NEW YORK MORTGAGE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, ~~2019~~2020

(unaudited)


1.	~~Organization~~

1.Organization

New York Mortgage Trust, Inc., together with its consolidated subsidiaries (“NYMT,” “we,” “our,” or the “Company”), is a real estate investment trust, or REIT, in the business of acquiring, investing in, financing and managing primarily mortgage-related single-family and multi-family residential ~~housing-related~~ assets. Our objective is to deliver long-term stable distributions to our stockholders over changing economic conditions through a combination of net interest margin and ~~net realized~~ capital gains from a diversified investment portfolio. Our investment portfolio includes ~~(i) structured~~credit sensitive residential and multi-family ~~property~~assets, including investments ~~such as multi-family CMBS and preferred equity in, and mezzanine loans to, owners of multi-family properties, (ii) residential mortgage loans, including~~that may have been sourced from distressed residential mortgage loans, non-QM loans, second mortgages, and other residential mortgage loans, (iii) non-Agency RMBS, (iv) Agency RMBS and (v) certain mortgage-, residential housing- and other credit-related assets.markets.

The Company conducts its business through the parent company, New York Mortgage Trust, Inc., and several subsidiaries, including special purpose subsidiaries established for securitization purposes, taxable REIT subsidiaries (“TRSs”) and qualified REIT subsidiaries (“QRSs”). The Company consolidates all of its subsidiaries under generally accepted accounting principles in the United States of America (“GAAP”).

The Company is organized and conducts its operations to qualify as a REIT for U.S. federal income tax purposes. As such, the Company will generally not be subject to federal income taxes on that portion of its income that is distributed to stockholders if it distributes at least 90% of its ~~annual~~ REIT taxable income to its stockholders by the due date of its federal income tax return and complies with various other requirements.

COVID-19 Impact

The outbreak of the novel coronavirus (“COVID-19”) pandemic around the globe continues to adversely impact the U.S. and world economies and has contributed to significant volatility in global financial and credit markets. The impact of the outbreak has evolved rapidly. The major disruptions caused by COVID-19 significantly slowed many commercial activities in the U.S., resulting in a rapid rise in unemployment claims, reduced business revenues and sharp reductions in liquidity and the fair value of many assets, including those in which the Company invests. The ultimate duration and impact of the COVID-19 pandemic and response thereto remains uncertain.

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2.Summary of Significant Accounting Policies

Definitions – The following defines certain of the commonly used terms in these financial statements:

“RMBS” refers to residential mortgage-backed securities ~~comprised of~~backed by adjustable-rate, hybrid adjustable-rate, or fixed-rate ~~interest only and inverse interest only and principal only securities;~~residential loans;

“Agency RMBS” refers to RMBS representing interests in or obligations backed by pools of ~~mortgage~~residential loans ~~issued or~~ guaranteed by a government sponsored enterprise (“GSE”), such as 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 Government National Mortgage Association (“Ginnie Mae”);

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

“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;

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

“ARMs” refers to adjustable-rate residential ~~mortgage~~ loans;

~~“ARM loans” and “residential securitized loans” each refer to prime credit quality residential ARMs held in our securitization trusts formed in 2005;~~

“Agency ARMs” refers to Agency RMBS comprised of adjustable-rate and hybrid adjustable-rate RMBS;

“Agency fixed-rate RMBS” refers to Agency RMBS comprised of fixed-rate RMBS;

“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;

“CMBS” refers to commercial mortgage-backed securities comprised of commercial mortgage pass-through securities issued by a GSE, as well as PO, IO ~~or senior~~ or mezzanine securities that represent the right to a specific component of the cash flow from a pool of commercial mortgage loans;

“~~Multi-family~~Agency CMBS” refers to CMBS representing interests or obligations backed by pools of mortgage loans guaranteed by a GSE, such as Fannie Mae or Freddie Mac;

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

“~~CDOs”~~CDO” refers to collateralized debt ~~obligations;~~obligation;

“non-QM loans” refers to residential ~~mortgage~~ loans that are not deemed “qualified mortgage,” or “QM,” loans under the rules of the Consumer Financial Protection Bureau (“CFPB”);

“qualified mortgage” refers to a mortgage loan eligible for delivery to a GSE under the rules of the CFPB, which have certain requirements such as debt-to-income ratio, being fully-amortizing, and limits on loan fees; ~~and~~

“second mortgages” refers to liens on residential properties that are subordinate to more senior mortgages or ~~loans.~~loans;

“residential bridge loans” refers to short-term business purpose loans collateralized by residential properties made to investors who intend to rehabilitate and sell the residential property for a profit;

“Residential CDOs” refers to the debt that permanently finances the residential loans held in the Company's residential loan securitization trusts and that we consolidate in our financial statements in accordance with GAAP;

“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; and

“SLST CDOs” refers to the debt that permanently finances the residential loans held in Consolidated SLST that we consolidate in our financial statements in accordance with GAAP.

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Basis of Presentation – The accompanying condensed consolidated balance sheet as of December 31, ~~2018~~2019 has been derived from audited financial statements. The accompanying condensed consolidated balance sheet as of September 30, ~~2019,~~2020, the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, the accompanying condensed consolidated statements of comprehensive income for the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, the accompanying condensed consolidated statements of changes in stockholders’ equity for the three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 and the accompanying condensed consolidated statements of cash flows for the nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 are unaudited. In our opinion, all adjustments (which include only normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations and cash flows have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with Article 10 of Regulation S-X and the instructions to Form 10-Q. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, as filed with the U.S. Securities and Exchange Commission (“SEC”). Accordingly, significant accounting policies and other disclosures have been omitted since such items are disclosed in Note 2 in the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~2019. Provided ~~below~~in this section is a summary of additional accounting policies that are significant to, or newly adopted by, the Company for the three and nine months ended September 30, ~~2019.~~2020. The results of operations for the three and nine months ended September 30, ~~2019~~2020 are not necessarily indicative of the operating results for the full year.

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The accompanying condensed consolidated financial statements have been prepared on the accrual basis of accounting in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the 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. Management has made significant estimates in several areas, including fair valuation of its ~~distressed and other~~ residential ~~mortgage~~ loans, ~~multi-family loans held in securitization trusts, multi-family~~SLST CDOs and ~~CMBS held~~preferred equity in, ~~securitization trusts, as well as income recognition on distressed residential mortgage~~and mezzanine loans ~~purchased at a discount. Although the Company’s estimates contemplate current conditions~~to, owners of multi-family properties.

The COVID-19 pandemic and ~~how it expects those conditions~~resulting emergency measures have led (and may continue to ~~change~~lead) to significant disruptions in the ~~future,~~global supply chain, global capital markets, the economy of the U.S. and the economies of other countries impacted by COVID-19. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions. The Company believes the estimates and assumptions underlying our condensed consolidated financial statements are reasonable and supportable based on the information available as of September 30, 2020; however, uncertainty over the ultimate impact COVID-19 will have on the global economy generally, and our business in particular, makes any estimates and assumptions as of September 30, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19. Accordingly, it is reasonably possible that actual conditions could be different than anticipated in those estimates, which could materially impact the Company’s results of operations and its financial condition.

Reclassifications – Certain prior period amounts have been reclassified in the accompanying condensed consolidated financial statements to conform to current period presentation.

Principles of Consolidation and Variable Interest Entities – The accompanying condensed consolidated financial statements of the Company include the accounts of all its subsidiaries which are majority-owned, controlled by the Company or a variable interest entity ~~("VIE"~~(“VIE”) where the Company is the primary beneficiary. All significant intercompany accounts and transactions have been eliminated in consolidation.

A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as 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. The Company consolidates a VIE when it is the primary beneficiary of such VIE, herein referred to as a "Consolidated VIE". As primary beneficiary, the Company 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. The Company is required to reconsider its evaluation of whether to consolidate a VIE each reporting period, based upon changes in the facts and circumstances pertaining to the VIE.

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As of December 31, 2019, the Company, or one of its “special purpose entities” (“SPEs”), owned the first loss POs, certain IOs, and certain senior and mezzanine securities issued by certain Freddie Mac-sponsored multi-family loan K-Series securitizations that we consolidated in our financial statements in accordance with GAAP (the “Consolidated K-Series”). Based on a number of factors, management determined that the Company was the primary beneficiary of each VIE within the Consolidated K-Series and met the criteria for consolidation and, accordingly, consolidated these securitizations, including their assets, liabilities, income and expenses in our financial statements. In response to market conditions and the Company's intention to improve its liquidity, in March 2020, the Company sold its entire portfolio of first loss POs issued by the Consolidated K-Series which resulted in the de-consolidation of each Consolidated K-Series as of the sale date of each first loss PO (see Note 6).

Goodwill – Goodwill in the amount of $25.2 million as of December 31, 2019 was related to the Company’s multi-family investment reporting unit.

Goodwill is not amortized but is evaluated for impairment on an annual basis, or more frequently if the Company believes indicators of impairment exist, by initially performing a qualitative screen and, if necessary, then comparing fair value of the reporting unit to its carrying value, including goodwill. If the fair value of the reporting unit is less than the carrying value, an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value (in an amount not to exceed the total amount of goodwill allocated to the reporting unit) is recognized.

The Company’s annual evaluation of goodwill related to its multi-family investment reporting unit as of October 1, 2019 indicated no impairment. However, financial, credit and mortgage-related asset markets experienced significant volatility as a result of the spread of COVID-19, which in turn put significant pressure on the mortgage REIT industry, including financing operations, mortgage asset pricing and liquidity demands. In response to these conditions and the Company's intention to improve its liquidity, in March 2020, the Company sold its entire portfolio of first loss POs issued by the Consolidated K-Series, certain senior and mezzanine securities issued by the Consolidated K-Series, Agency CMBS and CMBS that were held by its multi-family investment reporting unit. As a result of the sales, the Company re-evaluated its goodwill balance associated with the multi-family investment reporting unit for impairment. The Company considered qualitative indicators such as macroeconomic conditions, disruptions in equity and credit markets, REIT-specific market considerations, and changes in the net assets in the multi-family investment reporting unit to determine that a quantitative assessment of the fair value of the reporting unit was necessary. The Company performed its quantitative analysis by updating its discounted cash flow projection for the multi-family investment reporting unit for the reduced investment portfolio. This analysis yielded an impairment of the entire goodwill balance reported as a $25.2 million impairment of goodwill on the accompanying condensed consolidated statements of operations for the nine months ended September 30, 2020.

Receivables and Other Assets – Receivables and other assets as of September 30, 2020 and December 31, 2019 include restricted cash held by third parties, including cash held by the Company's securitization trusts, of $54.8 million and $2.8 million, respectively. Receivables and other assets also include collections receivable from loan servicers and interest receivable on residential loans totaling $36.7 million and $41.2 million as of September 30, 2020 and December 31, 2019, respectively. Also included in receivables and other assets are operating lease right of use assets of $10.4 million and $9.3 million as of September 30, 2020 and December 31, 2019, respectively (with corresponding operating lease liabilities of $11.0 million and $9.8 million as of September 30, 2020 and December 31, 2019, respectively, included in accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets).

Stock Based Compensation – The Company has awarded restricted stock to eligible employees and officers as part of their compensation. Compensation expense for equity based awards and stock issued for services are recognized over the vesting period of such awards and services based upon the fair value of the award at the grant date.

During the nine months ended September 30, 2020 and 2019, the Company granted Performance Stock Units (“PSUs”) to the Company's executive officers and certain other employees. The awards were issued pursuant to and are consistent with the terms and conditions of the Company’s 2017 Equity Incentive Plan (as amended, the “2017 Plan”). The PSUs are subject to performance-based vesting under the 2017 Plan pursuant to a form of PSU award agreement (the “PSU Agreement”). Vesting of the PSUs will occur after a three-year period based on the Company’s relative total stockholders' return (“TSR”) percentile ranking as compared to an identified performance peer group. The feature in this award constitutes a “market condition” which impacts the amount of compensation expense recognized for these awards. The grant date fair values of PSUs were determined through Monte-Carlo simulation analysis. The PSUs awarded during the nine months ended September 30, 2020 also include dividend equivalent rights (“DERs”) which entitle the holders of vested PSUs to receive payments in an amount equal to any dividends paid by the Company in respect of the share of the Company's common stock underlying the vested PSU to which such DER relates.

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During the nine months ended September 30, 2020, the Company granted Restricted Stock Units (“RSUs”) to the Company's executive officers and certain other employees. The awards were issued pursuant to and are consistent with the terms and conditions of the 2017 Plan and are subject to a service condition, vesting ratably over a three-year period. Upon vesting, each RSU represents the right to receive one share of the Company’s common stock. The RSUs include DERs which entitle the holders of vested RSUs to receive payments in an amount equal to any dividends paid by the Company in respect of the share of the Company's common stock underlying the vested RSU to which such DER relates.

Adoption of ~~Accounting Standards Codification ("ASC") Topic 842, Leases ("ASC 842")~~Financial Instruments — Credit Losses (Topic 326)

On January 1, ~~2019,~~2020, the Company adopted ~~ASC 842 using~~Accounting Standards Update (“ASU”) 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) which requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts (“CECL”). In adopting ASU 2016-13, the Company elected to apply the fair value option in accordance with ASU 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief (“ASU 2019-05”) to the Company’s residential loans, net and preferred equity and mezzanine loan investments that are accounted for as loans and preferred equity investments that are accounted for under the equity method. In adopting ASU 2016-13 and ASU 2019-05, the Company applied a modified retrospective ~~transition method applied~~basis by means of a cumulative-effect adjustment to ~~all leases that were not completed~~the opening balance of accumulated deficit. Adjustments resulting from this one-time election to record the difference between the carrying value and the fair value of these assets have been reflected in our condensed consolidated balance sheets as of January 1, ~~2019. Results~~2020. Subsequent changes in fair value for ~~reporting periods beginning~~these assets are recorded in unrealized gains (losses), net or other income on ~~or after January 1, 2019 are presented under ASC 842,~~our condensed consolidated statements of operations, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. ~~We elected~~As a result of the ~~practical expedients allowed for under ASC 842 that exempt~~implementation of ASU 2019-05, we recorded a cumulative-effect adjustment of $12.3 million as an entity from reassessing whether existing contracts contain leases, reassessing the lease classification of existing leases, and reassessing the initial direct costs for existing leases. As such, there was no cumulative impact on opening accumulated deficitincrease to stockholders’ equity as of January 1, 2020.

The following table presents the classification and balances at December 31, 2019, the transition adjustments, and the balances at January 1, 2020 for those balance sheet line items impacted by the implementation of ~~adopting ASC 842 under~~ASU 2019-05 (dollar amounts in thousands):


	December 31, 2019		Transition Adjustment		January 1, 2020
Assets
Residential loans, net	$	202,756	$	5,715	$	208,471
Investments in unconsolidated entities	106,083		1,394		107,477
Preferred equity and mezzanine loan investments	180,045		2,420		182,465
Receivables and other assets	865		2,755		3,620
Total Assets	$	489,749	$	12,284	$	502,033

Stockholders' Equity
Accumulated deficit	$	(148,863)	$	12,284	$	(136,579)
Total Stockholders' Equity	$	(148,863)	$	12,284	$	(136,579)

The Company also assessed the ~~modified retrospective transition method. Operating lease right~~impact of ~~use assets of $9.6 million~~ASU 2016-13 on the Company’s investment securities available for sale where the fair value option has not been elected and ~~operating lease liabilities of $10.0 million are included in receivables and other assets and accrued expenses and other liabilities in~~determined that the ~~condensed consolidated balance sheets, respectively, as of September 30, 2019. The~~ adoption of ~~ASC 842~~the standard did not have a material effect on our ~~results~~financial statements as of January 1, 2020.

The following significant accounting policies have been updated as a result of the Company's adoption of ASU 2016-13 and ASU 2019-05 effective January 1, 2020.

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Investment Securities Available for Sale – The Company’s investment securities where the fair value option has not been elected and which are reported at fair value with unrealized gains and losses reported in Other Comprehensive Income (“OCI”) include non-Agency RMBS and CMBS (collectively, “CECL Securities”). Beginning in the fourth quarter of 2019, the Company made a fair value election at the time of acquisition of newly purchased investment securities 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 fair value of investment securities subject to the fair value election are recorded in current period earnings in unrealized gains (losses), net on the accompanying condensed consolidated statements of operations.

The Company generally intends to hold its investment securities until maturity; however, from time to time, it may sell any of its securities as part of the overall management of its business. As a result, our investment securities are classified as available for sale securities. Realized gains and losses recorded on the sale of investment securities available for sale are based on the specific identification method and included in realized gains (losses), net on the accompanying condensed consolidated statements of operations.

Interest income on our investment securities available for sale is accrued based on the outstanding principal balance and their contractual terms. Purchase premiums or discounts associated with Agency RMBS and Agency CMBS assessed as high credit quality at the time of purchase are amortized or accreted to interest income over the estimated life of these investment securities using the effective yield method. Adjustments to amortization are made for actual prepayment activity on our Agency RMBS.

Interest income on certain of our credit sensitive securities that were purchased at a premium or discount to par value, such as certain of our non-Agency RMBS, CMBS and ABS that are of less than high credit quality, is recognized based on the security’s effective yield. The effective yield on these securities is based on management’s estimate of the projected cash flows from each security, which incorporates assumptions related to fluctuations in interest rates, prepayment speeds and the timing and amount of credit losses. On at least a quarterly basis, management reviews and, if appropriate, adjusts its cash flow projections based on input and analysis received from external sources, internal models, and its judgment about interest rates, prepayment rates, the timing and amount of credit losses, and other factors. Changes in cash flows from those originally projected, or from those estimated at the last evaluation, may result in a prospective change in the yield (or interest income) recognized on these securities.

The Company accounts for investment securities that are of high credit quality (generally those rated AA or better by a Nationally Recognized Statistical Rating Organization, or NRSRO) at the date of acquisition in accordance with ASC 320-10, Investments - Debt and Equity Securities (“ASC 320-10”). The Company accounts for investment securities that are not of high credit quality (i.e., those whose risk of loss is more than remote) or securities that can be contractually prepaid such that we would not recover our initial investment at the date of acquisition in accordance with ASC 325-40, Investments - Beneficial Interests in Securitized Financial Assets (“ASC 325-40”). The Company considers credit ratings, the underlying credit risk and other market factors in determining whether the investment securities are of high credit quality; however, securities rated lower than AA or an equivalent rating are not considered of high credit quality and are accounted for in accordance with ASC 325-40. If ratings are inconsistent among NRSROs, the Company uses the lower rating in determining whether the securities are of high credit quality.

When the fair value of an investment security where the fair value option has not been elected is less than its amortized cost as of the reporting balance sheet date, the security is considered impaired. If the Company intends to sell an impaired security, or it is more likely than not that it will be required to sell the impaired security before its anticipated recovery, the Company recognizes a loss through earnings equal to the difference between the investment’s amortized cost and its fair value and reduces the amortized cost basis to the fair value as of the balance sheet date. If the Company does not expect to sell an impaired security, it performs an analysis to determine if a portion of the impairment is a result of credit losses. The portion of the impairment related to credit losses (limited by the difference between the fair value and amortized cost basis) is recognized through earnings and a corresponding allowance for credit losses is established against the amortized cost basis. The remainder of the impairment is recognized as a component of other comprehensive income (loss) on the accompanying condensed consolidated balance sheets and does not impact earnings. Subsequent changes in the allowance for credit losses are recorded through earnings with reversals limited to the previously recorded allowance for credit losses. The determination of whether a credit loss exists, and if so, the amount considered to be a credit loss is subjective, as such determinations are based on both observable and subjective information available at the time of assessment as well as the Company's estimates of the future performance and cash flow projections. As a result, the timing and amount of credit losses constitute material estimates that are susceptible to significant change.

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In determining if a credit loss evaluation is required for securities that are impaired, the Company compares the present value of the remaining cash flows expected to be collected at the prior reporting date or purchase date, whichever is most recent, against the present value of the cash flows expected to be collected at the current financial reporting date. The Company considers information available about the past and expected future performance of underlying collateral, including timing of expected future cash flows, prepayment rates, default rates, loss severities and delinquency rates.

Residential Loans, at fair value – All of the Company’s acquired residential loans, including distressed residential loans, non-QM loans, second mortgages and residential bridge loans, are presented at fair value on the accompanying condensed consolidated balance sheets. Changes in fair value are recorded in current period earnings in unrealized gains (losses), net on the accompanying condensed consolidated statements of operations. The Company has elected the fair value option for residential loans either at the time of acquisition pursuant to ASC 825 or following the adoption of ASU 2019-05 effective January 1, 2020. As of September 30, 2020, residential loans, at fair value on the accompanying condensed consolidated balance sheets includes those residential loans previously accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality ("ASC 310-30"), and the Company's residential loans held in securitization trusts.

Premiums and discounts associated with the purchase of residential loans, at fair value are amortized or accreted into interest income over the life of the related loan using the effective interest method. Any premium amortization or discount accretion is reflected as a component of interest income, residential loans on the accompanying condensed consolidated statements of operations.

Residential loans, at fair value are considered past due when they are 30 days past their contractual due date, and are placed on nonaccrual status when delinquent for more than 90 days or when, in management's opinion, the interest is not collectible in the normal course of business. Interest accrued but not yet collected at the time loans are placed on nonaccrual is reversed and subsequently recognized only to the extent it is received in cash or until it qualifies for return to accrual status. Loans are restored to accrual status only when contractually current or the collection of future payments is reasonably assured.

Investments in Unconsolidated Entities – Non-controlling, unconsolidated ownership interests in an entity may be accounted for using the equity method or the cost method. In circumstances where the Company has a non-controlling interest but either owns a significant interest or is able to exert influence over the affairs of the enterprise, the Company utilizes the equity method of accounting. Under the equity method of accounting, the initial investment is increased each period for additional capital contributions and a proportionate share of the entity’s earnings or preferred return and decreased for cash distributions and a proportionate share of the entity’s losses. Management periodically reviews its investments for impairment based on projected cash flows from the entity over the holding period. When any impairment is identified, the investments are written down to recoverable amounts.

Effective January 1, 2020, the Company has elected the fair value option for all investments in unconsolidated entities that are accounted for using the equity method. The Company elected the fair value option for investments in unconsolidated entities that own interests (directly or indirectly) in commercial or residential real estate assets or loans because the Company determined that such presentation represents the underlying economics of the respective investment. The Company records the change in fair value of its investment in other income on the accompanying condensed consolidated statements of operations (see Note 7).

Preferred Equity and Mezzanine Loan Investments – The Company invests in preferred equity in, and mezzanine loans to, entities that have significant multi-family real estate assets.

A preferred equity investment is an equity investment in the entity that owns the underlying property. Preferred equity is not secured by the underlying property, but holders have priority relative to common equity holders on cash flow distributions and proceeds from capital events. In addition, preferred equity holders may be able to enhance their position and protect their equity position with covenants that limit the entity’s activities and grant the holder the exclusive right to control the property after an event of default.

Mezzanine loans are secured by a pledge of the borrower’s equity ownership in the property. Unlike a mortgage, this loan does not represent a lien on the property. Therefore, it is always junior and subordinate to any first lien as well as second liens, if applicable, on the property. These loans are senior to any preferred equity or common equity interests in the entity that owns the property.

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The Company has evaluated its preferred equity and mezzanine loan investments for accounting treatment as loans versus equity investments utilizing the ~~three~~guidance provided by the Acquisition, Development and ~~nine months ended September 30, 2019.~~Construction Arrangements Subsection of ASC 310, Receivables. Effective January 1, 2020, preferred equity and mezzanine loan investments, for which the characteristics, facts and circumstances indicate that loan accounting treatment is appropriate, are stated at fair value. The Company elected the fair value option for its preferred equity investments in and mezzanine loan investments to entities that have significant multi-family real estate assets because the Company determined that such presentation represents the underlying economics of the respective investment. Changes in fair value are recorded in current period earnings in unrealized gains (losses), net on the accompanying condensed consolidated statements of operations. The Company accretes or amortizes any discounts or premiums and deferred fees and expenses over the life of the related asset utilizing the effective interest method or straight line-method, if the result is not materially different.

As of December 31, 2019, preferred equity and mezzanine loan investments, for which the characteristics, facts and circumstances indicate that loan accounting treatment is appropriate, were stated at unpaid principal balance, adjusted for any unamortized premium or discount and deferred fees or expenses, net of valuation allowances. Management evaluates the collectability of both interest and principal of each of these loans, if circumstances warrant, to determine whether they are impaired. A loan is impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the existing contractual terms. When a loan is impaired, the amount of the loss accrual is calculated by comparing the carrying amount of the investment to the estimated fair value of the loan or, as a practical expedient, to the value of the collateral if the loan is collateral dependent. Interest income is accrued and recognized as revenue when earned according to the terms of the loans and when, in the opinion of management, it is collectible. The accrual of interest on loans is discontinued when, in management’s opinion, the interest is not collectible in the normal course of business, but in all cases when payment becomes greater than 90 days delinquent. Loans return to accrual status when principal and interest become current and are anticipated to be fully collectible.

Preferred equity and mezzanine loan investments where the risks and payment characteristics are equivalent to an equity investment are accounted for using the equity method of accounting. See “Investments in Unconsolidated Entities.”

Adoption of Fair Value Measurement (Topic 820)

On January 1, 2020, the Company adopted ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to Disclosure Requirements for Fair Value Measurement. These amendments added, modified, or removed disclosure requirements regarding the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, narrative descriptions of measurement uncertainty, and the valuation processes for Level 3 fair value measurements.

Summary of Recent Accounting Pronouncements

~~Financial Instruments — Credit Losses (Topic 326)~~

In ~~June 2016,~~March 2020, the FASB issued ASU ~~2016-13,~~2020-04, ~~Financial Instruments — Credit Losses~~Reference Rate Reform (Topic ~~326)~~848): ~~Measurement~~Facilitation of ~~Credit Losses~~the Effects of Reference Rate Reform on Financial ~~Instruments~~ Reporting(" ("ASU ~~2016-13"~~2020-04"). ~~The amendments~~ASU 2020-04 provides optional expedients and exceptions to GAAP requirements for modifications to debt agreements, leases, derivatives and other contracts, related to the expected market transition from LIBOR, and certain other floating rate benchmark indices, or collectively, IBORs, to alternative reference rates. ASU 2020-04 generally considers contract modifications related to reference rate reform to be an event that does not require ~~the measurement of all expected credit losses for financial assets held~~contract remeasurement at the ~~reporting~~modification date ~~based on historical experience, current conditions,~~nor a reassessment of a previous accounting determination. The guidance in ASU 2020-04 is optional and ~~reasonable~~may be elected over time, through December 31, 2022, as reference rate reform activities occur. Once ASU 2020-04 is elected, the guidance must be applied prospectively for all eligible contract modifications. The Company continues to evaluate the impact of ASU 2020-04 and ~~supportable forecasts. Financial institutions~~may apply elections, as applicable, as the expected market transition from IBORs to alternative reference rates continues to develop.

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and ~~other organizations will now use forward-looking information to better inform their credit loss estimates. In addition, the~~ Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity ("ASU ~~amends the~~2020-06"). ASU 2020-06 simplifies an issuer's accounting for ~~credit losses on purchased financial assets with credit deterioration~~convertible instruments, enhances disclosure requirements for convertible instruments and ~~available-for-sale debt securities, which will require~~modifies how particular convertible instruments and certain instruments that may be settled in cash or shares impact the ~~recognition~~diluted earnings per share computation. Entities may adopt the guidance through either a modified retrospective method of ~~credit losses through~~transition or a ~~valuation allowance when fair value is less than amortized cost.~~fully retrospective method of transition. The amendments are effective for public entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2019.~~2021. Early adoption is permitted, ~~beginning in 2019.~~

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~~In May 2019, the FASB issued ASU 2019-05,~~ ~~Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief~~ ~~("ASU 2019-05"). The amendments allow an entity to make an irrevocable one-time election to measure financial assets accounted for under ASC 326-20,~~ ~~Financial Instruments—Credit Losses— Measured at Amortized Cost,~~ using the fair value option upon adoption of ASU 2016-13. For the Company, the amendments are effective upon adoption of ASU 2016-13. The amendments in ASU 2019-05 should be applied on a modified retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained earnings as of the date that an entity adopted the amendments in ASU 2016-13. The Company is currently assessing the impact of this guidance in conjunction with ASU 2016-13 as the ASUs will affect the Company's accounting for distressed and other residential mortgage loans, net and preferred equity and mezzanine loan investments that are accounted for as loans. It is the Company's intention to elect fair value option for impacted assets but ~~the Company will continue to evaluate the new standards and any changes in our business or additional amendments to these standards could change our intention to elect fair value option.~~

~~Fair Value Measurement (Topic 820)~~

~~In August 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework - Changes to Disclosure Requirements for Fair Value Measurement~~ ~~("ASU 2018-13")~~. These amendments add, modify, or remove disclosure requirements regarding the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, narrative descriptions of measurement uncertainty, and the valuation processes for Level 3 fair value measurements. The amendments are effective for all entities forno earlier than fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted upon issuance of this update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of ASU 2018-13 and delay adoption of the additional disclosures until their effective date.2020. The Company ~~anticipates~~does not anticipate that the implementation of ~~this guidance as~~ASU 2020-06 will have a material impact on its consolidated financial statements or notes thereto.

Table of ~~the effective date will result in additional and modified disclosures with respect to~~Contents

3.Investment Securities Available for Sale, at Fair Value

The Company accounts for certain of its ~~Level 3~~investment securities available for sale using the fair value ~~measurements.~~

~~Table~~election pursuant to ASC 825 where changes in fair value are recorded in unrealized gains (losses), net on the Company's condensed consolidated statements of ~~Contents~~


3.	~~Investment Securities Available For Sale~~

~~Investment~~operations. The Company also has investment securities available for sale where the fair value option has not been elected, or CECL Securities. CECL Securities are reported at fair value with unrealized gains and losses recorded in other comprehensive income (loss) on the Company's condensed consolidated statements of comprehensive income. The Company's investment securities available for sale consisted of the following as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019, respectively (dollar amounts in thousands):


	September 30, 2020								December 31, 2019
	Amortized Cost		Unrealized				Fair Value		Amortized Cost		Unrealized				Fair Value
			Gains		Losses						Gains		Losses
Fair Value Option
Agency RMBS:

Agency Fixed-Rate	$	0	$	0	$	0	$	0	$	21,033	$	0	$	(55)	$	20,978
Total Agency RMBS	0		0		0		0		21,033		0		(55)		20,978
Agency CMBS	0		0		0		0		31,076		0		(395)		30,681
Total Agency	0		0		0		0		52,109		0		(450)		51,659
Non-Agency RMBS (1)	108,134		153		(11,884)		96,403		122,628		2,435		(1,248)		123,815
CMBS (2)	141,282		3,225		(5,619)		138,888		20,096		563		(19)		20,640
ABS	39,519		5,488		0		45,007		49,902		0		(688)		49,214
Total investment securities available for sale - fair value option	288,935		8,866		(17,503)		280,298		244,735		2,998		(2,405)		245,328

CECL Securities
Agency RMBS:
Agency ARMs (3)	0		0		0		0		55,740		13		(1,347)		54,406
Agency Fixed-Rate	0		0		0		0		846,203		7,397		(6,107)		847,493
Total Agency RMBS	0		0		0		0		901,943		7,410		(7,454)		901,899
Agency CMBS	0		0		0		0		20,258		19		0		20,277
Total Agency	0		0		0		0		922,201		7,429		(7,454)		922,176
Non-Agency RMBS (4)	291,925		425		(12,988)		279,362		578,955		12,557		(13)		591,499
CMBS	43,413		1,260		(636)		44,037		234,524		12,737		(124)		247,137
Total investment securities available for sale - CECL Securities	335,338		1,685		(13,624)		323,399		1,735,680		32,723		(7,591)		1,760,812

Total	$	624,273	$	10,551	$	(31,127)	$	603,697	$	1,980,415	$	35,721	$	(9,996)	$	2,006,140

September 30, 2019 December 31, 2018
Amortized Cost Unrealized Fair Value Amortized Cost Unrealized Fair Value
Gains Losses Gains Losses
Agency RMBS
Agency ARMs
Freddie Mac $ 23,841
$ —
$ (675 ) $ 23,166
$ 26,338
$ —
$ (1,052 ) $ 25,286
Fannie Mae 33,323
17
(705 ) 32,635
43,984
8
(1,384 ) 42,608
Ginnie Mae 2,971
—
(101 ) 2,870
3,627
—
(127 ) 3,500
Total Agency ARMs ⁽¹⁾
60,135
17
(1,481 ) 58,671
73,949
8
(2,563 ) 71,394
Agency Fixed- Rate
Freddie Mac 79,266
997
(433 ) 79,830
87,018
—
(2,526 ) 84,492
Fannie Mae 819,540
3,860
(6,063 ) 817,337
915,039
—
(33,195 ) 881,844
Total Agency Fixed-Rate 898,806
4,857
(6,496 ) 897,167
1,002,057
—
(35,721 ) 966,336

Total Agency RMBS 958,941
4,874
(7,977 ) 955,838
1,076,006
8
(38,284 ) 1,037,730
Non-Agency RMBS ^(1)(2)(3)
610,624
11,800
(896 ) 621,528
215,337
166
(1,466 ) 214,037
CMBS ⁽¹⁾ ⁽²⁾
264,721
13,831
(154 ) 278,398
243,046
17,815
(376 ) 260,485
ABS ⁽³⁾
48,557
—
(303 ) 48,254
—
—
—
—
Total investment securities available for sale $ 1,882,843
$ 30,505
$ (9,330 ) $ 1,904,018
$ 1,534,389
$ 17,989
$ (40,126 ) $ 1,512,252

(1)Includes non-Agency RMBS held in a securitization trust with a total fair value of $44.3 million as of September 30, 2020 (see Note 9).


⁽¹⁾	~~For~~(2)Includes IOs and mezzanine securities transferred from the Consolidated K-Series as a result of de-consolidation during the ~~Company's Agency ARMs, non-Agency RMBS, and CMBS securities with stated reset periods, the weighted average reset periods are 27 months, 45 months, and one month, respectively.~~


⁽²⁾	~~Included in CMBS is $52.7 million of first loss POs and certain IOs held in securitization trusts as of December 31, 2018.~~


⁽³⁾	~~For the Company's non-Agency RMBS IOs and ABS, unrealized gains and losses are recognized in unrealized gains (losses), net on the Company's condensed consolidated statements of operations.~~

~~Realized Gain or Loss Activity~~

~~During the three and~~ nine months ended September 30, ~~2019~~2020 with a total fair value of $95.9 million as of September 30, 2020.

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(3)For the ~~Company received~~Company's Agency ARMs with stated reset periods, the weighted average reset period was 26 months as of December 31, 2019.

(4)Includes non-Agency RMBS held in a securitization trust with a total ~~proceeds~~fair value of ~~approximately $41.2~~$87.6 million ~~and $98.0 million, respectively, from the sale~~as of September 30, 2020 (see Note 9).

Accrued interest receivable for all investment securities available for sale ~~realizing a net gain of approximately $5.0 million~~is included in receivables and ~~$21.8 million, respectively.~~ other assets on the Company's condensed consolidated balance sheets.

Realized Gain and Loss Activity

The ~~Company did not sell~~following tables summarize our investment securities ~~available for sale~~sold during the three months ended September 30, ~~2018. During~~2020 and 2019, respectively (dollar amounts in thousands).


	Three Months Ended September 30, 2020
	Sales Proceeds		Realized Gains		Realized Losses		Net Realized Gains (Losses)
Non-Agency RMBS (1)	$	259,493	$	141	$	(8,860)	$	(8,719)
CMBS	110,680		6,849		(705)		6,144
Total	$	370,173	$	6,990	$	(9,565)	$	(2,575)

(1)Includes the sale of non-Agency RMBS held in a securitization trust for total proceeds of $40.4 million and a net realized gain of $26.1 thousand.


	Three Months Ended September 30, 2019
	Sales Proceeds		Realized Gains		Realized Losses		Net Realized Gains (Losses)
Non-Agency RMBS	$	1,021	$	33	$	0	$	33
CMBS	40,161		4,980		0		4,980
Total	$	41,182	$	5,013	$	0	$	5,013

The following tables summarize our investment securities sold during the nine months ended September 30, ~~2018,~~2020 and 2019, respectively (dollar amounts in thousands):


	Nine Months Ended September 30, 2020
	Sales Proceeds		Realized Gains		Realized Losses		Net Realized Gains (Losses)
Agency RMBS:
Agency ARMs	$	49,892	$	44	$	(4,157)	$	(4,113)
Agency Fixed-Rate (1)	943,074		5,358		(11,697)		(6,339)
Total Agency RMBS	992,966		5,402		(15,854)		(10,452)
Agency CMBS (2)	145,411		5,666		(209)		5,457
Total Agency	1,138,377		11,068		(16,063)		(4,995)
Non-Agency RMBS (3)	428,251		435		(34,681)		(34,246)
CMBS	248,741		8,176		(30,289)		(22,113)
Total	$	1,815,369	$	19,679	$	(81,033)	$	(61,354)

(1)Includes Agency RMBS securities issued by Consolidated SLST (see Note 4).

(2)Includes Agency CMBS securities transferred from the ~~Company received~~Consolidated K-Series (see Note 6).

(3)Includes the sale of non-Agency RMBS held in a securitization trust for total proceeds of ~~approximately $26.9~~$67.6 million ~~from the sale of investment securities available for sale, realizing~~and a net ~~loss~~realized gain of ~~approximately $12.3~~$0.2 million.

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	Nine Months Ended September 30, 2019
	Sales Proceeds		Realized Gains		Realized Losses		Net Realized Gains (Losses)
Non-Agency RMBS	$	1,021	$	33	$	0	$	33
CMBS	96,930		21,938		(156)		21,782
Total	$	97,951	$	21,971	$	(156)	$	21,815

Weighted Average Life

Actual maturities of our investment securities available for sale ~~securities~~ are generally shorter than stated contractual maturities (with contractual maturities up to 4140 years), as they are affected by periodic payments and prepayments of principal on the underlying mortgages. As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, based on management’s estimates, ~~using the three month historical constant prepayment rate (“CPR”),~~ the weighted average life of the Company’s investment securities available for sale ~~securities~~ portfolio was approximately ~~5.6~~7.1 years and ~~5.7~~5.0 years, respectively.

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The following table sets forth the weighted average lives of our investment securities available for sale as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019, respectively (dollar amounts in thousands):


Weighted Average Life	September 30, 2020		December 31, 2019
0 to 5 years	$	343,573	$	1,359,894
Over 5 to 10 years	183,910		521,517
10+ years	76,214		124,729
Total	$	603,697	$	2,006,140

Weighted Average Life September 30, 2019 December 31, 2018
0 to 5 years $ 840,518
$ 456,947
Over 5 to 10 years 688,443
1,043,369
10+ years 375,057
11,936
Total $ 1,904,018
$ 1,512,252

Unrealized Losses in Other Comprehensive Income

As of January 1, 2020, the Company adopted ASU 2016-13 to account for its investments in CECL Securities (see Note 2). The ~~following tables present the Company's investment securities available for sale~~Company evaluated its CECL Securities that were in an unrealized loss position ~~reported~~as of September 30, 2020 and determined that 0 allowance for credit losses was necessary. Accordingly, the Company did not recognize credit losses through ~~other comprehensive income,~~earnings for the three and nine months ended September 30, 2020.

The following table presents the Company's CECL Securities in an unrealized loss position with no credit losses reported, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, ~~2019 and December 31, 2018~~2020 (dollar amounts in thousands):


September 30, 2020	Less than 12 months				Greater than 12 months				Total
	Carrying Value		Gross Unrealized Losses		Carrying Value		Gross Unrealized Losses		Carrying Value		Gross Unrealized Losses

Non-Agency RMBS	$	235,449	$	(11,651)	$	16,966	$	(1,337)	$	252,415	$	(12,988)
CMBS	33,903		(636)		0		0		33,903		(636)
Total	$	269,352	$	(12,287)	$	16,966	$	(1,337)	$	286,318	$	(13,624)

September 30, 2019 Less than 12 months Greater than 12 months Total

Carrying
Value

Gross
Unrealized
Losses

Carrying
Value

Gross
Unrealized
Losses

Carrying
Value

Gross
Unrealized
Losses
Agency RMBS $ —
$ —
$ 291,801
$ (7,977 ) $ 291,801
$ (7,977 )
Non-Agency RMBS 15,430
(178 ) 118
(14 ) 15,548
(192 )
CMBS 31,311
(154 ) —
—
31,311
(154 )
Total investment securities available for sale $ 46,741
$ (332 ) $ 291,919
$ (7,991 ) $ 338,660
$ (8,323 )

At September 30, ~~2019,~~2020, the Company ~~does~~did not intend to sell any of its ~~investments~~investment securities available for sale that were in an unrealized loss position, and it iswas “more likely than not” that the Company ~~will~~would not be required to sell these securities before recovery of their amortized cost basis, which may be at their maturity.

Gross unrealized losses in other comprehensive income on the Company’s Agency RMBS were $8.0 million at September 30, 2019. Agency RMBS are issued by GSEs and enjoy either the implicit or explicit backing

Table of the full faith and credit of the U.S. Government. While the Company’s Agency RMBS are not rated by any rating agency, they are currently perceived by market participants to be of high credit quality, with risk of default limited to the unlikely event that the U.S. Government would not continue to support the GSEs. Given the credit quality inherent in Agency RMBS, the Company does not consider any of the current impairments on its Agency RMBS to be credit related. In assessing whether it is more likely than not that it will be required to sell any impaired security before its anticipated recovery, which may be at its maturity, the Company considers for each impaired security, the significance of each investment, the amount of impairment, the projected future performance of such impaired securities, as well as the Company’s current and anticipated leverage capacity and liquidity position. Based on these analyses, the Company determined that, at September 30, 2019, any unrealized losses on its Agency RMBS were temporary.Contents

Gross unrealized losses in other comprehensive income on the Company's non-Agency RMBS and CMBS were ~~$0.2~~$13.0 million and ~~$0.2~~$0.6 million, respectively, at September 30, ~~2019.~~2020. Credit risk associated with non-Agency RMBS and CMBS is regularly assessed as new information regarding the underlying collateral becomes available and based on updated estimates of cash flows generated by the underlying collateral. In performing its assessment, the Company considers past and expected future performance of the underlying collateral, including timing of expected future cash flows, prepayment rates, default rates, loss severities, delinquency rates, current levels of subordination, volatility of the security's fair value, temporary declines in liquidity for the asset class and interest rate changes since purchase. Based upon the most recent evaluation, the Company ~~does not consider these unrealized losses to be indicative of other-than-temporary impairment and~~ does not believe that these unrealized losses are credit related but are rather a reflection of current market yields and/or marketplace bid-ask spreads.

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December 31, 2018 Less than 12 months Greater than 12 months Total

Carrying
Value

Gross
Unrealized
Losses

Carrying
Value

Gross
Unrealized
Losses

Carrying
Value

Gross
Unrealized
Losses
Agency RMBS $ 310,783
$ (8,037 ) $ 726,028
$ (30,247 ) $ 1,036,811
$ (38,284 )
Non-Agency RMBS 187,395
(1,451 ) 158
(15 ) 187,553
(1,466 )
CMBS 75,292
(376 ) —
—
75,292
(376 )
Total investment securities available for sale $ 573,470
$ (9,864 ) $ 726,186
$ (30,262 ) $ 1,299,656
$ (40,126 )

The following table presents the Company's investment securities available for sale in an unrealized loss position reported through other comprehensive income, aggregated by investment category and length of time that individual securities were in a continuous unrealized loss position as of December 31, 2019 (dollar amounts in thousands):


December 31, 2019	Less than 12 months				Greater than 12 months				Total
	Carrying Value		Gross Unrealized Losses		Carrying Value		Gross Unrealized Losses		Carrying Value		Gross Unrealized Losses
Agency RMBS	$	0	$	0	$	222,286	$	(7,454)	$	222,286	$	(7,454)
Non-Agency RMBS	0		0		104		(13)		104		(13)
CMBS	25,507		(124)		0		0		25,507		(124)
Total	$	25,507	$	(124)	$	222,390	$	(7,467)	$	247,897	$	(7,591)

Other than Temporary Impairment

For the three and nine months ended September 30, 2019, ~~and 2018,~~ the Company did ~~not~~0t recognize other-than-temporary impairment through earnings.

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4.Residential Loans, at Fair Value


4.	~~Distressed and Other Residential Mortgage Loans, At Fair Value~~

~~Certain of the~~The Company’s acquired residential ~~mortgage~~ loans, including distressed residential ~~mortgage~~ loans, non-QM loans, ~~and~~ second mortgages and residential bridge loans, are presented at fair value on its condensed consolidated balance sheets as a result of a fair value election made at the time of ~~acquisition.~~acquisition or as of January 1, 2020 (see Note 2). 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 table presents the Company’s ~~distressed and other~~ residential ~~mortgage~~ loans, at fair value, which consist of residential loans held by the ~~following~~Company, Consolidated SLST and other securitization trusts, as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively (dollar amounts in thousands):

Principal Premium/(Discount) Unrealized Gains/(Losses) Carrying Value
September 30, 2019 $ 1,150,176
$ (72,684 ) $ 38,636
$ 1,116,128
December 31, 2018 788,372
(54,905 ) 4,056
737,523


	September 30, 2020						December 31, 2019
	Residential loans		Consolidated SLST (1)		Residential loans held in securitization trusts (2)		Residential loans		Consolidated SLST (1)
Principal	$	1,207,391	$	1,259,063	$	371,826	$	1,464,984	$	1,322,131
(Discount)/premium	(58,904)		2,628		(24,874)		(81,372)		6,455
Unrealized gains	28,811		28,314		8,534		46,142		300
Carrying value	$	1,177,298	$	1,290,005	$	355,486	$	1,429,754	$	1,328,886

(1)In 2019, the Company invested in first loss subordinated securities and certain IOs and senior securities 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 held in the securitization and the SLST CDOs issued to permanently finance these residential loans, representing Consolidated SLST. SLST CDOs are included in residential collateralized debt obligations, at fair value on the Company's condensed consolidated balance sheets.

