AG MORTGAGE INVESTMENT TRUST, INC. Management Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q) | Market Screener

In this quarterly report on Form 10-Q, or this "report," we refer to AG Mortgage
Investment Trust, Inc. as "we," "us," the "Company," or "our," unless we
specifically state otherwise or the context indicates otherwise. We refer to our
external manager, AG REIT Management, LLC, as our "Manager," and we refer to the
direct parent company of our Manager, Angelo, Gordon & Co., L.P., as "Angelo
Gordon."

The following discussion 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, 2021, and any subsequent filings.
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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, and the impact of the novel
coronavirus ("COVID-19"). When we use the words "believe," "expect,"
"anticipate," "estimate," "plan," "continue," "intend," "should," "may" or
similar expressions, we intend to identify forward-looking statements.

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 uncertainty and economic impact of the COVID-19 pandemic (including the
impact of any significant variants) and of responsive measures implemented by
various governmental authorities, businesses and other third parties, and the
potential impact of COVID-19 on our personnel;
•the persistence of labor shortages, supply chain imbalances, Russia's invasion
of Ukraine, 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;
•conditions in the market for Residential Investments and Agency RMBS;
•legislative and regulatory actions by the U.S. Congress, U.S. Department of the
Treasury, the Federal Reserve and other agencies and instrumentalities;
•the forbearance program included in the Coronavirus Aid, Relief, and Economic
Security Act (the "CARES Act");
•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, 2021 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.

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executive summary


During the third quarter of 2022, we continued to grow our portfolio of
newly-originated residential mortgage loans and completed two securitizations in
order to obtain long-term, non-recourse financing without mark-to-market margin
calls. We also repurchased shares of our common stock under our repurchase
program authorized in 2022 (the "2022 Repurchase Program"). See below for detail
on these activities during the third quarter 2022.

investment activity


•Purchased Non-Agency Loans with a fair value of $510.3 million, $288.8 million
of which were purchased from Arc Home, our residential mortgage loan originator
in which we own an approximate 44.6% interest; and
•Purchased Agency-Eligible Loans with a fair value of $381.3 million, $67.2
million of which were purchased from Arc Home.

Lending activity


•Executed two rated securitizations converting financing from recourse financing
with mark-to-market margin calls to non-recourse financing without
mark-to-market margin calls;
•Securitized Non-Agency Loans with a total unpaid principal balance of $415.9
million; and
•Securitized Agency-Eligible Loans with a total unpaid principal balance of
$422.7 million.
•Subsequent to quarter end, executed a rated securitization of Non-Agency Loans
with $457.4 million of unpaid principal balance, converting financing from
recourse financing with mark-to-market margin calls to non-recourse financing
without mark-to-market margin calls.

capital activity


•Repurchased 0.4 million shares of common stock for $2.3 million, representing a
weighted average cost of $6.08 per share.
•Subsequent to quarter end, repurchased 0.1 million shares of common stock for
$0.3 million, representing a weighted average cost of $4.32 per share.

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 own an approximate 44.6%
interest, and through other third-party origination partners. We finance our
acquired loans through various financing lines on a short-term basis and utilize
Angelo, Gordon & Co., L.P.'s ("Angelo Gordon") 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.

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Our investment portfolio (which excludes our ownership in Arc Home) includes
Residential Investments and Agency RMBS. Currently, our Residential Investments
primarily consist of newly originated Non-Agency Loans and Agency-Eligible
Loans, which we refer to as our target assets. In addition, we may also invest
in other types of residential mortgage loans and other mortgage related assets.
As of September 30, 2022, the Company's investment portfolio consisted of the
following:

           Asset Class                   Description
Target Assets
Non-Agency Loans(1)(2)(3)                •Non-Agency Loans are loans that

does not meet the underwriting conditions

                                         guidelines of a 

Government Sponsored Enterprise (“GSE”).Non-agency loan

                                         consist of Qualified mortgage 

Loans (“QM Loans”) and Non-Qualified Home Loans

                                         loans ("Non-QM Loans"). QM Loans 

A compliant mortgage.

                                         with the Ability-To-Repay rules 

and consumer related guidelines

                                         Finance Protection Bureau 

(“CFPB”).

Agency-Eligible Loans(1)(2)              •Agency-Eligible Loans are loans 

accepted in accordance with

                                         GSE guidelines and are primarily secured by investment properties.
Other Residential Mortgage Related Assets
Re/Non-Performing Loans(1)(3)            •Performing, re-performing, and 

Bad debts are mortgages

                                         mortgage loans collateralized by a first lien mortgaged property.
Land Related Financing(3)                •First mortgage loans originated 

3rd party land developer and home

                                         builders for purposes of the acquisition and horizontal development of land.
Agency RMBS(2)                           •Agency RMBS represent interests 

in the mortgage pool

                                         guaranteed by a GSE such as Fannie 

May or Freddie Mac, or their agents

                                         U.S. Government such as Ginnie 

Previous.



(1)Loans held directly are included in the "Securitized residential mortgage
loans, at fair value" or the "Residential mortgage loans, at fair value" line
items on our consolidated balance sheets.
(2)Non-Agency Loans and Agency-Eligible Loans held in securitized form, as well
as Agency RMBS, are included in the "Real estate securities, at fair value" line
item on our consolidated balance sheets.
(3)Investments held through our unconsolidated affiliates are included in the
"Investments in debt and equity of affiliates" line item on our consolidated
balance sheets. This includes Non-Agency Loans held indirectly through our
investment in Mortgage Acquisition Trust I LLC ("MATT"), certain retained
tranches from unconsolidated Re/Non-Performing Loan securitizations which we
hold alongside other private funds under the management of Angelo Gordon, and
Land Related Financing.

Our primary sources of income are net interest income from our investment
portfolio, changes in the fair value of our investments, and income from our
investment in Arc Home. Net interest income consists of the interest income we
earn on investments less the interest expense we incur on borrowed funds and any
costs 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 currently 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 ("TRS") 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.

with our manager Angelo Gordon


We are externally managed by AG REIT Management, LLC (our "Manager"), a
subsidiary of Angelo, Gordon & Co., L.P. ("Angelo Gordon"). Pursuant to the
terms of our management agreement, our Manager provides us with our management
team, including our officers, along with appropriate support personnel. All of
our officers are employees of Angelo Gordon or its affiliates. We do not have
any employees. Our Manager is at all times subject to the supervision and
oversight of our Board of Directors and has only such functions and authority as
our Board of Directors delegates to it. Our Manager has delegated to Angelo
Gordon the overall responsibility with respect to our Manager's day-to-day
duties and obligations arising under our management agreement.

Through our relationship with our Manager, we benefit from the expertise and
relationships that Angelo Gordon has established which provides us with
resources to generate attractive risk-adjusted returns for our stockholders. Our
management has significant experience in the mortgage industry and expertise in
structured credit investments. We are able to leverage our
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Manager, along with our ownership interest in Arc Home, a vertically integrated
origination platform, to access investment opportunities in the non-agency
residential mortgage loan market. This strategic advantage has enabled us to
grow our investment portfolio and remain active in the securitization markets,
utilizing Angelo Gordon's proprietary securitization platform to deliver
non-agency investments to a diverse mix of investors.

market conditions


During the third quarter 2022, the financial markets continued to be volatile
due to the impact of sustained inflation, higher benchmark rates and elevated
interest rate volatility. Credit spreads tightened at the start of the third
quarter before reversing to end unchanged compared to the previous quarter. The
30-year fixed-rate mortgage according to Freddie Mac's Primary Mortgage Market
Survey ended the third quarter at 6.70% reaching multi-decade highs. As we
continue to see an unprecedented sharp rise in mortgage rates, mortgage
prepayments are nearing a plateau as the pipeline of refinance candidates has
significantly declined. Mortgage underwriting remains very tight, similar to
2013 levels according to the Mortgage Bankers Association and is particularly
tight for conforming balance agency mortgages which are a primary benchmark in
underwriting new mortgages across other product sets. Home ownership
affordability is historically low and in line with 1986 and 2006 readings,
according to the National Association of Realtors. Year-to-date home price
appreciation was 10.8% as of July 2022, according to the latest data from
Case-Shiller; however, month over month home price readings have turned negative
in the most recent data. Home prices in July fell -0.33%, or close to -4% when
annualized, according to Case-Shiller data, while the CoreLogic index reported a
-0.7% monthly decline a month later in August, more than -8% annualized.

Non-Agency Loans and Securitizations: Market conditions continued to weaken in
the third quarter with Non-QM AAA credit spreads widening from around low to mid
200 basis points over comparable maturity benchmark rates at the end of June
2022 to mid to high 200 basis points at the end of the third quarter. There was
a brief recovery in spreads in the month of August, with deals pricing in the
mid 100 basis point area, but that trend quickly reversed as markets reacted
negatively to Federal Reserve Chairman Jerome Powell's speech at the Jackson
Hole Economic Policy Symposium which took place in the end of August. The
30-year fixed-rate mortgage ended the third quarter at 6.70% compared with 5.70%
at the end of the second quarter, indicative of how quickly rates have risen as
the Federal Reserve continues with its policy of monetary tightening in an
effort to slow inflation. Originators faced considerable margin pressure with
the significant reduction in non-cash out refinance activity, resulting in
right-sizing across the industry. Conversely, the increase in mortgage rates on
new production should provide for attractive reinvestment opportunities into
higher yielding assets for market participants with capital available to deploy.

