What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-04-29 compared with 2021-10-29 · 944 added, 1293 removed, 825 unchanged (73% of the section changed)

6 unchanged sentences

statements that involve risks and uncertainties.

Forward-looking statements

are those that are not historical in nature.

Forward-looking statements are

those that are not historical in nature.

As a result of

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certain of our structured Agency RMBS through short-term borrowings

structured as repurchase agreements.

structured as repurchase

PT RMBS and structured

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Capital Raising Activities

On January 23, 2020, we entered into an equity distribution agreement (the “January

2020 Equity Distribution Agreement”) with

three sales agents pursuant to which we could offer and sell, from time to time, up to an aggregate amount

of $200,000,000 of shares

of our common stock in transactions that were deemed to be “at the market”

offerings and privately negotiated transactions.

a total of 3,170,727 shares under the January 2020 Equity Distribution Agreement for aggregate

gross proceeds of $19.8 million, and

net proceeds of approximately $19.4 million, after commissions and fees,

prior to its termination in August 2020.

On August 4, 2020, we entered into an equity distribution agreement (the “August

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Equity Distribution Agreement”) with four

sales agents pursuant to which we may offer and sell, from time to time, up to an aggregate

sales agents pursuant to which we could offer and sell, from time to time, up to an aggregate

amount of $250,000,000 of shares of our

common stock in transactions that are deemed to be “at the market” offerings and privately

common stock in transactions that were deemed to be “at the market” offerings and privately

negotiated transactions.

September 30, 2021, we issued a total of 41,568,338 shares under the June 2021 Equity Distribution

Agreement for aggregate gross

proceeds of approximately $211.0 million, and net proceeds of approximately $207.5 million, after commissions and fees.

to September 30, 2021 and through October 28, 2021, we issued a total of 7,838,998

shares under the June 2021 Equity Distribution

Agreement for aggregate gross proceeds of approximately $39.0 million, and net proceeds

of approximately $38.4 million, after

commissions and fees.

We issued a total

of 49,407,336 shares under the June 2021 Equity Distribution Agreement for aggregate

gross proceeds of approximately $250.0

million, and net proceeds of approximately $246.2 million, after commissions

and fees, prior to its termination in October 2021.

On October 29, 2021,

we entered into an equity distribution agreement (the “October 2021

Equity Distribution Agreement”) with

four sales agents pursuant to which we may offer and sell, from time to time, up to an aggregate

amount of $250,000,000 of shares of

our common stock in transactions that are deemed to be “at the market” offerings and privately negotiated

transactions.

Through March

31, 2022, we issued a total of 15,835,700 shares under the October 2021 Equity

Distribution Agreement for aggregate gross proceeds

of approximately $78.3 million, and net proceeds of approximately $77.0 million,

after commissions and fees.

Stock Repurchase Agreement

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additional 4,522,822 shares of the Company’s common stock.

Coupled with the 783,757

shares remaining from the original 2,000,000

Coupled with the 783,757 shares

remaining from the original 2,000,000

share authorization, the increased authorization brought the total authorization

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Company’s then outstanding share count.

This stock repurchase program has no termination

From the inception of the stock repurchase program through September 30, 2021, the

Company repurchased a total of 5,685,511

On December 9, 2021, the Board of Directors

approved an increase in the number of shares

of the Company’s common stock available in the stock repurchase program for up

to an additional 16,861,994 shares, bringing the

remaining authorization under the stock repurchase program to 17,699,305 shares, representing

approximately 10% of the Company’s

then outstanding shares of common stock.

This stock repurchase program has no

termination date.

From the inception of the stock repurchase program through March 31, 2022, the Company

repurchased a total of 5,685,511

shares at an aggregate cost of approximately $40.4

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The Company did not repurchase any shares of its common stock during the

nine and three months ended September 30, 2021.

The remaining authorization under the repurchase program as of September 30, 2021 was

837,311 shares.

three months ended March 31, 2022 or the year

ended December 31, 2021.

Factors that Affect our Results of Operations and Financial Condition

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government, including the presidential administration,

the Fed, the Federal Housing Financing

Agency (the “FHFA”), Federal Housing Administration (the “FHA”), the Federal Open Market Committee (the “FOMC”)

the Federal Reserve (the “Fed”), the Federal

Housing Financing Agency (the “FHFA”), Federal Housing Administration (the “FHA”), the Federal Open

Market Committee

(the “FOMC”) and the U.S.

prepayment rates on mortgages underlying our Agency RMBS and credit

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the market value of our investments

increases in our cost of funds resulting from increases in the Fed Funds rate that

are controlled by the Fed and are likely to

continue to occur in 2022;

the requirements to qualify as a REIT and the requirements to qualify for

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the Company’s

ended September

the Company’s

Company’s results

of operations

for the three

Income Summary

for the three

of net (loss)

ended September

$148.7 million,

for the three

$29.4 million,

The components

for the three

are presented

(in thousands)

Nine Months Ended September 30,

Three Months Ended, September 30,

Interest income

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Net interest income

(Losses) gains on RMBS and derivative contracts

Net portfolio (loss) income

Net (loss) income

GAAP and Non-GAAP Reconciliations

In addition to the results presented in accordance with GAAP,

our results of operations discussed below include certain

non-GAAP financial information, including “Net Earnings Excluding Realized and Unrealized Gains and Losses”, “Economic

Interest Expense” and “Economic Net Interest Income.”

Net Earnings Excluding Realized and Unrealized Gains and Losses

We have elected to account for our Agency RMBS under the fair value option.

Securities held under the fair value

option are recorded at estimated fair value, with changes in the fair value recorded as unrealized gains or losses through

the statements of operations.

In addition, we have not designated our derivative financial instruments used for hedging purposes as hedges for

accounting purposes, but rather hold them for economic hedging purposes.

Changes in fair value of these instruments are

presented in a separate line item in the Company’s statements of operations and are not included in interest expense.

such, for financial reporting purposes, interest expense and cost of funds are not impacted by the fluctuation in value of the

derivative instruments.

Presenting net earnings excluding realized and unrealized gains and losses allows management to:

(i) isolate the net

interest income and other expenses of the Company over time, free of all fair value adjustments and (ii) assess the

effectiveness of our funding and hedging strategies on our capital allocation decisions and our asset allocation performance.

Our funding and hedging strategies, capital allocation and asset selection are integral to our risk management strategy, and

therefore critical to the management of our portfolio.

We believe that the presentation of our net earnings excluding realized

and unrealized gains is useful to investors because it provides a means of comparing our results of operations to those of

our peers who have not elected the same accounting treatment.

