NEW YORK MORTGAGE TRUST INC Management’s Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q) | MarketScreener

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS



When used in this Quarterly Report on Form 10-Q, in future filings with the SEC
or in press releases or other written or oral communications issued or made by
us, statements which are not historical in nature, including those containing
words such as "will," "believe," "expect," "anticipate," "estimate," "plan,"
"continue," "intend," "could," "would," "should," "may," or similar expressions,
are intended to identify "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, as such,
may involve known and unknown risks, uncertainties and assumptions.

Forward-looking statements are based on estimates, projections, beliefs and
assumptions of management of the Company at the time of such statements and are
not guarantees of future performance. Forward-looking statements involve risks
and uncertainties in predicting future results and conditions. Actual results
and outcomes could differ materially from those projected in
these forward-looking statements due to a variety of factors, including, without
limitation:

•changes in our business and investment strategy;
•changes in interest rates and the fair market value of our assets, including
negative changes resulting in margin calls relating to the financing of our
assets;
•changes in credit spreads;
•changes in the long-term credit ratings of the U.S., Fannie Mae, Freddie Mac,
and Ginnie Mae;
•general volatility of the markets in which we invest;
•changes in prepayment rates on the loans we own or that underlie our investment
securities;
•increased rates of default, delinquency or vacancy and/or decreased recovery
rates on or at our assets;
•our ability to identify and acquire our targeted assets, including assets in
our investment pipeline;
•our ability to dispose of assets from time to time on terms favorable to us,
including the disposition over time of our joint venture equity investments;
•changes in our relationships with our financing counterparties and our ability
to borrow to finance our assets and the terms thereof;
•changes in our relationships with and/or the performance of our operating
partners;
•our ability to predict and control costs;
•changes in laws, regulations or policies affecting our business, including
actions that may be taken to contain or address the impact of the novel
coronavirus ("COVID-19") and variants;
•our ability to make distributions to our stockholders in the future;
•our ability to maintain our qualification as a REIT for federal tax purposes;
•our ability to maintain our exemption from registration under the Investment
Company Act of 1940, as amended (the "Investment Company Act");
•risks associated with investing in real estate assets, including changes in
business conditions and the general economy, the availability of investment
opportunities and the conditions in the market for Agency RMBS, non-Agency RMBS,
ABS and CMBS securities, residential loans, structured multi-family investments
and other mortgage-, residential housing- and credit-related assets; and
•the impact of COVID-19 on us, our operations and our personnel.

These and other risks, uncertainties and factors, including the risk factors
described herein, as updated by those risks described in our subsequent filings
with the SEC under the Exchange Act, could cause our actual results to differ
materially from those projected in any forward-looking statements we make. All
forward-looking statements speak only as of the date on which they are made. New
risks and uncertainties arise over time and it is not possible 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.

Special Note Regarding COVID-19 Pandemic


Because there have been no comparable recent global pandemics that resulted in
similar impact, we do not yet know the full extent of the effects of the
COVID-19 on our business, operations, personnel, or the U.S. economy as a whole.
Any future developments in this regard will be highly uncertain and cannot be
predicted with any certainty. Future developments with respect to COVID-19 and
its variants remain fluid and could materially and adversely affect our
business, operations, operating results, financial condition, liquidity or
capital levels.

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Defined Terms


In this Quarterly Report on Form 10-Q we refer to New York Mortgage Trust, Inc.,
together with its consolidated subsidiaries, as "we," "us," "Company," or "our,"
unless we specifically state otherwise or the context indicates otherwise, and
we refer to our wholly-owned taxable REIT subsidiaries as "TRSs" and our
wholly-owned qualified REIT subsidiaries as "QRSs." In addition, the following
defines certain of the commonly used terms in this report:

•”ABS” refers to debt and/or equity tranches of securitizations backed by
various asset classes including, but not limited to, automobiles, aircraft,
credit cards, equipment, franchises, recreational vehicles and student loans;


•"Agency RMBS" refers to RMBS representing interests in or obligations backed by
pools of residential loans guaranteed by the Federal National Mortgage
Association ("Fannie Mae") or the Federal Home Loan Mortgage Corporation
("Freddie Mac"), or an agency of the U.S. government, such as the Governmental
National Mortgage Association ("Ginnie Mae");

•”business purpose loans” refers to short-term loans collateralized by
residential properties made to investors who intend to rehabilitate and sell the
residential property for a profit or loans which finance (or refinance)
non-owner occupied residential properties that are rented to one or more
tenants;

•”CDO” refers to collateralized debt obligation and includes debt that
permanently finances the residential loans held in Consolidated SLST, the
Company’s residential loans held in securitization trusts and a non-Agency RMBS
re-securitization that we consolidate, or consolidated, in our financial
statements in accordance with GAAP;


•"CMBS" refers to commercial mortgage-backed securities comprised of commercial
mortgage pass-through securities issued by a government sponsored enterprise
("GSE"), as well as PO, IO or mezzanine securities that represent the right to a
specific component of the cash flow from a pool of commercial mortgage loans;

•”Consolidated SLST” refers to a Freddie Mac-sponsored residential loan
securitization, comprised of seasoned re-performing and non-performing
residential loans, of which we own or owned the first loss subordinated
securities and certain IOs and senior securities that we consolidate in our
financial statements in accordance with GAAP;


•"Consolidated VIEs" refers to VIEs where the Company is the primary
beneficiary, as it has both the power to direct the activities that most
significantly impact the economic performance of the VIE and a right to receive
benefits or absorb losses of the entity that could be potentially significant to
the VIE and that we consolidate in our financial statements in accordance with
GAAP;

•"excess mortgage servicing spread" refers to the difference between the
contractual servicing fee with Fannie Mae, Freddie Mac or Ginnie Mae and the
base servicing fee that is retained as compensation for servicing or
subservicing the related mortgage loans pursuant to the applicable servicing
contract;

•”GAAP” refers to generally accepted accounting principles within the United
States
;

•”IOs” refers collectively to interest only and inverse interest only
mortgage-backed securities that represent the right to the interest component of
the cash flow from a pool of mortgage loans;

•”Mezzanine Lending” refers, collectively, to preferred equity and mezzanine
loan investments;

•”multi-family CMBS” refers to CMBS backed by commercial mortgage loans on
multi-family properties;

•”non-Agency RMBS” refers to RMBS that are not guaranteed by any agency of the
U.S. Government or GSE;

•”POs” refers to mortgage-backed securities that represent the right to the
principal component of the cash flow from a pool of mortgage loans;

•”RMBS” refers to residential mortgage-backed securities backed by
adjustable-rate, hybrid adjustable-rate or fixed-rate residential loans;

•”second mortgages” refers to liens on residential properties that are
subordinate to more senior mortgages or loans; and

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•"Variable Interest Entity" or "VIE" refers to an entity in which equity
investors do not have the characteristics of a controlling financial interest or
do not have sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other parties.

General


We are a real estate investment trust ("REIT") for U.S. federal income tax
purposes, in the business of acquiring, investing in, financing and managing
primarily mortgage-related single-family and multi-family residential assets.
Our objective is to deliver long-term stable distributions to our stockholders
over changing economic conditions through a combination of net interest spread
and capital gains from a diversified investment portfolio. Our investment
portfolio includes credit sensitive single-family and multi-family assets.

We have elected to be taxed as a REIT for U.S. federal income tax purposes and
have complied, and intend to continue to comply, with the provisions of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), with
respect thereto. Accordingly, we do not expect to be subject to federal income
tax on our REIT taxable income that we currently distribute to our stockholders
if certain asset, income, distribution and ownership tests and record keeping
requirements are fulfilled. Even if we maintain our qualification as a REIT, we
expect to be subject to some federal, state and local taxes on our income
generated in our TRSs.

Executive Summary


Since the significant market disruption that occurred in March 2020, we have
endeavored to build out a low-levered, higher-yielding portfolio of credit
sensitive single-family and multi-family assets through proprietary sourcing
channels while reducing our exposure to investment securities. Building scale in
the portfolio and momentum in investment activity has proven challenging for
much of the approximately 30 months following the March 2020 market disruption,
with initial challenges driven in large part by robust demand for credit assets
and elevated prepayment and redemption levels. Market opportunities in our areas
of investment focus became more abundant from the fourth quarter of 2021 through
May of 2022, allowing us to expand our total investment portfolio to
approximately $4.6 billion as of June 30, 2022, up from $3.3 billion as of
September 30, 2021. Extreme interest rate volatility and credit spread widening
caused us to significantly curtail our investment activity and pipeline late in
the second quarter of 2022. In light of current market conditions, which
includes increased volatility in interest rate, credit, mortgage and financial
markets and the increasing risk of the U.S. economy experiencing a recession
within the next 12 months, in the third quarter, we were selective in pursuing
investments across the residential housing sector, choosing instead to focus on
further enhancing our liquidity, strengthening our balance sheet and protecting
our book value. During the third quarter, we opportunistically disposed of
assets in our portfolio generating $32.4 million of net gains and, as further
discussed below, also announced a repositioning of our business through the
opportunistic disposition over time of our joint venture equity investments in
multi-family properties.

The mortgage industry, and the U.S. economy more generally, experienced
significant headwinds throughout most of 2022, as rising bond yields, a rapidly
flattening yield curve, Federal Reserve interest rate hikes and expectations for
future interest rate hikes and tightening monetary policy, combined with
elevated inflation data, geopolitical instability and growing concerns over the
likelihood of an economic recession in the U.S. sometime in the next 12 months
contributed to widening credit spreads that caused price declines for many of
the residential credit assets in our portfolio. In our residential loan
portfolio alone, we recorded approximately $252.5 million of unrealized losses
for the nine months ended September 30, 2022 as compared to unrealized gains of
$55.3 million for the year ended December 31, 2021. Consistent with our efforts
to further strengthen our balance sheet, we completed a securitization of
residential loans, resulting in approximately $220.8 million in net proceeds to
us, which we used to repay outstanding financings related to residential loans.
With the completion of this securitization, as of September 30, 2022, only 23%
of our total financing arrangements (including Company sponsored CDOs) is
subject to mark-to-market margin call risk, down from 99% at December 31, 2019.

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On September 2022, we announced that our board of directors had approved a
strategic repositioning of our business pursuant to which we will
opportunistically dispose of our joint venture equity interests in multi-family
properties over time and, following disposition, we will reallocate the capital
associated with such assets to our targeted assets. Beginning in 2020, we saw an
attractive opportunity within the multi-family property sector to utilize our
sourcing network and add common equity exposure to over 20 properties through
joint venture equity investments. Due to various factors, the multi-family
property sector recorded historical increases in per unit rent in several
targeted markets resulting in improved valuations that we believe are capable of
achieving our targeted returns for such investments on an accelerated timeline.
As a result, we are considering various opportunities to monetize what we
believe is appreciated value within our portfolio of multi-family joint venture
equity investments. We believe that through a well-navigated disposition
process, we can rotate the portfolio over time to more attractive investments in
a higher rate environment. We expect to continue to invest in multi-family
mezzanine lending going forward, which remains one of our targeted assets.

We intend to focus on our core portfolio strengths of single-family and
multi-family residential credit assets, which we believe will deliver better
risk adjusted returns over time. Our targeted investments include (i)
residential loans and business purpose loans, (ii) structured multi-family
property investments such as preferred equity in, and mezzanine loans to, owners
of multi-family properties, (iii) non-Agency RMBS, (iv) Agency RMBS, (v) CMBS
and (vi) certain other mortgage-, residential housing- and credit-related assets
and strategic investments in companies from which we purchase, or may in the
future purchase, our targeted assets. Subject to maintaining our qualification
as a REIT and the maintenance of our exclusion from registration as an
investment company under the Investment Company Act, we also may
opportunistically acquire and manage various other types of mortgage-,
residential housing- and credit-related and other assets that we believe will
compensate us appropriately for the risks associated with them, including,
without limitation, collateralized mortgage obligations, mortgage servicing
rights, excess mortgage servicing spreads, securities issued by newly originated
securitizations, including credit sensitive securities from these
securitizations, and debt or equity investments in alternative assets or
businesses. Our investment and capital allocation decisions depend on prevailing
market conditions, among other factors, and may change over time in response to
opportunities available in different economic and capital market environments.

We expect to continue to place a greater emphasis on procuring longer-termed
and/or more committed financing arrangements that provide less or no exposure to
fluctuations in the collateral repricing determinations of financing
counterparties or rapid liquidity reductions in repurchase agreement financing
markets. We still expect to utilize some level of repurchase agreement financing
as we do currently, but expect repurchase agreement financing, particularly
short-term agreements, to represent a smaller percentage of our financing
relative to historic levels and/or to utilize facilities where the terms provide
for less liquidity and financing risk. While longer-termed financings may
involve greater expense relative to repurchase agreement funding that exposes us
to mark-to-market risks, we believe, over time, this weighting towards
longer-termed financings may better allow us to manage our liquidity risk and
reduce exposures to market events like those caused by the COVID-19 pandemic
during March 2020.

We currently intend to continue to pursue selective investments across the
residential housing sector, consider the opportunistic disposition of assets
from our portfolio, including our joint venture equity investments, focus on
generating higher portfolio turnover and prudently manage our liabilities. We
believe these actions, combined with our strong balance sheet and cash position,
will help to protect our undepreciated book value per common share during the
expected continued volatile periods in the near future and will better enable us
to rapidly reposition our portfolio in a higher interest rate environment and
position us to deploy capital and seize on superior market opportunities in the
market cycles ahead.