Agency RMBS: Nominal spreads on Agency mortgage-backed securities continued to
widen in the third quarter alongside the Federal Reserve's continued aggressive
policy actions to bring down inflation. Mortgage loan supply continues to slow
in response to the sharp rise in borrowing rates, but elevated interest rate
volatility, low levels of macroeconomic conviction, and fixed income mutual fund
outflows all continue to keep buyers sidelined. The spread between current
coupon and a blend of 5-year and 10-year U.S. Treasury yields widened by an
additional 36 basis points during the quarter, rivaling spreads experienced
during March 2020. Despite attractive asset valuations, uncertainty in the
macroeconomic landscape and interest rate volatility continue to pose headwinds
to a recovery near-term.

Non-Agency RMBS: Spreads for securitized residential debt sectors were volatile
during the third quarter but ultimately saw little quarter-over-quarter change.
While that held for credit risk transfer spreads, specific pockets of risk were
changed by 30-40 basis points in both directions. Spreads for senior Non-QM
tranches rallied from around 250 basis points at the end of the second quarter
to as tight as around 175 basis points before reversing back to 250 basis points
by quarter-end. Quarterly new issuance of RMBS fell to $20 billion, down about
47% from the second quarter and 62% from year-ago levels, bringing year-to-date
volume to $109 billion. The sharpest declines came from prime jumbo and
agency-eligible investor loans, which were lower by 80-90% quarter-over-quarter
as deal sponsors were reluctant to issue amid sharply higher all-in costs from
rising benchmark yields and wider spreads. Primary issuance of Non-QM fell 27%
to $7.8 billion, and credit risk transfer activity halved to around $4 billion.
Primary RMBS volume is unlikely to reach levels achieved in 2021 when over $210
billion of activity was recorded, a post Great Financial Crisis peak. However,
this year's issuance has matched 2020 volume of $110 billion and may eclipse
2019 volume of $137 billion.

In light of various market uncertainties for the U.S. and global economy,
geopolitical risks, and interest rate volatility, there can be no assurance that
the trends and conditions described above will not change in a manner materially
adverse to the mortgage REIT industry and/or our Company.

Presentation of investment, financing and hedging activities

In the Investing Activities, Funding Activities, Hedging Activities, and Liquidity and Funding Resources sections of this document:

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Item 2 presents information about our investment portfolio and related funding arrangements, including unconsolidated ownership interests in affiliates that are accounted for under GAAP using the equity method. Our investment portfolio does not include our investment in Ark 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 Notes 2 and 10 to the "Notes
to Consolidated Financial Statements (unaudited)" for a discussion of
investments in debt and equity of affiliates. See below for further terms used
when describing our investment portfolio.

•Our "Investment portfolio" includes our Residential Investments and Agency
RMBS, inclusive of TBAs.
•Our "Residential Investments" refer to our residential mortgage loans and
Non-Agency RMBS.
•"Residential mortgage loans" or "Loans" refer to our Non-Agency Loans,
Agency-Eligible Loans, and Re/Non-Performing Loans (exclusive of retained
tranches from unconsolidated securitizations) and Land Related Financing.
•"Non-Agency RMBS" refer to the retained tranches from unconsolidated
securitizations of Non-Agency Loans and Re/Non-Performing Loans, as well as
Agency-Eligible Loans held in securitized form.
•"Real estate securities" refers to our Non-Agency RMBS and Agency RMBS,
inclusive of TBAs.
•Our "GAAP Investment portfolio" includes our GAAP Residential Investments and
Agency RMBS.
•Our "GAAP Residential Investments" refer to our Residential Investments
excluding investments held within affiliated entities.

our investment portfolio and our GAAP investment
For portfolios, see GAAP Investment Portfolio Reconciliation below.

Special Note Regarding the COVID-19 Pandemic


In March 2020, the global pandemic associated with COVID-19 and the related
economic conditions caused financial and mortgage-related asset markets to come
under extreme duress, resulting in credit spread widening, a sharp decrease in
interest rates and unprecedented illiquidity in repurchase agreement financing
and MBS markets. The illiquidity was exacerbated by inadequate demand for MBS
among primary dealers due to balance sheet constraints.

Although market conditions have improved, the COVID-19 pandemic is ongoing with
new variants emerging despite growing vaccination rates. As a result, the full
impact of COVID-19 (including the impact of any significant variants) on the
mortgage REIT industry, credit markets, and, consequently, on our financial
condition and results of operations for future periods remains uncertain. Future
developments with respect to the COVID-19 pandemic, including among others, the
emergence of new variants, the effectiveness and durability of current vaccines
and government stimulus measures, could materially and adversely affect our
business, operations, operating results, financial condition, liquidity, or
capital levels.

Investment performance


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, less our cost 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.
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3 months ended September 30, 2022 3 months comparison
September 30, 2021


The table below presents certain information from our consolidated statements of
operations for the three months ended September 30, 2022 and 2021 (in
thousands).
                                                                  Three Months Ended
                                                    September 30, 2022           September 30, 2021           Increase/(Decrease)
Statement of Operations Data:
Net Interest Income
Interest income                                   $            50,190          $            19,629          $             30,561
Interest expense                                               34,699                        7,197                        27,502
Total Net Interest Income                                      15,491                       12,432                         3,059

Other Income/(Loss)
Net interest component of interest rate
swaps                                                            (996)                      (1,184)                          188
Net realized gain/(loss)                                       50,981                       (5,460)                       56,441
Net unrealized gain/(loss)                                    (54,261)                      29,461                       (83,722)

Total Other Income/(Loss)                                      (4,276)                      22,817                       (27,093)

Expenses
Management fee to affiliate                                     2,064                        1,693                           371
Other operating expenses                                        4,083                        2,997                         1,086
Transaction related expenses                                    5,325                        2,013                         3,312
Servicing fees                                                    986                          849                           137
Total Expenses                                                 12,458                        7,552                         4,906

Income/(loss) before equity in
earnings/(loss) from affiliates                                (1,243)                      27,697                       (28,940)

Equity in earnings/(loss) from affiliates                      (1,626)                       6,882                        (8,508)
Net Income/(Loss)                                              (2,869)                      34,579                       (37,448)

Dividends on preferred stock                                   (4,586)                      (4,586)                            -

Net Income/(Loss) Available to Common
Stockholders                                      $            (7,455)         $            29,993          $            (37,448)



Interest income

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


Interest income increased from September 30, 2021 to September 30, 2022
primarily due to an increase in the size of our portfolio driven by purchases of
Non-Agency Loans and Agency-Eligible Loans during the period. The weighted
average amortized cost of our GAAP investment portfolio increased by $2.3
billion from $2.0 billion for the three months ended September 30, 2021 to $4.3
billion for the three months ended September 30, 2022. This increase was coupled
with an increase of 0.69% in the weighted average yield of our GAAP investment
portfolio from 3.98% for the three months ended September 30, 2021 to 4.67% for
the three months ended September 30, 2022.

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Interest expense

Interest expense is calculated based on the actual funding rate and the outstanding funding balance of the GAAP investment portfolio.


Interest expense increased from September 30, 2021 to September 30, 2022 due to
an increase in the amount of financing on our GAAP investment portfolio,
inclusive of securitized debt, and an increase in the weighted average financing
rate during the period. We issued $2.7 billion of securitized debt during 2022,
which contributed to an increase of $2.2 billion in the weighted average
financing balance on our GAAP investment portfolio, inclusive of securitized
debt, from $1.8 billion for the three months ended September 30, 2021 to $4.0
billion for the three months ended September 30, 2022. Additionally, the
weighted average financing rate on our GAAP investment portfolio, inclusive of
securitized debt, increased by 1.88% from 1.61% for the three months ended
September 30, 2021 to 3.49% for the three months ended September 30, 2022.

Net interest portion of interest rate swap

The net interest component of interest rate swaps represents the net interest income received or expenses paid on interest rate swaps.


The net interest component of interest rate swap expense decreased from
September 30, 2021 to September 30, 2022 primarily as a result of our interest
rate swap portfolio being in a net pay position in 2021 compared with the
portfolio transitioning into a net receive position during the three months
ended September 30, 2022 as a result of rising interest rates during the period.
As of September 30, 2022, we held an interest rate swap portfolio with a
notional value of $0.7 billion, a weighted average receive-variable rate of
2.98%, and a weighted average pay-fix rate of 2.65%. As of September 30, 2021,
we held an interest rate swap portfolio with a notional value of $0.7 billion, a
weighted average receive-variable rate of 0.13%, and a weighted average pay-fix
rate of 0.73%.

Net realized gain/(loss)

The following table summarizes net realized gains/(losses) for the three months ended. September 30, 2022 And 2021 (in thousands).Realized profit for the ended three months September 30, 2022 This was due to the unwinding of pay fix, receive float interest rate swaps that were previously held at unrealized gains as a result of rising interest rates.

3 months ended

                                                                    September 30, 2022           September 30, 2021

Sale of loans transferred or sold to mortgages and other assets

                                      $               731          $               253
Sales of real estate securities                                                   168                       (4,795)
Settlement of derivatives and other instruments                                50,082                       (1,305)
Sales of commercial loans                                                           -                          387
Total Net realized gain/(loss)                                    $            50,981          $            (5,460)



Net unrealized gain/(loss)

The following table presents a summary of net unrealized gain/(loss) for the
three months ended September 30, 2022 and 2021 (in thousands). During the three
months ended September 30, 2022, unrealized losses on residential mortgage loans
and unrealized gains on securitized debt were the result of rising interest
rates and credit spread widening during the period.
                                                         Three Months Ended
                                            September 30, 2022       

September 30, 2021

     Residential mortgage loans            $          (154,563)     $            13,468
     Real estate securities                             (2,563)                   5,388
     Securitized debt                                  124,606                     (191)
     Derivatives                                       (21,741)                   2,095
     Commercial loans                                        -                    7,194
     Excess mortgage servicing rights                        -                    1,507
     Total Net unrealized gain/(loss)      $           (54,261)     $            29,461



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Management fee for affiliates


Our management fee is based upon a percentage of our Stockholders' Equity. See
the "Contractual obligations" section of this Item 2 for further detail on the
calculation of our management fee and for the definition of Stockholders'
Equity. Management fees increased from September 30, 2021 to September 30, 2022
primarily due to an increase in our Stockholder's Equity as calculated pursuant
to our Management Agreement resulting from our November 2021 common stock
offering.