Our presentation of net earnings excluding realized and

unrealized gains and losses may not be comparable to similarly-titled measures of other companies, who may use different

Losses on RMBS and derivative contracts

Net portfolio deficiency

Reconciliations

to the results

in accordance

with GAAP, our results

of operations

below include

certain non-GAAP

“Net Earnings

and Unrealized

Losses”, “Economic

and Unrealized

We have elected

value recorded

as unrealized

losses through

the statements

our derivative

hedging purposes

for accounting

hedging purposes.

are presented

in a separate

in the Company’s

of operations

for financial

cost of funds

are not impacted

by the fluctuation

the derivative

losses allows

the net interest

effectiveness

of our funding

hedging strategies

on our capital

asset allocation

strategy, and therefore

the management

of our portfolio.

the presentation

and unrealized

gains is useful

of operations

same accounting

Our presentation

not be comparable

to similarly-titled

other companies,

may use different

calculations.

As a result, net earnings excluding realized and unrealized gains and losses should not be considered as a

substitute for our GAAP net income (loss) as a measure of our financial performance or any measure of our liquidity under

The table below presents a reconciliation of our net income (loss) determined in accordance with GAAP and net

earnings excluding realized and unrealized gains and losses.

losses should

not be considered

of our financial

or any measure

of our liquidity

a reconciliation

income (loss)

in accordance

and net earnings

and unrealized

the Company’s

Company’s results

of operations

Net Earnings Excluding Realized and Unrealized Gains and Losses

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Three Months Ended

September 30, 2021

June 30, 2021

March 31, 2022

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March 31, 2021

Nine Months Ended

September 30, 2021

September 30, 2020

Includes realized and unrealized gains (losses) on RMBS and derivative financial

instruments, including net interest income or expense on

interest rate swaps

Economic Interest Expense and Economic Net Interest Income

We use derivative and other hedging instruments, specifically Eurodollar,

Fed Funds and Treasury Note (“T-Note”)

futures contracts, short positions in U.S.

Treasury securities, interest rate swaps and swaptions, to hedge a portion of the

interest rate risk on repurchase agreements in a rising rate environment.

We have not elected to designate our derivative holdings for hedge accounting treatment.

Changes in fair value of these

instruments are presented in a separate line item in our statements of operations and not included in interest expense.

such, for financial reporting purposes, interest expense and cost of funds are not impacted by the fluctuation in value of the

derivative instruments.

For the purpose of computing economic net interest income and ratios relating to cost of funds measures, GAAP

interest expense has been adjusted to reflect the realized and unrealized gains or losses on certain derivative instruments

the Company uses, specifically Eurodollar, Fed Funds and U.S.

Treasury futures, and interest rate swaps and swaptions,

that pertain to each period presented.

We believe that adjusting our interest expense for the periods presented by the gains

or losses on these derivative instruments would not accurately reflect our economic interest expense for these periods.

reason is that these derivative instruments may cover periods that extend into the future, not just the current period.

realized or unrealized gains or losses on the instruments reflect the change in market value of the instrument caused by

changes in underlying interest rates applicable to the term covered by the instrument, not just the current period.

period presented, we have combined the effects of the derivative financial instruments in place for the respective period with

the actual interest expense incurred on borrowings to reflect total economic interest expense for the applicable period.

Interest expense, including the effect of derivative instruments for the period, is referred to as economic interest expense.

Net interest income, when calculated to include the effect of derivative instruments for the period, is referred to as economic

net interest income.

This presentation includes gains or losses on all contracts in effect during the reporting period, covering

the current period as well as periods in the future.

The Company may invest in TBAs, which are forward contracts for the purchase or sale of Agency RMBS at a

predetermined price, face amount, issuer, coupon and stated maturity on an agreed-upon future date.

The specific Agency

RMBS to be delivered into the contract are not known until shortly before the settlement date.

We may choose, prior to

settlement, to move the settlement of these securities out to a later date by entering into a dollar roll transaction.

Agency RMBS purchased or sold for a forward settlement date are typically priced at a discount to equivalent securities

settling in the current month.

Consequently, forward purchases of Agency RMBS and dollar roll transactions represent a

form of off-balance sheet financing.

These TBAs are accounted for as derivatives and marked to market through the income

Gains or losses on TBAs are included with gains or losses on other derivative contracts and are not included in

interest income for purposes of the discussions below.

We believe that economic interest expense and economic net interest income provide meaningful information to

consider, in addition to the respective amounts prepared in accordance with GAAP.

The non-GAAP measures help

management to evaluate its financial position and performance without the effects of certain transactions and GAAP

adjustments that are not necessarily indicative of our current investment portfolio or operations.

The unrealized gains or

losses on derivative instruments presented in our statements of operations are not necessarily representative of the total

interest rate expense that we will ultimately realize.

This is because as interest rates move up or down in the future, the

gains or losses we ultimately realize, and which will affect our total interest rate expense in future periods, may differ from

the unrealized gains or losses recognized as of the reporting date.

Our presentation of the economic value of our hedging strategy has important limitations.

First, other market

participants may calculate economic interest expense and economic net interest income differently than the way we

calculate them.

Second, while we believe that the calculation of the economic value of our hedging strategy described

above helps to present our financial position and performance, it may be of limited usefulness as an analytical tool.

Therefore, the economic value of our investment strategy should not be viewed in isolation and is not a substitute for

interest expense and net interest income computed in accordance with GAAP.

The tables below present a reconciliation of the adjustments to interest expense shown for each period relative to our

derivative instruments, and the income statement line item, gains (losses) on derivative instruments, calculated in

accordance with GAAP for each quarter of 2021 to date and 2020.

Includes realized

and unrealized

gains (losses)

on RMBS and derivative

financial instruments,

including net

interest income

or expense on

Economic Interest

We use derivative

hedging instruments,

Eurodollar, Fed

T-Note futures

short positions

and swaptions,

of the interest

on repurchase

our derivative

hedge accounting

are presented

in a separate

in our statements

of operations

and not included

cost of funds

are not impacted

by the fluctuation

the derivative

For the purpose

ratios relating

funds measures,

GAAP interest

certain derivative

uses, specifically

Eurodollar, Fed

and swaptions,

to each period

these periods.

is that these

current period.

or unrealized

the instruments

of the instrument

rates applicable

the instrument,

we have combined

of the derivative

expense incurred

on borrowings

total economic

the applicable

expense, including

of derivative

for the period,

to as economic

interest expense.

interest income,

when calculated

of derivative

for the period,

to as economic

all contracts

in effect during

the reporting

period, covering

in the future.

forward contracts

for the purchase

at a predetermined

issuer, coupon

an agreed-upon

to be delivered

are not known

until shortly

choose, prior

to settlement,

into a dollar

roll transaction.

RMBS purchased

are typically

to equivalent

in the current

Consequently,

roll transactions

sheet financing.

are accounted

for as derivatives

market through

Gains or losses

the discussions

that economic

income provide

to consider, in

to the respective

amounts prepared

in accordance

measures help

its financial

certain transactions

not necessarily

current investment

or operations.