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Portfolio Update


In the three months ended September 30, 2022, we continued to selectively pursue
new single-family residential loans, multi-family investments and single-family
rental property investments. Our investment activity was offset by prepayments,
redemptions and distributions, opportunistic sales of investment securities and
unrealized losses recognized on a majority of our investment portfolio due to
increases in interest rates and wider credit spreads. The following table
presents the activity for our investment portfolio for the three months ended
September 30, 2022 (dollar amounts in thousands):

                                                                                                                         Transfers to
                                                                                                                           Disposal            Fair Value
                                                                                                                          Group Held          Changes and           September 30,
                            June 30, 2022           Acquisitions (1)           Repayments (2)            Sales           for Sale (3)          Other (4)                2022
Residential loans         $    3,408,414          $         100,622          $      (314,607)         $       -          $       -          $    (122,038)         $  3,072,391
Preferred equity
investments, mezzanine
loans and equity
investments                      330,476                      8,895                  (16,525)                 -             (9,936)               (11,267)              301,643
Investment securities

CMBS                              30,096                          -                     (245)                 -                  -                    495                30,346
Non-Agency RMBS                   74,822                          -                       (4)                 -                  -                 (3,589)               71,229
ABS                               35,588                          -                        -            (36,215)                 -                  1,738                 1,111
Total investment
securities available for
sale                             140,506                          -                     (249)           (36,215)                 -                 (1,356)              102,686
Consolidated SLST (5)            208,585                          -                        -                  -                  -                 (9,751)              198,834
Total investment
securities                       349,091                          -                     (249)           (36,215)                 -                (11,107)              301,520
Equity investments in
consolidated multi-family
properties (6)                   387,797                      1,540                  (26,550)                 -           (237,655)                16,745               141,877
Equity investments in
disposal group held for
sale (3)                               -                          -                        -                  -            247,591                      -               247,591
Single-family rental
properties                       142,848                      7,531                        -                  -                  -                   (759)              149,620
Total investment
portfolio                 $    4,618,626          $         118,588          $      (357,931)         $ (36,215)         $       -          $    (128,426)         $  4,214,642



(1)Includes draws funded for business purpose bridge loans and existing joint
venture equity investments and capitalized costs for single-family rental
properties.
(2)Includes principal repayments and return of invested capital.
(3)In September 2022, the Company announced a repositioning of its business
through the opportunistic disposition over time of the Company's joint venture
equity investments in multi-family properties and reallocation of its capital
away from such assets to its targeted assets. Accordingly, as of September 30,
2022, the assets and liabilities related to certain joint venture equity
investments in multi-family properties is included in assets of disposal group
held for sale on the accompanying condensed consolidated balance sheets. See
"Balance Sheet Analysis-Equity Investments in Multi-Family Entities" for a
reconciliation of equity investments in consolidated multi-family properties and
disposal group held for sale to the Company's condensed consolidated balance
sheets.
(4)Primarily includes net realized gains or losses, changes in net unrealized
gains or losses (including reversals of previously recognized net unrealized
gains or losses on sales), net amortization/accretion/depreciation and net loss
from real estate attributable to the Company.
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(5)Consolidated SLST is primarily presented on our condensed consolidated
balance sheets as residential loans, at fair value and collateralized debt
obligations, at fair value. A reconciliation to our condensed consolidated
financial statements as of September 30, 2022 and June 30, 2022, respectively,
follows (dollar amounts in thousands):

                                                            September 30, 2022           June 30, 2022
Residential loans, at fair value                           $          860,785          $      920,778
Deferred interest (a)                                                  (1,882)                 (1,960)
Less: Collateralized debt obligations, at fair value                 (660,069)               (710,233)

Consolidated SLST investment securities owned by NYMT $ 198,834 $ 208,585

(a)Included in other liabilities on our condensed consolidated balance sheets.


(6)See "Balance Sheet Analysis-Equity Investments in Multi-Family Entities" for
a reconciliation of equity investments in consolidated multi-family properties
and disposal group held for sale to the Company's condensed consolidated balance
sheets.
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Current Market Conditions and Commentary


The results of our business operations are affected by a number of factors, many
of which are beyond our control, and primarily depend on, among other things,
the level of our net interest income, the market value of our assets, which is
driven by numerous factors including the supply and demand for mortgage, housing
and credit assets in the marketplace, the ability of our operating partners,
tenants and borrowers of our loans and those that underlie our investment
securities to meet their payment obligations, the terms and availability of
adequate financing and capital, general economic and real estate conditions
(both on a national and local level), the impact of government actions in the
real estate, mortgage, credit and financial markets, and the credit performance
of our credit sensitive assets.

Financial and mortgage-related asset market conditions declined further during
the third quarter of 2022. U.S. stocks finished down for the third quarter in a
row with the Dow Jones Industrial Average and the Nasdaq Composite Index ending
the third quarter down 6.7% and 4.1%, respectively. U.S. economic activity was
pressured in the third quarter by rising interest rates, concerns over
tightening monetary policy, near double digit inflation and geopolitical
instability. As was the case for credit-sensitive assets generally across
markets, pricing for many of the assets in our investment portfolio during the
third quarter declined, particularly so in the final weeks of the quarter.

Thus far in 2022, equity markets have been challenged with investors absorbing
the Federal Reserve's combined 3.00% in interest rate hikes, taking the federal
funds rate to its highest point since 2008, expected additional future rate
hikes in 2022 and into 2023 and growing concerns of the potential for a U.S.
economic recession within the next 12 months. Fixed-income markets have been
accordingly impacted with the yield on the 2-year U.S. Treasury note increasing
to 4.22% on September 30, 2022 from a yield of 0.73% on December 31, 2021, an
increase of 349 basis points. Due to high inflation, expected increases in the
federal funds rate, the Federal Reserve's reduction of its balance sheet and
growing recession concerns, we anticipate markets, and the pricing for many of
our assets, will continue to experience volatility through year-end and into
2023.

The market conditions discussed below significantly influence our investment
strategy and results:


Select U.S. Financial and Economic Data. The U.S. economy grew modestly in the
third quarter of 2022, with real gross domestic product ("GDP") increasing at a
2.6% (advanced estimate) annualized rate in the third quarter of 2022, versus a
0.6% decrease in the second quarter of 2022 and a 1.6% decrease in the first
quarter of 2022.

Although the data remains mixed, the U.S. labor market began to see signs of a
cooling pattern throughout the third quarter, adding 263,000 jobs in September,
as compared to the monthly average of more than 440,000 during the first half of
the year. According to the U.S. Department of Labor, the U.S. unemployment rate
decreased slightly from 3.6% at the end of June 2022 to 3.5% at the end of
September 2022, with the labor force participation rate returning to
pre-pandemic rates in July and wages increasing 5.0% year-over-year. The number
of unemployed persons decreased by 1.9 million year­over­year to 5.8 million as
of September 2022. There continues to be a wide disparity between the number of
available job openings, 10.1 million as of the end of September 2022, and the
number of unemployed persons, resulting in a competitive labor market and rising
wages.

The interest rate environment remained turbulent as the Federal Reserve raised
interest rates again in September following two increases in the second quarter
in an effort to rein in inflation as the Consumer Price Index ("CPI") maintained
multi-decade highs above 8% during the third quarter. The record-high inflation
levels have put pressure on our mortgage borrowers, rents and operating
partners. These rate hikes and the anticipation of future rate hikes by the
Federal Reserve contributed to the Treasury curve inverting in July. On
September 30, 2022, the spread between the 2-Year U.S. Treasury yield and the
10-Year U.S. Treasury yield closed at negative 39 basis points, as compared to a
79 and 124 basis point spread on December 31, 2021 and September 30, 2021,
respectively. The 2-year and 10-year yield curve has remained inverted since
July.

As noted above, fears of an economic recession here in the U.S. continue to
grow. A recent survey of economists by the Wall Street Journal indicated that
the probability of a recession in the next twelve months is at 63%, a figure
that has risen 14% since the last survey taken in July 2022. With two
consecutive quarters of GDP contraction in 2022, the U.S. economy increasingly
moves toward recession territory, which the National Bureau of Economic Research
defines as "a significant decline in economic activity that is spread across the
economy and that lasts more than a few months." An economic recession may put
pressure on the ability of our operating partners, tenants and borrowers to meet
their obligations to us, and would likely adversely impact the value of our
assets, among other things, which could materially adversely affect our results
of operations and financial condition.

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Single-Family Homes and Residential Mortgage Market. The residential real estate
market began to see the impacts of higher interest rates in the third quarter as
existing-home sales slipped 1.5% in September from August and decreased for the
eighth consecutive month. Although there has been a decline in home sales, data
released by the S&P Dow Jones Indices for their S&P CoreLogic Case-Shiller
National Home Price NSA Indices for July 2022 showed that, on average, home
prices increased 15.77% for the 20-City Composite over July 2021. According to
the National Association of Realtors ("NAR"), the median existing-home price for
all housing types in September 2022 was $384,000, up 8.4% from $355,100 in
September 2021. Despite 127 consecutive months of year-over-year increases in
median home prices, the longest streak on NAR's records, median sales price
declined for the third month in a row in September after reaching a record high
of $413,800 in June, suggesting that homebuilding and pricing may be starting to
moderate. According to data provided by the U.S. Census Bureau and the U.S.
Department of Housing and Urban Development, privately-owned housing starts for
single-family homes averaged a seasonally adjusted annual rate of 909,000 and
1,061,000 for the three and nine months ended September 30, 2022, respectively,
as compared to 1,131,000 for the year ended December 31, 2021. Overall, existing
home inventory for sale at the end of September amounted to 3.2 months of
supply, up from 2.4 months of supply in September 2021, according to the NAR. As
interest rates continue to move higher, we expect this to put downward pressure
on home prices and borrowers. Declining single-family housing fundamentals may
adversely impact the overall credit profile and value of our existing portfolio
of single-family residential credit investments, as well as the availability of
certain of our targeted assets.

Multi-family Housing. According to data provided by the U.S. Census Bureau and
the U.S. Department of Housing and Urban Development, starts on multi-family
homes containing five or more units averaged a seasonally adjusted annual rate
of 534,000 and 531,000 for the three and nine months ended September 30, 2022,
respectively, as compared to 462,000 for the year ended December 31, 2021.
Demand for new apartments will likely remain elevated in the near term,
particularly in the South and Southeastern U.S. where demand has outpaced
supply. Nationally, rents have continued to rise-building upon their
double-digit growth in 2021. Weakening multi-family housing fundamentals,
including, among other things, increasing interest rates, widening
capitalization rates and reduced liquidity for owners of multi-family
properties, may cause our operating partners to fail to meet their obligations
to us and/or contribute to reduced cash flows from and/or valuation declines for
multi-family properties, and in turn, many of the multi-family investments that
we own.

Credit Spreads. During the third quarter, both investment grade and high-yield
credit spreads widened amid the Federal Reserve's aggressive stance regarding
interest rate increases and high inflation. Tightening credit spreads generally
increase the value of many of our credit sensitive assets, while widening credit
spreads tend to have a negative impact on the value of many of our credit
sensitive assets.

Financing Markets. During the third quarter, the bond market experienced
continued yield gains with the closing yield of the 10-year U.S. Treasury Note
rising from 2.88% on July 1, 2022 to 3.83% on September 30, 2022. Throughout the
third quarter of 2022, the Treasury curve continued to experience volatility.
The Treasury curve began the third quarter with the spread between the 2-Year
U.S. Treasury yield and the 10-Year U.S. Treasury yield at 4 basis points on
July 1, 2022 before inverting and then ultimately closing the quarter with a
spread of negative 39 basis points on September 30, 2022. Inversions of this
spread are generally considered to be indicators of a recession in the near
term. This spread is important as it is indicative of opportunities for
investing in levered assets. Increases in interest rates raise the costs of many
of our liabilities, while overall interest rate volatility generally increases
the costs of hedging and may place downward pressure on some of our strategies.

Monetary Policy and Recent Regulatory Developments. The Federal Reserve took a
number of actions to stabilize markets during the COVID-19 pandemic. From March
2020 until March 2022, the Federal Reserve implemented an asset purchase program
aimed at providing liquidity to the U.S. Treasury and Agency RMBS markets. Under
the Federal Reserve's asset purchase program, the Federal Reserve's balance
sheet grew from about $4.2 trillion in assets at the start of March 2020 to
about $8.9 trillion in assets at the end of the program in March 2022. On June
1, 2022, the Federal Reserve shifted course and began shrinking its balance
sheet by reducing its holdings of U.S. Treasuries and Agency RMBS by $47.5
billion per month. In September, the Federal Reserve increased its efforts to
reduce its balance sheet by doubling the amount of U.S. Treasuries and Agency
RMBS it plans to roll off to $95 billion each month. Sales or reductions in the
pace of purchasing of Agency RMBS by the Federal Reserve could create headwinds
in the market for Agency RMBS where increased supply could drive prices lower
and interest rates higher.

From March 2020 to March 2022, the Federal Reserve maintained a target range for
the federal funds rate of 0% to 0.25% in view of the COVID-19 pandemic and to
foster maximum employment and price stability. With inflation well above the 2%
objective so far in 2022 and a strong labor market, the Federal Reserve approved
a 0.25% increase to the target range for the federal funds rate on March 16,
2022, a 0.50% increase on May 4, 2022, a 0.75% increase on June 15, 2022, a
0.75% increase on July 27, 2022 and a 0.75% increase on September 21, 2022. With
additional increases to the Federal Reserve's target range possible in the
remainder of 2022, some Federal Reserve officials expect the target range for
the federal funds rate to reach a level between 4.25% and 4.50% by the end of
2022.

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In 2017, policymakers announced that LIBOR would be replaced by 2021. The
directive was spurred by the fact that banks are uncomfortable contributing to
the LIBOR panel given the shortage of underlying transactions on which to base
levels and the liability associated with submitting an unfounded level. The
Alternative Reference Rates Committee ("ARRC"), which was convened by the
Federal Reserve Board and the Federal Reserve Bank of New York to help ensure a
successful transition from LIBOR, proposed that the Secured Overnight Funding
Rate ("SOFR") would replace LIBOR. SOFR is based on overnight Treasury General
Collateral repo rates.