Other operating expenses


Other operating expenses is primarily comprised of professional fees, directors'
and officers' ("D&O") insurance, directors' compensation, and certain
non-investment related and investment related expenses reimbursable to the
Manager. 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, due diligence, and other services. Refer to the "Contractual
obligations" section below for more detail on certain expenses reimbursable to
the Manager. The following table presents a summary of Other operating expenses
broken out between non-investment related expenses and investment related
expenses for the three months ended September 30, 2022 and 2021 (in thousands).
                                                                            

3 months ended

                                                                  September 30, 2022            September 30, 2021
Non Investment Related Expenses
Affiliate expense reimbursement - Operating expenses (1)        $           1,405             $             1,125
Professional fees                                                             501                             343
D&O insurance                                                                 309                             349
Directors' compensation                                                       168                             169
Other                                                                         118                             275
Total Non Investment Related Expenses                                       2,501                           2,261

Investment Related Expenses
Affiliate expense reimbursement - Deal related expenses                       261                             189
Residential mortgage loan asset management fees                               781                             396
Other                                                                         540                             151
Total Investment Related Expenses                                           1,582                             736
Total Other operating expenses                                  $           4,083             $             2,997


(1)For the year ended December 31, 2021, the Manager agreed to waive its right
to receive expense reimbursements of $0.8 million. For the three months ended
September 30, 2021, $0.2 million of the waived reimbursable expenses is included
within the "Affiliated expense reimbursement - Operating expenses" line item
above.

transaction-related costs


Transaction related expenses are expenses associated with purchasing and
securitizing residential mortgage loans as well as certain other transaction and
performance related fees associated with assets we invest in. These fees
increased from the three months ended September 30, 2021 to the three months
ended September 30, 2022 primarily as a result of the upfront expenses on the
two securitizations completed in the third quarter of 2022, as compared with
upfront expenses on one securitization completed in the third quarter of 2021.
Additionally, for the three months ended September 30, 2022, we accrued expenses
on a securitization which settled in October 2022.

commission


We incur servicing fee expenses in connection with the servicing of our
residential mortgage loans. Servicing fees increased from the three months ended
September 30, 2021 to the three months ended September 30, 2022 primarily due to
an increase in our GAAP residential mortgage loan portfolio. The weighted
average cost of our GAAP residential mortgage loan portfolio increased by $3.0
billion from $1.3 billion for the three months ended September 30, 2021 to $4.3
billion for the three months ended September 30, 2022 resulting from purchases
of Non-Agency Loans and Agency-Eligible Loans.
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Equity income/(loss) from associates


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 table
reconciles the net income/(loss) to the "Equity in earnings/(loss) from
affiliates" line item on our consolidated statements of operations (in
thousands).
                                                                            

3 months ended

                                                                  September 30, 2022            September 30, 2021
MATT Non-QM Loans                                               $              1,413          $              (644)
Land Related Financing                                                           300                          598
Re/Non-Performing Loans                                                          927                        6,553
AG Arc                                                                        (4,266)                         399
Other                                                                              -                          (24)
Equity in earnings/(loss) from affiliates                       $             (1,626)         $             6,882



The following table further disaggregates the ‘Equity income/(loss) from affiliates’ line item in the Company’s Consolidated Statements of Income (in thousands).

3 months ended

                                                          September 30, 2022            September 30, 2021
Interest income                                         $              1,748          $            15,607
Interest expense                                                         314                          437
Total Net Interest Income                                              1,434                       15,170

Net realized gain/(loss)                                                   -                          417
Net unrealized gain/(loss)                                             1,355                       (8,822)
Total Other Income/(Loss)                                              1,355                       (8,405)

After-tax earnings/(loss) at AG Arc (1)                               (1,303)                       1,868
Net unrealized gain/(loss) on investment in AG
Arc                                                                   (1,208)                         111
Elimination of gains on loans sold to MITT (2)                        (1,755)                      (1,580)
Total AG Arc Earnings/(Loss)                                          (4,266)                         399

Other operating expenses                                                 149                          282

Equity in earnings/(loss) from affiliates               $             (1,626)         $             6,882


(1)The earnings/(loss) at AG Arc during the three months ended September 30,
2022 were primarily the result of $(1.9) million of losses related to Arc Home's
lending and servicing operations, offset by $0.6 million related to changes in
the fair value of the MSR portfolio held by Arc Home. The earnings/(loss) at AG
Arc during the three months ended September 30, 2021 were primarily the result
of $2.6 million of net income related to Arc Home's lending and servicing
operations, offset by $(0.7) million related to changes in the fair value of the
MSR portfolio held by Arc Home.
(2)The earnings recognized by AG Arc do not include our portion of gains
recorded by Arc Home in connection with the sale of residential mortgage loans
to us. Refer to Note 2 to the "Notes to Consolidated Financial Statements
(unaudited)" for more information on this accounting policy.


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9 months ended September 30, 2022 9 months comparison September 30, 2021


The table below presents certain information from our consolidated statements of
operations for the nine months ended September 30, 2022 and 2021 (in thousands).
                                                                   Nine Months Ended
                                                    September 30, 2022           September 30, 2021           Increase/(Decrease)
Statement of Operations Data:
Net Interest Income
Interest income                                    $          123,017          $            45,976          $             77,041
Interest expense                                               73,994                       16,552                        57,442
Total Net Interest Income                                      49,023                       29,424                        19,599

Other Income/(Loss)
Net interest component of interest rate
swaps                                                          (5,849)                      (3,498)                       (2,351)
Net realized gain/(loss)                                       60,072                       (5,124)                       65,196
Net unrealized gain/(loss)                                   (123,032)                      58,995                      (182,027)
Other income/(loss), net                                            -                           37                           (37)
Total Other Income/(Loss)                                     (68,809)                      50,410                      (119,219)

Expenses
Management fee to affiliate                                     5,984                        5,014                           970
Other operating expenses                                       11,594                       10,128                         1,466
Transaction related expenses                                   14,939                        3,731                        11,208
Servicing fees                                                  3,005                        2,136                           869
Total Expenses                                                 35,522                       21,009                        14,513

Income/(loss) before equity in
earnings/(loss) from affiliates                               (55,308)                      58,825                      (114,133)

Equity in earnings/(loss) from affiliates                      (9,486)                      34,496                       (43,982)
Net Income/(Loss)                                             (64,794)                      93,321                      (158,115)

Gain on Exchange Offers, net                                        -                          472                          (472)
Dividends on preferred stock                                  (13,758)                     (14,199)                          441

Net Income/(Loss) Available to Common
Stockholders                                       $          (78,552)         $            79,594          $           (158,146)



Interest income

Interest income increased from the nine months ended September 30, 2021 to the
nine months ended September 30, 2022 primarily due to an increase in the size of
our portfolio driven by purchases of Non-Agency Loans and Agency-Eligible Loans
during the period. The weighted average amortized cost of our GAAP investment
portfolio increased by $2.1 billion from $1.7 billion for the nine months ended
September 30, 2021 to $3.8 billion for the nine months ended September 30, 2022.
This increase was coupled with an increase of 0.80% in the weighted average
yield of our GAAP investment portfolio from 3.56% for the nine months ended
September 30, 2021 to 4.36% for the nine months ended September 30, 2022.

Interest expense


Interest expense increased from the nine months ended September 30, 2021 to the
nine months ended September 30, 2022 due to an increase in the amount of
financing on our GAAP investment portfolio, inclusive of securitized debt, and
an increase in the weighted average financing rate during the period. We issued
$2.7 billion of securitized debt during 2022, which contributed to an increase
of $1.9 billion in the weighted average financing balance on our GAAP investment
portfolio, inclusive of securitized debt, from $1.5 billion for the nine months
ended September 30, 2021 to $3.4 billion for the nine
                                       53

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months ended September 30, 2022. Additionally, the weighted average financing
rate on our GAAP investment portfolio, inclusive of securitized debt, increased
1.39% from 1.48% for the nine months ended September 30, 2021 to 2.87% for the
nine months ended September 30, 2022.

Net interest portion of interest rate swap


The net interest component of interest rate swap expense increased from
September 30, 2021 to September 30, 2022 primarily due to the weighted average
swap notional value increasing by $0.3 billion from $0.8 billion for the nine
months ended September 30, 2021 to $1.1 billion for the nine months ended
September 30, 2022. As of September 30, 2022, we held an interest rate swap
portfolio with a notional value of $0.7 billion, a weighted average
receive-variable rate of 2.98%, and a weighted average pay-fix rate of 2.65%. As
of September 30, 2021, we held an interest rate swap portfolio with a notional
value of $0.7 billion, a weighted average receive-variable rate of 0.13%, and a
weighted average pay-fix rate of 0.73%.