The unrealized

in our statements

are not necessarily

representative

in the future,

we ultimately

total interest

losses recognized

Our presentation

of the economic

hedging strategy

has important

market participants

income differently

way we calculate

the calculation

of the economic

our financial

as an analytical

our investment

strategy should

income computed

in accordance

below present

a reconciliation

of the adjustments

expense shown

period relative

to our derivative

and the income

gains (losses)

on derivative

in accordance

Gains (Losses) on Derivative Instruments

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Three Months Ended

September 30, 2021

June 30, 2021

March 31, 2022

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March 31, 2021

Nine Months Ended

September 30, 2021

September 30, 2020

Economic Interest Expense and Economic Net Interest Income

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Three Months Ended

September 30, 2021

June 30, 2021

March 31, 2022

3 unchanged sentences

March 31, 2021

Nine Months Ended

September 30, 2021

September 30, 2020

Reflects the effect of derivative instrument hedges for only the period

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Net Interest Income

ended September

$39.2 million

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income, consisting

$23.0 million

million increase

average RMBS,

103 basis point

("bps") decrease

$18.0 million

84 bps decrease

in the average

cost of funds,

million increase

On an economic

$40.6 million,

respectively, resulting

income, respectively.

ended September

$32.6 million

of net interest

income, consisting

offset by $1.9

For the three

$25.2 million

of net interest

income, consisting

offset by $2.0

million increase

offset by the

million increase

52 bps decrease

in the average

cost of funds,

million increase

average assets

and borrowings

2022 compared

of our capital

raising activity

ended December

On an economic

for the three

million, respectively,

$20.9 million

respectively, resulting

in $31.4 million

income, respectively.

economic interest

expense during

positive performance

of our hedging

below provide

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expense, cost

economic basis.

($ in thousands)

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Three Months Ended

September 30, 2021

June 30, 2021

March 31, 2022

3 unchanged sentences

March 31, 2021

Nine Months Ended

September 30, 2021

September 30, 2020

($ in thousands)

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Three Months Ended

September 30, 2021

June 30, 2021

March 31, 2022

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March 31, 2021

Nine Months Ended

September 30, 2021

September 30, 2020

Portfolio yields and costs of borrowings presented in the tables above and the

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Economic interest expense and economic net interest income

presented in the table above and the tables on page 31 includes the effect

presented in the table above and the tables on page 32 include the effect

of our derivative instrument hedges for only the periods presented.

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$41.9 million

respectively.

RMBS holdings

respectively.

on our portfolio

2020, respectively.

a $0.1 million

to the $1,284.9

million increase

offset by the

103 bps decrease

average RMBS.

$27.2 million,

respectively.

RMBS holdings

million, respectively.

2022 and 2021,

respectively.

on our portfolio

for the three

2021, respectively.

ended September

a $6.9 million

For the three

million increase

offset by the

52 bps decrease

average RMBS.

combined with

million increase

below presents

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of structured

for each quarter

($ in thousands)

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Three Months Ended

September 30, 2021

June 30, 2021

March 31, 2022

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March 31, 2021

Nine Months Ended

September 30, 2021

September 30, 2020

Interest Expense and the Cost of Funds

We had average

$3,116.6 million

the nine months

ended September

respectively.

ended September

for the comparable

million decrease

84 bps decrease

in the average

cost of funds,

offset by the

million increase

ended September

$40.6 million

respectively.

in the average

cost of funds

We had average

total interest

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cost of funds

respectively.

in the average

cost of funds

and a $1,636.3

to the increase

million increase

ended September

for the three

2021, respectively.

in the average

cost of funds

ended September

economic cost

for the three

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directly affect

ended September

cost of funds

economic cost

average one-month

average six-month

ended September

term to maturity

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Three Months Ended

September 30, 2021

June 30, 2021

March 31, 2022

3 unchanged sentences

March 31, 2021

Nine Months Ended

September 30, 2021

September 30, 2020

Average GAAP Cost of Funds

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Three Months Ended

September 30, 2021

June 30, 2021

March 31, 2022

3 unchanged sentences

March 31, 2021

Nine Months Ended

September 30, 2021

September 30, 2020

Gains or Losses

below presents

for the three

(in thousands)

Nine Months Ended September 30,

Three Months Ended September 30,

Realized (losses) gains on sales of RMBS

Unrealized (losses) gains on RMBS

Total (losses)

gains on RMBS

Gains (losses) on interest rate futures

Gains (losses) on interest rate swaps

Gains (losses) on payer swaptions (short positions)

Gains (losses) on payer swaptions (long positions)

Gains (losses) on interest rate floors

Gains (losses) on TBA securities (short positions)

(Losses) gains on TBA securities (long positions)

(Losses) gains on U.S.

Treasury securities (short

Total (losses)

gains from derivative instruments

Realized losses on sales of RMBS

Unrealized losses on RMBS

Total losses on

Gains on interest rate futures

Gains on interest rate swaps

Losses on payer swaptions (short positions)

Gains on payer swaptions (long positions)

Losses on interest rate caps

Gains on interest rate floors

Gains (losses) on TBA securities (long positions)

Gains on TBA securities (short positions)

yield on those

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of our asset/liability

respectively, from

Most of these

half of March

cash and liquidity

risk associated

market turmoil

brought about

ended September

received proceeds

$988.5 million,

respectively, from

and unrealized

part by changes

1 unchanged sentence

in our portfolio.

The unrealized

of prepayments

the underlying

premiums increase.

negative impact

the reporting

2 unchanged sentences

Mortgage Rate

September 30, 2021

June 30, 2021

March 31, 2022

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15 Year Fixed

Rate Mortgage Rates are obtained from Freddie Mac’s

Primary Mortgage Market Survey.

Rate Mortgage Rates are obtained from Freddie Mac’s Primary

Mortgage Market Survey.

Historical LIBOR is obtained from the Intercontinental Exchange Benchmark

Administration Ltd.

and three months

ended September

the Company’s

total operating

expenses were

approximately

$10.9 million

and $3.7 million,

respectively, compared

to approximately

and $2.8 million,

respectively, for

and three months

ended September

Total operating expenses

were approximately

respectively.

below presents

ended September

(in thousands)

Nine Months Ended September 30,

Three Months Ended September 30,

Management fees

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Audit, legal and other professional fees

Direct REIT operating expenses

Other administrative

Other direct REIT operating expenses

Other expenses

Total expenses

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One-twelfth of 1.00% of the Company’s month end equity that is greater than $500 million.

The Company is obligated to reimburse the Manager for any direct expenses incurred

on its behalf and to pay the Manager the

Company’s pro rata portion of certain overhead costs set forth in the management

Should the Company terminate the

management agreement without cause, it will pay the Manager a termination

fee equal to three times the average annual management

fee, as defined in the management agreement, before or on the last day of the

term of the agreement.