The administrator of LIBOR, with the support of the Federal Reserve and the
United Kingdom's Financial Conduct Authority, ceased publication of USD LIBOR on
December 31, 2021, for only the one week and two month USD LIBOR tenors, and
plans to cease publication of USD LIBOR on June 30, 2023 for all other USD LIBOR
tenors. While the transition period has been extended to June 2023, the Federal
Reserve issued a statement advising banks to stop new USD LIBOR issuances by the
end of 2021. Thus far in 2022, the market's adoption of SOFR appears to be
strong and growing. Additionally, the federal government enacted the Adjustable
Interest Rate Act in March 2022 with the intention of assisting in the
transition away from LIBOR. Nevertheless, uncertainty about the transition away
from LIBOR and the future of the alternative reference rate remains. We continue
to monitor the emergence of this new rate carefully, as it will likely become
the new benchmark for hedges and a range of interest rate investments.

The scope and nature of the actions the Federal Reserve and other governmental
authorities will ultimately undertake are unknown and will continue to evolve.
There can be no assurance as to how, in the long term, these and other actions,
as well as the negative impacts from the ongoing COVID-19 and variants and
geopolitical instability and uncertainty surrounding inflation, interest rates
and the outlook for the U.S. and global economies, will affect the efficiency,
liquidity and stability of the financial, credit and mortgage markets, and thus,
our business. Greater uncertainty frequently leads to wider asset spreads or
lower prices and higher hedging costs.
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Third Quarter 2022 Summary

Earnings and Return Metrics

The following table presents key earnings and return metrics for the three and
nine months ended September 30, 2022 (dollar amounts in thousands, except per
share data):

                                                           Three Months Ended             Nine Months Ended
                                                           September 30, 2022            September 30, 2022

Net loss attributable to Company’s common stockholders $ (125,770)

            $        (292,501)

Net loss attributable to Company’s common stockholders
per share (basic)

                                        $           (0.33)            $           (0.77)
Undepreciated loss (1)                                   $        (101,473)            $        (215,462)
Undepreciated loss per common share (1)                  $           (0.27)            $           (0.57)

Comprehensive loss attributable to Company’s common
stockholders

                                             $        (126,879)            $        (296,333)

Comprehensive loss attributable to Company’s common
stockholders per share (basic)

                           $           (0.34)            $           (0.78)
Yield on average interest earning assets (1) (2)                      6.66     %                    6.71     %
Interest income                                          $          68,920             $         195,441
Interest expense                                         $          54,699             $         125,212
Net interest income                                      $          14,221             $          70,229
Adjusted net interest income (1) (3)                     $          30,357             $         106,674
Net interest spread (1) (3)                                           2.18     %                    2.93     %
Book value per common share at the end of the period     $            3.65             $            3.65

Undepreciated book value per common share at the end of
the period (1)

                                           $            3.89             $            3.89
Economic return on book value (4)                                    (7.64)    %                  (15.96)    %
Economic return on undepreciated book value (5)                      (5.90)    %                  (11.60)    %
Dividends per common share                               $            0.10             $            0.30



(1)Represents a non-GAAP financial measure. A reconciliation of the Company's
non-GAAP financial measures to their most directly comparable GAAP measure is
included in "Non-GAAP Financial Measures" elsewhere in this section.
(2)Calculated as the quotient of our adjusted interest income and our average
interest earning assets, which excludes all Consolidated SLST assets other than
those securities owned by the Company.
(3)Excludes interest expense recognized on mortgages payable on real estate. Our
calculation of adjusted net interest income and net interest spread may not be
comparable to similarly-titled measures of other companies who may use a
different calculation.
(4)Economic return on book value is based on the periodic change in GAAP book
value per common share plus dividends declared per common share, if any, during
the period.
(5)Economic return on undepreciated book value is based on the periodic change
in undepreciated book value per common share, a non-GAAP financial measure, plus
dividends declared per common share, if any, during the period.

Key Developments During Third Quarter 2022

Investing Activities

•A joint venture in which we held a common equity investment sold its
multi-family apartment community for approximately $48.0 million. The sale
generated a net gain attributable to the Company’s common stockholders of
approximately $14.4 million.

•Sold investment securities for approximately $36.2 million and recognized a
realized gain of approximately $18.0 million.

•Announced a repositioning of our business through the opportunistic disposition
over time of our joint venture equity investments in multi-family properties.

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Financing Activities


•Completed a securitization of residential loans, resulting in approximately
$220.8 million in net proceeds to the Company after deducting expenses
associated with the transaction. The Company utilized the net proceeds to repay
outstanding repurchase agreement financing related to residential loans.

•Repurchased 5.5 million shares of common stock at an average repurchase price
of $2.62 per share.


Subsequent Developments

•Subsequent to quarter end, settled on the repurchase of an additional 2.1
million shares of common stock at an average repurchase price of $2.23 per
share.

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Capital Allocation


The following provides an overview of the allocation of our total equity as of
September 30, 2022 and December 31, 2021, respectively. We fund our investing
and operating activities with a combination of cash flow from operations,
proceeds from common and preferred equity and debt securities offerings,
including convertible notes and senior unsecured notes, short-term and
longer-term repurchase agreements, CDOs and trust preferred debentures. A
detailed discussion of our liquidity and capital resources is provided in
"Liquidity and Capital Resources" elsewhere in this section.

The following tables set forth our allocated capital by investment category at
September 30, 2022 and December 31, 2021, respectively (dollar amounts in
thousands).

At September 30, 2022:

                                                                                      Multi-
                                                             Single-Family            Family            Corporate/Other             Total
Residential loans                                          $    3,933,176          $       -          $              -          $ 3,933,176
Consolidated SLST CDOs                                           (660,069)                 -                         -             (660,069)
Multi-family loans                                                      -             95,829                         -               95,829
Investment securities available for sale                           71,229             30,346                     1,111              102,686
Equity investments                                                      -            176,339                    29,475              205,814
Equity investments in consolidated multi-family
properties (1)                                                          -            141,877                         -              141,877

Equity investments in disposal group held for sale
(2)

                                                                     -            247,591                         -              247,591
Single-family rental properties                                   149,620                  -                         -              149,620
Total investment portfolio carrying value                       3,493,956            691,982                    30,586            4,216,524

Liabilities:

Repurchase agreements                                          (1,215,023)                 -                         -           (1,215,023)
Residential loan securitization CDOs                           (1,309,735)                 -                         -           (1,309,735)

Senior unsecured notes                                                  -                  -                   (97,210)             (97,210)
Subordinated debentures                                                 -                  -                   (45,000)             (45,000)
Cash, cash equivalents and restricted cash (3)                    121,716                  -                   337,528              459,244
Other                                                             (35,119)            (4,548)                  (51,627)             (91,294)
Net Company capital allocated                              $    1,055,795          $ 687,434          $        174,277          $ 1,917,506

Company Recourse Leverage Ratio (4)                                                                                                       0.5x
Portfolio Recourse Leverage Ratio (5)                                                                                                     0.4x



(1)Represents the Company's equity investments in consolidated multi-family
properties that are not held for sale. See "Balance Sheet Analysis-Equity
Investments in Multi-Family Entities" for a reconciliation of equity investments
in consolidated multi-family properties and disposal group held for sale to the
Company's condensed consolidated financial statements.
(2)Includes both unconsolidated and consolidated equity investments in
multi-family properties that are held for sale in disposal group. See "Balance
Sheet Analysis-Equity Investments in Multi-Family Entities" for a reconciliation
of equity investments in consolidated multi-family properties and disposal group
held for sale to the Company's condensed consolidated financial statements.
(3)Excludes cash in the amount of $33.8 million and restricted cash in the
amount of $2.1 million held in the Company's equity investments in consolidated
multi-family properties. Restricted cash is included in the Company's
accompanying condensed consolidated balance sheets in other assets.
(4)Represents the Company's total outstanding recourse repurchase agreement
financing, subordinated debentures and senior unsecured notes divided by the
Company's total stockholders' equity. Does not include certain repurchase
agreement financing amounting to $371.7 million, Consolidated SLST CDOs
amounting to $660.1 million, residential loan securitization CDOs amounting to
$1.3 billion and mortgages payable on real estate amounting to $387.8 million as
they are non-recourse debt.
(5)Represents the Company's outstanding recourse repurchase agreement financing
divided by the Company's total stockholders' equity.
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At December 31, 2021:

                                                                             Multi-
                                                    Single-Family            Family            Corporate/Other             Total
Residential loans                                 $    3,575,601          $       -          $              -          $ 3,575,601
Consolidated SLST CDOs                                  (839,419)                 -                         -             (839,419)
Multi-family loans                                             -            120,021                         -              120,021
Investment securities available for sale                 128,019             33,146                    39,679              200,844
Equity investments                                             -            191,238                    48,393              239,631
Equity investments in consolidated multi-family
properties (1)                                                 -            261,639                         -              261,639
Single-family rental properties                           38,749                  -                         -               38,749
Total investment portfolio carrying value              2,902,950            606,044                    88,072            3,597,066

Liabilities:

Repurchase agreements                                   (554,259)                 -                         -             (554,259)
Residential loan securitization CDOs                    (682,802)                 -                         -             (682,802)
Convertible notes                                              -                  -                  (137,898)            (137,898)
Senior unsecured notes                                         -                  -                   (96,704)             (96,704)
Subordinated debentures                                        -                  -                   (45,000)             (45,000)
Cash, cash equivalents and restricted cash (2)            39,366                  -                   260,279              299,645
Other                                                     29,612            (13,205)                  (55,424)             (39,017)
Net Company capital allocated                     $    1,734,867          $ 

592,839 $ 13,325 $ 2,341,031


Company Recourse Leverage Ratio (3)                                                                                              0.4x
Portfolio Recourse Leverage Ratio (4)                                                                                            0.2x



(1)Represents the Company's equity investments in consolidated multi-family
apartment communities. See "Balance Sheet Analysis-Equity Investments in
Multi-Family Entities" for a reconciliation of equity investments in
consolidated multi-family properties to the Company's condensed consolidated
financial statements.
(2)Excludes cash in the amount of $30.1 million and restricted cash in the
amount of $8.1 million held in the Company's equity investments in consolidated
multi-family properties. Restricted cash is included in the Company's
accompanying condensed consolidated balance sheets in other assets.
(3)Represents the Company's total outstanding recourse repurchase agreement
financing, subordinated debentures, convertible notes and senior unsecured notes
divided by the Company's total stockholders' equity. Does not include
Consolidated SLST CDOs amounting to $839.4 million, residential loan
securitization CDOs amounting to $682.8 million and mortgages payable on real
estate amounting to $709.4 million as they are non-recourse debt.
(4)Represents the Company's outstanding recourse repurchase agreement financing
divided by the Company's total stockholders' equity.


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Results of Operations


The following discussion provides information regarding our results of
operations for the three and nine months ended September 30, 2022 and 2021,
including a comparison of year-over-year results and related commentary. A
number of the tables contain a "change" column that indicates the amount by
which results from the three and nine months ended September 30, 2022 are
greater or less than the results from the respective period in 2021. Unless
otherwise specified, references in this section to increases or decreases in the
"three-month periods" refer to the change in results for the three months ended
September 30, 2022 when compared to the three months ended September 30, 2021
and increases or decreases in the "nine-month periods" refer to the change in
results for the nine months ended September 30, 2022 when compared to the nine
months ended September 30, 2021.

The following table presents the main components of our net (loss) income for
the three and nine months ended September 30, 2022 and 2021, respectively
(dollar amounts in thousands, except per share data):

                                           Three Months Ended September 30,                              Nine Months Ended September 30,
                                      2022                2021             $ Change                2022                   2021             $ Change
Interest income                  $     68,920          $ 52,323          $  16,597          $    195,441              $ 154,548          $  40,893
Interest expense                       54,699            21,292             33,407               125,212                 61,702             63,510
Net interest income                    14,221            31,031            (16,810)               70,229                 92,846            (22,617)
Total non-interest (loss) income      (57,028)           49,412           (106,440)             (124,046)               132,409           (256,455)
General and administrative
expenses                               11,610            12,458               (848)               39,143                 36,419              2,724
Expenses related to real estate        53,683             8,549             45,134               172,431                 15,386            157,045
Portfolio operating expenses           10,124             7,039              3,085                32,303                 18,558             13,745
(Loss) income from operations
before income taxes                  (118,224)           52,397           (170,621)             (297,694)               154,892           (452,586)
Income tax (benefit) expense             (330)            1,215             (1,545)                 (262)                 1,296             (1,558)
Net loss attributable to
non-controlling interest in
consolidated variable interest
entities                                2,617               394              2,223                36,409                  3,428             32,981
Net (loss) income attributable
to Company                           (115,277)           51,576           (166,853)             (261,023)               157,024           (418,047)
Preferred stock dividends              10,493            11,272               (779)               31,478                 31,865               (387)
Preferred stock redemption
charge                                      -             3,443             (3,443)                    -                  3,443             (3,443)
Net (loss) income attributable
to Company's common stockholders     (125,770)           36,861           (162,631)             (292,501)               121,716           (414,217)
Basic (loss) earnings per common
share                            $      (0.33)         $   0.10          $   (0.43)         $      (0.77)             $    0.32          $   (1.09)
Diluted (loss) earnings per
common share                     $      (0.33)         $   0.10          $   (0.43)         $      (0.77)             $    0.32          $   (1.09)


Interest Income and Interest Expense


During the three- and nine-month periods, interest income increased primarily
due to the increase in our average interest earning assets as the Company
continued to invest in residential loans, particularly higher-yielding business
purpose loans. This increase was offset by an increase of interest expense
during the three- and nine-month periods due to 1) increased borrowings on
repurchase agreement and securitization financings, 2) an increase in cost of
financing due to an increase in interest rates and 3) an increase in interest
expense related to mortgages payable on real estate due to the impact of
multi-family joint venture investments consolidated since September 2021.