Net Realized Gain/(Loss)


The following table presents a summary of net realized gain/(loss) for the nine
months ended September 30, 2022 and 2021 (in thousands). The realized gain
during the nine months ended September 30, 2022 was driven by unwinding pay-fix,
receive-float interest rate swaps which were previously held at unrealized gains
as a result of rising interest rates. This was offset by realized losses on
sales of Agency RMBS.
                                                                                  Nine Months Ended
                                                                   September 30, 2022           September 30, 2021

Sale of loans transferred or sold to mortgages and other assets

                                      $              696          $             7,643
Sales of real estate securities                                              (34,504)                      (9,677)
Settlement of derivatives and other instruments                               93,880                         (573)
Sales of commercial loans                                                          -                       (2,517)
Total Net realized gain/(loss)                                    $           60,072          $            (5,124)



Net unrealized gain/(loss)

The following table presents a summary of net unrealized gain/(loss) for the
nine months ended September 30, 2022 and 2021 (in thousands). During the nine
months ended September 30, 2022, unrealized losses on residential mortgage loans
and unrealized gains on securitized debt were the result of rising interest
rates and credit spread widening during the period.
                                                         Nine Months Ended
                                            September 30, 2022       

September 30, 2021

     Residential mortgage loans            $          (451,532)     $            28,638
     Real estate securities                              3,529                    1,122
     Securitized debt                                  306,302                   (3,093)
     Derivatives                                        18,669                   14,781
     Commercial loans                                        -                   16,148
     Excess mortgage servicing rights                        -                    1,399
     Total Net unrealized gain/(loss)      $          (123,032)     $            58,995



Management fee to affiliate

administrative costs increase from September 30, 2021 To September 30, 2022
This is primarily due to an increase in shareholders’ equity calculated under our management agreement. November 2021 Offer of common stock.

                                       54

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Other operating expenses


The following table presents a summary of Other operating expenses broken out
between non-investment related expenses and investment related expenses for the
nine months ended September 30, 2022 and 2021 (in thousands).
                                                                            

9 months ended

                                                                 September 30, 2022           September 30, 2021
Non Investment Related Expenses
Affiliate expense reimbursement - Operating expenses (1)        $            4,215          $             3,375
Professional fees                                                            1,438                        2,048
D&O insurance                                                                  963                        1,137
Directors' compensation                                                        505                          504
Other                                                                          589                          689
Total Non Investment Related Expenses                                        7,710                        7,753

Investment Related Expenses
Affiliate expense reimbursement - Deal related expenses                        637                          518
Residential mortgage loan asset management fees                              1,963                        1,168
Other                                                                        1,284                          689
Total Investment Related Expenses                                            3,884                        2,375
Total Other operating expenses                                  $           11,594          $            10,128


(1)For the year ended December 31, 2021, the Manager agreed to waive its right
to receive expense reimbursements of $0.8 million. For the nine months ended
September 30, 2021, $0.6 million of the waived reimbursable expenses is included
within the "Affiliated expense reimbursement - Operating expenses" line item
above.

transaction-related costs


Transaction related expenses increased from the nine months ended September 30,
2021 to the nine months ended September 30, 2022 primarily as a result of the
upfront expenses on the seven securitizations completed during the nine months
ended September 30, 2022, as well as expenses accrued on a securitization which
settled in October 2022. This is compared with upfront expenses on two
securitizations completed during the nine months ended September 30, 2021.

commission


Servicing fees increased from the nine months ended September 30, 2021 to the
nine months ended September 30, 2022 primarily due to an increase in our GAAP
residential mortgage loan portfolio. The weighted average cost of our GAAP
residential mortgage loan portfolio increased by $2.7 billion from $0.9 billion
for the nine months ended September 30, 2021 to $3.6 billion for the nine months
ended September 30, 2022 resulting from purchases of Non-Agency Loans and
Agency-Eligible Loans.

Equity income/(loss) from associates


The below table reconciles the net income/(loss) to the "Equity in
earnings/(loss) from affiliates" line item on our consolidated statements of
operations (in thousands).
                                                                                 Nine Months Ended
                                                                  September 30, 2022            September 30, 2021
MATT Non-QM Loans                                               $                154          $            15,277
Land Related Financing                                                         1,248                        1,848
Re/Non-Performing Loans                                                          758                       13,370
AG Arc                                                                       (11,646)                       4,033
Other                                                                              -                          (32)
Equity in earnings/(loss) from affiliates                       $             (9,486)         $            34,496


                                       55
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The following table further disaggregates the ‘Equity income/(loss) from affiliates’ line item in the Company’s Consolidated Statements of Income (in thousands).

9 months ended

                                                          September 30, 2022            September 30, 2021
Interest income                                         $              4,899          $            25,480
Interest expense                                                         888                        1,820
Total Net Interest Income                                              4,011                       23,660

Net realized gain/(loss)                                                  (7)                       1,913
Net unrealized gain/(loss)                                            (1,465)                       6,075
Total Other Income/(Loss)                                             (1,472)                       7,988

After-tax earnings/(loss) at AG Arc (1)                                  589                        6,946
Net unrealized gain/(loss) on investment in AG
Arc                                                                   (6,366)                         554
Elimination of gains on loans sold to MITT (2)                        (5,869)                      (3,467)
Total AG Arc Earnings/(Loss)                                         (11,646)                       4,033

Other operating expenses                                                 379                        1,185

Equity in earnings/(loss) from affiliates               $             (9,486)         $            34,496


(1)The earnings/(loss) at AG Arc during the nine months ended September 30, 2022
were primarily the result of $4.1 million related to changes in the fair value
of the MSR portfolio held by Arc Home, offset by $(3.5) million of losses
related to Arc Home's lending and servicing operations. The earnings/(loss) at
AG Arc during the nine months ended September 30, 2021 were primarily the result
of $8.8 million of net income related to Arc Home's lending and servicing
operations, offset by $(1.9) million related to changes in the fair value of the
MSR portfolio held by Arc Home.
(2)The earnings recognized by AG Arc do not include our portion of gains
recorded by Arc Home in connection with the sale of residential mortgage loans
to us. Refer to Note 2 to the "Notes to Consolidated Financial Statements
(unaudited)" for more information on this accounting policy.

Gains from exchange offers, net


We completed two privately negotiated exchange offers during the nine months
ended September 30, 2021. As a result of the exchange offers, we exchanged
153,325 shares of our 8.25% Series A Cumulative Redeemable Preferred Stock
("Series A Preferred Stock"), 437,087 shares of our 8.00% Series B Cumulative
Redeemable Preferred Stock ("Series B Preferred Stock"), and 154,383 shares of
our 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock
("Series C Preferred Stock") for a total of 1,367,264 shares of common stock. We
recognized a gain of $0.5 million in connection with the offers. There were no
exchange offers completed during the nine months ended September 30, 2022.

Book value per share and adjusted book value


The below table details book value and adjusted book value per common share. Per
share amounts for book value are calculated using all outstanding common shares
in accordance with GAAP, including all vested shares issued to our Manager and
our independent directors under our equity incentive plans as of quarter-end.

                                              September 30, 2022       December 31, 2021
Book value per common share (1)              $             11.02      $     

14.64

Adjusted book value per common share (2)                   10.68            

14.32

(1) Calculated by deducting net proceeds from shareholders’ equity $220.5 million Based on outstanding preferred stock outstanding as the numerator. (2) Calculated by deducting liquidation preference from shareholders’ equity.
$228 million Based on outstanding preferred stock outstanding as the numerator.

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.

                                       56

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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, which utilizes all estimates of future cash flows and adjusts for
actual prepayment and cash flow activity as of quarter-end. The calculation of
weighted average yield is weighted on fair value at quarter-end. The 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, which is the
weighted average of the net pay rate on our interest rate swaps. GAAP and
non-GAAP cost of funds are weighted by the outstanding financing arrangements on
our GAAP investment portfolio and our investment portfolio, respectively, and
the fair value of securitized debt at quarter-end.

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.

The table below shows the current investment portfolio net interest margin and leverage ratio. September 30, 2022 When September 30, 2021 Also, a reconciliation of the GAAP investment portfolio net interest margin and leverage ratio.

September 30, 2022

                                                                                          Investments in Debt
Weighted Average                       GAAP Investment Portfolio                        and Equity of Affiliates                         Investment Portfolio (a)
Yield                                                      4.92  %                                               15.57  %                                          5.06  %
Cost of Funds (b)(c)                                       3.92  %                                                4.76  %                                          3.93  %
Net Interest Margin                                        1.00  %                                               10.81  %                                          1.13  %
Leverage Ratio (d)                                            8.5x                                                    (e)                                             2.0x

September 30, 2021
                                                                                          Investments in Debt
Weighted Average                       GAAP Investment Portfolio                        and Equity of Affiliates                         Investment Portfolio (a)
Yield                                                      3.60  %                                               18.69  %                                          4.30  %
Cost of Funds (b)(c)                                       1.92  %                                                3.16  %                                          1.96  %
Net Interest Margin                                        1.68  %                                               15.53  %                                          2.34  %
Leverage Ratio (d)                                            3.8x                                                    (e)                                             1.8x


(a)Excludes any net TBA positions.
(b)Includes cost of non-recourse financing arrangements.
(c)As of September 30, 2022, Cost of Funds related to our GAAP investment
portfolio includes 3.75% on our securitized debt and 4.74% on our financing
arrangements. As of September 30, 2021, Cost of Funds related to our GAAP
investment portfolio includes 1.94% on our securitized debt and 1.54% on our
financing arrangements.
(d)The leverage ratio on our GAAP Investment Portfolio represents GAAP leverage.
The leverage ratio on our investment portfolio represents Economic Leverage as
defined below in the "Financing Activities" section.
(e)Refer to the "Financing activities" section below for an aggregate breakout
of leverage.