Should the Company terminate the management agreement without cause,

it will pay the Manager a termination fee equal to three

times the average annual management fee, as defined in the management

agreement, before or on the last day of the term of the

The Company is obligated to reimburse the Manager for any direct expenses

incurred on its behalf and to pay the Manager the

Company’s pro rata portion of certain overhead costs set forth in the management agreement.

On April 1, 2022, pursuant to the third amendment to the management agreement

entered into on November 16, 2021, the

Manager began providing certain repurchase agreement trading, clearing and

administrative services to the Company that had been

previously provided by AVM, L.P.

under an agreement terminated on March 31, 2022.

In consideration for such services, the Company

will pay the following fees to the Manager:

A daily fee equal to the outstanding principal balance of repurchase agreement funding

in place as of the end of such day

multiplied by 1.5 basis points for the amount of aggregate outstanding principal balance

less than or equal to $5 billion, and

multiplied by 1.0 basis points for any amount of aggregate outstanding principal

balance in excess of $5 billion, and

A fee for the clearing and operational services provided by personnel

of the Manager equal to $10,000 per month.

The following table summarizes the management fee and overhead allocation

3 unchanged sentences

Three Months Ended

September 30, 2021

June 30, 2021

March 31, 2022

3 unchanged sentences

March 31, 2021

Nine Months Ended

September 30, 2021

September 30, 2020

Mortgage-Backed Securities

As of September

at fair value

average coupon

ended September

million compared

ended September

respectively.

3 unchanged sentences

on our structured

sub-portfolios,

on an annualized

1 unchanged sentence

periods presented.

CPR is a method

of expressing

the prepayment

mortgage pool

that a constant

of the remaining

month or year.

Specifically, the

the three month

Specifically,

below represents

month prepayment

in the respective

asset category.

Three Months Ended

2 unchanged sentences

Portfolio (%)

September 30, 2021

June 30, 2021

March 31, 2022

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Asset Category

September 30, 2021

March 31, 2022

Fixed Rate RMBS

Total Mortgage-backed Pass-through

Interest-Only Securities

Inverse Interest-Only Securities

Total Structured RMBS

Total Mortgage Assets

1 unchanged sentence

Fixed Rate RMBS

Fixed Rate CMOs

Total Mortgage-backed Pass-through

Interest-Only Securities

Total Structured RMBS

Inverse Interest-Only Securities

Total Mortgage Assets

($ in thousands)

September 30, 2021

March 31, 2022

December 31, 2021

4 unchanged sentences

Total Portfolio

September 30, 2021

March 31, 2022

December 31, 2021

9 unchanged sentences

of the RMBS in the Company’s investment portfolio

at September 30, 2021.

at March 31, 2022.

An effective duration of 3.390 indicates that an interest rate increase

9 unchanged sentences

assets acquired

ended September

purchased during

settled after

($ in thousands)

1 unchanged sentence

Structured RMBS

As of September

we had established

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provide borrowing

As of September

we had obligations

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our outstanding

with a weighted

average remaining

the repurchase

as of September

with an estimated

accrued interest,

of approximately

of 344 months,

counterparties

and cash pledged

to counterparties

of approximately

$113.6 million.

Through April

able to maintain

1 unchanged sentence

with comparable

with maturities

through September

The table below presents information about our period end,

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Three Months Ended

September 30, 2021

June 30, 2021

March 31, 2022

5 unchanged sentences

ended March 31, 2022 reflects the disposal of RMBS pledged as

collateral in order to maintain cash and liquidity in response to the dislocations in the financial

and mortgage markets resulting from the

economic impacts of COVID-19.

During the quarter ended March 31, 2022, the Company’s investment

9 unchanged sentences

pay dividends.

Our principal

under repurchase

Our borrowing

capacity will

of our interest

earning assets

unused sources

to sell encumbered

balance sheet

also generates

on an on-going

3 unchanged sentences

of additional

size and nature

of our existing

RMBS portfolio,

4 unchanged sentences

qualification

liquidity from

debt securities

private placements.

cash balances,

our encumbered

on an on-going

basis through

RMBS portfolio.

PT RMBS portfolio

consists entirely

of government

having difficulty

difficulty converting

to cash should

1 unchanged sentence

Our structured

RMBS portfolio

also consists

of governmental

agency securities,

1 unchanged sentence

with comparable

bid / ask spreads

However, we anticipate

that we would

liquidate such

readily, even

in distressed

markets, although

such securities

readily, even in

such securities

could be sold

stable market.

To enhance our liquidity

even further,

of our structured

further, we may

our structured

lieu of acquiring

1 unchanged sentence

the likelihood

to sell assets

in a distressed

costs typically

7 unchanged sentences

move in price

offset the derivative

related margin

in sufficient

of the levered

2 unchanged sentences

the portfolio

have no stated

at our option

counterparty.

once a definitive

are our ability

to (i) borrow

Our borrowing

capacity will

of our interest

earning assets

stated expiration,

the counterparty.

However, once

under a master

22 unchanged sentences

and make margin

Typically, but not

parties agree

Typically, but not always,

so as to avoid

3 unchanged sentences

on an individual

the nine months

ended September

as of September

average haircut

approximately

of our collateral.

we do acquire

time to time.

our collateral.

TBAs represent

sheet financing

and are accounted

for as derivative

4 to our Financial

10-Q for additional

2 unchanged sentences

future months

make physical

or make physical

of the underlying

to take physical

settle a long

our liquidity

physical delivery

financing sources

position could

4 unchanged sentences

by our Master

(“MSFTAs”), which

may establish

margin levels

Such provisions

on the notional

6 unchanged sentences

provide additional

business day.

the underlying

19 unchanged sentences

RMBS in order

our cash levels,

but generally

The following

table summarizes

on our liquidity

for repurchase

(in thousands)

Obligations Maturing

Three to Five

Repurchase agreements

Interest expense on repurchase agreements

Interest expense

on repurchase

agreements is

based on current

interest rates

as of September

the remaining

term of the liabilities

our activities

1 unchanged sentence

current operations

As of September

and cash equivalents

$497.8 million

from principal

and had average

ended September

million during

below, we may

or debt securities

Stockholders’

On January 23, 2020, we entered into the January 2020 Equity Distribution Agreement

with three sales agents pursuant to which

we could offer and sell, from time to time, up to an aggregate amount of $200,000,000 of

shares of our common stock in transactions

that were deemed to be “at the market” offerings and privately negotiated transactions.

We issued a total of 3,170,727 shares under

the January 2020 Equity Distribution Agreement for aggregate gross proceeds of $19.8

million, and net proceeds of approximately

$19.4 million, after commissions and fees, prior to its termination in August

On August 4, 2020, we entered into the August 2020 Equity Distribution Agreement with

22 unchanged sentences

2021, with proceeds to us of approximately $45.2 million, net of offering expenses.