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Non-Interest Income (Loss)

Realized Gains, Net

The following table presents the components of realized gains, net recognized
for the three and nine months ended September 30, 2022 and 2021, respectively
(dollar amounts in thousands):

                                         Three Months Ended September 30,                          Nine Months Ended September 30,
                                     2022                2021           $ Change              2022                2021            $ Change
Residential loans               $      1,673          $ 3,219          $ 

(1,546) $ 7,492 $ 10,500 $ (3,008)
Investment securities and
derivatives

                           18,922            5,095            13,827                19,296             9,861             9,435

Total realized gains, net $ 20,595 $ 8,314 $ 12,281 $ 26,788 $ 20,361 $ 6,427




During the three months ended September 30, 2022, the Company recognized
$18.0 million of realized gain on the sale of ABS and $1.7 million of net
realized gains related to our residential loan portfolio, primarily as a result
of loan prepayments. During the three months ended September 30, 2021, the
Company recognized net realized gains of $3.2 million related to our residential
loan portfolio, primarily as a result of loan prepayments. The Company also
recognized net realized gains of $5.0 million and $4.8 million on the sale of
CMBS and non-Agency RMBS, respectively, offset by a write-down of $4.8 million
recognized on the Company's investment in non-Agency RMBS IOs during the three
months ended September 30, 2021.

During the nine months ended September 30, 2022, the Company recognized net
realized gains of $18.4 million on the sale of ABS and non-Agency RMBS and net
realized gains of $7.5 million related to our residential loan portfolio,
primarily as a result of loan prepayments. During the nine months ended
September 30, 2021, the Company recognized net realized gains of $10.6 million
and $4.0 million on the sale of CMBS and non-Agency RMBS, respectively, offset
by a write-down of $4.8 million recognized on the Company's investment in
non-Agency RMBS IOs. The Company also recognized net realized gains on
residential loans of $10.5 million during the nine months ended September 30,
2021, primarily as a result of loan prepayments.

Unrealized (Losses) Gains, Net

The following table presents the components of unrealized (losses) gains, net
recognized for the three and nine months ended September 30, 2022 and 2021,
respectively (dollar amounts in thousands):

                                            Three Months Ended September 30,                                Nine Months Ended September 30,
                                       2022                  2021             $ Change                2022                 2021             $ Change
Residential loans               $    (124,275)            $ 20,074          $ (144,349)         $   (252,534)           $ 44,651          $ (297,185)
Consolidated SLST                      (7,925)               4,302             (12,227)              (27,480)             23,320             (50,800)
Preferred equity and mezzanine
loan investments                       (2,509)                 392              (2,901)               (2,951)                688              (3,639)
Investment securities and
derivatives                             6,653                5,370               1,283                 3,557              11,498              (7,941)
Total unrealized (losses)
gains, net                      $    (128,056)            $ 30,138          $ (158,194)         $   (279,408)           $ 80,157          $ (359,565)



The Company recognized $128.1 million and $279.4 million in net unrealized
losses for the three and nine months ended September 30, 2022, primarily due to
credit spread widening that impacted the pricing of our credit assets,
particularly our residential loans and investment in Consolidated SLST. Net
unrealized losses on our investment securities for the three and nine months
ended September 30, 2022 included a reversal of previously recognized unrealized
gains amounting to $15.9 million on ABS that were sold during the quarter as
well as additional unrealized losses on non-Agency RMBS and CMBS due to credit
spread widening. Unrealized losses on investment securities for the nine months
ended September 30, 2022 were partially offset by unrealized gains recognized on
certain non-Agency IOs during the period as a result of an increase in interest
rates. During the three and nine months ended September 30, 2022, the Company
recognized $24.0 million of unrealized gains related to interest rate cap
agreements entered into by multi-family joint ventures, also as a result of an
increase in interest rates during the period.

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The Company recognized $30.1 million and $80.2 million in net unrealized gains
for the three and nine months ended September 30, 2021, respectively, primarily
due to improved pricing on our credit assets, particularly our residential
loans, investment in Consolidated SLST and our non-Agency RMBS. In addition, the
net unrealized gains on our investment securities for the three and nine months
ended September 30, 2021 included a reversal of previously recognized unrealized
losses amounting to $4.8 million on non-Agency RMBS IOs that were written down
during the quarter.

Income from Equity Investments


The following table presents the components of income from equity investments
for the three and nine months ended September 30, 2022 and 2021, respectively
(dollar amounts in thousands):

                                          Three Months Ended September 30,                             Nine Months Ended September 30,
                                      2022                2021            $ Change                2022                  2021             $ Change
Preferred return on preferred
equity investments accounted for
as equity                        $      5,651          $ 6,172          $    (521)         $    17,015               $ 17,078          $     (63)
Unrealized (losses) gains, net
on preferred equity investments
accounted for as equity                (4,195)            (294)            (3,901)              (3,757)                   634             (4,391)
(Loss) from unconsolidated joint
venture equity investments in
multi-family properties                (1,054)               -             (1,054)                (503)                     -               (503)
(Loss) income from entities that
invest in or originate
residential properties and loans       (3,500)           2,137             (5,637)              (1,699)                 4,309             (6,008)
Total (loss) income from equity
investments                      $     (3,098)         $ 8,015          $ (11,113)         $    11,056               $ 22,021          $ (10,965)



Income from equity investments decreased in the three- and nine-month periods,
primarily due to net unrealized losses recognized on preferred equity and
residential equity investments. Income from equity investments also decreased in
the three- and nine-month periods due to the redemption of a residential equity
investment in the first quarter of 2022. Preferred return on preferred equity
investments decreased in the three-month period as a result of investment
redemptions since September 30, 2021.


Other Income


The following table presents the components of other income for the three and
nine months ended September 30, 2022 and 2021, respectively (dollar amounts in
thousands):

                                          Three Months Ended September 30,                          Nine Months Ended September 30,
                                      2022                2021            $ Change              2022                2021           $ Change
Preferred equity and mezzanine
loan premiums resulting from
early redemption (1)             $      1,356          $    117          $  1,239          $      3,839          $ 2,147          $  1,692
Gain on sale of real estate held
for sale                               16,759                 -            16,759                17,132                -            17,132

Miscellaneous                          (5,368)           (1,152)           (4,216)               (5,696)              97            (5,793)
Total other income               $     12,747          $ (1,035)         $ 13,782          $     15,275          $ 2,244          $ 13,031


(1)Includes premiums resulting from early redemptions of preferred equity and
mezzanine loan investments accounted for as loans.

The net increase in other income in the three- and nine-month periods is
primarily due to gain recognized on the sale of real estate held for sale during
the three months ended September 30, 2022. The increase in the three- and
nine-month periods was partially offset by an impairment loss related to an
equity investment recognized during the three months ended September 30, 2022.

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Expenses

The following tables present the components of general, administrative and
portfolio operating expenses for the three and nine months ended September 30,
2022
and 2021, respectively (dollar amounts in thousands):

                                            Three Months Ended September 30,                            Nine Months Ended September 30,
                                        2022                2021             $ Change              2022                2021            $ Change
General and Administrative
Expenses
Salaries, benefits and directors'
compensation                      $       8,916          $  8,612          $     304          $     29,733          $ 27,204          $  2,529
Professional fees                         1,206               858                348                 3,420             2,465               955

Other                                     1,488             2,988             (1,500)                5,990             6,750              (760)
Total general and administrative
expenses                          $      11,610          $ 12,458          $    (848)         $     39,143          $ 36,419          $  2,724


The decrease in general and administrative expenses in the three-month period is
primarily related to other expenses and reduced state capital base tax.


The increase in general and administrative expenses in the nine-month period is
primarily related to an increase in salary and stock-based compensation expenses
due in part to an increase in employee headcount and an increase in legal and
audit fees.

                                       Three Months Ended September 30,                           Nine Months Ended September 30,
                                    2022                2021           $ Change              2022                2021            $ Change

Portfolio operating expenses  $      10,124          $ 7,039          $  3,085          $     32,303          $ 18,558          $ 13,745



The increase in portfolio operating expenses in both the three- and nine-month
periods can be attributed primarily to increased servicing fees due to increased
investment in residential loans since September 2021.

Net (Loss) Income from Real Estate

The following table presents the components of net (loss) income from real
estate for the three and nine months ended September 30, 2022 and 2021,
respectively (dollar amounts in thousands):

                                            Three Months Ended September 30,                             Nine Months Ended September 30,
                                        2022                2021            $ Change                2022                  2021             $ Change
Income from real estate            $     40,784          $  3,980          $ 36,804          $    102,243              $  7,626          $  94,617
Interest expense, mortgages
payable on real estate (1)              (16,136)           (1,147)          (14,989)              (36,445)               (1,886)           (34,559)
Expenses related to real estate:
Depreciation expense on operating
real estate                             (16,025)           (1,749)          (14,276)              (41,269)               (3,268)           (38,001)
Amortization of lease intangibles
related to operating real estate        (16,908)           (3,993)          (12,915)              (79,645)               (6,751)           (72,894)
Other expenses                          (20,750)           (2,807)          (17,943)              (51,517)               (5,367)           (46,150)
Total expenses related to real
estate                                  (53,683)           (8,549)          (45,134)             (172,431)              (15,386)          (157,045)
Net gain (2)                             41,213                 -            41,213                40,983                     -             40,983
Net income (loss) from real estate       12,178            (5,716)           17,894               (65,650)               (9,646)           (56,004)
Net loss attributable to
non-controlling interest                  2,617               394             2,223                36,409                 3,428             32,981
Net income (loss) from real estate
attributable to Company            $     14,795          $ (5,322)         $ 20,117          $    (29,241)             $ (6,218)         $ (23,023)



(1)Included in interest expense in the Company’s condensed consolidated
statements of operations.

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(2)Includes $16.8 million of gain on sale and $0.5 million of loss on
extinguishment of mortgages payable on real estate included in other income,
$0.9 million included in realized gains, net and $24.0 million of unrealized
gains on derivatives included in unrealized gains, net in the Company's
condensed consolidated statements of operations for the three months ended
September 30, 2022. Includes $17.1 million of gain on sale and $1.1 million of
loss on extinguishment of mortgages payable on real estate included in other
income, $0.9 million included in realized gains, net and $24.0 million of
unrealized gains on derivatives included in unrealized gains, net in the
Company's condensed consolidated statements of operations for the nine months
ended September 30, 2022.

Since September 30, 2021, we have significantly grown our portfolio of joint
venture equity investments in multi-family properties, the assets and
liabilities of which are consolidated in our condensed consolidated financial
statements in accordance with GAAP. The increase in net income from real estate
in the three-month periods was primarily due to unrealized gains recognized on
interest rate cap agreements related to mortgages payable as a result of an
increase in interest rates, as well as gain recognized on the sale of real
estate held for sale during the three months ended September 30, 2022. The
increase was partially offset by net loss attributable to depreciation expense
and amortization of lease intangibles related to the operating real estate.

The increase in net loss from real estate in the nine-month periods is primarily
related to the activity of the consolidated joint venture equity investments in
multi-family properties. A significant portion of the net loss is attributable
to depreciation expense and amortization of lease intangibles related to the
operating real estate.




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Comprehensive Income (Loss)


The main components of comprehensive income (loss) for the three and nine months
ended September 30, 2022 and 2021, respectively, are detailed in the following
table (dollar amounts in thousands):

                                                    Three Months Ended September 30,                               Nine Months Ended September 30,
                                               2022                  2021             $ Change               2022                 2021             $ Change
NET (LOSS) INCOME ATTRIBUTABLE TO
COMPANY'S COMMON STOCKHOLDERS           $    (125,770)            $ 36,861          $ (162,631)         $   (292,501)         $ 121,716          $ (414,217)
OTHER COMPREHENSIVE (LOSS) INCOME
(Decrease) increase in fair value of
available for sale securities
Non-Agency RMBS                                (1,109)                 621              (1,730)               (3,832)             5,341              (9,173)
CMBS                                                -                   16                 (16)                    -               (279)                279
Total                                          (1,109)                 637              (1,746)               (3,832)             5,062              (8,894)
Reclassification adjustment for net
gain included in net (loss) income                  -               (6,045)              6,045                     -             (4,015)              

4,015

TOTAL OTHER COMPREHENSIVE (LOSS) INCOME        (1,109)              (5,408)              4,299                (3,832)             1,047              

(4,879)

COMPREHENSIVE (LOSS) INCOME
ATTRIBUTABLE TO COMPANY'S COMMON
STOCKHOLDERS                            $    (126,879)            $ 31,453          $ (158,332)         $   (296,333)         $ 122,763          $ (419,096)



The changes in other comprehensive income (loss) ("OCI") for the three-month
periods can be attributed primarily to the reclassification of previously
recognized net unrealized gains reported in OCI to net realized gains as a
result of the sale of certain investment securities in the prior period. During
the three months ended September 30, 2022, the net fair value of our investment
securities where fair value option was not elected decreased as a result of
credit spread widening.

The changes in OCI for the nine-month periods can be attributed primarily to a
decrease in the fair value of our investment securities where fair value option
was not elected during the nine months ended September 30, 2022 as a result of
credit spread widening. During the nine months ended September 30, 2021, the net
fair value of our investment securities where fair value option was not elected
increased as a result of general spread tightening during the period.
Additionally, previously recognized net unrealized gains reported in OCI were
reclassified to net realized gains in relation to the sale of certain investment
securities during the nine months ended September 30, 2021.

Beginning in the fourth quarter of 2019, the Company's newly purchased
investment securities are presented at fair value as a result of a fair value
election made at the time of acquisition pursuant to ASC 825, Financial
Instruments ("ASC 825"). The fair value option was elected for these investment
securities to provide stockholders and others who rely on our financial
statements with a more complete and accurate understanding of our economic
performance. Changes in the market values of investment securities where the
Company elected the fair value option are reflected in earnings instead of in
OCI. As of September 30, 2022, the majority of the Company's investment
securities are accounted for using the fair value option.