(2)On January 1, 2020, the Company made a fair value election for its residential loans held in securitization trusts which were included in residential loans, net on the Company's condensed consolidated balance sheets as of December 31, 2019 (see Note 5). In July 2020, the Company transferred additional residential loans to residential loans held in securitization trusts (see Note 9).

The following table presents the ~~components of realized gains (losses), net and~~ unrealized gains (losses), net attributable to ~~distressed and other~~ residential ~~mortgage~~ loans, at fair value for the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively (dollar amounts in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Net realized gains on payoff and sale of loans $ 1,658
$ 1,127
$ 7,177
$ 1,496
Net unrealized gains (losses) 16,818
(484 ) 34,580
(923 )


	Three Months Ended
	September 30, 2020						September 30, 2019
	Residential loans		Consolidated SLST (1)		Residential loans held in securitization trusts		Residential loans
Unrealized gains, net	$	25,583	$	41,063	$	10,143	$	16,818


	Nine Months Ended
	September 30, 2020						September 30, 2019
	Residential loans		Consolidated SLST (1)		Residential loans held in securitization trusts		Residential loans
Unrealized (losses) gains, net	$	(17,899)	$	28,014	$	8,418	$	34,580

(1)The fair value of residential loans held in Consolidated SLST is determined in accordance with the practical expedient in ASC 810, Consolidation, ("ASC 810") (see Note 14). See Consolidated SLST below for unrealized gains (losses), net recognized by the Company on its investment in Consolidated SLST.

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The Company also recognized $2.4 million of net realized gains and $11.7 million of net realized losses on the sale and payoff of residential loans, at fair value during the three and nine months ended September 30, 2020, respectively. The Company recognized $1.7 million and $7.2 million of net realized gains on the sale and payoff of residential loans, at fair value during the three and nine months ended September 30, 2019, respectively.

The geographic concentrations of credit risk exceeding 5% of the unpaid principal balance of ~~distressed and other~~ residential ~~mortgage~~ loans, at fair value as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, are as follows:

September 30, 2019 December 31, 2018
California 23.2 % 27.9 %
Florida 9.8 % 9.0 %
Texas 6.0 % 4.2 %
New York 6.0 % 5.1 %


	September 30, 2020						December 31, 2019
	Residential loans		Consolidated SLST		Residential loans held in securitization trusts		Residential loans		Consolidated SLST
California	23.4	%	10.9	%	15.8	%	23.9	%	11.0	%
Florida	11.7	%	10.5	%	6.4	%	9.4	%	10.6	%
New York	8.0	%	9.2	%	11.0	%	8.0	%	9.1	%
Texas	5.6	%	4.0	%	4.4	%	5.4	%	4.0	%
New Jersey	5.2	%	7.0	%	6.0	%	5.1	%	6.9	%
Maryland	3.6	%	3.8	%	8.1	%	4.6	%	3.8	%
Massachusetts	2.5	%	2.8	%	5.5	%	2.8	%	2.9	%
Illinois	2.7	%	6.7	%	3.2	%	2.8	%	6.6	%

The following table presents the fair value and aggregate unpaid principal balance of the Company's ~~distressed~~residential loans and ~~other~~ residential ~~mortgage~~ loans ~~at fair value greater than 90 days past due and~~held in securitization trusts in non-accrual status as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively (dollar amounts in thousands):

Fair Value Unpaid Principal Balance
September 30, 2019 $ 71,251
$ 87,882
December 31, 2018 60,117
75,167


	Greater than 90 days past due				Less than 90 days past due
	Fair Value		Unpaid Principal Balance		Fair Value		Unpaid Principal Balance
September 30, 2020	$	136,023	$	157,682	$	18,586	$	20,255
December 31, 2019	106,199		122,918		9,291		10,705

~~Additionally, the fair value and~~

Residential loans held in Consolidated SLST with an aggregate unpaid principal balance of ~~distressed~~$173.2 million and ~~other residential mortgage loans at fair value held in non-accrual status but less than~~$50.7 million were 90 days ~~past due was approximately $2.6 million and $3.1 million, respectively,~~or more delinquent as of September 30, ~~2019.~~

2020 and December 31, 2019, respectively.

~~Distressed and other residential mortgage~~

Repurchase Agreements - Residential Loans

Residential loans with a fair value of approximately ~~$854.4~~$938.6 million and ~~$626.2~~$881.2 million at September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, are pledged as collateral for ~~master~~ repurchase agreements (see Note 1211).

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5.	~~Distressed and Other Residential Mortgage Loans, Net~~

~~Distressed~~ Residential ~~Mortgage Loans, Net~~

Collateralized Debt Obligations

The Company's residential loans held in securitization trusts are pledged as collateral for the Residential CDOs issued by the Company. These Residential CDOs are accounted for as financings and included in residential collateralized debt obligations on the Company's condensed consolidated balance sheets. In July 2020, the Company completed a securitization of certain residential loans (see Note 9). As of September 30, ~~2019 and December 31, 2018,~~2020, the ~~carrying value~~Company had Residential CDOs outstanding of $268.8 million recorded as liabilities on the Company’s condensed consolidated balance sheets with a current weighted average interest rate of 3.57%. The Company had a net investment in four residential securitization trusts of $98.0 million. The net investment amount is the maximum amount of the Company’s ~~distressed~~investment that is at risk to loss and represents the difference between (i) the carrying amount of the residential ~~mortgage~~ loans, ~~accounted~~real estate owned and receivables held in residential securitization trusts and (ii) the amount of Residential CDOs outstanding. The Residential CDOs are non-recourse debt for ~~under ASC 310-30,~~ ~~Loans and Debt Securities Acquired with Deteriorated Credit Quality~~ ~~("ASC 310-30") amounts to approximately $164.8 million and $228.5 million, respectively.~~which the Company has no obligation.

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Consolidated SLST

The Company has elected the fair value option on the assets and liabilities held within Consolidated SLST, which requires that changes in valuations in the assets and liabilities of Consolidated SLST be reflected in the Company’s condensed consolidated statements of operations. Our investment in Consolidated SLST is limited to the securities that we own with an aggregate net carrying value of $210.9 million and $276.8 million at September 30, 2020 and December 31, 2019, respectively (see Note 9). During the nine months ended September 30, 2020, the Company purchased approximately $40.0 million in additional senior securities issued by Consolidated SLST and subsequently sold its entire investment in the senior securities issued by Consolidated SLST for ~~all~~sales proceeds of approximately $62.6 million at a realized loss of approximately $2.4 million, which is included in realized gains (losses), net on the Company's condensed consolidated statements of operations.

The condensed consolidated balance sheets of Consolidated SLST at September 30, 2020 and December 31, 2019, respectively, are as follows (dollar amounts in thousands):


Balance Sheet	September 30, 2020		December 31, 2019
Assets
Residential loans, at fair value	$	1,290,005	$	1,328,886
Receivables (1)	4,162		5,244
Total Assets	$	1,294,167	$	1,334,130
Liabilities and Equity
Residential collateralized debt obligations, at fair value	$	1,077,980	$	1,052,829
Accrued expenses and other liabilities (2)	3,664		2,643
Total Liabilities	1,081,644		1,055,472
Equity	212,523		278,658
Total Liabilities and Equity	$	1,294,167	$	1,334,130

(1)Included in receivables and other assets on the accompanying condensed consolidated balance sheets.

(2)Included in accrued expenses and other liabilities on the accompanying condensed consolidated balance sheets.

The SLST CDOs had aggregate unpaid principal balances of approximately $1.3 billion at September 30, 2020 and December 31, 2019. As of September 30, 2020 and December 31, 2019, the weighted average interest rate on the SLST CDOs was 3.53%.

The Company does not have any claims to the assets or obligations for the liabilities of Consolidated SLST (other than those securities owned by the Company as of September 30, 2020 and December 31, 2019, respectively). The net fair value of our investment in Consolidated SLST, which represents the difference between the carrying values of residential loans, at fair value held in Consolidated SLST less the carrying value of SLST CDOs, approximates the fair value of our underlying securities (see Note 14).

The condensed consolidated statements of operations of Consolidated SLST for the three and nine months ended September 30, 2020, respectively, are as follows (dollar amounts in thousands):


Statements of Operations	Three Months Ended September 30, 2020		Nine Months Ended September 30, 2020
Interest income (1)	$	10,896	$	34,542
Interest expense (2)	7,562		24,255
Net interest income	3,334		10,287
Unrealized gains (losses), net (3)	27,145		(34,893)
Net income (loss)	$	30,479	$	(24,606)

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(1)Included in the Company’s accompanying condensed consolidated statements of operations in interest income, residential loans.

(2)Included in the Company’s accompanying condensed consolidated statements of operations in interest expense, residential collateralized debt obligations.

(3)Presented in unrealized gains (losses), net on the Company’s condensed consolidated statements of operations. Includes $41.1 million and $28.0 million of unrealized gains on residential loans held in Consolidated SLST for the three and nine months ended September 30, 2020, respectively, and $13.9 million and $62.9 million of unrealized losses on SLST CDOs for the three and nine months ended September 30, 2020, respectively.

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5.Residential Loans, Net

As of January 1, 2020, the Company has elected to account for its residential loans using the fair value option (see Note 2). The following information related to the Company's residential loans, net is provided for the prior periods presented in the accompanying condensed consolidated financial statements.

Distressed Residential Loans, Net

As of December 31, 2019, the carrying value of the Company’s distressed residential loans, ~~purchased after June 30, 2017 (see Note 4~~).net accounted for under ASC 310-30 amounted to approximately $158.7 million.

The following table details activity in accretable yield for the distressed residential ~~mortgage~~ loans, net for the nine months ended September 30, 2019 ~~and 2018, respectively~~ (dollar amounts in thousands):

September 30, 2019 September 30, 2018
Balance at beginning of period $ 195,560
$ 303,949
Additions 1,813
6,007
Disposals (48,383 ) (64,876 )
Accretion (4,672 ) (11,999 )
Balance at end of period ⁽¹⁾
$ 144,318
$ 233,081


	September 30, 2019
Balance at beginning of period	$	195,560
Additions	1,813
Disposals	(48,383)
Accretion	(4,672)
^{Balance at end of period}(1)	Accretable yield is the excess of the distressed residential mortgage loans’ cash flows expected to be collected over the purchase price. The cash flows expected to be collected represents the Company’s estimate of the amount and timing of undiscounted principal and interest cash flows. Additions include accretable yield estimates for purchases made during the period and reclassification to accretable yield from nonaccretable yield. Disposals include distressed residential mortgage loan dispositions, which include refinancing, sale and foreclosure of the underlying collateral and resulting removal of the distressed residential mortgage loans from the accretable yield, and reclassifications from accretable to nonaccretable yield. The reclassifications between accretable and nonaccretable yield and the accretion of interest income is based on various estimates regarding loan performance and the value of the underlying real estate securing the loans. As the Company continues to update its estimates regarding the loans and the underlying collateral, the accretable yield may change. Therefore, the amount of accretable income recorded in each of the nine month periods ended September 30, 2019 and 2018 is not necessarily indicative of future results.$	144,318

(1)Accretable yield is the excess of the distressed residential loans’ cash flows expected to be collected over the purchase price. The cash flows expected to be collected represented the Company’s estimate of the amount and timing of undiscounted principal and interest cash flows. Additions included reclassification to accretable yield from nonaccretable yield. Disposals included distressed residential loan dispositions, which included refinancing, sale and foreclosure of the underlying collateral and resulting removal of the distressed residential loans from the accretable yield, and reclassifications from accretable to nonaccretable yield. The reclassifications between accretable and nonaccretable yield and the accretion of interest income were based on various estimates regarding loan performance and the value of the underlying real estate securing the loans. As the Company continued to update its estimates regarding the loans and the underlying collateral, the accretable yield was subject to change. Therefore, the amount of accretable income recorded in the nine month period ended September 30, 2019 was not necessarily indicative of future results.

The geographic concentrations of credit risk exceeding 5% of the unpaid principal balance of our distressed residential ~~mortgage~~ loans, net as of ~~September 30, 2019 and~~ December 31, ~~2018, respectively, are~~2019 was as follows:


	December 31, 2019
North Carolina	10.5	%
Florida	10.1	%
Georgia	7.0	%
South Carolina	5.8	%
Texas	5.6	%
New York	5.5	%
Ohio	5.2	%
Virginia	5.2	%

September 30, 2019 December 31, 2018
North Carolina 10.3 % 9.0 %
Florida 10.0 % 10.4 %
Georgia 7.1 % 7.2 %
South Carolina 5.7 % 5.6 %
Virginia 5.6 % 5.3 %
Texas 5.5 % 4.9 %
New York 5.3 % 5.4 %
Ohio 5.2 % 5.0 %

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9.Use of Special Purpose Entities (SPE) and Variable Interest Entities (VIE)


9.	~~Use of Special Purpose Entities (SPE) and Variable Interest Entities (VIE)~~

The Company uses SPEs to facilitate transactions that involve securitizing financial assets or re-securitizing previously securitized financial assets. The objective of such transactions may include obtaining non-recourse financing, obtaining liquidity or refinancing the underlying securitized financial assets on improved terms. Securitization involves transferring assets to an SPE to convert all or a portion of those assets into cash before they would have been realized in the normal course of business through the SPE’s issuance of debt or equity instruments. Investors in an SPE usually have recourse only to the assets in the SPE and depending on the overall structure of the transaction, may benefit from various forms of credit enhancement, such as over-collateralization in the form of excess assets in the SPE, priority with respect to receipt of cash flows relative to holders of other debt or equity instruments issued by the SPE, or a line of credit or other form of liquidity agreement that is designed with the objective of ensuring that investors receive principal and/or interest cash flow on the investment in accordance with the terms of their investment agreement.

The Company has entered into ~~re-securitization or~~ financing transactions, including residential loan securitizations and re-securitizations, which required the Company to analyze and determine whether the SPEs that were created to facilitate the transactions are VIEs in accordance with ASC 810 ~~Consolidation~~, and if so, whether the Company is the primary beneficiary requiring consolidation.

In July 2020, the Company completed a securitization of certain residential loans for which the Company received net proceeds of approximately $241.1 million after deducting expenses associated with the securitization transaction. The Company engaged in this transaction for the purpose of obtaining non-recourse, longer-term financing on a portion of its residential loan portfolio. The residential loans serving as collateral for the financing are comprised of performing, re-performing and non-performing loans which are included in residential loans, at fair value on the accompanying condensed consolidated balance sheets. The securitization matures in June 2025 and has an expected redemption date of June 2023. The Company's net investment amount in the securitization is $89.9 million as of September 30, 2020.

In June 2020, the Company completed a re-securitization of certain non-Agency RMBS for which the Company received net cash proceeds of approximately $109.0 million after deducting expenses associated with the re-securitization transaction. The Company engaged in the re-securitization transaction primarily for the purpose of obtaining non-recourse, longer-term financing on a portion of its non-Agency RMBS portfolio and continues to classify the non-Agency RMBS collateral in the re-securitization as available for sale securities as the purpose is not to trade these securities. The securitization matures in June 2025 and has an expected redemption date in June 2022. The Company's net investment amount in the re-securitization is $93.3 million as of September 30, 2020.

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As of September 30, 2020 and December 31, 2019, the Company evaluated its ~~Residential CDOs~~residential loan securitizations and re-securitization of non-Agency RMBS and concluded that the entities created to facilitate each of the financing transactions are VIEs and that the Company is the primary beneficiary of these ~~VIEs. Accordingly, the Company continues to consolidate the Residential CDOs as of September 30, 2019.~~

As of December 31, 2018, the Company evaluated the following re-securitization and financing transactions: 1) its Residential CDOs; 2) its multi-family CMBS re-securitization transaction and 3) its distressed residential mortgage loan securitization transactionVIEs (each a “Financing VIE” and collectively, the “Financing VIEs”) ~~and concluded that the entities created to facilitate each of the transactions were VIEs and that the Company was the primary beneficiary of these VIEs.~~. Accordingly, the Company consolidated the Financing VIEs as of September 30, 2020 and December 31, 2018. On March 14, 2019, the Company exercised its right to an optional redemption of its multi-family CMBS re-securitization with an outstanding principal balance of $33.2 million resulting in a loss on extinguishment of debt of $2.9 million. Additionally, on March 25, 2019, the Company repaid outstanding notes from its April 2016 distressed residential mortgage loan securitization with an outstanding principal balance of $6.5 million. Due to the redemptions, the multi-family CMBS held by the re-securitization trust and residential mortgage loans held in securitization trust were returned to the Company.2019.

The Company invests in subordinated securities that represent the first loss position of the Freddie Mac-sponsored residential loan securitization from which they were issued, and certain IOs and senior securities issued from the securitization. The Company has evaluated its investments in this securitization trust to determine whether it is a VIE and if so, whether the Company is the primary beneficiary requiring consolidation. The Company has determined that the Freddie Mac-sponsored residential loan securitization trust is a VIE as of September 30, 2020 and December 31, 2019, which we refer to as Consolidated SLST. The Company also determined that it is the primary beneficiary of the VIE within Consolidated SLST and, accordingly, has consolidated its assets, liabilities, income and expenses, in the accompanying condensed consolidated financial statements (see Notes 2 and 4). The Company’s investments that are included in Consolidated SLST were not included as collateral to any Financing VIE as of September 30, 2020 and December 31, 2019.

As of December 31, 2019, the Company invested in multi-family CMBS consisting of POs that represent the first loss position of the Freddie Mac-sponsored multi-family K-series securitizations from which they were issued, and certain IOs and certain senior and mezzanine CMBS securities issued from ~~the securitization.~~those securitizations. The Company ~~has~~ evaluated these CMBS investments in Freddie Mac-sponsored K-Series securitization trusts to determine whether they ~~are~~were VIEs and if so, whether the Company iswas the primary beneficiary requiring consolidation. The Company ~~has~~ determined that ~~12 and 9~~the Freddie Mac-sponsored multi-family K-Series securitization trusts ~~are~~were VIEs as of ~~September 30, 2019 and~~ December 31, ~~2018, respectively.~~2019, which we refer to as the Consolidated K-Series. The Company also determined that it iswas the primary beneficiary of each VIE within the Consolidated K-Series and, accordingly, ~~has~~ consolidated its assets, liabilities, income and expenses in the accompanying condensed consolidated financial statements (see Notes 2 and 6). ~~Of the multi-family CMBS investments owned by~~In March 2020, the Company ~~that are included in~~sold its first loss POs and certain mezzanine securities issued by the Consolidated K-Series ~~12 and 8~~which resulted in the de-consolidation of ~~these investments are not included as collateral to any Financing VIE~~each Consolidated K-Series as of ~~September 30, 2019 and December 31, 2018, respectively.~~the sale date of each first loss PO.

In analyzing whether the Company is the primary beneficiary of the Financing VIEs, Consolidated ~~K-Series~~SLST and the ~~Financing VIEs,~~Consolidated K-Series, the Company considered its involvement in each of the VIEs, including the design and purpose of each VIE, and whether its involvement reflected a controlling financial interest that resulted in the Company being deemed the primary beneficiary of the VIEs. In determining whether the Company would be considered the primary beneficiary, the following factors were assessed:

•whether the Company has both the power to direct the activities that most significantly impact the economic performance of the VIE; and

•whether the Company has a right to receive benefits or absorb losses of the entity that could be potentially significant to the VIE.

~~Table of Contents~~

The Company owns 100% of RB Development Holding Company, LLC ("RBDHC"). RBDHC owns 50% of Kiawah River View Investors LLC ("KRVI"), a limited liability company that owns developed land and residential homes under development in Kiawah Island, SC, for which RiverBanc LLC ("RiverBanc"), a wholly-owned subsidiary of the ~~Company)~~Company, is the manager. The Company has evaluated KRVI to determine if it is a VIE and if so, whether the Company is the primary beneficiary requiring consolidation. The Company has determined that KRVI is a VIE for which RBDHC is the primary beneficiary as the Company, collectively through its wholly-owned subsidiaries, RiverBanc and RBDHC, has both the power to direct the activities that most significantly impact the economic performance of KRVI and has a right to receive benefits or absorb losses of KRVI that could be potentially significant to KRVI. Accordingly, the Company has consolidated KRVI in its condensed consolidated financial statements with a non-controlling interest for the third-party ownership of KRVI membership interests. Real estate under development in KRVI as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 of ~~$13.9~~$3.6 million and ~~$22.0~~$14.5 million, respectively, is included in receivables and other assets on the condensed consolidated balance sheets.

~~In March 2017, the Company reconsidered its evaluation~~

Table of its variable interests in 200 RHC Hoover, LLC ("Riverchase Landing") and The Clusters, LLC ("The Clusters"), 2 VIEs that each owned a multi-family apartment community and in each of which the Company held a preferred equity investment. The Company determined that it gained the power to direct the activities, and became primary beneficiary, of Riverchase Landing and The Clusters and consolidated them in its condensed consolidated financial statements. In March 2018, Riverchase Landing completed the sale of its multi-family apartment community and redeemed the Company's preferred equity investment. Also, in February 2019, The Clusters completed the sale of its multi-family apartment community and redeemed the Company's preferred equity investment. The Company de-consolidated Riverchase Landing and The Clusters as of the date of each property's sale. Prior to the sale of the respective properties, the Company did not have any claims to the assets or obligations for the liabilities of Riverchase Landing and The Clusters (other than the preferred equity investments held by the Company).Contents

The following table presents a summary of the assets and liabilities of the ~~Residential CDOs,~~Company's residential loan securitizations, non-Agency RMBS re-securitization, Consolidated SLST and KRVI as of September 30, 2020 (dollar amounts in thousands). Intercompany balances have been eliminated for purposes of this presentation.


	Financing VIEs				Other VIEs
	Residential Loan Securitizations		Non-Agency RMBS Re-Securitization		Consolidated SLST		KRVI		Total
Cash and cash equivalents	$	0	$	—	$	0	$	4,305	$	4,305
Investment securities available for sale, at fair value	—		131,836		—		—		131,836
Residential loans, at fair value	355,486		0		1,290,005		—		1,645,491



Receivables and other assets	12,568		50,635		4,162		3,660		71,025
Total assets	$	368,054	$	182,471	$	1,294,167	$	7,965	$	1,852,657

Residential collateralized debt obligations	$	268,820	$	0	$	0	$	0	$	268,820
Residential collateralized debt obligations, at fair value	—		—		1,077,980		—		1,077,980

Securitized debt	—		88,791		—		—		88,791
Accrued expenses and other liabilities	1,211		396		3,664		74		5,345
Total liabilities	$	270,031	$	89,187	$	1,081,644	$	74	$	1,440,936

The following table presents a summary of the assets and liabilities of the Company's residential loan securitizations, the Consolidated K-Series, Consolidated SLST and KRVI of as of ~~September 30,~~December 31, 2019 (dollar amounts in thousands). Intercompany balances have been eliminated for purposes of this presentation.

Financing VIE Other VIEs

Residential
Mortgage
Loan Securitization
Consolidated K-Series Other Total
Cash and cash equivalents $ —
$ —
$ 656
$ 656
Residential mortgage loans held in securitization trusts, net 45,672
—
—
45,672
Multi-family loans held in securitization trusts, at fair value —
15,863,264
—
15,863,264
Receivables and other assets 1,274
51,950
14,098
67,322
Total assets $ 46,946
$ 15,915,214
$ 14,754
$ 15,976,914

Residential collateralized debt obligations $ 42,119
$ —
$ —
$ 42,119
Multi-family collateralized debt obligations, at fair value —
14,978,199
—
14,978,199
Mortgages and notes payable in consolidated variable interest entities —
—
935
935
Accrued expenses and other liabilities 35
50,783
120
50,938
Total liabilities $ 42,154
$ 15,028,982
$ 1,055
$ 15,072,191


	Financing VIE		Other VIEs
	Residential Loan Securitizations		Consolidated K-Series		Consolidated SLST		KRVI		Total
Cash and cash equivalents	$	0	$	0	$	—	$	107	$	107
Residential loans, net	44,030		—		—		—		44,030
Residential loans, at fair value	—		—		1,328,886		—		1,328,886

Multi-family loans held in securitization trusts, at fair value	—		17,816,746		—		—		17,816,746
Receivables and other assets	1,328		59,417		5,244		14,626		80,615
Total assets	$	45,358	$	17,876,163	$	1,334,130	$	14,733	$	19,270,384

Residential collateralized debt obligations	$	40,429	$	—	$	—	$	—	$	40,429
Residential collateralized debt obligations, at fair value	—		—		1,052,829		—		1,052,829
Multi-family collateralized debt obligations, at fair value	—		16,724,451		—		—		16,724,451
Accrued expenses and other liabilities	14		57,873		2,643		75		60,605
Total liabilities	$	40,443	$	16,782,324	$	1,055,472	$	75	$	17,878,314

~~Table of Contents~~

~~The following table presents a summary of the assets and liabilities of the Financing VIEs, the Consolidated K-Series, KRVI, and The Clusters as of December 31, 2018 (dollar amounts in thousands):~~

Financing VIEs Other VIEs

Multi-family
CMBS Re-
securitization ⁽¹⁾

Distressed
Residential
Mortgage
Loan
Securitization ⁽²⁾

Residential
Mortgage
Loan Securitization

Consolidated K-Series ⁽³⁾
Other Total
Cash and cash equivalents $ —
$ —
$ —
$ —
$ 708
$ 708
Investment securities available for sale, at fair value held in securitization trusts 52,700
—
—
—
—
52,700
Residential mortgage loans held in securitization trusts, net —
—
56,795
—
—
56,795
Distressed residential mortgage loans held in securitization trusts, net —
88,096
—
—
—
88,096
Multi-family loans held in securitization trusts, at fair value 1,107,071
—
—
10,572,776
—
11,679,847
Real estate held for sale in consolidated variable interest entities —
—
—
—
29,704
29,704
Receivables and other assets 4,243
10,287
1,061
37,679
23,254
76,524
Total assets $ 1,164,014
$ 98,383
$ 57,856
$ 10,610,455
$ 53,666
$ 11,984,374

Residential collateralized debt obligations $ —
$ —
$ 53,040
$ —
$ —
$ 53,040
Multi-family collateralized debt obligations, at fair value 1,036,604
—
—
9,985,644
—
11,022,248
Securitized debt 30,121
12,214
—
—
—
42,335
Mortgages and notes payable in consolidated variable interest entities —
—
—
—
31,227
31,227
Accrued expenses and other liabilities 4,228
444
26
37,022
1,166
42,886
Total liabilities $ 1,070,953
$ 12,658
$ 53,066
$ 10,022,666
$ 32,393
$ 11,191,736

⁽¹⁾

The Company classified the multi-family CMBS issued by 2 securitizations and held by this Financing VIE as available for sale securities. The Financing VIE consolidated 1 securitization included in the Consolidated K-Series that issued certain of the multi-family CMBS owned by the Company, including its assets, liabilities, income and expenses, in its financial statements, as based on a number of factors, the Company determined that it was the primary beneficiary and has a controlling financial interest in this particular K-Series securitization (~~see Note 6~~).

⁽²⁾

The Company engaged in this transaction for the purpose of financing certain distressed residential mortgage loans acquired by the Company. The distressed residential mortgage loans serving as collateral for the financing are comprised of re-performing and, to a lesser extent, non-performing and other delinquent mortgage loans secured by first liens on one- to four- family properties. Balances as of December 31, 2018 are related to a securitization transaction that closed in April 2016 that involved the issuance of $177.5 million of Class A Notes representing the beneficial ownership in a pool of performing and re-performing seasoned mortgage loans. The Company held 5% of the Class A Notes issued as part of the securitization transaction, which were eliminated in consolidation.


⁽³⁾	~~NaN of the securitizations included in the Consolidated K-Series were not held in a Financing VIE as of December 31, 2018.~~

~~Table of Contents~~

~~As of September 30, 2019, the Company had 0 securitized debt outstanding.~~ The following table summarizes the Company’s securitized debt collateralized by ~~multi-family CMBS or distressed residential mortgage loans~~non-Agency RMBS as of ~~December 31, 2018~~September 30, 2020 (dollar amounts in thousands):


	Principal Amount		Carrying Value (1)		Pass-through Rate of Notes Issued (2)
Non-Agency RMBS re-securitization	$	89,916	$	88,791	One-month LIBOR plus 5.25%

(1)Classified as securitized debt in the liability section of the Company’s accompanying condensed consolidated balance sheets. The securitized debt is non-recourse debt for which the Company has no obligation.

(2)Represents the pass-through rate through the payment date in December 2021. Pass-through rate increases to one-month LIBOR plus 7.75% for payment dates in or after January 2022.

Multi-family CMBS
Re-securitization ⁽¹⁾

Distressed
Residential Mortgage
Loan Securitization
Principal Amount at December 31, 2018 $ 33,177
$ 12,381
Carrying Value at December 31, 2018 ⁽²⁾
$ 30,121
$ 12,214
Pass-through rate of notes issued 5.35 % 4.00 %

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⁽¹⁾	The Company engaged in the re-securitization transaction primarily for the purpose of obtaining non-recourse financing on a portion of its multi-family CMBS portfolio. As a result of engaging in this transaction, the Company remained economically exposed to the first loss position on the underlying multi-family CMBS transferred to the Consolidated VIE.


⁽²⁾	~~Presented net of unamortized deferred costs of $0.2 million related to the issuance of the securitized debt, which included underwriting, rating agency, legal, accounting and other fees.~~

The following table presents contractual maturity information about the ~~Financing VIEs’~~Company's securitized debt collateralized by non-Agency RMBS as of ~~December 31, 2018~~September 30, 2020 (dollar amounts in thousands):


ScheduledMaturity(principal amount)	September 30, 2020
Over 36 months	$	89,916

Debt issuance cost	(1,125)
Carrying value	$	88,791

Scheduled Maturity (principal amount)
December 31, 2018
Within 24 months $ 12,381
Over 24 months to 36 months —
Over 36 months 33,177
Total 45,558
Discount (2,983 )
Debt issuance cost (240 )
Carrying value $ 42,335

~~Residential Mortgage Loan Securitization Transaction~~

The Company has completed 4 residential mortgage loan securitizations (other than the distressed residential mortgage loan securitizations discussed above) since inception; the first 3 were accounted for as permanent financings and have been included in the Company’s accompanying condensed consolidated financial statements. The fourth was accounted for as a sale and, accordingly, is not included in the Company’s accompanying condensed consolidated financial statements.

~~Table of Contents~~

Unconsolidated VIEs

As of September 30, 2020 and December 31, 2019, the Company evaluated its investment securities available for sale, preferred equity, mezzanine loan ~~preferred equity~~ and other equity investments to determine whether they are VIEs and should be consolidated by the Company. Based on a number of factors, the Company determined that, as of September 30, ~~2019, it does not have a controlling financial interest~~2020 and ~~is not the primary beneficiary of these VIEs. As of~~ December 31, 2018, the Company evaluated its multi-family CMBS investments in two Freddie Mac-sponsored multi-family loan K-Series securitizations and its mezzanine loan, preferred equity and other equity investments to determine whether they are VIEs and should be consolidated by the Company. Based on a number of factors, the Company determined that, as of December 31, 2018, except for the Clusters,2019, it does not have a controlling financial interest and is not the primary beneficiary of these VIEs. The following tables present the classification and carrying value of unconsolidated VIEs as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively (dollar amounts in thousands):


	September 30, 2020
	Investment securities available for sale, at fair value		Preferred equity and mezzanine loan investments		Investments in unconsolidated entities		Total
ABS	$	45,007	$	0	$	0	$	45,007
Preferred equity investments in multi-family properties	0		178,286		145,250		323,536
Mezzanine loans on multi-family properties	0		4,868		0		4,868
Equity investments in entities that invest in residential properties and loans	0		0		73,456		73,456
Total assets	$	45,007	$	183,154	$	218,706	$	446,867

September 30, 2019

Investment
securities,
available for
sale, at fair value
Preferred equity and mezzanine loan investments Investments in unconsolidated entities Total
ABS $ 48,254
$ —
$ —
$ 48,254
Preferred equity investments in multi-family properties —
172,826
92,684
265,510
Mezzanine loans on multi-family properties —
6,171
—
6,171
Equity investments in entities that invest in residential properties and loans —
—
61,779
61,779
Total assets $ 48,254
$ 178,997
$ 154,463
$ 381,714


	December 31, 2019
	Investment securities available for sale, at fair value		Preferred equity and mezzanine loan investments		Investments in unconsolidated entities		Total
ABS	$	49,214	$	0	$	0	$	49,214
Preferred equity investments in multi-family properties	0		173,825		106,083		279,908
Mezzanine loans on multi-family properties	0		6,220		0		6,220
Equity investments in entities that invest in residential properties and loans	0		0		65,572		65,572
Total assets	$	49,214	$	180,045	$	171,655	$	400,914

December 31, 2018

Investment
securities,
available for
sale, at fair
value, held in securitization trusts
Receivables and other assets Preferred equity and mezzanine loan investments Investments in unconsolidated entities Total
Multi-family CMBS $ 52,700
$ 72
$ —
$ —
$ 52,772
Preferred equity investments in multi-family properties —
—
154,629
40,472
195,101
Mezzanine loans on multi-family properties —
—
10,926
—
10,926
Equity investments in entities that invest in residential properties —
—
—
10,954
10,954
Total assets $ 52,700
$ 72
$ 165,555
$ 51,426
$ 269,753

Our maximum loss exposure on the investment securities available for sale, at fair value, preferred equity and mezzanine loan investments, and investments in unconsolidated entities is approximately $381.7 million at September 30, 2019. Our maximum loss exposure on the investment securities available for sale, at fair value, held in securitization trusts, preferred equity and mezzanine loan investments, and investments in unconsolidated entities was approximately ~~$269.8~~$446.9 million and $400.9 million at September 30, 2020 and December 31, ~~2018.~~2019, respectively. The Company’s maximum exposure does not exceed the carrying value of its investments.

Table of Contents


~~10.~~	~~Real Estate Held for Sale in Consolidated VIEs~~

10.Derivative Instruments and Hedging Activities

In March 2017, the Company determined that it became the primary beneficiary of Riverchase Landing and The Clusters, two VIEs that each owned a multi-family apartment community and in each of which the Company held a preferred equity investment. Accordingly, the Company consolidated both Riverchase Landing and The Clusters into its condensed consolidated financial statements (
~~seeNote 9).~~

During the second quarter of 2017, Riverchase Landing determined to actively market its multi-family apartment community for sale and completed the sale in March 2018, recognizing a net gain on sale of approximately $2.3 million which is included in other income and is allocated to net income attributable to non-controlling interest in consolidated variable interest entities on the accompanying condensed consolidated statements of operations. In connection with the sale, the Company's preferred equity investment was redeemed, resulting in de-consolidation of Riverchase Landing as of the date of the sale.

During the third quarter of 2017, The Clusters determined to actively market its multi-family apartment community for sale and completed the sale in February 2019, recognizing a net gain on sale of approximately $1.6 million which is included in other income and is allocated to net income attributable to non-controlling interest in consolidated variable interest entities on the accompanying condensed consolidated statements of operations. In connection with the sale, the Company's preferred equity investment was redeemed, resulting in de-consolidation of The Clusters as of the date of the sale.

As of September 30, 2019, there is 0 real estate held for sale in consolidated variable interest entities. The following is a summary of the real estate held for sale in consolidated variable interest entities as of December 31, 2018 (dollar amounts in thousands):

December 31, 2018
Land $ 2,650
Building and improvements 26,032
Furniture, fixtures and equipment 974
Lease intangible 2,802
Real estate held for sale before accumulated depreciation and amortization 32,458
Accumulated depreciation
(418 )
Accumulated amortization of lease intangible (2,336 )
Real estate held for sale in consolidated variable interest entities $ 29,704

~~There were no depreciation and amortization expenses for the three and nine months ended September 30, 2019 and 2018.~~

No gain or loss was recognized by the Company or allocated to non-controlling interests related to the initial classification of the real estate assets as held for sale during the year ended December 31, 2017.

~~Table of Contents~~


~~11.~~	~~Derivative Instruments and Hedging Activities~~

The Company enters into derivative instruments in connection with its risk management activities. These derivative instruments may include interest rate swaps, swaptions, futures and options on futures. The Company may also purchase or sell “To-Be-Announced,” or TBAs, purchase options on U.S. Treasury futures or invest in other types of mortgage derivative securities. The Company's derivative instruments ~~are currently~~were comprised of interest rate swaps, which ~~are~~were designated as trading ~~instruments.~~instruments and were terminated during the nine months ended September 30, 2020.

Derivatives Not Designated as Hedging Instruments

The following table presents the fair value of derivative instruments and their location in our condensed consolidated balance sheets at ~~September 30, 2019 and~~ December 31, ~~2018, respectively~~2019 (dollar amounts in thousands):

Type of Derivative Instrument Balance Sheet Location September 30, 2019 December 31, 2018
Interest rate swaps ⁽¹⁾
Derivative assets $ 20,673
$ 10,263

Type of Derivative Instrument

Balance Sheet Location

December 31, 2019

^{Interest rate swaps}(1)

All of the Company's interest rate swaps outstanding are cleared through a central clearing house. The Company exchanges variation margin for swaps based upon daily changes in fair value. As a result of amendments to rules governing certain central clearing activities, the exchange of variation margin is treated as a legal settlement of the exposure under the swap contract. Previously, such payments were treated as cash collateral pledged against the exposure under the swap contract. Accordingly, the Company accounted for the receipt or payment of variation margin as a direct reduction to or increase of the carrying value of the interest rate swap asset or liability on the Company's condensed consolidated balance sheets. Includes $40.4 million of derivative liabilities netted against a variation margin of $61.1 million at September 30, 2019. Includes $1.8 million of derivative

Derivative assets ~~and variation margin of $8.5 million at December 31, 2018.~~

15,878

(1)All of the Company's interest rate swaps were cleared through a central clearing house. The Company exchanged variation margin for swaps based upon daily changes in fair value. As a result of amendments to rules governing certain central clearing activities, the exchange of variation margin is treated as a legal settlement of the exposure under the swap contract. Previously, such payments were treated as cash collateral pledged against the exposure under the swap contract. Accordingly, the Company accounted for the receipt or payment of variation margin as a direct reduction to or increase of the carrying value of the interest rate swap asset or liability on the Company's condensed consolidated balance sheets. Includes $29.0 million of derivative liabilities netted against a variation margin of $44.8 million at December 31, 2019.

The tables below summarize the activity of derivative instruments not designated as hedges for the nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively (dollar amounts in thousands):

Notional Amount For the Nine Months Ended September 30, 2019
Type of Derivative Instrument December 31, 2018 Additions
Settlement,
Expiration
or Exercise
September 30, 2019
Interest rate swaps $ 495,500
$ —
$ —
$ 495,500

Notional Amount For the Nine Months Ended September 30, 2018
Type of Derivative Instrument December 31, 2017 Additions
Settlement,
Expiration
or Exercise
September 30, 2018
Interest rate swaps $ 345,500
$ 50,000
$ —
$ 395,500


	Notional Amount for the Nine Months Ended September 30, 2020
Type of Derivative Instrument	December 31, 2019		Additions		Terminations		September 30, 2020






Interest rate swaps	$	495,500	$	0	$	(495,500)	$	0


	Notional Amount for the Nine Months Ended September 30, 2019
Type of Derivative Instrument	December 31, 2018		Additions		Terminations		September 30, 2019






Interest rate swaps	$	495,500	$	0	$	0	$	495,500

Table of Contents

~~For the three and nine months ended September 30, 2019 and 2018, the Company did not recognize any net realized gains related to our derivative instruments.~~ The following table presents the components of realized gains (losses), net and unrealized gains (losses), net related to our derivative instruments that were not designated as hedging instruments, which are included in ~~the~~ non-interest income ~~category~~(loss) in our condensed consolidated statements of operations for the three and nine months ended September 30, 2020 and 2019, ~~and 2018~~respectively (dollar amounts in thousands):


	Three Months Ended September 30,
	2020				2019
	Realized Gains (Losses)		Unrealized Gains (Losses)		Realized Gains (Losses)		Unrealized Gains (Losses)
Interest rate swaps	$	0	$	0	$	0	$	(12,595)
Total	$	0	$	0	$	0	$	(12,595)

Three Months Ended September 30,
2019 2018
Interest rate swaps $ (12,595 ) $ 2,275
Total $ (12,595 ) $ 2,275

Nine Months Ended September 30,
2019 2018
Interest rate swaps $ (42,188 ) $ 16,379
Total $ (42,188 ) $ 16,379


	Nine Months Ended September 30,
	2020				2019
	Realized Gains (Losses)		Unrealized Gains (Losses)		Realized Gains (Losses)		Unrealized Gains (Losses)
Interest rate swaps	$	(73,078)	$	28,967	$	0	$	(42,188)
Total	$	(73,078)	$	28,967	$	0	$	(42,188)

Derivatives Designated as Hedging Instruments

As of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, there were no derivative instruments designated as hedging instruments.

Outstanding Derivatives

The Company had no outstanding derivatives as of September 30, 2020. The following table presents information about our interest rate swaps whereby we ~~receive~~received floating rate payments in exchange for fixed rate payments as of ~~September 30, 2019 and~~ December 31, ~~2018, respectively~~2019 (dollar amounts in thousands):

September 30, 2019 December 31, 2018
Swap Maturities

Notional
Amount

Weighted Average
Fixed Interest Rate
Weighted Average
Variable Interest Rate
Notional
Amount

Weighted Average
Fixed
Interest Rate
Weighted Average
Variable Interest Rate
2024 $ 98,000
2.18 % 2.30 % $ 98,000
2.18 % 2.45 %
2027 247,500
2.39 % 2.30 % 247,500
2.39 % 2.53 %
2028 150,000
3.23 % 2.21 % 150,000
3.23 % 2.53 %
Total $ 495,500
2.60 % 2.27 % $ 495,500
2.60 % 2.52 %


	December 31, 2019
Swap Maturities		Notional Amount		Weighted Average Fixed Interest Rate		Weighted Average Variable Interest Rate
2024		$	98,000	2.18	%	1.98	%
2027		247,500		2.39	%	1.94	%
2028		150,000		3.23	%	1.92	%
Total		$	495,500	2.60	%	1.95	%

The use of derivatives exposes the Company to counterparty credit risks in the event of a default by a counterparty. If a counterparty defaults under the applicable derivative agreement, the Company may be unable to collect payments to which it is entitled under its derivative agreements and may have difficulty collecting the assets it pledged as collateral against such derivatives. ~~Currently, all~~All of the Company's interest rate swaps ~~outstanding are~~were cleared through CME Group Inc. ("CME Clearing") which is the parent company of the Chicago Mercantile Exchange Inc. CME Clearing serves as the counterparty to every cleared transaction, becoming the buyer to each seller and the seller to each buyer, limiting the credit risk by guaranteeing the financial performance of both parties and netting down exposures.

Table of Contents

11.Repurchase Agreements


~~12.~~	~~Repurchase Agreements~~

Investment Securities

The Company has entered into repurchase agreements with ~~third party~~ financial institutions to finance its investment securities ~~portfolio.~~portfolio (including investment securities available for sale and securities owned in Consolidated SLST and the Consolidated K-Series). These repurchase agreements ~~are~~provide short-term ~~borrowings~~financing that bear interest rates typically based on a spread to LIBOR and are secured by the investment securities which they ~~finance. At~~finance and additional collateral pledged, if any. During March 2020, in connection with the significant market disruption caused by the COVID-19 pandemic, the repurchase agreement counterparties for our investment securities increased haircuts, started to require additional collateral or determined to not roll our financing. As a result, we liquidated our investment securities at a disadvantageous time, which resulted in losses. As of September 30, ~~2019 and~~2020, we currently have no amounts outstanding under repurchase agreements to finance investment securities. At December 31, ~~2018,~~2019, the Company had ~~repurchase agreements secured by investment securities~~financing arrangements with 14 counterparties and had no exposure to an ~~outstanding balance~~individual counterparty where the amount at risk was in excess of ~~$1.8 billion and $1.5 billion, respectively, and a weighted average interest rate~~5% of ~~3.06% and 3.41%, respectively.~~the Company's stockholders’ equity.

The following table presents detailed information about the amounts outstanding under the Company’s ~~borrowings under~~ repurchase agreements secured by investment securities and associated assets pledged as collateral at ~~September 30, 2019 and~~ December 31, ~~2018~~2019 (dollar amounts in thousands):


	December 31, 2019
		Outstanding Repurchase Agreements		Fair Value of Collateral Pledged		Amortized Cost of Collateral Pledged

Agency RMBS (1)		$	812,742	$	865,765	$	864,428
Agency CMBS (2)		133,184		139,317		140,118
Non-Agency RMBS (3)		594,286		797,784		785,952
CMBS (4)		811,890		1,036,513		853,043
Balance at end of the period		$	2,352,102	$	2,839,379	$	2,643,541

September 30, 2019 December 31, 2018

Outstanding
Repurchase Agreements

Fair Value of
Collateral
Pledged

Amortized
Cost
of Collateral
Pledged

Outstanding
Repurchase Agreements

Fair Value of
Collateral
Pledged

Amortized
Cost
of Collateral
Pledged
Agency ARMs RMBS $ 55,598
$ 57,546
$ 58,993
$ 67,648
$ 70,747
$ 73,290
Agency Fixed-rate RMBS 785,266
830,400
832,071
857,582
907,610
940,994
Non-Agency RMBS 210,339
288,014
280,724
88,730
117,958
118,414
CMBS ⁽¹⁾
772,707
976,121
790,492
529,617
687,876
539,788
Balance at end of the period $ 1,823,910
$ 2,152,081
$ 1,962,280
$ 1,543,577
$ 1,784,191
$ 1,672,486

(1)Collateral pledged includes Agency RMBS securities with a fair value amounting to $26.2 million included in Consolidated SLST as of December 31, 2019.

(2)Collateral pledged includes Agency CMBS securities with a fair value amounting to $88.4 million included in the Consolidated K-Series as of December 31, 2019.

(3)Collateral pledged includes first loss subordinated RMBS securities with a fair value amounting to $214.8 million included in Consolidated SLST as of December 31, 2019.

(4)Collateral pledged includes first loss POs, IOs and mezzanine CMBS securities with a fair value amounting to $848.2 million included in the Consolidated K-Series as of December 31, 2019.