On March 2, 2021, we entered into the “March 2021 Underwriting Agreement with J.P.

On March 2, 2021, we entered into the March 2021 Underwriting Agreement with

Morgan, relating to the offer and sale of

11 unchanged sentences

million, net of offering expenses payable.

On June 22, 2021, we entered into an equity distribution agreement (the “June 2021

Equity Distribution Agreement”) with four

sales agents pursuant to which we may offer and sell, from time to time, up to an aggregate

amount of $250,000,000 of shares of our

common stock in transactions that are deemed to be “at the market” offerings and privately

negotiated transactions.

September 30, 2021, we issued a total of 41,568,338 shares under the June 2021 Equity Distribution

Agreement for aggregate gross

proceeds of approximately $211.0 million, and net proceeds of approximately $207.5 million, after commissions and fees.

to September 30, 2021 and through October 29, 2021, we issued a total of 7,838,998

shares under the June 2021 Equity Distribution

Agreement for aggregate gross proceeds of approximately $39.0 million, and net proceeds

of approximately $38.4 million, after

commissions and fees.

On June 22, 2021, we entered into the June 2021 Equity Distribution Agreement with four

sales agents pursuant to which we may

could offer and sell, from time to time, up to an aggregate amount of $250,000,000 of

shares of our common stock in transactions that

were deemed to be “at the market” offerings and privately negotiated transactions.

We issued a total

of 49,407,336 shares under the

June 2021 Equity Distribution Agreement for aggregate gross proceeds of approximately

$250.0 million, and net proceeds of

approximately $246.2 million, after commissions and fees, prior to its termination in October

On October 29, 2021, we entered into the October 2021 Equity Distribution

Agreement with four sales agents pursuant to which

we may offer and sell, from time to time, up to an aggregate amount of $250,000,000 of shares

of our common stock in transactions

that are deemed to be “at the market” offerings and privately negotiated transactions.

March 31, 2022, we issued a total of

15,835,700 shares under the October 2021 Equity Distribution Agreement for aggregate

gross proceeds of approximately $78.3 million,

and net proceeds of approximately $77.0 million, after commissions and fees.

Economic Summary

The effects of

COVID-19 continued

activity during

the third quarter

of 2021, particularly

first emerged

in earnest during

Daily new infections

from the Delta

rapidly during

peak in early

September and

have been slowly

falling since.

COVID related

the new cases

the unvaccinated.

various measures

by governments

and corporations

to mandate employees

receive vaccinations.

The net effect

spreading virus

and a reluctance

get vaccinated

has been subdued

third quarter

This is particularly

true among workers

such as those

in the leisure

and hospitality

forms of pandemic

related supplemental

ended in early

September, so job

in the fourth

In the interim,

the combination

of a reluctance

many individuals,

sufficient income

via unemployment

in both robust

and shortages

many industries.

a demand/supply

favor of demand

many commodities

and parts, the

led to severe

supply shortages

supply imbalances

for goods and

for both, driving

multi-decade highs.

The Fed chairman,

(“FOMC”) have

temporary and

will ease once

fade and workers

Yet, as implied by

market pricing

Treasury securities

various market

participants,

transitory, and

have admitted

inflation has

remained high

they had anticipated.

Over the course

into the fourth,

economy during

quarter continued

28, 2021, the

advanced read

domestic product

approximately

the beginning

of the quarter.

has decelerated

levels suppressed.

Over the course

of the balance

it should become

apparent whether

to labor, are transitory

that essentially

have ended and

the new cases

question about

the transitory

nature of inflation.

market remains

robust as evidenced

of new and existing

home construction.

However, as home

the last year

new home construction,

for the Company’s

as prepayments

related to housing

Congress passed

the CARES Act

the pandemic’s

of 2021and followed

over the ensuing

However, as certain

July of 2021,

there appeared

for additional

for the economy

deal with the

pandemic that

set in, particularly

over the Christmas

mentioned above,

passed an additional

package in late

again in March

and continues

as much support

to the markets

it can within

the constraints

of its mandate.

third quarter

a new monetary

policy framework

focused on average

rate targeting

the Fed Funds

rate to remain

quite low, even

to temporarily

2% target level.

Further, the Fed

has indicated

look past the

markets, should

they be present

a significant

policy framework,

on the unemployment

rate as a key

could steepen

curve as short-term

for a considerable

rise given the

Fed’s intention

to let inflation

in the future

as the economy

Treasury rates

pattern precisely

during the first

but have since

reversed since

the second quarter

Interest Rates

Interest rates

curve and U.S.

little changed

third quarter

notable development

rates complex

was the slight

flattening of

30-year points

as the market

asset purchases

in the fourth

to the Fed funds

rate in either

or early 2023.

above, the Delta

the COVID virus

has dominated

activity, both during

the third quarter

2021 and generally

However, the FOMC

chairman have

looked through

see the impact

At the conclusion

of the September

FOMC meeting,

the Fed chairman

that the economy

had made “substantial

further progress”

towards achieving

price stability

and full employment.

the Fed appeared

close to commencing

More specifically,

the Fed chairman

indicated they

asset purchases

and that they

mid next year.

released their

economic projections,

or “Dot Plot”

as it is known,

at the conclusion

of the meeting

the case with

indicated FOMC

members anticipated

the Fed Funds

and by a larger

FOMC members,

Plot released

September, expect

at least once

This surprised

and the market

rates quickly

reflect these

expectations.

As the fourth

have continued

market pricing

reflect additional

the Fed Funds

higher levels

challenge the

Fed’s assertion

prove transitory,

longer maturity

rates have moved

higher so far

fourth quarter.

of the 10-year

The Agency RMBS

for the Agency

for the third

a modest 0.01%,

generally in-line

asset classes.

return to comparable

duration U.S.

Treasuries and

the Agency RMBS

sub-index was

0.1% for both

for the quarter.

sector, higher coupon

coupons, specifically

the coupon currently

in widespread

Total returns for the

third quarter

respectively.

were 0.6% and

0.5%, respectively.

and fifteen-year

both returned

above, at the

September FOMC

chairman made

it quite clear

begin to taper

purchases this

the $40 billion

per month purchases

Given the length

been supporting

banks that are

deposits that

the Agency RMBS

prior to this

the Fed routinely

been the 2.0%

and 2.5% coupons

predominantly.

underperformance

period whereby

the Fed migrated

from reluctantly

acknowledging

policy regime

pandemic emerged

first quarter

a more aggressive

The Fed announced

simultaneously

The acceleration

emerged during

and has continued

to do so into

the fourth quarter.