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Analysis of Changes in GAAP Book Value


The following table analyzes the changes in GAAP book value of our common stock
for the three and nine months ended September 30, 2022 (amounts in thousands,
except per share data):

                                            Three Months Ended September 30, 2022                               Nine Months Ended September 30, 2022
                                     Amount                Shares             Per Share (1)              Amount                Shares             Per Share (1)
Beginning Balance               $   1,535,866             378,647           $         4.06          $   1,783,906             379,405           $         4.70
Common stock issuance, net (2)          3,278                 (28)                                          8,612               2,009

Common stock repurchase               (14,314)             (5,469)                                        (21,855)             (8,264)

Balance after share activity        1,524,830             373,150          
          4.09              1,770,663             373,150                     4.75

Dividends and dividend
equivalents declared                  (37,570)                                       (0.10)              (113,949)                                       (0.31)
Net change in accumulated other
comprehensive income (loss):

Investment securities available
for sale (3)                           (1,109)                                           -                 (3,832)                                       (0.01)
Net loss attributable to
Company's common stockholders        (125,770)                             
         (0.34)              (292,501)                                       (0.78)
Ending Balance                  $   1,360,381             373,150           $         3.65          $   1,360,381             373,150           $         3.65


(1)Outstanding shares used to calculate book value per common share for the
three and nine months ended September 30, 2022 are 373,150,076.
(2)Includes amortization of stock based compensation.
(3)The decrease relates to unrealized losses on our investment securities due to
reductions in pricing.

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Non-GAAP Financial Measures


In addition to the results presented in accordance with GAAP, this Quarterly
Report on Form 10-Q includes certain non-GAAP financial measures, including
adjusted interest income, adjusted interest expense, adjusted net interest
income, yield on average interest earning assets, average financing cost, net
interest spread, undepreciated earnings and undepreciated book value per common
share. Our management team believes that these non-GAAP financial measures, when
considered with our GAAP financial statements, provide supplemental information
useful for investors as it enables them to evaluate our current performance and
trends using the metrics that management uses to operate our business. Our
presentation of non-GAAP financial measures may not be comparable to
similarly-titled measures of other companies, who may use different
calculations. Because these measures are not calculated in accordance with GAAP,
they should not be considered a substitute for, or superior to, the financial
measures calculated in accordance with GAAP. Our GAAP financial results and the
reconciliations of the non-GAAP financial measures included in this Quarterly
Report on Form 10-Q to the most directly comparable financial measures prepared
in accordance with GAAP should be carefully evaluated.

Adjusted Net Interest Income and Net Interest Spread


Financial results for the Company during a given period include the net interest
income earned on our investment portfolio of residential loans, RMBS, CMBS, ABS
and preferred equity investments and mezzanine loans, where the risks and
payment characteristics are equivalent to and accounted for as loans
(collectively, our "interest earning assets"). Adjusted net interest income and
net interest spread (both supplemental non-GAAP financial measures) are impacted
by factors such as our cost of financing, the interest rate that our investments
bear and our interest rate hedging strategies. Furthermore, the amount of
premium or discount paid on purchased investments and the prepayment rates on
investments will impact adjusted net interest income as such factors will be
amortized over the expected term of such investments.

We provide the following non-GAAP financial measures, in total and by investment
category, for the respective period:


•adjusted interest income - calculated by reducing our GAAP interest income by
the interest expense recognized on Consolidated SLST CDOs,
•adjusted interest expense - calculated by reducing our GAAP interest expense by
the interest expense recognized on Consolidated SLST CDOs and mortgages payable
on real estate,
•adjusted net interest income - calculated by subtracting adjusted interest
expense from adjusted interest income,
•yield on average interest earning assets - calculated as the quotient of our
adjusted interest income and our average interest earning assets, which excludes
all Consolidated SLST assets other than those securities owned by the Company,
•average financing cost - calculated as the quotient of our adjusted interest
expense and the average outstanding balance of our interest bearing liabilities,
excluding Consolidated SLST CDOs and mortgages payable on real estate, and
•net interest spread - calculated as the difference between our yield on average
interest earning assets and our average financing cost.

We provide the non-GAAP financial measures listed above because we believe these
non-GAAP financial measures provide investors and management with additional
detail and enhance their understanding of our interest earning asset yields, in
total and by investment category, relative to the cost of our financing and the
underlying trends within our portfolio of interest earning assets. In addition
to the foregoing, our management team uses these measures to assess, among other
things, the performance of our interest earning assets in total and by asset,
possible cash flows from our interest earning assets in total and by asset, our
ability to finance or borrow against the asset and the terms of such financing
and the composition of our portfolio of interest earning assets, including
acquisition and disposition determinations. These measures remove the impact of
joint venture equity investments and Consolidated SLST that we consolidate in
accordance with GAAP by (i) excluding mortgages payable on real estate since the
joint ventures themselves, and not the Company, directly incur interest expense
for these liabilities and the mortgages directly finance the multi-family
properties which are non-interest earning assets, and (ii) only including the
interest income earned by the Consolidated SLST securities that are actually
owned by the Company, as the Company only receives income or absorbs losses
related to the Consolidated SLST securities actually owned by the Company.

Our calculation of the non-GAAP financial measures presented below may not be
comparable to similarly-titled measures of other companies who may use different
calculations.

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The following tables set forth certain information about our interest earning
assets by category and their related adjusted interest income, adjusted interest
expense, adjusted net interest income, yield on average interest earning assets,
average financing cost and net interest spread for the three and nine months
ended September 30, 2022 and 2021, respectively (dollar amounts in thousands):

Three Months Ended September 30, 2022

Multi-

                                                        Single-Family (8)            Family           Corporate/Other            Total
Adjusted Interest Income (1) (2)                       $          57,667    

$ 3,414 $ 1,228 $ 62,309
Adjusted Interest Expense (1)

                                    (29,610)               (30)                 (2,312)             (31,952)
Adjusted Net Interest Income (1)                       $          28,057    

$ 3,384 $ (1,084) $ 30,357


Average Interest Earning Assets (3)                    $       3,597,311    

$ 137,268 $ 9,706 $ 3,744,285
Average Interest Bearing Liabilities (4)

               $       2,679,668    

$ 3,485 $ 145,000 $ 2,828,153


Yield on Average Interest Earning Assets (1) (5)                    6.41  %            9.95  %                50.61  %              6.66  %
Average Financing Cost (1) (6)                                     (4.38) %           (3.42) %                (6.33) %             (4.48) %
Net Interest Spread (1) (7)                                         2.03  %            6.53  %                44.28  %              2.18  %



Three Months Ended September 30, 2021

Multi-

                                                        Single-Family (8)            Family           Corporate/Other            Total
Adjusted Interest Income (1) (2)                       $          39,144    

$ 4,247 $ 1,816 $ 45,207
Adjusted Interest Expense (1)

                                     (8,163)                 -                  (4,866)             (13,029)
Adjusted Net Interest Income (1)                       $          30,981    

$ 4,247 $ (3,050) $ 32,178


Average Interest Earning Assets (3)                    $       2,608,604    

$ 195,431 $ 26,468 $ 2,830,503
Average Interest Bearing Liabilities (4)

               $       1,040,540                  -                 283,000          $ 1,323,540

Yield on Average Interest Earning Assets (1) (5)                    6.00  %            8.69  %                27.44  %              6.39  %
Average Financing Cost (1) (6)                                     (3.14) %               -                   (6.88) %             (3.94) %
Net Interest Spread (1) (7)                                         2.86  %            8.69  %                20.56  %              2.45  %


Nine Months Ended September 30, 2022

Multi-

                                                        Single-Family (8)            Family           Corporate/Other            Total
Adjusted Interest Income (1) (2)                       $         160,752    

$ 9,985 $ 5,908 $ 176,645
Adjusted Interest Expense (1)

                                    (62,850)              (152)                 (6,969)             (69,971)
Adjusted Net Interest Income (1)                       $          97,902    

$ 9,833 $ (1,061) $ 106,674


Average Interest Earning Assets (3)                    $       3,353,215    

$ 139,062 $ 17,793 $ 3,510,070
Average Interest Bearing Liabilities (4)

               $       2,315,687    

$ 7,360 $ 151,925 $ 2,474,972


Yield on Average Interest Earning Assets (1) (5)                    6.39  %            9.57  %                44.27  %              6.71  %
Average Financing Cost (1) (6)                                     (3.63) %           (2.76) %                (6.13) %             (3.78) %
Net Interest Spread (1) (7)                                         2.76  %            6.81  %                38.14  %              2.93  %



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Nine Months Ended September 30, 2021

Multi-

                                                        Single-Family (8)            Family           Corporate/Other            Total
Adjusted Interest Income (1) (2)                       $         111,858    

$ 16,133 $ 5,186 $ 133,177
Adjusted Interest Expense (1)

                                    (25,955)                 -                 (12,490)             (38,445)
Adjusted Net Interest Income (1)                       $          85,903    

$ 16,133 $ (7,304) $ 94,732


Average Interest Earning Assets (3)                    $       2,549,489    

$ 264,889 $ 29,591 $ 2,843,969
Average Interest Bearing Liabilities (4)

                       1,030,809                  -                 244,333          $ 1,275,142

Yield on Average Interest Earning Assets (1) (5)                    5.85  %            8.12  %                23.37  %              6.24  %
Average Financing Cost (1) (6)                                     (3.36) %               -                   (6.82) %             (4.02) %
Net Interest Spread (1) (7)                                         2.49  %            8.12  %                16.55  %              2.22  %



(1)Represents a non-GAAP financial measure.
(2)Includes interest income earned on cash accounts held by the Company.
(3)Average Interest Earning Assets is calculated based on the daily average
amortized cost for the respective periods and excludes all Consolidated SLST
assets other than those securities owned by the Company.
(4)Average Interest Bearing Liabilities is calculated based on the daily average
outstanding balance for the respective periods and excludes Consolidated SLST
CDOs and mortgages payable on real estate as the Company does not directly incur
interest expense on these liabilities that are consolidated for GAAP purposes.
(5)Yield on Average Interest Earning Assets is calculated by dividing our
annualized adjusted interest income relating to our portfolio of interest
earning assets by our Average Interest Earning Assets for the respective
periods.
(6)Average Financing Cost is calculated by dividing our annualized adjusted
interest expense by our Average Interest Bearing Liabilities.
(7)Net Interest Spread is the difference between our Yield on Average Interest
Earning Assets and our Average Financing Cost.
(8)The Company has determined it is the primary beneficiary of Consolidated SLST
and has consolidated Consolidated SLST into the Company's condensed consolidated
financial statements. Our GAAP interest income includes interest income
recognized on the underlying seasoned re-performing and non-performing
residential loans held in Consolidated SLST. Our GAAP interest expense includes
interest expense recognized on the Consolidated SLST CDOs that permanently
finance the residential loans in Consolidated SLST. We calculate adjusted
interest income by reducing our GAAP interest income by the interest expense
recognized on the Consolidated SLST CDOs and adjusted interest expense by
excluding the interest expense recognized on the Consolidated SLST CDOs, thus
only including the interest income earned by the SLST securities that are
actually owned by the Company in adjusted net interest income.

Our average interest bearing liabilities and adjusted interest expense increased
during the three-month period, primarily due to additional repurchase agreement
and securitization financings and an increase in the cost of financing due to
base interest rate movements. The increase to adjusted interest expense of $18.9
million was partially offset by an $18.5 million increase in single-family
adjusted interest income, primarily due to increased investment in
higher-yielding business purpose loans. During the nine-month period, our
average interest earning assets increased primarily due to additional investment
in higher-yielding business purpose loans, contributing to an increase of $12.0
million in single-family adjusted net interest income. These increases were
partially offset by CMBS sales and multi-family loan redemptions since September
30, 2021, contributing to a net decrease of $6.1 million in multi-family
adjusted interest income. Average interest bearing liabilities increased during
the nine-month period, primarily due to additional repurchase agreement
financing obtained on residential loans and investment securities and
securitization financings related to residential loans. As a result,
single-family adjusted interest expense increased by $36.9 million during the
nine-month period.

Net interest spread decreased during the three-month period, primarily due to an
increase in the cost of financing due to base interest rate movements in 2022.
The decrease was partially offset by an increase in yield on average interest
earning assets due to our continued investment in higher-yielding business
purpose loans. Net interest spread increased during the nine-month period,
primarily due to our continued investment in higher-yielding business purpose
loans. The Company also lowered its average portfolio financing cost through the
issuance of three new residential loan securitizations in 2022 with a weighted
average interest rate of 3.77% and the redemption of the Convertible Notes
(defined below) in the first quarter of 2022.
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A reconciliation of GAAP interest income to adjusted interest income, GAAP
interest expense to adjusted interest expense and GAAP total net interest income
to adjusted net interest income for the three and nine months ended
September 30, 2022 and 2021, respectively, is presented below (dollar amounts in
thousands):

                                                                                                            Three Months Ended September 30,
                                                                            2022                                                                                        2021
                                      Single-Family           Multi-Family           Corporate/Other            Total             Single-Family           Multi-Family           Corporate/Other            Total
GAAP interest income                $       64,278          $       3,414          $          1,228          $  68,920          $       46,260          $       4,247          $          1,816          $  52,323
GAAP interest expense                      (36,221)               (16,166)                   (2,312)           (54,699)                (15,279)                (1,147)                   (4,866)           (21,292)

GAAP total net interest income $ 28,057 $ (12,752)

       $         (1,084)         $  14,221          $       30,981          $       3,100          $         (3,050)         $  31,031

GAAP interest income                $       64,278          $       3,414          $          1,228          $  68,920          $       46,260          $       4,247          $          1,816          $  52,323
Remove interest expense from:
Consolidated SLST CDOs                      (6,611)                     -                         -             (6,611)                 (7,116)                     -                         -             (7,116)
Adjusted interest income            $       57,667          $       3,414          $          1,228          $  62,309          $       39,144          $       4,247          $          1,816          $  45,207

GAAP interest expense               $      (36,221)         $     (16,166) 

$ (2,312) $ (54,699) $ (15,279) $ (1,147) $ (4,866) $ (21,292)
Remove interest expense from:
Consolidated SLST CDOs

                       6,611                      -                         -              6,611                   7,116                      -                         -              7,116
Mortgages payable on real estate                 -                 16,136                         -             16,136                       -                  1,147                         -              1,147
Adjusted interest expense           $      (29,610)         $         (30)         $         (2,312)         $ (31,952)         $       (8,163)         $           -          $         (4,866)         $ (13,029)

Adjusted net interest income (1) $ 28,057 $ 3,384

       $         (1,084)         $  30,357          $       30,981          $       4,247          $         (3,050)         $  32,178




                                                                                                             Nine Months Ended September 30,
                                                                             2022                                                                                        2021
                                      Single-Family           Multi-Family           Corporate/Other             Total             Single-Family           Multi-Family           Corporate/Other            Total
GAAP interest income                $      179,548          $       9,985          $          5,908          $  195,441          $      133,229          $      16,133          $          5,186          $ 154,548
GAAP interest expense                      (81,646)               (36,597)                   (6,969)           (125,212)                (47,326)                (1,886)                  (12,490)           (61,702)

GAAP total net interest income $ 97,902 $ (26,612)

       $         (1,061)         $   70,229          $       85,903          $      14,247          $         (7,304)         $  92,846

GAAP interest income                $      179,548          $       9,985          $          5,908          $  195,441          $      133,229          $      16,133          $          5,186          $ 154,548
Remove interest expense from:
Consolidated SLST CDOs                     (18,796)                     -                         -             (18,796)                (21,371)                     -                         -            (21,371)
Adjusted interest income            $      160,752          $       9,985          $          5,908          $  176,645          $      111,858          $      16,133          $          5,186          $ 133,177

GAAP interest expense               $      (81,646)         $     (36,597)         $         (6,969)         $ (125,212)         $      (47,326)       

$ (1,886) $ (12,490) $ (61,702)
Remove interest expense from:
Consolidated SLST CDOs

                      18,796                      -                         -              18,796                  21,371                      -                         -             21,371
Mortgages payable on real estate                 -                 36,445                         -              36,445                       -                  1,886                         -              1,886
Adjusted interest expense           $      (62,850)         $        (152)         $         (6,969)         $  (69,971)         $      (25,955)         $           -          $        (12,490)         $ (38,445)

Adjusted net interest income (1) $ 97,902 $ 9,833

       $         (1,061)         $  106,674          $       85,903          $      16,133          $         (7,304)         $  94,732


(1)Adjusted net interest income is calculated by subtracting adjusted interest
expense from adjusted interest income.