⁽¹⁾	Includes first loss PO, IO and mezzanine CMBS securities with a fair value amounting to $773.4 million and $543.0 million included in the Consolidated K-Series as of September 30, 2019 and December 31, 2018, respectively.

As of ~~September 30, 2019 and~~ December 31, ~~2018,~~2019, the average days to maturity for repurchase agreements secured by investment securities ~~were 71~~was 73 days and ~~62 days, respectively.~~the weighted average interest rate was 2.72%. The Company’s accrued interest payable on outstanding repurchase agreements secured by investment securities at ~~September 30, 2019 and~~ December 31, ~~2018 amounts~~2019 amounted to ~~$7.1~~$8.8 million ~~and $3.9 million, respectively,~~ and is included in accrued expenses and other liabilities on the Company’s condensed consolidated balance sheets.

The following table presents contractual maturity information about the Company’s outstanding repurchase agreements secured by investment securities at ~~September 30, 2019 and~~ December 31, ~~2018~~2019 (dollar amounts in thousands):

Contractual Maturity September 30, 2019 December 31, 2018
Within 30 days $ 752,874
$ 732,051
Over 30 days to 90 days 824,579
677,906
Over 90 days 246,457
133,620
Total $ 1,823,910
$ 1,543,577


Contractual Maturity	December 31, 2019
Within 30 days	$	449,474
Over 30 days to 90 days	1,647,683
Over 90 days	254,945
Total	$	2,352,102

Table of Contents

As of September 30, 2019, the outstanding balance under our repurchase agreements secured by investment securities was funded at a weighted average advance rate of 86.1% that implies an average “haircut” of 13.9%. As of September 30, 2019, the weighted average “haircut” related to our repurchase agreement financing for our Agency RMBS, non-agency RMBS, and CMBS was approximately 5%, 26%, and 20%, respectively.

In the event we are unable to obtain sufficient short-term financing through existing repurchase agreements, or our lenders start to require additional collateral, we may have to liquidate our investment securities at a disadvantageous time, which could result in losses. Any losses resulting from the disposition of our investment securities in this manner could have a material adverse effect on our operating results and net profitability. At September 30, 2019 and December 31, ~~2018, the Company had financing arrangements with 14 and 11 counterparties, respectively. As of September 30,~~ 2019, the Company had ~~no exposure where the amount at risk was in excess of 5% of the Company's stockholders’ equity. As of December 31, 2018 the Company's only exposure where the amount at risk was in excess of 5% was~~assets available to ~~Jefferies & Company, Inc. at 5.04%.~~

~~Table of Contents~~

~~As of September 30, 2019, our available~~be posted as margin which included liquid assets, ~~included~~such as unrestricted cash and cash equivalents, and unencumbered securities that ~~we believe may~~could be ~~posted as margin. The~~monetized to pay down or collateralize a liability immediately. As of December 31, 2019, the Company had ~~$65.9~~$118.8 million in cash and cash equivalents and ~~$637.0~~$535.8 million in unencumbered investment securities to meet additional haircuts or market valuation requirements. The unencumbered securities that we believe may be posted as margin as of September 30, 2019 included $67.9 million of Agency RMBS, $187.3 million of CMBS, $333.5 million of non-Agency RMBS and $48.3 million of ABS. The cash and unencumbered securities,requirements, which collectively ~~represent 38.5%~~represented 27.8% of our outstanding repurchase agreements secured by investment securities. The following table presents information about the Company's unencumbered securities ~~are liquid and could be monetized to pay down or collateralize a liability immediately.~~at December 31, 2019 (dollar amounts in thousands):

~~Distressed and Other~~


Unencumbered Securities	December 31, 2019
Agency RMBS	$	83,351
CMBS	235,199
Non-Agency RMBS	168,063
ABS	49,214
Total	$	535,827

Residential ~~Mortgage~~ Loans

The Company has ~~master~~ repurchase agreements with ~~third party~~three financial institutions to fund the purchase of ~~distressed and other~~ residential ~~mortgage~~ loans, including both first and second mortgages. The following table presents detailed information about the Company’s ~~borrowings~~financings under these repurchase agreements and associated ~~distressed and other~~ residential ~~mortgage~~ loans pledged as collateral at September 30, ~~2019~~2020 and December 31, ~~2018~~2019, respectively (dollar amounts in thousands):


	Maximum Aggregate Uncommitted Principal Amount		Outstanding Repurchase Agreements		Carrying Value of Loans Pledged (1)		Weighted Average Rate		Weighted Average Months to Maturity (2)
September 30, 2020	$	1,247,483	$	673,787	$	938,572	2.46	%	2.96
December 31, 2019	$	1,200,000	$	754,132	$	961,749	3.67	%	11.20

Maximum Aggregate Uncommitted Principal Amount
Outstanding
Repurchase Agreements

Carrying Value of Loans Pledged ⁽¹⁾
Weighted Average Rate Weighted Average Months to Maturity
September 30, 2019 $ 950,000
$ 736,348
$ 937,682
4.05 % 4.00
December 31, 2018 $ 950,000
$ 589,148
$ 754,352
4.67 % 9.24

(1)Includes residential loans, at fair value of $938.6 million and $881.2 million at September 30, 2020 and December 31, 2019, respectively, and residential loans, net of $80.6 million at December 31, 2019.

(2)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.


⁽¹⁾	Includes distressed and other residential mortgage loans at fair value of $854.4 million and $626.2 million and distressed and other residential mortgage loans, net of $83.3 million and $128.1 million at September 30, 2019 and December 31, 2018, respectively.

During the terms of the ~~master~~ repurchase agreements, proceeds from the ~~distressed and other~~ residential ~~mortgage~~ loans will be applied to pay any price differential and to reduce the aggregate repurchase price of the collateral. The financings under the ~~master~~ repurchase agreements with two of the counterparties are subject to margin calls to the extent the market value of the ~~distressed and other~~ residential ~~mortgage~~ loans falls below specified levels and repurchase may be accelerated upon an event of default under the ~~master~~ repurchase agreements.

During the three months ended March 31, 2020, the Company was not in compliance with the market capitalization covenants in its repurchase agreements with two counterparties. In March 2020, the Company executed an amended repurchase agreement with 1 counterparty to modify the terms of financial covenants. The ~~master~~Company also agreed to a reservation of rights with the other counterparty during the three months ended March 31, 2020 in which the counterparty elected not to declare an event of default in accordance with the terms of the repurchase agreement for non-compliance with a financial covenant. The Company subsequently executed an amended repurchase agreement with this counterparty in April to modify the terms of financial covenants. As of September 30, 2020, the Company's repurchase agreements contain various covenants, including among other things, the maintenance of certain amounts of liquidity ~~market capitalization,~~ and total stockholders' equity. The Company is in compliance with such covenants as of November ~~7, 2019. The Company expects to roll outstanding borrowings under these master repurchase agreements into new repurchase agreements or other financings prior to or at maturity.~~6, 2020.

Costs related to ~~the establishment of~~ 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 in the amount of ~~$0.4~~$1.3 million as of September 30, ~~2019~~2020 and ~~$1.2~~$0.8 million as of December 31, ~~2018.~~2019. These deferred charges are amortized as an adjustment to interest expense using the effective interest method, or straight line-method, if the result is not materially different.

Table of Contents


~~13.~~	12. Debt

~~Residential Collateralized Debt Obligations~~

The Company’s Residential CDOs, which are recorded as liabilities on the Company’s condensed consolidated balance sheets, are secured by ARMs pledged as collateral, which are recorded as assets of the Company. Pledged assets of $45.7 million and $56.8 million are included in distressed and other residential mortgage loans, net in the Company's condensed consolidated balance sheets as of September 30, 2019 and December 31, 2018, respectively. As of September 30, 2019 and December 31, 2018, the Company had Residential CDOs outstanding of
~~$42.1 million~~ and $53.0 million, respectively. As of September 30, 2019 and December 31, 2018, the current weighted average interest rate on these Residential CDOs was 2.64% and 3.12%, respectively. The Residential CDOs are collateralized by ARM loans with a principal balance of $48.9 million and $60.2 million at September 30, 2019 and December 31, 2018, respectively. The Company retained the owner trust certificates, or residual interest, for 3 securitizations, and, as of September 30, 2019 and December 31, 2018, had a net investment in the residential securitization trusts of $4.8 million.

Convertible Notes

~~On January 23, 2017,~~As of September 30, 2020, the Company ~~issued~~had $138.0 million aggregate principal amount of its 6.25% Senior Convertible Notes due 2022 (the "Convertible Notes") in an underwritten public offering. The net proceeds to the Company from the sale of the Convertible Notes, after deducting the underwriter's discounts, commissions and offering expenses, were approximately $127.0 million with the total cost to the Company of approximately 8.24%.outstanding. Costs related to the issuance of the Convertible Notes which include underwriting, legal, accounting and other fees, are reflected as deferred charges. The underwriter's discount and deferred charges, net of amortization, are presented as a deduction from the corresponding debt liability on the Company's accompanying condensed consolidated balance sheets in the amount of ~~$5.6~~$3.3 million and ~~$7.2~~$5.0 million as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. The underwriter's discount and deferred charges are amortized as an adjustment to interest expense using the effective interest ~~method.~~method, resulting in a total cost to the Company of approximately 8.24%.

The Convertible Notes were issued at 96% of the principal amount, bear interest at a rate equal to 6.25% per year, payable semi-annually in arrears on January 15 and July 15 of each year, and are expected to mature on January 15, 2022, unless earlier converted or repurchased. The Company does not have the right to redeem the Convertible Notes prior to maturity and no sinking fund is provided for the Convertible Notes. Holders of the Convertible Notes are permitted to convert their Convertible Notes into shares of the Company's common stock at any time prior to the close of business on the business day immediately preceding January 15, 2022. The conversion rate for the Convertible Notes, which is subject to adjustment upon the occurrence of certain specified events, initially equals 142.7144 shares of the Company’s common stock per $1,000 principal amount of Convertible Notes, which is equivalent to a conversion price of approximately $7.01 per share of the Company’s common stock, based on a $1,000 principal amount of the Convertible Notes. The Convertible Notes are senior unsecured obligations of the Company that rank senior in right of payment to the Company's subordinated debentures and any of its other indebtedness that is expressly subordinated in right of payment to the Convertible Notes.

During the nine months ended September 30, ~~2019,~~2020, none of the Convertible Notes were converted. As of November ~~7, 2019,~~6, 2020, the Company has not been notified, and is not aware, of any event of default under the ~~covenants~~indenture for the Convertible Notes.

Subordinated Debentures

Subordinated debentures are trust preferred securities that are fully guaranteed by the Company with respect to distributions and amounts payable upon liquidation, redemption or repayment. The following table summarizes the key details of the Company’s subordinated debentures as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 (dollar amounts in thousands):


	NYM Preferred Trust I		NYM Preferred Trust II
Principal value of trust preferred securities	$	25,000	$	20,000
Interest rate	Three month LIBOR plus 3.75%, resetting quarterly		Three month LIBOR plus 3.95%, resetting quarterly
Scheduled maturity	March 30, 2035		October 30, 2035

NYM Preferred Trust I NYM Preferred Trust II
Principal value of trust preferred securities $ 25,000
$ 20,000
Interest rate Three month LIBOR plus 3.75%, resetting quarterly
Three month LIBOR plus 3.95%, resetting quarterly
Scheduled maturity March 30, 2035
October 30, 2035

As of November ~~7, 2019,~~6, 2020, the Company has not been notified, and is not aware, of any event of default under the ~~covenants~~indenture for the subordinated debentures.

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~~Mortgages and Notes Payable in Consolidated VIEs~~

~~In March 2017, the Company consolidated both Riverchase Landing and The Clusters into its condensed consolidated financial statements (s~~ee~~Note 9)~~. In March 2018, Riverchase Landing completed the sale of its multi-family apartment community and redeemed the Company's preferred equity investment. The Company de-consolidated Riverchase Landing as of the date of the sale. In February 2019, The Clusters completed the sale of its multi-family apartment community and redeemed the Company's preferred equity investment. The Company de-consolidated The Clusters as of the date of the sale. The Clusters' real estate investment was subject to a mortgage payable as of December 31, 2018, and the Company had no obligation for this liability as of December 31, 2018.

~~The Company also consolidates KRVI into its condensed consolidated financial statements (see Note 9~~). KRVI's real estate under development is subject to a note payable of $0.9 million that has an unused commitment of $7.5 million as of September 30, 2019. The Company has not been notified, and is not aware, of any event of default under the covenants of KRVI's note payable as of November 7, 2019.

~~The mortgages and notes payable in the consolidated VIEs as of September 30, 2019 are described below (dollar amounts in thousands):~~

Mortgage Note Amount as of
Origination Date September 30, 2019 Maturity Date Interest Rate Net Deferred Finance Costs
KRVI 12/16/2016 $ 935
12/16/2019 6.50 % $ —

Debt Maturities

As of September 30, ~~2019,~~2020, maturities for debt on the Company's condensed consolidated balance sheet are as follows (dollar amounts in thousands):


Year Ending December 31,	Total
2020	$	0
2021	0
2022	138,000
2023	0
2024	0
2025	0
Thereafter	45,000
	$	183,000

Year Ending December 31, Total
2019 $ 935
2020 —
2021 —
2022 138,000
2023 —
Thereafter 87,319
$ 226,254

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13. Commitments and Contingencies

Impact of COVID-19

~~Table~~As further discussed in Notes 1 and 2, the full extent of ~~Contents~~


~~14.~~	~~Commitments and Contingencies~~

~~Commitment to Purchase Securities~~

~~The Company has committed to purchase a first loss PO~~the impact of the COVID-19 pandemic on the global economy generally, and ~~IOs to be issued by a Freddie Mac-sponsored multi-family loan K-series securitization~~the Company's business in ~~the amount~~particular, is uncertain. As of ~~approximately $56.0 million.~~

In the third quarter of 2019, the Company entered into an agreement to purchase mortgage-backed securities to be issued in a securitization transaction sponsored by Freddie Mac. Pursuant to the terms of this agreement, the Company plans to acquire subordinate securities backed by a pool of seasoned re-performing residential first lien mortgage loans. The Company deposited $66.0 million with Freddie Mac towards the purchase price of these securities which is included in receivables and other assets in the accompanyingSeptember 30, 2020, no contingencies have been recorded on our condensed consolidated balance ~~sheets. The Company expects to fund the remainder~~sheets as a result of the ~~purchase price of these securities, approximately $166.0 million, upon~~COVID-19 pandemic; however, as the ~~closing of this transaction in~~global pandemic and its economic implications continue, it may have long-term impacts on the ~~fourth quarter of 2019.~~Company's operations, financial condition, liquidity or cash flows.

Outstanding Litigation

The Company is at times subject to various legal proceedings arising in the ordinary course of business. As of September 30, ~~2019,~~2020, the Company does not believe that any of its current legal proceedings, individually or in the aggregate, will have a material adverse effect on the Company’s operations, financial condition or cash flows.

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14. Fair Value of Financial Instruments


~~15.~~	~~Fair Value of Financial Instruments~~

The Company has established and documented processes for determining fair values. Fair value is based upon quoted market prices, where available. If listed prices or quotes are not available, then fair value is based upon internally developed models that primarily use inputs that are market-based or ~~independently-sourced~~independently sourced market parameters, including interest rate yield curves.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of valuation hierarchy are defined as follows:

Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The following describes the valuation methodologies used for the Company’s financial instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy.

~~Investment Securities, Available for Sale –~~ The Company determines the fair value of the investment securities in our portfolio, except the CMBS held in securitization trusts, using a third-party pricing service or quoted prices provided by dealers who make markets in similar financial instruments. Dealer valuations typically incorporate common market pricing methods, including a spread measurement to the Treasury curve or interest rate swap curve as well as underlying characteristics of the particular security including coupon, periodic and life caps, collateral type, rate reset period and seasoning or age of the security. If quoted prices for a security are not reasonably available from a dealer, the security will be classified as a Level 3 security and, as a result, management will determine fair value by modeling the security based on its specific characteristics and available market information. Management reviews all prices used in determining fair value to ensure they represent current market conditions. This review includes surveying similar market transactions, comparisons to interest pricing models as well as offerings of like securities by dealers. The Company's investment securities, except the CMBS held in securitization trusts, are valued based upon readily observable market parameters and are classified as Level 2 fair values.

a.Investment Securities Available for Sale – The Company determines the fair value of the investment securities available for sale in our portfolio by considering several observable market data points, including prices obtained from third-party pricing services or dealers who make markets in similar financial instruments, as well as dialogue with market participants. Third-party pricing services typically incorporate commonly used market pricing methods, trading activity observed in the marketplace and other data inputs. The methodology considers the characteristics of the particular security and its underlying collateral, which are observable inputs. These inputs include, but are not limited to, historical performance, coupon, periodic and life caps, collateral type, rate reset period, seasoning, prepayment speeds and credit enhancement levels. The Company’s ~~CMBS~~investment securities available for sale are valued based upon readily observable market parameters and are classified as Level 2 fair values.

b.Multi-Family Loans Held in Securitization Trusts and Residential Loans Held in Consolidated SLST – Multi-family loans held in securitization trusts and residential loans held in Consolidated SLST are carried at ~~December 31, 2018 were comprised of first loss POs~~fair value and ~~certain IOs for which there were not substantially similar securities that traded frequently. The Company~~ classified ~~these securities~~ as Level 3 fair values. ~~Fair~~In accordance with the practical expedient in ASC 810, the Company determines the fair value of ~~the Company’s CMBS investments~~multi-family loans held in securitization trusts ~~was~~and residential loans held in Consolidated SLST based on ~~an internal valuation model that considered expected cash flows~~the fair value of its Multi-Family CDOs and SLST CDOs and its retained interests from these securitizations (eliminated in consolidation in accordance with GAAP), as the ~~underlying~~fair value of these instruments is more observable.

c.Residential Loans and Residential Loans Held in Securitization Trusts – The Company’s acquired residential loans are recorded at fair value and ~~yields required by market participants. The significant unobservable inputs used~~classified as Level 3 in the ~~measurement of these investments were projected losses of certain identified loans within the pool of loans and a discount rate. The discount rate used in determining~~ fair value ~~incorporated default rate, loss severity and current market interest rates.~~hierarchy. The ~~discount rate ranged from 4.5% to 9.5% as of December 31, 2018. Significant increases or decreases in these inputs would have resulted in a significantly lower or higher~~ fair value ~~measurement.~~for residential loans is determined using valuations obtained from a third party that specializes in providing valuations of residential loans. The valuation approach depends on whether the residential loan is considered performing, re-performing or non-performing at the date the valuation is performed.

~~Multi~~-~~Family Loans Held in Securitization Trusts~~ – Multi-family loans held in securitization trusts are carried at fair value and classified as Level 3 fair values. In accordance with the practical expedient in ASC 810, the Company determines the fair value of multi-family loans held in securitization trusts based on the fair value of its Multi-Family CDOs and its retained interests from these securitizations (eliminated in consolidation in accordance with GAAP), as the fair value of these instruments is more observable.


c.	~~Derivative Instruments –~~ The Company’s derivative instruments are classified as Level 2 fair values and are measured using valuations reported by the clearing house, CME Clearing, through which these instruments were cleared. The derivatives are presented net of variation margin payments pledged or received.

~~Table of Contents~~

~~Multi-Family CDOs –~~ Multi-Family CDOs are recorded at fair value and classified as Level 3 fair values. The fair value of Multi-Family CDOs is determined using a third party pricing service or are based on quoted prices provided by dealers who make markets in similar financial instruments. The dealers will consider contractual cash payments and yields expected by market participants. Dealers also incorporate common market pricing methods, including a spread measurement to the Treasury curve or interest rate swap curve as well as underlying characteristics of the particular security including coupon, periodic and life caps, collateral type, rate reset period and seasoning or age of the security.

~~Investments in Unconsolidated Entities –~~ Fair value for investments in unconsolidated entities is determined based on a valuation model using assumptions for the timing and amount of expected future cash flow for income and realization events for the underlying assets in the unconsolidated entities and a discount rate. This fair value measurement is generally based on unobservable inputs and, as such, is classified as Level 3 in the fair value hierarchy.

~~Residential Mortgage Loans –~~ Certain of the Company’s acquired distressed and other residential mortgage loans are recorded at fair value and classified as Level 3 in the fair value hierarchy. The fair value for distressed and other residential mortgage loans is determined using valuations obtained from a third party that specializes in providing valuations of residential mortgage loans. The valuation approach depends on whether the residential mortgage loan is considered performing, re-performing or non-performing at the date the valuation is performed.

For performing and re-performing loans, estimates of fair value are derived using a discounted cash flow model, where estimates of cash flows are determined from scheduled payments for each loan, adjusted using forecast prepayment rates, default rates and rates for loss upon default. For non-performing loans, asset liquidation cash flows are derived based on the estimated time to liquidate the loan, expected liquidation costs and home price appreciation. Estimated cash flows for both performing and non-performing loans are discounted at yields considered appropriate to arrive at a reasonable exit price for the asset. Indications of loan value such as actual trades, bids, offers and generic market color may be used in determining the appropriate discount yield.

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d.Derivative Instruments –The ~~discount~~Company’s derivative instruments as of December 31, 2019 were classified as Level 2 fair values and were measured using valuations reported by the clearing house, CME Clearing, through which these instruments were cleared. The derivatives were presented net of variation margin payments pledged or received.

e.Investments in Unconsolidated Entities – Fair value for investments in unconsolidated entities is determined by (i) the valuation process for residential loans as described in c. above, (ii) the valuation process for preferred equity and mezzanine loan investments as described in f. below or (iii) provided by the general partner of the equity investment entity. These fair value measurements are generally based on unobservable inputs and, as such, are classified as Level 3 in the fair value hierarchy.

f.Preferred Equity and Mezzanine Loan Investments– Fair value for preferred equity and mezzanine loan investments is determined by both market comparable pricing and discounted cash flows. The discounted cash flows are based on the underlying contractual cash flows and estimated changes in market yields. The fair value also reflects consideration of changes in credit risk since the origination or time of initial investment. This fair value measurement is generally based on unobservable inputs and, as such, is classified as Level 3 in the fair value hierarchy.

g.Multi-Family and Residential Collateral Debt Obligations, at fair value – Multi-Family CDOs and SLST CDOs are classified as Level 3 fair values. The fair value of Multi-Family CDOs and SLST CDOs is determined by considering several market data points, including prices obtained from third-party pricing services or dealers who make markets in similar financial instruments. The third-party pricing service or dealers incorporate common market pricing methods, including a spread measurement to the Treasury curve or interest rate swap curve as well as underlying characteristics of a particular security. They will also consider contractual cash payments and yields expected by market participants.

Management reviews all prices used in determining fair value ~~for distressed~~to ensure they represent current market conditions. This review includes surveying similar market transactions and ~~other residential mortgage loans ranges from 3.9%~~comparisons to ~~12.8%.~~

interest pricing models as well as offerings of like securities by dealers. Any changes to the valuation methodology are reviewed by management to ensure the changes are appropriate. As markets and products develop and the pricing for certain products becomes more transparent, the Company continues to refine its valuation methodologies. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies, or assumptions, to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The Company uses inputs that are current as of each reporting date, which may include periods of market dislocation, during which time price transparency may be reduced. This condition could cause the Company’s financial instruments to be reclassified from Level 2 to Level 3 in future periods.

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The following table presents the Company’s financial instruments measured at fair value on a recurring basis as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, on the Company’s condensed consolidated balance sheets (dollar amounts in thousands):

Measured at Fair Value on a Recurring Basis at
September 30, 2019 December 31, 2018
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Assets carried at fair value
Investment securities available for sale:
Agency RMBS $ —
$ 955,838
$ —
$ 955,838
$ —
$ 1,037,730
$ —
$ 1,037,730
Non-Agency RMBS —
621,528
—
621,528
—
214,037
—
214,037
CMBS —
278,398
—
278,398
—
207,785
52,700
260,485
ABS —
48,254
—
48,254
—
—
—
—
Multi-family loans held in securitization trusts —
—
15,863,264
15,863,264
—
—
11,679,847
11,679,847
Distressed and other residential mortgage loans, at fair value —
—
1,116,128
1,116,128
—
—
737,523
737,523
Derivative assets:

Interest rate swaps ⁽¹⁾
—
20,673
—
20,673
—
10,263
—
10,263
Investments in unconsolidated entities —
—
76,249
76,249
—
—
32,994
32,994
Total $ —
$ 1,924,691
$ 17,055,641
$ 18,980,332
$ —
$ 1,469,815
$ 12,503,064
$ 13,972,879
Liabilities carried at fair value
Multi-family collateralized debt obligations $ —
$ —
$ 14,978,199
$ 14,978,199
$ —
$ —
$ 11,022,248
$ 11,022,248
Total $ —
$ —
$ 14,978,199
$ 14,978,199
$ —
$ —
$ 11,022,248
$ 11,022,248


	Measured at Fair Value on a Recurring Basis at
	September 30, 2020								December 31, 2019
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets carried at fair value
Investment securities available for sale, at fair value:
Agency RMBS	$	0	$	0	$	0	$	0	$	0	$	922,877	$	0	$	922,877
Agency CMBS	0		0		0		0		0		50,958		0		50,958
Non-Agency RMBS	0		375,765		0		375,765		0		715,314		0		715,314
CMBS	0		182,925		0		182,925		0		267,777		0		267,777
ABS	0		45,007		0		45,007		0		49,214		0		49,214
Residential loans, at fair value:
Residential loans	0		0		1,177,298		1,177,298		0		0		1,429,754		1,429,754
Consolidated SLST	—		—		1,290,005		1,290,005		—		—		1,328,886		1,328,886
Residential loans held in securitization trusts	0		0		355,486		355,486		0		0		0		0
Investments in unconsolidated entities	0		0		218,706		218,706		—		—		83,882		83,882
Preferred equity and mezzanine loan investments	—		—		183,154		183,154		—		—		0		0
Multi-family loans held in securitization trusts, at fair value	0		0		0		0		0		0		17,816,746		17,816,746
Derivative assets:
Interest rate swaps (1)	0		0		0		0		0		15,878		0		15,878
Total	$	0	$	603,697	$	3,224,649	$	3,828,346	$	0	$	2,022,018	$	20,659,268	$	22,681,286
Liabilities carried at fair value
Multi-family collateralized debt obligations, at fair value	$	0	$	0	$	0	$	0	$	0	$	0	$	16,724,451	$	16,724,451





Residential collateralized debt obligations, at fair value	—		—		1,077,980		1,077,980		—		—		1,052,829		1,052,829
Total	$	0	$	0	$	1,077,980	$	1,077,980	$	0	$	0	$	17,777,280	$	17,777,280

⁽¹⁾

All of the Company's interest rate swaps outstanding are cleared through a central clearing house. The Company exchanges variation margin for swaps based upon daily changes in fair value. Includes derivative liabilities of $40.4 million netted against a variation margin of $61.1 million at September 30, 2019. Includes derivative assets of $1.8 million and variation margin of $8.5 million at December 31, 2018.

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The following tables detail changes in valuation for the Level 3 assets for the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively ~~(amounts~~(dollar amounts in thousands):

Level 3 Assets:


	Nine Months Ended September 30, 2020
	Residential loans		Consolidated SLST		Residential loans held in securitization trusts		Investments in unconsolidated entities		Preferred equity and mezzanine loan investments		Multi-family loans held in securitization trusts		Total
Balance at beginning of period	$	1,429,754	$	1,328,886	$	0	$	83,882	$	0	$	17,816,746	$	20,659,268
Total (losses)/gains (realized/unrealized)
Included in earnings	(26,069)		24,096		8,836		14,573		9,760		41,795		72,991

Transfers in (1)	164,279		0		46,572		107,477		182,465		0		500,793
Transfers out (2) (3)	(5,061)		0		(1,497)		0		0		(237,297)		(243,855)
Transfer to securitization trust (4)	(317,089)		0		317,089		0		0		0		0
Contributions	0		0		0		35,951		13,712		0		49,663
Paydowns/Distributions	(224,073)		(62,977)		(15,514)		(23,177)		(22,783)		(239,796)		(588,320)
Recovery of charge-off	0		0		0		0		0		35		35
Sales (3)	(93,755)		0		0		0		0		(17,381,483)		(17,475,238)
Purchases	249,312		0		0		0		0		0		249,312
Balance at the end of period	$	1,177,298	$	1,290,005	$	355,486	$	218,706	$	183,154	$	0	$	3,224,649

Nine Months Ended September 30, 2019
Multi-family loans held in securitization trusts Distressed and other residential mortgage loans Investments in unconsolidated entities CMBS held in securitization trusts Total
Balance at beginning of period $ 11,679,847
$ 737,523
$ 32,994
$ 52,700
$ 12,503,064
Total gains/(losses) (realized/unrealized)
Included in earnings 760,132
44,913
7,169
17,734
829,948
Included in other comprehensive income (loss) —
—
—
(13,665 ) (13,665 )
Transfers in —
—
—
—
—
Transfers out —
(437 ) —
—
(437 )
Contributions —
—
50,000
—
50,000
Paydowns/Distributions (368,811 ) (106,113 ) (13,914 ) —
(488,838 )
Charge-off (3,510 ) —
—
—
(3,510 )
Sales —
(19,814 ) —
(56,769 ) (76,583 )
Purchases ⁽¹⁾
3,795,606
460,056
—
—
4,255,662
Balance at the end of period $ 15,863,264
$ 1,116,128
$ 76,249
$ —
$ 17,055,641

(1)As of January 1, 2020, the Company has elected to account for all residential loans, residential loans held in securitization trusts, investments in unconsolidated entities and preferred equity and mezzanine loan investments using the fair value option (see Note 2).

⁽¹⁾

During the nine months ended September 30, 2019, the Company purchased first loss PO securities, and certain IOs and senior or mezzanine CMBS securities issued from securitizations that it determined to consolidate and included in the Consolidated K-Series. As a result, the Company consolidated assets of these securitizations in the amount of $3.8 billion during the nine months ended September 30, 2019

(2)Transfers out of Level 3 assets include the transfer of residential loans to real estate owned.

(3)During the nine months ended September 30, 2020, the Company sold first loss PO securities included in the Consolidated K-Series and, as a result, de-consolidated multi-family loans held in securitization trusts and transferred its remaining securities owned in the Consolidated K-Series to investment securities available for sale (see Notes 2 and 6).

(4)In July 2020, the Company completed a securitization of certain performing, re-performing and non-performing residential loans (see Note 9).

Nine Months Ended September 30, 2018
Multi-family loans held in securitization trusts Distressed and other residential mortgage loans Investments in unconsolidated entities CMBS held in securitization trusts Total
Balance at beginning of period $ 9,657,421
$ 87,153
$ 42,823
$ 47,922
$ 9,835,319
Total (losses)/gains (realized/unrealized)
Included in earnings (289,797 ) (1,361 ) 7,930
2,928
(280,300 )
Included in other comprehensive income (loss) —
—
—
901
901
Transfers in —
—
—
—
—
Transfers out —
—
—
—
—
Contributions —
—
—
—
—
Paydowns/Distributions (101,953 ) (15,456 ) (15,692 ) —
(133,101 )
Sales —
(7,105 ) —
—
(7,105 )
Purchases ⁽¹⁾
805,163
118,679
—
—
923,842
Balance at the end of period $ 10,070,834
$ 181,910
$ 35,061
$ 51,751
$ 10,339,556

⁽¹⁾

During the nine months ended September 30, 2018, the Company purchased first loss PO securities and certain IOs and mezzanine CMBS securities issued from securitizations that it determined to consolidate and included in the Consolidated K-Series. As a result, the Company consolidated assets of these securitizations in the amount of $0.8 billion during the nine months ended September 30, 2018 (~~see Notes 2 and 6~~).

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	Nine Months Ended September 30, 2019
	Residential loans		Investments in unconsolidated entities		Multi-family loans held in securitization trusts		CMBS held in securitization trusts		Total
Balance at beginning of period	$	737,523	$	32,994	$	11,679,847	$	52,700	$	12,503,064
Total gains/(losses) (realized/unrealized)
Included in earnings	44,913		7,169		760,132		17,734		829,948
Included in other comprehensive income (loss)	0		0		0		(13,665)		(13,665)
Transfers in	0		0		0		0		0
Transfers out	(437)		0		0		0		(437)
Contributions	0		50,000		0		0		50,000
Paydowns/Distributions	(106,113)		(13,914)		(368,811)		0		(488,838)
Charge-off	0		0		(3,510)		0		(3,510)
Sales	(19,814)		0		0		(56,769)		(76,583)
Purchases (1)	460,056		0		3,795,606		0		4,255,662
Balance at the end of period	$	1,116,128	$	76,249	$	15,863,264	$	0	$	17,055,641

(1)During the nine months ended September 30, 2019, the Company purchased first loss PO securities and certain IOs and senior or mezzanine CMBS securities issued from securitizations that it determined to consolidate and included in the Consolidated K-Series. As a result, the Company consolidated assets of these securitizations in the amount of $3.8 billion during the nine months ended September 30, 2019 (see Notes 2 and 6).

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The following ~~table details~~tables detail changes in valuation for the Level 3 liabilities ~~(Multi-family CDOs)~~ for the nine months ended September 30, 2020 and 2019, ~~and 2018,~~ respectively ~~(amounts~~(dollar amounts in thousands):

Level 3 Liabilities:


	Nine Months Ended September 30, 2020
	Multi-Family CDOs		SLST CDOs		Total
Balance at beginning of period	$	16,724,451	$	1,052,829	$	17,777,280
Total losses/(gains) (realized/unrealized)
Included in earnings	35,018		66,203		101,221


Paydowns	(147,376)		(63,278)		(210,654)
Sales (1)	(16,612,093)		22,226		(16,589,867)
Transfers out	0		0		0
Balance at the end of period	$	0	$	1,077,980	$	1,077,980

Nine Months Ended September 30,
2019 2018
Balance at beginning of period $ 11,022,248
$ 9,189,459
Total losses (gains) (realized/unrealized)
Included in earnings 694,043
(350,674 )
Purchases ⁽¹⁾
3,633,525
767,477
Paydowns (368,107 ) (101,949 )
Charge-off (3,510 ) —
Balance at the end of period $ 14,978,199
$ 9,504,313

(1)During the nine months ended September 30, 2020, the Company sold first loss PO securities included in the Consolidated K-Series and, as a result, de-consolidated the Multi-Family CDOs (see Notes 2 and 6). Also includes the Company's net sales of senior securities issued by Consolidated SLST during the nine months ended September 30, 2020 (see Note 4).


	Nine Months Ended September 30, 2019
	Multi-Family CDOs
Balance at beginning of period	$	11,022,248
Total losses (realized/unrealized)
Included in earnings	694,043

^Purchases(1)	~~During~~3,633,525
Paydowns	(368,107)

Charge-off	(3,510)
Balance at the nine months ended September 30, 2019 and 2018, the Company purchased PO securities and certain IOs and senior or mezzanine CMBS securities issued from securitizations that it determined to consolidate and included in the Consolidated K-Series. As a result, the Company consolidated liabilitiesend of ~~these securitizations in the amount of $3.6 billion and $0.8 billion during the nine months ended September 30, 2019 and 2018, respectively (~~period	~~see Notes 2 and 6~~$	).14,978,199

(1)During the nine months ended September 30, 2019, the Company purchased first loss PO securities and certain IOs and senior or mezzanine CMBS securities issued from securitizations that it determined to consolidate and included in the Consolidated K-Series. As a result, the Company consolidated liabilities of these securitizations in the amount of $3.6 billion during the nine months ended September 30, 2019 (see Notes 2 and 6).

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The following table discloses quantitative information regarding the significant unobservable inputs used in the valuation of our Level 3 assets and liabilities measured at fair value (dollar amounts in thousands, except input values):


September 30, 2020	Fair Value	Valuation Technique	Unobservable Input	Weighted Average	Range
Assets
Residential loans, at fair value:
Residential loans and residential loans held in securitization trusts (1)	$1,397,090	Discounted cash flow	Lifetime CPR	9.6%	0	-	67.6%
			Lifetime CDR	2.6%	0	-	100.0%
			Loss severity	16.3%	0	-	100.0%
			Yield	5.3%	2.3%	-	35.0%

	$135,694	Liquidation model	Annual home price appreciation	0.1%	0	-	5.7%
			Liquidation timeline (months)	29	1	-	57
			Property value	$572,723	$12,430	-	$3,550,000
			Yield	7.1%	7.0%	-	35.0%

Residential loans held in Consolidated SLST (2)	$1,290,005		Liability price	N/A

Total	$2,822,789

Investments in unconsolidated entities (1)	$145,250	Discounted cash flow	Discount rate	12.5%	12.0%	-	13.5%
			Months to assumed redemption	42	18	-	56
			Loss severity	—

Preferred equity and mezzanine loan investments (1)	$183,154	Discounted cash flow	Discount rate	12.4%	11.5%	-	16.0%
			Months to assumed redemption	45	1	-	186
			Loss severity	—
Liabilities
Residential collateralized debt obligations, at fair value
SLST CDOs (2) (3)	$1,077,980	Discounted cash flow	Yield	2.3%	1.2%	-	11.5%
			Collateral prepayment rate	5.5%	2.8%	-	6.1%
			Collateral default rate	2.0%	0	-	6.8%
			Loss severity	21.1%	0	-	23.7%

(1)Weighted average amounts are calculated based on the weighted average fair value of the assets.

(2)In accordance with the practical expedient in ASC 810, the Company determines the fair value of the residential loans held in Consolidated SLST based on the fair value of SLST CDOs, including securities we own, as the fair value of these instruments is more observable. At September 30, 2020, the fair value of securities we owned in Consolidated SLST was $210.9 million.

(3)Weighted average yield calculated based on the weighted average fair value of the liabilities. Weighted average collateral prepayment rate, weighted average collateral default rate, and weighted average loss severity are calculated based on the weighted average unpaid balance of the liabilities.

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The following table details the changes in unrealized gains (losses) included in earnings for the three and nine months ended September 30, ~~2019~~2020 and ~~2018~~2019 for our Level 3 assets and liabilities held as of September 30, ~~2019~~2020 and ~~2018,~~2019, respectively (dollar amounts in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Assets
Multi-family loans held in securitization trusts ⁽¹⁾
$ 197,837
$ (33,153 ) $ 802,625
$ (252,899 )
Investments in unconsolidated entities ⁽²⁾
449
4,092
1,295
5,359
Distressed and other residential mortgage loans, at fair value ⁽¹⁾
17,413
(629 ) 37,079
(754 )

Liabilities
Multi-family debt held in securitization trusts ⁽¹⁾
(190,207 ) 45,456
(780,378 ) 284,766


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Assets
Residential loans, at fair value
Residential loans (1)	$	35,420	$	17,413	$	(883)	$	37,079
Consolidated SLST (1)	41,063		0		28,014		0
Residential loans held in securitization trusts (1)	817		0		(823)		0
Investments in unconsolidated entities (2)	7		449		(4,052)		1,295
Preferred equity and mezzanine loan investments (1)	(955)		0		(6,518)		0
Multi-family loans held in securitization trusts, at fair value (1)	0		197,837		0		802,625
Liabilities
Multi-family collateralized debt obligations, at fair value (1)	0		(190,207)		0		(780,378)
Residential collateralized debt obligations, at fair value (1)	(13,918)		0		(62,907)		0


⁽¹⁾ (1)Presented in unrealized gains (losses), net on the Company's condensed consolidated statements of operations. (2)Presented in other income on the Company's condensed consolidated statements of operations.	~~Presented in unrealized gains (losses), net on the Company's condensed consolidated statements of operations.~~


⁽²⁾	~~Presented in other income on the Company's condensed consolidated statements of operations.~~

The following table presents assets measured at fair value on a non-recurring basis as of ~~September 30, 2019 and~~ December 31, ~~2018, respectively,~~2019, on the Company's condensed consolidated balance sheets (dollar amounts in thousands):


	December 31, 2019
	Level 1	Level 2	Level 3		Total
Residential loans held in securitization trusts – impaired loans, net	0	0	$	5,256	$	5,256

Assets Measured at Fair Value on a Non-Recurring Basis at
September 30, 2019 December 31, 2018
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Residential mortgage loans held in securitization trusts – impaired loans, net —
—
$ 5,350
$ 5,350
—
—
$ 5,921
$ 5,921

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The following table presents gains (losses) incurred for assets measured at fair value on a non-recurring basis for the three and nine months ended September 30, 2019, ~~and 2018,~~ respectively, on the Company’s condensed consolidated statements of operations (dollar amounts in thousands):


	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Residential loans held in securitization trusts – impaired loans, net	$	13	$	(24)

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Residential mortgage loans held in securitization trusts – impaired loans, net $ 13
$ (17 ) $ (24 ) $ 93

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18. Income Taxes


~~19.~~	~~Income Taxes~~

For the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, the Company qualified to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), for U.S. federal income tax purposes. As long as the Company qualifies as a REIT, the Company generally will not be subject to U.S. federal income taxes on its taxable income to the extent it annually distributes at least 100% of its taxable income to stockholders and does not engage in prohibited transactions. Certain activities the Company performs may produce income that will not be qualifying income for REIT purposes. The Company has designated its TRSs to engage in these activities. The tables below reflect the taxes accrued at the TRS level and the tax attributes included in the consolidated financial statements.

The income tax provision for the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, is comprised of the following components (dollar amounts in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Current income tax (benefit) expense	$	(659)	$	(33)	$	1,386	$	(25)
Deferred income tax benefit	(113)		(154)		(469)		(222)
Total (benefit) provision	$	(772)	$	(187)	$	917	$	(247)

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 2019 2018
Current income tax benefit $ (33 ) $ (94 ) $ (25 ) $ (87 )
Deferred income tax benefit (154 ) (360 ) (222 ) (460 )
Total benefit $ (187 ) $ (454 ) $ (247 ) $ (547 )

Deferred Tax Assets and Liabilities

The major sources of temporary differences included in the deferred tax assets and their deferred tax effect as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019 are as follows (dollar amounts in thousands):


	September 30, 2020		December 31, 2019
Deferred tax assets
Net operating loss carryforward	$	5,488	$	3,975
Capital loss carryover	4,991		739
GAAP/Tax basis differences	2,053		3,699
Total deferred tax assets (1)	12,532		8,413
Deferred tax liabilities
Deferred tax liabilities	2		5
Total deferred tax liabilities (2)	2		5
Valuation allowance (1)	(10,681)		(7,029)
Total net deferred tax asset	$	1,849	$	1,379

September 30, 2019 December 31, 2018
Deferred tax assets
Net operating loss carryforward $ 2,708
$ 2,416
Capital loss carryover 739
739
GAAP/Tax basis differences 4,174
3,903
Total deferred tax assets ⁽¹⁾
7,621
7,058
Deferred tax liabilities
Deferred tax liabilities 5
6
Total deferred tax liabilities ⁽²⁾
5
6
Valuation allowance ⁽¹⁾
(6,410 ) (6,069 )
Total net deferred tax asset
$ 1,206
$ 983
(1)Included in receivables and other assets in the accompanying condensed consolidated balance sheets.


⁽¹⁾(2)Included in accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets.	~~Included in receivables and other assets in the accompanying condensed consolidated balance sheets.~~


⁽²⁾	~~Included in accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets.~~

As of September 30, ~~2019,~~2020, the Company, through wholly-owned TRSs, had incurred net operating losses in the aggregate amount of approximately ~~$8.0~~$15.2 million. The Company’s carryforward net operating losses of approximately $14.3 million can be carried forward indefinitely until they are offset by future taxable income. The remaining $0.9 millionof net operating losses will expire between 2036 and 2037 if they are not offset by future taxable income. Additionally, as of September 30, ~~2019,~~2020, the Company, through ~~one of~~ its wholly-owned TRSs, had also incurred approximately ~~$2.2~~$14.7 million in capital losses. The Company's carryforward capital losses will expire between 2023 and 2024 if they are not offset by future capital gains.

At September 30, ~~2019,~~2020, the Company has recorded a valuation allowance against certain deferred tax assets as management does not believe that it is more likely than not that these deferred tax assets will be realized. The change in the valuation for the current year is approximately $3.7 million. We will continue to monitor positive and negative evidence related to the utilization of the remaining deferred tax assets for which a valuation allowance continues to be provided.

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The Company files income tax returns with the U.S. federal government and various state and local jurisdictions. The Company's federal, state and city income tax returns are subject to examination by the Internal Revenue Service and related tax authorities generally for three years after they were filed. The Company has assessed its tax positions for all open years and concluded that there are no material uncertainties to be recognized.

~~In addition, based~~Based on the Company’s evaluation, the Company has concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. To the extent that the Company incurs interest and accrued penalties in connection with its tax obligations, including expenses related to the Company’s evaluation of unrecognized tax positions, such amounts will be included in income tax expense.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was enacted in the U.S. This legislation was intended to support the economy during the COVID-19 pandemic with temporary changes to income and non-income based tax laws. For the three and nine months ended September 30, 2020, the changes are not expected to have a material impact to our financial statements. We will continue to monitor as additional guidance is issued by the U.S. Treasury Department, the Internal Revenue Service and others.

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~~20.~~	19. Subsequent Events

On October 10, 2019, the Company filed articles of amendment to its charter which increased the number of shares of stock the Company is authorized to issue from 600,000,000 shares to 1,000,000,000 shares, consisting of 800,000,000 shares of common stock, increased from 400,000,000 shares, and 200,000,000 shares of preferred stock.