Core Earnings

One of our objectives is to generate net income from net interest margin on the
portfolio, and management uses Core Earnings, 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 Core
Earnings has important limitations as it does not include certain earnings or
losses our management team considers in evaluating our financial performance.
Our presentation of Core Earnings 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 Core Earnings, 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
                                       57

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incurred in connection with the acquisition, disposition, or securitization of
our investments, (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 Core Earnings, such as unrealized and realized
gains/(losses), (iv) realized and unrealized changes in the fair value of Arc
Home's net mortgage servicing rights and the derivatives intended to offset
changes in the fair value of those net mortgage servicing rights, (v) deferred
taxes recognized at our taxable REIT subsidiaries, if any, and (vi) any
gains/(losses) associated with exchange transactions on our common and preferred
stock. Items (i) through (vi) above include any amount related to those items
held in affiliated entities. Management considers the transaction related
expenses referenced in (ii) above to be similar to realized losses incurred at
the acquisition, disposition, or securitization of an asset and does not view
them as being part of its core operations. Management views the exclusion
described in (iv) above to be consistent with how it calculates Core Earnings on
the remainder of its portfolio. Management excludes all deferred taxes because
it believes deferred taxes are not representative of current operations. Core
Earnings include the net interest income and other income earned on our
investments on a yield adjusted basis, including TBA dollar roll income/(loss)
or any other investment activity that may earn or pay net interest or its
economic equivalent.

A reconciliation of "Net Income/(loss) available to common stockholders" to Core
Earnings for the three and nine months ended September 30, 2022 and 2021 is set
forth below (in thousands, except per share data).
                                                 Three Months Ended                          Nine Months Ended
                                        September 30,          September 30,        September 30,         September 30,
                                             2022                  2021                  2022                 2021
Net Income/(loss) available to common
stockholders                           $      (7,455)         $     29,993          $   (78,552)         $     79,594
Add (Deduct):
Net realized (gain)/loss                     (50,981)                5,460              (60,072)                5,124
Net unrealized (gain)/loss                    54,261               (29,461)             123,032               (58,995)
Transaction related expenses and deal
related performance fees (1)                   5,486                 2,484               15,575                 4,496
Equity in (earnings)/loss from
affiliates                                     1,626                (6,882)               9,486               (34,496)
Net interest income and expenses from
equity method investments (2)(3)              (4,170)               15,000              (10,755)               24,861
Other (income)/loss, net                           -                     -                    -                   (14)
(Gains) from Exchange Offers, net                  -                     -                    -                  (472)
Dollar roll income/(loss)                        633                (1,113)               1,999                (1,113)
Core Earnings                          $        (600)         $     15,481          $       713          $     18,985

Core earnings per diluted share (4) $ (0.03) $0.96

$0.03 $1.24



(1)For the three months ended September 30, 2022 and 2021, total transaction
related expenses and deal related performance fees included $5.3 million and
$2.0 million, respectively, recorded within the "Transaction related expenses"
line item and $0.2 million and $0.5 million, respectively, recorded within the
"Interest expense" line item, which relates to the amortization of deferred
financing costs. For the nine months ended September 30, 2022 and 2021, total
transaction related expenses and deal related performance fees included $14.9
million and $3.7 million, respectively, recorded within the "Transaction related
expenses" line item and $0.7 million and $0.8 million, respectively, recorded
within the "Interest expense" line item, which relates to the amortization of
deferred financing costs.
(2)For the three months ended September 30, 2022 and 2021, $2.4 million or $0.11
per share and $0.2 million or $0.01 per share, respectively; and for the nine
months ended September 30, 2022 and 2021, $9.2 million or $0.40 per share and
$1.3 million or $0.08 per share, respectively, of realized and unrealized
changes in the fair value of Arc Home's net mortgage servicing rights and
corresponding derivatives were excluded from Core Earnings, net of deferred tax
expense. Additionally, for the three months ended September 30, 2022 and 2021,
$(1.2) million or $(0.05) per share and $0.1 million or $0.01 per share,
respectively; and for the nine months ended September 30, 2022 and 2021, $(6.4)
million or $(0.28) per share and $0.6 million or $0.04 per share, respectively,
of unrealized changes in the fair value of our investment in Arc Home were
excluded from Core Earnings.
(3)Core income or loss recognized by AG Arc does not include our portion of
gains recorded by Arc Home in connection with the sale of residential mortgage
loans to us. For the three months ended September 30, 2022 and 2021, we
eliminated $1.8 million or $0.08 per share and $1.6 million or $0.10 per share,
and for the nine months ended September 30, 2022 and 2021, we eliminated $5.9
million or $0.25 per share and $3.5 million or $0.23 per share of intra-entity
profits recognized by Arc Home, respectively, and also decreased the cost basis
of the underlying loans we purchased by the same amount. Refer to Note 2 to the
"Notes to Consolidated Financial Statements (unaudited)" for more information on
this accounting policy.
(4)Per share amounts presented have been adjusted to reflect the one-for-three
reverse stock split effected July 22, 2021, where applicable.
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investment activity


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.

We allocate our equity by investment type using the fair value of our investment
portfolio, less any associated leverage, inclusive of any long TBA position (at
cost). We allocate all non-investment portfolio related assets and liabilities
to our investment portfolio based on the characteristics of such assets and
liabilities in order to sum to stockholders' equity per the consolidated balance
sheets. Our equity allocation method is a non-GAAP methodology and may not be
comparable to the similarly titled measure or concepts of other companies, who
may use different calculations and allocation methodologies.

The following table provides an overview of the allocated shares in our current investment portfolio. September 30, 2022 When December 31, 2021 (thousand dollars).

                                                   Allocated Equity                                             Percent of Equity
                                    September 30, 2022           December 31, 2021               September 30, 2022                December 31, 2021
           Residential Investments $          457,719          $          459,058                                  98.6  %                     80.5  %
                       Agency RMBS              6,577                     111,322                                   1.4  %                     19.5  %
                             Total $          464,296          $          570,380                                 100.0  %                    100.0  %


The following table provides an overview of our current investment portfolio.
September 30, 2022 When December 31, 2021 Reconciliation to GAAP Investment Portfolio ($’000).

Percentage of investment portfolio

                                         Fair Value                             Fair Value                                                    Leverage Ratio (a)
                                            September 30,          December 31,           September 30,           December 31,
                                                2022                   2021                   2022                    2021                                                        September 30, 2022         December 31, 2021
    Residential Investments                $  4,286,474          $   2,725,889                    99.5  %                84.6  %                                                                 2.0x                       2.1x
                Agency RMBS                      19,543                495,713                     0.5  %                15.4  %                                                                 2.2x                       3.7x
Total: Investment Portfolio                $  4,306,017          $   3,221,602                   100.0  %               100.0  %                                                                 2.0x                       

2.4 times

investment in debt and

       Equity of Affiliates                $     57,982          $      72,026                        N/A                    N/A                                                                  (b)                        (b)

     Total: GAAP Investment
                  Portfolio                $  4,248,035          $   3,149,576                        N/A                    N/A                                                                 8.5x                       4.9x


(a)The leverage ratio 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 by its
allocated equity (described in the chart above). Cash posted as collateral has
been allocated pro-rata by each respective asset class's Economic Leverage
amount. 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.
(b)Refer to the "Financing activities" section below for an aggregate breakout
of leverage.
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The following table presents a reconciliation of our Investment Portfolio to our
GAAP Investment Portfolio as of September 30, 2022 and December 31, 2021 ($ in
thousands).
                                                                                                                                                                                                                    December 31,
                                                                                                                 September 30, 2022                                                                                     2021
                                                                                          Unrealized
                                                                                            Mark-                                     Weighted Average             Weighted               Weighted Average
            Instrument                    Current Face           Amortized Cost           to-Market            Fair Value (1)            Coupon (2)             Average Yield            Life  (Years) (3)         Fair Value (1)
Residential Investments
Non-Agency Loans                         $  2,931,350          $     2,984,999          $  (290,327)         $     2,694,672                   5.10  %                    4.85  %                       9.20       $  

1,858,798

Agency-Eligible Loans                       1,377,367                1,369,518             (123,771)               1,245,747                   4.00  %                    4.23  %                       9.59            440,837
MATT Non-QM Loans (4)                         373,359                   41,197               (2,373)                  38,824                   1.03  %                   15.50  %                       3.43             45,837
Re/Non-Performing Loans                       373,913                  305,438              (14,074)                 291,364                   3.83  %                    8.17  %                       4.69            

360,131

Land Related Financing                         10,946                   10,946                    -                   10,946                  14.50  %                   14.50  %                       0.24             16,891

Non-Agency RMBS Interest Only (5)             111,990                    2,910                2,011                    4,921                   0.38  %                   33.04  %                       4.44              3,395

Total Residential Investments               5,178,925                4,715,008             (428,534)               4,286,474                   4.50  %                    5.05  %                       8.44          2,725,889

Agency RMBS
30 Year Fixed Rate                                  -                        -                    -                        -                      -  %                       -  %                  -                    495,713

Interest Only                                 130,457                   20,333                 (790)                  19,543                   2.97  %                    7.48  %                       6.69                  -

Total Agency RMBS                             130,457                   20,333                 (790)                  19,543                   2.97  %                    7.48  %                       6.69            495,713

Total: Investment Portfolio $5,309,382 $4,735,341 $ (429,324) $4,306,017

                   4.46  %                    5.06  %                       8.40       $  

3,221,602

investments in debt and equity

                        Affiliates       $    419,136          $        60,136          $    (2,154)         $        57,982                   1.92  %                   15.57  %                       3.20       $     72,026

  Total: GAAP Investment Portfolio       $  4,890,246          $     4,675,205          $  (427,170)         $     4,248,035                   4.59  %                    4.92  %                       8.68       $  3,149,576


(1)Refer to Note 10 to the "Notes of the Consolidated Financial Statements
(unaudited)" for more detail on what is included in our "Investments in debt and
equity of affiliates" line item on our consolidated balance sheets. Our assets
held through Investments in debt and equity of affiliates are included in the
"MATT Non-QM Loans," "Re/Non-Performing Loans," and "Land Related Financing,"
line items above.
(2)Equity residuals with a zero coupon rate are excluded from this calculation.
(3)Weighted average life is based on projected life. Typically, actual
maturities are shorter than stated contractual maturities. Maturities are
affected by the contractual lives of the underlying mortgages, periodic payments
of principal, and prepayments of principal.
(4)As of September 30, 2022 and December 31, 2021, this line item primarily
includes retained tranches from securitizations.
(5)As of September 30, 2022 and December 31, 2021, this line item includes
Non-QM interest-only bonds.

housing investment


The following table presents the fair value of the loans and securities in our
residential investments and a reconciliation to our GAAP residential portfolio
(in thousands).
                                                                                  Fair Value
                                                                September 30, 2022           December 31, 2021
Residential mortgage loans (1)                                $         4,222,235          $        2,663,992
Non-Agency RMBS (2)                                                        64,239                      61,897

Total Residential Investments                                 $         

4,286,474 $2,725,889
Deduction: Mortgage on investments in affiliates’ liabilities and equity

                                                   19,056                      28,886

Less: Non-agency RMBS on investments in affiliated company debt and equity

                                                              38,926                      43,140
Total GAAP Residential Investments                            $         

4,228,492 $2,653,863



(1)Includes Non-Agency Loans, Agency-Eligible Loans, Re/Non-Performing Loans,
and Land Related Financing not held in securitized form.
(2)Includes Non-Agency Loans, Agency-Eligible Loans, and Re/Non-Performing Loans
held in securitized form.

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Housing loan


The following tables present certain information regarding credit quality for
certain categories within our Residential mortgage loan portfolio ($ in
thousands).
                                                                                                                  September 30, 2022                                                                                       December 31,
                                                                                        Weighted Average (1)(2)(3)                                    Aging by Unpaid Principal Balance (1)(2)                                 2021
                                   Unpaid Principal                              Original LTV
                                       Balance              Fair Value               Ratio               Current FICO (4)                Current                30-59 Days           60-89 Days          90+ Days           Fair Value
Non-Agency Loans                   $   2,916,456          $ 2,684,474                   69.24  %                732               $    2,862,790              $    30,305          $     9,109          $ 14,252          $  1,844,198
Agency-Eligible Loans                  1,360,470            1,235,553                   66.56  %                760                    1,350,150                    9,969                  351                 -               440,837
MATT Non-QM Loans                          8,477                8,110                   60.41  %                677                        6,308                        -                  746             1,423                11,839
Re/Non-Performing Loans                  339,082              283,152                   79.62  %                640                      237,314                   30,534               10,973            56,378               350,227
Land Related Financing                    10,946               10,946                        N/A                        N/A                         N/A                  N/A                  N/A               N/A             16,891
Total Residential mortgage
loans                              $   4,635,431          $ 4,222,235                   69.19  %                734               $    4,456,562              $    70,808          $    21,179          $ 72,053          $  2,663,992
Less: Residential mortgage
loans in Investments in Debt
and Equity of Affiliates                  19,423               19,056                   60.41  %                677                        6,308                        -                  746             1,423                28,886
Total GAAP Residential
mortgage Loans                     $   4,616,008          $ 4,203,179                   69.20  %                734               $    4,450,254              $    70,808          $    20,433          $ 70,630          $  2,635,106


(1)Weighted average and aging data excludes residual positions where we
consolidate a securitization and the positions are recorded on our balance sheet
as Re/Non-Performing Loans. There may be limited data available regarding the
underlying collateral of the residual positions.
(2)Weighted average and aging data excludes Land Related Financing.
(3)Amounts are weighted based on unpaid principal balance.
(4)Weighted average current FICO excludes borrowers where FICO scores were not
available.

See Note 3 to the "Notes to Consolidated Financial Statements (unaudited)" for 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.

Non-Agency RMBS

The following table presents the fair value of non-agency RMBS by current credit rating. September 30, 2022 When December 31, 2021 (in thousands). Credit Ratings – Non-Agency RMBS (1)

                           September 30, 2022           December 31, 2021

BBB                                                         $             8,122          $            4,074
BB                                                                        8,196                       7,709
B                                                                        12,843                      15,018

Not Rated                                                                35,078                      35,096
                               Total: Non-Agency RMBS       $            64,239          $           61,897

Deduction: Non-governmental RMBS in debt investments

                                 Equity of Affiliates                    38,926                      43,140
                                    Total: GAAP Basis       $            25,313          $           18,757

(1) Represents the minimum ratings of rated assets for S&P, Moody, Morningstar, and Fitch credit ratings, expressed in S&P equivalents.

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The following table shows the geographic concentrations of collateral underlying the non-agency RMBS portfolio ($’000).
September 30, 2022

                               December 31, 2021
State            Fair Value       Percentage     State            Fair Value       Percentage
California      $    29,729           46.3  %    California      $    31,480           50.9  %
New York              9,901           15.4  %    New York             11,092           17.9  %
Florida               4,050            6.3  %    Florida               3,661            5.9  %
Texas                 2,289            3.6  %    New Jersey            1,684            2.7  %
New Jersey            2,028            3.2  %    Texas                 1,511            2.4  %
Other                16,242           25.2  %    Other                12,469           20.2  %
       Total    $    64,239          100.0  %           Total    $    61,897          100.0  %



Agency RMBS

The following table presents the fair value and the Constant Prepayment Rate
("CPR") experienced on our GAAP Agency RMBS portfolio for the periods presented
($ in thousands).
                                                           Fair Value                                               CPR (1)
          Agency RMBS                    September 30, 2022           December 31, 2021          September 30, 2022          December 31, 2021
30 Year Fixed Rate                     $                 -          $          495,713                          -  %                      6.1  %

Interest Only                                       19,543                           -                       12.6  %                        -  %
Total/Weighted Average                 $            19,543          $          495,713                       12.6  %                      6.1  %

(1) Represents the weighted average monthly CPR published during the year-to-date period for our in-place portfolio.

Investments in affiliated company debt and equity


See Note 10 to the "Notes to Consolidated Financial Statements (unaudited)" for
a breakout of the "Investments in debt and equity of affiliates" line item on
our consolidated balance sheets.

Lending activity


We use leverage to finance the purchase of our investment portfolio. Our
leverage has primarily been in the form of repurchase agreements, revolving
facilities, and securitized debt. Repurchase agreements involve the sale and a
simultaneous agreement to repurchase the transferred assets or similar assets at
a future date and typically have a term of 30 to 90 days. 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 on borrowings are fixed based on prevailing rates
corresponding to the terms of the borrowings, and interest is paid at the
termination of the borrowing at which time we may enter into a new borrowing
arrangement at prevailing market rates with the same counterparty or repay that
counterparty and negotiate financing with a different counterparty. We have also
used revolving facilities, which are typically longer term in nature than
repurchase agreements, to finance loans. Interest rates on these facilities are
based on prevailing rates corresponding to the terms of the borrowings, and
interest is paid on a monthly basis. Repurchase agreements and revolving
facilities, which we refer to as our financing arrangements, are generally
mark-to-market with respect to margin calls and recourse to us. We had
outstanding financing arrangements with six and five counterparties as of
September 30, 2022 and December 31, 2021, respectively.

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 is otherwise found to be in default under the
terms of such agreements, the counterparty has the right to accelerate amounts
due under the associated agreement. As of September 30, 2022, we are in
compliance with all of our financial covenants.

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We also use securitized debt to finance our loan portfolio. Securitized debt is
generally non-mark-to-market with respect to margin calls and non-recourse to
us.

Recourse and non-recourse loans

The table below details the current breakdown of recourse and non-recourse loans. September 30, 2022 When December 31, 2021 (in thousands).

                                                              September 30, 2022           December 31, 2021

Recourse Financing – Financing arrangements including debt and investments in equity of affiliates

                                                  $           

947,366 $1,791,596
Non-recourse finance – securitized debt, fair value

                                                                 3,025,128                     999,215
Non-recourse financing - Financing arrangements
included in Investments in Debt and Equity of
Affiliates                                                               17,625                      22,156
Total Financing                                                       3,990,119                   2,812,967

Less:

Recourse Financing – Financing arrangements involved in investments in the debt and equity of affiliates

                          11,601                      13,853
Non-recourse financing - Financing arrangements
included in Investments in Debt and Equity of
Affiliates                                                               17,625                      22,156

Total funding for affiliate debt and equity investments

                                                               29,226                      36,009

Total Financing: GAAP Basis                                 $         3,960,893          $        2,776,958



Leverage

We define GAAP leverage as the sum of (1) GAAP Securitized debt, at fair value,
(2) our GAAP Financing arrangements, net of any restricted cash posted on such
financing arrangements, and (3) the amount payable on purchases that have not
yet settled less the financing remaining on sales that have not yet settled. We
define Economic Leverage, a non-GAAP metric, as the sum of: (i) our GAAP
leverage, exclusive of any fully non-recourse financing arrangements, (ii)
financing arrangements held through affiliated entities, net of any restricted
cash posted on such financing arrangements, exclusive of any financing utilized
through AG Arc, any adjustment related to unsettled trades as described in (2)
in the previous sentence, and any non-recourse financing arrangements and (iii)
our net TBA position (at cost), if any.

The calculations in the tables below divide GAAP leverage and Economic Leverage
by our GAAP stockholders' equity to derive our leverage ratios. The following
tables present a reconciliation of our Economic Leverage ratio to GAAP Leverage
($ in thousands).

                                                                           Stockholders'
September 30, 2022                                     Leverage                Equity                Leverage Ratio
GAAP Securitized debt, at fair value                $ 3,025,128
GAAP Financing arrangements                             935,765
Restricted cash posted on Financing
arrangements                                             (1,373)
Purchase price payable on loans                             794
GAAP Leverage                                       $ 3,960,314          $       464,296                           8.5x
Financing arrangements through affiliated
entities                                                 29,226
Non-recourse financing arrangements (1)              (3,042,753)

Economic Leverage                                   $   946,787          $       464,296                           2.0x


(1) Non-recourse loan agreements include securitized debt and other non-recourse loans held by MATT.

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Shareholders

December 31, 2021                                            Leverage                Equity                Leverage Ratio
GAAP Securitized debt, at fair value                      $   999,215
GAAP Financing arrangements                                 1,777,743
Restricted cash posted on Financing arrangements               (4,951)
Purchase price payable on loans                                    87
GAAP Leverage                                             $ 2,772,094          $       570,380                           4.9x
Financing arrangements through affiliated entities             35,744
Non-recourse financing arrangements (1)                    (1,021,371)
Net TBA receivable/(payable) adjustment                      (394,212)
Economic Leverage                                         $ 1,392,255          $       570,380                           2.4x


(1) Non-recourse loan agreements include securitized debt and other non-recourse loans held by MATT.

hedging activity


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 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 GAAP. See Note 7 in the "Notes to Consolidated Financial
Statements (unaudited)" for more information.

Dividend


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, (vi) methods of depreciation and (vii) differences between GAAP income or
losses in our TRSs' and taxable income resulting from dividend distributions to
the REIT from our TRSs'. Undistributed taxable income is based on current
estimates and is not finalized until we file our annual tax return for that tax
year, typically in October of the following year. We did not have any
undistributed taxable income as of September 30, 2022.

upon July 12, 2021announced a one-third reverse stock split of its outstanding common stock.Consolidation of shares July 22, 2021All per share amounts and common shares outstanding for all applicable periods presented have been retrospectively adjusted to reflect the one-third reverse stock split.

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The following table details our common stock dividends declared during the nine
months ended September 30, 2022 and 2021.
2022
 Declaration Date      Record Date      Payment Date      Cash Dividend Per Share
         3/18/2022        3/31/2022         4/29/2022    $                   0.21
         6/15/2022        6/30/2022         7/29/2022                        0.21
         9/15/2022        9/30/2022        10/31/2022                        0.21
             Total                                       $                   0.63

2021
 Declaration Date      Record Date      Payment Date      Cash Dividend Per Share
         3/22/2021         4/1/2021         4/30/2021    $                   0.18
         6/15/2021        6/30/2021         7/30/2021                        0.21
         9/15/2021        9/30/2021        10/29/2021                        0.21
             Total                                       $                   0.60


The following table details preferred stock dividends declared and paid for the nine months ended. September 30, 2022 And in 2021.

      2022                                                                                                         Cash Dividend Per Share
       Declaration Date               Record Date                  Payment
Date               8.25% Series A           8.00% Series B           8.000% Series C
                2/18/2022                     2/28/2022                     3/17/2022       $       0.51563          $          0.50          $           0.50
                 5/2/2022                     5/31/2022                     6/17/2022               0.51563                     0.50                      0.50
                 8/3/2022                     8/31/2022                     9/19/2022               0.51563                     0.50                      0.50
                    Total                                                                   $       1.54689          $          1.50          $           1.50

      2021                                                                                                         Cash Dividend Per Share
       Declaration Date               Record Date                  Payment Date               8.25% Series A           8.00% Series B           8.000% Series C
                2/16/2021                     2/26/2021                     3/17/2021       $       0.51563          $          0.50          $           0.50
                5/17/2021                     5/28/2021                     6/17/2021               0.51563                     0.50                      0.50
                7/30/2021                     8/31/2021                     9/17/2021               0.51563                     0.50                      0.50
                    Total                                                                   $       1.54689          $          1.50          $           1.50


Liquidity and capital resources

Our liquidity determines our ability to meet our cash obligations, including making distributions to shareholders, paying expenses, financing investments and meeting other general business needs.


Our principal sources of cash consist of borrowings under financing
arrangements, principal and interest payments we receive on our investment
portfolio, cash generated from our operating results, and proceeds from capital
market transactions. We typically use cash to repay principal and interest on
our financing arrangements, to purchase loans, real estate securities, and other
real estate related assets, to make dividend payments on our capital stock, to
repurchase our capital stock, and to fund our operations. We 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, 2022, we had $79.7 million of liquidity, which consisted of $77.6
million of cash and cash equivalents and $2.1 million of unencumbered Agency
RMBS. At October 31, 2022, total liquidity was $103.8 million, which consisted
of $101.7 million of cash and cash equivalents and $2.1 million of unencumbered
Agency RMBS. Refer to the "Contractual obligations" section of this Item 2 for
additional obligations that could impact our liquidity.

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margin requirement


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 seeking to manage effectively
the margin requirements established by our lenders, we maintain a position of
cash and, when owned, unpledged Agency RMBS. We refer to this position as our
"liquidity." The level of liquidity we have available 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 assets that constitute 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 increase, our liquidity will proportionately decrease. In addition, if
we increase our borrowings, our liquidity will decrease by the amount of
additional haircut on the increased level of indebtedness. We intend to maintain
a level of liquidity in relation to our assets that enables us to meet
reasonably anticipated margin calls but that also allows us to be substantially
invested in the residential mortgage market. We may misjudge the appropriate
amount of our liquidity by maintaining excessive liquidity, which would lower
our investment returns, or by maintaining insufficient liquidity, which may
force us to liquidate assets into potentially unfavorable market conditions and
harm our results of operations and financial condition. Further, an unexpected
rise in interest rates and a corresponding fall in the fair value of our
securities may also force us to liquidate assets under difficult market
conditions, thereby harming our results of operations and financial condition,
in an effort to maintain sufficient liquidity to meet increased margin calls.

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

Below are details of changes in cash, cash equivalents and restricted cash for the nine months ended. September 30, 2022 and 2021 (thousand dollars).

                                                                  Nine 

end month

                                                   September 30, 2022          September 30, 2021             Change
Cash and cash equivalents and restricted
cash, Beginning of Period                         $          100,229          $           62,318          $     37,911

Net cash provided by (used in) operating
activities (1)                                                16,806                      19,765                (2,959)
Net cash provided by (used in) investing
activities (2)                                            (1,491,640)                   (878,706)             (612,934)
Net cash provided by (used in) financing
activities (3)                                             1,474,041                     925,449               548,592

Net change in cash and cash equivalents and
restricted cash                                                 (793)                     66,508               (67,301)
Effect of exchange rate changes on cash                            -                          10                   (10)
Cash and cash equivalents and restricted
cash, End of Period                               $           99,436        

$128,836 $ (29,400)



(1)Cash provided by operating activities is primarily attributable to net
interest income less operating expenses for the nine months ended September 30,
2022.
(2)Cash used in investing activities for the nine months ended September 30,
2022 was primarily attributable to purchases of investments, offset by sales of
investments, principal repayments on investments, and the settlement of
derivatives.
(3)Cash provided by financing activities for the nine months ended September 30,
2022 was primarily attributable to issuance of securitized debt, offset by net
repayments of financing arrangements and dividend payments.

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share buyback program


During the nine months ended September 30, 2022, we repurchased 1.4 million
shares for $11.0 million under the common stock repurchase program authorized by
our Board of Directors on November 3, 2015 (the "2015 Repurchase Program").
During the three and nine months ended September 30, 2021, we repurchased 0.3
million shares for $2.8 million under the 2015 Repurchase Program. As of June
30, 2022, the $25.0 million maximum repurchase amount authorized under the 2015
Repurchase Program was fully utilized.

On August 3, 2022, our Board of Directors authorized the 2022 Repurchase Program
to repurchase up to $15.0 million of our outstanding common stock on
substantially the same terms as the 2015 Repurchase Program. 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. During the three and nine months ended September 30,
2022, we repurchased 0.4 million shares for $2.3 million under the 2022
Repurchase Program. As of September 30, 2022, approximately $12.7 million of
common stock remained authorized for future share repurchases 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 repurchased by the Company under the Repurchase Program, if any, shall be considered authorized but unissued shares until canceled and reissued by the Company. Maryland law. The cost of acquiring shares of the Company in excess of the par value of the shares by the Company reduces additional paid-in capital to the extent initially available and applies a residual cost to the surplus.

Stock distribution agreement


On May 5, 2017, we entered into an equity distribution agreement with each of
Credit Suisse Securities (USA) LLC and JMP Securities LLC (collectively, the
"Sales Agents"), which we refer to as the "Equity Distribution Agreements,"
pursuant to which we may sell up to $100.0 million aggregate offering price of
shares of our common stock from time to time through the Sales Agents, under the
Securities Act of 1933. For the three and nine months ended September 30, 2022,
we did not issue any shares of common stock under the Equity Distribution
Agreements. For the three months ended September 30, 2021, we did not issue any
shares under the Equity Distribution Agreements. For the nine months ended
September 30, 2021, we issued 1.0 million shares of common stock under the
Equity Distribution Agreements for net proceeds of approximately $13.1 million.
Since inception of the program, we have issued approximately 2.2 million shares
of common stock under the Equity Distribution Agreements for gross proceeds of
$48.3 million.

Common stock offering

On November 22, 2021, we completed a public offering of 7.0 million shares of
our common stock and subsequently issued an additional 1.1 million shares
pursuant to the underwriters' exercise of their over-allotment option at a price
of $9.98 per share. Net proceeds to us from the offering were approximately
$80.0 million, after deducting offering expenses.

Liquidity Forward-Looking Statements


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

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contractual obligations

Terms of management

The Amended Management Agreement provides for reimbursement of Management Fees, Incentive Fees and certain expenses incurred by the Management Company or its affiliates on our behalf to the Management Company.

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, 2022 and 2021 (in thousands).
                                                         Three Months Ended                                        Nine Months Ended
                                           September 30, 2022          September 30, 2021           September 30, 2022           September 30, 2021
Management fee to affiliate               $        2,064             $             1,693          $             5,984          $             5,014



Current September 30, 2022 When December 31, 2021accrues unpaid administrative costs $2.1 million When $1.8 million, Respectively. Accrued administrative expenses are included in the line item “Affiliates” within the line item “Other liabilities” on the Consolidated Balance Sheets.

bounty


In connection with our common stock offering in November 2021, including the
Manager's purchase of 700,000 shares in the offering, on November 22, 2021, we
and the Manager executed an amendment (the "Third Amendment") to the management
agreement, pursuant to which we will pay the Manager an annual incentive fee in
addition to the base management fee. Pursuant to the Third Amendment, the
Manager waived the annual incentive fee with respect to the fiscal years ending
December 31, 2021 and December 31, 2022, and the annual incentive fee will first
be payable with respect to the fiscal year ending December 31, 2023.

The annual incentive fee with respect to each applicable fiscal year will be
equal to 15% of the amount by which our cumulative adjusted net income from the
date of the Third Amendment 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) our adjusted book value (calculated in the
manner described in our public filings) as of October 31, 2021, (ii) $80.0
million, and (iii) 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 our common stock or a
combination of cash and shares.

In addition, pursuant to the Third Amendment, the term of the management
agreement was extended until June 30, 2023, unless earlier terminated in
accordance with its terms. Thereafter, the management agreement will continue to
renew automatically each year for an additional one-year period, unless the
Company or the Manager exercise its respective termination rights. All other
terms and conditions of the management agreement continued without change.

reimbursement of costs


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 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
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is a combination of management contract guidelines and board oversight and discussions with managers.


We record expenses reimbursed to our Manager or its affiliates within the "Other
operating expenses" and "Transaction related expenses" line items on the
consolidated statements of operations. The below table details the expense
reimbursement incurred during the three and nine months ended September 30, 2022
and 2021 (in thousands).
                                                   Three Months Ended                                  Nine Months Ended
                                                                   September 30,                                       September 30,
                                        September 30, 2022              2021               September 30, 2022               2021
Operating expenses (1)                 $        1,405             $       1,125          $             4,215          $       3,375
Deal related expenses (1)                         261                       189                          637                    518
Transaction related expenses (2)                        738                    251                     2,484                       331
Expense reimbursements to
affiliates                             $        2,404             $       1,565          $             7,336          $       4,224


(1)Included in the "Other operating expenses" line item on the consolidated
statement of operations.
(2)Included in the "Transaction related expenses" line item on the consolidated
statement of operations.

For the year ended December 31, 2021, our Manager agreed to waive its right to
receive expense reimbursements of $0.8 million. For the three and nine months
ended September 30, 2021, we reduced our expense reimbursement amount by
$0.2 million and $0.6 million, respectively. As of September 30, 2022 and
December 31, 2021, we recorded reimbursements payable to our Manager or its
affiliates of $2.5 million and $2.1 million, respectively. The Reimbursement
payable to the Manager or its affiliates is included within the "Due to
affiliates" item within the "Other liabilities" line item on the consolidated
balance sheets.

Share-based compensation

The AG Mortgage Investment Trust, Inc. 2020 Equity Incentive Plan, which became
effective on April 15, 2020 following the approval of our stockholders at our
2020 annual meeting of stockholders, provides for a maximum of 666,666 shares of
common stock that may be issued under the plan. The maximum number of shares of
common stock granted during a single fiscal year to any non-employee director,
taken together with any cash fees paid to such non-employee director during any
fiscal year, shall not exceed $300,000 in total value (calculating the value of
any such awards based on the grant date fair value). As of September 30, 2022,
570,901 shares of common stock were available to be awarded under the Equity
Incentive Plan.

Since inception of the 2020 Equity Incentive Plan and through September 30,
2022, we have granted an aggregate of 95,765 shares of restricted common stock
to our independent directors under our 2020 Equity Incentive Plan, all of which
have vested.

The AG Mortgage Investment Trust, Inc. 2021 Manager Equity Incentive Plan (the
"2021 Manager Plan"), which became effective on April 7, 2021 following the
approval of our stockholders at our 2021 annual meeting of stockholders,
provides for a maximum of 573,425 shares of common stock that may be subject to
awards thereunder to our Manager. As of September 30, 2022, there were no shares
or awards issued under the 2021 Manager Plan. Following the execution of the
third amendment to our management agreement in November 2021 related to the
incentive fee, our compensation committee no longer expects to continue its
historical practice of making periodic equity grants to the Manager pursuant to
the 2021 Manager Equity Incentive Plan.

unfulfilled commitments

See Note 12 of the “Notes to Consolidated Financial Statements (Unaudited)” for further information on our commitments. September 30, 2022.

Off-balance sheet arrangements


Our investments in debt and equity of affiliates primarily consist of loans,
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
Loans and Re/Non-Performing Loans line items of our investment portfolio. See
Notes 2 and 10 to the "Notes to Consolidated Financial Statements (unaudited)"
for a discussion of investments in debt and equity of affiliates.

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We record TBA purchases and sales on the trade date and present the purchase or
receipt net of the corresponding payable or receivable until the settlement date
of the transaction. Refer to Note 7 to the "Notes to Consolidated Financial
Statements (unaudited)" for additional detail on TBAs as of September 30, 2022,
if applicable.

For additional information on our commitments as of September 30, 2022, 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.

Significant accounting policies


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 reported amounts of revenues 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,
2022 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, liabilities
and accumulated other comprehensive income at the date of the consolidated
financial statements and the reported amounts of income, expenses and other
comprehensive income during the periods presented.

Our consolidated financial statements are prepared in accordance with GAAP,
which requires the use of estimates that involve the exercise of judgment and
the use of assumptions as to future uncertainties. A discussion of the critical
accounting policies and the possible effects of changes in estimates on our
consolidated financial statements is included in Item 8 of our Annual Report on
Form 10-K for the year ended December 31, 2021 and in Note 2 to the "Notes to
Consolidated Financial Statements (unaudited)." Our most critical accounting
policies are believed to include (i) Valuation of financial instruments, (ii)
Accounting for loans, (iii) Accounting for real estate securities, (iv) Interest
income recognition, (v) Financing arrangements, and (vi) Investment
consolidation.

These policies involve decisions and assessments that could affect our reported
assets and liabilities, as well as our reported revenues and expenses. We
believe that all of the decisions and assessments upon which our consolidated
financial statements are based are reasonable at the time made and based upon
information available to us at that time. We rely upon third-party pricing of
our assets at each-quarter end to arrive at what we believe to be reasonable
estimates of fair value, whenever available. For more information on our fair
value measurements, see Note 5 to the "Notes to Consolidated Financial
Statements (unaudited)." For a review of our significant accounting policies and
the recent accounting pronouncements that may impact our results of operations,
see Note 2 to the "Notes to Consolidated Financial Statements (unaudited)."

Compliance with the Investment Company Law and REIT Tests


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 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 closely monitor our holdings to ensure
continuing and ongoing compliance with the 40% Test. As of December 31, 2021 and
September 30, 2022, we determined that we maintained compliance with the 40%
Test requirements.

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. Accordingly, in order to maintain our exempt status, we closely monitor
our subsidiaries' holdings to ensure continuing and ongoing compliance with
Section 3(c)(5)(C) of the Investment Company Act, which 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 staff of the Securities and Exchange Commission, or the SEC,
generally requires an entity relying on Section 3(c)(5)(C) to invest at least
55% of its
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portfolio in "qualifying assets" (the "55% Test") and at least another 25% in
additional qualifying assets or in "real estate-related" assets (with no more
than 20% comprised of miscellaneous assets) (the "80% Test"). As of December 31,
2021 and September 30, 2022, we determined that our subsidiaries maintained
compliance with both the 55% Test and the 80% Test requirements.

We intend to conduct our business so as to maintain our qualification as a REIT
under the Code by satisfying the asset, income, distribution and other REIT
requirements. We calculate that at least 75% of our assets were real estate
assets, cash and cash items and government securities for the year ended
December 31, 2021. We also calculate that a sufficient portion of our revenue
qualifies for the 75% gross income test and for the 95% gross income test rules
for the year ended December 31, 2021. We believe we are currently in compliance
with the REIT income and asset tests as well as all other REIT requirements
including the ownership of our stock and the distribution of our taxable income.
Therefore, for the year ended December 31, 2021, we believe that we qualified as
a REIT under the Code.
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