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Undepreciated (Loss) Earnings


Undepreciated (loss) earnings is a supplemental non-GAAP financial measure
defined as GAAP net (loss) income attributable to Company's common stockholders
excluding the Company's share in depreciation expense and lease intangible
amortization expense related to operating real estate, net. By excluding these
non-cash adjustments from our operating results, we believe that the
presentation of undepreciated (loss) earnings provides a consistent measure of
our operating performance and useful information to investors to evaluate the
effective net return on our portfolio. In addition, we believe that presenting
undepreciated (loss) earnings enables our investors to measure, evaluate, and
compare our operating performance to that of our peers.

A reconciliation of net (loss) income attributable to Company’s common
stockholders to undepreciated (loss) earnings for the three and nine months
ended September 30, 2022 and 2021, respectively, is presented below (amounts in
thousands, except per share data):


                                           For the Three Months Ended            For the Nine Months Ended September
                                                  September 30,                                  30,
                                            2022                 2021                 2022                 2021
Net (loss) income attributable to
Company's common stockholders          $   (125,770)         $   36,861          $   (292,501)         $  121,716
Add:
Depreciation expense on operating real
estate                                       11,104               1,655                26,956               2,145
Amortization of lease intangibles
related to operating real estate             13,193               3,674                50,083               4,976

Undepreciated (loss) earnings $ (101,473) $ 42,190

$ (215,462) $ 128,837


Weighted average shares outstanding -
basic                                       377,078             379,395               379,677             379,193
Undepreciated (loss) earnings per
common share                           $      (0.27)         $     0.11          $      (0.57)         $     0.34



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Undepreciated Book Value Per Common Share


Undepreciated book value per common share is a supplemental non-GAAP financial
measure defined as GAAP book value excluding the Company's share of cumulative
depreciation and lease intangible amortization expenses related to operating
real estate, net held at the end of the period. By excluding these non-cash
adjustments, undepreciated book value reflects the value of the Company's rental
property portfolio at its undepreciated basis. The Company's rental property
portfolio includes single-family rental homes directly owned by the Company and
consolidated multi-family apartment communities. We believe that the
presentation of undepreciated book value per common share is useful to investors
and us as it allows management to consider our overall portfolio exclusive of
non-cash adjustments to operating real estate, net and facilitates the
comparison of our financial performance to that of our peers.

A reconciliation of GAAP book value to undepreciated book value and calculation
of undepreciated book value per common share as of September 30, 2022 and
December 31, 2021, respectively, is presented below (amounts in thousands,
except per share data):

                                                                  September 30,                           December 31,
                                                                      2022                                    2021
Company's stockholders' equity                                   $  1,917,506                            $  2,341,031
Preferred stock liquidation preference                               (557,125)                               (557,125)
GAAP book value                                                     1,360,381                               1,783,906

Add:

Cumulative depreciation expense on operating real estate               29,473                                   4,381
Cumulative amortization of lease intangibles related to
operating real estate                                                  59,844                                  11,324
Undepreciated book value                                         $  1,449,698                            $  1,799,611

Common shares outstanding                                             373,150                                 379,405
GAAP book value per common share (1)                             $       3.65                            $       4.70
Undepreciated book value per common share (2)                    $       3.89                            $       4.74



(1)GAAP book value per common share is calculated using the GAAP book value and
the common shares outstanding for the periods indicated.
(2)Undepreciated book value per common share is calculated using the
undepreciated book value and the common shares outstanding for the periods
indicated.






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Critical Accounting Estimates


We prepare our consolidated financial statements in conformity with GAAP, which
requires the use of estimates and assumptions that affect reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the 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 those estimates,
which could materially affect reported amounts of assets, liabilities and
accumulated other comprehensive income (loss) at the date of the consolidated
financial statements and the reported amounts of income, expenses and other
comprehensive income (loss) during the periods presented. Moreover, the
uncertainty over the ultimate impact that the COVID-19 pandemic will have on the
global economy generally, and on our business in particular, makes any estimates
and assumptions inherently less certain than they would be absent the current
and potential impacts of the COVID-19 pandemic.

Changes in the estimates and assumptions could have a material effect on these
consolidated financial statements. Accounting policies and estimates related to
specific components of our consolidated financial statements are disclosed in
the notes to our consolidated financial statements. There have been no material
changes to our critical accounting estimates as previously described under Part
II, Item 7 of our Annual Report on Form 10-K for the year ended December 31,
2021. For a discussion of our critical accounting estimates and the possible
effects of changes in estimates on our consolidated financial statements, please
see Part II., Item 7 of our Annual Report on Form 10-K for the year ended
December 31, 2021.

Recent Accounting Pronouncements


A discussion of recent accounting pronouncements and the possible effects on our
consolidated financial statements is included in "Note 2 - Summary of
Significant Accounting Policies" included in Part I, Item 1 of this Quarterly
Report on Form 10-Q.




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Balance Sheet Analysis


As of September 30, 2022, we had approximately $6.8 billion of total assets.
Included in this amount is approximately $864.0 million of assets held in
Consolidated SLST and $1.7 billion of assets related to equity investments in
multi-family properties that we consolidate in accordance with GAAP. As of
December 31, 2021, we had approximately $5.7 billion of total assets,
approximately $1.1 billion of which represented Consolidated SLST and
$1.0 billion of which related to equity investments in multi-family properties
that we consolidate in accordance with GAAP. For a reconciliation of our actual
interests in Consolidated SLST, see "Portfolio Update" above. For a
reconciliation of our equity investments in consolidated multi-family
properties, see "Equity Investments in Multi-Family Entities" below.

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Residential Loans


The following table presents the Company's residential loans, which include
acquired residential loans held by the Company and residential loans held in
Consolidated SLST, as of September 30, 2022 and December 31, 2021, respectively
(dollar amounts in thousands):

                               September 30, 2022       December 31, 2021
Acquired residential loans    $         3,072,391      $        2,504,719
Consolidated SLST                         860,785               1,070,882
Total                         $         3,933,176      $        3,575,601



Acquired Residential Loans

The Company's acquired residential loans, including performing, re-performing,
and non-performing residential loans and business purpose loans, are presented
at fair value on our condensed consolidated balance sheets. Subsequent changes
in fair value are reported in current period earnings and presented in
unrealized gains (losses), net on the Company's condensed consolidated
statements of operations.

The following tables detail our acquired residential loans by strategy at
September 30, 2022 and December 31, 2021, respectively (dollar amounts in
thousands):

                                                                                                          September 30, 2022
                                   Number of Loans           Unpaid Principal           Fair Value          Weighted Average FICO         Weighted Average LTV (1)         Weighted Average Coupon
Re-performing residential loan
strategy                                5,083              $         691,741          $   648,671                    631                            62%                              4.9%
Performing residential loan
strategy                                2,974                        697,014              574,839                    724                            64%                              3.9%
Business purpose bridge loan
strategy                                2,629                      1,563,434            1,548,344                    734                            65%                              8.4%
Business purpose rental loan
strategy                                1,164                        329,594              300,537                    748                            69%                              5.1%
Total                                  11,850              $       3,281,783          $ 3,072,391


                                                                                                         December 31, 2021
                                  Number of Loans           Unpaid Principal           Fair Value          Weighted Average FICO        

Weighted Average LTV (1) Weighted Average Coupon
Re-performing residential loan
strategy

                               5,515              $         769,779          $   818,900                    628                            65%                              4.8%
Performing residential loan
strategy                               2,807                        616,763              606,711                    722                            65%                              4.0%
Business purpose bridge loan
strategy                               2,028                        988,963              992,870                    728                            65%                              8.7%
Business purpose rental loan
strategy                                 266                         83,071               86,238                    747                            68%                              4.8%
Total                                 10,616              $       2,458,576          $ 2,504,719



(1)For second mortgages (included in performing residential loan strategy), the
Company calculates the combined LTV. For business purpose bridge loans, the
Company calculates LTV as the ratio of the maximum unpaid principal balance of
the loan, including unfunded commitments, to the estimated "after repaired"
value of the collateral securing the related loan.

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Characteristics of Our Acquired Residential Loans:

Loan to Value at Purchase (1)     September 30, 2022      December 31, 2021
50% or less                                   13.5  %                11.8  %
>50% - 60%                                    12.4  %                11.9  %
>60% - 70%                                    24.8  %                27.9  %
>70% - 80%                                    29.1  %                26.8  %
>80% - 90%                                    10.0  %                 9.0  %
>90% - 100%                                    5.0  %                 6.3  %
>100%                                          5.2  %                 6.3  %
Total                                        100.0  %               100.0  %



(1)For second mortgages, the Company calculates the combined LTV. For business
purpose bridge loans, the Company calculates LTV as the ratio of the maximum
unpaid principal balance of the loan, including unfunded commitments, to the
estimated "after repaired" value of the collateral securing the related loan.

FICO Scores at Purchase     September 30, 2022      December 31, 2021
550 or less                              7.6  %                11.3  %
551 to 600                               6.7  %                10.0  %
601 to 650                               7.6  %                11.0  %
651 to 700                              16.4  %                16.1  %
701 to 750                              26.5  %                23.4  %
751 to 800                              28.6  %                22.1  %
801 and over                             6.6  %                 6.1  %
Total                                  100.0  %               100.0  %



Current Coupon     September 30, 2022      December 31, 2021
3.00% or less                   7.2  %                10.0  %
3.01% - 4.00%                  14.8  %                15.5  %
4.01% - 5.00%                  17.5  %                19.7  %
5.01% - 6.00%                   7.0  %                 7.5  %
6.01% - 7.00%                   7.8  %                 5.9  %
7.01% - 8.00%                  18.5  %                13.2  %
8.01% and over                 27.2  %                28.2  %
Total                         100.0  %               100.0  %



Delinquency Status    September 30, 2022      December 31, 2021
Current                           92.8  %                92.6  %
31 - 60 days                       2.3  %                 2.5  %
61 - 90 days                       0.8  %                 0.8  %
90+ days                           4.1  %                 4.1  %
Total                            100.0  %               100.0  %



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Origination Year      September 30, 2022      December 31, 2021
2007 or earlier                   18.9  %                28.2  %
2008 - 2016                        3.8  %                 5.6  %
2017                               1.2  %                 1.9  %
2018                               2.3  %                 3.6  %
2019                               3.8  %                 6.0  %
2020                               8.2  %                16.1  %
2021                              28.5  %                38.6  %
2022                              33.3  %                   -
Total                            100.0  %               100.0  %



Consolidated SLST

The Company owns first loss subordinated securities and certain IOs issued by a
Freddie Mac-sponsored residential loan securitization. In accordance with GAAP,
the Company has consolidated the underlying seasoned re-performing and
non-performing residential loans of the securitization and the CDOs issued to
permanently finance these residential loans, representing Consolidated SLST.

Our investment in Consolidated SLST as of September 30, 2022 and December 31,
2021 was limited to the RMBS comprised of first loss subordinated securities and
IOs issued by the securitization with an aggregate net carrying value of $198.8
million and $230.3 million, respectively. For more information on investment
securities held by the Company within Consolidated SLST, refer to the
"Investment Securities" section below.

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The following table details the loan characteristics of the underlying
residential loans that back our first loss subordinated securities issued by
Consolidated SLST as of September 30, 2022 and December 31, 2021, respectively
(dollar amounts in thousands, except current average loan size):
                                                           September 30, 2022         December 31, 2021
Current fair value                                        $         860,785          $       1,070,882
Current unpaid principal balance                          $         973,944          $       1,071,228
Number of loans                                                       6,261                      6,802
Current average loan size                                 $         155,557

$ 157,487
Weighted average original loan term (in months) at
purchase

                                                                351                        351
Weighted average LTV at purchase                                         68  %                      67  %
Weighted average credit score at purchase                               705                        710

Current Coupon:
3.00% or less                                                           3.0  %                     2.8  %
3.01% - 4.00%                                                          38.0  %                    37.2  %
4.01% - 5.00%                                                          39.2  %                    39.9  %
5.01% - 6.00%                                                          12.0  %                    12.1  %
6.01% and over                                                          7.8  %                     8.0  %

Delinquency Status:
Current                                                                69.9  %                    70.3  %
31 - 60                                                                11.3  %                    12.3  %
61 - 90                                                                 4.4  %                     4.7  %
90+                                                                    14.4  %                    12.7  %

Origination Year:
2005 or earlier                                                        31.1  %                    30.9  %
2006                                                                   15.5  %                    15.4  %
2007                                                                   21.3  %                    21.1  %
2008 or later                                                          32.1  %                    32.6  %

Geographic state concentration (greater than 5.0%):

  California                                                           10.5  %                    10.5  %
  Florida                                                              10.2  %                    10.5  %
  New York                                                              9.9  %                     9.8  %
  New Jersey                                                            7.5  %                     7.3  %
  Illinois                                                              7.3  %                     7.1  %




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Residential Loans Financing

Repurchase Agreements

As of September 30, 2022, the Company had repurchase agreements with four
third-party financial institutions to fund the purchase of residential loans. As
of September 30, 2022, the Company’s only repurchase agreement exposure
(including repurchase agreements to fund residential loans and investment
securities) where the amount at risk was in excess of 5% of the Company’s
stockholders’ equity was to Bank of America at 6.62%.