The second driver

of Agency RMBS

third quarter

With interest

rates relatively

steady during

the third quarter

such a prolonged

period of low

rates prepayment

speeds on higher

coupon, premium

priced securities

were expected

to eventually

finally happening,

by the August

and September

reports, released

respectively.

have moved higher

the fourth quarter,

quarter, market

trend to continue,

in the performance

of these coupons

second quarter

expenditures,

highest levels

related lock-downs

in particular

global inflationary

that may have

late February

2022, western

nations began

progressively

severe sanctions

These sanctions,

of many commodities.

global supplier

of many commodities

China, authorities

imposed lock-downs

to the closure

of many manufacturing

further exacerbating

in particular,

The unemployment

the pre-pandemic

lows, unemployment

lowest levels

growing rapidly,

rate of inflation.

and most market

participants,

to anticipate

that inflation,

energy inflation,

may even accelerate

of life cannot

price pressures

remain elevated

as affordability

to deteriorate

due to higher

inflated home

sum, inflation

and not likely

in the near-term.

Fed’s anticipated

rate volatility

very elevated

pandemic first

of the forces

the uncertainty

COVID related

and the uncertain

these forces,

that volatility

very elevated

forces subside.

the remainder

of 2022 hinges

and the impact

these factors

and the unemployment

As the outlook

for inflation

changed materially

to the upside

policy by the

2022, interest

and the curve

first quarter

Note increased

basis points,

on the 5-year

Note increased

and the yield

on the 10-year

Note increased

by 82.8 basis

80 basis points.

2022 the yield

curve actually

by approximately

basis points,

for the re-steepening

was the release

the Fed’s January

which strongly

Fed may actually

revealed that

Funds futures

market, anticipates

and 250 basis

and the pending

the Fed’s Agency

RMBS portfolio,

potential for

sales in addition

to the prepayment

related run-off,

in poor returns

for the sector.

poor performance

has continued

second quarter

these factors

is transitioning

from a prolonged

from not only

daily purchases

- $40 billion

the reinvestment

of all paydowns

existing holdings

bank community

growth resulting

Going forward

only purchasing

their monthly

and eventually

removes reserves

for the first

2022 was -5.0%

and the excess

return versus

Longer duration/lower

coupon mortgages

underperformed

higher coupon/lower

underperformed

15-year maturities

underperformed

higher coupons.

The same pattern

excess returns

versus comparable

has also continued

second quarter

rates continue

Recent Legislative

and Regulatory

The Fed conducted

overnight repo

address disruptions

Treasury, Agency debt

MBS financing

July 2020 after

tamed volatile

funding costs

that had threatened

to cause disruption

taken a number

of other actions

of the impacts

of the COVID-19

March of 2020,

the Fed announced

Fed announced

a $700 billion

asset purchase

provide liquidity

Treasury and Agency

RMBS markets.

Fed Funds rate

to a range of

Specifically, the

Fed announced

that it would

at least $500

0.0% – 0.25%,

already lowered

by 50 bps earlier

in the month.

the Fed Funds

Powell announced

recent events

achieve maximum

FOMC continued

this commitment

at all subsequent

meetings through

to climb modestly

sufficient for

2% long term.

FOMC reiterated

with a strong

and inflation

2%, it expected

soon be appropriate

to the deterioration

in the markets

Treasuries, Agency

other mortgage

income markets

to the economic

crisis resulting

on the morning

of Monday, March

the Fed announced

amounts needed

smooth market

support smooth

market functioning.

market conditions

improved substantially.

Currently, the Fed is

substantially.

Through November

to purchasing

and $40 billion

RMBS each month.

Chairman Powell

have reiterated

their commitment

to this level

of asset purchases

meeting since

their meeting

2021 meeting,

the Fed generally

assessed that,

provided that

recovery remained

track, a gradual

tapering process

that concluded

be appropriate.

The Fed noted

to begin tapering

the next meeting,

tapering could

commence with

purchase calendars

either mid-November

has taken various

certain other

support mortgage

and to implement

various portions

of the Coronavirus

Security (“CARES”)

Treasuries and

its net asset

by early March

the Fed would

begin reducing

Treasuries and

month, phased

in over three

likely beginning

Act was passed

and signed into

COVID-19 relief

other things,

direct payments

to each American

Trump on March

steep decline

things, provided

each American

a year, increased

and health providers,

to businesses,

states and municipalities

municipalities

to the airline

24, 2020, President

signed an additional

into law that

an additional

to individuals,

small businesses,

and additional

testing efforts.

Various provisions

on evictions,

expanded unemployment

in July 2020,

2020), expanded

benefits (July

and a moratorium

1 unchanged sentence

2020, President

Executive Order

13945, directing

Trump issued Executive

the Department

of Health and

Human Services,

Disease Control

and Prevention

the Department

and Urban Development,

and Department

of the Treasury

to take measures

to temporarily

halt residential

evictions and

foreclosures,

and foreclosures,

through temporary

an additional

Appropriations

providing for

the CARES Act

well as additional

package provided

for, among other

things, direct

most Americans

$75,000 a year, extension

of unemployment

benefits through

March 14, 2021,

loans to qualified

rental assistance

and funding for

2021, the CDC

issued guidance

for extensions

guidance extending

eviction moratoriums

persons through

26, 2021, the

2021, the FHFA announced

that the foreclosure

the CARES Act

eviction moratorium

for real estate

owned by Fannie

FHFA subsequently

the foreclosure

Act for loans

and the eviction

Mae and Freddie

extended until

extended through

respectively.

July 31, 2021

of the eviction

through September

and other occupants

and noted the

expiration of

the foreclosure

on July 31, 2021.

On March 11, 2021,

the $1.9 trillion

American Rescue

2021 was signed

This stimulus

furthered the

Federal government’s

efforts to stabilize

the economy and

provide assistance

of the population

suffering from

economic effects

of the pandemic.

30, 2019, the

FHFA announced that

Mac were allowed

their capital

buffers to $25

and September

respectively.

2021 effectively

from initiating

a foreclosure

before January

most instances.

this limitation,

40% month-over-month

176% year-over-year,

respectively, although

below pre-pandemic

Trump administration

made statements

Mac and expectations

for the development

for comprehensive

housing finance

the FHFA announced

Mae and Freddie

increase their

capital buffers

to $25 billion

and $20 billion,

respectively, from

the prior limit

of $3 billion

the FHFA released

proposed rule

on a new regulatory

framework for

the GSEs which

seeks to implement

billion each.

could ultimately

and represents

FHFA released

new regulatory

both a risk-based

capital framework

minimum leverage

capital requirements.

requirements.

was published

in the federal

December 2020.

14, 2021, the

and the FHFA executed

letter agreements

GSEs to continue

to retain capital

including buffers,

as prescribed

executed letter

in the December

from conservatorship

conservatorship

material litigation

common equity

Tier 1 capital

the GSEs will

the FHFA’s regulatory

capital framework,

of its assets,

FHFA’s regulatory capital

(iii) higher-risk

single-family

mortgage acquisitions

will be restricted

(iv) the U.S.

