitization transactions are used to repay any outstanding financing arrangements initially employed to acquire newly originated residential mortgage loans, replacing recourse financing with mark-to-market margin calls with securitized debt. Securitized debt is generally long-term in nature, non-recourse to us and is not subject to mark-to-market margin calls. Additionally, generally the holders of the securitized debt have no recourse to the general credit of the Company and we have no obligation to provide any other explicit or implicit support to the securitization trusts. 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 (unaudited)" for additional information on the Senior Unsecured Notes. Leverage We use leverage to increase potential returns to our stockholders. 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. As discussed above, financing arrangements are generally recourse to the Company whereas securitized debt used to finance our Non-Agency VIEs, Home Equity VIEs, and RPL/NPL VIEs is generally non-recourse to the Company. In addition to disclosing GAAP leverage, we also disclose Economic Leverage, which excludes non-recourse financing. Management believes that this non-GAAP measure, when considered with our GAAP financial statements, provides supplemental information useful for investors to help evaluate our use of leverage and the related risk associated with our leverage profile. Our presentation of Economic Leverage 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, GAAP leverage calculated in accordance with GAAP. Our GAAP financial results and the reconciliations from these results should be carefully evaluated. We define GAAP leverage as the sum of (1) Securitized debt, at fair value, (2) 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 our GAAP leverage, exclusive of any fully non-recourse financing arrangements, and our net TBA position (at cost), if any. Our leverage does not include any financing utilized through AG Arc. 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). September 30, 2025 Leverage Stockholders’ Equity Leverage Ratio Securitized debt, at fair value (1) $ 7,428,111 Financing arrangements (2) 838,245 Senior Unsecured Notes (2) 96,267 Restricted cash posted on financing arrangements (4,427) GAAP Leverage $ 8,358,196 $ 559,843 14.9x Non-recourse financing arrangements (1) (7,428,111) Net TBA (receivable)/payable adjustment 868 Economic Leverage $ 930,953 $ 559,843 1.7x (1) Securitized debt, at fair value is non-recourse to the Company. (2) Financing arrangements and senior unsecured notes are recourse to the Company. Hedging activities Subject to maintaining our qualification as a REIT and our Investment Company Act exemption, to the extent leverage is deployed, we may utilize derivative instruments in an effort to hedge the interest rate risk associated with the financing of our portfolio. Specifically, we may seek to hedge our exposure to potential interest rate mismatches between the interest we earn on our investments and our borrowing costs caused by fluctuations in short-term interest rates. We may utilize interest rate swaps, swaption agreements, and other financial instruments such as short positions in to-be-announced securities. In utilizing leverage 68 and interest rate derivatives, our objectives are to improve risk-adjusted returns and, where possible, to lock in, on a long-term basis, a spread between the yield on our assets and the costs of our financing and hedging. Derivatives have not been designated as hedging instruments for accounting purposes. See Note 7 in the "Notes to Consolidated Financial Statements (unaudited)" for more information. Dividends Federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT ordinary taxable income, without regard to the deduction for dividends paid and excluding net capital gains and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its net taxable income. Before we pay any dividend, whether for U.S. 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. Differences between taxable income and GAAP net income include (i) unrealized gains and losses associated with investment and derivative portfolios which are marked-to-market in current income for GAAP purposes, but excluded from taxable income until realized or settled, (ii) temporary differences related to amortization of premiums and discounts paid on investments, (iii) the timing and amount of deductions related to stock-based compensation, (iv) temporary differences related to the recognition of realized gains and losses on sold investments and certain terminated derivatives, (v) taxes, and (vi) 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. As of December 31, 2024, we had undistributed taxable income of $0.36 per common share. During the nine months ended September 30, 2025, the Company declared common stock dividends of $0.62 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 $1.54689, $1.50, and $2.103968 per share, 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 securitized debt and financing arrangements, principal and interest payments we receive on our investment portfolio, cash generated from our operating results, proceeds from the sale of investments, and proceeds from capital market transactions. We typically use cash to repay principal and interest on our securitized debt, 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. Refer to "—Margin requirements" below discussing instances where we may use liquidity to meet margin requirements. At September 30, 2025, we had $104.2 million of liquidity, which consisted of $59.0 million of cash and cash equivalents, $44.5 million of available committed financing on certain Home Equity Loans, and $0.7 million of unencumbered Agency RMBS available to support our liquidity needs. The $44.5 million of available committed financing on Home Equity Loans relates to certain financing arrangements in which our counterparty has contractually committed to provide up to $50.0 million of financing at an advance rate of 87.5% of unpaid principal balance pledged as collateral, which was $50.9 million as of September 30, 2025. Margin requirements The fair value of our loans and real estate securities fluctuate according to market conditions. When the fair value of the assets pledged as collateral to secure a financing arrangement decreases to the point where the difference between the collateral fair value and the financing arrangement amount is less than the haircut, our lenders may issue a "margin call," which requires us to post additional collateral to the lender in the form of additional assets or cash. Under our repurchase facilities, our lenders have full discretion to determine the fair value of the securities we pledge to them. Our lenders typically value assets based on recent transactions in the market. Lenders also issue margin calls as the published current principal balance factors change on the pool of mortgages underlying the securities pledged as collateral when scheduled and unscheduled paydowns are announced monthly. We experience margin calls in the ordinary course of our business. In addition to our cash and cash equivalents, we may hold 69 unpledged Agency RMBS and maintain available committed financing on certain residential mortgage loans to effectively manage the margin requirements established by our lenders. We refer to this position as our "liquidity." Additionally, we may use certain financing arrangements collateralized by residential mortgage loans which are not subject to mark-to-market margin calls. The level of liquidity we maintain to meet margin calls is directly affected by our leverage levels, our haircuts and the price changes on our assets. Typically, if interest rates increase or if credit spreads widen, then the prices of our collateral (and our unpledged Agency RMBS that constitute a portion of our liquidity) will decline, we will experience margin calls, and we will need to use our liquidity to meet the margin calls. There can be no assurance that we will maintain sufficient levels of liquidity to meet any margin calls. If our haircuts on existing financing arrangements increase, our liquidity will proportionately decrease. We intend to maintain a level of liquidity in relation to our borrowings that enables us to meet reasonably anticipated margin calls but that also allows us to be substantially invested in the residential mortgage market. 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. 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. 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. Refer to the "Liquidity risk – derivatives" section of Item 3 below for a further discussion on margin. Cash flows The below details changes to our cash, cash equivalents, and restricted cash for the nine months ended September 30, 2025 and 2024 (in thousands). Nine Months Ended September 30, 2025 September 30, 2024 Change Cash and cash equivalents and restricted cash, Beginning of Period $ 138,568 $ 125,573 $ 12,995 Net cash provided by (used in) operating activities (1) 40,894 40,184 710 Net cash provided by (used in) investing activities (2) (1,954,802) (637,889) (1,316,913) Net cash provided by (used in) financing activities (3) 1,852,148 586,350 1,265,798 Net change in cash and cash equivalents and restricted cash (61,760) (11,355) (50,405) Cash and cash equivalents and restricted cash, End of Period $ 76,808 $ 114,218 $ (37,410) (1) Cash provided by operating activities is primarily attributable to net interest income less operating expenses for the nine months ended September 30, 2025. (2) Cash used in investing activities for the nine months ended September 30, 2025 was primarily attributable to purchases of residential mortgage loans and real estate securities, offset by principal repayments on our investment portfolio and proceeds from the sale of certain investments. (3) Cash provided by financing activities for the nine months ended September 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, repayments of fixed-rate long-term financing arrangements, and dividend payments. 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. The 2022 Repurchase Program does not have an expiration date and permits us to repurchase our shares through various methods, including open market repurchases, privately negotiated block transactions and Rule 10b5-1 plans. We may repurchase shares of our common stock from time to time in compliance with SEC regulations and other legal requirements. The extent to which we repurchase our shares, and the timing, manner, price, and amount of any such repurchases, will depend upon a variety of factors including market conditions and other corporate considerations as determined by management, as well as the limits of the 2022 Repurchase Program and our liquidity and business strategy. The 2022 Repurchase Program does not obligate us to acquire any particular amount of shares and may be modified or discontinued at any time. As of the date of this filing, approximately $1.5 million of common stock remained 70 authorized for future share repurchases under the 2022 Repurchase Program. There were no shares repurchased during the three and nine months ended September 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. As of the date of this filing, the full $15.0 million authorized amount remains available for repurchase under the 2023 Repurchase Program. 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. 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 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 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 any of our equity distribution agreements then in effect during the three and nine months ended September 30, 2025 and 2024. Acquisition of additional interest in AG Arc On August 1, 2025, in connection with the acquisition of an additional 21.4% interest in AG Arc, we issued 2,027,676 restricted shares of common stock (the “Holder Shares”) to certain funds managed by TPG Angelo Gordon (the “Holders”) as consideration. Refer to Note 10 of the "Notes to Consolidated Financial Statements (unaudited)" for additional information. Pursuant to the registration rights agreement we entered into with the Holders, in August 2025, we filed a resale shelf registration statement on Form S-3 registering the resale of all the Holder Shares (the “Resale Shelf”), which was declared effective by the Securities and Exchange Commission in August 2025. 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, 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 Management agreement The management agreement, as amended, provides for payment to the Manager of a management fee, an incentive fee, and reimbursements of certain expenses incurred by the Manager or its affiliates on behalf of us. Pursuant to our management agreement, the closing of the TPG Transaction resulted in an assignment of the management agreement. Our independent directors unanimously consented to such assignment on July 31, 2023 in advance of the TPG Transaction closing. There were no changes to the management agreement in connection with the TPG Transaction and the assignment of the management agreement became effective upon the closing of the TPG Transaction. 71 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 The management fee is calculated and payable quarterly in arrears in an amount equal to 1.50% of our Stockholders’ Equity, per annum. For purposes of calculating the management fee, "Stockholders’ Equity" means the sum of the net proceeds from any issuances of equity securities (including preferred securities) since inception (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance, and excluding any future equity issuance to the Manager), plus our retained earnings at the end of such quarter (without taking into account any non-cash equity compensation expense or other non-cash items described below incurred in current or prior periods), less any amount that we pay for repurchases of our common stock, excluding any unrealized gains, losses or other non-cash items that have impacted stockholders’ equity as reported in our financial statements prepared in accordance with GAAP, regardless of whether such items are included in other comprehensive income or loss, or in net income, and excluding one-time events pursuant to changes in GAAP, and certain other non-cash charges after discussions between the Manager and our independent directors and after approval by a majority of our independent directors. Stockholders’ Equity, for purposes of calculating the management fee, could be greater or less than the amount of stockholders’ equity shown on our financial statements. The below table details the management fees incurred during the three and nine months ended September 30, 2025 and 2024 (in thousands). Three Months Ended Nine Months Ended Consolidated statements of operations line item: September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 Management fee to affiliate (1) $ 2,319 $ 1,708 $ 6,947 $ 5,202 (1) For the three and nine months ended September 30, 2024, the Manager agreed to waive its right to receive management fees of $0.6 million and $1.8 million, respectively, pursuant to the MITT Management Agreement Amendment executed in connection with the WMC acquisition. As of September 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. Incentive fee The Manager is entitled to an annual incentive fee with respect to each applicable fiscal year, which will be equal to 15% of the amount by which our cumulative adjusted net income from November 22, 2021 exceeds the cumulative hurdle amount, which represents an 8% return (cumulative, but not compounding) on an equity hurdle base consisting of the sum of (i) $341.5 million and (ii) the gross proceeds of any subsequent public or private common stock offerings by us. 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 and nine months ended September 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 September 30, 2025 and December 31, 2024, no event of termination of the management agreement had occurred. Expense reimbursement Our Manager uses the proceeds from its management fee in part to pay compensation to its officers and personnel, who, notwithstanding that certain of them also are our officers, receive no compensation directly from us. We are required to 72 reimburse our Manager or its affiliates for operating expenses incurred by our Manager or its affiliates on our behalf, including certain salary expenses and other expenses relating to legal, accounting, due diligence and other services. Our reimbursement obligation is not subject to any dollar limitation; however, reimbursements are subject to an annual budget process which combines guidelines from the management agreement with oversight by our Board of Directors and discussions with our Manager. The below table details the expense reimbursement incurred during the three and nine months ended September 30, 2025 and 2024 (in thousands). Three Months Ended Nine Months Ended Consolidated statements of operations line item: September 30, 2025 September 30, 2024 September 30, 2025 September 30, 2024 Non-investment related expenses (1) $ 1,544 $ 1,636 $ 4,687 $ 4,936 Investment related expenses 256 194 551 395 Transaction related expenses 174 22 543 396 Expense reimbursements to Manager or its affiliates $ 1,974 $ 1,852 $ 5,781 $ 5,727 (1) For the three and nine months ended September 30, 2024, the Manager agreed to waive its right to receive expense reimbursements of $0.3 million and $0.9 million, respectively, pursuant to the MITT Management Agreement Amendment executed in connection with the WMC acquisition. As of September 30, 2025 and December 31, 2024, we recorded a reimbursement payable to our Manager or its affiliates of $2.5 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 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 equity incentive plan approved in 2020 (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). Since inception of the 2025 Equity Incentive Plan and through September 30, 2025, we have granted an aggregate 13,383 shares of restricted common stock and 411 dividend equivalent units to its independent directors, all of which have vested. As of September 30, 2025, there were 1,006,987 remaining shares available to be issued under the 2025 Equity Incentive Plan. As of September 30, 2025, we have 12,981 restricted stock units and 2,460 associated dividend equivalent units outstanding, all of which are fully vested and held by one of our independent directors. These units will be settled on a one-for-one basis in shares of our common stock upon the director's separation from service with us. Unfunded commitments See Note 12 of the "Notes to Consolidated Financial Statements (unaudited)" for detail on our commitments as of September 30, 2025. Off-balance sheet arrangements Our investments in debt and equity of affiliates primarily consist of real estate securities and our interest in AG Arc. Investments in debt and equity of affiliates are accounted for using the equity method of accounting. 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. See Note 10 to the "Notes to Consolidated Financial Statements (unaudited)" for a discussion of investments i n debt and equity of affiliates. 73 We record TBA purchases and sales on the trade date and present the purchase or receipt net of the corresponding payable or receivable until the settlement date of the transaction. Refer to Note 7 to the "Notes to Consolidated Financial Statements (unaudited)" for additional detail on TBAs as of September 30, 2025, if applicable. For additional information on our commitments as of September 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 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. These estimates are based, in part, on our judgment and assumptions regarding various economic conditions that we believe are reasonable based on facts and circumstances existing at the time of reporting. We believe that the estimates, judgments and assumptions utilized in the preparation of our consolidated financial statements are prudent and reasonable. Although our estimates contemplate conditions as of September 30, 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. Our critical accounting estimates are those which require assumptions to be made about matters that are highly uncertain and include (i), (iv), and (vi) above. A discussion of critical accounting policies and estimates is included in our Form 10-K. Our critical accounting policies and estimates have not materially changed since December 31, 2024. REIT Qualification We have elected to be treated as a REIT under Sections 856 through 859 of the Internal Revenue Code of 1986, as amended (the "Code"). Our qualification as a REIT depends upon our ability to meet on a continuing basis, through actual investment and operating results, various complex requirements under the Code relating to, among other things, the sources of our gross income, the composition and values of our assets, our distribution levels and the diversity of ownership of our shares. We believe that we are organized in conformity with the requirements for qualification and taxation as a REIT under the Code, and that our manner of operation enables us to meet the requirements for qualification and taxation as a REIT. We generally need to distribute at least 90% of our ordinary taxable income each year (subject to certain adjustments) to our stockholders in order to qualify as a REIT under the Code. Our ability to make distributions to our stockholders depends, in part, upon the performance of our investment portfolio. As a REIT, we generally are not subject to U.S. federal income tax on our REIT taxable income that we distribute currently to our stockholders. If we fail to qualify as a REIT in any taxable year and do not qualify for certain statutory relief provisions, we will be subject to U.S. federal income tax at regular corporate rates and may be precluded from qualifying as a REIT for the subsequent four taxable years following the year during which we lost our REIT qualification. Accordingly, our failure to qualify as a REIT could have a material adverse impact on our results of operations and our ability to pay distributions, if any, to our stockholders. 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. In addition, any income earned by a domestic taxable REIT subsidiary, or TRS, will be subject to corporate income taxation. Investment Company Act Exemption We conduct our business so as to maintain our exempt status under, and not to become regulated as an investment company for purposes of, the Investment Company Act. Under Section 3(a)(1)(A) of the Investment Company Act, a company is an investment company if it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities. Under Section 3(a)(1)(C) of the Investment Company Act, a company is deemed to be an investment company if it is engaged, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire "investment securities" having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis (the "40% Test"). "Investment 74 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). 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. Rather, through wholly-owned or majority-owned subsidiaries, we are primarily engaged in the non-investment company businesses of these subsidiaries, namely the real estate finance business of purchasing or otherwise acquiring mortgage loans and other interests in real estate. We currently have several subsidiaries that rely on the exclusion provided by Section 3(c)(7) of the Investment Company Act, each a "3(c)(7) subsidiary." In addition, we currently have several subsidiaries that rely on the exclusion provided by Section 3(c)(5)(C) of the Investment Company Act, each a "3(c)(5)(C) subsidiary." While investments in 3(c)(7) subsidiaries are considered investment securities for the purposes of the 40% Test, investments in 3(c)(5)(C) subsidiaries are not considered investment securities for the purposes of the 40% Test, nor are investments in subsidiaries that rely on the exclusion provided by Section 3(a)(1)(C). Therefore, our investments in 3(c)(7) subsidiaries and other investment securities cannot exceed 40% of the value of our total assets (excluding U.S. government securities and cash) on an unconsolidated basis. Section 3(c)(5)(C) of the Investment Company Act exempts from the definition of "investment company" entities primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate. The 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 3(c)(5)(C) 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. We closely monitor our holdings to ensure continuing and ongoing compliance with these tests. If we failed to comply with the 40% Test or another exemption under the Investment Company Act and became regulated as an investment company, our ability to, among other things, use leverage would be substantially reduced and, as a result, we would be unable to conduct our business as described in this report. 75