The following table presents detailed information about these repurchase
agreements and associated assets pledged as collateral at September 30, 2022 and
December 31, 2021, respectively (dollar amounts in thousands):


                                                                                                                                                                       Weighted
                         Maximum Aggregate          Outstanding           Net Deferred        Carrying Value of                                                     Average Months
                            Uncommitted              Repurchase          Finance Costs           Repurchase            Fair Value of         Weighted Average        to Maturity
                          Principal Amount         Agreements (1)             (2)                Agreements            Loans Pledged               Rate
                 (3)
September 30, 2022       $     2,064,587          $   1,163,408          $    (1,544)         $    1,161,864          $   1,439,654                   5.20  %                13.09
December 31, 2021        $     1,252,352          $     554,784          $      (525)         $      554,259          $     729,649                   2.79  %                 4.38



(1)Includes non-mark-to-market repurchase agreements with an aggregate
outstanding balance of $620.7 million, a weighted average rate of 5.32%, and
weighted average months to maturity of 19.09 months as of September 30, 2022.
Includes a non-mark-to-market repurchase agreement with an outstanding balance
of $15.6 million, a rate of 4.00%, and months to maturity of 2.03 months as of
December 31, 2021.
(2)Costs related to the repurchase agreements which include commitment,
underwriting, legal, accounting and other fees are reflected as deferred
charges. Such costs are presented as a deduction from the corresponding debt
liability on the Company's accompanying condensed consolidated balance sheets
and are amortized as an adjustment to interest expense using the effective
interest method, or straight line-method, if the result is not materially
different.
(3)The Company expects to roll outstanding amounts under these repurchase
agreements into new repurchase agreements or other financings, or to repay
outstanding amounts, prior to or at maturity.

The following table details the quarterly average balance, ending balance and
maximum balance at any month-end during each quarter in 2022, 2021 and 2020 for
our repurchase agreements secured by residential loans (dollar amounts in
thousands):

                         Quarterly Average       End of Quarter        Maximum Balance
   Quarter Ended              Balance                Balance           at any Month-End
September 30, 2022         1,324,819             1,163,408              1,554,993
June 30, 2022              1,386,714             1,566,926              1,566,926
March 31, 2022               682,867               783,168                783,168

December 31, 2021            397,651               554,784                554,784
September 30, 2021           337,295               335,434                345,620
June 30, 2021                401,466               341,791                506,750
March 31, 2021               441,006               538,632                538,632

December 31, 2020            415,625               407,213                425,903
September 30, 2020           651,384               673,787                673,787
June 30, 2020                892,422               876,923                905,776
March 31, 2020               731,245               715,436                744,522


Collateralized Debt Obligations


Included in our portfolio are residential loans that are pledged as collateral
for CDOs issued by the Company or by Consolidated SLST. The Company had a net
investment in Consolidated SLST and other residential loan securitizations of
$200.2 million and $149.7 million, respectively, as of September 30, 2022.

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The following table summarizes Consolidated SLST CDOs and CDOs issued by the
Company’s residential loan securitizations as of September 30, 2022 (dollar
amounts in thousands):

                                              Outstanding Face                                 Weighted Average
                                                   Amount              Carrying Value          Interest Rate (1)           Stated Maturity (2)
Consolidated SLST (3)                         $     716,652          $       660,069                      2.75  %                            2059
Residential loan securitizations              $   1,321,740          $     1,309,735                      3.25  %                     2026 - 2062



(1)Weighted average interest rate is calculated using the outstanding face
amount and stated interest rate of notes issued by the securitization and not
owned by the Company.
(2)The actual maturity of the Company's CDOs are primarily determined by the
rate of principal prepayments on the assets of the issuing entity. The CDOs are
also subject to redemption prior to the stated maturity according to the terms
of the respective governing documents. As a result, the actual maturity of the
CDOs may occur earlier than the stated maturity.
(3)The Company has elected the fair value option for CDOs issued by Consolidated
SLST.

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Mezzanine Lending


The Company's Mezzanine Lending strategy may include preferred equity in, and
mezzanine loans to, entities that have multi-family real estate assets. A
preferred equity investment is an equity investment in the entity that owns the
underlying property and mezzanine loans are secured by a pledge of the
borrower's equity ownership in the property. We evaluate our Mezzanine Lending
investments for accounting treatment as loans versus equity investments.
Mezzanine Lending investments for which the characteristics, facts and
circumstances indicate that loan accounting treatment is appropriate are
included in multi-family loans on our condensed consolidated balance sheets.
Mezzanine Lending investments where the risks and payment characteristics are
equivalent to an equity investment are accounted for using the equity method of
accounting and are included in equity investments on our condensed consolidated
balance sheets.

As of September 30, 2022, one preferred equity investment was greater than 90
days delinquent. This investment represents 1.6% of the total fair value of our
Mezzanine Lending portfolio.

The following tables summarize our Mezzanine Lending portfolio as of
September 30, 2022 and December 31, 2021, respectively (dollar amounts in
thousands):

                                                                           September 30, 2022
                                                                                              Weighted Average           Weighted Average
                                                 Fair Value (1)         Investment            Preferred Return            Remaining Life
                                 Count                (2)               Amount (2)                Rate (3)                    (Years)
Preferred equity investments        27           $   272,168          $    276,021                      11.92  %                    3.6


                                                                             December 31, 2021
                                                                                               Weighted Average           Weighted Average
                                                  Fair Value (1)         Investment            Preferred Return            Remaining Life
                                  Count                (2)               Amount (2)                Rate (3)                    (Years)
Preferred equity investments         33           $   300,819          $    298,330                      11.80  %                    4.6


(1)Preferred equity investments in the amounts of $95.8 million and $120.0
million are included in multi-family loans on the accompanying condensed
consolidated balance sheets as of September 30, 2022 and December 31, 2021,
respectively. Preferred equity investments in the amounts of $176.3 million and
$180.8 million are included in equity investments on the accompanying condensed
consolidated balance sheets as of September 30, 2022 and December 31, 2021,
respectively.
(2)The difference between the fair value and investment amount consists of any
unamortized premium or discount, deferred fees or deferred expenses, and any
unrealized gain or loss.
(3)Based upon investment amount and contractual preferred return rate.




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Mezzanine Lending Characteristics:


The following tables present characteristics of our Mezzanine Lending portfolio
summarized by geographic concentrations of credit risk exceeding 5% of our total
investment amount as of September 30, 2022 and December 31, 2021, respectively
(dollar amounts in thousands):

                                                                            

September 30, 2022

                                                Investment                                  Weighted Average         Weighted Average        Weighted Average
     State                  Count                 Amount                % Total                  Coupon                    LTV                   DSCR (1)
Florida                                6       $   86,312                    31.3  %                  12.5  %                    72  %                   1.92x
Texas                                  6           48,908                    17.7  %                  11.1  %                    84  %                   1.73x
Alabama                                2           33,135                    12.0  %                  12.3  %                    67  %                   2.09x
Ohio                                   3           29,111                    10.6  %                  11.6  %                    89  %                   1.68x
Utah                                   1           20,238                     7.3  %                  12.0  %                    67  %                 N/A (2)
Other                                  9           58,317                    21.1  %                  11.6  %                    86  %                   1.74x
Total                                 27       $  276,021                   100.0  %                  11.9  %                    78  %                   1.76x




                                                                                      December 31, 2021
                                                    Investment                                  Weighted Average         Weighted Average        Weighted Average
       State                     Count                Amount                % Total                  Coupon                    LTV                   DSCR (1)
Florida                                    6       $   83,786                    28.1  %                  12.5  %                    72  %                   2.43x
Texas                                      9           70,523                    23.6  %                  11.2  %                    84  %                   2.13x
Alabama                                    3           40,960                    13.7  %                  12.2  %                    73  %                   2.12x
Ohio                                       3           28,482                     9.5  %                  11.6  %                    88  %                   2.05x
North Carolina                             3           19,214                     6.4  %                  12.0  %                    74  %                   1.50x

Other                                      9           55,365                    18.7  %                  11.2  %                    84  %                   1.91x
Total                                     33       $  298,330                   100.0  %                  11.8  %                    79  %                   2.05x



(1)Represents the weighted average debt service coverage ratio ("DSCR") of the
underlying properties.
(2)Not applicable as the underlying property is under construction.


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Equity Investments in Multi-Family Entities


The Company has invested in joint venture equity investments that own
multi-family apartment communities. The Company determined that these joint
venture entities are VIEs and that the Company is the primary beneficiary,
resulting in consolidation of the VIEs, including their assets, liabilities,
income and expenses, in our financial statements in accordance with GAAP. We
receive a preferred return and/or pro rata variable distributions from these
investments and, in certain cases, management fees based upon property
performance. We also will participate in allocation of excess cash upon sale of
the multi-family real estate assets.

The Company has invested in two additional joint venture entities that own
multi-family apartment communities. The Company determined that these joint
venture entities are VIEs but that the Company is not the primary beneficiary,
resulting in the Company recording its equity investments at fair value. We
receive variable distributions from these investments on a pro rata basis and
management fees based upon property performance. We also will participate in
allocation of excess cash upon sale of the multi-family real estate assets.

In September 2022, the Company announced a repositioning of its business through
the opportunistic disposition over time of the Company's joint venture equity
investments in multi-family properties and reallocation of its capital away from
such assets to its targeted assets. As of September 30, 2022, the Company
determined that certain joint venture equity investments met the criteria to be
classified as held for sale and transferred the assets and liabilities of the
respective Consolidated VIEs and its unconsolidated multi-family joint venture
equity investments to assets and liabilities of disposal group held for sale.
The Company's net equity in the consolidated multi-family properties and
disposal group held for sale totaled $389.5 million as of September 30, 2022.

As of December 31, 2021, a wholly-owned subsidiary of the Company owned a
multi-family apartment community and the Company’s net equity in this entity
totaled $14.6 million. During the nine months ended September 30, 2022, the
entity completed the sale of its multi-family apartment community.

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A reconciliation of our net equity investments in consolidated multi-family
properties and disposal group held for sale to our condensed consolidated
financial statements as of September 30, 2022 and December 31, 2021,
respectively, is shown below (dollar amounts in thousands):


                                                               September 30, 2022           December 31, 2021
Cash and cash equivalents                                    $            18,555          $           30,130
Real estate, net                                                         546,118                     978,834
Lease intangible, net (1)                                                      -                      39,769
Assets of disposal group held for sale (2)                             1,147,410                           -
Other assets                                                              17,457                      31,006
Total assets                                                 $         1,729,540          $        1,079,739

Mortgages payable on real estate, net (3)                    $           387,761          $          709,356
Liabilities of disposal group held for sale (2)                          875,576                           -
Other liabilities                                                         12,335                      17,993
Total liabilities                                            $         1,275,672          $          727,349

Redeemable non-controlling interest in Consolidated
VIEs

                                                         $            27,786          $           66,392
Non-controlling interest in Consolidated VIEs                             12,371                      24,359
Non-controlling interest in disposal group held for
sale                                                                      24,243                           -
Net equity investment (4)                                    $           389,468          $          261,639



(1)Included in other assets in the accompanying condensed consolidated balance
sheets.
(2)See Note 9 in the Notes to Condensed Consolidated Financial Statements for
further information regarding our assets and liabilities of disposal group held
for sale.
(3)See Note 13 in the Notes to Condensed Consolidated Financial Statements for
further information regarding our mortgages payable on real estate.
(4)The Company's net equity investment as of September 30, 2022 consists of
$141.9 million of net equity investments in consolidated multi-family properties
and $247.6 million of net equity investments in disposal group held for sale.

Equity Investments in Consolidated Multi-Family Properties


The Company's net equity investment in consolidated multi-family properties of
$141.9 million primarily consists of two investments in one joint venture entity
that do not meet the criteria to be classified as held for sale: a preferred
equity investment of approximately $134.5 million earning a preferred return of
11% and a common equity investment of approximately $7.1 million. This joint
venture entity also has third-party investors that have the ability to sell
their ownership interests to us, at their election, and we are obligated to
purchase, subject to certain conditions, such interests for cash, representing
redeemable non-controlling interests of approximately $27.8 million.

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The geographic concentrations in consolidated multi-family properties exceeding
5% of our combined common and preferred net equity investments in consolidated
multi-family properties as of September 30, 2022 and December 31, 2021,
respectively, are shown below (dollar amounts in thousands):

September 30, 2022
                                                             Total Equity Ownership                                        Percentage of Total Net
          State                     Property Count                  Interest                Net Equity Investment             Equity Investment
Texas                                      5                          68%                 $               57,796                             40.8  %
Tennessee                                  2                       64% - 68%              $               23,060                             16.3  %
Florida                                    1                          49%                 $               19,501                             13.8  %
South Carolina                             2                       66% - 68%              $               16,980                             12.0  %
Kentucky                                   1                          68%                 $               12,967                              9.2  %
Alabama                                    1                          68%                 $                8,197                              5.8  %



December 31, 2021
                                                             Total Equity Ownership                                        Percentage of Total Net
          State                     Property Count                  Interest                Net Equity Investment             Equity Investment
Florida                                    6                       47% - 100%             $               81,754                             31.2  %
Texas                                      9                       66% - 95%              $               79,527                             30.4  %
Alabama                                    2                       80% - 95%              $               37,162                             14.2  %
South Carolina                             2                       63% - 66%              $               16,540                              6.3  %



The following table provides summary information regarding our consolidated
multi-family properties as of September 30, 2022.