In October ~~2019,~~2020, the Company ~~closed an underwritten public offering~~completed a securitization of 6,900,000 shares of the Company's 7.875% Series E Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, $0.01 par value per share ("Series E Preferred Stock"). Holders of Series E Preferred Stock will be entitled to receive cumulative cash dividends (i) from and including the original issue date to, but excluding, January 15, 2025 at a fixed rate of 7.875% of the $25.00 liquidation preference (equivalent to $1.96875 per annum per share) and (ii) from and including January 15, 2025, at a floating rate equal to three-month LIBOR as calculated on each dividend determination date plus a spread of 6.429% per annum of the $25.00 per share liquidation preference. The Series E Preferred Stock is not redeemable by the Company prior to January 15, 2025, except under circumstances where it is necessary to preserve the Company’s qualification as a REIT for U.S. federal income tax purposes and exceptresidential loans, resulting in ~~certain instances upon the occurrence of a change of control. The issuance and sale of the 6,900,000 shares of Series E Preferred Stock resulted~~approximately $299.4 million in ~~total~~ net proceeds to the Company ofafter deducting estimated expenses associated with the transaction. The Company utilized the net proceeds to repay approximately ~~$166.7~~$236.0 million ~~after deduction of underwriting discounts and commissions and estimated offering expenses.~~on outstanding repurchase agreements related to residential loans.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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,” ~~“should,~~“could,” “would,” ~~“could,” “goal,” “objective,” “will,~~“should,” “may”, “expect” or similar expressions, are intended to identify “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, ~~or the Securities Act,~~ and Section 21E of the Securities Exchange Act of 1934, as amended ~~or Exchange Act,~~(the “Exchange Act”), and, as such, may involve known and unknown risks, uncertainties and assumptions.

Forward-looking statements are based on ~~our~~estimates, projections, beliefs and assumptions of management of the Company at the time of such statements and ~~expectations~~are not guarantees of ~~our~~ future ~~performance, taking into account all information currently available to us. These beliefs, assumptions and expectations are subject to~~performance. Forward-looking statements involve risks and uncertainties in predicting future results and ~~can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity~~conditions. Actual results and ~~results of operations may vary~~outcomes could differ materially from those ~~expressed~~projected in these forward-looking statements due to a variety of factors, including, without limitation:

•changes in our ~~forward-looking statements. The following factors are examples of those that could cause actual results to vary from our forward-looking statements:~~ 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, the impact of a downgrade of~~spreads;

•changes in the long-term credit ratings of the U.S., Fannie Mae, Freddie Mac, orand Ginnie Mae; ~~market volatility;~~

•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 or delinquency and/or decreased recovery rates on our assets;

•our ability to identify and acquire our targeted ~~assets;~~assets, including assets in our investment pipeline;

•changes in our relationships with our financing counterparties and our ability to borrow to finance our assets and the terms thereof;

•our ability to predict and control costs;

•changes in governmental laws, regulations or policies affecting our ~~business;~~ business, including actions that may be taken to contain or address the impact of the COVID-19 pandemic;

•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”); and~~ amended;

•risks associated with investing in real estate assets, including changes in business conditions and the general ~~economy.~~ 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, including changes resulting from the ongoing spread and economic effects of COVID-19; 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 and in Part I, Item ~~1A –~~1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019 and Part II, Item 1A. "Risk Factors" of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, 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.

5770

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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 pandemic 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, including the scope and duration of the pandemic, the effectiveness of our work from home arrangements, third-party providers’ ability to support our operations, any actions taken by governmental authorities and other third parties in response to the pandemic, and the other factors discussed above and throughout this Quarterly Report on Form 10-Q. The uncertain future development of this crisis could materially and adversely affect our business, operations, operating results, financial condition, liquidity or capital levels.

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 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 ARMs” refers to Agency RMBS comprised of adjustable-rate and hybrid adjustable-rate RMBS;

•“Agency CMBS” refers to CMBS representing interests in or obligations backed by pools of multi-family mortgage loans ~~issued or~~ guaranteed by a government sponsored enterprise (“GSE”), such as the Federal National Mortgage Association (“Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“Freddie Mac”);

•“Agency ~~fixed-rate"~~fixed-rate RMBS” refers to Agency RMBS comprised of fixed-rate RMBS;

~~“Agency IOs” refers to Agency RMBS comprised of IO RMBS;~~

•“Agency RMBS” refers to RMBS representing interests in or obligations backed by pools of ~~mortgage~~residential loans ~~issued or~~ guaranteed by ~~a GSE, such as the Federal National Mortgage Association (“~~Fannie ~~Mae”)~~Mae or Freddie Mac, or an agency of the U.S. government, such as the Government National Mortgage Association (“Ginnie Mae”);

•“ARMs” refers to adjustable-rate residential ~~mortgage~~ loans;

•“CDO” refers to collateralized debt obligation;

•“CMBS” refers to commercial mortgage-backed securities comprised of commercial mortgage pass-through securities issued by a GSE, as well as PO, IO ~~or senior~~ or mezzanine securities that represent the right to a specific component of the cash flow from a pool of commercial mortgage loans;

•“Consolidated K-Series” refers to Freddie Mac-sponsored multi-family loan K-Series securitizations, of which we, or one of our “special purpose entities,” or “SPEs,” ~~own~~owned the first loss POs and certain IOs and certain senior or mezzanine securities, that we consolidated in our financial statements in accordance with GAAP;

•“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;~~VIE and that we consolidate in our financial statements in accordance with GAAP;

•“distressed residential ~~mortgage~~ loans” refers to pools of seasoned re-performing, non-performing and other delinquent ~~mortgage~~ loans secured by first liens on one- to four-family properties;

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•“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;

~~"IO RMBS"~~•“MBS” refers to ~~RMBS comprised of IOs;~~mortgage-backed securities;

•“Multi-family CDOs” refers to the debt that permanently finances the multi-family mortgage loans held by the Consolidated K-Series that we consolidated in our financial statements in accordance with GAAP;

•“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;

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“non-QM loans” refers to residential ~~mortgage~~ loans that are not deemed “qualified mortgage,” or “QM,” loans under the rules of the Consumer Financial Protection ~~Bureau (“CFPB”);~~Bureau;

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

•“~~prime ARM~~residential bridge loans” refers to short-term business purpose loans collateralized by residential properties made to investors who intend to rehabilitate and ~~“residential securitized loans” each refer~~sell the residential property for a profit;

•“Residential CDOs” refers to ~~prime credit quality~~the debt that permanently finances the residential ~~ARM~~ loans held in the Company's residential loan securitization trusts and that we consolidate in our ~~securitization trusts;~~financial statements in accordance with GAAP;

•“RMBS” refers to residential mortgage-backed securities ~~comprised of~~backed by adjustable-rate, hybrid adjustable-rate or fixed-rate ~~interest only and inverse interest only, and principal only securities;~~residential loans;

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

•“SLST CDOs” refers to the debt that permanently finances the residential loans held in Consolidated SLST that we consolidate in our financial statements in accordance with GAAP; and

•“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 ~~residential-housing related~~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 margin and ~~net realized~~ capital gains from a diversified investment portfolio. Our investment portfolio includes credit sensitive residential and multi-family assets, ~~and~~including investments that may have been sourced from distressed markets.

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Executive Summary

The global pandemic associated with novel coronavirus (“COVID-19”) and its related economic conditions have caused, and continue to cause, a significant disruption in the U.S. and world economies. To slow the spread of COVID-19, since mid-March, many countries, including in the U.S., implemented public heath responses that involved social distancing measures that substantially prohibited large gatherings, including at sporting events, religious services and schools, shelter-in-place and stay-at-home orders or other measures designed to limit capacity or services on a number of businesses. Many businesses have moved to a remote working environment, temporarily suspended operations, laid off a significant percentage of their workforce and/or shut down completely. The economic fallout caused by the pandemic and certain of the actions taken to reduce its spread have been startling, resulting in lost business revenue, rapid and significant increases in unemployment, changes in consumer behavior and significant reductions in liquidity and the fair value of many assets. These conditions, or some level thereof, are expected to continue over the near term and are likely to prevail throughout 2020.

Although economic data and markets generally, including those in which we invest, showed signs of improvement beginning in the second quarter and continuing through the third quarter, these markets and the economy continue to face significant challenges from the impact of the ongoing pandemic. The exact timing and pace of the economic recovery are uncertain with a large swath of the U.S. and many countries now experiencing a surge or resurgence of COVID-19 cases, some of which are halting or re-instituting various restrictions on economic and social activity. Moreover, the lack of additional economic stimulus measures from the U.S. government and other authorities is expected to put even more pressure on the ability of borrowers and renters, including borrowers and renters that ~~create~~own or rent properties that back directly, or indirectly, the ~~potential~~assets we finance or invest in, to meet their financial obligations.

The global pandemic associated with COVID-19 and related economic conditions caused financial and mortgage-related asset markets to come under extreme duress beginning in mid-March, resulting in credit spread widening, a sharp decrease in interest rates and unprecedented illiquidity in repurchase agreement financing and MBS markets. These events, in turn, resulted in falling prices of our assets and increased margin calls from our repurchase agreement counterparties in March, particularly with respect to our investment securities portfolio. In an effort to manage our portfolio through this unprecedented turmoil in the financial markets and improve liquidity, in March, we paused funding of margin calls to our repurchase agreement financing counterparties, sold approximately $2.0 billion of assets, terminated interest rate swap positions with an aggregate notional value of $495.5 million and reduced our outstanding repurchase agreements that finance our investment securities and residential loan portfolios, which had exposed our investment portfolio and the financing thereof to unprecedented volatility in mark-to-market collateral repricing determinations by financing counterparties, reducing our overall leverage to less than one times as of March 31, 2020.

Since the market disruption and through the date hereof, we have continued our deliberate and patient approach to enhancing liquidity and strengthening our balance sheet by completing two non-mark-to-market securitizations of residential mortgage loans, a non-mark-to-market re-securitization of non-Agency RMBS, a non-mark-to-market repurchase agreement financing for ~~capital gains, as well as more traditional types~~residential loans and opportunistically selling non-Agency RMBS and CMBS in our portfolio. The proceeds from these transactions were used to reduce our outstanding repurchase agreements and invest in new single-family residential and multi-family investments. As of ~~mortgage-related~~September 30, 2020, we have reduced our portfolio leverage, which is the portion that is exposed to fluctuations in mark-to-market pricing, to 0.3 times and reduced to zero our outstanding repurchase agreements that finance investment securities.

We transitioned in March to a fully remote work force, ensuring the safety and well-being of our employees. Our prior investments ~~that generate interest income.~~in technology, business continuity planning and cyber-security protocols have enabled us to continue working with limited operational impact and we expect to continue our remote work arrangement for the foreseeable future.

Our ~~investment portfolio includes~~targeted investments include the following (i) residential loans, including distressed residential loans, second mortgages, residential bridge loans and other residential loans, (ii) structured multi-family property investments such as ~~multi-family CMBS and~~ preferred equity in, and mezzanine loans to, owners of multi-family properties, ~~(ii) residential mortgage loans, including distressed residential mortgage loans, non-QM loans, second mortgages, and other residential mortgage loans,~~ (iii) non-Agency RMBS, (iv) Agency RMBS (v) CMBS and ~~(v)~~(vi) certain other mortgage-, residential housing- and ~~other~~ credit-related 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 other credit-related 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 and securities issued by newly originated securitizations, including credit sensitive securities from these securitizations.

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We intend to ~~maintain our~~continue to focus on ~~expanding~~ our core portfolio strengths of single-family residential and multi-family credit assets, which we believe will ~~benefit from improving credit metrics.~~deliver better risk adjusted returns over time. In periods where we have working capital in excess of our short-term liquidity needs, we may invest the excess in more liquid assets until such time as we are able to re-invest that capital in credit assets that meet our underwriting requirements. 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 maintain a defensive posture as it relates to new investments due to the uncertainty relating to the duration and ongoing economic impact associated with the COVID-19 pandemic and to currently focus on assets that may benefit from active management in a prolonged, low rate environment, although we do expect that volatility surrounding the U.S. elections and the COVID-19 pandemic will present better entry points for investment during the balance of 2020 and early 2021. We also expect to continue to selectively monetize gains from the price recovery experienced by our non-Agency RMBS and Freddie-K mezzanine securities.

~~We seek~~Prior to the recent turmoil in the financial markets, we sought to achieve a balanced and diverse funding mix to finance our assets and ~~operations. We currently rely primarily on~~operations, which included a combination of short-term borrowings, such as repurchase agreements with terms typically of 3030-90 days, ~~longer term~~longer-term repurchase agreement borrowings with terms between one year and 24 months and longer term financings, such as securitizations and convertible notes, with terms longer than one year. As a result of the severe market dislocations related to the COVID-19 pandemic and, more specifically, the unprecedented illiquidity in our repurchase agreement financing and MBS markets, looking forward, we expect to place a greater emphasis on procuring stable, longer-termed financing, such as securitizations and term financings, 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. While longer-termed financings may involve greater expense relative to repurchase agreement funding, we believe, over time, this approach may better allow us to manage our liquidity risk and reduce exposures to events like those caused by the COVID-19 pandemic. Consistent with this emphasis on procuring financings that provide limited or no mark-to-market repricing exposure and more committed lines of financing and as discussed above, we have completed four non-mark-to-market financings since June 2020. We intend to continue in the near term to explore additional financing arrangements to further strengthen our balance sheet and position ourselves for future investment opportunities, including, without limitation, additional issuances of our equity and debt securities and longer-termed financing arrangements; however, no assurance can be given that we will be able to access any such financing or the size, timing or terms thereof.

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~~Business~~Portfolio Update

~~Our credit-focused investment portfolio continued to grow in~~In the third quarter of ~~2019 as~~2020, we ~~sourced~~pursued new single-family residential and multi-family ~~credit assets with proceeds from underwritten public offerings of our common stock, our at-the-market preferred equity offering programs and repurchase agreement financing.~~

investments while we opportunistically sold investment securities. The following table presents the activity for our investment portfolio for the three months ended September 30, ~~2019~~2020 (dollar amounts in thousands):


	June 30, 2020		Acquisitions		Repayments (1)		Sales		Fair Value Changes and Other (2)		September 30, 2020
Investment securities




Non-Agency RMBS	$	630,196	$	—	$	(16,684)	$	(259,493)	$	21,746	$	375,765
CMBS	288,112		—		(359)		(110,680)		5,852		182,925
ABS	42,500		—		—		—		2,507		45,007
Total investment securities available for sale	960,808		—		(17,043)		(370,173)		30,105		603,697
Consolidated SLST (3)	185,310		—		—		—		25,592		210,902

Total investment securities	1,146,118		—		(17,043)		(370,173)		55,697		814,599
Residential loans	1,483,378		92,673		(80,653)		—		37,386		1,532,784
Preferred equity investments, mezzanine loans and investments in unconsolidated entities	395,139		19,117		(20,943)		—		8,547		401,860
Other investments (4)	10,550		327		—		(7,292)		—		3,585
Totals	$	3,035,185	$	112,117	$	(118,639)	$	(377,465)	$	101,630	$	2,752,828

June 30, 2019 Acquisitions
Runoff ⁽¹⁾
Sales
Other ⁽²⁾
September 30, 2019
Investment securities
RMBS
Agency RMBS $ 994,200
$ —
$ (41,986 ) $ —
$ 3,624
$ 955,838
Non-Agency RMBS 432,840
185,971
(2,171 ) (1,021 ) 5,909
621,528
Total RMBS 1,427,040
185,971
(44,157 ) (1,021 ) 9,533
1,577,366
Agency CMBS 292,090
30,177
(7,382 ) (40,161 ) 3,674
278,398
ABS 24,739
23,108
—
—
407
48,254
Total investment securities, available for sale 1,743,869
239,256
(51,539 ) (41,182 ) 13,614
1,904,018
Consolidated K-Series ⁽³⁾
801,199
60,511
(432 ) —
23,787
885,065
Total investment securities 2,545,068
299,767
(51,971 ) (41,182 ) 37,401
2,789,083
Distressed and other residential mortgage loans 1,280,048
79,712
(50,486 ) —
17,320
1,326,594
Preferred equity investments, mezzanine loans and investments in unconsolidated entities 357,535
17,379
(30,208 ) —
3,224
347,930
Other investments ⁽⁴⁾
16,781
—
(1,605 ) (3,151 ) 3,380
15,405
Totals $ 4,199,432
$ 396,858
$ (134,270 ) $ (44,333 ) $ 61,325
$ 4,479,012
(1)Primarily includes principal repayments.


⁽¹⁾(2)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 and transfers within investment categories.	~~Primarily includes principal repayments, preferred equity redemptions and joint venture investment redemptions.~~


⁽²⁾	Primarily includes changes in fair value, net premium amortization/discount accretion, preferred return or interest deferral and payments made on mortgages and notes payable in consolidated variable interest entities.


⁽³⁾	The Consolidated K-Series are presented on our condensed consolidated balance sheets as multi-family loans held in securitization trusts, at fair value and multi-family collateralized debt obligations, at fair value. A reconciliation to our financial statements as of June 30, 2019 and September 30, 2019 follows (dollar amounts in thousands):

June 30, 2019 September 30, 2019
Multi-family loans held in securitization trusts, at fair value $ 14,573,925
$ 15,863,264
Less: Multi-family collateralized debt obligations, at fair value (13,772,726 ) (14,978,199 )
Consolidated K-Series investment securities owned by NYMT $ 801,199
$ 885,065
(3)Consolidated SLST is presented on our condensed consolidated balance sheets as of June 30, 2020 and September 30, 2020, respectively, as residential loans, at fair value and residential collateralized debt obligations, at fair value. A reconciliation to our condensed consolidated financial statements follows (dollar amounts in thousands):


	June 30, 2020		September 30, 2020
Residential loans, at fair value	$	1,274,850	$	1,290,005
Deferred interest (a)	(1,307)		(1,123)
Less: Residential collateralized debt obligations, at fair value	(1,088,233)		(1,077,980)
Consolidated SLST investment securities owned by NYMT	$	185,310	$	210,902


⁽⁴⁾	~~Includes the following balances as of June 30, 2019 and September 30, 2019 (dollar amounts in thousands:~~

June 30, 2019 September 30, 2019
Real estate under development in consolidated variable interest entities $ 16,727
$ 13,903
Less: Mortgages and notes payable in consolidated variable interest entities (3,986 ) (935 )
Other loan investments 4,040
2,437
Other investments $ 16,781
$ 15,405

~~Table of Contents~~(a)

~~Our single-family residential investment strategy is presently focused on mortgage credit and also consists of two primary investment strategies. We invest~~Included in ~~distressed, performing~~accrued expenses and other ~~residential mortgage loans either~~liabilities on our condensed consolidated balance sheets at September 30, 2020.

(4)Includes real estate under development in loan form or securities backed by these loans. Consistent with this strategy, we acquired an aggregate of $79.7 million of residential mortgage loans and $186.0 million of securities during the third quarter. To date, we have not pursued vertical integration into a mortgage origination platform to acquire new originationsConsolidated VIEs in the ~~residential loan market~~amounts of $3.6 million and $10.6 million as we believe it is more important to maintain the flexibility to move among markets to better locate compelling opportunities and invest where attractively-priced risk can be sourced from a large selection of sellers. We feel that a market position where we are not viewed as a competitive threat and instead offer the market liquidity with certain mortgage characteristics, positions us to see unique investment opportunities in the sector. With a deep credit understanding of the residential loan markets, we can move quickly in various sub-sectors, such as in sub-performing or credit-impaired loans to unlock value.

In multi-family investments, we presently focus on two strategies. We have continued to invest in first loss POs and other securities issued by Freddie Mac-sponsored multi-family loan K-Series securitizations where our asset management team can monitor the performance of the underlying collateral and, if needed, participate in the workouts of problem loans. As of September 30, ~~2019, the Company has committed to purchase an additional first loss PO~~2020 and IOs to be issued by a Freddie Mac-sponsored multi-family loan K-Series securitization in the amount of $56.0 million which will be funded in the fourth quarter. Our second strategy is to source preferred equity and mezzanine loan investments in entities that own multi-family properties in private transactions away from the broader markets through our relationships with developers and owners. In the first nine months of 2019, we have funded 16 such investments aggregating approximately $97.4 million, $17.4 million of which was funded in the third quarter of 2019.June 30, 2020, respectively.

The market experienced general spread tightening during the third quarter of 2019, which benefited our residential credit and multi-family portfolios. While lower interest rates and increased prepayment speeds negatively impacted our Agency RMBS portfolio, it had the opposite effect on our single-family residential mortgage loan portfolio as prepayments monetize the discount at which we purchased the loans, providing for higher investment return. With Agency RMBS exposure less than 10% of total capitalization, we expect to continue to reduce our Agency RMBS exposure to optimize returns in the portfolio in a slower growth, lower rate environment.

In the first nine months of 2019, we successfully accessed the capital markets with five public common stock offerings and our at-the-market common and preferred equity programs, raising a total of $662.7 million. Our book value per common share has increased by $0.12 per common share in the nine months ended September 30, 2019 while we have continued to pay dividends of $0.20 per share per quarter. As of September 30, 2019, our $4.5 billion investment portfolio was financed with borrowings representing 1.5 times our total stockholders’ equity. We believe our utilization of a conservative leverage strategy will enable us to better preserve book value over future quarters and to take advantage of market dislocations.

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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 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 ~~mortgage sector,~~financial markets, and the credit performance of our credit sensitive assets.

Financial and mortgage-related asset markets experienced improving conditions during the third quarter of 2020 with the U.S. economy in recovery. U.S. stocks continued to show signs of recovery during the third quarter of 2020 following the sharp sell-off during the back half of the first quarter. Reflective of abundant liquidity and sustained progress on the re-opening of state and the global economies, asset prices continued to experience improvements during the third quarter. Overall, global economic activity and consumer sentiment showed signs of advancement as well during the third quarter of 2020. However, in some sectors activity levels remain well below normal levels and economic progress is generally likely to be impacted going forward by the evolution of the COVID-19 pandemic and further stimulus initiatives.

Similar to assets in the larger economy, pricing for our investment portfolio during the third quarter rebounded with credit spreads tightening across a large swath of the portfolio. Liquidity to MBS and mortgage financing markets was stable during the third quarter, as evidenced by the Company completing multiple longer-term, securitization financing transactions during the quarter and subsequent to end of the quarter. Due to the possibility that a number of states or the U.S. federal government may again impose greater restrictions on economic and social activity in light of rising COVID-19 daily case counts this fall and heightened uncertainty relating to the U.S. elections, stimulus negotiations and other policy matters, we expect market volatility generally to remain elevated throughout the balance of 2020.

The market conditions discussed below significantly influence our investment strategy and ~~results:~~results, many of which have been significantly impacted since mid-March by the ongoing COVID-19 pandemic:

General. Global and U.S. equity markets made modest gains during the third quarter of 2019, despite volatility largely driven by investor uncertainty regarding global trade restrictions, while economic data remains mixed. U.S. economic data released over the past quarter ~~suggests~~shows that the U.S. economy has ~~continued to expand,~~begun its recovery from the short but steep recession, with U.S. gross domestic product (“GDP”) ~~estimated to have grown~~having advanced by ~~1.9%~~33.1% (advance estimate) in the third quarter of ~~2019, down~~2020, up from GDP ~~growth~~contraction of ~~2.0%~~31.4% (revised) in the second quarter of 2019. GDP grew 3.1% in the first quarter of 2019 and 2.2% in the quarter ended December 31, 2018. While GDP growth and the labor market data continue to indicate modest economic expansion, consumer and business confidence indices have weakened and recent survey data has indicated that business activity is slowing.2020.

The U.S. labor market continued to ~~expand during~~show improvements throughout the third ~~quarter~~quarter. The U.S. Department of ~~2019.~~Labor attributed these improvements to the resumption of economic activity that had been curtailed due to the COVID-19 pandemic. According to the U.S. Department of Labor, the U.S. unemployment rate continued to decrease in the third quarter from 10.2% in July to 7.9% in September, as the number of unemployed persons decreased ~~slightly over the quarter, ending at 3.5% as of the end of September 2019.~~from 16.3 million in July to 12.6 million in September. Total nonfarm payroll employment ~~posted an average monthly increase~~rose by 661,000 in September. While the unemployment rate and number of ~~157,000 jobs during the three~~unemployed persons have decreased for five consecutive months, ~~ended September 30, 2019, as compared to an average monthly increase~~each of 161,000 jobs for the nine months ended September 30, 2019 and an average monthly increase of 223,000 jobs in 2018. Although the pace of the labor market expansion has slowed some in 2019, average hourly earnings for all employees of private nonfarm payrolls have increased by 2.9% over the prior 12 months.

these measures remains higher than February.

~~Federal Reserve and Monetary Policy~~. In September 2019, in view of realized and expected labor market conditions, economic activity and inflation, the Federal Reserve again lowered the target range for the federal funds rate by 25 basis points from 2.00% to 2.25% to 1.75% to 2.00%. The Federal Reserve also lowered the target range for the federal funds rate by 25 basis points in July 2019. The Federal Reserve indicated that in determining the size and timing of future adjustments to the target range for the federal funds rate, it will assess “realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective.” Significant uncertainty with respect to the timing at which the Federal Reserve will adjust the target range for the federal funds rate continues to persist and may result in significant volatility in the remainder of 2019 and future periods. Greater uncertainty frequently leads to wider asset spreads or lower prices and higher hedging costs.

Single-Family Homes and Residential Mortgage Market. The residential real estate market displayed ~~mixed~~ signals of continued modest growth in the third ~~quarter of 2019.~~quarter. Data released by the S&P Dow Jones Indices for ~~its~~their S~~&P/~~&P CoreLogic Case-Shiller National Home Price NSA Indices for ~~August 2019~~July 2020 showed that, on average, home prices increased ~~2.0%~~3.9% for the 20-City Composite over ~~August 2018, no change~~July 2019, up from 3.5% the previous month. In addition, according to data provided by the U.S. Department of Commerce, privately-owned housing starts for single-family homes averaged a seasonally adjusted annual rate of ~~901,000~~1,040,000 and ~~871,000 during~~925,000 for the three and nine months ended September 30, ~~2019,~~2020, respectively, as compared to 766,000 for the second quarter of 2020 and an annual rate of ~~871,000~~894,000 for the year ended December 31, ~~2018.~~2019. Declining single-family housing fundamentals may adversely impact the borrowers of our residential mortgage loans and those that underlie our RMBS, and thus the overall credit profile of our existing portfolio of single-family residential credit investments, ~~but also may result~~as well as the availability of certain of our targeted assets. As of September 30, 2020, approximately 2% of borrowers in ~~a more attractive new investment environment.~~our residential loan portfolio remained in an active COVID-19 plan.

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Multi-family Housing. ~~Apartments and other residential rental properties have continued to perform well.~~ According to data provided by the U.S. Department of Commerce, starts on multi-family homes containing five units or more averaged a seasonally adjusted annual rate of ~~368,000~~375,000 and ~~367,000 during~~394,000 for the three and nine months ended September 30, ~~2019,~~2020, respectively, ~~and 366,000~~compared to 391,000 for the year ended December 31, ~~2018. Although supply expansion has remained strong, vacancy concerns among~~2019. While starts on multi-family ~~industry participants dropped during the~~homes containing five units or more experienced a slight increase from second quarter levels in the beginning of ~~2019. According~~the third quarter, these rates saw a decrease towards the end of the third quarter, eventually reaching 295,000 in September. Moreover, as many workers remain unemployed or under-employed, the financial ability of households to ~~the Multifamily Vacancy Index (“MVI”), which~~meet their rental payment obligations is ~~produced~~an ongoing concern. Data released by the National ~~Association~~Multifamily Housing Council (“NMHC”) shows that 86.8% of ~~Home Builders~~professionally-managed apartment households made a full or partial October rent payment by October 13, 2020 in its survey of 11.5 million professionally-managed apartment units across the country. This represents a 2.4-percentage point decrease in the share who paid rent through October 13, 2019 and ~~surveys~~compares to 86.2% that had paid by September 13, 2020. These data encompass a wide variety of market-rate rental properties, which can vary by size, type and average rental price. As of September 30, 2020, the ~~multi-family housing industry’s perception~~Company had one operating partner, representing approximately 1.0% of ~~vacancies, the MVI~~our total preferred equity and mezzanine loan investment portfolio, that was ~~at 40 for the second quarter of 2019, down from 48 for the first quarter of 2019, representing the lowest level it has reached~~delinquent in ~~two years. Strength~~making distributions to us. Weakness in the multi-family housing sector, ~~has contributed~~including, among other things, widening capitalization rates, reduced demand, increased vacancy rates, increased tenant lease defaults 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 valuation ~~improvements~~declines for multi-family properties, and in turn, many of the structured multi-family investments that we own.

Credit Spreads. Credit spreads ~~generally~~ tightened ~~during the first half of 2019 and although they experienced some volatility~~further during the third quarter of 2019, they ended the quarter largely unchanged. Credit spreads for many residential and multi-family credit assets remained tight during the third quarter 2019 and this had a positive impact on the value of many of our credit sensitive assets.as economic activity accelerated. Tightening credit spreads generally increase the value of many of our credit sensitive assets, while widening credit spreads ~~generally decrease~~tend to have a negative impact on the value of ~~these~~many of our credit sensitive assets.

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Financing markets. During the third quarter, ~~of 2019,~~ the bond market ~~experienced volatility~~was largely stable with the closing yield of the 10-year U.S. Treasury Note trading between ~~1.47%~~0.52% and ~~2.13%~~0.74% during the quarter, closing the quarter at ~~1.68%~~0.69%. Overall interest rate volatility tends to increase the costs of hedging and may place downward pressure on some of our strategies. During the third quarter of ~~2019,~~2020, the Treasury curve ~~inverted for a short period and ultimately flattened~~increased with the spread between the 2-Year U.S. Treasury yield and the 10-Year U.S. Treasury yield ~~closing to 5~~at 56 basis points, ~~down 20~~up 22 basis points from ~~June 30,~~December 31, 2019. This spread is important as it is indicative of opportunities for investing in levered assets. Increases in interest rates ~~raises~~raise the costs of many of our liabilities, while overall interest rate volatility generally increases the costs of hedging.

~~Developments at Fannie Mae~~Monetary Policy and ~~Freddie Mac~~Recent Regulatory Developments. ~~Payments on~~The Federal Reserve has taken a number of actions to stabilize markets as a result of the impact of the COVID-19 pandemic. To address funding disruptions resulting from the economic crisis and market dislocations resulting from the COVID-19 pandemic, the Federal Reserve has been conducting large scale overnight repo operations to address disruptions in the U.S. Treasury, Agency ~~fixed-rate~~debt and Agency ~~ARMs~~ RMBS ~~in which we invest are guaranteed by Fannie Mae~~financing markets and ~~Freddie Mac. In addition, although not guaranteed by Freddie Mac, all of our multi-family CMBS~~ has ~~been issued by securitization vehicles sponsored by Freddie Mac. As broadly publicized, Fannie Mae and Freddie Mac are presently under federal conservatorship as~~substantially increased these operations. On March 15, 2020, the Federal Reserve announced a $700 billion asset purchase program to provide liquidity to the U.S. ~~Government continues~~Treasury and Agency RMBS markets. Specifically, the Federal Reserve announced that it would purchase at least $500 billion of U.S. Treasuries and at least $200 billion of Agency RMBS. The Federal Reserve also lowered the federal funds rate by 100 basis points to ~~evaluate~~a range of 0.0% - 0.25%, after having already lowered the ~~future~~federal funds rate by 50 basis points on March 3, 2020. By mid-August, the Federal Reserve had increased its holdings of ~~these entities~~U.S. Treasuries and ~~what role the U.S. Government should continue to play in the housing markets in the future.~~ Agency MBS by approximately $2.36 trillion, since mid-March.

On March 27, ~~2019,~~2020, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law to provide many forms of direct support to individuals and small businesses in order to stem the steep decline in economic activity resulting from the COVID-19 pandemic. The over $2 trillion relief bill, among other things, provided for direct payments to each American making up to $75,000 a year, increased unemployment benefits for up to four months (on top of state benefits), funding to hospitals and health care providers, loans and investments to businesses, states and municipalities and grants to the airline industry. On April 24, 2020, President Trump signed an additional funding bill into law that provided an additional $484 billion of funding to individuals, small businesses, hospitals, health care providers and additional coronavirus testing efforts. In addition, in response to the economic impact of the COVID-19 pandemic, governors of several states issued executive orders prohibiting evictions and foreclosures for specified periods of time, and many courts enacted emergency rules delaying hearings related to evictions or foreclosures. While some of these state protections have expired, the Centers for Disease Control and Prevention issued an order to temporarily halt residential evictions under certain circumstances in an effort to prevent the spread of the COVID-19 pandemic, which became effective on September 4, 2020 and expires on December 31, 2020.

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The markets for U.S. Treasuries, MBS and other mortgage and fixed income markets experienced severe dislocations in March as a ~~Presidential memorandum directing~~result of the Secretary of Treasury to develop a reform plan aimed at ending the conservatorship of Fannie Mae and Freddie Mac and improving regulatory oversight over them. On September 5, 2019, the U.S. Treasury Department released its reform plan, which consists of nearly 50 recommended legislative and administrative reforms, aimed at (i) ending the conservatorship of Fannie Mae and Freddie Mac, (ii) increasing competitionCOVID-19 pandemic. To address these issues in the ~~housing finance~~fixed income and funding markets, on March 23, 2020, the Federal Reserve announced a program to acquire U.S. Treasuries and Agency RMBS in the amounts needed to support smooth market functioning. Since that date, the Federal Reserve and ~~(iii) providing adequate compensation~~the Federal Housing Finance Agency (“FHFA”) have taken various other steps to support certain other fixed income markets, to support mortgage servicers and to implement various portions of the CARES Act. The FHFA instructed the GSEs on how to handle servicer advances for loans that back Agency RMBS that enter into forbearance, which limits prepayments during the forbearance period that could have resulted otherwise. Further, the FHFA announced a loan payment deferment plan for Agency multi-family borrowers facing hardship from revenue losses caused by COVID-19, with the condition that these borrowers suspend all evictions for renters unable to pay rent due to the ~~federal~~impact of COVID-19. On October 19, 2020, the FHFA announced the extension of certain COVID-19 related loan origination flexibilities until November 30, 2020, including alternative appraisals on purchase and rate term refinance loans and alternative methods for documenting income and verifying employment before loan closing.

The increased unemployment benefits under the CARES Act expired in July and negotiations in Congress to provide additional relief are ongoing. Without additional government ~~for~~support or related measures, we anticipate that the ~~support it provides to the housing finance market. Since being placed under federal conservatorship, there have been a~~ number of ~~proposals introduced, both from industry groups~~our operating partners and ~~by the U.S. Congress, relating to changing the role~~borrowers of ~~the U.S. government in the mortgage market~~our residential loans and ~~reforming~~those that underlie our investment securities that become delinquent or ~~eliminating Fannie Mae and Freddie Mac. It remains unclear how the U.S. Congress or the executive branch of the U.S. Government will move forward~~default on such reform at this time and what impact, if any, this reform will have on mortgage REITs. See “Item 1A. Risk Factors-Risks Related to Regulatory Matters-The federal conservatorship of Fannie Mae and Freddie Mac and related efforts, along with any changes in laws and regulations affecting the relationship between Fannie Mae, Freddie Mac and Ginnie Mae and the U.S. Government,their financial obligations may increase significantly. Such increased levels could materially adversely affect our business, financial condition, ~~and~~ results of operations and our ability to ~~pay dividends~~make distributions to our ~~shareholders”~~stockholders.

According to the Board of Governors of the Federal Reserve, trading conditions in ~~our Annual Report on Form 10-K~~U.S. Treasuries and MBS markets have improved gradually since the announcement of Federal Reserve policies and the functioning and liquidity of the MBS market have mostly returned to pre-February standards, though strains continue in less liquid parts of the market. However, bid-ask spreads for ~~the year ended December 31, 2018.~~longer-maturity and off-the-run Treasuries remain wider than in mid-February.

In 2017, policymakers announced that LIBOR will 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. LIBOR will be replaced with a new Secured Overnight Funding Rate (“SOFR”), a rate based on U.S. repo trading. The new benchmark rate will be based on overnight Treasury General Collateral repo rates. The rate-setting process will be managed and published by the Federal Reserve and the Treasury’s Office of Financial Research. Many banks believe that it may take four to five years to complete the transition to SOFR, despite the 2021 deadline. We will 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 pandemic, 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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~~Key Highlights -~~ Third Quarter ~~of 2019~~2020 Summary

Earnings and Return Metrics

The following table presents key earnings and return metrics for the three and nine months ended September 30, ~~2019~~2020 (dollar amounts in thousands, except per share data):


	Three Months Ended September 30, 2020			Nine Months Ended September 30, 2020
Net interest income	$	25,529		$	101,134
Net income (loss) attributable to Company's common stockholders	$	91,344		$	(399,819)
Net income (loss) attributable to Company's common stockholders per share (basic)	$	0.24		$	(1.08)
Comprehensive income (loss) attributable to Company's common stockholders	$	113,834		$	(436,889)
Comprehensive income (loss) attributable to Company's common stockholders per share (basic)	$	0.30		$	(1.18)
Book value per common share	$	4.58		$	4.58
Economic return on book value (1)	7.0		%	(18.6)		%

Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Net interest income $ 31,971
$ 83,866
Net income attributable to Company's common stockholders $ 34,835
$ 89,528
Net income attributable to Company's common stockholders per share (basic) $ 0.15
$ 0.44
Comprehensive income attributable to Company's common stockholders $ 45,747
$ 133,579
Comprehensive income attributable to Company's common stockholders per share (basic) $ 0.20
$ 0.66
Book value per share $ 5.77
$ 5.77
Economic return on book value ⁽¹⁾
3.8 % 17.0 %
Dividends per share $ 0.20
$ 0.60
(1)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 respective periods.


⁽¹⁾	Economic return on book value is based on the change in GAAP book value per share plus dividends declared per common share during the respective periods. For the nine months ended September 30, 2019, economic return on book value is calculated on an annualized basis.

Developments


•	~~We acquired residential, multi-family and other credit assets totaling~~ ~~$396.9 million~~ ~~during the third quarter.~~

~~During the third quarter, we issued 51,750,000 shares~~•Completed a securitization of ~~common stock collectively through two underwritten public offerings,~~residential loans, resulting in ~~total~~approximately $241.1 million of net proceeds to the Company. A portion of the net proceeds were utilized to repay approximately $230.6 million on an outstanding repurchase agreement related to residential loans.

•Obtained non-mark-to-market financing for residential loans through a repurchase agreement with a new counterparty, receiving net proceeds of ~~$310.6~~approximately $47.2 million.

~~During~~

•Sold non-Agency RMBS for approximately $259.5 million in proceeds and CMBS for approximately $110.7 million in proceeds.

•Purchased residential loans for approximately $92.7 million.

•Repaid last remaining repurchase agreement to finance investment securities in the ~~third quarter,~~amount of approximately $87.6 million.

Subsequent Developments

In October 2020, we ~~issued 589,420 shares~~completed a securitization of ~~preferred stock under our at-the-market preferred equity offering program,~~residential loans, resulting in approximately $299.4 million in net proceeds ~~of $14.4 million.~~

~~Subsequent Development~~

~~In October 2019, we issued 6,900,000 shares of our 7.875% Series E Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock through an underwritten public offering, resulting in total~~to the Company after deducting estimated expenses associated with the transaction. We utilized the net proceeds to ~~us of $166.7~~repay approximately $236.0 million ~~after deducting underwriting discounts and commissions and estimated offering expenses.~~on outstanding repurchase agreements related to residential loans.

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Significant Estimates and Critical Accounting Policies

We prepare our consolidated financial statements in conformity with GAAP, which requires the use of estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based, in part, on our judgment and assumptions regarding various economic conditions that we believe are reasonable based on facts and circumstances existing at the time of reporting. We believe that the estimates, judgments and assumptions utilized in the preparation of our consolidated financial statements are prudent and reasonable. Although our estimates contemplate conditions as of September 30, 2020 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 at the date of the consolidated financial statements and the reported amounts of income, expenses and other comprehensive income 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.

Accounting policies and estimates related to specific components of our consolidated financial statements are disclosed in the notes to our consolidated financial statements. A discussion of the critical accounting policies and the possible effects of changes in estimates on our consolidated financial statements is included in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2019 and under “Note 2 – Summary of Significant Accounting Policies” to the consolidated financial statements included therein.

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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Capital Allocation

The following provides an overview of the allocation of our total equity as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, 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, short-term and longer-term repurchase agreements, ~~borrowings,~~ CDOs, securitized debt and trust preferred debentures. A detailed discussion of our liquidity and capital resources is provided in “Liquidity and Capital Resources” elsewhere in this section.

During the nine months ended September 30, 2019, our continued focus on residential and multi-family credit investments resulted in a decrease in capital allocated to our Agency RMBS portfolio. We also continued to take advantage of repurchase agreement financing available to us in our residential and multi-family credit portfolios.

~~Table of Contents~~

The following tables set forth our allocated capital by investment category at September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively (dollar amounts in thousands):. As previously discussed, in an effort to manage our portfolio through the unprecedented turmoil in the financial markets and improve liquidity, we sold our entire Agency CMBS and Agency RMBS portfolio during March 2020.

At September 30, ~~2019:~~2020:


	Single-Family Credit		Multi- Family Credit		Other		Total
Investment securities available for sale, at fair value	$	375,765	$	182,925	$	45,007	$	603,697
Residential loans, at fair value	2,822,789		—		—		2,822,789

Residential collateralized debt obligations, at fair value	(1,077,980)		—		—		(1,077,980)
Investments in unconsolidated entities	73,456		145,250		—		218,706
Preferred equity and mezzanine loan investments	—		183,154		—		183,154

Other investments (1)	—		3,585		—		3,585
Carrying value	2,194,030		514,914		45,007		2,753,951
Liabilities:
Repurchase agreements	(672,519)		—		—		(672,519)
Securitized debt	(88,791)		—		—		(88,791)
Residential collateralized debt obligations	(268,820)		—		—		(268,820)
Subordinated debentures	—		—		(45,000)		(45,000)
Convertible notes	—		—		(134,720)		(134,720)
Cash, cash equivalents and restricted cash (2)	119,578		47,952		537,094		704,624
Other	50,362		(4,356)		(41,348)		4,658
Net capital allocated	$	1,333,840	$	558,510	$	361,033	$	2,253,383

Total Leverage Ratio (3)							0.4
Portfolio Leverage Ratio (4)							0.3

(1)Includes real estate under development presented in the Company's accompanying condensed consolidated balance sheets in receivables and other assets.

(2)Restricted cash is included in the Company's accompanying condensed consolidated balance sheets in receivables and other assets.

(3)Represents total outstanding repurchase agreement financing, subordinated debentures and Convertible Notes divided by the Company's total stockholders' equity. Does not include SLST CDOs amounting to $1.1 billion, Residential CDOs amounting to $268.8 million and securitized debt amounting to $88.8 million as they are non-recourse debt to the Company.

(4)Represents outstanding repurchase agreement financing divided by the Company's total stockholders' equity.

Agency
RMBS Residential Credit Multi-
Family Credit Other Total
Investment securities, available for sale, at fair value $ 955,838
$ 621,528
$ 278,398
$ 48,254
$ 1,904,018
Distressed and other residential mortgage loans, at fair value —
1,116,128
—
—
1,116,128
Distressed and other residential mortgage loans, net —
210,466
—
—
210,466
Investments in unconsolidated entities —
61,779
107,154
—
168,933
Preferred equity and mezzanine loan investments —
—
178,997
—
178,997
Multi-family loans held in securitization trusts, at fair value —
—
15,863,264
—
15,863,264
Multi-family collateralized debt obligations, at fair value —
—
(14,978,199 ) —
(14,978,199 )
Other investments ⁽¹⁾
—
2,437
12,968
—
15,405
Carrying value 955,838
2,012,338
1,462,582
48,254
4,479,012
Liabilities:
Repurchase agreements (840,864 ) (946,309 ) (772,707 ) —
(2,559,880 )
CDOs and subordinated debentures —
(42,119 ) —
(45,000 ) (87,119 )
Convertible notes —
—
—
(132,395 ) (132,395 )
Hedges (net) ⁽²⁾
20,673
—
—
—
20,673
Cash and restricted cash ⁽³⁾
9,558
9,554
5,314
42,412
66,838
Goodwill —
—
—
25,222
25,222
Other ⁽⁴⁾
(3,057 ) 109,487
(11,503 ) (60,279 ) 34,648
Net capital allocated $ 142,148
$ 1,142,951
$ 683,686
$ (121,786 ) $ 1,846,999

Overall leverage ratio ⁽⁵⁾
1.5
Leverage ratio on callable debt ⁽⁶⁾
1.4

⁽¹⁾

Includes real estate under development in the amount of $13.9 million, net of mortgages and notes payable in consolidated variable interest entities in the amount of $0.9 million, and other loan investments in the amount of $2.4 million. Both real estate under development and other loan investments are included in the Company's accompanying condensed consolidated balance sheets in receivables and other assets.


⁽²⁾	~~Includes derivative liabilities of $40.4 million netted against a $61.1 million variation margin.~~


⁽³⁾	~~Restricted cash is included in the Company's accompanying condensed consolidated balance sheets in receivables and other assets.~~


⁽⁴⁾	Includes a $66.0 million deposit to be used towards the purchase price of RMBS to be issued in a securitization transaction sponsored by Freddie Mac. The deposit is included in receivables and other assets in the accompanying condensed consolidated balance sheets.


⁽⁵⁾	Represents total debt divided by our total stockholders' equity. Total debt does not include debt associated with Multi-family CDOs amounting to $15.0 billion and Residential CDOs amounting to $42.1 million that are consolidated in the Company's financial statements as they are non-recourse debt for which we have no obligation.


⁽⁶⁾	~~Represents repurchase agreement borrowings divided by our total stockholders' equity.~~

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At December 31, ~~2018:~~2019:


	Agency		Single-Family Credit		Multi- Family Credit		Other		Total
Investment securities available for sale, at fair value	$	973,835	$	715,314	$	267,777	$	49,214	$	2,006,140
Residential loans, at fair value	26,239		2,732,401		—		—		2,758,640
Residential collateralized debt obligations, at fair value	—		(1,052,829)		—		—		(1,052,829)
Residential loans, net	—		202,756		—		—		202,756
Investments in unconsolidated entities	—		65,573		124,392		—		189,965
Preferred equity and mezzanine loan investments	—		—		180,045		—		180,045
Multi-family loans held in securitization trusts, at fair value	88,359		—		17,728,387		—		17,816,746
Multi-family collateralized debt obligations, at fair value	—		—		(16,724,451)		—		(16,724,451)

Other investments (1)	—		3,119		14,464		—		17,583
Carrying value	1,088,433		2,666,334		1,590,614		49,214		5,394,595
Liabilities:
Repurchase agreements	(945,926)		(1,347,600)		(811,890)		—		(3,105,416)
Residential collateralized debt obligations	—		(40,429)		—		—		(40,429)
Subordinated debentures	—		—		—		(45,000)		(45,000)
Convertible notes	—		—		—		(132,955)		(132,955)
Hedges (net) (2)	15,878		—		—		—		15,878
Cash, cash equivalents and restricted cash (3)	9,738		44,604		4,152		63,118		121,612
Goodwill	—		—		—		25,222		25,222
Other	(1,449)		54,895		(10,123)		(71,801)		(28,478)
Net capital allocated	$	166,674	$	1,377,804	$	772,753	$	(112,202)	$	2,205,029

Total Leverage Ratio (4)									1.5
Portfolio Leverage Ratio (5)									1.4

(1)Includes real estate under development in the amount of $14.5 million, other loan investments in the amount of $2.4 million and deferred interest related to residential loans, at fair value held in Consolidated SLST of $0.7 million, all of which are included in the Company's accompanying condensed consolidated balance sheets in receivables and other assets.