Treasury and the

FHFA will establish

current levels,

the FHFA will

However, no definitive

have been released

or enacted with

conservatorship,

unwinding the

GSEs, or materially

June 23, 2021,

President Biden

FHFA and appointed

14, 2021, the

FHFA suspended

certain provisions

14, 2021, including

the enterprises'

cash windows,

lending, loans

characteristics,

homes and investment

The enterprises

will continue

to build capital

of the letter

Additionally, the

FHFA is reviewing

the enterprise

capital framework

further action

In 2017, policymakers

announced that

be replaced by

or legislation

the conservatorship,

or materially

the FHFA suspended

policy provisions

in the January

loans acquired

consideration,

risk characteristics

the FHFA published

a final rule,

2022, amending

the GSE capital

2020 by, among

other things,

a GSE’s adjusted

with a dynamic

a GSE’s stability

capital buffer,

the risk weight

the requirement

apply an overall

effectiveness

will be replaced

The directive

fact that banks

are uncomfortable

uncomfortable

of underlying

and the liability

to base levels

with submitting

ICE Benchmark

the ICE Benchmark

Administration,

1 unchanged sentence

as administrator

of USD LIBOR,

has confirmed

cease publication

two-month USD

settings immediately

following the

LIBOR publication

31, 2021, and

(ii) the overnight

and one, three,

LIBOR settings

following the

LIBOR publication

key regulatory

has announced

that it intends

Notwithstanding

this possible

a joint statement

by key regulatory

calls on banks

to cease entering

into new contracts

reference rate

The Alternative

Reference Rates

committee comprised

of large U.S.

as a reference

institutions,

replacing USD-LIBOR

with a new SOFR,

banks believe

the transition

certain, despite

the 2021 deadline.

based on U.S.

We will monitor

this new rate

become the new

for hedges and

interest rate

the emergence

as it appears

new benchmark

rate investments.

At this time,

however, no consensus

become accepted

accepted alternatives

at addressing

mostly becomes

2022, establishes

for the selection

of replacement

linked consumer

as the alternative

open-end products,

has determined

spread-adjusted

indices based

the one-month,

substantially

however, on a

spread-adjusted

of Representatives

“LIBOR Act”),

which provides

for a statutory

new benchmark

rate by operation

Act establishes

a safe harbor

from litigation

of or related

not be construed

any benchmark

on a prospective

discontinuance

to a replacement

receive payment

their performance

or to declare

the Trust Indenture

of any holder

of any indenture

the principal

of and interest

on such indenture

security shall

not be deemed

to be impaired

by application

States Senate

to the Committee

Urban Affairs.

continue until

as it appears

new benchmark

rate investments.

At this time,

however, no consensus

Effective January

1, 2021, Fannie

Mae, in alignment

extend the timeframe

Mac, extended

the timeframe

for its delinquent

buyout policy

for Single-Family

2 unchanged sentences

four consecutively

missed monthly

monthly payments

to twenty-four

consecutively

1 unchanged sentence

payments (i.e.,

24 months past

new timeframe

to outstanding

single-family

pools and newly

issued single-family

pools and was

reflected when

the fourth business

day in February

single-family

were released

RMBS investors,

1 unchanged sentence

loan is bought

out of a pool

loans, the removal

from the pool

pool of mortgage

The respective

GSEs currently

GSEs anticipated,

however, that

delinquent loans

will be repurchased

in most cases

before the 24-month

be repurchased

deadline under

one of the following

full, or where

lien is released

listed below.

a loan repurchased

1 unchanged sentence

under applicable

and servicing

requirements;

2 unchanged sentences

which generally

to be removed

from the MBS.

trial period,

the loan will

remain in the

the MBS until

a loan subject

sale or deed-in-lieu

of foreclosure;

1 unchanged sentence

to foreclosure.

Because of these

the GSEs currently

these exceptions,

believe based

2 unchanged sentences

on prepayment

more than half

of loans referred

to foreclosure

half of loans

are historically

referred within

six months of

affected depends

on delinquency

levels, borrower

response, and

to foreclosure

The scope and

of the actions

will ultimately

undertake are

evolve, especially

pandemic, President

administration

in the United

developments,

rates and prepayment

ways, including

Effects on our

or elimination

the following:

in or elimination

of the guarantee

fees increase)

us to change our

strategy altogether.

our investment

the elimination

of the guarantee

of Agency RMBS

to change our

focus on non-Agency

would require

us to significantly

on non-Agency

in turn would

to significantly

of the credit

our investments

Lower long-term

interest rates

can affect the

the refinancing

1 unchanged sentence

above), lower

long-term interest

rates can increase

of higher-coupon

This is because

investors typically

value of higher-coupon

place a premium

on assets with

market yields.

Although lower

long-term interest

rates may increase

term interest

in our portfolio,

be able to invest

similarly-yielding

funds in similarly-yielding

If prepayment

levels increase,

of our Agency

RMBS affected

4 unchanged sentences

investor would

receive above-market

returns (assuming

asset is higher

on the prepaid

market yields).

Also, prepayment

to be reinvested

in similar-yielding

high interest

more susceptible

to prepayment

those mortgages

are most likely

a lower rate.

IOs and IIOs,

however, may be

most sensitive

payments, the

values of IOs

entirely dependent

balance on the

or IIO receives

on the existence

of a principal

the underlying

If the principal

eliminated due

to prepayment,

IIOs essentially

is eliminated

due to prepayment,

become worthless.

Although increased

rates can negatively

affect the value

effect on POs.

bonds, meaning

they are purchased

at a discount

value and have

interest rate

on the discount

of the underlying

loan, an increase

reduce the effective

POs and accelerate

earned on those

assets, which

effective term

and accelerate

those assets,

Higher long-term

rates can also

affect the value

of our Agency

rates available

This tends to

cause prepayment

to cause prepayment

expected average

1 unchanged sentence

As the expected

of the mortgage

higher discount

value of Agency

RMBS declines.

uses to hedge

1 unchanged sentence

rate futures,

swaps and swaptions,

extent we use

such instruments

not adequately

declines, and

therefore may

use such instruments

and therefore

may negatively

we use interest

only securities

in our portfolio.

expected average

life of these

causing generally

positive price

as the number

mortgages remain

interest only

flows increase

the underlying

remain outstanding.

only securities

hedge instruments

for pass-through

above, the Agency

began to experience

to experience

severe dislocations

2020 as a result

the economic,

market turmoil

brought about

2020, the Fed

announced that

purchase Agency

RMBS and U.S.

Treasuries in

the amounts needed

smooth market

Fed announced

that it would

in the amounts

support smooth

market functioning,

which largely

the Agency RMBS

it reaffirmed

at all subsequent

Fed meetings.