       Market             Property Count       Occupancy %       Units        Rent per Unit (1)       LTV (2)
Beaufort, SC                     1                  93.1  %           248    $            1,397        83.7  %
Collierville, TN                 1                  95.1  %           324                 1,457        79.9  %
Columbia, SC                     1                  90.6  %           276                 1,036        84.5  %
Dallas, TX                       2                  91.5  %           401                 1,797        84.8  %
Houston, TX                      1                  92.2  %           192                 1,393        91.7  %
Little Rock, AR                  1                  97.0  %           202                 1,224        91.6  %
Louisville, KY                   1                  85.0  %           300                 1,358        84.2  %
Memphis, TN                      1                  93.4  %           242                 1,095        97.1  %
Montgomery, AL                   1                  90.9  %           252                   971        92.9  %
San Antonio, TX                  2                  93.3  %           684                 1,251        80.5  %
St. Petersburg, FL               1                  95.7  %           326                 2,279        75.2  %

Total Count/Average             13                  92.5  %     3,447        $            1,412        84.0  %



(1)Represents average monthly rent per unit.
(2)Represents loan-to-value ("LTV") of the underlying properties.

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Equity Investments in Disposal Group Held for Sale

The following table provides summary information regarding the multi-family
properties in the disposal group held for sale as of September 30, 2022.

       Market             Property Count       Occupancy %       Units        Rent per Unit (1)       LTV (2)
Apopka, FL                       1                  90.4  %           240    $            1,430        84.8  %
Birmingham, AL                   2                  95.4  %           693                 1,394        75.2  %
Brandon, FL                      2                  89.3  %         1,267                 1,282        88.9  %
Fort Myers, FL                   1                  87.6  %           338                 1,414        89.7  %
Fort Worth, TX                   1                  95.3  %           256                 1,093        80.2  %
Houston, TX                      1                  87.0  %           200                   942        80.6  %
Kissimmee, FL                    1                  94.1  %           320                 1,457        84.9  %
Oklahoma City, OK                2                  89.7  %           957                   737        85.9  %
Orlando, FL                      1                  95.5  %           220                 1,457        82.9  %
Pearland, TX                     2                  96.2  %           234                 1,513        67.2  %
Pensacola, FL                    1                  93.8  %           240                 1,432        79.2  %
Plano, TX                        2                  92.2  %           702                 1,430        79.5  %
Tampa, FL                        1                  97.8  %           400                 1,570        86.1  %
Webster, TX                      1                  86.1  %           366                   970        81.6  %

Total Count/Average             19                  91.6  %     6,433        $            1,258        83.0  %



(1)Represents average monthly rent per unit.
(2)Represents LTV of the underlying properties.

Equity Investments in Entities that Invest in or Originate Residential
Properties
and Loans


As of September 30, 2022, the Company had an ownership interest in an entity
that invests in residential properties. We may receive variable distributions
from this investment based upon underlying asset performance and we record our
position at fair value. Also as of September 30, 2022, the Company had an
investment in an entity that originates residential loans. The following table
summarizes our ownership interests in entities that invest in residential
properties and originate residential loans as of September 30, 2022 and
December 31, 2021, respectively (dollar amounts in thousands):

                                                                               September 30, 2022                           December 31, 2021
                                                                                                                      Ownership
                                              Strategy              Ownership Interest          Fair Value            Interest             Fair Value
Morrocroft Neighborhood                Single-Family Rental
Stabilization Fund II, LP (1)          Properties                           11%               $     1,975                11%             $    19,143
Constructive Loans, LLC (2)            Residential Loans                     -                     27,500                 -                   29,250
Total                                                                                         $    29,475                                $    48,393



(1)The Company's equity investment was partially redeemed, subject to holdbacks,
as a result of a sale transaction initiated by the general partner during the
nine months ended September 30, 2022.
(2)The Company has the option to purchase 50% of the issued and outstanding
interests of an entity that originates residential loans. The Company accounts
for this investment using the equity method and has elected the fair value
option.

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Investment Securities


At September 30, 2022, our investment securities portfolio included non-Agency
RMBS, CMBS and ABS, which are classified as investment securities available for
sale. Our investment securities also include first loss subordinated securities
and certain IOs issued by Consolidated SLST. At September 30, 2022, we had no
investment securities in a single issuer or entity that had an aggregate book
value in excess of 5% of our total assets. The decrease in the carrying value of
our investment securities as of September 30, 2022 as compared to December 31,
2021 is primarily due to sales and paydowns of non-Agency RMBS and ABS and a
decrease in the fair value of a number of our investment securities during the
period due to spread widening.

The following tables summarize our investment securities portfolio as of
September 30, 2022 and December 31, 2021, respectively (dollar amounts in
thousands):

                                                                                                        September 30, 2022
                                                                                       Unrealized                                               Weighted Average
                                                                                                                                                                                     Outstanding
                                 Current Par                                                                                                                                          Repurchase
Investment Securities               Value              Amortized Cost      
    Gains             Losses           Fair Value           Coupon (1)            Yield (2)               Agreements
Available for Sale ("AFS")

Non-Agency RMBS
Senior                         $         44          $            44          $     -          $      (5)         $       39                 2.74  %                2.95  %       $             -
Mezzanine                            30,250                   29,276                -             (2,236)             27,040                 4.77  %                5.58  %                     -
Subordinated                         39,109                   28,050               51             (9,366)             18,735                10.64  %                8.32  %                     -
IO                                  543,951                   17,766            7,649                  -              25,415                 1.46  %               18.95  %                     -
Total Non-Agency RMBS               613,354                   75,136       
    7,700            (11,607)             71,229                 2.18  %                9.96  %                     -
CMBS
Mezzanine                            26,355                   26,355                -             (1,758)             24,597                 4.75  %                4.74  %                     -
Subordinated                          6,000                    6,000                -               (251)              5,749                 8.59  %                8.59  %                     -

Total CMBS                           32,355                   32,355                -             (2,009)             30,346                 5.46  %                5.45  %                     -
ABS
Residuals                                 4                      970              141                  -               1,111                    -                  30.68  %                     -
Total ABS                                 4                      970              141                  -               1,111                    -                  30.68  %                     -
Total - AFS                    $    645,713          $       108,461          $ 7,841          $ (13,616)         $  102,686                 2.49  %                8.86  %       $             -
Consolidated SLST
Non-Agency RMBS
Subordinated                   $    256,807          $       211,992          $     -          $ (31,982)         $  180,010                 4.48  %                5.25  %       $        53,159
IO                                  153,568                   22,647                -             (3,823)             18,824                 3.50  %                2.73  %                     -
Total Non-Agency RMBS               410,375                  234,639                -            (35,805)            198,834                 4.10  %                4.99  %                53,159

Total – Consolidated SLST $ 410,375 $ 234,639

   $     -          $ (35,805)         $  198,834                 4.10  %                4.99  %       $        53,159

Total Investment Securities $ 1,056,088 $ 343,100

  $ 7,841          $ (49,421)         $  301,520                 3.11  %                6.22  %       $        53,159



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                                                                                             December 31, 2021
                                                                                        Unrealized                                                Weighted Average
                                                                                                                                                                                      Outstanding
                                 Current Par                                                                                                                                          Repurchase
Investment Securities               Value              Amortized Cost      
     Gains             Losses           Fair Value           Coupon (1)             Yield (2)             Agreements
Available for Sale ("AFS")

Non-Agency RMBS
Senior                         $     14,055          $        14,054          $      -          $      (6)         $   14,048                  5.97  %                5.97  %       $          -
Mezzanine                            40,350                   39,243             1,787                 (8)             41,022                  6.72  %                6.18  %                  -
Subordinated                         63,153                   53,386               374             (2,265)             51,495                  4.35  %                6.12  %                  -
IO                                  633,530                   21,246               575               (367)             21,454                  1.01  %               12.08  %                  -
Total Non-Agency RMBS               751,088                  127,929             2,736             (2,646)            128,019                  1.80  %                6.86  %                  -
CMBS
Mezzanine                            26,600                   26,600               159               (138)             26,621                  3.81  %                3.81  %                  -
Subordinated                          6,000                    6,000               525                  -               6,525                  7.69  %                7.69  %                  -

Total CMBS                           32,600                   32,600               684               (138)             33,146                  4.52  %                4.52  %                  -
ABS
Residuals                               117                   21,795            17,884                  -              39,679                     -                  24.58  %                  -
Total ABS                               117                   21,795            17,884                  -              39,679                     -                  24.58  %                  -
Total - AFS                    $    783,805          $       182,324          $ 21,304          $  (2,784)         $  200,844                  5.49  %                9.36  %       $          -
Consolidated SLST
Non-Agency RMBS
Subordinated                   $    256,807          $       212,254          $  1,514          $       -          $  213,768                  4.57  %                4.88  %       $          -
IO                                  174,483                   26,415                 -             (9,839)             16,576                  3.50  %                8.48  %                  -
Total Non-Agency RMBS               431,290                  238,669             1,514             (9,839)            230,344                  4.11  %                5.30  %                  -

Total – Consolidated SLST $ 431,290 $ 238,669

   $  1,514          $  (9,839)         $  230,344                  4.11  %                5.30  %       $          -

Total Investment Securities $ 1,215,095 $ 420,993

  $ 22,818          $ (12,623)         $  431,188                  4.90  %                6.97  %       $          -



(1)Our weighted average coupon was calculated by dividing our annualized coupon
income by our weighted average current par value for the respective periods.
(2)Our weighted average yield was calculated by dividing our annualized interest
income by our weighted average amortized cost for the respective periods.

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Investment Securities Financing

Repurchase Agreements


In March 2020, in reaction to the market turmoil related to the COVID-19
pandemic, our investment securities repurchase agreement providers dramatically
changed their risk tolerances, including reducing or eliminating availability to
add or roll maturing repurchase agreements, increasing haircuts and reducing
security valuations. In turn, this led to significant disruptions in our
financing markets, negatively impacting the Company as well as the mortgage REIT
industry, generally. In response, the Company completely eliminated its
securities repurchase agreement exposure in 2020, which continued throughout
2021.

As of September 30, 2022, the Company had amounts outstanding under repurchase
agreements with third-party financial institutions to fund a portion of its
investment securities portfolio. These repurchase agreements are short-term
financings that bear interest rates typically based on a spread to SOFR and are
secured by the investment securities which they finance. Upon entering into a
financing transaction, our counterparties negotiate a "haircut", which is the
difference expressed in percentage terms between the fair value of the
collateral and the amount the counterparty will advance to us. The size of the
haircut represents the counterparty's perceived risk associated with holding the
investment securities as collateral. The haircut provides counterparties with a
cushion for daily market value movements that reduce the need for margin calls
or margins to be returned as normal daily changes in investment security market
values occur. The Company expects to roll outstanding amounts under its
repurchase agreements into new repurchase agreements or other financings, or to
repay outstanding amounts, prior to or at maturity.

The following table details the quarterly average balance, ending balance and
maximum balance at any month-end during each quarter in 2022, 2021 and 2020 for
our repurchase agreements secured by investment securities (dollar amounts in
thousands):

                         Quarterly Average       End of Quarter       Maximum Balance
   Quarter Ended              Balance                Balance          at any Month-End
September 30, 2022      $           53,159      $        53,159      $         53,159
June 30, 2022                      132,712              129,331               138,301
March 31, 2022                     116,766              144,852               144,852

December 31, 2021                        -                    -                     -
September 30, 2021                       -                    -                     -
June 30, 2021                            -                    -                     -
March 31, 2021                           -                    -                     -

December 31, 2020                        -                    -                     -
September 30, 2020                  29,190                    -                87,571
June 30, 2020                      108,529               87,571               150,445
March 31, 2020                   1,694,933              713,364             2,237,399


Non-Agency RMBS Re-Securitization


In June 2020, the Company completed a re-securitization of certain non-Agency
RMBS primarily for the purpose of obtaining non-recourse, longer-term financing
on a portion of its non-Agency RMBS portfolio. In February 2021, the Company
exercised its right to an optional redemption of its non-Agency RMBS
re-securitization with an outstanding principal balance of $14.7 million at the
time of redemption, returning the non-Agency RMBS held by the re-securitization
trust to the Company.
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Debt

The Company’s debt as of September 30, 2022 included senior unsecured notes and
subordinated debentures.


Senior Unsecured Notes

As of September 30, 2022, the Company had $100.0 million aggregate principal
amount of its 5.75% Senior Unsecured Notes (the "Senior Unsecured Notes")
outstanding, due on April 30, 2026. The Senior Unsecured Notes were issued at
par and carry deferred charges resulting in a total cost to the Company of
approximately 6.64%. The Company's Senior Unsecured Notes contain various
covenants including the maintenance of a minimum net asset value, ratio of
unencumbered assets to unsecured indebtedness and senior debt service coverage
ratio and limit the amount of leverage the Company may utilize and its ability
to transfer the Company's assets substantially as an entirety or merge into or
consolidate with another person.

Subordinated Debentures


As of September 30, 2022, certain of our wholly-owned subsidiaries had trust
preferred securities outstanding of $45.0 million with a weighted average
interest rate of 7.12% which are due in 2035. The securities are fully
guaranteed by us with respect to distributions and amounts payable upon
liquidation, redemption or repayment. These securities are classified as
subordinated debentures in the liability section of our condensed consolidated
balance sheets.

Convertible Notes

As of December 31, 2021, the Company had $138.0 million aggregate principal
amount of its 6.25% Senior Convertible Notes (the "Convertible Notes")
outstanding. The Company redeemed the Convertible Notes at maturity for $138.0
million in January 2022. None of the Convertible Notes were converted prior to
maturity.

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