(2)Includes derivative liabilities of $29.0 million netted against a $44.8 million variation margin.

(3)Restricted cash is included in the Company's accompanying condensed consolidated balance sheets in receivables and other assets.

(4)Represents total outstanding repurchase agreement financing, subordinated debentures and Convertible Notes divided by the Company's total stockholders' equity. Does not include Multi-family CDOs amounting to $16.7 billion, SLST CDOs amounting to $1.1 billion and Residential CDOs amounting to $40.4 million as they are non-recourse debt to the Company.

(5)Represents outstanding repurchase agreement financing divided by the Company's total stockholders' equity.

Agency
RMBS
Residential Credit
Multi-
Family Credit
Other Total
Investment securities, available for sale $ 1,037,730
$ 214,037
$ 260,485
$ —
$ 1,512,252
Distressed and other residential mortgage loans, at fair value —
737,523
—
—
737,523
Distressed and other residential mortgage loans, net —
285,261
—
—
285,261
Investments in unconsolidated entities —
10,954
62,512
—
73,466
Preferred equity and mezzanine loan investments —
—
165,555
—
165,555
Multi-family loans held in securitization trusts, at fair value —
—
11,679,847
—
11,679,847
Multi-family collateralized debt obligations, at fair value —
—
(11,022,248 ) —
(11,022,248 )
Other investments ⁽¹⁾
—
4,995
20,477
—
25,472
Carrying value $ 1,037,730
$ 1,252,770
$ 1,166,628
$ —
$ 3,457,128
Liabilities:
Repurchase agreements (925,230 ) (676,658 ) (529,617 ) —
(2,131,505 )
CDOs, securitized debt and subordinated debentures —
(65,253 ) (30,121 ) (45,000 ) (140,374 )
Convertible notes —
—
—
(130,762 ) (130,762 )
Hedges (net) ⁽²⁾
10,263
—
—
—
10,263
Cash and restricted cash ⁽³⁾
10,377
20,859
17,291
60,618
109,145
Goodwill —
—
—
25,222
25,222
Other 2,374
24,182
(4,929 ) (40,451 ) (18,824 )
Net capital allocated $ 135,514
$ 555,900
$ 619,252
$ (130,373 ) $ 1,180,293

Overall leverage ratio ⁽⁴⁾
2.0
Leverage ratio on callable debt ⁽⁵⁾
1.8

⁽¹⁾

Includes real estate under development in the amount of $22.0 million and real estate held for sale in consolidated variable interest entities of $29.7 million, net of mortgages and notes payable in consolidated variable interest entities in the amount of $31.2 million, and other loan investments in the amount of $5.0 million. Both real estate under development and other loan investments are included in the Company's accompanying condensed consolidated balance sheets in receivables and other assets.


⁽²⁾	~~Includes derivative assets of $1.8 million and an $8.5 million variation margin.~~


⁽³⁾	~~Restricted cash is included in the Company's accompanying condensed consolidated balance sheets in receivables and other assets.~~


⁽⁴⁾	Represents total debt divided by our total stockholders' equity. Total debt does not include debt associated with Multi-family CDOs amounting to $11.0 billion and Residential CDOs amounting to $53.0 million and mortgage debt of The Clusters amounting to $27.2 million that are consolidated in the Company's financial statements as they are non-recourse debt for which we have no obligation.


⁽⁵⁾	~~Represents repurchase agreement borrowings divided by our total stockholders' equity.~~

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Analysis of Changes in Book Value Per Share

The following table analyzes the changes in book value of our common stock for the three and nine months ended September 30, ~~2019~~2020 (amounts in thousands, except per share data):


	Three Months Ended September 30, 2020					Nine Months Ended September 30, 2020
	Amount		Shares	Per Share (1)		Amount		Shares	Per Share (1)
Beginning Balance	$	1,642,883	377,465	$	4.35	$	1,683,911	291,371	$	5.78
Cumulative-effect adjustment for implementation of fair value option (2)	—					12,284
Common stock issuance, net (3)	3,175		279			519,473		86,373


Balance after cumulative-effect adjustment and share issuance activity	1,646,058		377,744	4.36		2,215,668		377,744	5.87
Dividends declared	(28,331)			(0.08)		(47,218)			(0.13)
Net change in accumulated other comprehensive income (loss):

Investment securities available for sale (4)	22,490			0.06		(37,070)			(0.10)

Net income (loss) attributable to Company's common stockholders	91,344			0.24		(399,819)			(1.06)
Ending Balance	$	1,731,561	377,744	$	4.58	$	1,731,561	377,744	$	4.58

(1)Outstanding shares used to calculate book value per common share for the three and nine months ended September 30, 2020 are 377,744,476.

(2)On January 1, 2020, the Company adopted Accounting Standards Update ("ASU") 2016-13, Financial Instruments —Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and elected to apply the fair value option provided by ASU 2019-05, Financial Instruments — Credit Losses (Topic 326): Targeted Transition Relief to our residential loans, net, preferred equity and mezzanine loan investments that are accounted for as loans and preferred equity investments that are accounted for under the equity method, resulting in a cumulative-effect adjustment to beginning book value of our common stock and book value per common share.

(3)Includes amortization of stock based compensation.

(4)The changes primarily relate to unrealized gains (losses) in our investment securities due to increases or reductions in pricing.

Three Months Ended September 30, 2019 Nine Months Ended September 30, 2019
Amount Shares
Per Share⁽¹⁾
Amount Shares
Per Share⁽¹⁾
Beginning Balance $ 1,211,546
210,873
$ 5.75
$ 879,389
155,590
$ 5.65
Common stock issuance, net ⁽²⁾
311,848
51,748

636,340
107,031

Preferred stock issuance, net 14,359

30,446

Preferred stock liquidation preference (14,736 )

(31,268 )
Balance after share issuance activity 1,523,017
262,621
5.80
1,514,907
262,621
5.76
Dividends declared (52,524 )

(0.20 ) (132,246 ) (0.50 )
Net change in accumulated other comprehensive income:

Investment securities, available for sale ⁽³⁾
10,912

0.04
44,051
0.17
Net income attributable to Company's common stockholders 34,835

0.13
89,528
0.34
Ending Balance $ 1,516,240
262,621
$ 5.77
$ 1,516,240
262,621
$ 5.77


⁽¹⁾	~~Outstanding shares used to calculate book value per share for the three and nine months ended September 30, 2019 are 262,621,039.~~


⁽²⁾	~~Includes amortization of stock based compensation.~~


⁽³⁾	~~The increases relate to unrealized gains in our investment securities due to improved pricing.~~

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Results of Operations

Beginning in mid-March and continuing into the second quarter, the global pandemic associated with COVID-19 and related economic conditions caused financial and mortgage-related asset markets to experience significant volatility. The significant dislocation in the financial markets in March and part of April caused, among other things, credit spread widening, a sharp decrease in interest rates, higher unemployment levels and unprecedented illiquidity in repurchase agreement financing and MBS markets, which in turn materially negatively impacted liquidity and pricing of our assets. While market conditions improved and volatility subsided to an extent in the latter part of the second quarter and into the third quarter as parts of the global and U.S. economy "re-opened", leading to partial pricing recovery for a number of assets in our portfolio, we expect volatility and markets to continue to fluctuate and that these conditions may continue to negatively affect our business through the balance of 2020 and into 2021 due to the uncertain duration and ongoing impact of the pandemic. The factors described above and throughout this Quarterly Report on Form 10-Q (particularly as related to the COVID-19 pandemic) have driven the majority of our results of operations for the three and nine months ended September 30, 2020, and are expected to continue to impact our results of operations in future periods. Thus, our results of operations should be read and viewed in the context of these unprecedented conditions.

The following discussion provides information regarding our results of operations for the three and nine months ended September 30, ~~2019~~2020 and ~~2018~~,2019, 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 ~~2019~~2020 are greater or less than the results from the respective ~~periods~~period in ~~2018.~~2019. Unless otherwise specified, references in this section to increases or decreases ~~during~~in the ~~“three month periods”~~"three-month periods" refer to the change in results for the three months ended September 30, ~~2019~~2020 when compared to the three months ended September 30, ~~2018~~2019 and increases or decreases in the ~~“nine-month periods”~~"nine-month periods" refer to the change in results for the nine months ended September 30, ~~2019~~2020 when compared to the nine months ended September 30, ~~2018.~~2019.

The following table presents the main components of our net income (loss) for the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively (dollar amounts in thousands, except per share data):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020		2019		$ Change		2020		2019		$ Change
Net interest income	$	25,529	$	31,971	$	(6,442)	$	101,134	$	83,866	$	17,268
Total non-interest income (loss)	90,528		21,396		69,132		(427,060)		60,822		(487,882)
Total general, administrative and operating expenses	13,424		12,288		1,136		41,382		37,326		4,056
Income (loss) from operations before income taxes	102,633		41,079		61,554		(367,308)		107,362		(474,670)
Income tax (benefit) expense	(772)		(187)		(585)		917		(247)		1,164
Net income (loss) attributable to Company	101,641		41,379		60,262		(368,929)		108,254		(477,183)
Preferred stock dividends	10,297		6,544		3,753		30,890		18,726		12,164
Net income (loss) attributable to Company's common stockholders	91,344		34,835		56,509		(399,819)		89,528		(489,347)
Basic earnings (loss) per common share	$	0.24	$	0.15	$	0.09	$	(1.08)	$	0.44	$	(1.52)
Diluted earnings (loss) per common share	$	0.23	$	0.15	$	0.08	$	(1.08)	$	0.43	$	(1.51)

Three Months Ended
September 30, Nine Months Ended
September 30,
2019 2018 $ Change 2019 2018 $ Change
Net interest income $ 31,971
$ 19,603
$ 12,368
$ 83,866
$ 56,854
$ 27,012
Total non-interest income 21,396
24,303
(2,907 ) 60,822
65,265
(4,443 )
Total general, administrative and operating expenses 12,288
9,912
2,376
37,326
27,380
9,946
Income from operations before income taxes 41,079
33,994
7,085
107,362
94,739
12,623
Income tax benefit (187 ) (454 ) 267
(247 ) (547 ) 300
Net income attributable to Company 41,379
33,973
7,406
108,254
93,285
14,969
Preferred stock dividends 6,544
5,925
619
18,726
17,775
951
Net income attributable to Company's common stockholders 34,835
28,048
6,787
89,528
75,510
14,018
Basic earnings per common share $ 0.15
$ 0.21
$ (0.06 ) $ 0.44
$ 0.63
$ (0.19 )
Diluted earnings per common share $ 0.15
$ 0.20
$ (0.05 ) $ 0.43
$ 0.60
$ (0.17 )

Net Interest Income

Our results of operations for our investment portfolio during a given period typically reflect, in large part, the net interest income earned on our investment portfolio of RMBS, CMBS, ~~distressed and other~~ residential ~~mortgage~~ loans ~~(including loans accounted for at fair value and loans accounted for under ASC 310-10 and ASC 310-30)~~ 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”). The net interest spread is 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 portfolio investments and the prepayment rates on portfolio investments will impact the net interest spread as such factors will be amortized over the expected term of such investments.

The ~~increases~~decrease in net interest income for the ~~three- and nine-month~~three-month periods ~~were~~was primarily driven by ~~increases~~a decrease in average interest earning assets due to asset sales in response to the impacts of the COVID-19 pandemic. In particular, we sold our entire portfolio of higher yielding first loss POs within the Consolidated K-Series in March 2020.

Table of Contents

The increase in net interest income for the nine-month periods was primarily driven by a decrease in interest expense due to the repayment of all of our outstanding repurchase agreements that finance our investment securities and an increase in assets in our ~~residential and multi-family~~single-family credit ~~portfolios~~portfolio resulting from purchase activity since September 30, ~~2018. These increases were~~2019, which was funded by a combination of equity capital raised in 2019 and in the first quarter of 2020 and repurchase agreement financing. This increase during the nine-month period was partially offset by ~~decreases~~a decrease in net interest income ~~in our Agency RMBS portfolio due to (1) reductions in average interest earning assets caused primarily by paydowns, (2) increased prepayment rates compared~~related to the ~~corresponding periods~~sale of higher yielding first loss POs within the Consolidated K-Series in ~~2018 and (3) the impact of our exit from our Agency IO portfolio in 2018.~~March 2020.

~~Table of Contents~~

~~Quarterly Comparative~~ Portfolio Net Interest Margin

The following tables set forth certain information about our portfolio by investment category and their related interest income, interest expense, ~~weighted~~ average yield on interest earning assets, average portfolio financing cost ~~of funds~~ and portfolio net interest margin for our average interest earning assets (by investment category) for the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively (dollar amounts in thousands):

Three Months Ended September 30, 2020


	Single-Family Credit (1) (3)			Multi- Family Credit (2)			Other (7)			Total
Interest Income (4)	$	28,747		$	7,846		$	1,203		$	37,796
Interest Expense	(9,025)			—			(3,242)			(12,267)
Net Interest Income (Expense)	$	19,722		$	7,846		$	(2,039)		$	25,529

Average Interest Earning Assets (3) (5)	$	2,279,813		$	417,102		$	41,540		$	2,738,455
Average Yield on Interest Earning Assets (6)	5.03		%	7.52		%	11.58		%	5.51		%
Average Portfolio Financing Cost (7)	(3.33)		%	—			—			(3.33)		%
Portfolio Net Interest Margin (8)	1.70		%	7.52		%	11.58		%	2.18		%

Three Months Ended September 30, 2019


	Agency (9)			Single-Family Credit			Multi- Family Credit (2) (3)			Other (7)			Total
Interest Income (4)	$	6,512		$	23,668		$	28,413		$	681		$	59,274
Interest Expense	(4,980)			(10,499)			(8,400)			(3,424)			(27,303)
Net Interest Income (Expense)	$	1,532		$	13,169		$	20,013		$	(2,743)		$	31,971

Average Interest Earning Assets (3) (5)	$	1,001,567		$	1,772,485		$	1,104,560		$	26,235		$	3,904,847
Average Yield on Interest Earning Assets (6)	2.60		%	5.34		%	10.29		%	10.38		%	6.07		%
Average Portfolio Financing Cost (7)	(2.38)		%	(4.27)		%	(4.29)		%	—			(3.67)		%
Portfolio Net Interest Margin (8)	0.22		%	1.07		%	6.00		%	10.38		%	2.40		%

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Agency
RMBS ⁽¹⁾
Residential Credit
Multi-
Family Credit ⁽²⁾ ⁽³⁾
Other Total
Interest Income ⁽⁴⁾
$ 6,512
$ 23,668
$ 28,413
$ 681
$ 59,274
Interest Expense (4,980 ) (10,499 ) (8,400 ) (3,424 ) (27,303 )
Net Interest Income (Expense) $ 1,532
$ 13,169
$ 20,013
$ (2,743 ) $ 31,971

Average Interest Earning Assets ^{(3) (5)}
$ 1,001,567
$ 1,772,485
$ 1,104,560
$ 26,235
$ 3,904,847
Weighted Average Yield on Interest Earning Assets ⁽⁶⁾
2.60 % 5.34 % 10.29 % 10.38 % 6.07 %
Average Cost of Funds ⁽⁷⁾
(2.38 )% (4.27 )% (4.29 )% —
(3.67 )%
Portfolio Net Interest Margin ⁽⁸⁾
0.22 % 1.07 % 6.00 % 10.38 % 2.40 %

~~Three~~Nine Months Ended September 30, ~~2018~~

2020

Agency
RMBS ⁽¹⁾
Residential Credit
Multi-
Family Credit ⁽²⁾ ⁽³⁾
Other Total
Interest Income ⁽⁴⁾
$ 7,479
$ 7,957
$ 19,668
$ —
$ 35,104
Interest Expense (4,860 ) (3,213 ) (4,047 ) (3,381 ) (15,501 )
Net Interest Income (Expense) $ 2,619
$ 4,744
$ 15,621
$ (3,381 ) $ 19,603

Average Interest Earning Assets ^{(3) (5)}
$ 1,121,180
$ 597,200
$ 681,040
$ —
$ 2,399,420
Weighted Average Yield on Interest Earning Assets ⁽⁶⁾
2.67 % 5.33 % 11.55 % —
5.85 %
Average Cost of Funds ⁽⁷⁾
(2.22 )% (4.68 )% (5.04 )% —
(3.30 )%
Portfolio Net Interest Margin ⁽⁸⁾
0.45 % 0.65 % 6.51 % —
2.55 %

~~Table of Contents~~


	Agency (9)			Single-Family Credit (1) (3)			Multi- Family Credit (2) (3)			Other (7)			Total
Interest Income (4)	$	6,401		$	92,676		$	46,914		$	3,933		$	149,924
Interest Expense	(4,930)			(27,138)			(6,774)			(9,948)			(48,790)
Net Interest Income (Expense)	$	1,471		$	65,538		$	40,140		$	(6,015)		$	101,134

Average Interest Earning Assets (3) (5)	$	337,084		$	2,444,464		$	696,812		$	46,524		$	3,524,884
Average Yield on Interest Earning Assets (6)	2.46		%	5.05		%	8.98		%	11.27		%	5.66		%
Average Portfolio Financing Cost (7)	(2.25)		%	(3.12)		%	(3.41)		%	—			(3.02)		%
Portfolio Net Interest Margin (8)	0.21		%	1.93		%	5.57		%	11.27		%	2.64		%

Nine Months Ended September 30, 2019


	Agency (9)			Single-Family Credit			Multi- Family Credit (2) (3)			Other (7)			Total
Interest Income (4)	$	20,768		$	61,842		$	79,479		$	710		$	162,799
Interest Expense	(17,225)			(29,423)			(22,003)			(10,282)			(78,933)
Net Interest Income (Expense)	$	3,543		$	32,419		$	57,476		$	(9,572)		$	83,866

Average Interest Earning Assets (3) (5)	$	1,046,265		$	1,541,787		$	1,028,659		$	9,112		$	3,625,823
Average Yield on Interest Earning Assets (6)	2.65		%	5.35		%	10.30		%	10.39		%	5.99		%
Average Portfolio Financing Cost (7)	(2.58)		%	(4.47)		%	(4.27)		%	—			(3.73)		%
Portfolio Net Interest Margin (8)	0.07		%	0.88		%	6.03		%	10.39		%	2.26		%

(1)The Company, through its ownership of certain securities purchased in the fourth quarter of 2019, has determined it is the primary beneficiary of Consolidated SLST and has consolidated Consolidated SLST into the Company's condensed consolidated financial statements. Interest income amounts represent interest income earned by securities that are owned by the Company. A reconciliation of net interest income generated by our single-family credit portfolio to our condensed consolidated financial statements for the three and nine months ended September 30, 2020, respectively, is set forth below (dollar amounts in thousands):


	Three Months Ended September 30, 2020		Nine Months Ended September 30, 2020
Interest income, residential loans	$	30,704	$	94,424
Interest income, investment securities available for sale (a)	5,605		22,507
Interest expense, SLST CDOs (b)	(7,562)		(24,255)
Interest income, Single-Family Credit, net	28,747		92,676
Interest expense, repurchase agreements	(5,341)		(22,617)
Interest expense, Residential CDOs (b)	(2,160)		(2,527)
Interest expense, securitized debt	(1,524)		(1,994)
Net interest income, Single-Family Credit	$	19,722	$	65,538

(a)Included in the Company’s accompanying condensed consolidated statements of operations in interest income, investment securities and other interest earning assets.

(b)Included in the Company’s accompanying condensed consolidated statements of operations in interest expense, residential collateralized debt obligations.

Agency
RMBS ⁽¹⁾
Residential Credit
Multi-
Family Credit ⁽²⁾ ⁽³⁾
Other Total
Interest Income ⁽⁴⁾
$ 20,768
$ 61,842
$ 79,479
$ 710
$ 162,799
Interest Expense (17,225 ) (29,423 ) (22,003 ) (10,282 ) (78,933 )
Net Interest Income (Expense) $ 3,543
$ 32,419
$ 57,476
$ (9,572 ) $ 83,866

Average Interest Earning Assets ^{(3) (5)}
$ 1,046,265
$ 1,541,787
$ 1,028,659
$ 9,112
$ 3,625,823
Weighted Average Yield on Interest Earning Assets ⁽⁶⁾
2.65 % 5.35 % 10.30 % 10.39 % 5.99 %
Average Cost of Funds ⁽⁷⁾
(2.58 )% (4.47 )% (4.27 )% —
(3.73 )%
Portfolio Net Interest Margin ⁽⁸⁾
0.07 % 0.88 % 6.03 % 10.39 % 2.26 %

~~Nine Months Ended September 30, 2018~~

Agency
RMBS ⁽¹⁾
Residential Credit
Multi-
Family Credit ⁽²⁾ ⁽³⁾
Other Total
Interest Income ⁽⁴⁾
$ 23,301
$ 23,812
$ 55,440
$ —
$ 102,553
Interest Expense (13,911 ) (9,767 ) (12,027 ) (9,994 ) (45,699 )
Net Interest Income (Expense) $ 9,390
$ 14,045
$ 43,413
$ (9,994 ) $ 56,854

Average Interest Earning Assets ^{(3) (5)}
$ 1,165,786
$ 599,207
$ 647,400
$ —
$ 2,412,393
Weighted Average Yield on Interest Earning Assets ⁽⁶⁾
2.66 % 5.30 % 11.42 % —
5.67 %
Average Cost of Funds ⁽⁷⁾
(2.01 )% (4.42 )% (4.72 )% —
(3.06 )%
Portfolio Net Interest Margin ⁽⁸⁾
0.65 % 0.88 % 6.70 % —
2.61 %


⁽¹⁾	~~Includes Agency fixed-rate RMBS, Agency ARMs and, solely with respect to the nine months ended September 30, 2018, Agency IOs.~~

⁽²⁾

The Company, through its ownership of certain securities, has determined it is the primary beneficiary of the Consolidated K-Series and has consolidated the Consolidated K-Series into the Company’s condensed consolidated financial statements. Interest income amounts represent interest income earned by securities that are actually owned by the Company. A reconciliation of our net interest income generated by our multi-family credit portfolio to our condensed consolidated financial statements for the three and nine months ended September 30, 2019 and 2018, respectively, is set forth below (dollar amounts in thousands):

Three Months Ended
September 30, Nine Months Ended
September 30,
2019 2018 2019 2018
Interest income, multi-family loans held in securitization trusts $ 139,818
$ 86,458
$ 384,743
$ 257,179
Interest income, investment securities, available for sale ^(a)
3,419
2,481
11,117
7,389
Interest income, preferred equity and mezzanine loan investments 5,505
5,874
15,660
15,182
Interest expense, multi-family collateralized debt obligations (120,329 ) (75,145 ) (332,041 ) (224,310 )
Interest income, Multi-Family Credit, net 28,413
19,668
79,479
55,440
Interest expense, repurchase agreements (8,400 ) (3,317 ) (21,509 ) (9,853 )
Interest expense, securitized debt —
(730 ) (494 ) (2,174 )
Net interest income, Multi-Family Credit $ 20,013
$ 15,621
$ 57,476
$ 43,413

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^(a)

(2)Prior to the sale of first loss POs in March 2020, the Company had determined it was the primary beneficiary of the Consolidated K-Series and had consolidated the Consolidated K-Series into the Company’s condensed consolidated financial statements. Interest income amounts represent interest income earned by securities that were owned by the Company. A reconciliation of net interest income generated by our multi-family credit portfolio to our condensed consolidated financial statements for the three and nine months ended September 30, 2020 and 2019, respectively, is set forth below (dollar amounts in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Interest income, multi-family loans held in securitization trusts	$	—	$	139,818	$	151,841	$	384,743
Interest income, investment securities available for sale (a)	2,546		3,419		8,960		11,117
Interest income, preferred equity and mezzanine loan investments	5,300		5,505		15,875		15,660
Interest expense, multi-family collateralized debt obligations	—		(120,329)		(129,762)		(332,041)
Interest income, Multi-Family Credit, net	7,846		28,413		46,914		79,479
Interest expense, repurchase agreements	—		(8,400)		(6,774)		(21,509)
Interest expense, securitized debt	—		—		—		(494)
Net interest income, Multi-Family Credit	$	7,846	$	20,013	$	40,140	$	57,476

(a)Included in the Company’s accompanying condensed consolidated statements of operations in interest income, investment securities and other interest earning assets.

(3)Average Interest Earning Assets for the periods indicated exclude cash and cash equivalents, all Consolidated SLST assets (for the three and nine months ended September 30, 2020) and all Consolidated K-Series assets (for the nine months ended September 30, 2020 and the three and nine months ended September 30, 2019) other than, in each case, those securities owned by the Company.

(4)Includes interest income earned on cash accounts held by the Company.

(5)Average Interest Earning Assets is calculated each quarter based on daily average amortized cost for the respective periods.

(6)Average Yield on Interest Earning Assets was calculated by dividing our annualized interest income relating to our interest earning assets by our Average Interest Earning Assets for the respective periods.

(7)Average Portfolio Financing Cost was calculated by dividing our annualized interest expense relating to our interest earning assets by our average interest bearing liabilities, excluding our subordinated debentures and convertible notes, for the respective periods. For the three and nine months ended September 30, 2020 and 2019, respectively, interest expense generated by our subordinated debentures and convertible notes is set forth below (dollar amounts in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Subordinated debentures	$	483	$	711	$	1,714	$	2,185
Convertible notes	2,759		2,713		8,234		8,097
Total	$	3,242	$	3,424	$	9,948	$	10,282

(8)Portfolio Net Interest Margin is the difference between our Average Yield on Interest Earning Assets and our Average Portfolio Financing Cost, excluding the weighted average cost of subordinated debentures and convertible notes.

(9)Includes Agency RMBS and Agency CMBS.

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~~Included in the Company’s accompanying condensed consolidated statements of operations in interest income, investment securities and other interest earning assets.~~


⁽³⁾	~~Average Interest Earning Assets for the periods indicated exclude all Consolidated K-Series assets other than those securities actually owned by the Company.~~


⁽⁴⁾	~~Includes interest income earned on cash accounts held by the Company.~~


⁽⁵⁾	~~Our Average Interest Earning Assets is calculated each quarter based on daily average amortized cost for the respective periods.~~


⁽⁶⁾	~~Our Weighted Average Yield on Interest Earning Assets was calculated by dividing our annualized interest income by our Average Interest Earning Assets for the respective periods.~~

⁽⁷⁾

Our Average Cost of Funds was calculated by dividing our annualized interest expense by our average interest bearing liabilities, excluding our subordinated debentures and convertible notes, for the respective periods. For the three and nine months ended September 30, 2019 and 2018, respectively, interest expense generated by our subordinated debentures and convertible notes is set forth below (dollar amounts in thousands):

Three Months Ended
September 30, Nine Months Ended
September 30,
2019 2018 2019 2018
Subordinated debentures $ 711
$ 712
$ 2,185
$ 2,023
Convertible notes 2,713
2,669
8,097
7,971


⁽⁸⁾	Portfolio Net Interest Margin is the difference between our Weighted Average Yield on Interest Earning Assets and our Average Cost of Funds, excluding the weighted average cost of subordinated debentures and convertible notes.

Non-interest Income (Loss)

Realized (Losses) Gains, ~~(Losses),~~ Net

The Company sold approximately $377.5 million and $2.5 billion of assets during the three and nine months ended September 30, 2020, respectively in response to the disruption of the financial markets caused by the COVID-19 pandemic. The following table presents the components of ~~net~~ realized (losses) gains, ~~(losses)~~net recognized for the three and nine months endedSeptember 30, ~~2019~~2020 and ~~2018~~2019, respectively (dollar amounts in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020		2019		$ Change		2020		2019		$ Change
Investment securities and related hedges	$	(2,575)	$	5,013	$	(7,588)	$	(134,452)	$	21,815	$	(156,267)
Residential loans	1,508		1,089		419		(15,467)		10,741		(26,208)
Total realized (losses) gains, net	$	(1,067)	$	6,102	$	(7,169)	$	(149,919)	$	32,556	$	(182,475)

Three Months Ended
September 30, Nine Months Ended
September 30,
2019 2018 $ Change 2019 2018 $ Change
Investment securities and related hedges $ 5,013
$ —
$ 5,013
$ 21,815
$ (12,270 ) $ 34,085
Distressed and other residential mortgage loans at carrying value (569 ) 2,105
(2,674 ) 3,564
3,546
18
Distressed and other residential mortgage loans at fair value 1,658
1,127
531
7,177
1,496
5,681
Total realized gains (losses), net $ 6,102
$ 3,232
$ 2,870
$ 32,556
$ (7,228 ) $ 39,784

~~Realized~~During the three months ended September 30, 2020, the Company recognized net realized losses of $2.6 million on the sale of non-Agency RMBS and CMBS while the Company recognized net realized gains of $5.0 million, primarily on ~~investment securities and related hedges increased~~sales of CMBS, during the three months ended September 30, 2019. Realized gain activity on residential loans in both three-month periods ~~due to~~is primarily a result of loan prepayment activity.

During the nine months ended September 30, 2020, the Company recognized net realized losses of $61.4 million on the sale of Agency RMBS, Agency CMBS, non-Agency RMBS and CMBS and realized losses of $73.1 million on the termination of interest rate swaps. The Company also recognized net realized losses on residential loans in 2020, primarily as a result of the sale of performing and re-performing loans. The Company sold residential loans with an aggregate unpaid principal balance of $116.4 million that resulted in net realized losses of $18.2 million during the nine months ended September 30, 2020, which was mostly incurred in the ~~third~~first quarter of 2020.

During the nine months ended September 30, 2019, ~~for a realized gain~~the Company recognized $21.8 million of ~~$5.0 million. The increase in~~net realized gains primarily on ~~investment securities and related hedges during the nine-month periods also includes a realized gain of $16.8 million from the sale~~sales of certain Freddie Mac-sponsored multi-family loan K-Series first loss POs and IOs ~~in the first quarter of 2019. Also in 2018, the~~and CMBS. The Company ~~liquidated its Agency IO portfolio resulting in a $12.4 million~~also recognized net realized ~~loss.~~

~~Realized~~ gains on ~~distressed and other~~ residential loans ~~at carrying value decreased~~ during the ~~three-month periods~~nine months ended September 30, 2019, primarily as ~~there was no sale activity for these loans in the third quarter~~a result of 2019. Realized gains on distressed and other residential mortgage loans at fair value increased during the three-month and nine-month periods primarily due to an increase in loans accounted for at fair value and realized gain from sale activity and loan ~~prepayments..~~prepayments.

Realized Loss on De-consolidation of Multi-family Loans Held in Securitization Trusts and Multi-family Collateralized Debt Obligations, Net

~~Table~~In March 2020, the Company sold its entire portfolio of ~~Contents~~first loss POs and certain mezzanine securities issued by the Consolidated K-Series. These sales, for total proceeds of approximately $555.2 million, resulted in the de-consolidation of each Consolidated K-Series as of the sale date of each first loss PO and a realized net loss on de-consolidation of multi-family loans held in securitization trusts and multi-family collateralized debt obligations of $54.1 million for the nine months ended September 30, 2020. The sales also resulted in the de-consolidation of $17.4 billion in multi-family loans held in securitization trusts and $16.6 billion in multi-family collateralized debt obligations.

Unrealized Gains (Losses), Net

The disruptions of the financial markets due to the COVID-19 pandemic caused credit spread widening, a sharp decrease in interest rates and unprecedented illiquidity in repurchase agreement financing and MBS markets during the first quarter of 2020. These conditions put significant downward pressure on the fair value of our assets and resulted in unrealized losses for the first quarter. Pricing for our investment portfolio during the second and third quarters of 2020 rebounded with credit spreads tightening on a majority of our assets, which resulted in a partial reversal of unrealized losses recognized in the first quarter of 2020. The following table presents the components of unrealized gains (losses), net recognized for the three and nine months endedSeptember 30, ~~2019~~2020 and ~~2018~~2019, respectively (dollar amounts in thousands):

Table of Contents

Three Months Ended
September 30, Nine Months Ended
September 30,
2019 2018 $ Change 2019 2018 $ Change
Investment securities and related hedges $ (13,336 ) $ 2,275
$ (15,611 ) $ (42,929 ) $ 26,574
$ (69,503 )
Distressed and other residential mortgage loans at fair value 16,818
(484 ) 17,302
34,580
(923 ) 35,503
Multi-family loans and debt held in securitization trusts 7,630
12,303
(4,673 ) 22,247
31,867
(9,620 )
Total unrealized gains (losses), net $ 11,112
$ 14,094
$ (2,982 ) $ 13,898
$ 57,518
$ (43,620 )


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020		2019		$ Change		2020		2019		$ Change
Investment securities and related hedges	$	19,193	$	(13,336)	$	32,529	$	9,303	$	(42,929)	$	52,232
Residential loans	35,726		16,818		18,908		(9,481)		34,580		(44,061)
Consolidated SLST	27,145		—		27,145		(34,893)		—		(34,893)
Consolidated K-Series	—		7,630		(7,630)		(171,011)		22,247		(193,258)
Preferred equity and mezzanine loan investments	(866)		—		(866)		(6,629)		—		(6,629)
Total unrealized gains (losses), net	$	81,198	$	11,112	$	70,086	$	(212,711)	$	13,898	$	(226,609)

~~Unrealized~~

For the three months ended September 30, 2020, the Company recognized $81.2 million in net unrealized gains. The credit markets continued to improve in the third quarter, which translated to improved pricing across most of our asset classes.

For the nine months ended September 30, 2020, the Company recognized $212.7 million in net unrealized losses. Included in unrealized losses on both investment securities and related hedges ~~increased in both the three-~~ and ~~nine-month periods due to unrealized losses recognized on our interest rate swaps in~~ ~~2019~~ ~~and reversals of unrealized losses upon liquidation of the Agency IO portfolio in~~ ~~2018. The unrealized losses on our interest rate swaps are offset by unrealized gains on our investment securities portfolio recorded in other comprehensive income.~~

The increases in unrealized gains on distressed and other residential mortgage loans at fair value in both the three- and nine-month periods is primarily due to increased purchase activity since September 30, 2018 and tightening credit spreads in 2019.

~~Unrealized gains on multi-family loans and debt held in securitization trusts decreased during both the three- and nine-month periods due to a deceleration in tightening of credit spreads on~~ the Consolidated K-Series ~~as compared~~are net unrealized gain reversals due to sales and interest rate swap terminations during the ~~previous periods as well as lower unrealized gains on certain~~nine months ended September 30, 2020 totaling $135.3 million.

Impairment of Goodwill

In March 2020, the Company sold its entire portfolio of first loss POs issued by the Consolidated K-Series, ~~investments that are nearing maturity. This decrease was partially offset~~certain senior and mezzanine securities issued by ~~unrealized gains on additional~~the Consolidated K-Series, ~~purchased since~~Agency CMBS and CMBS that were held by its multi-family investment reporting unit. As a result of the sales, the Company re-evaluated its goodwill balance associated with the multi-family investment reporting unit for impairment. This analysis yielded an impairment of the entire goodwill balance of $25.2 million for the nine months ended September 30, ~~2018.~~2020.

Other Income

The following table presents the components of other income for the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively (dollar amounts in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020		2019		$ Change		2020		2019		$ Change
Income from preferred equity investments accounted for as equity (1)	$	4,302	$	2,458	$	1,844	$	7,364	$	5,557	$	1,807
Income from joint venture equity investments in multi-family properties	122		985		(863)		(949)		6,331		(7,280)
Income from entities that invest in residential properties and loans	5,542		431		5,111		8,158		826		7,332
Preferred equity and mezzanine loan premiums resulting from early redemption (2)	463		—		463		518		3,364		(2,846)
Losses in Consolidated VIEs (3)	(159)		(185)		26		(2,280)		(2,158)		(122)
Income from real estate held for sale in consolidated variable interest entities	—		—		—		—		215		(215)
Miscellaneous income	127		249		(122)		2,099		485		1,614
Total other income	$	10,397	$	3,938	$	6,459	$	14,910	$	14,620	$	290

Three Months Ended
September 30, Nine Months Ended
September 30,
2019 2018 $ Change 2019 2018 $ Change
Income from preferred equity investments accounted for as equity ⁽¹⁾
$ 2,458
$ 265
$ 2,193
$ 5,557
$ 777
$ 4,780
Income from joint venture equity investments in multi-family properties 985
4,205
(3,220 ) 6,331
7,169
(838 )
Income from entities that invest in residential properties and loans 431
149
282
826
829
(3 )
Preferred equity and mezzanine loan premiums resulting from early redemption ⁽²⁾
—
61
(61 ) 3,364
201
3,163
Losses in Consolidated VIEs ⁽³⁾
(185 ) (1 ) (184 ) (2,158 ) (220 ) (1,938 )
Miscellaneous income 249
78
171
485
225
260
Total other income $ 3,938
$ 4,757
$ (819 ) $ 14,405
$ 8,981
$ 5,424
(1)Includes income earned from preferred equity ownership interests in entities that invest in multi-family properties accounted for under the equity method of accounting.


(2)⁽¹⁾	~~Includes income earned from preferred equity ownership interests in entities that invest in multi-family properties accounted for under the equity method of accounting.~~


⁽²⁾	Includes premiums resulting from early redemptions of preferred equity and mezzanine loan ~~investments accounted for as loans.~~


⁽³⁾	Losses in Consolidated VIEs are offset by allocations to non-controlling interests in the respective Consolidated VIEs, resulting in net losses to the Company of $0.1 million and $0.5 million for the three months ended September 30, 2019 and 2018, respectively, and $1.5 million and $2.2 million for the nine months ended September 30, 2019 and 2018, respectively.

~~Table of Contents~~

The decrease in other income during the three-month periods is primarily due to a decrease of $3.2 million in income generated from the Company's remaining joint venture equity investments. The decrease was partially offset by an increase of $2.2 million in income from preferred equity investments accounted for as ~~equity due~~loans.

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(3)Losses in Consolidated VIEs exclude income or loss from the Consolidated K-Series and Consolidated SLST and are offset by allocations of losses or increased by allocations of income to ~~additional investments made since~~non-controlling interests in the respective Consolidated VIEs, resulting in net losses to the Company of $0.1 million for the three months ended September 30, ~~2018.~~2020 and 2019 and $1.1 million and $1.5 million for the nine months ended September 30, 2020 and 2019, respectively.

The increase in other income during both the three- and nine-month periods is primarily due to ~~a $4.8 million~~an increase in the income generated by the Company's investment in entities that invest in residential properties and loans resulting from realized gains on sale and unrealized gains recognized by these entities as well as an increase in income from preferred equity investments accounted for as equity due to additional investments made since September 30, ~~2018~~2019. The increase during both the three- and nine-month periods was partially offset by a ~~$3.2 million~~decrease in income from joint venture equity investments in multi-family properties due to the redemption of these investments. The increase in ~~premiums recognized on early~~other income during the nine-month periods was also partially offset by a decrease in income related to the redemptions of preferred equity ~~investments. The increase was partially offset by an increase~~and mezzanine loan investments as a result of ~~$2.0 million~~fewer redemptions in ~~realized losses recognized by the Company's 50% owned real estate development property, which is offset by the non-controlling interest share of the loss of $1.0 million.~~

2020.

~~Comparative~~

Expenses

The following ~~table presents~~tables present the components of general, administrative and operating expenses for the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively (dollar amounts in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020		2019		$ Change		2020		2019		$ Change
General and Administrative Expenses
Salaries, benefits and directors’ compensation	$	7,247	$	5,780	$	1,467	$	23,018	$	17,943	$	5,075
Professional fees	1,176		983		193		4,113		3,263		850

Other	2,106		1,551		555		6,026		5,833		193
Total general and administrative expenses	$	10,529	$	8,314	$	2,215	$	33,157	$	27,039	$	6,118

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 $ Change 2019 2018 $ Change
General and Administrative Expenses
Salaries, benefits and directors’ compensation $ 5,780
$ 4,219
$ 1,561
$ 17,943
$ 9,948
$ 7,995
Professional fees 983
958
25
3,263
3,164
99
Base management and incentive fees (31 ) 844
(875 ) 1,235
2,486
(1,251 )
Other 1,582
1,019
563
4,598
3,017
1,581
Operating Expenses
Expenses related to distressed and other residential mortgage loans 3,974
2,117
1,857
9,805
5,531
4,274
Expenses related to real estate held for sale in Consolidated VIEs —
755
(755 ) 482
3,234
(2,752 )
Total $ 12,288
$ 9,912

$ 2,376
$ 37,326
$ 27,380
$ 9,946

The ~~increases~~increase in ~~general and administrative expenses~~compensation in the three- and nine-month periods is primarily due to an increase in employee headcount as part of the ~~internalization and~~ expansion of our ~~residential credit~~ investment ~~platform and overall asset growth. This change was partially offset by a decrease in base management and incentive~~platforms. Professional fees also increased in the ~~three- and nine-month periods due to the termination of our last management agreement and the end of transition services related to that agreement in the second quarter of 2019.~~

The increases in expenses related to distressed and other residential mortgage loans in the three- and nine-month periods are due to overall growth in the portfolio, resulting from the internalization and expansion of our residential credit investment platform. Expenses related to real estate held for sale in consolidated variable interest entities decreased in the three- and nine-month periods as a result of additional legal expenses incurred in March 2020 in connection with the ~~de-consolidation of~~disruptions in the ~~variable interest entities after~~financial markets. Other expenses increased in the ~~sales of~~three-month periods due mainly to increased technology costs related to overall asset growth and tools to enhance efficiencies for working remotely.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020		2019		$ Change		2020		2019		$ Change
Operating Expenses
Expenses related to residential loans	$	2,895	$	3,974	$	(1,079)	$	8,225	$	9,805	$	(1,580)
Expenses related to real estate held for sale in Consolidated VIEs	—		—		—		—		482		(482)
Total	$	2,895	$	3,974	$	(1,079)	$	8,225	$	10,287	$	(2,062)

The decrease in expenses related to residential loans for the ~~real estate held by these entities.~~

three- and nine-month periods can be attributed primarily to a reduction in investment activity related to residential loans in 2020.

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Comprehensive Income (Loss)

The main components of comprehensive income (loss) for the three and nine months ended September 30, ~~2019~~2020 and ~~2018,~~2019, respectively, are detailed in the following table (dollar amounts in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2020		2019		$ Change		2020		2019		$ Change
NET INCOME (LOSS) ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS	$	91,344	$	34,835	$	56,509	$	(399,819)	$	89,528	$	(489,347)
OTHER COMPREHENSIVE INCOME (LOSS)
Increase (decrease) in fair value of available for sale securities
Agency RMBS	—		5,405		(5,405)		—		35,173		(35,173)
Non-Agency RMBS	11,161		6,972		4,189		(34,946)		12,640		(47,586)
CMBS	1,484		2,979		(1,495)		(9,462)		14,347		(23,809)

Total	12,645		15,356		(2,711)		(44,408)		62,160		(106,568)
Reclassification adjustment for net loss (gain) included in net income (loss)	9,845		(4,444)		14,289		7,338		(18,109)		25,447
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	22,490		10,912		11,578		(37,070)		44,051		(81,121)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS	$	113,834	$	45,747	$	68,087	$	(436,889)	$	133,579	$	(570,468)

Three Months Ended September 30, Nine Months Ended September 30,
2019 2018 $ Change 2019 2018 $ Change
NET INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS $ 34,835
$ 28,048
$ 6,787
$ 89,528
$ 75,510
$ 14,018
OTHER COMPREHENSIVE INCOME
Increase (decrease) in fair value of available for sale securities
Agency RMBS 5,405
(9,621 ) 15,026
35,173
(39,750 ) 74,923
Non-Agency RMBS 6,972
(420 ) 7,392
12,640
(1,891 ) 14,531
CMBS 2,979
167
2,812
14,347
765
13,582
Total 15,356
(9,874 ) 25,230
62,160
(40,876 ) 103,036
Reclassification adjustment for net gain included in net income - CMBS (4,444 ) —
(4,444 ) (18,109 ) —
(18,109 )
TOTAL OTHER COMPREHENSIVE INCOME 10,912
(9,874 ) 20,786
44,051
(40,876 ) 84,927
COMPREHENSIVE INCOME ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS $ 45,747
$ 18,174
$ 27,573
$ 133,579
$ 34,634
$ 98,945

The changes in other comprehensive income ("OCI") for the three-month periods can be attributed primarily to the reversal of previously recognized net unrealized losses reported in OCI that were reclassified to net realized loss as a result of the sale of certain investment securities during the third quarter of 2020.

The changes in OCI for the ~~three- and~~ nine-month periods can be attributed primarily to ~~an increase~~a decrease in the fair value of our investment securities where fair value option was not elected as a result of significant spread widening during the first quarter of 2020 due to ~~general spread tightening. The changes~~the market turmoil caused by the COVID-19 pandemic. These losses were partially offset by fair value increases during the ~~reclassification~~second and third quarters of 2020 as well as the reversal of previously recognized net unrealized ~~gains~~losses reported in OCI that were reclassified to net ~~income in relation to~~realized loss as a result of the sale of certain ~~multi-family CMBS investments~~investment securities in ~~2019.~~2020.

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.

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Balance Sheet Analysis

As of September 30, ~~2019,~~2020, we had approximately ~~$19.8~~$4.6 billion of total ~~assets, as compared to~~assets. Included in this amount was approximately ~~$14.7~~$1.3 billion of ~~total~~ assets ~~as of December 31, 2018. A significant portion of our assets represents the assets comprising the~~held in Consolidated ~~K-Series,~~SLST, which we consolidate in accordance with GAAP.

As of ~~September 30, 2019 and~~ December 31, ~~2018,~~2019, we had approximately $23.5 billion of total assets, $17.9 billion of which represented assets comprising the Consolidated K-Series that we consolidated in accordance with GAAP. The Company subsequently sold its first loss POs and certain mezzanine securities issued by the Consolidated K-Series resulting in the de-consolidation of $17.4 billion in multi-family loan assets. The Company had no claims to the assets or obligations for the liabilities of the Consolidated K-Series (other than those securities that were owned by the Company). As of December 31, 2019, Consolidated SLST assets amounted to approximately ~~$15.9 billion and $11.7 billion, respectively.~~ $1.3 billion.

For a reconciliation of our actual ~~interest~~interests in Consolidated SLST and the Consolidated K-Series to our financial statements, see “Capital Allocation” and ~~“Quarterly Comparative Portfolio~~“Portfolio Net Interest Margin” above.

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Investment Securities

At September 30, ~~2019,~~2020, our investment securities portfolio ~~includes Agency RMBS, including Agency fixed-rate and Agency ARMs,~~included non-Agency RMBS, ~~Agency~~ CMBS and ABS, which are classified as investment securities available for sale. Our securities investments also ~~include the~~included first loss subordinated securities and certain IOs issued by Consolidated ~~K-Series.~~SLST. At September 30, ~~2019,~~2020, 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 ~~increase~~decrease in the carrying value of our investment securities as of September 30, ~~2019~~2020 as compared to December 31, ~~2018~~2019 is ~~primarily~~ due to ~~purchases~~our $2.4 billion in asset sales related, in part, to our response to the significant disruption in the financial markets caused by the COVID-19 pandemic and opportunistic dispositions, including $1.1 billion of our entire portfolio of Agency ~~CMBS,~~securities (including Agency RMBS issued by Consolidated SLST), $555.2 million of first loss POs and certain mezzanine securities issued by the Consolidated K-Series, $428.3 million of non-Agency RMBS and ~~ABS during~~$248.7 million of CMBS. The decrease in carrying value was also due to a decline in the ~~period and an increase in~~ fair value of a number of our investment securities ~~partially offset by sales~~since December 31, 2019 as a result of ~~Agency CMBS during~~ the ~~period.~~ongoing pandemic.

Table of Contents

The following tables summarize our investment securities portfolio as of September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively (dollar amounts in thousands):


	September 30, 2020
					Unrealized						Weighted Average
Investment Securities	Current Par Value		Amortized Cost		Gains		Losses		Fair Value		Coupon (1)		Yield (2)		Outstanding Repurchase Agreements
Available for Sale (“AFS”)
Non-Agency RMBS
Senior	$	112,947	$	113,238	$	—	$	(6,457)	$	106,781	4.00	%	4.16	%	$	—
Mezzanine	215,089		212,055		425		(8,884)		203,596		4.04	%	4.60	%	—
Subordinated	78,183		67,876		—		(6,950)		60,926		4.28	%	5.32	%	—
IO	545,549		6,890		153		(2,581)		4,462		0.44	%	5.91	%	—
Total Non-Agency RMBS	951,768		400,059		578		(24,872)		375,765		1.83	%	4.55	%	—
CMBS
Mezzanine	106,153		101,146		4,098		(3,493)		101,751		4.32	%	4.81	%	—
Subordinated	6,000		6,000		—		(960)		5,040		7.97	%	7.97	%	—
IO	12,268,487		77,549		387		(1,802)		76,134		0.10	%	4.71	%	—
Total CMBS	12,380,640		184,695		4,485		(6,255)		182,925		0.14	%	4.84	%	—
ABS
Residuals	113		39,519		5,488		—		45,007		—		11.27	%	—
Total ABS	113		39,519		5,488		—		45,007		—		11.27	%	—
Total - AFS	$	13,332,521	$	624,273	$	10,551	$	(31,127)	$	603,697	0.50	%	5.11	%	$	—
Consolidated SLST
Non-Agency RMBS
Subordinated	$	256,807	$	214,012	$	—	$	(31,901)	$	182,111	4.67	%	4.96	%	$	—
IO	214,548		31,866		—		(3,075)		28,791		3.50	%	8.25	%	—
Total Non-Agency RMBS	471,355		245,878		—		(34,976)		210,902		4.13	%	5.40	%	—
Total - Consolidated SLST	$	471,355	$	245,878	$	—	$	(34,976)	$	210,902	4.13	%	5.40	%	$	—
Total Investment Securities	$	13,803,876	$	870,151	$	10,551	$	(66,103)	$	814,599	0.54	%	5.19	%	$	—

September 30, 2019
Unrealized Weighted Average
Investment Securities Current Par Value Amortized Cost Gains Losses Fair Value
Coupon ⁽¹⁾

Yield ⁽²⁾
Outstanding Repurchase Agreements
Available for Sale (“AFS”)
Agency RMBS

Agency Fixed-Rate $ 866,370
$ 898,806
$ 4,857
$ (6,496 ) $ 897,167
3.38 % 2.68 % $ 785,266
Agency ARMs 57,219
60,135
17
(1,481 ) 58,671
3.22 % 1.73 % 55,598
Total Agency RMBS 923,589
958,941
4,874
(7,977 ) 955,838
3.37 % 2.62 % 840,864
Non-Agency RMBS
Senior 196,784
196,877
1,970
(14 ) 198,833
5.07 % 5.06 % 81,016
Mezzanine 289,210
285,007
7,616
(178 ) 292,445
5.24 % 5.66 % 90,646
Subordinate 119,702
119,655
1,947
—
121,602
6.03 % 6.06 % 38,677
IO 969,116
9,085
267
(704 ) 8,648
0.40 % 5.87 % —
Total Non-Agency RMBS 1,574,812
610,624
11,800
(896 ) 621,528
3.04 % 5.51 % 210,339
Agency CMBS
Senior 20,258
20,258
6
—
20,264
2.71 % 2.71 % —
Mezzanine 250,774
244,463
13,825
(154 ) 258,134
5.14 % 5.49 % 162,245
Total Agency CMBS 271,032
264,721
13,831
(154 ) 278,398
5.11 % 5.45 % 162,245
ABS
Residuals 113
48,557
—
(303 ) 48,254
—
10.39 % —
Total ABS 113
48,557
—
(303 ) 48,254
—
10.39 % —
Total - AFS $ 2,769,546
$ 1,882,843
$ 30,505
$ (9,330 ) $ 1,904,018
3.45 % 3.67 % $ 1,213,448
Consolidated K-Series
Agency CMBS
Senior $ 11,989
$ 12,223
$ 201
$ —
$ 12,424
2.63 % 2.29 % $ —
Mezzanine 92,926
83,055
12,500
—
95,555
4.22 % 5.72 % 75,614
PO 1,176,420
545,138
167,046
—
712,184
—
13.22 % 508,387
IO 9,723,057
64,927
152
(177 ) 64,902
0.10 % 4.61 % 26,461
Total - Consolidated K-Series 11,004,392
705,343
179,899
(177 ) 885,065
0.13 % 11.44 % 610,462
Total Investment Securities $ 13,773,938
$ 2,588,186
$ 210,404
$ (9,507 ) $ 2,789,083
0.69 % 5.80 % $ 1,823,910

(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.


⁽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.~~

Table of Contents


	December 31, 2019
					Unrealized						Weighted Average
Investment Securities	Current Par Value		Amortized Cost		Gains		Losses		Fair Value		Coupon (1)		Yield (2)		Outstanding Repurchase Agreements
Available for Sale (“AFS”)
Agency RMBS
Agency Fixed-Rate	$	836,223	$	867,236	$	7,397	$	(6,162)	$	868,471	3.38	%	2.61	%	$	746,834
Agency ARMs	53,038		55,740		13		(1,347)		54,406		3.21	%	1.68	%	41,765
Total Agency RMBS	889,261		922,976		7,410		(7,509)		922,877		3.37	%	2.55	%	788,599
Agency CMBS
Senior	51,184		51,334		19		(395)		50,958		2.45	%	2.41	%	48,640
Total Agency CMBS	51,184		51,334		19		(395)		50,958		2.45	%	2.41	%	48,640
Total Agency	940,445		974,310		7,429		(7,904)		973,835		3.36	%	2.55	%	837,239
Non-Agency RMBS
Senior	260,604		260,741		1,971		(13)		262,699		4.65	%	4.66	%	194,024
Mezzanine	285,760		281,743		8,713		—		290,456		5.24	%	5.59	%	179,424
Subordinated	150,961		150,888		2,518		(2)		153,404		5.64	%	5.66	%	70,390
IO	842,577		8,211		1,790		(1,246)		8,755		0.42	%	5.93	%	—
Total Non-Agency RMBS	1,539,902		701,583		14,992		(1,261)		715,314		2.68	%	5.26	%	443,838
CMBS
Mezzanine	261,287		254,620		13,300		(143)		267,777		5.00	%	5.37	%	142,230
Total CMBS	261,287		254,620		13,300		(143)		267,777		5.00	%	5.37	%	142,230
ABS
Residuals	113		49,902		—		(688)		49,214		—		10.70	%	—
Total ABS	113		49,902		—		(688)		49,214		—		10.70	%	—
Total - AFS	$	2,741,747	$	1,980,415	$	35,721	$	(9,996)	$	2,006,140	3.25	%	3.71	%	$	1,423,307
Consolidated K-Series
Agency CMBS
Senior	$	86,355	$	88,784	$	—	$	(425)	$	88,359	2.74	%	2.34	%	$	84,544
Total Agency CMBS	86,355		88,784		—		(425)		88,359		2.74	%	2.34	%	84,544
CMBS
Mezzanine	92,926		83,264		12,271		—		95,535		4.21	%	5.70	%	59,579
PO	1,375,874		654,849		169,678		—		824,527		—		13.98	%	571,403
IO	12,364,412		83,960		138		(224)		83,874		0.10	%	4.66	%	38,678
Total CMBS	13,833,212		822,073		182,087		(224)		1,003,936		0.13	%	12.10	%	669,660
Total - Consolidated K-Series	$	13,919,567	$	910,857	$	182,087	$	(649)	$	1,092,295	0.13	%	11.92	%	$	754,204
Consolidated SLST
Agency RMBS
Senior	$	25,902	$	26,227	$	11	$	—	$	26,238	2.83	%	2.53	%	$	24,143

December 31, 2018
Unrealized Weighted Average
Investment Securities Current Par Value Amortized Cost Gains Losses Fair Value
Coupon ⁽¹⁾

Yield ⁽²⁾
Outstanding Repurchase Agreements
Available for Sale (“AFS”)
Agency RMBS
Agency Fixed-Rate $ 965,501
$ 1,002,057
$ —
$ (35,721 ) $ 966,336
3.37 % 2.76 % $ 857,582
Agency ARMs 70,360
73,949
8
(2,563 ) 71,394
2.99 % 1.68 % 67,648
Total Agency RMBS 1,035,861

1,076,006

8

(38,284 ) 1,037,730
3.34 % 2.68 % 925,230
Non-Agency RMBS
Senior 108,138
108,155
—
(470 ) 107,685
4.71 % 4.71 % 80,875
Mezzanine 98,417
97,683
166
(971 ) 96,878
5.16 % 6.42 % 7,855
Subordinate 9,537
9,499
—
(25 ) 9,474
1.43 % 4.34 % —
Total Non-Agency RMBS 216,092
215,337
166
(1,466 ) 214,037
4.87 % 5.92 % 88,730
Agency CMBS
Mezzanine 214,151
204,011
4,150
(376 ) 207,785
5.20 % 5.17 % 117,936
PO 63,873
37,288
13,621
—
50,909
—
13.38 % —
IO 743,446
1,747
44
—
1,791
0.12 % 7.37 % —
Total Agency CMBS 1,021,470
243,046
17,815
(376 ) 260,485
0.63 % 7.31 % 117,936
Total - AFS $ 2,273,423
$ 1,534,389
$ 17,989
$ (40,126 ) $ 1,512,252
2.26 % 3.40 % $ 1,131,896
Consolidated K-Series
Agency CMBS

Mezzanine $ 67,323
$ 58,449
$ 2,780
$ (324 ) $ 60,905
4.01 % 6.13 % $ 47,214
PO 912,922
401,695
155,014
(123 ) 556,586
—
12.93 % 364,467
IO 6,201,542
39,977
190
(59 ) 40,108
0.10 % 4.73 % —
Total - Consolidated K-Series 7,181,787
500,121
157,984
(506 ) 657,599
0.11 % 11.84 % 411,681
Total Investment Securities $ 9,455,210
$ 2,034,510
$ 175,973
$ (40,632 ) $ 2,169,851
0.75 % 5.24 % $ 1,543,577


⁽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.~~

Table of Contents


Total Agency RMBS	25,902		26,227		11		—		26,238		2.83	%	2.53	%	24,143
Non-Agency RMBS
Subordinated	256,093		215,034		—		(275)		214,759		5.62	%	7.23	%	150,448
IO	228,437		35,592		181		—		35,773		3.60	%	8.58	%	—
Total Non-Agency RMBS	484,530		250,626		181		(275)		250,532		4.67	%	7.42	%	150,448
Total - Consolidated SLST	$	510,432	$	276,853	$	192	$	(275)	$	276,770	4.58	%	6.96	%	$	174,591
Total Investment Securities	$	17,171,746	$	3,168,125	$	218,000	$	(10,920)	$	3,375,205	0.69	%	6.02	%	$	2,352,102

(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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Consolidated SLST and Consolidated K-Series

AsConsolidated 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 SLST CDOs issued to permanently finance these residential loans, representing Consolidated SLST.

We do not have any claims to the assets or obligations for the liabilities of Consolidated SLST (other than those securities owned by the Company). Our investment in Consolidated SLST as of September 30, 2020 was limited to the RMBS comprised of first loss subordinated securities and IOs issued by the securitization with an aggregate net carrying value of $210.9 million. In March 2020, we sold our entire investment in the senior securities issued by Consolidated SLST. As of December 31, 2019, our investment in Consolidated SLST was limited to the RMBS comprised of first loss subordinated securities, IOs and senior securities with an aggregate carrying value of $276.8 million.

The following table details the loan characteristics of the underlying residential loans that back our first loss subordinated securities of Consolidated SLST as of September 30, 2020 and December 31, ~~2018, we owned 100%~~2019, respectively (dollar amounts in thousands, except as noted):


	September 30, 2020			December 31, 2019
Current balance of loans	$	1,259,063		$	1,322,131
Number of loans	7,797			8,103
Current average loan size	$	161,480		$	162,804
Weighted average original loan term (in months)	351			351
Weighted average LTV at purchase	67.0		%	66.2		%
Weighted average credit score at purchase	710			711

Current Coupon:
3.00% or less	3.2		%	3.8		%
3.01% – 4.00%	36.3		%	35.2		%
4.01% – 5.00%	40.0		%	40.2		%
5.01% – 6.00%	12.3		%	12.4		%
6.01% and over	8.2		%	8.4		%

Delinquency Status:
Current	64.0		%	47.6		%
31 - 60	13.6		%	35.5		%
61 - 90	8.6		%	13.1		%
90+	13.8		%	3.8		%

Origination Year:
2005 or earlier	31.0		%	30.9		%
2006	15.3		%	15.4		%
2007	20.9		%	20.7		%
2008 or later	32.8		%	33.0		%

Geographic state concentration (greater than 5.0%):
California	10.9		%	11.0		%
Florida	10.5		%	10.6		%
New York	9.2		%	9.1		%
New Jersey	7.0		%	6.9		%
Illinois	6.7		%	6.6		%

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Consolidated K-Series

In March 2020, in response to the market turmoil related to the COVID-19 pandemic, the Company elected to sell its entire portfolio of first loss POs ofand certain mezzanine securities issued by the Consolidated K-Series. The Consolidated K-Series ~~are~~were comprised of multi-family mortgage loans held in, and related debt issued by, ~~twelve and nine~~ Freddie Mac-sponsored multi-family loan K-Series securitizations ~~as of September 30, 2019 and December 31, 2018, respectively,~~ of which we, or one of our SPEs, ~~own~~owned the first loss POs and, in certain cases, IOs and/or senior or mezzanine securities issued by these securitizations. We determined that the securitizations comprising the Consolidated K-Series were VIEs and that we ~~are~~were the primary beneficiary of these securitizations. Accordingly, we ~~are~~were required to consolidate the Consolidated K-Series’ underlying multi-family loans and related debt, income and expense in our condensed consolidated financial statements. The sales of the first loss POs and certain mezzanine securities issued by the Consolidated K-Series, for total proceeds of approximately $555.2 million, resulted in the de-consolidation of each Consolidated K-Series as of the sale date of each first loss PO, a realized net loss on de-consolidation of multi-family loans held in securitization trusts and multi-family collateralized debt obligations of $54.1 million and reversal of previously recognized net unrealized gains of $168.5 million. The sales also resulted in the de-consolidation of $17.4 billion in multi-family loans held in securitization trusts and $16.6 billion in multi-family collateralized debt obligations. Also in March 2020, the Company transferred its remaining IOs and mezzanine and senior securities owned in the Consolidated K-Series with a fair value of approximately $237.3 million to investment securities available for sale.

As of December 31, 2019, we owned 100% of the first loss POs of the Consolidated K-Series. We dodid not have any claims to the assets (other than those securities ~~represented~~owned by ~~our first loss POs, IOs and senior or mezzanine securities)~~the Company) or obligations for the liabilities of the Consolidated K-Series. Our investment in the Consolidated K-Series iswas limited to the ~~Agency~~multi-family CMBS comprised of first loss ~~PO,~~POs, and, in certain cases, IOs, ~~and/or~~ senior or mezzanine securities, issued by these K-Series securitizations with an aggregate net carrying value of ~~$885.1 million and $657.6 million~~$1.1 billion as of ~~September 30, 2019 and~~ December 31, ~~2018, respectively.~~2019.

~~Agency~~Multi-family CMBS - Consolidated K-Series Loan Characteristics:

The following table details the loan characteristics of the underlying multi-family mortgage loans that ~~back~~backed our ~~Agency~~multi-family CMBS first loss POs as of ~~September 30, 2019 and~~ December 31, ~~2018~~2019 (dollar amounts in thousands, except as noted):


	December 31, 2019
Current balance of loans	$	16,759,382
Number of loans	828
Weighted average original LTV	68.2		%
Weighted average underwritten debt service coverage ratio	1.48x
Current average loan size	$	20,241
Weighted average original loan term (in months)	125
Weighted average current remaining term (in months)	84
Weighted average loan rate	4.12		%
First mortgages	100		%
Geographic state concentration (greater than 5.0%):
California	15.9		%
Texas	12.4		%
Florida	6.2		%
Maryland	5.8		%

September 30, 2019 December 31, 2018
Current balance of loans $ 14,727,391
$ 13,593,818
Number of loans 749
773
Weighted average original LTV 68.0 % 68.8 %
Weighted average underwritten debt service coverage ratio 1.47x
1.45x
Current average loan size $ 19,663
$ 19,364
Weighted average original loan term (in months) 125
123
Weighted average current remaining term (in months) 79
64
Weighted average loan rate 4.25 % 4.34 %
First mortgages 100 % 100 %
Geographic state concentration (greater than 5.0%):
California 15.4 % 14.8 %
Texas 12.0 % 13.0 %
Maryland 6.3 % 5.0 %
Florida 5.4 % 4.5 %

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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 repurchase agreement providers dramatically changed their risk tolerances, including reducing or eliminating availability to add or roll maturing repurchase agreements, increased haircuts and reduced security valuations. In turn, this led to significant disruptions in our financing markets, negatively impacting the Company as well as the entire mortgage REIT industry. In response, the Company has completely eliminated its securities repurchase agreement exposure since mid-March. The Company will continue to evaluate the securities repurchase agreement market before increasing its exposure in the future.

The Company ~~finances~~has historically financed its investment securities primarily through repurchase agreements with ~~third party~~third-party financial institutions. These repurchase agreements are short-term ~~borrowings~~financings that bear interest rates typically based on a spread to LIBOR 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 ~~lend~~advance to us. The size of the haircut represents the ~~lender’s~~counterparty’s perceived risk associated with holding the investment securities as collateral. The haircut provides ~~lenders~~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. ~~At each settlement date, we typically refinance each expiring repurchase agreement at the market interest rate at that time.~~

The following table details the quarterly average balance, ending balance and maximum balance at any month-end during each quarter in 2020, 2019 ~~2018~~ and ~~2017~~2018 for our repurchase ~~agreement borrowings~~agreements secured by investment securities (dollar amounts in thousands):


Quarter Ended	Quarterly Average Balance		End of Quarter Balance		Maximum Balance at any Month-End
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

December 31, 2019	2,212,335		2,352,102		2,352,102
September 30, 2019	1,776,741		1,823,910		1,823,910
June 30, 2019	1,749,293		1,843,815		1,843,815
March 31, 2019	1,604,421		1,654,439		1,654,439

December 31, 2018	1,372,459		1,543,577		1,543,577
September 30, 2018	1,144,080		1,130,659		1,163,683
June 30, 2018	1,230,648		1,179,961		1,279,121
March 31, 2018	1,287,939		1,287,314		1,297,949

Quarter Ended
Quarterly Average
Balance

End of Quarter
Balance

Maximum Balance
at any Month-End
September 30, 2019 $ 1,776,741

$ 1,823,910

$ 1,823,910
June 30, 2019 1,749,293
1,843,815
1,843,815
March 31, 2019 1,604,421
1,654,439
1,654,439

December 31, 2018 1,372,459
1,543,577
1,543,577
September 30, 2018 1,144,080
1,130,659
1,163,683
June 30, 2018 1,230,648
1,179,961
1,279,121
March 31, 2018 1,287,939
1,287,314
1,297,949

December 31, 2017 1,224,771
1,276,918
1,276,918
September 30, 2017 624,398
608,304
645,457
June 30, 2017 688,853
656,350
719,222
March 31, 2017 702,675
702,309
762,382

Securitized Debt

~~As of December 31, 2018,~~In June 2020, the Company ~~had securitized~~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 ~~Agency CMBS first loss POs and IOs in a multi-family CMBS re-securitization transaction.~~non-Agency RMBS portfolio. The ~~Company’s~~Company received net ~~investment in this re-securitization was the maximum amount~~cash proceeds of ~~the Company’s investment that was at risk to loss and represented the difference between the carrying amount of the net assets and liabilities~~approximately $109.0 million after deducting expenses associated with the ~~Agency CMBS first loss POs and IOs held in the re-securitization.~~re-securitization transaction. The Company had a net investment in the re-securitization of ~~$93.1~~$93.3 million as of September 30, 2020.

The following table summarizes the Company’s securitized debt collateralized by non-Agency RMBS as of September 30, 2020 (dollar amounts in thousands):


	Principal Amount		Carrying Value (1)		Pass-through Rate of Notes Issued (2)
Non-Agency RMBS re-securitization	$	89,916	$	88,791	One-month LIBOR plus 5.25%

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(2)Represents the pass-through rate through the payment date in December 2021. Pass-through rate increases to one-month LIBOR plus 7.75% for payment dates in or after January 2022.

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Residential Loans

As of September 30, 2020, all of Company’s acquired residential loans, including distressed residential loans, non-QM loans, second mortgages and residential bridge loans, are presented at fair value on its 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 table details our distressed residential and other residential loans at September 30, 2020 and December 31, 2019, respectively (dollar amounts in thousands):


	September 30, 2020					December 31, 2019
	Number of Loans	Unpaid Principal		Carrying Value		Number of Loans	Unpaid Principal		Carrying Value
Distressed Residential Loans (1)	6,632	$	981,025	$	954,725	7,713	$	1,131,855	$	1,098,867
Other Residential Loans (2)	2,873	$	598,192	$	578,059	2,700	$	547,379	$	533,643

(1)As of December 31, 2019, the Company had 5,696 distressed residential loans with aggregate unpaid principal of $964.8 million and an aggregate carrying value of $940.1 million accounted for at fair value. The Company also had 2,017 distressed residential loans with aggregate unpaid principal of $167.0 million and an aggregate carrying value of $158.7 million accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality as of December 31, ~~2018.~~2019.

(2)As of December 31, 2019, the Company had 2,534 other residential loans with an aggregate unpaid principal balance of $500.1 million and an aggregate carrying value of $489.6 million accounted for at fair value. The ~~interest rate on the multi-family CMBS re-securitization was 5.35%~~Company also had 166 residential loans held in securitization trusts with an aggregate unpaid principal balance of $47.2 million and an aggregate carrying value of $44.0 million accounted for at amortized cost as of December 31, ~~2018. In March 2019,~~2019.

Characteristics of Our Residential Loans:


Loan to Value at Purchase (1)	September 30, 2020		December 31, 2019
50.00% or less	14.7	%	15.4	%
50.01% - 60.00%	12.0	%	12.6	%
60.01% - 70.00%	19.9	%	17.9	%
70.01% - 80.00%	19.9	%	18.5	%
80.01% - 90.00%	13.6	%	14.5	%
90.01% - 100.00%	9.8	%	10.0	%
100.01% and over	10.1	%	11.1	%
Total	100.0	%	100.0	%

(1)For second mortgages, the Company ~~exercised its option~~calculates the combined loan to ~~redeem~~value. For residential bridge loans, the ~~notes issued by this multi-family CMBS re-securitization with an outstanding~~Company calculates as the ratio of the maximum unpaid principal balance of ~~$33.2 million resulting in a loss on extinguishment~~the loan, including unfunded commitments, to the estimated “after repaired” value of ~~debt of $2.9 million.~~the collateral securing the related loan.


FICO Scores at Purchase	September 30, 2020		December 31, 2019
550 or less	21.9	%	22.1	%
551 to 600	19.5	%	20.4	%
601 to 650	16.9	%	17.1	%
651 to 700	14.8	%	14.2	%
701 to 750	12.1	%	12.1	%
751 to 800	10.9	%	10.4	%
801 and over	3.9	%	3.7	%
Total	100.0	%	100.0	%

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Current Coupon	September 30, 2020		December 31, 2019
3.00% or less	5.5	%	5.1	%
3.01% - 4.00%	21.4	%	17.1	%
4.01% - 5.00%	35.4	%	38.4	%
5.01% – 6.00%	14.0	%	18.1	%
6.01% and over	23.7	%	21.3	%
Total	100.0	%	100.0	%


Delinquency Status	September 30, 2020		December 31, 2019
Current	83.6	%	80.8	%
31 – 60 days	4.3	%	6.4	%
61 – 90 days	2.2	%	2.6	%
90+ days	9.9	%	10.2	%
Total	100.0	%	100.0	%


Origination Year	September 30, 2020		December 31, 2019
2007 or earlier	55.5	%	59.3	%
2008 - 2016	10.8	%	13.8	%
2017	4.8	%	6.1	%
2018	9.8	%	11.0	%
2019	15.1	%	9.8	%
2020	4.0	%	—
Total	100.0	%	100.0	%

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Residential Loan Financing

Repurchase Agreements

As of September 30, 2020, the Company has repurchase agreements with three third-party financial institutions to fund the purchase of residential loans, including both first and second mortgages. The following table presents detailed information about these repurchase agreements and associated assets pledged as collateral at September 30, 2020 and December 31, 2019, respectively (dollar amounts in thousands):


	Maximum Aggregate Uncommitted Principal Amount		Outstanding Repurchase Agreements		Carrying Value of Loans Pledged (1)		Weighted Average Rate		Weighted Average Months to Maturity (2)
September 30, 2020	$	1,247,483	$	673,787	$	938,572	2.46	%	2.96
December 31, 2019	$	1,200,000	$	754,132	$	961,749	3.67	%	11.20

(2)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 2020, 2019 and 2018 for our repurchase agreements secured by residential loans, including both first and second mortgages (dollar amounts in thousands):


Quarter Ended	Quarterly Average Balance		End of Quarter Balance		Maximum Balance at any Month-End
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

December 31, 2019	764,511		754,132		774,666
September 30, 2019	745,972		736,348		755,299
June 30, 2019	705,817		761,361		761,361
March 31, 2019	595,897		619,605		619,605

December 31, 2018	301,956		589,148		589,148
September 30, 2018	179,241		177,378		181,574
June 30, 2018	176,951		192,553		197,263
March 31, 2018	150,537		149,535		153,236

Residential Collateralized Debt Obligations

Included in our portfolio are residential loans held in securitization trusts that are pledged as collateral for the Residential CDOs issued by the Company. As of September 30, 2020 and December 31, 2019, we had Residential CDOs outstanding of $268.8 million and $40.4 million, respectively. The Company’s net investment in the residential securitization trusts, which is the maximum amount of the Company’s investment that is at risk to loss and represents the difference between (i) the carrying amount of the residential loans, real estate owned and receivables held in residential securitization trusts and (ii) the amount of Residential CDOs outstanding, was $98.0 million and $4.9 million as of September 30, 2020 and December 31, 2019, respectively. As of September 30, 2020 and December 31, 2019, the weighted average interest rate of these Residential CDOs was 3.57% and 2.41%, respectively.

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Multi-Family Preferred Equity and Mezzanine Loan Investments

The Company invests in preferred equity ofin, and mezzanine loans to, entities that have significant multi-family real estate assets (referred to in this section as “Preferred Equity and Mezzanine Loans”). 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 Preferred Equity and Mezzanine Loans for accounting treatment as loans versus equity ~~investment.~~investments. Preferred Equity and Mezzanine Loans, for which the characteristics, facts and circumstances indicate that loan accounting treatment is appropriate are included in preferred equity and mezzanine loan investments on our condensed consolidated balance sheets. Preferred Equity and Mezzanine Loans 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 investments in unconsolidated entities on our condensed consolidated balance sheets.

As of September 30, ~~2019, all~~2020, one preferred equity investment representing 1% of the total fair value of our Preferred Equity and Mezzanine Loans ~~were paying in accordance with their contractual terms. During~~was greater than 90 days delinquent.

As of January 1, 2020, the ~~three and nine months ended September 30, 2019, there were no impairments with respect~~Company has elected to ~~our~~account for its Preferred Equity and Mezzanine ~~Loans.~~

Loans using the fair value option. Accordingly, balances presented below as of September 30, 2020 are stated at fair value. The following tables summarize our Preferred Equity and Mezzanine Loans as of September 30, ~~2019~~2020 and December 31, ~~2018~~2019, respectively (dollar amounts in thousands):


	September 30, 2020
	Count	Fair Value (1) (2)		Investment Amount (2)		Weighted Average Interest or Preferred Return Rate (3)		Weighted Average Remaining Life (Years)
Preferred equity investments	47	$	323,536	$	332,556	11.45	%	6.8
Mezzanine loans	2	4,868		5,176		11.58	%	30.4
Total	49	$	328,404	$	337,732	11.45	%	7.1


	December 31, 2019
	Count	Carrying Amount (1) (2)		Investment Amount (2)		Weighted Average Interest or Preferred Return Rate (3)		Weighted Average Remaining Life (Years)
Preferred equity investments	42	$	279,908	$	282,064	11.39	%	7.8
Mezzanine loans	3	6,220		6,235		11.95	%	25.8
Total	45	$	286,128	$	288,299	11.40	%	8.2

(1)Preferred equity and mezzanine loan investments in the amounts of $183.2 million and $180.0 million are included in preferred equity and mezzanine loan investments on the accompanying condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019, respectively. Preferred equity investments in the amounts of $145.3 million and $106.1 million are included in investments in unconsolidated entities on the accompanying condensed consolidated balance sheets as of September 30, 2020 and December 31, 2019, respectively.

(2)The difference between the fair value and investment amount as of September 30, 2020 consists of any unamortized premium or discount, deferred fees or deferred expenses, and any unrealized gain or loss. The difference between the carrying amount and the investment amount as of December 31, 2019 consists of any unamortized premium or discount, deferred fees or deferred expenses.

(3)Based upon investment amount and contractual interest or preferred return rate.

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September 30, 2019
Count
Carrying Amount ^{(1) (2)}

Investment Amount ⁽²⁾

Weighted Average Interest or Preferred Return Rate ⁽³⁾
Weighted Average Remaining Life (Years)
Preferred equity investments 41
$ 265,510
$ 267,571
11.41 % 7.8
Mezzanine loans 3
6,171
6,186
11.96 % 26.0
Total 44
$ 271,681
$ 273,757
11.42 % 8.2

December 31, 2018
Count
Carrying Amount ^{(1) (2)}

Investment Amount ⁽²⁾

Weighted Average Interest or Preferred Return Rate ⁽³⁾
Weighted Average Remaining Life (Years)
Preferred equity investments 28
$ 195,101
$ 196,464
11.59 % 7.2
Mezzanine loans 4
10,926
10,970
12.29 % 17.5
Total 32
$ 206,027
$ 207,434
11.62 % 7.8

⁽¹⁾

Preferred equity and mezzanine loan investments in the amounts of $179.0 million and $165.6 million are included in preferred equity and mezzanine loan investments on the accompanying condensed consolidated balance sheets as of September 30, 2019 and December 31, 2018, respectively. Preferred equity investments in the amounts of $92.7 million and $40.5 million are included in investments in unconsolidated entities on the accompanying condensed consolidated balance sheets as of September 30, 2019 and December 31, 2018, respectively.


⁽²⁾	~~The difference between the carrying amount and the investment amount consists of any unamortized premium or discount, deferred fees or deferred expenses.~~


⁽³⁾	~~Based upon investment amount and contractual interest or preferred return rate.~~

Preferred Equity and Mezzanine Loans Characteristics:


Combined Loan to Value at Investment	September 30, 2020		December 31, 2019
60.01% - 70.00%	9.6	%	—
70.01% - 80.00%	19.6	%	23.4	%
80.01% - 90.00%	69.1	%	76.6	%
90.01% - 100.00%	1.7	%	—
Total	100.0	%	100.0	%

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Combined Loan to Value at Investment September 30, 2019 December 31, 2018
70.01% - 80.00% 22.7 % 8.5 %
80.01% - 90.00% 77.3 % 91.5 %
Total 100.0 % 100.0 %

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Equity Investments in Multi-Family and Residential Entities

Multi-Family Joint Venture Equity Investments

The ~~Company has invested in~~Company's joint venture equity ~~investments~~investment in ~~entities~~an entity that ~~own~~owned a multi-family real estate ~~assets.~~asset was redeemed during the three months ended September 30, 2020. We ~~receive~~received variable distributions from ~~these investments~~this investment on a pari passu basis based upon property performance and ~~record~~recorded our ~~positions~~position at fair value. The following table summarizes our multi-family joint venture equity ~~investments~~investment as of ~~September 30, 2019 and~~ December 31, ~~2018, respectively~~2019 (dollar amounts in thousands):

December 31, 2019

Property Location

Ownership Interest

Fair Value

The Preserve at Port Royal Venture, LLC (1)

Port Royal, SC

77%

18,310

September 30, 2019 December 31, 2018
Property Location Ownership Interest Carrying Amount Ownership Interest Carrying Amount
Evergreens JV Holdings, LLC ⁽¹⁾
Durham, NC — $ —
85% $ 8,200
The Preserve at Port Royal Venture, LLC Port Royal, SC 77% 14,470
77% 13,840
Total $ 14,470
$ 22,040
(1)The Company's joint venture equity investment was redeemed during the three months ended September 30, 2020.


⁽¹⁾	~~The Company's equity investment was redeemed during the~~ ~~nine months endedSeptember 30, 2019~~.

Equity Investments in Entities ~~That~~that Invest Inin Residential Properties and ~~Mortgage~~ Loans

The Company has ownership interests in entities that invest in residential properties and ~~mortgage~~ loans. We may receive variable distributions from these investments based upon underlying asset performance and record our positions at fair value. The following table summarizes our ownership interests in entities that invest in residential properties and ~~mortgage~~ loans ~~(dollar amounts in thousands):~~

September 30, 2019 December 31, 2018
Strategy Ownership Interest Carrying Amount Ownership Interest Carrying Amount
Morrocroft Neighborhood Stabilization Fund II, LP Single-Family Rental Properties 11% $ 11,564
11% $ 10,954
Headlands Asset Management Fund III (Cayman), LP (Headlands Flagship Opportunity Fund Series I) Residential Mortgage Loans 49% 50,215
— —
Total $ 61,779
$ 10,954

~~Table~~as of ~~Contents~~

~~Distressed and Other Residential Mortgage Loans, at Fair Value~~

Certain of the Company’s acquired residential mortgage loans, including distressed residential mortgage loans, non-QM loans and second mortgages, are presented at fair value on its condensed consolidated balance sheets as a result of a fair value election made at the time of acquisition pursuant to ASC 825, ~~Financial Instruments. 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 table details our residential and other mortgage loans, at fair value at~~ September 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively (dollar amounts in thousands):


		September 30, 2020			December 31, 2019
	Strategy	Ownership Interest	Fair Value		Ownership Interest	Fair Value
Morrocroft Neighborhood Stabilization Fund II, LP	Single-Family Rental Properties	11%	$	12,602	11%	$	11,796
Headlands Asset Management Fund III (Cayman), LP (Headlands Flagship Opportunity Fund Series I)	Residential Loans	49%	60,854		49%	53,776
Total			$	73,456		$	65,572

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September 30, 2019 December 31, 2018
Number of Loans Unpaid Principal Fair Value Number of Loans Unpaid Principal Fair Value
Distressed Residential Mortgage Loans 4,686
$ 790,181
$ 761,900
3,352
$ 627,092
$ 576,816
Other Residential Mortgage Loans 2,096
$ 359,995
$ 354,228
1,539
$ 161,280
$ 160,707

~~Characteristics of Our Distressed and Other Residential Mortgage Loans, at Fair Value:~~

Loan to Value at Purchase ⁽¹⁾
September 30, 2019 December 31, 2018
50.00% or less 17.7 % 18.5 %
50.01% - 60.00% 12.5 % 13.6 %
60.01% - 70.00% 16.6 % 14.5 %
70.01% - 80.00% 17.8 % 15.9 %
80.01% - 90.00% 16.0 % 15.4 %
90.01% - 100.00% 10.1 % 9.3 %
100.01% and over 9.3 % 12.8 %
Total 100.0 % 100.0 %


⁽¹⁾	~~For second mortgages, the Company calculates the combined loan to value.~~

FICO Scores at Purchase September 30, 2019 December 31, 2018
550 or less 22.0 % 26.0 %
551 to 600 21.0 % 21.9 %
601 to 650 16.8 % 17.3 %
651 to 700 14.9 % 12.7 %
701 to 750 11.9 % 10.3 %
751 to 800 9.2 % 7.8 %
801 and over 4.2 % 4.0 %
Total 100.0 % 100.0 %

Current Coupon September 30, 2019 December 31, 2018
3.00% or less 4.8 % 8.6 %
3.01% - 4.00% 18.3 % 16.1 %
4.01% - 5.00% 38.1 % 35.2 %
5.01% – 6.00% 22.0 % 19.0 %
6.01% and over 16.8 % 21.1 %
Total 100.0 % 100.0 %

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Delinquency Status September 30, 2019 December 31, 2018
Current 83.5 % 71.8 %
31 – 60 days 6.5 % 6.4 %
61 – 90 days 2.4 % 12.3 %
90+ days 7.6 % 9.5 %
Total 100.0 % 100.0 %

Origination Year September 30, 2019 December 31, 2018
2005 or earlier 20.6 % 23.8 %
2006 14.2 % 16.0 %
2007 24.0 % 27.4 %
2008 or later 41.2 % 32.8 %
Total 100.0 % 100.0 %

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~~Distressed and Other Residential Mortgage Loans, Net~~

~~Distressed Residential Mortgage Loans accounted for under ASC 310-30:~~

Certain of the distressed residential mortgage loans acquired by the Company at a discount, with evidence of credit deterioration since their origination and where it is probable that the Company will not collect all contractually required principal payments, are accounted for under ASC 310-30, ~~Loans and Debt Securities Acquired with Deteriorated Credit Quality~~ ("ASC 310-30"). Management evaluates whether there is evidence of credit quality deterioration as of the acquisition date using indicators such as past due or modified status, risk ratings, recent borrower credit scores and recent loan-to-value percentages.

~~The following table details our portfolio of distressed residential mortgage loans at carrying value at September 30, 2019 and December 31, 2018, respectively (dollar amounts in thousands):~~

Number of
Loans
Unpaid Principal Carrying Value
September 30, 2019 2,080
$ 173,325
$ 164,794
December 31, 2018 2,702
$ 242,007
$ 228,466

~~Characteristics of Distressed Residential Mortgage Loans accounted for under ASC 310-30:~~

Loan to Value at Purchase September 30, 2019 December 31, 2018
50.00% or less 4.6 % 3.9 %
50.01% - 60.00% 5.0 % 4.8 %
60.01% - 70.00% 6.7 % 7.6 %
70.01% - 80.00% 14.1 % 12.4 %
80.01% - 90.00% 14.6 % 13.7 %
90.01% - 100.00% 15.8 % 15.0 %
100.01% and over 39.2 % 42.6 %
Total 100.0 % 100.0 %

FICO Scores at Purchase September 30, 2019 December 31, 2018
550 or less 22.1 % 20.3 %
551 to 600 31.5 % 30.5 %
601 to 650 29.0 % 29.3 %
651 to 700 11.5 % 12.3 %
701 to 750 4.2 % 5.3 %
751 to 800 1.5 % 1.9 %
801 and over 0.2 % 0.4 %
Total 100.0 % 100.0 %

Current Coupon September 30, 2019 December 31, 2018
3.00% or less 6.2 % 7.9 %
3.01% - 4.00% 6.4 % 8.5 %
4.01% - 5.00% 22.2 % 21.2 %
5.01% – 6.00% 13.3 % 13.6 %
6.01% and over 51.9 % 48.8 %
Total 100.0 % 100.0 %

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Delinquency Status September 30, 2019 December 31, 2018
Current 67.0 % 65.7 %
31 – 60 days 6.8 % 10.6 %
61 – 90 days 3.0 % 4.5 %
90+ days 23.2 % 19.2 %
Total 100.0 % 100.0 %

Origination Year September 30, 2019 December 31, 2018
2005 or earlier 30.4 % 29.2 %
2006 17.4 % 17.9 %
2007 30.8 % 32.1 %
2008 or later 21.4 % 20.8 %
Total 100.0 % 100.0 %

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~~Distressed and Other Residential Loans Financing~~

~~Repurchase Agreements~~

The Company has master repurchase agreements with two third party financial institutions to fund the purchase of distressed and other residential mortgage loans, including both first and second mortgages. The following table presents detailed information about the Company’s borrowings under repurchase agreements and associated assets pledged as collateral at September 30, 2019 and December 31, 2018 (dollar amounts in thousands):

Maximum Aggregate Uncommitted Principal Amount
Outstanding
Repurchase Agreements
Carrying Value of Loans Pledged Weighted Average Rate Weighted Average Months to Maturity
September 30, 2019 $ 950,000
$ 736,348
$ 937,682
4.05 % 4.00
December 31, 2018 $ 950,000
$ 589,148
$ 754,352
4.67 % 9.24

~~The Company expects to roll outstanding borrowings under these master repurchase agreements into new repurchase agreements or other financings 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 2019, 2018 and 2017 for our repurchase agreement borrowings secured by distressed and other residential mortgage loans, including both first and second mortgages (dollar amounts in thousands):

Quarter Ended
Quarterly Average
Balance

End of Quarter
Balance

Maximum Balance
at any Month-End
September 30, 2019 $ 745,972
$ 736,348
$ 755,299
June 30, 2019 705,817
761,361
761,361
March 31, 2019 595,897
619,605
619,605

December 31, 2018 301,956
589,148
589,148
September 30, 2018 179,241
177,378
181,574
June 30, 2018 176,951
192,553
197,263
March 31, 2018 150,537
149,535
153,236

December 31, 2017 151,523
149,715
159,708
September 30, 2017 160,546
161,006
169,099
June 30, 2017 172,221
175,597
175,597
March 31, 2017 185,047
173,283
191,510

~~Securitized Debt~~

As of December 31, 2018, $88.1 million of distressed residential mortgage loans were held in a securitization trust and were pledged as collateral for certain of the securitized debt issued by the Company. As of December 31, 2018, the interest rate on the distressed residential mortgage loan securitization trust was 4.0%. The Company’s net investment in this securitization trust was the maximum amount of the Company’s investment that was at risk to loss and represented the difference between the carrying amount of the net assets and liabilities associated with the distressed residential mortgage loans held in securitization trusts. The Company had a net investment in these securitization trusts of $85.7 million as of December 31, 2018. In March 2019, the Company repaid $6.5 million in outstanding notes from this securitization and distressed residential mortgage loans with a carrying value of $80.0 million became unencumbered.

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~~Residential Mortgage Loans Held in Securitization Trusts, Net and Residential CDOs~~

~~Residential Mortgage Loans Held in Securitization Trusts, Net~~

Included in our portfolio are prime ARM loans that we originated or purchased in bulk from third parties that met our investment criteria and portfolio requirements and that we subsequently securitized in 2005. The following table details our residential mortgage loans held in securitization trusts at September 30, 2019 and December 31, 2018, respectively (dollar amounts in thousands):

Number of Loans
Unpaid
Principal
Carrying Value
September 30, 2019 171
$ 48,869
$ 45,672
December 31, 2018 196
$ 60,171
$ 56,795

Of the residential mortgage loans held in securitization trusts, 100% are traditional ARMs or hybrid ARMs, 80.7% of which were ARM loans that were interest only at the time of origination. With respect to the hybrid ARMs included in these securitizations, interest rate reset periods were predominately five years or less and the interest-only period is typically nine years, which mitigates the “payment shock” at the time of interest rate reset. None of the residential mortgage loans held in securitization trusts are pay option-ARMs or ARMs with negative amortization. As of September 30, 2019, the interest only period for the interest only ARM loans included in these securitizations has ended.

~~Characteristics of Our Residential Mortgage Loans Held in Securitization Trusts:~~

The following table sets forth the composition of our residential mortgage loans held in securitization trusts as of September 30, 2019 and December 31, 2018, respectively (dollar amounts in thousands):

September 30, 2019 December 31, 2018
Average High Low Average High Low
General Loan Characteristics:
Original Loan Balance $ 414
$ 2,850
$ 48
$ 425
$ 2,850
$ 48
Current Coupon Rate 4.87 % 6.88 % 3.00 % 4.75 % 6.63 % 3.00 %
Gross Margin 2.36 % 4.13 % 1.25 % 2.36 % 4.13 % 1.13 %
Lifetime Cap 11.32 % 12.63 % 9.38 % 11.32 % 12.63 % 9.38 %
Original Term (Months) 360
360
360
360
360
360
Remaining Term (Months) 188
195
154
197
204
163
Average Months to Reset 5
11
1
5
11
1
Original FICO Score 727
818
603
725
818
603
Original LTV 70.45 % 95.00 % 16.28 % 70.54 % 95.00 % 16.28 %

~~Residential Collateralized Debt Obligations~~

All of the Company’s residential mortgage loans held in securitization trusts are pledged as collateral for residential CDOs issued by the Company. The Company retained the owner trust certificates, or residual interest, in three securitization trusts. As of September 30, 2019 and December 31, 2018, we had residential CDOs outstanding of $42.1 million and $53.0 million, respectively. The Company’s net investment in the residential securitization trusts, which is the maximum amount of the Company’s investment that is at risk to loss and represents the difference between (i) the carrying amount of the mortgage loans, real estate owned and receivables held in residential securitization trusts and (ii) the amount of residential CDOs outstanding, was $4.8 million as of September 30, 2019 and December 31, 2018. As of September 30, 2019 and December 31, 2018, the weighted average interest rate of these residential CDOs was 2.64% and 3.12%, respectively.

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Derivative Assets and Liabilities

The Company enters into derivative instruments in connection with its risk management activities. These derivative instruments may include interest rate swaps, swaptions, futures, options on futures and mortgage derivatives such as forward-settling purchases and sales of Agency RMBS where the underlying pools of mortgage loans are "To-Be-Announced," or TBAs.

Our ~~current~~ derivative instruments ~~are~~were comprised of interest rate ~~swaps. We use interest rate~~ swaps that we used to hedge variable cash flows associated with our variable rate borrowings. We typically ~~pay~~paid a fixed rate and ~~receive~~received a floating rate based on one- or three- month LIBOR, on the notional amount of the interest rate swaps. The floating rate we ~~receive~~received under our swap agreements ~~has~~had the effect of offsetting the repricing characteristics and cash flows of our financing arrangements. ~~For~~

In March 2020, in response to the turmoil in the financial markets, we terminated our interest rate swaps, recognizing a realized loss of $73.1 million which was partially offset by a reversal of $29.0 million in unrealized losses, resulting in a total net loss of $44.1 million for the nine months ended September 30, 2020. We did not recognize any realized gains or losses and unrealized gains and losses during the three months ended September 30, 2020.

We did not recognize any realized gains or losses during the three and nine months ended September 30, 2019. We recognized unrealized losses of $12.6 million and $42.2 million on our interest rate swaps for the three and nine months ended September 30, 2019, ~~we recognized unrealized losses on our interest rate swaps of $12.6 million and $42.2 million,~~ respectively. Unrealized gains and losses include the change in market value, period over period, generally as a result of changes in interest ~~rates. We may or may not ultimately realize these unrealized derivative losses depending upon trade activity, changes in interest~~ rates and ~~the values~~reversals of ~~the underlying securities.~~previously recognized unrealized gains or losses upon termination.

Derivative financial instruments may contain credit risk to the extent that the institutional counterparties may be unable to meet the terms of the agreements. ~~Currently, all~~All of the Company's interest rate swaps ~~outstanding are~~were cleared through CME Group Inc. ("CME Clearing") which is the parent company of the Chicago Mercantile Exchange Inc. CME Clearing serves as the counterparty to every cleared transaction, becoming the buyer to each seller and the seller to each buyer, limiting the credit risk by guaranteeing the financial performance of both parties and netting down exposures.

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Debt

The Company's debt as of September 30, ~~2019~~2020 included Convertible Notes and subordinated ~~debentures and mortgages and notes payable in consolidated variable interest entities.~~debentures.

Convertible Notes

Subordinated Debentures

As of September 30, ~~2019,~~2020, certain of our wholly-owned subsidiaries had trust preferred securities outstanding of $45.0 million with a weighted average interest rate of ~~6.13%.~~4.08% 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.

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Balance Sheet Analysis - Company's Stockholders’ Equity

The Company's stockholders' equity at September 30, ~~2019~~2020 was ~~$1.8~~$2.3 billion and included ~~$21.9~~$11.9 million of accumulated other comprehensive loss. The accumulated other comprehensive loss at September 30, 2020 consisted primarily of $12.6 million in net unrealized losses related to our non-Agency RMBS and $0.6 million in net unrealized gains related to our CMBS. The Company's stockholders’ equity at December 31, 2019 was $2.2 billion and included $25.1 million of accumulated other comprehensive income. The accumulated other comprehensive income at ~~September 30,~~December 31, 2019 consisted primarily of ~~$13.7~~$12.6 million in net unrealized gains related to our CMBS and ~~$11.3~~$12.5 million in net unrealized gains related to our non-Agency ~~RMBS, partially offset by $3.1 million in net unrealized losses related to our Agency~~ RMBS. The Company's stockholders’ equity at December 31, 2018 was $1.2 billion and included $22.1 million of accumulated other comprehensive loss. The accumulated other comprehensive loss at December 31, 2018 consisted of $38.3 million in unrealized losses related to our Agency RMBS and $1.2 million in net unrealized losses related to our non-Agency RMBS, partially offset by $17.4 million in net unrealized gains related to our CMBS.

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~~Significant Estimates and Critical Accounting Policies~~

We prepare our consolidated financial statements in conformity with GAAP, which requires the use of estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based, in part, on our judgment and assumptions regarding various economic conditions that we believe are reasonable based on facts and circumstances existing at the time of reporting. We believe that the estimates, judgments and assumptions utilized in the preparation of our consolidated financial statements are prudent and reasonable. Although our estimates contemplate current conditions 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 at the date of the consolidated financial statements and the reported amounts of income, expenses and other comprehensive income during the periods presented.

Accounting policies and estimates related to specific components of our consolidated financial statements are disclosed in the notes to our consolidated financial statements. A discussion of the critical accounting policies and the possible effects of changes in estimates on our consolidated financial statements is included in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2018 and under “Note 2 – Summary of Significant Accounting Policies” to the consolidated financial statements included therein.

~~Recent Accounting Pronouncements~~

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Liquidity and Capital Resources

General

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain investments, comply with margin requirements, fund our operations, pay ~~management and incentive fees, pay~~ dividends to our stockholders and other general business needs. ~~Our~~Generally, our investments and assets ~~excluding the Agency CMBS first loss POs we invest in,~~ generate liquidity on an ongoing basis through principal and interest payments, prepayments, net earnings retained prior to payment of dividends and distributions from unconsolidated investments. ~~Our~~In addition, we may generate liquidity through the sale of assets from our investment portfolio.

As discussed throughout this Quarterly Report on Form 10-Q, the COVID-19 pandemic driven disruptions in the real estate, mortgage and financial markets have negatively affected and may negatively affect our liquidity in the future. In March 2020, we observed a mark-down of a portion of our assets by the counterparties to our repurchase agreements, resulting in us having to pay cash or additional securities to counterparties to satisfy margin calls that were well beyond historical norms. To conserve capital, protect assets and to pause the escalating negative impacts caused by the market dislocation and allow the markets for many of our assets to stabilize, on March 23, 2020, we notified our repurchase agreement counterparties that we did not expect to fund the existing and anticipated future margin calls under our repurchase agreements and commenced discussions with our counterparties with regard to entering into forbearance agreements.

In response to these conditions, we have focused on improving liquidity and long-term capital preservation by taking the actions described below. Starting March 23, 2020 and through the period ended June 30, 2020, we sold a total of $2.1 billion in assets, including the sale of 100% of our Agency ~~CMBS~~securities portfolio, all of our first loss multi-family POs and a portion of our non-Agency RMBS, CMBS and residential loan portfolios for proceeds of $1.1 billion, $555.2 million, $168.8 million, $138.1 million and $93.8 million, respectively. By April 7, 2020, we were again current with our repurchase payment obligations and no longer in a position to need forbearance agreements from our repurchase agreement counterparties. During the third quarter of 2020, we selectively disposed of non-Agency RMBS and CMBS for proceeds of $370.2 million. Moreover, during the second and third quarters of 2020, we completed two securitization transactions generating proceeds to us of $350.1 million. We used the proceeds from these sales and securitization transactions to pay down our repurchase agreement financing, reducing our portfolio leverage to 0.3 times as of September 30, 2020. At September 30, 2020, we had $649.8 million of cash and cash equivalents, $682.8 million of unencumbered securities (including Consolidated SLST), $238.7 million of unencumbered residential loans and $328.4 million of unencumbered preferred equity investments in and mezzanine loans to owners of multi-family properties.

Both of our residential and multi-family asset management teams have been active in responding to the government assistance programs instituted in response to the impacts of the COVID-19 pandemic providing relief to residential and multi-family loan borrowers. At this time, we are ~~backed by balloon non-recourse mortgage loans~~endeavoring to work with any of our borrowers or operating partners that ~~provide~~require relief because of the pandemic. As of September 30, 2020, approximately 2% of our residential loan portfolio has an active COVID-19 assistance plan. We have a long history of dealing with distressed borrowers and currently do not expect these levels of forbearance to have a material impact on our liquidity. In our multi-family portfolio, only one operating partner, representing 1% of our total preferred equity and mezzanine loan investment portfolio, is delinquent in making its distribution to us. Although we did not see an increase in forbearance and delinquency rates in our portfolio during the quarter ended September 30, 2020, we expect delinquencies, defaults and requests for ~~the payment~~forbearance arrangements to rise as savings, incomes and revenues of ~~principal at maturity date, which is typically ten to fifteen years~~borrowers, operating partners and other businesses become increasingly constrained from the ~~date~~slow-down in economic activity caused by the ~~underlying mortgage loans are originated,~~COVID-19 pandemic and/or the reduction or elimination of current unemployment benefits or other policies intended to help keep borrowers and ~~therefore do~~renters in their residence. We cannot assure you that any increase in or prolonged period of payment deferrals, forbearance, delinquencies, defaults, foreclosures or losses will not ~~directly contribute to monthly cash flows. In addition,~~adversely affect our net interest income, the ~~Company will, from time to time, sell on an opportunistic basis certain~~fair value of our assets ~~from its investment portfolio as part of its overall investment strategy and these sales are expected to provide additional~~or our liquidity.

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We historically have endeavored to fund our investments and operations through a balanced and diverse funding mix, ~~which includes~~including proceeds from the issuance of common and preferred equity and debt securities, ~~including convertible notes,~~ short-term and longer-term repurchase ~~agreement borrowings,~~agreements, CDOs, securitized debt and trust preferred debentures. The type and terms of financing used by us depends on the asset being financed and the financing available at the time of the financing. ~~In those cases where~~As discussed above, as a result of the severe market dislocations related to the COVID-19 pandemic and, more specifically, the unprecedented illiquidity in our repurchase agreement financing and MBS markets, looking forward, we ~~utilize some form~~expect to place a greater emphasis on procuring stable, longer-termed financing, such as securitizations and other term financings, that provide less or no exposure to fluctuations in the collateral repricing determinations of ~~structured~~ financing ~~be it through CDOs,~~counterparties or rapid liquidity reductions in repurchase agreement financing markets. Consistent with our stated intent to procure this type of stable longer-term ~~repurchase agreements or securitized debt, the cash flow produced~~financing, and as noted above, we completed a non-mark-to-market re-securitization backed by ~~the assets~~non-Agency RMBS that ~~serve as collateral for these structured finance instruments may be restricted~~has an expected redemption date of June 3, 2022. Moreover, in ~~terms of its use or applied~~July 2020 and subsequent to ~~pay principal or interest~~September 30, 2020, we closed on ~~CDOs, repurchase agreements, notes or other securities~~two non-mark-to-market securitizations backed by residential loans that are ~~senior~~expected to ~~our interests.~~be redeemed in June 2023 and October 2023, respectively.

~~At September 30, 2019, we had cash and cash equivalents balances of $65.9 million, which decreased from $103.7 million at December 31, 2018.~~ Based on current market conditions, our current investment portfolio, new investment initiatives, leverage ratio and available and future possible financing arrangements, we believe our existing cash balances, funds available under our various financing arrangements and cash flows from operations will meet our liquidity requirements for at least the next 12 months.

We have explored and will continue in the near term to explore additional financing arrangements to further strengthen our balance sheet and position ourselves for future investment opportunities, including, without limitation, additional issuances of our equity and debt securities and longer-termed financing arrangements; however, no assurance can be given that we will be able to access any such financing, or the size, timing or terms thereof.

Cash Flows and Liquidity for the Nine Months Ended September 30, ~~2019~~2020

During the nine months ended September 30, ~~2019,~~2020, net cash, cash equivalents and restricted cash ~~decreased~~increased by ~~$42.3~~$583.0 million.

Cash Flows from Operating Activities

We generated net cash flows from operating activities of ~~$26.4~~$76.6 million during the nine months endedSeptember 30, ~~2019~~.2020. Our cash flow provided by operating activities differs from our net income due to these primary factors: (i) differences between (a) accretion, amortization and recognition of income and losses recorded with respect to our investments and (b) the cash received therefrom and (ii) unrealized gains and losses on our investments and derivatives.

Cash Flows from Investing Activities

During the nine months ended September 30, ~~2019,~~2020, our net cash flows ~~used in~~provided by investing activities was ~~$601.8 million,~~$2.4 billion, primarily as a result of ~~purchases~~sales of ~~residential mortgage loans~~Agency RMBS and ~~distressed residential mortgage loans, RMBS,~~ Agency CMBS, including securities inissued by Consolidated SLST and the Consolidated K-Series, sales of non-Agency RMBS and CMBS, sales of first loss POs and certain mezzanine securities issued by the Consolidated K-Series and ~~funding~~sales of ~~preferred equity, equity and mezzanine loan investments, reflecting our continued focus on single-family~~ residential ~~and multi-family investment strategies. These purchases were partially offset~~loans compounded by principal repayments and ~~proceeds from sales and~~ refinancing of ~~distressed~~residential loans and ~~other residential mortgage loans,~~ principal paydowns or repayments of investment securities and preferred equity and mezzanine loan investments. These sales and repayments were partially offset by purchases of residential loans, RMBS, CMBS, and funding of preferred equity investments during the period, reflecting our continued focus on single-family residential and ~~proceeds from sales of~~multi-family investment ~~securities.~~strategies.

Although we generally intend to hold our ~~investment securities~~assets as long-term investments, we may sell certain of these ~~securities~~assets in order to manage our interest rate risk and liquidity needs, to meet other operating objectives or to adapt to market ~~conditions.~~conditions, as was the case in March 2020. We cannot predict the timing and impact of future sales of ~~investment securities,~~assets, if any.

Because ~~many~~a portion of our ~~investment securities~~assets are financed through repurchase agreements, CDOs or securitized debt, a portion of the proceeds from any sales of or principal repayments ofon our ~~investment securities~~assets may be used to repay balances under these financing sources. ~~Similarly,~~Accordingly, all or a significant portion of cash flows from principal repayments received on multi-family loans held in securitization trusts, ~~and~~ principal repayments received from ~~distressed~~residential loans and ~~other residential mortgage loans would generally be~~proceeds from sales or principal paydowns received from investment securities available for sale were used to repay CDOs or securitized debt issued by the respective Consolidated VIEs or repurchase agreements (included as cash used in financing activities).

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As presented in the “Supplemental Disclosure - Non-Cash Investment Activities” subsection of our condensed consolidated statements of cash flows, during the ~~the~~ nine months ended September 30, ~~2019,~~2020, we ~~consolidated~~de-consolidated certain multi-family securitization trusts which represent significant non-cash transactions that were not included in cash flows ~~used in~~provided by investing activities.

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Cash Flows from Financing Activities

During the nine months ended September 30, ~~2019,~~2020, our net cash flows ~~provided by~~used in financing activities was ~~$533.2 million.~~$1.9 billion. The main ~~sources~~uses of cash flows from financing activities were ~~proceeds from~~primarily payments made on repurchase agreements ~~for both our investment securities and distressed and other residential mortgage loans and~~partially offset by net proceeds from various issuances of ~~both~~ our common stock, securitized debt and preferred stock. During the nine months ended September 30, 2019, we paid dividends on both our common and preferred stock, redeemed our multi-family CMBS re-securitization and repaid outstanding notes from our distressed residential mortgage loan securitization.CDOs.

Liquidity – Financing Arrangements

We rely primarily on short-term repurchase agreements to finance the more liquid assets in our investment portfolio. Over the last several years, certain repurchase agreement lenders have elected to exit the repo lending market for various reasons, including new capital requirement regulations. However, as certain lenders have exited the space, other financing counterparties that had not participated in the repo lending market historically have stepped in, offsetting, in part the lenders that have elected to exit.

As of September 30, ~~2019,~~2020, we have no amounts outstanding under short-term repurchase agreements ~~a form of collateralized short-term borrowing, with fourteen different financial institutions.~~on our investment securities. These repurchase agreements are typically secured by certain of our investment securities and bear interest rates that have historically moved in close relationship to LIBOR. ~~Our borrowings~~Any financings under these repurchase agreements are based on the fair value of ~~our investment securities~~the assets that serve as collateral under these agreements. Interest rate changes and increased prepayment activity can have a negative impact on the valuation of these securities, reducing the amount we can borrow under these agreements. Moreover, our repurchase agreements allow the counterparties to determine a new market value of the collateral to reflect current market conditions and because these lines of financing are not committed, the counterparty can effectively call the loan at any time. Market value of the collateral represents the price of such collateral obtained from generally recognized sources or most recent closing bid quotation from such source plus accrued income. If a counterparty determines that the value of the collateral has decreased, the counterparty may initiate a margin call and require us to either post additional collateral to cover such decrease or repay a portion of the outstanding ~~borrowing~~amount financed in cash, on minimal ~~notice.~~notice, and repurchase may be accelerated upon an event of default under the repurchase agreements. Moreover, in the event an existing counterparty elected to not renew the outstanding balance at its maturity into a new repurchase agreement, we would be required to repay the outstanding balance with cash or proceeds received from a new counterparty or to surrender the securities that serve as collateral for the outstanding balance, or any combination thereof. If we are unable to secure financing from a new counterparty and had to surrender the collateral, we would expect to incur a loss. In addition, in the event one of our ~~lenders under the~~ repurchase agreement counterparties defaults on its obligation to “re-sell” or return to us the ~~securities~~assets that are securing the ~~borrowings~~financing at the end of the term of the repurchase agreement, we would incur a loss on the transaction equal to the amount of “haircut” associated with the short-term repurchase agreement, which we sometimes refer to as the “amount at risk.” As of September 30, 2019, we had an aggregate amount at risk under our repurchase agreements of approximately $328.2 million, with no more than approximately $77.4 million at risk with any single counterparty.

At September 30, ~~2019, the Company~~2020, we had ~~short-term repurchase agreement borrowings of $1.8 billion as compared to $1.5 billion as of December 31, 2018.~~

As of September 30, 2019, our available liquid assets include unrestricted cash and cash equivalents and unencumbered securities we believe may be posted as margin. We had $65.9 million in cash and cash equivalents and $637.0 million in unencumbered investment securities to meet additional haircuts or market valuation requirements. The unencumbered securities that we believe may be posted as margin as of September 30, 2019 included $67.9 million of Agency RMBS, $187.3 million of CMBS, $333.5 million of non-Agency RMBS and $48.3 million of ABS. We believe the cash and unencumbered securities, which collectively represent 38.5% of our financing arrangements, are liquid and could be monetized to pay down or collateralize a liability immediately.

~~At September 30, 2019, the Company also had~~ longer-term ~~master~~ repurchase agreements with terms of up to one year with ~~certain third party~~three third-party financial institutions that are secured by certain of our residential ~~mortgage loans.~~loans and that function similar to our short-term repurchase agreements. The financings under two of these repurchase agreements are subject to margin calls to the extent the market value of the residential loans falls below specified levels and repurchase may be accelerated upon an event of default under the repurchase agreements. In September 2020, we entered into a repurchase agreement with a new counterparty with a term of one year that is secured by certain of our residential loans and is not subject to margin calls in the event the market value of the collateral declines. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Analysis—~~Distressed and Other~~ Residential ~~Loans~~Loan Financing—Repurchase Agreements" for further information. During the terms of the repurchase agreements secured by residential loans, proceeds from the residential loans will be applied to pay any price differential, if applicable, and to reduce the aggregate repurchase price of the collateral. The repurchase agreements secured by residential loans contain various covenants, including among other things, the maintenance of certain amounts of liquidity and total stockholders' equity. As of September 30, 2020, we had an aggregate amount at risk under our residential loan repurchase agreements of approximately $264.8 million, which represents the difference between the carrying value of the loans pledged and the outstanding balance of our repurchase agreements. Significant margin calls have had, and could in the future have, a material adverse effect on our results of operations, financial condition, business, liquidity and ability to make distributions to our stockholders. See “Liquidity and Capital Resources –General” above.

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~~The~~At September 30, 2020, the Company ~~has~~had $138.0 million aggregate principal amount of Convertible Notes outstanding. The Convertible Notes were issued at 96% of the principal amount, bear interest at a rate equal to 6.25% per year, payable semi-annually in arrears on January 15 and July 15 of each year, and are expected to mature on January 15, 2022, unless earlier converted or repurchased. The Company does not have the right to redeem the Convertible Notes prior to maturity and no sinking fund is provided for the Convertible Notes. Holders of the Convertible Notes are permitted to convert their Convertible Notes into shares of the Company's common stock at any time prior to the close of business on the business day immediately preceding January 15, 2022. The conversion rate for the Convertible Notes, which is subject to adjustment upon the occurrence of certain specified events, initially equals 142.7144 shares of the Company’s common stock per $1,000 principal amount of Convertible Notes, which is equivalent to a conversion price of approximately $7.01 per share of the Company’s common stock, based on a $1,000 principal amount of the Convertible Notes.

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At September 30, ~~2019,~~2020, we also had other consolidated longer-term debt, including ~~Residential~~SLST CDOs outstanding of ~~$42.1 million, multi-family CDOs outstanding of $15.0~~$1.1 billion (which represent obligations of ~~the~~ Consolidated ~~K-Series)~~SLST), securitized debt outstanding of $88.8 million, Residential CDOs outstanding of $268.8 million and subordinated debt outstanding of $45.0 million. The CDOs are collateralized by residential ~~and multi-family~~ loans held in securitization trusts ~~respectively.~~and the securitized debt is collateralized by non-Agency RMBS.

As of September 30, ~~2019,~~2020, our overall leverage ratio, which represents our total ~~debt~~outstanding repurchase agreement financing, subordinated debentures and Convertible Notes divided by our total stockholders' equity, was approximately ~~1.5~~0.4 to 1. Our overall leverage ratio does not include debt associated with ~~the Multi-family~~SLST CDOs, securitized debt, the Residential CDOs or other non-recourse debt ~~for which we have no obligation.~~to the Company. As of September 30, ~~2019,~~2020, our leverage ratio on our ~~short term~~shorter-term financings, ~~or callable debt,~~ which represents our outstanding repurchase agreement ~~borrowings~~financing divided by our total stockholders' equity, was approximately ~~1.4~~0.3 to 1. We monitor all at risk or ~~short-term borrowings~~shorter-term financings to ~~ensure that we have adequate liquidity to satisfy margin calls and have the ability~~enable us to respond to ~~other~~ market ~~disruptions.~~disruptions as they arise.

Liquidity – Hedging and Other Factors

Certain of our hedging instruments may also impact our liquidity. We may use interest rate swaps, swaptions, TBAs or other futures contracts to hedge interest rate and market value risk associated with our investments in Agency RMBS.

With respect to interest rate swaps, futures contracts and TBAs, initial margin deposits, which can be comprised of either cash or securities, will be made upon entering into these contracts. During the period these contracts are open, changes in the value of the contract are recognized as unrealized gains or losses by marking to market on a daily basis to reflect the market value of these contracts at the end of each day’s trading. We may be required to satisfy variable margin payments periodically, depending upon whether unrealized gains or losses are incurred. In addition, because delivery of TBAs extend beyond the typical settlement dates for most non-derivative investments, these transactions are more prone to market fluctuations between the trade date and the ultimate settlement date, and thereby are more vulnerable to increasing amounts at risk with the applicable counterparties. In March 2020, in response to the turmoil in the financial markets, we terminated our interest rate swaps and currently do not have any hedges in place.

For additional information regarding the Company’s derivative instruments and hedging activities for the periods covered by this report, including the fair values and notional amounts of these instruments and realized and unrealized gains and losses relating to these instruments, please see Note 1110 to our condensed consolidated financial statements included in this report. Also, please see Item 3. Quantitative and Qualitative Disclosures about Market Risk, under the caption, “Fair Value Risk”, for a tabular presentation of the sensitivity of the fair value and net duration changes of the Company’s portfolio across various changes in interest rates, which takes into account the Company’s hedging activities.

Liquidity — Securities Offerings

In addition to the financing arrangements described above under the caption “Liquidity—Financing Arrangements,” we also rely on follow-on equity offerings of common and preferred stock, and may utilize from time to time debt securities offerings, as a source of both short-term and long-term liquidity. We also may generate liquidity through the sale of shares of our common stock or preferred stock in “at-the-market” equity offering programs pursuant to equity distribution agreements, as well as through the sale of shares of our common stock pursuant to our Dividend Reinvestment Plan (“DRIP”). Our DRIP provides for the issuance of up to $20,000,000 of shares of our common stock.

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The following table details the Company's public ~~and “at-the-market”~~ offerings of ~~both~~ common ~~and preferred~~ stock during the nine months ended September 30, ~~2019~~2020 (dollar amounts in thousands):


Offering Type	Shares Issued	Net Proceeds ⁽¹⁾		Amount Remaining Available for Issuance under Offering Program		Offering Type	Shares Issued	Net Proceeds (1)
Public offerings of common stock	104,190,000	$	618,627	N/A		Public offerings of common stock	85,100,000	$	511,924
At-the-market common stock	2,260,200	$	13,621	$	72,526
At-the-market preferred stock	1,250,707	$	30,490	$	19,045


(1)⁽¹⁾	Proceeds are net of ~~underwriting discounts and commissions and offering expenses, as applicable.~~

Additionally, in October 2019, the Company issued 6,900,000 shares of its preferred stock through an underwritten public offering, resulting in total net proceeds to the Company of $166.7 million after deducting underwriting discounts and commissions and ~~estimated~~ offering ~~expenses.~~expenses, as applicable.

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Dividends

On September ~~9, 2019,~~14, 2020, our Board of Directors declared the following quarterly cash dividends:

Class of Stock

Dividend Amount Per Share

Record Date

Payment Date

Common Stock

0.075

September 24, 2020

October 26, 2020

Fixed Rate Preferred Stock

7.75% Series B Cumulative Redeemable Preferred Stock

0.484

October 1, 2020

October 15, 2020

7.875% Series C Cumulative Redeemable Preferred Stock

0.492

October 1, 2020

October 15, 2020

Fixed-to-Floating Rate Preferred Stock

8.00% Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock

0.500

October 1, 2020

October 15, 2020

7.875% Series E Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock

0.492

October 1, 2020

October 15, 2020

Class of Stock Dividend Amount Per Share Record Date Payment Date
Common Stock $ 0.20
September 19, 2019 October 25, 2019
7.75% Series B Cumulative Redeemable Preferred Stock $ 0.48
October 1, 2019 October 15, 2019
7.875% Series C Cumulative Redeemable Preferred Stock $ 0.49
October 1, 2019 October 15, 2019
8.00% Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock

$ 0.50
October 1, 2019 October 15, 2019

~~We expect to continue to pay quarterly cash dividends on our common stock during the near term. However, our~~Our Board of Directors will continue to evaluate our dividend policy each quarter and will make adjustments as necessary, based on a variety of factors, including, among other things, the need to maintain our REIT status, our financial condition, liquidity, earnings projections, business prospects and ~~business prospects.~~current and anticipated future market conditions. Our dividend policy does not constitute an obligation to pay dividends.

We intend to make distributions to our stockholders to comply with the various requirements to maintain our REIT status and to minimize or avoid corporate income tax and the nondeductible excise tax. However, differences in timing between the recognition of REIT taxable income and the actual receipt of cash could require us to sell assets or to borrow funds on a short-term basis to meet the REIT distribution requirements and to minimize or avoid corporate income tax and the nondeductible excise tax.

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Inflation

Substantially all our assets and liabilities are financial in nature and are sensitive to interest rate and other related factors to a greater degree than inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. Our condensed consolidated financial statements and corresponding notes thereto have been prepared in accordance with GAAP, which require the measurement of financial position and operating results in terms of historical dollars without considering inflation.

Off-Balance Sheet Arrangements

We did not maintain any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide funding to any such entities.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

This section should be read in conjunction with “Item 1A. Risk Factors” in our Annual Report on Form 10-K, ~~and~~"Part II, Item 1A. Risk Factors" in our ~~subsequent periodic reports filed with~~Quarterly Report on Form 10-Q for the ~~SEC.~~quarter ended March 31, 2020 and the other disclosures made throughout this report and our Annual Report on Form 10-K.

We seek to manage risks that we believe will impact our business including interest rates, liquidity, prepayments, credit quality and market value. Many of these risks have become particularly heightened due to the COVID-19 pandemic and related economic and market conditions. When managing these risks we consider the impact on our assets, liabilities and derivative positions. While we do not seek to avoid risk completely, we believe the risk can be quantified from historical experience. We seek to actively manage that risk, to generate risk-adjusted total returns that we believe compensate us appropriately for those risks and to maintain capital levels consistent with the risks we take.

The following analysis includes forward-looking statements that assume that certain market conditions occur. Actual results may differ materially from these ~~projected results~~projections due to changes in our portfolio assets and borrowings mix and due to developments in the domestic and global financial, mortgage and real estate markets. Developments in the financial markets include the likelihood of changing interest rates and the relationship of various interest rates and their impact on our portfolio yield, cost of funds and cash flows. The analytical methods that we use to assess and mitigate these market risks should not be considered projections of future events or operating performance.

Interest Rate Risk

Interest rates are sensitive to many factors, including governmental, monetary or tax policies, domestic and international economic conditions, and political or regulatory matters beyond our control. Changes in interest rates affect the value of the assets we manage and hold in our investment portfolio and the variable-rate borrowings we use to finance our portfolio. Changes in interest rates also affect the interest rate swaps and caps, TBAs and other securities or instruments we may use to hedge our portfolio. As a result, our net interest income is particularly affected by changes in interest rates.

For example, we hold RMBS and loans, some of which may have fixed rates or interest rates that adjust on various dates that are not synchronized to the adjustment dates on our repurchase agreements. In general, the re-pricing of our repurchase agreements occurs more quickly than the re-pricing of our variable-interest rate assets. Thus, it is likely that our floating rate ~~borrowings,~~financing, such as our repurchase agreements, may react to interest rates before our RMBS or loans because the weighted average next re-pricing dates on the related ~~borrowings~~financing may have shorter time periods than that of the ~~RMBS. In addition, the interest rates on our Agency ARMs backed by hybrid ARMs may be limited to a “periodic cap,”~~RMBS or ~~an increase of typically 1% or 2% per adjustment period, while our borrowings do not have comparable limitations.~~loan. Moreover, changes in interest rates can directly impact prepayment speeds, thereby affecting our net return on RMBS. During a declining interest rate environment, the prepayment of RMBS may accelerate (as borrowers may opt to refinance at a lower interest rate) causing the amount of liabilities that have been extended by the use of interest rate swaps to increase relative to the amount of RMBS, possibly resulting in a decline in our net return on RMBS, as replacement RMBS may have a lower yield than those being prepaid. Conversely, during an increasing interest rate environment, RMBS may prepay more slowly than expected, requiring us to finance a higher amount of RMBS than originally forecast and at a time when interest rates may be higher, resulting in a decline in our net return on RMBS. Accordingly, each of these scenarios can negatively impact our net interest income.

We seek to manage interest rate risk in our portfolio by utilizing interest rate swaps, swaptions, interest rate caps, futures, options on futures and U.S. Treasury securities with the goal of optimizing the earnings potential while seeking to maintain long term stable portfolio values. ~~We continually monitor~~Given current market volatility and historically low interest rates, we do not currently have any hedges in place to mitigate the ~~duration~~risk of our mortgage assets and have a policy to hedge the financing of those assets such that the net duration of the assets, our borrowed funds related to such assets, and related hedging instruments, is less than one year.rising interest rates.

We utilize a model-based risk analysis system to assist in projecting portfolio performances over a scenario of different interest rates. The model incorporates shifts in interest rates, changes in prepayments and other factors impacting the valuations of our financial securities and derivative hedging instruments.

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Based on the results of the model, the instantaneous changes in interest rates specified below would have had the following effect on our net interest income for the next 12 months based on our assets and liabilities as of September 30, ~~2019~~2020 (dollar amounts in thousands):


Changes in Net Interest Income
Changes in Interest Rates (basis points)			Changes in Net Interest Income
+200			$(10,868)
+100			$(960)
-100			$(760)

Changes in Net Interest Income
Changes in Interest Rates (basis points)
Changes in Net Interest
Income
+200 $(28,210)
+100 $(14,498)
-100 $14,780

Interest rate changes may also impact our net book value as our assets and related hedge derivatives, if any are marked-to-market each quarter. Generally, as interest rates increase, the value of our mortgage assets decreases, and conversely, as interest rates decrease, the value of such investments will increase. In general, we expect that, over time, decreases in the value of our portfolio attributable to interest rate changes will be offset, to the degree we are hedged, by increases in the value of our interest rate swaps or other financial instruments used for hedging purposes, and vice versa. However, the relationship between spreads on our assets and spreads on our hedging instruments may vary from time to time, resulting in a net aggregate book value increase or decline.

The interest rates for certain of our investments and a majority of our financing transactions are either explicitly or indirectly based on LIBOR. On July 27, 2017, the United Kingdom Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. At this time, it is not possible to predict the effect of such change, including the establishment of potential alternative reference rates, on the economy or markets we are active in either currently or in the future, or on any of our assets or liabilities whose interest rates are based on LIBOR. We are in the process of evaluating the potential impact of a discontinuation of LIBOR after 2021 on our portfolio, as well as the related accounting impact. However, we expect that throughout 2020, we will work closely with the entities that are involved in calculating the interest rates for our RMBS and securitized debt, our loan servicers for our floating rate loans, and with the various counterparties to our financing transactions in order to determine what changes, if any, are required to be made to existing agreements for these transactions.

Our net interest income, the fair value of our assets and our financing activities could be negatively affected by volatility in interest rates caused by uncertainties stemming from COVID-19. A prolonged period of extremely volatile and unstable market conditions would likely increase our funding costs and negatively affect market risk mitigation strategies. Higher income volatility from changes in interest rates could cause a loss of future net interest income and a decrease in current fair market values of our assets. Fluctuations in interest rates will impact both the level of income and expense recorded on most of our assets and liabilities and the market value of all or substantially all of our interest-earning assets and interest-bearing liabilities, which in turn could have a material adverse effect on our net income, operating results, or financial condition.

Liquidity Risk

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain investments, pay dividends to our stockholders and other general business needs. The primary liquidity risk we face arises from financing long-maturity assets with shorter-term ~~borrowings primarily in the form of repurchase agreement~~ financings. We recognize the need to have funds available to operate our business. We manage and forecast our liquidity needs and sources daily to ensure that we have adequate liquidity at all times. We plan to meet liquidity through normal operations with the goal of avoiding unplanned sales of assets or emergency borrowing of funds.

We are subject to “margin call” risk under nearly all of our repurchase agreements. In the event the value of our assets pledged as collateral suddenly decreases, margin calls relating to our repurchase agreements could increase, causing an adverse change in our liquidity position. Additionally, if one or more of our repurchase agreement counterparties chooses not to provide ongoing funding, we may be unable to replace the financing through other lenders on favorable terms or at all.

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As discussed throughout this Quarterly Report on Form 10-Q, in March 2020, we observed unprecedented illiquidity in repurchase agreement financing and MBS markets which resulted in our receiving margin calls under our repurchase agreements that were well beyond historical norms. We took a number of decisive actions in response to these conditions, including the sale of assets and termination of our interest rate swaps. Because of this, we intend to place a greater emphasis on procuring stable, longer-termed financings, such weas securitizations and other term financings, which may involve greater expense relative to repurchase agreement funding. We provide no assurance that we will be able in the future to access sources of capital that are attractive to us, that we will be able to roll over or replace our repurchase agreements, securitized debt or other financing instruments as they mature from time to time in the future or that we otherwise will not need to resort to unplanned sales of assets to provide liquidity in the future. See Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" and the other information in this Quarterly Report on Form 10-Q for further information about our liquidity and capital resource management.

Derivative financial instruments are also subject to “margin call” risk. For example, under ~~our~~the interest rate swaps we have utilized, typically we would pay a fixed rate to the counterparties while they would pay us a floating rate. If interest rates drop below the fixed rate we ~~are paying~~pay on an interest rate swap, we may be required to post cash margin. Given current market volatility and historically low interest rates, we do not currently have any interest rate swaps in place.

Prepayment Risk

When borrowers repay the principal on their residential ~~mortgage~~ loans before maturity or faster than their scheduled amortization, the effect is to shorten the period over which interest is earned, and therefore, reduce the yield for residential mortgage assets purchased at a premium to their then current ~~balance, as with our portfolio of Agency RMBS.~~balance. Conversely, residential mortgage assets purchased for less than their then current balance, such as many of our ~~distressed~~ residential ~~mortgage~~ loans, exhibit higher yields due to faster prepayments. Furthermore, actual prepayment speeds may differ from our modeled prepayment speed projections impacting the effectiveness of any hedges we may have in place to mitigate financing and/or fair value risk. Generally, when market interest rates decline, borrowers have a tendency to refinance their mortgages, thereby increasing prepayments.

Our modeled prepayments will help determine the amount of hedging we use to off-set changes in interest rates. If actual prepayment rates are higher than modeled, the yield will be less than modeled in cases where we paid a premium for the particular residential mortgage asset. Conversely, when we have paid a premium, if actual prepayment rates experienced are slower than modeled, we would amortize the premium over a longer time period, resulting in a higher yield to maturity.

In an environment of increasing prepayment speeds, the timing difference between the actual cash receipt of principal paydowns and the announcement of the principal paydowns may result in additional margin requirements from our repurchase agreement counterparties.

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We mitigate prepayment risk by constantly evaluating our residential mortgage assets relative to prepayment speeds observed for assets with similar structures, quantities and characteristics. Furthermore, we stress-test the portfolio as to prepayment speeds and interest rate risk in order to further develop or make modifications to our hedge balances. Historically, we have not hedged 100% of our liability costs due to prepayment risk. Given the combination of low interest rates, government stimulus, high unemployment and other disruptions related to COVID-19, it has become more difficult to predict prepayment levels for the securities in our portfolio.

Credit Risk

Credit risk is the risk that we will not fully collect the principal we have invested in our credit sensitive assets, including ~~distressed~~ residential ~~and other mortgage~~ loans, non-Agency RMBS, ABS, multi-family CMBS, preferred equity and mezzanine loan and joint venture equity investments, due to borrower ~~defaults.~~defaults or defaults by our operating partners in their payment obligations to us. In selecting the credit sensitive assets in our portfolio, we seek to identify and invest in assets with characteristics that we believe offset or limit our exposure to ~~borrower~~ defaults.

We seek to manage credit risk through our pre-acquisition or pre-funding due diligence process, and by factoring projected credit losses into the purchase price we pay or loan terms we negotiate for all of our credit sensitive assets. In general, we evaluate relative valuation, supply and demand trends, prepayment rates, delinquency and default rates, vintage of collateral and macroeconomic factors as part of this process. Nevertheless, these procedures doprovide no assurance that we will not ~~guarantee~~experience unanticipated credit losses which would materially affect our operating results.

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Concern surrounding the ongoing COVID-19 pandemic and certain of the actions taken to reduce its spread has caused and may continue to cause business shutdowns, limitations on commercial activity and financial transactions, labor shortages, supply chain interruptions, increased unemployment and multi-family property vacancy and lease default rates, reduced profitability and ability for property owners to make loan, mortgage and other payments, and overall economic and financial market instability, all of which may cause an increase in the credit risk of our credit sensitive assets. Although we did not see an increase in forbearance and delinquency rates in our portfolio during the quarter ended September 30, 2020, we expect delinquencies, defaults and requests for forbearance arrangements to rise as savings, incomes and revenues of borrowers, operating partners and other businesses become increasingly constrained from the resulting slow-down in economic activity and/or the reduction or elimination of current unemployment benefits or other policies intended to help keep borrowers and renters in their residences. Any future period of payment deferrals, forbearance, delinquencies, defaults, foreclosures or losses will likely adversely affect our net interest income from preferred equity investments, residential loans, mezzanine loans and our RMBS, CMBS and ABS investments, the fair value of these assets, our ability to liquidate the collateral that may underlie these investments and obtain additional financing and the future profitability of our investments. Further, in the event of delinquencies, defaults and foreclosure, regulatory changes and policies designed to protect borrowers and renters may slow or prevent us from taking remediation actions. See “Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” in this Quarterly Report on Form 10-Q and "Part II - Item 1A. Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 for more information on how COVID-19 may impact the credit quality of our credit sensitive assets and the credit quality of the underlying borrowers or operating partners.

With respect to ~~the $164.8 million of distressed~~our residential ~~mortgage~~ loans, ~~at carrying value and $761.9 million of distressed residential mortgage loans at fair value owned by the Company at September 30, 2019,~~ we purchased the majority of these mortgage loans at a discount to par reflecting their distressed state or perceived higher risk of default. In connection with our loan acquisitions, we or a ~~third party~~third-party due diligence firm perform an independent review of the mortgage file to assess the state of mortgage loan files, the servicing of the mortgage loan, compliance with existing guidelines, as well as our ability to enforce the contractual rights in the mortgage. We also obtain certain representations and warranties from each seller with respect to the mortgage loans, as well as the enforceability of the lien on the mortgaged property. A seller who breaches these representations and warranties may be obligated to repurchase the loan from us. In addition, as part of our process, we focus on selecting a servicer with the appropriate expertise to mitigate losses and maximize our overall return on these residential ~~mortgage~~ loans. This involves, among other things, performing due diligence on the servicer prior to their engagement, assigning the appropriate servicer on each loan based on certain characteristics and monitoring each servicer's performance on an ongoing basis.

We are exposed to credit risk in our investments in CMBS, non-Agency RMBS ~~totaling $621.5 million as of September 30, 2019. The non-Agency RMBS in our investment portfolio~~and ABS. These investments typically consist of either the senior, mezzanine or subordinate tranches in securitizations. The underlying collateral of these securitizations ~~are predominantly residential credit assets, which~~ may be exposed to various macroeconomic and asset-specific credit risks. These securities have varying levels of credit enhancement which ~~provides~~provide some structural protection from losses within the portfolio. We undertake an in-depth assessment of the underlying collateral and securitization structure when investing in these assets, which may include modeling defaults, prepayments and loss across different scenarios.

~~As of September 30, 2019,~~ In addition, we ~~own $712.2 million of multi-family CMBS comprised solely of first loss POs that~~ are ~~backed by commercial mortgage loans on multi-family properties at a weighted average amortized purchase price of approximately 46.3% of current par. Prior~~exposed to the acquisition of each of our multi-family CMBS comprised of first loss POs, the Company completed an extensive review of the underlying loan collateral, including loan level cash flow re-underwriting, site inspections on selected properties, property specific cash flow and loss modeling, review of appraisals, property condition and environmental reports, and other credit risk analysis. We continue to monitor credit quality on an ongoing basis using updated property level financial reports provided by borrowers and periodic site inspection of selected properties. We also reconcile on a monthly basis the actual bond distributions received against projected distributions to assure proper allocation of cash flow generated by the underlying loan pool.

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~~As of September 30, 2019, we own approximately $297.7 million of~~in our preferred equity, mezzanine loan and equity investments in owners of residential and multi-family properties. The performance and value of these investments depend upon the applicable operating partner’s or borrower’s ability to effectively operate the multi-family and residential properties, that serve as the underlying collateral, to produce cash flows adequate to pay distributions, interest or principal due to us. The Company monitors the performance and credit quality of the underlying assets that serve as collateral for its investments. In connection with these types of investments by us in multi-family properties, the procedures for ongoing monitoring include financial statement analysis and regularly scheduled site inspections of portfolio properties to assess property physical condition, performance of on-site staff and competitive activity in the sub-market. We also formulate annual budgets and performance goals alongside our operating partners for use in measuring the ongoing investment performance and credit quality of our investments. Additionally, the Company's preferred equity and equity investments typically provide us with various rights and remedies to protect our investment. ~~In March 2017, the Company exercised such rights and remedies with respect to Riverchase Landing and The Clusters and effectively assumed control~~

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Table of both entities. In March 2018, the Company successfully resolved its investment in Riverchase Landing with the sale of the entity's multi-family apartment community and full redemption of the Company's preferred equity investment. In February 2019, the Company successfully resolved its investment in The Clusters with the sale of the entity's multi-family apartment community and full redemption of the Company's preferred equity investment.Contents

Fair Value Risk

Changes in interest rates, market liquidity, credit quality and other factors also expose us to market value (fair value) fluctuation on our assets, liabilities and hedges. ~~While a significant amount~~For certain of our credit sensitive assets, ~~(when excluding all Consolidated K-Series assets other than the securities we actually own) that are measured on a recurring basis are determined using Level 2~~ fair values ~~we own certain assets, such as our multi-family CMBS POs and residential mortgage loans, for which fair values~~ may ~~not be readily available if there are no active trading markets for the instruments. In such cases, fair values would~~ only be derived or estimated for these investments using various valuation techniques, such as computing the present value of estimated future cash flows using discount rates commensurate with the risks involved. However, the determination of estimated future cash flows is inherently subjective and imprecise. 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. The uncertainties stemming from the pandemic created unprecedented illiquidity and volatility in the financial markets. As a result, our market value (fair value) risk has significantly increased. Minor changes in assumptions or estimation methodologies can have a material effect on these derived or estimated fair values. Our fair value estimates and assumptions are indicative of the interest rate and business environments as of September 30, ~~2019~~2020 and do not take into consideration the effects of subsequent ~~interest rate fluctuations.~~changes.

We note that the fair values of our investments in derivative instruments will be sensitive to changes in market interest rates, interest rate spreads, credit spreads and other market factors. The value of these investments can vary and has varied materially from period to period.

The following describes the methods and assumptions we use in estimating fair values of our financial instruments:

Fair value estimates are made as of a specific point in time based on estimates using present value or other valuation techniques. These techniques involve uncertainties and are significantly affected by the assumptions used and the judgments made regarding risk characteristics of various financial instruments, discount rates, estimate of future cash flows, future expected loss experience and other factors.

Changes in assumptions could significantly affect these estimates and the resulting fair values. Derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in an immediate sale of the instrument. Also, because of differences in methodologies and assumptions used to estimate fair values, the fair values used by us should not be compared to those of other companies.

The table below presents the sensitivity of the fair value and net duration changes of our portfolio as of September 30, ~~2019,~~2020, using a discounted cash flow simulation model assuming an instantaneous interest rate shift. Application of this method results in an estimation of the fair market value change of our assets, liabilities and hedging instruments per 100 basis point ~~(“bp”)~~ shift in interest rates.

The use of hedging instruments ishas historically been a critical part of our interest rate risk management ~~strategies, and the effects of these hedging instruments on the market value of the portfolio are reflected in the model's output.~~strategies. This analysis also takes into consideration the value of options embedded in our mortgage assets including constraints on the re-pricing of the interest rate of assets resulting from periodic and lifetime cap features, as well as prepayment options. Assets and liabilities that are not interest rate-sensitive such as cash, payment receivables, prepaid expenses, payables and accrued expenses are excluded.

Changes in assumptions including, but not limited to, volatility, mortgage and financing spreads, prepayment behavior, credit conditions, defaults, as well as the timing and level of interest rate changes will affect the results of the model. Therefore, actual results are likely to vary from modeled results.


Fair Value Changes
Changes in Interest Rates	Changes in Fair Value	Net Duration
(basis points)	(dollar amounts in thousands)
+200	$(118,890)	2.1
+100	$(60,480)	1.5
Base		2.6
-100	$54,018	2.6

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Fair Value Changes
Changes in Interest Rates Changes in Fair Value Net Duration
(basis points) (dollar amounts in thousands)
+200 $(192,212) 3.2
+100 $(86,978) 2.7
Base
2.9
-100 $90,230 2.5

It should be noted that the model is used as a tool to identify potential risk in a changing interest rate environment but does not include any changes in portfolio composition, financing strategies, market spreads or changes in overall market liquidity.

Although market value sensitivity analysis is widely accepted in identifying interest rate risk, it does not take into consideration changes that may occur such as, but not limited to, changes in investment and financing strategies, changes in market spreads and changes in business volumes. Accordingly, we make extensive use of an earnings simulation model to further analyze our level of interest rate risk.

~~102~~120

Table of Contents

Capital Market Risk

We are exposed to risks related to the equity capital markets, and our related ability to raise capital through the issuance of our common stock, preferred stock or other equity instruments. We are also exposed to risks related to the debt capital markets, and our related ability to finance our business through credit facilities or other debt instruments. As a REIT, we are required to distribute a significant portion of our taxable income annually, which constrains our ability to accumulate operating cash flow and therefore may require us to utilize debt or equity capital to finance our business. We seek to mitigate these risks by monitoring the debt and equity capital markets to inform our decisions on the amount, timing, and terms of capital we raise. The ongoing COVID-19 pandemic has resulted in volatility that has been extreme at times in a variety of global markets, including the U.S. financial, mortgage and real estate markets. In reaction to these tumultuous market conditions, various banks and other financing participants restricted or limited lending activity and requested margin posting or repayments where applicable. Although these conditions have subsided somewhat during the quarter ended September 30, 2020, we expect these conditions to remain volatile and uncertain at varying levels for the near future and this may adversely affect our ability to access capital to fund our operations, meet our obligations and make distributions to our stockholders.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosures. An evaluation was performed under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of September 30, ~~2019.~~2020. Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of September 30, ~~2019.~~2020.

Changes in Internal Control Over Financial Reporting. There have been no changes in our internal control over financial reporting during the quarter ended September 30, ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~103~~

122

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PART II. OTHER INFORMATION

Item 1A. Risk Factors

~~There have been no material changes from the~~For a discussion of our risk factors, ~~disclosed under "Item~~see Part I, Item 1A. ~~Risk~~"Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, ~~2018.~~

2019 ("Form 10-K") and Part II, Item 1A. "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the "First Quarter Form 10-Q"). The information included in the "Risk Factors" section of the First Quarter Form 10-Q is incorporated by reference herein. However, the risks and uncertainties that we face are not limited to those set forth in the Form 10-K, as supplemented and updated in the First Quarter Form 10-Q. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and the trading price of our securities, particularly in light of the fast-changing nature of the COVID-19 pandemic, containment measures, the potential for future waves of outbreaks and the related impacts to economic and operating conditions.

~~104~~

123

Table of Contents

Item 6. Exhibits

EXHIBIT INDEX



Exhibit		Description

~~2.1~~3.1		Membership Purchase Agreement, by and among Donlon Family LLC, JMP Investment Holdings LLC, Hypotheca Capital, LLC, RiverBanc LLC and the Company, dated May 3, 2016 (Incorporated by reference to Exhibit 2.1 to the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 5, 2016).

~~3.1~~	Articles of Amendment and Restatement of the Company, as amended (Incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on ~~March 10, 2014)~~February 28, 2020).

3.2		~~Articles of Amendment~~Second Amended and Restated Bylaws of the Company (Incorporated by reference to Exhibit 3.1 ofto the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on ~~October 10, 2019)~~April 23, 2020).

3.3		Amended and Restated Bylaws of the Company (Incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on July 1, 2019).

~~3.4~~	Articles Supplementary designating the Company’s 7.75% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”) (Incorporated by reference to Exhibit 3.3 of the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on May 31, 2013).

~~3.5~~3.4		Articles Supplementary classifying and designating 2,550,000 additional shares of the Series B Preferred Stock (Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 20, 2015).

~~3.6~~3.5		Articles Supplementary classifying and designating the Company's 7.875% Series C Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”) (Incorporated by reference to Exhibit 3.5 of the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on April 21, 2015).

~~3.7~~3.6		Articles Supplementary classifying and designating the Company's 8.00% Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (the “Series D Preferred Stock”) (Incorporated by reference to Exhibit 3.6 to the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on October 10, 2017).

~~3.8~~3.7		Articles Supplementary classifying and designating 2,460,000 additional shares of the Series C Preferred Stock (Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 29, 2019).

~~3.9~~3.8		Articles Supplementary classifying and designating 2,650,000 additional shares of the Series D Preferred Stock (Incorporated by reference to Exhibit 3.3 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 29, 2019).

~~3.10~~3.9		Articles Supplementary classifying and designating the Company's 7.875% Series E Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (the “Series E Preferred Stock”) (Incorporated by reference to Exhibit 3.9 to the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on October 15, 2019).

~~4.1~~3.10		Articles Supplementary classifying and designating 3,000,000 additional shares of the Series E Preferred Stock (Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 27, 2019).

4.1		Form of Common Stock Certificate (Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-11 (Registration No. 333-111668) filed with the Securities and Exchange Commission on June 18, 2004).

4.2		Form of Certificate representing the Series B Preferred Stock Certificate (Incorporated by reference to Exhibit 3.4 of the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on May 31, 2013).

~~105~~

~~Table of Contents~~



4.3						Form of Certificate representing the Series C Preferred Stock (Incorporated by reference to Exhibit 3.6 of the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on April 21, 2015).

4.4						Form of Certificate representing the Series D Preferred Stock (Incorporated by reference to Exhibit 3.7 to the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on October 10, 2017).

124

Table of Contents


4.5		Form of Certificate representing the Series E Preferred Stock (Incorporated by reference to Exhibit 3.10 to the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on October 15, 2019).

4.6		Indenture, dated April 15, 2016, by and between NYMT Residential 2016-RP1, LLC and U.S. Bank National Association (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 19, 2016).

~~4.7~~	Indenture, dated January 23, 2017, between the Company and U.S. Bank National Association, as trustee (Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 23, 2017).

~~4.8~~4.7		First Supplemental Indenture, dated January 23, 2017, between the Company and U.S. Bank National Association, as trustee (Incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 23, 2017).

~~4.9~~4.8		Form of 6.25% Senior Convertible Note Due 2022 of the Company (Incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 23, 2017).

		Certain instruments defining the rights of holders of long-term debt securities of the Company and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. The Company hereby undertakes to furnish to the Securities and Exchange Commission, upon request, copies of any such instruments.





31.1						Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~32.1~~32.1*						Certification Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

~~101.INS~~101.INS**						XBRL Instance Document **- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

~~101.SCH~~101.SCH**						Taxonomy Extension Schema Document **

~~101.CAL~~101.CAL**						Taxonomy Extension Calculation Linkbase Document **

101.DEF ~~XBRL~~XBRL**						Taxonomy Extension Definition Linkbase Document **

~~101.LAB~~101.LAB**						Taxonomy Extension Label Linkbase Document **

~~101.PRE~~101.PRE**						Taxonomy Extension Presentation Linkbase Document **


*104			~~Furnished herewith. Such certification shall not be deemed “filed”~~			The cover page for the ~~purposes of Section 18 of the Securities Exchange Act of 1934, as amended.~~

~~106~~

~~Table of Contents~~

Submitted electronically herewith. Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at September 30, 2019 and December 31, 2018; (ii) Condensed Consolidated Statements of OperationsRegistrant’s Quarterly Report on Form 10-Q for the ~~three and nine months~~quarter ended September 30, ~~2019~~2020 (formatted in Inline XBRL and ~~2018; (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2019 and 2018; (iv) Condensed Consolidated Statements of Changes~~contained in Stockholders’ Equity for the three and nine months ended September 30, 2019 and 2018; (v) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018; and (vi) Notes to Condensed Consolidated Financial Statements.Exhibit 101).

*Furnished herewith. Such certification shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

**Submitted electronically herewith. Attached as Exhibit 101 to this report are the following documents formatted in Inline XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at September 30, 2020 and December 31, 2019; (ii) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019; (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2020 and 2019; (iv) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2020 and 2019; (v) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019; and (vi) Notes to Condensed Consolidated Financial Statements.

~~107~~

125

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned. thereunto duly authorized.


				NEW YORK MORTGAGE TRUST, INC.

Date:			November 6, 2020	~~NEW YORK MORTGAGE TRUST, INC.~~
By:
~~Date:~~	~~November 7, 2019~~	~~By:~~	/s/ Steven R. Mumma
					Steven R. Mumma
					Chairman of the Board and Chief Executive Officer
					(Principal Executive Officer)

Date:			November ~~7, 2019~~6, 2020	By:	/s/ Kristine R. Nario-Eng
					Kristine R. Nario-Eng
					Chief Financial Officer
					(Principal Financial and Accounting Officer)

~~108~~

126

~~Table of Contents~~

~~EXHIBIT INDEX~~



~~Exhibit~~		~~Description~~

~~2.1~~		Membership Purchase Agreement, by and among Donlon Family LLC, JMP Investment Holdings LLC, Hypotheca Capital, LLC, RiverBanc LLC and the Company, dated May 3, 2016 (Incorporated by reference to Exhibit 2.1 to the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 5, 2016).

~~3.1~~		Articles of Amendment and Restatement of the Company, as amended (Incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2014).

~~3.2~~		~~Articles of Amendment of the Company (Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 10, 2019).~~

~~3.3~~		Amended and Restated Bylaws of the Company (Incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-8 filed with the Securities and Exchange Commission on July 1, 2019).

~~3.4~~		Articles Supplementary designating the Company’s 7.75% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”) (Incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on May 31, 2013).

~~3.5~~		Articles Supplementary classifying and designating 2,550,000 additional shares of the Series B Preferred Stock (Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 20, 2015).

~~3.6~~		Articles Supplementary classifying and designating the Company's 7.875% Series C Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”) (Incorporated by reference to Exhibit 3.5 of the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on April 21, 2015).

~~3.7~~		Articles Supplementary classifying and designating the Company's 8.00% Series D Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (the “Series D Preferred Stock”) (Incorporated by reference to Exhibit 3.6 to the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on October 10, 2017).

~~3.8~~		Articles Supplementary classifying and designating 2,460,000 additional shares of the Series C Preferred Stock (Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 29, 2019).

~~3.9~~		Articles Supplementary classifying and designating 2,650,000 additional shares of the Series D Preferred Stock (Incorporated by reference to Exhibit 3.3 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 29, 2019).

~~3.10~~		Articles Supplementary classifying and designating the Company's 7.875% Series E Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (the “Series E Preferred Stock”) (Incorporated by reference to Exhibit 3.9 to the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on October 15, 2019).

~~4.1~~		Form of Common Stock Certificate (Incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-11 (Registration No. 333-111668) filed with the Securities and Exchange Commission on June 18, 2004).

~~4.2~~		Form of Certificate representing the Series B Preferred Stock Certificate (Incorporated by reference to Exhibit 3.4 of the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on May 31, 2013).

~~4.3~~		Form of Certificate representing the Series C Preferred Stock (Incorporated by reference to Exhibit 3.6 of the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on April 21, 2015).

~~109~~

~~Table of Contents~~



~~4.4~~		Form of Certificate representing the Series D Preferred Stock (Incorporated by reference to Exhibit 3.7 to the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on October 10, 2017).

~~4.5~~		Form of Certificate representing the Series E Preferred Stock (Incorporated by reference to Exhibit 3.10 to the Company’s Registration Statement on Form 8-A filed with the Securities and Exchange Commission on October 15, 2019).

~~4.6~~		Indenture, dated April 15, 2016, by and between NYMT Residential 2016-RP1, LLC and U.S. Bank National Association (Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 19, 2016).

~~4.7~~		Indenture, dated January 23, 2017, between the Company and U.S. Bank National Association, as trustee (Incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 23, 2017).

~~4.8~~		First Supplemental Indenture, dated January 23, 2017, between the Company and U.S. Bank National Association, as trustee (Incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 23, 2017).

~~4.9~~		Form of 6.25% Senior Convertible Note Due 2022 of the Company (Incorporated by reference to Exhibit 4.3 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on January 23, 2017).

		Certain instruments defining the rights of holders of long-term debt securities of the Company and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. The Company hereby undertakes to furnish to the Securities Exchange Commission, upon request, copies of any such instruments.



~~31.1~~		Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~31.2~~		Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~32.1~~		Certification Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

~~101.INS~~		XBRL Instance Document **

~~101.SCH~~		Taxonomy Extension Schema Document **

~~101.CAL~~		Taxonomy Extension Calculation Linkbase Document **

~~101.DEF XBRL~~		Taxonomy Extension Definition Linkbase Document **

~~101.LAB~~		Taxonomy Extension Label Linkbase Document **

~~101.PRE~~		Taxonomy Extension Presentation Linkbase Document **


*	~~Furnished herewith. Such certification shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended.~~

Submitted electronically herewith. Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at September 30, 2019 and December 31, 2018; (ii) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018; (iii) Condensed Consolidated Statements of Comprehensive Income for the three and nine ~~months ended September 30, 2019 and 2018; (iv) Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine~~ ~~months ended September 30, 2019 and 2018; (v) Condensed Consolidated Statements of Cash Flows for the nine months ended~~ ~~September 30, 2019 and 2018; and (vi) Notes to Condensed Consolidated Financial Statements.~~

~~110~~



Maryland			47-0934168
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)



PART I. Financial Information
			Item 1. Condensed Consolidated Financial Statements
			Condensed Consolidated Balance Sheets as of September 30, ~~2019~~2020 (Unaudited) and December 31, ~~2018~~2019	4
			Unaudited Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019	5
			Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three and ~~Nine~~Ni ne Months Ended ~~September~~Sept ember 30, ~~2019~~2020 and ~~2018~~2019	6
			Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019	7
			Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2019~~2020 and ~~2018~~2019	9
			Unaudited Notes to the Condensed Consolidated Financial Statements	11
			Note 1. Organization	11
			Note 2. Summary of Significant Accounting Policies	12
			Note 3. Investment Securities Available For Sale, at Fair Value	1519
			Note 4. ~~Distressed and Other~~ Residential ~~Mortgage~~ Loans, Atat Fair Value	1823
			Note 5. ~~Distressed and Other~~ Residential ~~Mortgage~~ Loans, Net	1927
			Note 6. Consolidated K-Series	2230
			Note 7. Investments in Unconsolidated Entities	2432
			Note 8. Preferred Equity and Mezzanine Loan Investments	2635
			Note 9. Use of Special Purpose Entities (SPE) and Variable Interest Entities (VIE)	2736
			Note 10. ~~Real Estate Held for Sale in Consolidated VIEs~~	32
	~~Note 11.~~ Derivative Instruments and Hedging Activities	3340
			Note 11. Repurchase Agreements	42
			Note 12. ~~Repurchase Agreements~~Debt	3544
			Note 13. ~~Debt~~	37
	~~Note 14.~~ Commitments and Contingencies	3946
			Note ~~15.~~14. Fair Value of Financial Instruments	4047
			Note 15. Stockholders' Equity	57
			Note 16. ~~Stockholders' Equity~~Earnings (Loss) Per Common Share	4761
			Note 17. ~~Earnings Per Share~~	50
	~~Note 18.~~ Stock Based Compensation	5163
			Note 18. Income Taxes	67
			Note 19. ~~Income Taxes~~Subsequent Events	5469
			~~Note 20. Subsequent Events~~	56
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	5770
			Item 3. Quantitative and Qualitative Disclosures about Market Risk	98116
			Item 4. Controls and Procedures	~~103~~122
PART II. OTHER INFORMATION
			Item 1A. Risk Factors	~~104~~123
			Item 6. Exhibits	~~105~~124

SIGNATURES				~~108~~126


	For the Nine Months Ended September 30,
	2020		2019
Cash Flows from Operating Activities:
Net (loss) income	$	(368,225)	$	107,609
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Net amortization (accretion)	3,675		(35,948)
Realized losses (gains), net	149,919		(32,556)
Realized loss on de-consolidation of multi-family loans held in securitization trusts and multi-family collateralized debt obligations, net	54,118		0
Unrealized losses (gains), net	212,711		(13,898)
Impairment of goodwill	25,222		0
Gain on sale of real estate held for sale in consolidated variable interest entities	0		(1,580)
Impairment of real estate under development in consolidated variable interest entities	1,754		1,660
Loss on extinguishment of debt	0		2,857



Recovery of loan losses	0		(2,605)
Income from unconsolidated entity, preferred equity and mezzanine loan investments	(30,963)		(31,670)
Distributions of income from unconsolidated entity, preferred equity and mezzanine loan investments	17,285		18,861
Stock based compensation expense, net	7,567		4,079
Changes in operating assets and liabilities:
Receivables and other assets	70,863		(21,393)
Accrued expenses and other liabilities	(67,334)		30,962
Net cash provided by operating activities	76,592		26,378

Cash Flows from Investing Activities:


Proceeds from sales of investment securities	1,815,369		97,951
Principal paydowns on investment securities available for sale	162,277		135,956
Purchases of investment securities	(448,093)		(563,441)
Principal repayments and refinancing of residential loans	307,522		119,325
Proceeds from sales of residential loans	93,755		71,969
Purchases of residential loans	(249,312)		(460,167)
Principal repayments received on preferred equity and mezzanine loan investments	11,243		37,885
Return of capital from unconsolidated entity investments	17,432		13,378
Funding of preferred equity, equity and mezzanine loan investments	(49,663)		(147,383)
Proceeds from sales resulting in de-consolidation of multi-family loans held in securitization trusts and multi-family collateralized debt obligations, net	555,218		0
Principal repayments received on multi-family loans held in securitization trusts	239,796		368,811
Purchases of investments held in multi-family securitization trusts	0		(162,081)
Net payments made on other derivative instruments settled during the period	(28,233)		(52,598)
Proceeds from sale of real estate owned	3,791		2,035
Net proceeds from sale of real estate held for sale in consolidated variable interest entities	0		3,587
Capital expenditures on real estate held for sale in consolidated variable interest entities	0		(128)
Purchases of other assets	(431)		(939)




Deposit for investment in a residential securitization	0		(66,000)
Net cash provided by (used in) investing activities	2,430,671		(601,840)

Cash Flows from Financing Activities:
Net (payments made on) proceeds from repurchase agreements	(2,434,447)		427,077

Proceeds from issuance of securitized debt, net	108,980		0
Proceeds from issuance of collateralized debt obligations, net	241,072		0

Common stock issuance, net	511,924		632,248
Preferred stock issuance, net	0		30,490
Dividends paid on common stock	(77,161)		(110,839)
Dividends paid on preferred stock	(30,768)		(18,107)
Payments made on mortgages and notes payable in consolidated variable interest entities	0		(3,087)

Payments made on residential collateralized debt obligations	(76,030)		(10,963)
Payments made on multi-family collateralized debt obligations	(147,376)		(368,107)
Payments made on and extinguishment of securitized debt	(20,445)		(45,557)

Net cash (used in) provided by financing activities	(1,924,251)		533,155



	For the Nine Months Ended September 30,
	2019			2018
Cash Flows from Operating Activities:
Net income	$	107,609		$	95,286
Adjustments to reconcile net income to net cash provided by operating activities:
Net accretion	(35,948		)	(19,109		)
Realized (gains) losses, net	(32,556		)	7,228
Unrealized (gains) losses, net	(13,898		)	(57,518		)
Gain on sale of real estate held for sale in consolidated variable interest entities	(1,580		)	(2,328		)
Impairment of real estate under development in consolidated variable interest entities	1,660			2,091
Loss on extinguishment of debt	2,857			—
Recovery of loan losses	(2,605		)	(1,235		)
Income from unconsolidated entity, preferred equity and mezzanine loan investments	(31,670		)	(24,020		)
Distributions of income from unconsolidated entity, preferred equity and mezzanine loan investments	18,861			15,957
Amortization of stock based compensation, net	4,079			1,906
Changes in operating assets and liabilities:
Receivables and other assets	(21,393		)	497
Accrued expenses and other liabilities	30,962			326
Net cash provided by operating activities	26,378			19,081

Cash Flows from Investing Activities:
Net proceeds from sale of real estate held for sale in consolidated variable interest entities	3,587			33,192
Proceeds from sales of investment securities	97,951			26,899
Purchases of investment securities	(563,441		)	(140,241		)
Purchases of other assets	(939		)	(131		)
Capital expenditures on real estate held for sale in consolidated variable interest entities	(128		)	(311		)
Funding of preferred equity, equity and mezzanine loan investments	(147,383		)	(65,668		)
Principal repayments received on preferred equity and mezzanine loan investments	37,885			9,543
Return of capital from unconsolidated entity investments	13,378			11,871
Proceeds from mortgage loans held for investment	1,580			—
(Net payments made on) received from other derivative instruments settled during the period	(52,598		)	17,719
Principal repayments and proceeds from sales and refinancing of distressed and other residential mortgage loans	189,714			106,520
Principal repayments received on multi-family loans held in securitization trusts	368,811			101,953
Principal paydowns on investment securities - available for sale	135,956			193,070
Proceeds from sale of real estate owned	2,035			3,183
Purchases of residential mortgage loans and distressed residential mortgage loans	(460,167		)	(118,679		)
Purchases of investments held in multi-family securitization trusts	(162,081		)	(37,686		)
Deposit for investment in a residential securitization	(66,000		)	—
Net cash (used in) provided by investing activities	(601,840		)	141,234

Cash Flows from Financing Activities:
Net proceeds from (net payments made on) repurchase agreements	427,077			(118,596		)
Common stock issuance, net	632,248			174,995
Preferred stock issuance, net	30,490			—
Dividends paid on common stock	(110,839		)	(69,668		)
Dividends paid on preferred stock	(18,107		)	(17,835		)
Payments made on mortgages and notes payable in consolidated variable interest entities	(3,087		)	(25,781		)
Proceeds from mortgages and notes payable in consolidated variable interest entities	—			1,130
Payments made on residential collateralized debt obligations	(10,963		)	(13,859		)
Payments made on multi-family collateralized debt obligations	(368,107		)	(101,958		)
Extinguishment of and payments made on securitized debt	(45,557		)	(29,170		)
Net cash provided by (used in) financing activities	533,155			(200,742		)

Net Decrease in Cash, Cash Equivalents and Restricted Cash	(42,307		)	(40,427		)
Cash, Cash Equivalents and Restricted Cash - Beginning of Period	109,145			106,195
Cash, Cash Equivalents and Restricted Cash - End of Period	$	66,838		$	65,768



Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash	583,012		(42,307)
Cash, Cash Equivalents and Restricted Cash - Beginning of Period	121,612		109,145
Cash, Cash Equivalents and Restricted Cash - End of Period	$	704,624	$	66,838


Supplemental Disclosure:
Cash paid for interest	$	277,087	$	456,242
Cash paid for income taxes	$	1,521	$	21

Non-Cash Investment Activities:


De-consolidation of multi-family loans held in securitization trusts	$	17,381,483	$	0
De-consolidation of multi-family collateralized debt obligations	$	16,612,093	$	0
Consolidation of multi-family loans held in securitization trusts	$	0	$	3,795,606
Consolidation of multi-family collateralized debt obligations	$	0	$	3,633,525
Transfer from residential loans to real estate owned	$	6,558	$	4,529

Non-Cash Financing Activities:
Dividends declared on common stock to be paid in subsequent period	$	28,331	$	52,524
Dividends declared on preferred stock to be paid in subsequent period	$	10,297	$	6,544
Mortgages and notes payable assumed by purchaser of real estate held for sale in consolidated variable entities	$	0	$	27,260

Cash, Cash Equivalents and Restricted Cash Reconciliation:
Cash and cash equivalents	$	649,822	$	65,906
Restricted cash included in receivables and other assets	54,802		932
Total cash, cash equivalents, and restricted cash	$	704,624	$	66,838


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2020		2019		2020		2019
INTEREST INCOME:
Investment securities and other interest earning assets	$	9,354	$	17,503	$	41,801	$	48,173
Residential loans	30,704		16,776		94,424		46,266
Preferred equity and mezzanine loan investments	5,300		5,505		15,875		15,660
Multi-family loans held in securitization trusts	0		139,818		151,841		384,743
Total interest income	45,358		179,602		303,941		494,842

INTEREST EXPENSE:
Repurchase agreements and other interest bearing liabilities	5,341		23,540		34,321		66,749

Residential collateralized debt obligations	9,722		338		26,782		1,162
Multi-family collateralized debt obligations	0		120,329		129,762		332,041
Convertible notes	2,759		2,713		8,234		8,097
Subordinated debentures	483		711		1,714		2,185
Securitized debt	1,524		0		1,994		742
Total interest expense	19,829		147,631		202,807		410,976

NET INTEREST INCOME	25,529		31,971		101,134		83,866

NON-INTEREST INCOME (LOSS):
Recovery of loan losses	0		244		0		2,605
Realized (losses) gains, net	(1,067)		6,102		(149,919)		32,556
Realized loss on de-consolidation of multi-family loans held in securitization trusts and multi-family collateralized debt obligations, net	0		0		(54,118)		0
Unrealized gains (losses), net	81,198		11,112		(212,711)		13,898
Impairment of goodwill	0		0		(25,222)		0
Loss on extinguishment of debt	0		0		0		(2,857)

Other income	10,397		3,938		14,910		14,620
Total non-interest income (loss)	90,528		21,396		(427,060)		60,822

GENERAL, ADMINISTRATIVE AND OPERATING EXPENSES:
General and administrative expenses	10,529		8,314		33,157		27,039



Operating expenses	2,895		3,974		8,225		10,287
Total general, administrative and operating expenses	13,424		12,288		41,382		37,326

INCOME (LOSS) FROM OPERATIONS BEFORE INCOME TAXES	102,633		41,079		(367,308)		107,362
Income tax (benefit) expense	(772)		(187)		917		(247)

NET INCOME (LOSS)	103,405		41,266		(368,225)		107,609
Net (income) loss attributable to non-controlling interest in consolidated variable interest entities	(1,764)		113		(704)		645
NET INCOME (LOSS) ATTRIBUTABLE TO COMPANY	101,641		41,379		(368,929)		108,254
Preferred stock dividends	(10,297)		(6,544)		(30,890)		(18,726)
NET INCOME (LOSS) ATTRIBUTABLE TO COMPANY'S COMMON STOCKHOLDERS	$	91,344	$	34,835	$	(399,819)	$	89,528

Basic earnings (loss) per common share	$	0.24	$	0.15	$	(1.08)	$	0.44
Diluted earnings (loss) per common share	$	0.23	$	0.15	$	(1.08)	$	0.43
Weighted average shares outstanding-basic	377,744		234,043		368,740		203,270
Weighted average shares outstanding-diluted	399,709		255,537		368,740		224,745


For the Three Months Ended
	Common Stock		Preferred Stock		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive (Loss) Income		Total Company Stockholders' Equity		Non-Controlling Interest in Consolidated VIE		Total
Balance, June 30, 2020	$	3,775	$	504,765	$	2,337,222	$	(646,629)	$	(34,428)	$	2,164,705	$	(1,764)	$	2,162,941
Net income	—		—		—		101,641		—		101,641		1,764		103,405


Stock based compensation expense, net	2		—		3,173		—		—		3,175		—		3,175
Dividends declared on common stock	—		—		—		(28,331)		—		(28,331)		—		(28,331)
Dividends declared on preferred stock	—		—		—		(10,297)		—		(10,297)		—		(10,297)
Reclassification adjustment for net loss included in net income	—		—		—		—		9,845		9,845		—		9,845
Increase in fair value of available for sale securities	—		—		—		—		12,645		12,645		—		12,645

Balance, September 30, 2020	$	3,777	$	504,765	$	2,340,395	$	(583,616)	$	(11,938)	$	2,253,383	$	0	$	2,253,383




Balance, June 30, 2019	$	2,109	$	305,842	$	1,337,330	$	(128,207)	$	11,004	$	1,528,078	$	(396)	$	1,527,682
Net income (loss)	—		—		—		41,379		—		41,379		(113)		41,266
Common stock issuance, net	517		—		310,043		—		—		310,560		—		310,560
Preferred stock issuance, net	—		14,359		—		—		—		14,359		—		14,359
Stock based compensation expense, net	—		—		1,288		—		—		1,288		—		1,288
Dividends declared on common stock	—		—		—		(52,524)		—		(52,524)		—		(52,524)
Dividends declared on preferred stock	—		—		—		(6,544)		—		(6,544)		—		(6,544)
Reclassification adjustment for net gain included in net income	—		—		—		—		(4,444)		(4,444)		—		(4,444)
Increase in fair value of available for sale securities	—		—		—		—		15,356		15,356		—		15,356

Balance, September 30, 2019	$	2,626	$	320,201	$	1,648,661	$	(145,896)	$	21,916	$	1,847,508	$	(509)	$	1,846,999



Balance, June 30, 2018	$	1,243	$	289,755	$	825,960	$	(75,541	)	$	(25,449	)	$	1,015,968		$	234	$	1,016,202
Net income	—		—		—		33,973			—			33,973			475		34,448
Common stock issuance, net	169		—		101,625		—			—			101,794			—		101,794
Dividends declared on common stock	—		—		—		(28,243		)	—			(28,243		)			(28,243		)
Dividends declared on preferred stock	—		—				(5,925		)	—			(5,925		)	—		(5,925		)
Decrease in fair value of available for sale securities	—		—		—		—			(9,874		)	(9,874		)	—		(9,874		)
Increase in non-controlling interest in variable interest entities	—		—		—		—			—			—			287		287
Balance, September 30, 2018	$	1,412	$	289,755	$	927,585	$	(75,736	)	$	(35,323	)	$	1,107,693		$	996	$	1,108,689


For the Nine Months Ended
	Common Stock		Preferred Stock		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total Company Stockholders' Equity		Non-Controlling Interest in Consolidated VIE		Total
Balance, December 31, 2019	$	2,914	$	504,765	$	1,821,785	$	(148,863)	$	25,132	$	2,205,733	$	(704)	$	2,205,029
Cumulative-effect adjustment for implementation of fair value option	—		—		—		12,284		—		12,284		—		12,284
Net (loss) income	—		—		—		(368,929)		—		(368,929)		704		(368,225)
Common stock issuance, net	851		—		511,055		—		—		511,906		—		511,906

Stock based compensation expense, net	12		—		7,555		—		—		7,567		—		7,567
Dividends declared on common stock	—		—		—		(47,218)		—		(47,218)		—		(47,218)
Dividends declared on preferred stock	—		—		—		(30,890)		—		(30,890)		—		(30,890)
Reclassification adjustment for net loss included in net loss	—		—		—		—		7,338		7,338		—		7,338
Decrease in fair value of available for sale securities	—		—		—		—		(44,408)		(44,408)		—		(44,408)

Balance, September 30, 2020	$	3,777	$	504,765	$	2,340,395	$	(583,616)	$	(11,938)	$	2,253,383	$	0	$	2,253,383



Balance, December 31, 2017	$	1,119	$	289,755	$	751,155	$	(75,717	)	$	5,553		$	971,865		$	4,136		$	976,001
Net income	—		—		—		93,285			—			93,285			2,001			95,286
Common stock issuance, net	293		—		176,430		—			—			176,723			—			176,723
Dividends declared on common stock	—		—		—		(75,529		)	—			(75,529		)	—			(75,529		)
Dividends declared on preferred stock	—		—		—		(17,775		)	—			(17,775		)	—			(17,775		)
Decrease in fair value of available for sale securities	—		—		—		—			(40,876		)	(40,876		)	—			(40,876		)
Decrease in non-controlling interest related to distributions from and de-consolidation of variable interest entities	—		—		—		—			—			—			(5,141		)	(5,141		)
Balance, September 30, 2018	$	1,412	$	289,755	$	927,585	$	(75,736	)	$	(35,323	)	$	1,107,693		$	996		$	1,108,689



	Principal		Premium/(Discount)			Unrealized Gains/(Losses)		Carrying Value
September 30, 2019	$	1,150,176	$	(72,684	)	$	38,636	$	1,116,128
December 31, 2018	788,372		(54,905		)	4,056		737,523


	December 31, 2019
Unpaid principal balance	$	47,237
Deferred origination costs – net	301
Allowance for loan losses	(3,508)
Total	$	44,030


	September 30, 2019
Balance at beginning of period	$	3,759
Provision for loan losses	25
Transfer to real estate owned	(167)
Charge-offs	(109)
Balance at the end of period	$	3,508



Days Late	Number of Delinquent Loans	Total Unpaid Principal		% of Loan Portfolio
90 +	17	$	10,289	20.92	%
Real estate owned through foreclosure	1	$	360	0.73	%



Days Late	Number of Delinquent Loans	Total Unpaid Principal		% of Loan Portfolio
90 +	19	$	10,926	18.16	%


6.	~~Consolidated K-Series~~December 31, 2019
New York	36.1	%
Massachusetts	17.2	%
New Jersey	12.8	%
Florida	12.1	%
Maryland	5.5	%



Balance Sheets	September 30, 2019		December 31, 2018
Assets
Multi-family loans held in securitization trusts, at fair value	$	15,863,264	$	11,679,847
Receivables	51,950		41,850
Total Assets	$	15,915,214	$	11,721,697
Liabilities and Equity
Multi-family CDOs, at fair value	$	14,978,199	$	11,022,248
Accrued expenses	50,783		41,102
Total Liabilities	15,028,982		11,063,350
Equity	886,232		658,347
Total Liabilities and Equity	$	15,915,214	$	11,721,697



	September 30, 2019			December 31, 2018
Investment Name	Ownership Interest	Carrying Amount		Ownership Interest	Carrying Amount
BBA-EP320 II, L.L.C., BBA-Ten10 II, L.L.C., and Lexington on the Green Apartments, L.L.C. (collectively)	45%	$	9,802	45%	$	8,948
Somerset Deerfield Investor, LLC	45%	17,102		45%	16,266
RS SWD Owner, LLC, RS SWD Mitchell Owner, LLC, RS SWD IF Owner, LLC, RS SWD Mullis Owner, LLC, RS SWD JH Mullis Owner, LLC and RS SWD Saltzman Owner, LLC (collectively)	43%	4,834		43%	4,714
Audubon Mezzanine Holdings, L.L.C. (Series A)	57%	10,895		57%	10,544
EP 320 Growth Fund, L.L.C. (Series A) and Turnbury Park Apartments - BC, L.L.C. (Series A) (collectively)	46%	6,765		—	—
Walnut Creek Properties Holdings, L.L.C.	36%	8,189		—	—
Towers Property Holdings, LLC	37%	11,099		—	—
Mansions Property Holdings, LLC	34%	10,695		—	—
Sabina Montgomery Holdings, LLC - Series B and Oakley Shoals Apartments, LLC - Series A (collectively)	43%	4,015		—	—
Gen1814, LLC - Series A, Highlands - Mtg. Holdings, LLC - Series A, and Polos at Hudson Investments, LLC - Series A (collectively)	37%	9,288		—	—
Total - Equity Method		$	92,684		$	40,472


⁽¹⁾	~~Includes income recognized from redemption of the Company's investment during the three and nine months ended September 30, 2019.~~


	September 30, 2020		December 31, 2019 (1)
Investment amount	$	188,654	$	181,409
Deferred loan fees, net	(1,291)		(1,364)
Unrealized losses, net	(4,209)		0
Total	$	183,154	$	180,045


	September 30, 2020		December 31, 2019
Tennessee	12.2	%	12.3	%
Florida	11.9	%	12.0	%
Georgia	11.7	%	11.8	%
Texas	9.9	%	10.6	%
South Carolina	9.1	%	6.3	%
Alabama	8.3	%	10.0	%
New Jersey	5.0	%	5.0	%



	Financing VIE		Other VIEs
	Residential Mortgage Loan Securitization		Consolidated K-Series		Other		Total
Cash and cash equivalents	$	—	$	—	$	656	$	656
Residential mortgage loans held in securitization trusts, net	45,672		—		—		45,672
Multi-family loans held in securitization trusts, at fair value	—		15,863,264		—		15,863,264
Receivables and other assets	1,274		51,950		14,098		67,322
Total assets	$	46,946	$	15,915,214	$	14,754	$	15,976,914

Residential collateralized debt obligations	$	42,119	$	—	$	—	$	42,119
Multi-family collateralized debt obligations, at fair value	—		14,978,199		—		14,978,199
Mortgages and notes payable in consolidated variable interest entities	—		—		935		935
Accrued expenses and other liabilities	35		50,783		120		50,938
Total liabilities	$	42,154	$	15,028,982	$	1,055	$	15,072,191



	Financing VIEs						Other VIEs
	Multi-family CMBS Re- securitization ⁽¹⁾		Distressed Residential Mortgage Loan Securitization ⁽²⁾		Residential Mortgage Loan Securitization		Consolidated K-Series ⁽³⁾		Other		Total
Cash and cash equivalents	$	—	$	—	$	—	$	—	$	708	$	708
Investment securities available for sale, at fair value held in securitization trusts	52,700		—		—		—		—		52,700
Residential mortgage loans held in securitization trusts, net	—		—		56,795		—		—		56,795
Distressed residential mortgage loans held in securitization trusts, net	—		88,096		—		—		—		88,096
Multi-family loans held in securitization trusts, at fair value	1,107,071		—		—		10,572,776		—		11,679,847
Real estate held for sale in consolidated variable interest entities	—		—		—		—		29,704		29,704
Receivables and other assets	4,243		10,287		1,061		37,679		23,254		76,524
Total assets	$	1,164,014	$	98,383	$	57,856	$	10,610,455	$	53,666	$	11,984,374

Residential collateralized debt obligations	$	—	$	—	$	53,040	$	—	$	—	$	53,040
Multi-family collateralized debt obligations, at fair value	1,036,604		—		—		9,985,644		—		11,022,248
Securitized debt	30,121		12,214		—		—		—		42,335
Mortgages and notes payable in consolidated variable interest entities	—		—		—		—		31,227		31,227
Accrued expenses and other liabilities	4,228		444		26		37,022		1,166		42,886
Total liabilities	$	1,070,953	$	12,658	$	53,066	$	10,022,666	$	32,393	$	11,191,736



	Multi-family CMBS Re-securitization ⁽¹⁾			Distressed Residential Mortgage Loan Securitization
Principal Amount at December 31, 2018	$	33,177		$	12,381
Carrying Value at December 31, 2018 ⁽²⁾	$	30,121		$	12,214
Pass-through rate of notes issued	5.35		%	4.00		%



Scheduled Maturity (principal amount)	December 31, 2018
Within 24 months	$	12,381
Over 24 months to 36 months	—
Over 36 months	33,177
Total	45,558
Discount	(2,983		)
Debt issuance cost	(240		)
Carrying value	$	42,335



	September 30, 2019
	Investment securities, available for sale, at fair value		Preferred equity and mezzanine loan investments		Investments in unconsolidated entities		Total
ABS	$	48,254	$	—	$	—	$	48,254
Preferred equity investments in multi-family properties	—		172,826		92,684		265,510
Mezzanine loans on multi-family properties	—		6,171		—		6,171
Equity investments in entities that invest in residential properties and loans	—		—		61,779		61,779
Total assets	$	48,254	$	178,997	$	154,463	$	381,714



	December 31, 2018
Land	$	2,650
Building and improvements	26,032
Furniture, fixtures and equipment	974
Lease intangible	2,802
Real estate held for sale before accumulated depreciation and amortization	32,458
Accumulated depreciation	(418		)
Accumulated amortization of lease intangible	(2,336		)
Real estate held for sale in consolidated variable interest entities	$	29,704



	Notional Amount For the Nine Months Ended September 30, 2018
Type of Derivative Instrument	December 31, 2017		Additions		Settlement, Expiration or Exercise		September 30, 2018
Interest rate swaps	$	345,500	$	50,000	$	—	$	395,500



	Maximum Aggregate Uncommitted Principal Amount		Outstanding Repurchase Agreements		Carrying Value of Loans Pledged ⁽¹⁾		Weighted Average Rate		Weighted Average Months to Maturity
September 30, 2019	$	950,000	$	736,348	$	937,682	4.05	%	4.00
December 31, 2018	$	950,000	$	589,148	$	754,352	4.67	%	9.24



		Mortgage Note Amount as of
	Origination Date	September 30, 2019		Maturity Date	Interest Rate		Net Deferred Finance Costs
KRVI	12/16/2016	$	935	12/16/2019	6.50	%	$	—



	Nine Months Ended September 30, 2019
	Multi-family loans held in securitization trusts			Distressed and other residential mortgage loans			Investments in unconsolidated entities			CMBS held in securitization trusts			Total
Balance at beginning of period	$	11,679,847		$	737,523		$	32,994		$	52,700		$	12,503,064
Total gains/(losses) (realized/unrealized)
Included in earnings	760,132			44,913			7,169			17,734			829,948
Included in other comprehensive income (loss)	—			—			—			(13,665		)	(13,665		)
Transfers in	—			—			—			—			—
Transfers out	—			(437		)	—			—			(437		)
Contributions	—			—			50,000			—			50,000
Paydowns/Distributions	(368,811		)	(106,113		)	(13,914		)	—			(488,838		)
Charge-off	(3,510		)	—			—			—			(3,510		)
Sales	—			(19,814		)	—			(56,769		)	(76,583		)
Purchases ⁽¹⁾	3,795,606			460,056			—			—			4,255,662
Balance at the end of period	$	15,863,264		$	1,116,128		$	76,249		$	—		$	17,055,641



	Nine Months Ended September 30, 2018
	Multi-family loans held in securitization trusts			Distressed and other residential mortgage loans			Investments in unconsolidated entities			CMBS held in securitization trusts		Total
Balance at beginning of period	$	9,657,421		$	87,153		$	42,823		$	47,922	$	9,835,319
Total (losses)/gains (realized/unrealized)
Included in earnings	(289,797		)	(1,361		)	7,930			2,928		(280,300		)
Included in other comprehensive income (loss)	—			—			—			901		901
Transfers in	—			—			—			—		—
Transfers out	—			—			—			—		—
Contributions	—			—			—			—		—
Paydowns/Distributions	(101,953		)	(15,456		)	(15,692		)	—		(133,101		)
Sales	—			(7,105		)	—			—		(7,105		)
Purchases ⁽¹⁾	805,163			118,679			—			—		923,842
Balance at the end of period	$	10,070,834		$	181,910		$	35,061		$	51,751	$	10,339,556



		September 30, 2019				December 31, 2018
	Fair Value Hierarchy Level	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Financial Assets:
Cash and cash equivalents	Level 1	$	65,906	$	65,906	$	103,724	$	103,724
Investment securities, available for sale	Level 2 or 3	1,904,018		1,904,018		1,512,252		1,512,252
Distressed and other residential mortgage loans, at fair value	Level 3	1,116,128		1,116,128		737,523		737,523
Distressed and other residential mortgage loans, net	Level 3	210,466		213,398		285,261		289,376
Investments in unconsolidated entities	Level 3	168,933		170,150		73,466		73,833
Preferred equity and mezzanine loan investments	Level 3	178,997		181,626		165,555		167,739
Multi-family loans held in securitization trusts	Level 3	15,863,264		15,863,264		11,679,847		11,679,847
Derivative assets	Level 2	20,673		20,673		10,263		10,263
Mortgage loans held for sale, net ⁽¹⁾	Level 3	2,437		2,525		3,414		3,584
Mortgage loans held for investment ⁽¹⁾	Level 3	—		—		1,580		1,580
Financial Liabilities:
Repurchase agreements	Level 2	2,559,880		2,559,880		2,131,505		2,131,505
Residential collateralized debt obligations	Level 3	42,119		40,534		53,040		50,031
Multi-family collateralized debt obligations	Level 3	14,978,199		14,978,199		11,022,248		11,022,248
Securitized debt	Level 3	—		—		42,335		45,030
Subordinated debentures	Level 3	45,000		41,273		45,000		44,897
Convertible notes	Level 2	132,395		140,557		130,762		135,689


a.	~~Cash and cash equivalents –~~ ~~Estimated fair value approximates the carrying value of such assets.~~