At the September

Fed generally

assessed that,

provided that

recovery remained

track, a gradual

concluded around

be appropriate.

The Fed noted

that if a decision

tapering purchases

the next meeting,

could commence

with the monthly

calendars beginning

or mid-December.

the Fed modifies,

reduces or suspends

its purchases

our investment

portfolio could

be negatively

the moratoriums

in March 2022

and announced

plans to reduce

The Fed’s planned

balance sheet

could negatively

on foreclosures

potential defaults

and evictions

delay potential

on loans that

would otherwise

be bought out

of Agency MBS

pools as described

on the ultimate

of the foreclosures,

out of Agency

of the foreclosure

or evictions,

if it occurs,

may be removed

pool into which

they were securitized.

were securitized.

to occur, it would

have the effect

effect of delaying

on the Company’s

3 unchanged sentences

asset in question.

base our investment

on risk management

interest rate

volatile interest

rate environment

we may allocate

to structured

We believe these

to changes in

interest rates

asset classes.

interest rates

in IOs and IIOs,

which typically

different sensitivities

to changes in

interest rates

than PT RMBS,

We may attempt

have different

sensitivities

term interest

PT RMBS backed

by fixed-rate

Effects on our

our borrowing

portfolio and

our structured

of our structured

with principal

balances through

of short-term

agreement transactions.

debt are determined

term repurchase

transactions.

are determined

term interest

the Fed Funds

rate or LIBOR

would increase

rate markets.

typically increase

our borrowing

spread if there

is no corresponding

corresponding

on our assets.

be most prevalent

by fixed rate

mortgage loans

interest rate

on a fixed-rate

mortgage loan

though market

to our Agency

loans because

our net interest

margin against

interest rates,

in short-term

into interest

floating-rate

agreement debt

to fixed-rate

debt, or utilize

other hedging

such as Eurodollar,

Fed Funds and

debt to fixed-rate

utilize other

hedging instruments

Eurodollar, Fed

T-Note futures

rate swaptions.

Once again COVID-19

dominated economic

this quarter.

However, we may

be at a crossroads

as the effects

the Delta variant

be waning and

of people with

either a vaccination

Pandemic related

relief measures

such as supplemental

insurance payments

and foreclosure

are essentially

the combination

of all of these

lead to surging

quickly lessen

supply shortage

the stubbornly

high inflation

If these events

come to pass,

be positioned

has stated that

slowly remove

the considerable

accommodation

they have provided

via a tapering

asset purchases

and eventually

to the Fed Funds

not unfold and

goods and labor

likely continue

to suffer from

elevated levels

of inflation.

path of economic

less certain,

quite challenging

The performance

of the Agency

was very modest

0.0% and 0.1%

versus comparable

duration interest

rates and swaps.

for the sector

was generally

other sectors

towards higher

lower coupons

that comprise

recent production

and Fed purchases.

This has continued

into the fourth

quarter, in large

because the Fed

them to begin

purchases has

commence doing

so this year, likely

ending in mid-2022.

speeds, particularly

on high coupon

have moderated

and are likely

to do so even

so far in the

fourth quarter

and the typical

seasonal slow

winter months.

Critical Accounting Estimates

Our condensed financial statements are prepared in accordance with GAAP.

GAAP requires our management to make

some complex and subjective decisions and assessments.

Our most critical accounting estimates involve decisions and

assessments which could significantly affect reported assets, liabilities, revenues and expenses.

There have been no

changes to our critical accounting estimates as discussed in our annual report on Form 10-K for the year ended December

extremely volatile

unprecedented

policy accommodation

rapid removal

of the accommodation.

market pricing

in the futures

markets implies

rate to approximately

induced downturn

Fed’s monetary

unprecedented

fiscal stimulus

As the economy

rapidly, inflationary

were exacerbated

supply constraints,

of labor, resulting

further stimulated

induced shutdowns

supply constraints,

another source

of inflationary

2022 unfolds,

have intensified

their accommodation

may even begin

sales of U.S.

For the Company,

rise materially

possibly into

the Company’s

fear possible

sales of Agency

first quarter

these securities

underperformed

Company’s shareholders

in the residential

housing market

However, as the

Company’s Agency

at discounts,

current market

is challenging

for the Company’s

and all Agency

levered investors.

To counter these challenging

market conditions,

to take steps

impact through

asset selection

and the lower

use of leverage.

The Company’s

buy-back program

shares, which

to book value

at a discount

to the Company’s

Our condensed

in accordance

GAAP requires

our management

and subjective

and assessments.

Our most critical

involve decisions

and assessments

significantly

affect reported

assets, liabilities,

and expenses.

been no changes

to our critical

in our annual

ended December

Capital Expenditures

At September 30, 2021, we had no material commitments for capital expenditures.

Off-Balance Sheet Arrangements

At September 30, 2021, we did not have any off-balance sheet arrangements.

In addition to other requirements that must be satisfied to qualify as a REIT, we must pay annual dividends to our

stockholders of at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and

excluding any net capital gains.

REIT taxable income (loss) is computed in accordance with the Code, and can be greater

than or less than our financial statement net income (loss) computed in accordance with GAAP.

These book to tax

differences primarily relate to the recognition of interest income on RMBS, unrealized gains and losses on RMBS, and the

amortization of losses on derivative instruments that are treated as funding hedges for tax purposes.

We intend to pay regular monthly dividends to our stockholders and have declared the following dividends since the

completion of our IPO.

material commitments

expenditures.

Sheet Arrangements

have any off-balance

sheet arrangements.

as a REIT, we must

income, determined

without regard

to the deduction

for dividends

excluding any

taxable income

in accordance

can be greater

(loss) computed

in accordance

the recognition

RMBS, unrealized

the amortization

on derivative

tax purposes.

to pay regular

monthly dividends

to our stockholders

the following

dividends since

the completion

(in thousands, except per share amounts)

On October 12, 2021, the Company declared a dividend of $0.065 per

share to be paid on November 26, 2021.

The effect of this dividend is

included in the table above, but is not reflected in the Company’s financial

statements as of September 30, 2021.

Virtually all of our assets and liabilities are interest rate sensitive in nature.

As a result, interest rates and other factors

influence our performance far more so than does inflation.

Changes in interest rates do not necessarily correlate with

inflation rates or changes in inflation rates.

Our financial statements are prepared in accordance with GAAP and our

distributions will be determined by our Board of Directors consistent with our obligation to distribute to our stockholders at

least 90% of our REIT taxable income on an annual basis in order to maintain our REIT qualification;

in each case, our

activities and balance sheet are measured with reference to historical cost and/or fair market value without considering

On April 13, 2022, the Company declared a dividend of $0.045 per share

to be paid on May 27, 2022.

The effect of this dividend is included in

the table above, but is not reflected in the Company’s financial statements

as of March 31, 2022.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis