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EFC Ellington Financial

Filed: 10 May 21, 2:29pm
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to         
Commission file number 001-34569
Ellington Financial Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware26-0489289
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
53 Forest Avenue
Old Greenwich, Connecticut, 06870
(Address of Principal Executive Offices) (Zip Code)
(203) 698-1200
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, $0.001 par value per shareEFCThe New York Stock Exchange
6.750% Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred StockEFC PR AThe New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated Filer
Non-Accelerated FilerSmaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No  x
Number of shares of the Registrant's common stock outstanding as of May 7, 2021: 43,781,684


ELLINGTON FINANCIAL INC.
INDEX
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits



PART I—FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
ELLINGTON FINANCIAL INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
March 31, 2021December 31, 2020
(In thousands, except share amounts)Expressed in U.S. Dollars
Assets
Cash and cash equivalents(1)
$149,350 $111,647 
Restricted cash(1)
175 175 
Securities, at fair value(1)(2)
1,909,127 1,514,185 
Loans, at fair value(1)(2)
1,582,516 1,453,480 
Investments in unconsolidated entities, at fair value(1)
147,684 141,620 
Real estate owned(1)(2)
35,557 23,598 
Financial derivatives—assets, at fair value23,082 15,479 
Reverse repurchase agreements96,783 38,640 
Due from brokers(1)
91,814 63,147 
Investment related receivables(1)
67,338 49,317 
Other assets(1)
3,499 2,575 
Total Assets$4,106,925 $3,413,863 
Liabilities
Securities sold short, at fair value$96,398 $38,642 
Repurchase agreements(1)
1,909,511 1,496,931 
Financial derivatives—liabilities, at fair value19,438 24,553 
Due to brokers5,337 5,059 
Investment related payables(1)
40,836 4,754 
Other secured borrowings(1)
64,506 51,062 
Other secured borrowings, at fair value(1)
911,256 754,921 
Senior notes, net85,627 85,561 
Base management fee payable to affiliate3,277 3,178 
Dividends payable5,740 5,738 
Interest payable(1)
1,915 3,233 
Accrued expenses and other liabilities(1)
19,708 18,659 
Total Liabilities3,163,549 2,492,291 
Commitments and contingencies (Note 21)0
Equity
Preferred stock, par value $0.001 per share, 100,000,000 shares authorized;
6.750% Series A Fixed-to-Floating Rate Cumulative Redeemable; 4,600,000 shares issued and outstanding, respectively ($115,000 liquidation preference)
111,034 111,034 
Common stock, par value $0.001 per share, 100,000,000 shares authorized;
43,781,684 and 43,781,684 shares issued and outstanding, respectively
44 44 
Additional paid-in-capital915,577 915,658 
Retained earnings (accumulated deficit)(116,799)(141,521)
Total Stockholders' Equity909,856 885,215 
Non-controlling interests(1)
33,520 36,357 
Total Equity943,376 921,572 
Total Liabilities and Equity$4,106,925 $3,413,863 
(1)Ellington Financial Inc.'s Condensed Consolidated Balance Sheet includes assets and liabilities of variable interest entities it has consolidated. See Note 9 for additional details on Ellington Financial Inc.'s consolidated variable interest entities.
(2)Includes assets pledged as collateral to counterparties. See Note 11 for additional details on the Company's borrowings and related collateral.

See Notes to Condensed Consolidated Financial Statements
3

ELLINGTON FINANCIAL INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three-Month Period Ended
March 31, 2021March 31, 2020
(In thousands, except per share amounts)
Net Interest Income
Interest income$40,079 $52,108 
Interest expense(11,342)(22,090)
Total net interest income28,737 30,018 
Other Income (Loss)
Realized gains (losses) on securities and loans, net4,276 12,260 
Realized gains (losses) on financial derivatives, net5,795 (12,406)
Realized gains (losses) on real estate owned, net61 350 
Unrealized gains (losses) on securities and loans, net(1,781)(133,738)
Unrealized gains (losses) on financial derivatives, net10,711 (9,984)
Unrealized gains (losses) on real estate owned, net(792)(357)
Other, net1,960 1,679 
Total other income (loss)20,230 (142,196)
Expenses
Base management fee to affiliate (Net of fee rebates of $194 and $507, respectively)(1)
3,277 2,443 
Investment related expenses:
Servicing expense986 2,531 
Debt issuance costs related to Other secured borrowings, at fair value1,665 
Other2,204 1,423 
Professional fees1,198 1,277 
Compensation expense1,420 788 
Other expenses1,579 1,752 
Total expenses12,329 10,214 
Net Income (Loss) before Income Tax Expense (Benefit) and Earnings (Losses) from Investments in Unconsolidated Entities36,638 (122,392)
Income tax expense (benefit)2,017 (547)
Earnings (losses) from investments in unconsolidated entities6,635 (6,497)
Net Income (Loss)41,256 (128,342)
Net income (loss) attributable to non-controlling interests1,459 (885)
Dividends on preferred stock1,941 1,941 
Net Income (Loss) Attributable to Common Stockholders$37,856 $(129,398)
Net Income (Loss) per Share of Common Stock:
Basic and Diluted$0.86 $(3.04)
(1)See Note 13 for further details on management fee rebates.
See Notes to Condensed Consolidated Financial Statements
4

ELLINGTON FINANCIAL INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED)
Common StockAdditional
Paid-in
Capital
Retained
Earnings/(Accumulated Deficit)
Total Stockholders' EquityNon-controlling InterestTotal Equity
Preferred StockSharesPar Value
(In thousands, except share amounts)Expressed in U.S. Dollars
BALANCE, December 31, 2020$111,034 43,781,684 $44 $915,658 $(141,521)$885,215 $36,357 $921,572 
Net income (loss)39,797 39,797 1,459 41,256 
Contributions from non-controlling interests1,517 1,517 
Common dividends(1)
(13,134)(13,134)(200)(13,334)
Preferred dividends(2)
(1,941)(1,941)(1,941)
Distributions to non-controlling interests(5,923)(5,923)
Adjustment to non-controlling interests(307)(307)307 — 
Share-based long term incentive plan unit awards226 226 229 
BALANCE, March 31, 2021$111,034 43,781,684 $44 $915,577 $(116,799)$909,856 $33,520 $943,376 
BALANCE, December 31, 2019$111,034 38,647,943 $39 $821,747 $(103,555)$829,265 $39,434 $868,699 
Net income (loss)(127,457)(127,457)(885)(128,342)
Net proceeds from the issuance of common stock(3)
5,290,000 95,287 95,292 — 95,292 
Shares of common stock issued in connection with incentive fee payment637 12 12 — 12 
Contributions from non-controlling interests3,487 3,487 
Common dividends(1)
(19,748)(19,748)(309)(20,057)
Preferred dividends(2)
(1,941)(1,941)(1,941)
Distributions to non-controlling interests(4,798)(4,798)
Conversion of non-controlling interest units to shares of common stock129,516 — 2,378 2,378 (2,378)— 
Adjustment to non-controlling interests— — (545)(545)545 — 
Repurchase of shares of common stock(288,172)— (3,035)(3,035)(3,035)
Share-based long term incentive plan unit awards— — 162 162 164 
BALANCE, March 31, 2020$111,034 43,779,924 $44 $916,006 $(252,701)$774,383 $35,098 $809,481 
(1)For the three-month periods ended March 31, 2021 and 2020, dividends totaling $0.30 and $0.45, respectively, per share of common stock and convertible unit outstanding, were declared.
(2)For the three-month period ended March 31, 2021 dividends totaling $0.421875 per share of preferred stock was declared. No such dividends were declared during the three-month period ended March 31, 2020.
(3)Net of underwriters' discounts and offering costs.
See Notes to Condensed Consolidated Financial Statements
5

ELLINGTON FINANCIAL INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Three-Month Period Ended
March 31, 2021March 31, 2020
(In thousands)Expressed in U.S. Dollars
Cash Flows from Operating Activities:
Net cash provided by (used in) operating activities$9,164 $28,867 
Cash Flows from Investing Activities:
Purchase of securities(761,382)(827,252)
Purchase of loans(302,567)(273,571)
Capital improvements of real estate owned(473)
Proceeds from disposition of securities285,767 1,241,449 
Proceeds from disposition of loans38 
Contributions to investments in unconsolidated entities200 (3,034)
Distributions from investments in unconsolidated entities12,971 13,824 
Proceeds from disposition of real estate owned336 6,946 
Proceeds from principal payments of securities108,082 135,093 
Proceeds from principal payments of loans53,586 154,441 
Proceeds from securities sold short86,373 201,998 
Repurchase of securities sold short(25,219)(265,932)
Payments on financial derivatives(14,566)(48,081)
Proceeds from financial derivatives18,138 26,877 
Payments made on reverse repurchase agreements(1,866,265)(5,880,200)
Proceeds from reverse repurchase agreements1,806,591 5,940,600 
Due from brokers, net6,044 (3,029)
Due to brokers, net2,088 8,287 
Net cash provided by (used in) investing activities(590,296)428,454 
Cash Flows from Financing Activities:
Net proceeds from the issuance of common stock(1)
95,537 
Offering costs paid(253)
Repurchase of common stock(3,035)
Dividends paid(15,273)(21,024)
Contributions from non-controlling interests1,159 3,487 
Distributions to non-controlling interests(5,923)(4,798)
Proceeds from issuance of Other secured borrowings20,634 31,913 
Principal payments on Other secured borrowings(7,990)(10,662)
Borrowings under repurchase agreements1,495,139 1,856,666 
Repayments of repurchase agreements(1,043,777)(2,267,741)
Proceeds from issuance of Other secured borrowings, at fair value211,187 
Due from brokers, net(34,815)(73,544)
Due to brokers, net(1,506)571 
Net cash provided by (used in) financing activities618,835 (392,883)
Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash37,703 64,438 
Cash, Cash Equivalents, and Restricted Cash, Beginning of Period111,822 72,477 
Cash, Cash Equivalents, and Restricted Cash, End of Period$149,525 $136,915 
See Notes to Condensed Consolidated Financial Statements
6

ELLINGTON FINANCIAL INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(UNAUDITED)
Three-Month Period Ended
March 31, 2021March 31, 2020
(In thousands)Expressed in U.S. Dollars
Supplemental disclosure of cash flow information:
Interest paid$12,660 $24,126 
Income tax paid(7)
Dividends payable5,740 7,952 
Transfers from mortgage loans to real estate owned (non-cash)12,554 1,422 
Transfers from mortgage loans to investments in unconsolidated entities (non-cash)12,600 10,833 
Purchase of loans (non-cash)(800)(6,270)
Principal payments on Other secured borrowings, at fair value (non-cash)(92,930)(44,704)
Proceeds received from Other secured borrowings, at fair value (non-cash)39,321 
Proceeds from issuance of Other secured borrowings (non-cash)800 6,270 
Proceeds from principal payments of investments (non-cash)92,930 44,704 
Repayments of repurchase agreements (non-cash)(38,782)
(1)Net of underwriters' discounts.
See Notes to Condensed Consolidated Financial Statements
7

ELLINGTON FINANCIAL INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
(UNAUDITED)
1. Organization and Investment Objective
Ellington Financial Inc., formerly known as Ellington Financial LLC, was originally formed as a Delaware limited liability company on July 9, 2007 and commenced operations on August 17, 2007. On February 28, 2019, Ellington Financial LLC filed a certificate of conversion with the Secretary of State of the State of Delaware (the "Secretary") to convert from a Delaware limited liability company to a Delaware corporation (the "Conversion") and change its name to Ellington Financial Inc. The Conversion became effective on March 1, 2019, and upon effectiveness, each of Ellington Financial LLC's existing common shares representing limited liability company interests, no par value, converted into one issued and outstanding, fully paid and nonassessable share of common stock, $0.001 par value per share, of Ellington Financial Inc. In connection with the Conversion, Ellington Financial Inc.'s Board of Directors (the "Board of Directors") approved Ellington Financial Inc.'s Certificate of Incorporation (which was also filed with the Secretary) and Bylaws.
Ellington Financial Operating Partnership LLC (the "Operating Partnership"), a 98.7% owned consolidated subsidiary of Ellington Financial Inc., was formed as a Delaware limited liability company on December 14, 2012 and commenced operations on January 1, 2013. All of Ellington Financial Inc.'s operations and business activities are conducted through the Operating Partnership. Ellington Financial Inc., the Operating Partnership, and their consolidated subsidiaries are hereafter collectively referred to as the "Company." All intercompany accounts are eliminated in consolidation.
The Company conducts its operations to qualify and be taxed as a real estate investment trust, or "REIT," under the Internal Revenue Code of 1986, as amended (the "Code"), and has elected to be taxed as a corporation effective January 1, 2019. In anticipation of the Company's intended election to be taxed as a REIT under the Code beginning with its 2019 taxable year (the "REIT Election"), the Company implemented an internal restructuring as of December 31, 2018. As part of this restructuring, the Company moved certain of its non-REIT-qualifying investments and financial derivatives to taxable REIT subsidiaries or, "TRSs," and disposed of certain of its investments in non-REIT-qualifying investments and financial derivatives.
The Company invests in a diverse array of financial assets, including residential and commercial mortgage loans, residential mortgage-backed securities, or "RMBS," commercial mortgage-backed securities, or "CMBS," consumer loans and asset-backed securities, or "ABS," including ABS backed by consumer loans, collateralized loan obligations, or "CLOs," non-mortgage- and mortgage-related derivatives, equity investments in loan origination companies, and other strategic investments.
Ellington Financial Management LLC (the "Manager") is an SEC-registered investment adviser that serves as the Manager to the Company pursuant to the terms of its Seventh Amended and Restated Management Agreement (the "Management Agreement"), which was approved by the Board of Directors effective March 13, 2018. The Manager is an affiliate of Ellington Management Group, L.L.C. ("Ellington"), an investment management firm that is registered as both an investment adviser and a commodity pool operator. In accordance with the terms of the Management Agreement, the Manager implements the investment strategy and manages the business and operations on a day-to-day basis for the Company and performs certain services for the Company, subject to oversight by the Board of Directors.
2. Significant Accounting Policies
(A) Basis of Presentation: The Company's unaudited condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, or "U.S. GAAP," and Regulation S-X. The condensed consolidated financial statements include the accounts of the Company, the Operating Partnership, its subsidiaries, and variable interest entities, or "VIEs," for which the Company is deemed to be the primary beneficiary. All intercompany balances and transactions have been eliminated. The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and those differences could be material (particularly in light of the significant volatility, lack of pricing transparency, and market dislocations that have been caused by the novel coronavirus disease, or "COVID-19," pandemic, and associated responses to the pandemic). In management's opinion, all material adjustments considered necessary for a fair statement of the Company's condensed consolidated financial statements have been included and are only of a normal recurring nature. Interim results are not necessarily indicative of the results that may be expected for the entire fiscal year. The information included in the condensed consolidated financial statements and notes thereto should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2020.

8

(B) Valuation: The Company applies ASC 820-10, Fair Value Measurement ("ASC 820") to its holdings of financial instruments. ASC 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the observability of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:
Level 1—inputs to the valuation methodology are observable and reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Currently, the types of financial instruments the Company generally includes in this category are listed equities and exchange-traded derivatives;
Level 2—inputs to the valuation methodology other than quoted prices included in Level 1 are observable for the asset or liability, either directly or indirectly. Currently, the types of financial instruments that the Company generally includes in this category are RMBS, for which the principal and interest payments are guaranteed by a U.S. government agency or a U.S. government-sponsored entity, or "Agency RMBS," U.S. Treasury securities and sovereign debt, certain non-Agency RMBS, CMBS, CLOs, corporate debt, and actively traded derivatives such as interest rate swaps, foreign currency forwards, and other over-the-counter derivatives; and
Level 3—inputs to the valuation methodology are unobservable and significant to the fair value measurement. The types of financial instruments that the Company generally includes in this category are certain RMBS, CMBS, CLOs, ABS, credit default swaps, or "CDS," on individual ABS, and total return swaps on distressed corporate debt, in each case where there is less price transparency. Also included in this category are residential and commercial mortgage loans, consumer loans, and private corporate debt and equity investments.
For certain financial instruments, the various inputs that management uses to measure fair value may fall into different levels of the fair value hierarchy. For each such financial instrument, the determination of which category within the fair value hierarchy is appropriate is based on the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the various inputs that management uses to measure fair value, with the highest priority given to inputs that are observable and reflect quoted prices (unadjusted) for identical assets or liabilities in active markets (Level 1), and the lowest priority given to inputs that are unobservable and significant to the fair value measurement (Level 3). The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument. The Company may use valuation techniques consistent with the market and income approaches to measure the fair value of its financial instruments. The market approach uses third-party valuations and information obtained from market transactions involving identical or similar financial instruments. The income approach uses projections of the future economic benefit of an instrument to determine its fair value, such as in the discounted cash flow methodology. The inputs or methodology used for valuing financial instruments are not necessarily an indication of the risk associated with investing in these financial instruments. The leveling of each financial instrument is reassessed at the end of each period. Transfers between levels of the fair value hierarchy are assumed to occur at the end of the reporting period.
Summary Valuation Techniques
For financial instruments that are traded in an "active market," the best measure of fair value is the quoted market price. However, many of the Company's financial instruments are not traded in an active market. Therefore, management generally uses third-party valuations when available. If third-party valuations are not available, management uses other valuation techniques, such as the discounted cash flow methodology. The following are summary descriptions, for various categories of financial instruments, of the valuation methodologies management uses in determining fair value of the Company's financial instruments in such categories. Management utilizes such methodologies to assign a fair value (the estimated price that, in an orderly transaction at the valuation date, would be received to sell an asset, or paid to transfer a liability, as the case may be) to each such financial instrument.
For mortgage-backed securities, or "MBS," forward settling to-be-announced mortgage-backed-securities, or "TBAs," CLOs, and corporate debt and equity, management seeks to obtain at least one third-party valuation, and often obtains multiple valuations when available. Management has been able to obtain third-party valuations on the vast majority of these instruments and expects to continue to solicit third-party valuations in the future. Management generally values each financial instrument at the average of third-party valuations received and not rejected as described below. Third-party valuations are not binding, management may adjust the valuations it receives (e.g., downward adjustments for odd lots), and management may challenge or reject a valuation when, based on its validation criteria, management determines that such valuation is unreasonable or erroneous. Furthermore, based on its validation criteria, management may determine that the average of the third-party valuations received for a given financial instrument does not result in what management believes to be the fair value of such instrument, and in such circumstances management may override this average with its own good faith valuation. The validation criteria may take into account output from management's own models, recent trading activity in the same or similar instruments, and valuations received from third parties. The use of proprietary models requires the use of a significant amount of judgment and the application of various assumptions including, but not limited to, assumptions concerning future prepayment rates and default rates. Given their relatively high level of price transparency, Agency RMBS pass-throughs are typically classified as

9

Level 2. Non-Agency RMBS, CMBS, Agency interest only and inverse interest only RMBS, CLOs, and corporate bonds are generally classified as either Level 2 or Level 3 based on analysis of available market data and/or third-party valuations. The Company's investments in distressed corporate debt can be in the form of loans as well as total return swaps on loans. These investments, as well as related non-listed equity investments, are generally designated as Level 3 assets. Valuations for total return swaps are typically based on prices of the underlying loans received from third-party pricing services. Private equity investments are generally classified as Level 3. Furthermore, the methodology used by the third-party valuation providers is reviewed at least annually by management, so as to ascertain whether such providers are utilizing observable market data to determine the valuations that they provide.
For residential and commercial mortgage loans and consumer loans, management determines fair value by taking into account both external pricing data, which includes third-party valuations, and internal pricing models. Management has obtained third-party valuations on the majority of these investments and expects to continue to solicit third-party valuations in the future. In determining fair value for non-performing mortgage loans, management evaluates third-party valuations, if applicable, as well as management's estimates of the value of the underlying real estate, using information including general economic data, broker price opinions, or "BPOs," recent sales, property appraisals, and bids. In determining fair value for performing mortgage loans and consumer loans, management evaluates third-party valuations, if applicable, as well as discounted cash flows of the loans based on market assumptions. Cash flow assumptions typically include projected default and prepayment rates and loss severities, and may include adjustments based on appraisals and BPOs. Mortgage and consumer loans are classified as Level 3.
The Company has securitized certain mortgage loans that are not deemed "qualified mortgage," or "QM," loans under the rules of the Consumer Financial Protection Bureau, or "non-QM loans." The Company's securitized non-QM loans are held as part of a collateralized financing entity, or "CFE." A CFE is a VIE that holds financial assets, issues beneficial interests in those assets, and has no more than nominal equity, and for which the issued beneficial interests have contractual recourse only to the related assets of the CFE. ASC 810, Consolidation ("ASC 810") allows the Company to elect to measure both the financial assets and financial liabilities of the CFE using the more observable of the fair value of the financial assets and the fair value of the financial liabilities of the CFE. The Company has elected the fair value option, or "FVO," for initial and subsequent recognition of the debt issued by its consolidated securitization trusts and has determined that each consolidated securitization trust meets the definition of a CFE; see Note 10 "Securitization TransactionsResidential Mortgage Loan Securitizations" for further discussion on the Company's securitization trusts. The Company has determined the inputs to the fair value measurement of the financial liabilities of each of its CFEs to be more observable than those of the financial assets and, as a result, has used the fair value of the financial liabilities of each of the CFEs to measure the fair value of the financial assets of each of the CFEs. The fair value of the debt issued by each CFE is typically valued using both external pricing data, which includes third-party valuations, and internal pricing models. The securitized non-QM loans, which are assets of the CFEs, are included in Loans, at fair value, on the Company's Condensed Consolidated Balance Sheet. The debt issued by the CFEs is included in Other secured borrowings, at fair value, on the Company's Condensed Consolidated Balance Sheet. Unrealized gains (losses) from changes in fair value of Other secured borrowings, at fair value, are included in Other, net, on the Company's Condensed Consolidated Statement of Operations. The securitized non-QM loans and the debt issued by the Company's CFEs are both classified as Level 3.
For financial derivatives with greater price transparency, such as CDS on asset-backed indices, CDS on corporate indices, certain options on the foregoing, and total return swaps on publicly traded equities or indices, market-standard pricing sources are used to obtain valuations; these financial derivatives are generally classified as Level 2. Interest rate swaps, swaptions, and foreign currency forwards are typically valued based on internal models that use observable market data, including applicable interest rates and foreign currency rates in effect as of the measurement date; the model-generated valuations are then typically compared to counterparty valuations for reasonableness. These financial derivatives are also generally classified as Level 2. Financial derivatives with less price transparency, such as CDS on individual ABS, are generally valued based on internal models, and are classified as Level 3. In the case of CDS on individual ABS, the valuation process typically starts with an estimation of the value of the underlying ABS. In valuing its financial derivatives, the Company also considers the creditworthiness of both the Company and its counterparties, along with collateral provisions contained in each financial derivative agreement.
Investments in private operating entities, such as loan originators, are valued based on available metrics, such as relevant market multiples and comparable company valuations, company specific-financial data including actual and projected results, and independent third party valuation estimates. These investments are classified as Level 3.
The Company's repurchase and reverse repurchase agreements are carried at cost, which approximates fair value. Repurchase and reverse repurchase agreements are classified as Level 2, based on the adequacy of the collateral and their short term nature.

10

The Company's valuation process, including the application of validation criteria, is directed by the Manager's Valuation Committee (the "Valuation Committee"), and overseen by the Company's audit committee. The Valuation Committee includes senior level executives from various departments within the Manager, and each quarter, the Valuation Committee reviews and approves the valuations of the Company's financial instruments. The valuation process also includes a monthly review by the Company's third-party administrator. The goal of this review is to replicate various aspects of the Company's valuation process based on the Company's documented procedures.
Because of the inherent uncertainty of valuation, the estimated fair value of the Company's financial instruments may differ significantly from the values that would have been used had a ready market for the financial instruments existed, and the differences could be material to the Company's condensed consolidated financial statements.
(C) Accounting for Securities: Purchases and sales of investments in securities are generally recorded on trade date, and realized and unrealized gains and losses are calculated based on identified cost. Investments in securities are recorded in accordance with ASC 320, Investments—Debt and Equity Securities ("ASC 320") or ASC 325-40, Beneficial Interests in Securitized Financial Assets ("ASC 325-40"). The Company generally classifies its securities as available-for-sale. The Company has chosen to elect the FVO pursuant to ASC 825, Financial Instruments ("ASC 825") for its investments in securities. Electing the FVO allows the Company to record changes in fair value in the Condensed Consolidated Statement of Operations, as a component of Unrealized gains (losses) on securities and loans, net, which, in management's view, more appropriately reflects the results of operations for a particular reporting period as all investment activities will be recorded in a similar manner.
Many of the Company's investments in securities, such as MBS and CLOs, are issued by entities that are deemed to be VIEs. For the majority of such investments, the Company has determined it is not the primary beneficiary of such VIEs and therefore has not consolidated such VIEs. The Company's maximum risk of loss in these unconsolidated VIEs is generally limited to the fair value of the Company's investment in the VIE.
The Company evaluates its investments in interest only securities to determine whether they meet the requirements for classification as financial derivatives under ASC 815, Derivatives and Hedging ("ASC 815"). For interest only securities, where the holder is entitled only to a portion of the interest payments made on the mortgages underlying certain MBS, and inverse interest only securities, which are interest only securities whose coupon has an inverse relationship to its benchmark rate, such as LIBOR, the Company has determined that such investments do not meet the requirements for treatment as financial derivatives and are classified as securities.
The Company applies the principles of ASU 2016-13, Financial Instruments—Credit Losses ("ASU 2016-13") and evaluates the cost basis of its investments in securities on at least a quarterly basis, under ASC 326-30, Financial Instruments—Credit Losses: Available-for-Sale Debt Securities ("ASC 326-30"). When the fair value of a security is less than its amortized cost basis as of the balance sheet date, the security's cost basis is considered impaired. The Company must evaluate the decline in the fair value of the impaired security and determine whether such decline resulted from a credit loss or non-credit related factors. In its assessment of whether a credit loss exists, the Company compares the present value of estimated future cash flows of the impaired security with the amortized cost basis of such security. The estimated future cash flows reflect those that a "market participant" would use and typically include assumptions related to fluctuations in interest rates, prepayment speeds, default rates, collateral performance, and the timing and amount of projected credit losses, as well incorporating observations of current market developments and events. Cash flows are discounted at an interest rate equal to the current yield used to accrete interest income. If the present value of estimated future cash flows is less than the amortized cost basis of the security, an expected credit loss exists and is included in Unrealized gains (losses) on securities and loans, net, on the Condensed Consolidated Statement of Operations. If it is determined as of the financial reporting date that all or a portion of a security's cost basis is not collectible, then the Company will recognize a realized loss to the extent of the adjustment to the security's cost basis. This adjustment to the amortized cost basis of the security is reflected in Net realized gains (losses) on securities and loans, net, on the Condensed Consolidated Statement of Operations.
(D) Accounting for Loans: The Company's loan portfolio primarily consists of residential mortgage, commercial mortgage, and consumer loans. The Company's loans are accounted for under ASC 310-10, Receivables, and are classified as held-for-investment when the Company has the intent and ability to hold such loans for the foreseeable future or to maturity/payoff. When the Company has the intent to sell loans, such loans will be classified as held-for-sale. Mortgage loans held-for-sale are accounted for under ASC 948-310, Financial services—mortgage banking. The Company may aggregate its loans into pools based on common risk characteristics at purchase. The Company has chosen to elect the FVO pursuant to ASC 825 for its loan portfolios. Loans are recorded at fair value on the Condensed Consolidated Balance Sheet and changes in fair value are recorded in earnings on the Condensed Consolidated Statement of Operations as a component of Unrealized gains (losses) on securities and loans, net. The Company generates income from fees on certain loans, generally commercial mortgage loans, that it originates and holds for investment, including origination and exit fees. Such fee income is recorded when earned and

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included in Other, net on the Condensed Consolidated Statement of Operations. Transfers between held-for-investment and held-for-sale occur once the Company's intent to sell the loans changes.
For residential and commercial mortgage loans, the Company generally accrues interest payments. Such loans are typically moved to non-accrual status if the loan becomes 90 days or more delinquent. The Company does not accrue interest payments on its consumer loans; interest payments are recorded upon receipt. Once consumer loans are more than 120 days past due, the Company will generally charge off such loans. The Company evaluates its charged-off loans and determines collectibility, if any, on such loans.
The Company evaluates the collectibility of both interest and principal on each of its loan investments and whether the cost basis of the loan is impaired. A loan's cost basis is impaired when, based on current information and market developments, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. When a loan's cost basis is impaired, the Company does not record an allowance for loan loss as it elected the FVO on all of its loan investments.
Consistent with the Company's application of the principles of ASU 2016-13, in its assessment of whether a credit loss exists, the Company compares the present value of the amount expected to be collected on the impaired loan with the amortized cost basis of such loan. If the present value of the amount expected to be collected on the impaired loan is less than the amortized cost basis of such loan, an expected credit loss exists and is included in Unrealized gains (losses) on securities and loans, net, on the Condensed Consolidated Statement of Operations. If it is determined as of the financial reporting date that all or a portion of a loan's cost basis is not collectible, then the Company will recognize a realized loss to the extent of the adjustment to the loan's cost basis. This adjustment to the amortized cost basis of the loan is reflected in Realized gains (losses) on securities and loans, net, on the Condensed Consolidated Statement of Operations.
(E) Interest Income: The Company amortizes premiums and accretes discounts on its debt securities. Coupon interest income on fixed-income investments is generally accrued based on the outstanding principal balance or notional value and the current coupon rate.
For debt securities that are deemed to be of high credit quality at the time of purchase (generally Agency RMBS, exclusive of interest only securities), premiums and discounts are amortized/accreted into interest income over the life of such securities using the effective interest method. For such securities whose cash flows vary depending on prepayments, an effective yield retroactive to the time of purchase is periodically recomputed based on actual prepayments and changes in projected prepayment activity, and a catch-up adjustment, or "Catch-up Premium Amortization Adjustment," is made to amortization to reflect the cumulative impact of the change in effective yield.
For debt securities (generally non-Agency RMBS, CMBS, ABS, CLOs, and interest only securities) that are deemed not to be of high credit quality at the time of purchase, interest income is recognized based on the effective interest method. For purposes of estimating future expected cash flows, management uses assumptions including, but not limited to, assumptions for future prepayment rates, default rates, and loss severities (each of which may in turn incorporate various macro-economic assumptions, such as future housing prices, GDP growth rates, and unemployment rates). These assumptions are re-evaluated not less than quarterly. Changes in projected cash flows may result in prospective changes in the yield/interest income recognized on such securities based on the updated expected future cash flows.
For each loan purchased with the expectation that both interest and principal will be paid in full, the Company generally amortizes or accretes any premium or discount over the life of the loan utilizing the effective interest method. However, based on current information and market developments, the Company re-assesses the collectibility of interest and principal, and generally designates a loan as in non-accrual status either when any payments have become 90 or more days past due, or when, in the opinion of management, it is probable that the Company will be unable to collect either interest or principal in full. Once a loan is designated as in non-accrual status, as long as principal is still expected to be collectible in full, interest payments are recorded as interest income only when received (i.e., under the cash basis method); accruals of interest income are only resumed when the loan becomes contractually current and performance is demonstrated to be resumed. However, if principal is not expected to be collectible in full, the cost recovery method is used (i.e., no interest income is recognized, and all payments received—whether contractually interest or principal—are applied to cost).
Certain of the Company's debt securities and loans, at the date of acquisition, have experienced or are expected to experience more-than-insignificant deterioration in credit quality since origination. Consistent with the Company's application of the principles of ASU 2016-13, if at the date of acquisition for a particular asset the Company projects a significant difference between contractual cash flows and expected cash flows, it establishes an initial estimate for credit losses as an upward adjustment to the acquisition cost of the asset for the purpose of calculating interest income using the effective yield method.

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In estimating future cash flows on the Company's debt securities, there are a number of assumptions that are subject to significant uncertainties and contingencies, including, in the case of MBS, assumptions relating to prepayment rates, default rates, loan loss severities, and loan repurchases. These estimates require the use of a significant amount of judgment.
(F) Investments in unconsolidated entities: The Company has made and may in the future make non-controlling equity investments in various entities, such as loan originators. Such investments are generally in the form of preferred and/or common equity, or membership interests. In certain cases, the Company can exercise significant influence over the entity (e.g. by having representation on the entity's board of directors) but the requirements for consolidation under ASC 810 are not met; in such cases the Company is required to account for such equity investments under ASC 323-10, Investments—Equity Method and Joint Ventures ("ASC 323-10"). The Company has chosen to elect the FVO pursuant to ASC 825 for its investments in unconsolidated entities, which, in management's view, more appropriately reflects the results of operations for a particular reporting period, as all investment activities will be recorded in a similar manner. The period change in fair value of the Company's investments in unconsolidated entities is recorded on the Condensed Consolidated Statement of Operations in Earnings (losses) from investments in unconsolidated entities.
(G) Real Estate Owned "REO": When the Company obtains possession of real property in connection with a foreclosure or similar action, the Company de-recognizes the associated mortgage loan according to ASU 2014-04, Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure ("ASU 2014-04"). Under the provisions of ASU 2014-04, the Company is deemed to have received physical possession of real estate property collateralizing a mortgage loan when it obtains legal title to the property upon completion of a foreclosure or when the borrower conveys all interest in the property to it through a deed in lieu of foreclosure or similar legal agreement. The Company's initial cost basis in REO is equal to the fair value of the real estate associated with the foreclosed mortgage loan, less expected costs to sell. REO valuations are reflected at the lower of cost or fair value. The fair value of such REO is typically based on management's estimates which generally use information including general economic data, BPOs, recent sales, property appraisals, and bids, and takes into account the expected costs to sell the property. REO recorded at fair value on a non-recurring basis are classified as Level 3.
(H) Securities Sold Short: The Company may purchase or engage in short sales of U.S. Treasury securities and sovereign debt to mitigate the potential impact of changes in interest rates and/or foreign exchange rates on the performance of its portfolio. When the Company sells securities short, it typically satisfies its security delivery settlement obligation by borrowing or purchasing the security sold short from the same or a different counterparty. When borrowing a security sold short from a counterparty, the Company generally is required to deliver cash or securities to such counterparty as collateral for the Company's obligation to return the borrowed security. The Company has chosen to elect the FVO pursuant to ASC 825 for its securities sold short. Electing the FVO allows the Company to record changes in fair value in the Condensed Consolidated Statement of Operations, which, in management's view, more appropriately reflects the results of operations for a particular reporting period as all securities activities will be recorded in a similar manner. As such, securities sold short are recorded at fair value on the Condensed Consolidated Balance Sheet and the period change in fair value is recorded in current period earnings on the Condensed Consolidated Statement of Operations as a component of Unrealized gains (losses) on securities and loans, net. A realized gain or loss will be recognized upon the termination of a short sale if the market price is less or greater than the original sale price. Such realized gain or loss is recorded on the Company's Condensed Consolidated Statement of Operations in Realized gains (losses) on securities and loans, net.
(I) Financial Derivatives: The Company enters into various types of financial derivatives subject to its investment guidelines, which include restrictions associated with maintaining qualification as a REIT. The Company's financial derivatives are predominantly subject to bilateral collateral arrangements or clearing in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the "Dodd-Frank Act." The Company may be required to deliver or receive cash or securities as collateral upon entering into derivative transactions. In addition, changes in the value of derivative transactions may require the Company or the counterparty to post or receive additional collateral. In the case of cleared derivatives, the clearinghouse becomes the Company's counterparty and a futures commission merchant acts as an intermediary between the Company and the clearinghouse with respect to all facets of the related transaction, including the posting and receipt of required collateral. Cash collateral received by the Company is included in Due to brokers, on the Condensed Consolidated Balance Sheet. Conversely, cash collateral posted by the Company is included in Due from brokers, on the Condensed Consolidated Balance Sheet. The types of derivatives primarily utilized by the Company are swaps, TBAs, futures, options, and forwards.
Swaps: The Company may enter into various types of swaps, including interest rate swaps, credit default swaps, and total return swaps. The primary risk associated with the Company's interest rate swap activity is interest rate risk. The primary risk associated with the Company's credit default swaps and total return swaps is credit risk.
The Company is subject to interest rate risk exposure in the normal course of pursuing its investment objectives. Primarily to help mitigate interest rate risk, the Company enters into interest rate swaps. Interest rate swaps are contractual

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agreements whereby one party pays a floating interest rate on a notional principal amount and receives a fixed-rate payment on the same notional principal, or vice versa, for a fixed period of time. Interest rate swaps change in value with movements in interest rates. The Company also enters into interest rate swaps whereby the Company pays one floating rate and receives a different floating rate, or "basis swaps."
The Company enters into credit default swaps. A credit default swap is a contract under which one party agrees to compensate another party for the financial loss associated with the occurrence of a "credit event" in relation to a "reference amount" or notional value of a "reference asset" (usually a bond, loan, or an index or basket of bonds or loans). The definition of a credit event may vary from contract to contract. A credit event may occur (i) when the reference asset (or underlying asset, in the case of a reference asset that is an index or basket) fails to make scheduled principal or interest payments to its holders, (ii) with respect to credit default swaps referencing mortgage/asset-backed securities and indices, when the reference asset (or underlying asset, in the case of a reference asset that is an index or basket) is downgraded below a certain rating level, or (iii) with respect to credit default swaps referencing corporate entities and indices, upon the bankruptcy of the obligor of the reference asset (or underlying obligor, in the case of a reference asset that is an index). The Company typically writes (sells) protection to take a "long" position with respect to the underlying reference assets, or purchases (buys) protection to take a "short" position with respect to the underlying reference assets or to hedge exposure to other investment holdings.
The Company enters into total return swaps in order to take a "long" or "short" position with respect to an underlying reference asset. The Company is subject to market price volatility of the underlying reference asset. A total return swap involves commitments to pay interest in exchange for a market-linked return based on a notional value. To the extent that the total return of the corporate debt, security, group of securities or index underlying the transaction exceeds or falls short of the offsetting interest obligation, the Company will receive a payment from or make a payment to the counterparty.
Swaps change in value with movements in interest rates, credit quality, or total return of the reference securities. During the term of swap contracts, changes in value are recognized as unrealized gains or losses on the Condensed Consolidated Statement of Operations. When a contract is terminated, the Company realizes a gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Company's basis in the contract, if any. Periodic payments or receipts required by swap agreements are recorded as unrealized gains or losses when accrued and realized gains or losses when received or paid. Upfront payments paid and/or received by the Company to open swap contracts are recorded as an asset and/or liability on the Condensed Consolidated Balance Sheet and are recorded as a realized gain or loss on the termination date.
TBA Securities: The Company transacts in the forward settling TBA market. A TBA position is a forward contract for the purchase ("long position") or sale ("short position") of Agency RMBS at a predetermined price, face amount, issuer, coupon, and maturity on an agreed-upon future delivery date. For each TBA contract and delivery month, a uniform settlement date for all market participants is determined by the Securities Industry and Financial Markets Association. The specific Agency RMBS to be delivered into the contract at the settlement date are not known at the time of the transaction. The Company typically does not take delivery of TBAs, but rather enters into offsetting transactions and settles the associated receivable and payable balances with its counterparties. The Company uses TBAs to mitigate interest rate risk, usually by taking short positions. The Company also invests in TBAs as a means of acquiring additional exposure to Agency RMBS, or for speculative purposes, including holding long positions.
TBAs are accounted for by the Company as financial derivatives. The difference between the forward contract price and the market value of the TBA position as of the reporting date is included in Unrealized gains (losses) on financial derivatives, net, on the Condensed Consolidated Statement of Operations.
Futures Contracts: A futures contract is an exchange-traded agreement to buy or sell an asset for a set price on a future date. The Company enters into Eurodollar and/or U.S. Treasury security futures contracts to hedge its interest rate risk. The Company may also enter into various other futures contracts, including equity index futures and foreign currency futures. Initial margin deposits are made upon entering into futures contracts and can generally be either in the form of cash or securities. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by marking-to-market to reflect the current market value of the contract. Variation margin payments are made or received periodically, depending upon whether unrealized losses or gains are incurred. When the contract is closed, the Company records a realized gain or loss equal to the difference between the proceeds of the closing transaction and the Company's basis in the contract.
Options: The Company may purchase or write put or call options contracts or enter into swaptions. The Company enters into options contracts typically to help mitigate overall market, credit, or interest rate risk depending on the type of options contract. However, the Company also enters into options contracts from time to time for speculative purposes. When the Company purchases an options contract, the option asset is initially recorded at an amount equal to the premium paid, if any, and is subsequently marked-to-market. Premiums paid for purchasing options contracts that expire unexercised are recognized

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on the expiration date as realized losses. If an options contract is exercised, the premium paid is subtracted from the proceeds of the sale or added to the cost of the purchase to determine whether the Company has realized a gain or loss on the related transaction. When the Company writes an options contract, the option liability is initially recorded at an amount equal to the premium received, if any, and is subsequently marked-to-market. Premiums received for writing options contracts that expire unexercised are recognized on the expiration date as realized gains. If an options contract is exercised, the premium received is subtracted from the cost of the purchase or added to the proceeds of the sale to determine whether the Company has realized a gain or loss on the related investment transaction. When the Company enters into a closing transaction, the Company will realize a gain or loss depending upon whether the amount from the closing transaction is greater or less than the premiums paid or received. The Company may also enter into options contracts that contain forward-settling premiums. In this case, no money is exchanged upfront. Instead, the agreed-upon premium is paid by the buyer upon expiration of the option, regardless of whether or not the option is exercised.
Forward Currency Contracts: A forward currency contract is an agreement between two parties to purchase or sell a specific quantity of currency with the delivery and settlement at a specific future date and exchange rate. During the period the forward currency contract is open, changes in the value of the contract are recognized as unrealized gains or losses. When the contract is settled, the Company records a realized gain or loss equal to the difference between the proceeds of the closing transaction and the Company's basis in the contract.
Financial derivative assets are included in Financial derivatives—assets, at fair value, on the Condensed Consolidated Balance Sheet. Financial derivative liabilities are included in Financial derivatives—liabilities, at fair value, on the Condensed Consolidated Balance Sheet. The Company has chosen to elect the FVO pursuant to ASC 825 for its financial derivatives. Electing the FVO allows the Company to record changes in fair value in the Condensed Consolidated Statement of Operations, which, in management's view, more appropriately reflects the results of operations for a particular reporting period as all securities activities will be recorded in a similar manner. Changes in unrealized gains and losses on financial derivatives are included in Unrealized gains (losses) on financial derivatives, net, on the Condensed Consolidated Statement of Operations. Realized gains and losses on financial derivatives are included in Realized gains (losses) on financial derivatives, net, on the Condensed Consolidated Statement of Operations.
(J) Cash and Cash Equivalents: Cash and cash equivalents include cash and short term investments with original maturities of three months or less at the date of acquisition. Cash and cash equivalents typically include amounts held in interest bearing overnight accounts and amounts held in money market funds, and these balances generally exceed insured limits. The Company holds its cash at institutions that it believes to be highly creditworthy. Restricted cash represents cash that the Company can use only for specific purposes. See Note 18 for further discussion of restricted cash balances.
(K) Repurchase Agreements: The Company enters into repurchase agreements with third-party broker-dealers whereby it sells securities under agreements to be repurchased at an agreed-upon price and date. The Company accounts for repurchase agreements as collateralized borrowings, with the initial sale price representing the amount borrowed, and with the future repurchase price consisting of the amount borrowed plus interest, at the implied interest rate of the repurchase agreement, on the amount borrowed over the term of the repurchase agreement. The interest rate on a repurchase agreement is based on competitive rates (or competitive market spreads, in the case of agreements with floating interest rates) at the time such agreement is entered into. When the Company enters into a repurchase agreement, the lender establishes and maintains an account containing cash and/or securities having a value not less than the repurchase price, including accrued interest, of the repurchase agreement. Repurchase agreements are carried at their contractual amounts, which approximate fair value as the debt is short-term in nature.
(L) Reverse Repurchase Agreements: The Company enters into reverse repurchase agreement transactions whereby it purchases securities under agreements to resell at an agreed-upon price and date. In general, securities received pursuant to reverse repurchase agreements are delivered to counterparties of short sale transactions. The interest rate on a reverse repurchase agreement is based on competitive rates (or competitive market spreads, in the case of agreements with floating interest rates) at the time such agreement is entered into. Assets held pursuant to reverse repurchase agreements are reflected as assets on the Condensed Consolidated Balance Sheet. Reverse repurchase agreements are carried at their contractual amounts, which approximates fair value due to their short-term nature.
Repurchase and reverse repurchase agreements that are conducted with the same counterparty may be reported on a net basis if they meet the requirements of ASC 210-20, Balance Sheet Offsetting. There are no repurchase and reverse repurchase agreements reported on a net basis in the Company's condensed consolidated financial statements.
(M) Transfers of Financial Assets: The Company enters into transactions whereby it transfers financial assets to third parties. Upon such a transfer of financial assets, the Company will sometimes retain or acquire interests in the related assets. The Company evaluates transferred assets pursuant to ASC 860-10, Transfers of Financial Assets, or "ASC 860-10," which

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requires that a determination be made as to whether a transferor has surrendered control over transferred financial assets. That determination must consider the transferor's continuing involvement in the transferred financial asset, including all arrangements or agreements made contemporaneously with, or in contemplation of, the transfer, even if they were not entered into at the time of the transfer. When a transfer of financial assets does not qualify as a sale, ASC 860-10 requires the transfer to be accounted for as a secured borrowing with a pledge of collateral. ASC 860-10 is a standard that requires the Company to exercise significant judgment in determining whether a transaction should be recorded as a "sale" or a "financing."
(N) Variable Interest Entities: VIEs are entities in which: (i) the equity investors do not have the characteristics of a controlling financial interest, or (ii) there is insufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties. Consolidation of a VIE is required by the entity that is deemed to be the primary beneficiary of the VIE. The Company evaluates all of its interests in VIEs for consolidation under ASC 810. The primary beneficiary is generally the party with both (i) the power to direct the activities of the VIE that most significantly impact its economic performance, and (ii) the obligation to absorb losses and the right to receive benefits from the VIE which could be potentially significant to the VIE.
When the Company has an interest in an entity that has been determined to be a VIE, the Company assesses whether it is deemed to be the primary beneficiary of the VIE. The Company will only consolidate a VIE for which it has concluded it is the primary beneficiary. To assess whether the Company has the power to direct the activities of a VIE that most significantly impact the VIE's economic performance, the Company considers all facts and circumstances, including its role in establishing the VIE and its ongoing rights and responsibilities. This assessment includes (i) identifying the activities that most significantly impact the VIE's economic performance; and (ii) identifying which party, if any, has power over those activities. To assess whether the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE, it considers all of its economic interests, including debt and/or equity investments, as well as other arrangements deemed to be variable interests in the VIE. These assessments to determine whether the Company is the primary beneficiary require significant judgment. In instances where the Company and its related parties have interests in a VIE, the Company considers whether there is a single party in the related party group that meets the criteria to be deemed the primary beneficiary. If one party within the related party group meets such criteria, that reporting entity would be deemed to be the primary beneficiary of the VIE and no further analysis is needed. If no party within the related party group on its own meets the criteria to be deemed the primary beneficiary, but the related party group as a whole meets such criteria, the determination of the primary beneficiary within the related party group requires significant judgment. The Company performs analysis, which is based upon qualitative as well as quantitative factors, such as the relationship of the VIE to each of the members of the related party group, as well as the significance of the VIE's activities to those members, with the objective of determining which party is most closely associated with the VIE.
The Company performs ongoing reassessments of (i) whether any entities previously evaluated have become VIEs, based on certain events, and therefore subject to assessment to determine whether consolidation is appropriate, and (ii) whether changes in the facts and circumstances regarding the Company's involvement with a VIE causes its consolidation conclusion regarding the VIE to change. See Note 9 and Note 13 for further information on the Company's consolidated VIEs.
The Company's maximum amount at risk is generally limited to the Company's investment in the VIE. The Company is generally not contractually required to provide and has not provided any form of financial support to the VIEs.
The Company holds beneficial interests in certain securitization trusts that are considered VIEs. The beneficial interests in these securitization trusts are represented by certificates issued by the trusts. The securitization trusts have been structured as pass-through entities that receive principal and interest payments on the underlying collateral and distribute those payments to the certificate holders, which include both third-party investors and the Company. The certificates held by the Company typically include some or all of the most subordinated tranches. The assets held by the trusts are restricted in that they can only be used to fulfill the obligations of the related trust. In certain cases, the design and structure of the securitization trust is such that the Company effectively retains control of the assets as well as the activities that most significantly impact the economic performance of the trust. In such cases, the Company is determined to be the primary beneficiary, and the Company consolidates the trust and all intercompany transactions are eliminated in consolidation. In cases where the Company does not effectively retain control of the assets of, or have the power to direct the activities that most significantly impact the economic performance of, the related trust, it does not consolidate the trust. See Note 10 for further discussion of the Company's securitization trusts.
(O) Offering Costs/Underwriters' Discount: Offering costs and underwriters' discount are generally charged against stockholders' equity upon the completion of a capital raise. Offering costs typically include legal, accounting, and other fees associated with the cost of raising capital.

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(P) Debt Issuance Costs: Debt issuance costs associated with debt for which the Company has elected the FVO are expensed at the issuance of the debt, and are included in Investment related expenses—Other on the Condensed Consolidated Statement of Operations. Costs associated with the issuance of debt for which the Company has not elected the FVO are deferred and amortized over the life of the debt, which approximates the effective interest rate method, and are included in Interest expense on the Condensed Consolidated Statement of Operations. Deferred debt issuance costs are presented on the Condensed Consolidated Balance Sheet as a direct deduction from the related debt liability, unless such deferred debt issuance costs are associated with borrowing facilities that are expected to have a future benefit, such as giving the Company the ability to access additional borrowings over the contractual term of the debt, in which case such deferred debt issuance costs are included in Other assets on the Condensed Consolidated Balance Sheet. Debt issuance costs include legal and accounting fees, purchasers' or underwriters' discount, as well as other fees associated with the cost of the issuance of the related debt.
(Q) Expenses: Expenses are recognized as incurred on the Condensed Consolidated Statement of Operations.
(R) Investment Related Expenses: Investment related expenses consist of expenses directly related to specific financial instruments. Such expenses generally include dividend expense on common stock sold short, servicing fees and corporate and escrow advances on mortgage and consumer loans, and various other expenses and fees related directly to the Company's financial instruments. The Company has elected the FVO for its investments, and as a result all investment related expenses are expensed as incurred and included in Investment related expenses on the Condensed Consolidated Statement of Operations.
(S) Investment Related Receivables: Investment related receivables on the Company's Condensed Consolidated Balance Sheet includes receivables for securities sold and interest and principal receivable on securities and loans.
(T) Long Term Incentive Plan Units: Long term incentive plan units of the Operating Partnership ("OP LTIP Units") have been issued to certain Ellington personnel dedicated or partially dedicated to the Company, certain of the Company's directors, as well as the Manager. Costs associated with OP LTIP Units issued to dedicated or partially dedicated personnel, or to the Company's directors, are measured as of the grant date based on the Company's closing stock price on the New York Stock Exchange and are amortized over the vesting period in accordance with ASC 718-10, Compensation—Stock Compensation. The vesting periods for OP LTIP Units are typically one year from issuance for non-executive directors, and are typically one year to two years from issuance for dedicated or partially dedicated personnel.
(U) Non-controlling interests: Non-controlling interests include interests in the Operating Partnership represented by units convertible into shares of the Company's common stock ("Convertible Non-controlling Interests"). Convertible Non-controlling Interests include both the OP LTIP Units and those common units ("OP Units") of the Operating Partnership not held by the Company (collectively, the "Convertible Non-controlling Interest Units"). Non-controlling interests also include the interests of joint venture partners in certain of our consolidated subsidiaries. The joint venture partners' interests are not convertible into shares of the Company's common stock. The Company adjusts the Convertible Non-controlling Interests to align their carrying value with their share of total outstanding Operating Partnership units, including both the OP Units held by the Company and the Convertible Non-controlling Interests. Any such adjustments are reflected in Adjustment to non-controlling interests, on the Condensed Consolidated Statement of Changes in Equity. See Note 15 for further discussion of non-controlling interests.
(V) Dividends: Dividends payable on shares of common stock and Convertible Non-controlling Interest Units are recorded on the declaration date.
(W) Shares Repurchased: Shares of common stock that are repurchased by the Company subsequent to issuance are immediately retired upon settlement and decrease the total number of shares of common stock issued and outstanding. The cost of such repurchases is charged against Additional paid-in-capital on the Company's Condensed Consolidated Balance Sheet.
(X) Earnings Per Share ("EPS"): Basic EPS is computed using the two class method by dividing net income (loss) after adjusting for the impact of Convertible Non-controlling Interests which are participating securities, by the weighted average number of shares of common stock outstanding calculated including Convertible Non-controlling Interests. Because the Company's Convertible Non-controlling Interests are participating securities, they are included in the calculation of both basic and diluted EPS.
(Y) Foreign Currency: The functional currency of the Company is U.S. dollars. Assets and liabilities denominated in foreign currencies are remeasured into U.S. dollars at current exchange rates at the following dates: (i) assets, liabilities, and unrealized gains/losses—at the valuation date; and (ii) income, expenses, and realized gains/losses—at the accrual/transaction date. The Company isolates the portion of realized and change in unrealized gain (loss) resulting from changes in foreign currency exchange rates on investments and financial derivatives from the fluctuations arising from changes in fair value of investments and financial derivatives held. Changes in realized and change in unrealized gain (loss) due to foreign currency are included in Other, net, on the Condensed Consolidated Statement of Operations.

17

The Company's reporting currency is U.S. Dollars. If the Company has investments in unconsolidated entities that have a functional currency other than U.S. Dollars, the fair value is translated to U.S. dollars using the current exchange rate at the valuation date. The cumulative translation adjustment, if any, associated with the Company's investments in unconsolidated entities is recorded in accumulated other comprehensive income (loss), a component of consolidated stockholders' equity.
(Z) Income Taxes: The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Code. As a REIT, the Company is generally not subject to corporate-level federal and state income tax on net income it distributes to its stockholders within the prescribed timeframes. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including distributing at least 90% of its annual taxable income to stockholders. Even if the Company qualifies as a REIT, it may be subject to certain federal, state, local and foreign taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income. If the Company fails to qualify as a REIT, and does not qualify for certain statutory relief provisions, it will be subject to U.S. federal, state, and local income taxes and may be precluded from qualifying as a REIT for the four taxable years following the year in which the Company fails to qualify as a REIT.
As a REIT, if the Company fails to distribute in any calendar year (subject to specific timing rules for certain dividends paid in January) at least the sum of (i) 85% of its ordinary income for such year, (ii) 95% of its capital gain net income for such year, and (iii) any undistributed taxable income from the prior year, the Company would be subject to a non-deductible 4% excise tax on the excess of such required distribution over the sum of (i) the amounts actually distributed and (ii) the amounts of income retained and on which the Company has paid corporate income tax.
The Company elected to treat certain domestic and foreign subsidiaries as TRSs, and may in the future elect to treat other current or future subsidiaries as TRSs. In general, a TRS may hold assets and engage in activities that the Company cannot hold or engage in directly and generally may engage in any real estate or non-real estate-related business. A domestic TRS may, but is not required to, declare dividends to the Company; such dividends will be included in the Company's taxable income/(loss) and may necessitate a distribution to the Company's stockholders. Conversely, if the Company retains earnings at the level of a domestic TRS, such earnings will increase the book equity of the consolidated entity. A domestic TRS is subject to U.S. federal, state, and local corporate income taxes. The Company has elected and may elect in the future to treat certain of its foreign corporate subsidiaries as TRSs and, accordingly, taxable income generated by these TRSs may not be subject to U.S. federal, state, and local corporate income taxation, but generally will be included in the Company's income on a current basis as Subpart F income, whether or not distributed. However, certain of the Company's foreign subsidiaries may be subject to income taxes in the relevant foreign jurisdictions. The Company's financial results are generally not expected to reflect provisions for current or deferred income taxes, except for any activities conducted through one or more TRSs that are subject to corporate income taxation.
The Company follows the authoritative guidance on accounting for and disclosure of uncertainty on tax positions, which requires management to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. For uncertain tax positions, the tax benefit to be recognized is measured as the largest amount of benefit that is more than 50% likely to be realized upon ultimate settlement. The Company did not have any unrecognized tax benefits resulting from tax positions related to the current period or its open tax years. In the normal course of business, the Company may be subject to examination by federal, state, local, and foreign jurisdictions, where applicable, for the current period and its open tax years. The Company may take positions with respect to certain tax issues which depend on legal interpretation of facts or applicable tax regulations. Should the relevant tax regulators successfully challenge any of such positions, the Company might be found to have a tax liability that has not been recorded in the accompanying condensed consolidated financial statements. Also, management's conclusions regarding the authoritative guidance may be subject to review and adjustment at a later date based on changing tax laws, regulations, and interpretations thereof.
(AA) Recent Accounting Pronouncements: In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform—Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"), which provides optional guidance for a limited period meant to ease the potential burden in accounting for, or recognizing the effects of, reform to LIBOR and certain other reference rates. The standard is effective for all entities beginning on March 12, 2020 and may be elected over time. However, ASU 2020-04 is only applicable to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform, and that were entered into or evaluated prior to January 1, 2023. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2021-01"), which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications apply to derivatives that are affected by the reform to LIBOR. The amendments in this update are effective immediately for all entities. ASU 2021-01 provides increased clarity as the Company continues to evaluate the transition of reference rates, and it is currently evaluating the impact that the adoption of ASU 2020-04 would have on the condensed consolidated financial statements.

18

3. Valuation
The tables below reflect the value of the Company's Level 1, Level 2, and Level 3 financial instruments that are measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020:
March 31, 2021:
DescriptionLevel 1Level 2Level 3Total
(In thousands)
Assets:
Securities, at fair value:
Agency RMBS$$1,470,380 $17,402 $1,487,782 
Non-Agency RMBS73,430 127,329 200,759 
CMBS27,779 17,294 45,073 
CLOs68,814 37,585 106,399 
Asset-backed securities, backed by consumer loans59,473 59,473 
Corporate debt securities760 4,761 5,521 
Corporate equity securities4,120 4,120 
Loans, at fair value:
Residential mortgage loans1,280,637 1,280,637 
Commercial mortgage loans235,948 235,948 
Consumer loans52,705 52,705 
Corporate loans13,226 13,226 
Investment in unconsolidated entities, at fair value147,684 147,684 
Financial derivatives–assets, at fair value:
Credit default swaps on asset-backed securities320 320 
Credit default swaps on asset-backed indices2,087 2,087 
Credit default swaps on corporate bond indices3,427 3,427 
Interest rate swaps10,703 10,703 
TBAs3,409 3,409 
Total return swaps
Warrants42 42 
Futures2,704 2,704 
Forwards388 388 
Total assets$2,704 $1,661,219 $1,998,486 $3,662,409 
Liabilities:
Securities sold short, at fair value:
Government debt$$(96,179)$$(96,179)
Corporate debt securities(219)(219)
Financial derivatives–liabilities, at fair value:
Credit default swaps on asset-backed indices(127)(127)
Credit default swaps on corporate bonds(682)(682)
Credit default swaps on corporate bond indices(5,128)(5,128)
Interest rate swaps(8,884)(8,884)
TBAs(4,076)(4,076)
Futures(163)(163)
Forwards(40)(40)
Total return swaps(338)(338)
Other secured borrowings, at fair value(911,256)(911,256)
Total liabilities$(163)$(115,335)$(911,594)$(1,027,092)


19

December 31, 2020:
DescriptionLevel 1Level 2Level 3Total
(In thousands)
Assets:
Securities, at fair value:
Agency RMBS$$947,780 $11,663 $959,443 
Non-Agency RMBS76,276 127,838 204,114 
CMBS54,505 63,148 117,653 
CLOs70,171 111,100 181,271 
Asset-backed securities, backed by consumer loans44,925 44,925 
Corporate debt securities1,107 4,082 5,189 
Corporate equity securities1,590 1,590 
Loans, at fair value:
Residential mortgage loans1,187,069 1,187,069 
Commercial mortgage loans213,031 213,031 
Consumer loans47,525 47,525 
Corporate loans5,855 5,855 
Investment in unconsolidated entities, at fair value141,620 141,620 
Financial derivatives–assets, at fair value:
Credit default swaps on asset-backed securities347 347 
Credit default swaps on asset-backed indices2,184 2,184 
Credit default swaps on corporate bond indices3,420 3,420 
Interest rate swaps8,519 8,519 
TBAs962 962 
Total return swaps
Warrants36 36 
Futures
Total assets$$1,164,960 $1,959,802 $3,124,764 
Liabilities:
Securities sold short, at fair value:
Government debt$$(38,424)$$(38,424)
Corporate debt securities(218)(218)
Financial derivatives–liabilities, at fair value:
Credit default swaps on asset-backed indices(130)(130)
Credit default swaps on corporate bonds(747)(747)
Credit default swaps on corporate bond indices(6,438)(6,438)
Interest rate swaps(15,174)(15,174)
TBAs(925)(925)
Futures(376)(376)
Forwards(279)(279)
Total return swaps(484)(484)
Other secured borrowings, at fair value(754,921)(754,921)
Total liabilities$(376)$(62,335)$(755,405)$(818,116)

20

The following tables identifies the significant unobservable inputs that affect the valuation of the Company's Level 3 assets and liabilities as of March 31, 2021 and December 31, 2020:
March 31, 2021:
Fair ValueValuation 
Technique
Unobservable InputRangeWeighted
Average
DescriptionMinMax
(In thousands)
Non-Agency RMBS$85,241 Market QuotesNon Binding Third-Party Valuation$2.13 $337.92 $86.00 
42,088 Discounted Cash Flows
127,329 
Yield(1)
0.4 %66.3 %7.2 %
Projected Collateral Prepayments5.3 %74.2 %48.3 %
Projected Collateral Losses%22.5 %6.1 %
Projected Collateral Recoveries0.8 %22.4 %13.0 %
Non-Agency CMBS11,177 Market QuotesNon Binding Third-Party Valuation$4.65 $98.25 $38.62 
6,117 Discounted Cash Flows
17,294 Yield3.8 %28.3 %9.5 %
Projected Collateral Losses1.2 %10.6 %4.4 %
Projected Collateral Recoveries9.6 %95.4 %92.0 %
CLOs23,370 Market QuotesNon Binding Third-Party Valuation$2.00 $95.00 $71.18 
14,215 Discounted Cash Flows
37,585 Yield7.0 %92.5 %17.6 %
Projected Collateral Prepayments79.2 %92.9 %86.5 %
Projected Collateral Losses3.9 %11.7 %6.7 %
Projected Collateral Recoveries1.3 %6.9 %4.6 %
Agency interest only RMBS4,026 Market QuotesNon Binding Third-Party Valuation$0.66 $18.45 $12.50 
13,376 Option Adjusted Spread ("OAS")
17,402 
LIBOR OAS(2)(3)
16 2,918 719 
Projected Collateral Prepayments9.2 %100.0 %66.0 %
ABS backed by consumer loans87 Market QuotesNon Binding Third-Party Valuation$96.92 $98.58 $97.61 
59,386 Discounted Cash Flows
59,473 Yield11.9 %33.7 %15.5 %
Projected Collateral Prepayments0.0 %11.9 %8.0 %
Projected Collateral Losses1.0 %22.2 %16.2 %
Corporate debt and equity8,881 Discounted Cash FlowsYield5.0 %12.2 %9.8 %
Performing and re-performing residential mortgage loans290,957 Discounted Cash FlowsYield1.3 %59.4 %5.6 %

21

Fair ValueValuation 
Technique
Unobservable InputRangeWeighted
Average
DescriptionMinMax
(continued)(In thousands)
Securitized residential mortgage loans(4)(5)
$921,678 Market QuotesNon Binding Third-Party Valuation$0.58 $105.92 $101.24 
39,654 Discounted Cash Flows
961,332 Yield1.1 %9.2 %4.6 %
Non-performing residential mortgage loans28,348 Discounted Cash FlowsYield1.8 %34.6 %13.7 %
Recovery Amount0.3 %169.9 %33.8 %
Months to Resolution1.0 105.8 36.8 
Performing commercial mortgage loans201,683 Discounted Cash FlowsYield6.5 %11.2 %8.6 %
Non-performing commercial mortgage loans34,265 Discounted Cash FlowsYield7.5 %9.4 %9.2 %
Recovery Amount100.0 %100.4 %100.3 %
Months to Resolution2.88.86.3
Consumer loans52,705 Discounted Cash FlowsYield5.5 %48.7 %9.5 %
Projected Collateral Prepayments0.0 %34.0 %16.1 %
Projected Collateral Losses0.6 %86.6 %10.0 %
Corporate loans13,167 Market QuotesNon Binding Third-Party Valuation$100.00 $100.00 $100.00 
59 Discounted Cash Flows
13,226 Yield21.7 %21.9 %21.8 %
Investment in unconsolidated entities147,684 Enterprise Value
Equity Price-to-Book(6)(7)
1.0x1.6x 1.2x
Total return swaps—assetDiscounted Cash FlowsYield17.1 %17.1 %17.1 %
Credit default swaps on asset-backed securities320 Net Discounted Cash FlowsProjected Collateral Prepayments26.5 %36.4 %34.1 %
Projected Collateral Losses6.7 %10.1 %8.3 %
Projected Collateral Recoveries14.2 %18.8 %15.6 %
Total return swaps—liability(338)Discounted Cash FlowsYield20.6%20.6%20.6%
Other secured borrowings, at fair value(4)
(911,256)Market QuotesNon Binding Third-Party Valuation$96.51 $105.92 $101.60 
Yield(8)
1.2%1.4%1.3%
Projected Collateral Prepayments0%83.3%54.0%
(1)For the range minimum, the range maximum, and the weighted average yield, excludes non-Agency RMBS with a negative yield, with a total fair value of $0.6 million. Including these securities the weighted average yield was 6.9%.
(2)Shown in basis points.
(3)For range minimum, range maximum, and the weighted average of LIBOR OAS, excludes Agency interest only securities with a negative LIBOR OAS, with a total fair value of $3.7 million. Including these securities the weighted average was 445 basis points.
(4)Securitized residential mortgage loans and Other secured borrowings, at fair value, represent financial assets and liabilities of the Company's CFEs as discussed in Note 2.
(5)Includes $21.2 million of non-performing securitized residential mortgage loans.
(6)Represents an estimation of where market participants might value an enterprise on a price-to-book basis.
(7)For the range minimum, the range maximum, and the weighted average equity price-to-book, excludes investments in unconsolidated entities of $3.4 million. Including these investments in unconsolidated entities the weighted average equity price-to-book was 2.1x.
(8)For the range minimum, the range maximum, and the weighted average yield, excludes other secured borrowings with a negative yield, with a total fair value of $(126.8) million. Including these securities the weighted average yield was 0.9%.

22

December 31, 2020:
Fair ValueValuation 
Technique
Unobservable InputRangeWeighted
Average
DescriptionMinMax
(In thousands)
Non-Agency RMBS$70,619 Market QuotesNon Binding Third-Party Valuation$9.53 $204.61 $85.70 
57,219 Discounted Cash Flows
127,838 
Yield(1)
0.7 %52.6 %7.4 %
Projected Collateral Prepayments%99.1 %45.3 %
Projected Collateral Losses0.4 %72.6 %18.4 %
Projected Collateral Recoveries%79.1 %16.8 %
Non-Agency CMBS53,199 Market QuotesNon Binding Third-Party Valuation$4.79 $98.00 $65.20 
9,949 Discounted Cash Flows
63,148 Yield3.7 %26.3 %8.7 %
Projected Collateral Losses0.7 %10.7 %3.6 %
Projected Collateral Recoveries72.4 %96.1 %90.6 %
CLOs102,910 Market QuotesNon Binding Third-Party Valuation$2.00 $330.00 $88.66 
8,190 Discounted Cash Flows
111,100 Yield3.4 %35.4 %10.5 %
Projected Collateral Prepayments41.2 %97.7 %65.7 %
Projected Collateral Losses1.7 %28.9 %11.2 %
Projected Collateral Recoveries0.6 %15.2 %7.9 %
Agency interest only RMBS4,844 Market QuotesNon Binding Third-Party Valuation$1.91 $18.91 $8.38 
6,819 Option Adjusted Spread ("OAS")
11,663 
LIBOR OAS(2)(3)
297 2,886 914 
Projected Collateral Prepayments8.3 %100.0 %75.9 %
ABS backed by consumer loans97 Market QuotesNon Binding Third-Party Valuation$96.51 $98.43 $97.33 
44,828 Discounted Cash Flows
44,925 Yield12.6 %27.5 %15.6 %
Projected Collateral Prepayments0.0 %11.6 %7.7 %
Projected Collateral Losses1.0 %21.1 %17.1 %
Corporate debt and equity5,672 Discounted Cash FlowsYield8.1 %10.8 %9.7 %
Performing and re-performing residential mortgage loans338,265 Discounted Cash FlowsYield2.5 %28.5 %5.4 %
15,659 Recent TransactionsTransaction Price$60.00 $103.88 $103.44 
353,924 
Securitized residential mortgage loans(4)(5)
$783,162 Market QuotesNon Binding Third-Party Valuation$5.34 $105.61 $100.22 
18,182 Discounted Cash Flows
801,343 Yield%38.7 %4.4 %

23

Fair ValueValuation 
Technique
Unobservable InputRangeWeighted
Average
DescriptionMinMax
(Continued)(In thousands)
Non-performing residential mortgage loans31,802 Discounted Cash FlowsYield1.2 %41.0 %12.1 %
Recovery Amount0.9 %1713.0 %30.6 %
Months to Resolution0.0 106.6 30.0 
Performing commercial mortgage loans181,545 Discounted Cash FlowsYield3.7 %9.7 %8.1 %
Non-performing commercial mortgage loans31,486 Discounted Cash FlowsYield8.6 %14.6 %10.8 %
Recovery Amount100.0 %102.4 %100.8 %
Months to Resolution1.85.83.7
Consumer loans47,525 Discounted Cash FlowsYield7.8 %28.1 %11.2 %
Projected Collateral Prepayments0.0 %36.0 %17.3 %
Projected Collateral Losses0.9 %86.6 %9.4 %
Corporate loans5,855 Market QuotesNon Binding Third-Party Valuation$100.00 $100.00 $100.00 
Yield21.1 %21.1 %21.1 %
Investment in unconsolidated entities141,620 Enterprise Value
Equity Price-to-Book(6)
1.0x6.2x1.4x
Total return swaps—assetDiscounted Cash FlowsYield22.0 %22.0 %22.0 %
Credit default swaps on asset-backed securities347 Net Discounted Cash FlowsProjected Collateral Prepayments32.7 %39.7 %38.1 %
Projected Collateral Losses6.6 %10.8 %8.9 %
Projected Collateral Recoveries13.9 %18.1 %15.6 %
Total return swaps—liability(484)Discounted Cash FlowsYield16.8%16.8%16.8%
Other secured borrowings, at fair value(4)
(754,921)Market QuotesNon Binding Third-Party Valuation$85.37 $105.61 $102.04 
Yield1.6%3.0%2.6%
Projected Collateral Prepayments0%75.3%48.7%
(1)For the range minimum, the range maximum, and the weighted average yield, excludes non-Agency RMBS with a negative yield, with a total fair value of $0.3 million. Including these securities the weighted average yield was 7.3%.
(2)Shown in basis points.
(3)For range minimum, range maximum, and the weighted average of LIBOR OAS, excludes Agency interest only securities with a negative LIBOR OAS, with a total fair value of $4.5 million. Including these securities the weighted average was 396 basis points.
(4)Securitized residential mortgage loans and Other secured borrowings, at fair value, represent financial assets and liabilities of the Company's CFEs as discussed in Note 2.
(5)Includes $26.4 million of non-performing securitized residential mortgage loans.
(6)Represent an estimation of where market participants might value an enterprise on a price-to-book basis.
Third-party non-binding valuations are validated by comparing such valuations to internally generated prices based on the Company's models and, when available, to recent trading activity in the same or similar instruments.
For those instruments valued using discounted and net discounted cash flows, collateral prepayments, losses, recoveries, and scheduled amortization are projected over the remaining life of the collateral and expressed as a percentage of the collateral's current principal balance. Averages are weighted based on the fair value of the related instrument. In the case of credit default swaps on asset-backed securities, averages are weighted based on each instrument's bond equivalent value. Bond equivalent value represents the investment amount of a corresponding position in the reference obligation, calculated as the difference between the outstanding principal balance of the underlying reference obligation and the fair value, inclusive of accrued interest, of the derivative contract. For those assets valued using the LIBOR Option Adjusted Spread ("LIBOR OAS") valuation methodology, cash flows are projected using the Company's models over multiple interest rate scenarios, and these projected cash flows are then discounted using the LIBOR rates implied by each interest rate scenario. The LIBOR OAS of an asset is then computed as the unique constant yield spread that, when added to all LIBOR rates in each interest rate scenario generated by the model, will equate (a) the expected present value of the projected asset cash flows over all model scenarios to (b) the actual current market price of the asset. LIBOR OAS is therefore model-dependent. Generally speaking, LIBOR OAS measures the additional yield spread over LIBOR that an asset provides at its current market price after taking into account any

24

interest rate options embedded in the asset. The Company considers the expected timeline to resolution in the determination of fair value for its non-performing commercial and residential mortgage loans.
Material changes in any of the inputs above in isolation could result in a significant change to reported fair value measurements. Additionally, fair value measurements are impacted by the interrelationships of these inputs. For example, for instruments subject to prepayments and credit losses, such as non-Agency RMBS and consumer loans and ABS backed by consumer loans, a higher expectation of collateral prepayments will generally be accompanied by a lower expectation of collateral losses. Conversely, higher losses will generally be accompanied by lower prepayments. Because the Company's credit default swaps on asset-backed security holdings represent credit default swap contracts whereby the Company has purchased credit protection, such credit default swaps on asset-backed securities generally have the directionally opposite sensitivity to prepayments, losses, and recoveries as compared to the Company's long securities holdings. Prepayments do not represent a significant input for the Company's commercial mortgage-backed securities and commercial mortgage loans. Losses and recoveries do not represent a significant input for the Company's Agency RMBS interest only securities, given the guarantee of the issuing government agency or government-sponsored enterprise.
The tables below includes a roll-forward of the Company's financial instruments for the three-month periods ended March 31, 2021 and 2020 (including the change in fair value), for financial instruments classified by the Company within Level 3 of the valuation hierarchy.
Three-Month Period Ended March 31, 2021
(In thousands)Beginning Balance as of 
December 31, 2020
Accreted
Discounts /
(Amortized
Premiums)
Net Realized
Gain/
(Loss)
Change in Net
Unrealized
Gain/(Loss)
Purchases/Payments(1)
Sales/Issuances(2)
Transfers Into Level 3Transfers Out of Level 3Ending
Balance as of 
March 31, 2021
Assets:
Securities, at fair value:
Agency RMBS$11,663 $(1,121)$(26)$(136)$1,814 $$5,857 $(649)$17,402 
Non-Agency RMBS127,838 679 (226)(557)20,742 (18,639)1,998 (4,506)127,329 
CMBS63,148 218 2,082 2,525 (39,705)(10,974)17,294 
CLOs111,100 734 912 5,334 1,812 (43,210)1,511 (40,608)37,585 
Asset-backed securities backed by consumer loans44,925 (657)33 (485)24,334 (8,677)59,473 
Corporate debt securities4,082 180 1,027 (533)4,761 
Corporate equity securities1,590 (385)604 2,311 4,120 
Loans, at fair value:
Residential mortgage loans1,187,069 (2,470)194 2,214 222,081 (128,451)1,280,637 
Commercial mortgage loans213,031 436 (263)57,166 (34,431)235,948 
Consumer loans47,525 (1,843)(1,265)327 16,749 (8,788)52,705 
Corporate loan5,855 7,371 13,226 
Investments in unconsolidated entities, at fair value141,620 128 6,507 12,870 (13,441)147,684 
Financial derivatives–assets, at fair value:
Credit default swaps on asset-backed securities347 26 (27)(30)320 
Total return swaps141 (6)(142)
Total assets, at fair value$1,959,802 $(4,451)$2,230 $16,042 $368,281 $(296,047)$9,366 $(56,737)$1,998,486 
Liabilities:
Financial derivatives–liabilities, at fair value:
Total return swaps$(484)$$(500)$146 $500 $$$$(338)
Other secured borrowings, at fair value(754,921)1,243 92,930 (250,508)(911,256)
Total liabilities, at fair value$(755,405)$$(500)$1,389 $93,430 $(250,508)$$$(911,594)
(1)For Investments in unconsolidated entities, at fair value, amount represents contributions to investments in unconsolidated entities.
(2)For Investments in unconsolidated entities, at fair value, amount represents distributions from investments in unconsolidated entities.

25

All amounts of net realized and change in net unrealized gain (loss) in the table above are reflected in the accompanying Condensed Consolidated Statement of Operations. The table above incorporates changes in net unrealized gain (loss) for both Level 3 financial instruments held by the Company at March 31, 2021, as well as Level 3 financial instruments disposed of by the Company during the three-month period ended March 31, 2021. For Level 3 financial instruments held by the Company at March 31, 2021, change in net unrealized gain (loss) of $3.2 million, $2.0 million, $6.3 million, $(33) thousand, $0.1 million, and $1.2 million, for the three-month period ended March 31, 2021 relate to securities, loans, investments in unconsolidated entities, financial derivatives–assets, financial derivatives–liabilities, and other secured borrowings, at fair value, respectively.
At March 31, 2021, the Company transferred $56.7 million of assets from Level 3 to Level 2 and $9.4 million from Level 2 to Level 3. Transfers between these hierarchy levels were based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria. The leveling of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third-party pricing sources.
Three-Month Period Ended March 31, 2020
(In thousands)Beginning Balance as of 
December 31, 2019
Accreted
Discounts /
(Amortized
Premiums)
Net Realized
Gain/
(Loss)
Change in Net
Unrealized
Gain/(Loss)
Purchases/
Payments
(1)
Sales/
Issuances
(2)
Transfers Into Level 3Transfers Out of Level 3Ending
Balance as of 
March 31, 2020
Assets:
Securities, at fair value:
Agency RMBS$19,904 $(1,822)$(1)$2,807 $5,259 $$1,088 $(6,254)$20,981 
Non-Agency RMBS89,581 226 (136)(11,533)33,950 (14,395)3,659 (7,155)94,197 
CMBS29,805 207 1,386 (11,193)31,025 (28,539)4,071 (6,486)20,276 
CLOs44,979 (318)(21)(20,261)22,760 54 6,325 (9,714)43,804 
Asset-backed securities backed by consumer loans48,610 (1,044)(150)(2,360)16,271 (6,700)54,627 
Corporate debt securities1,113 (96)10 (417)610 
Corporate equity securities1,394 (987)305 712 
Loans, at fair value:
Residential mortgage loans932,203 (458)205 (24,323)131,070 (99,325)939,372 
Commercial mortgage loans274,759 (1)860 (328)87,567 (59,557)303,300 
Consumer loans186,954 (7,470)26 (5,751)61,100 (40,056)194,803 
Corporate loan18,510 104 (12,500)6,114 
Investment in unconsolidated entities, at fair value71,850 (6,497)12,283 (12,239)65,397 
Financial derivatives–assets, at fair value:
Credit default swaps on asset-backed securities993 (994)917 (568)353 
Total return swaps620 191 (583)(191)37 
Total assets, at fair value$1,721,275 $(10,680)$1,366 $(80,188)$401,709 $(274,433)$15,143 $(29,609)$1,744,583 
Liabilities:
Financial derivatives–liabilities, at fair value:
Total return swaps$(436)$$31 $(403)$10 $(41)$$$(839)
Other secured borrowings, at fair value(594,396)24 44,704 (549,668)
Total liabilities, at fair value$(594,832)$$31 $(379)$44,714 $(41)$$$(550,507)
(1)For Investments in unconsolidated entities, at fair value, amount represents contributions to investments in unconsolidated entities.
(2)For Investments in unconsolidated entities, at fair value, amount represents distributions from investments in unconsolidated entities.
All amounts of net realized and change in net unrealized gain (loss) in the table above are reflected in the accompanying Condensed Consolidated Statement of Operations. The table above incorporates changes in net unrealized gain (loss) for both Level 3 financial instruments held by the Company at March 31, 2020, as well as Level 3 financial instruments disposed of by the Company during the three-month period ended March 31, 2020. For Level 3 financial instruments held by the Company at March 31, 2020, change in net unrealized gain (loss) of $(50.9) million, $(30.4) million, $(6.7) million, $0.5 million,

26

$(0.8) million, and $24 thousand, for the three-month period ended March 31, 2020 relate to securities, loans, investments in unconsolidated entities, financial derivatives–assets, financial derivatives–liabilities, and other secured borrowings, at fair value, respectively.
At March 31, 2020, the Company transferred $29.6 million of assets from Level 3 to Level 2 and $15.1 million from Level 2 to Level 3. Transfers between these hierarchy levels were based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria. The leveling of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third-party pricing sources.
The following table summarizes the estimated fair value of all other financial instruments not measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020:
As of
March 31, 2021December 31, 2020
(In thousands)Fair ValueCarrying ValueFair ValueCarrying Value
Other financial instruments
Assets:
Cash and cash equivalents$149,350 $149,350 $111,647 $111,647 
Restricted cash175 175 175 175 
Due from brokers91,814 91,814 63,147 63,147 
Reverse repurchase agreements96,783 96,783 38,640 38,640 
Liabilities:
Repurchase agreements1,909,511 1,909,511 1,496,931 1,496,931 
Other secured borrowings64,506 64,506 51,062 51,062 
Senior notes, net86,344 85,627 86,000 85,561 
Due to brokers5,337 5,337 5,059 5,059 
Cash and cash equivalents generally includes cash held in interest bearing overnight accounts, for which fair value equals the carrying value, and investments which are liquid in nature, such as investments in money market accounts or U.S. Treasury Bills, for which fair value equals the carrying value; such assets are considered Level 1. Restricted cash includes cash held in a segregated account for which fair value equals the carrying value; such assets are considered Level 1. Due from brokers and Due to brokers include collateral transferred to or received from counterparties, along with receivables and payables for open and/or closed derivative positions. These receivables and payables are short term in nature and any collateral transferred consists primarily of cash; fair value of these items is approximated by carrying value and such items are considered Level 1. The Company's reverse repurchase agreements, repurchase agreements, and other secured borrowings are carried at cost, which approximates fair value due to their short term nature. Reverse repurchase agreements, repurchase agreements, and other secured borrowings are classified as Level 2 based on the adequacy of the collateral and their short term nature. Senior notes, net are considered Level 3 liabilities given the relative unobservability of the most significant inputs to valuation estimation as well as the lack of trading activity of these instruments. As of March 31, 2021 and December 31, 2020, the estimated fair value of the Company's Senior notes was based on a third-party valuation.

27

4. Investment in Securities
The Company's securities portfolio primarily consists of Agency RMBS, non-Agency RMBS, CMBS, CLOs, ABS backed by consumer loans, and corporate debt and equity. The following tables detail the Company's investment in securities as of March 31, 2021 and December 31, 2020.
March 31, 2021:
Gross UnrealizedWeighted Average
($ in thousands)Current PrincipalUnamortized Premium (Discount)Amortized CostGainsLossesFair Value
Coupon(1)
Yield
Life (Years)(2)
Long:
Agency RMBS:
15-year fixed-rate mortgages$177,384 $8,396 $185,780 $1,680 $(1,646)$185,814 2.64 %1.28 %4.45
20-year fixed-rate mortgages52,654 3,140 55,794 45 (1,125)54,714 2.48 %1.09 %5.37
30-year fixed-rate mortgages1,037,659 55,060 1,092,719 19,811 (12,610)1,099,920 3.32 %1.92 %6.03
Adjustable rate mortgages5,526 145 5,671 136 5,807 3.48 %2.60 %4.14
Reverse mortgages85,309 4,840 90,149 2,339 (12)92,476 3.66 %2.35 %4.54
Interest only securities n/a n/a44,867 6,034 (1,850)49,051 3.47 %9.39 %5.39
Non-Agency RMBS332,129 (142,479)189,650 11,640 (4,677)196,613 4.15 %6.95 %5.52
CMBS79,301 (35,426)43,875 1,329 (6,574)38,630 2.72 %8.54 %7.72
Non-Agency interest only securities n/a n/a8,918 1,861 (190)10,589 1.08 %8.56 %5.16
CLOs n/a n/a126,830 2,695 (23,126)106,399 3.80 %9.12 %3.41
ABS backed by consumer loans90,892 (31,149)59,743 2,069 (2,339)59,473 9.81 %18.73 %1.22
Corporate debt26,861 (22,622)4,239 1,302 (20)5,521 1.34 %7.58 %2.63
Corporate equity n/a n/a3,530 612 (22)4,120 n/an/an/a
Total Long1,887,715 (160,095)1,911,765 51,553 (54,191)1,909,127 3.53 %3.76 %5.43
Short:
Corporate debt(200)(1)(201)(18)(219)5.11 %4.67 %6.17
U.S. Treasury securities(62,750)1,721 (61,029)1,577 (59,452)0.86 %1.21 %8.38
European sovereign bonds(36,308)1,682 (34,626)(2,101)(36,727)0.22 %0.06 %2.86
Total Short(99,258)3,402 (95,856)1,577 (2,119)(96,398)0.64 %0.80 %6.28
Total$1,788,457 $(156,693)$1,815,909 $53,130 $(56,310)$1,812,729 3.68 %3.62 %5.38
(1)Weighted average coupon represents the weighted average coupons of the securities, rather than, in the case of collateralized securities, the coupon rates or loan rates on the underlying collateral.
(2)Expected average lives of MBS are generally shorter than stated contractual maturities. Average lives are affected by the contractual maturities of the underlying mortgages, scheduled periodic payments of principal, and unscheduled prepayments of principal.

28

December 31, 2020:
Gross UnrealizedWeighted Average
($ in thousands)Current PrincipalUnamortized Premium (Discount)Amortized CostGainsLossesFair Value
Coupon(1)
Yield
Life (Years)(2)
Long:
Agency RMBS:
15-year fixed-rate mortgages$67,875 $2,543 $70,418 $1,832 $(36)$72,214 3.30 %1.83 %3.24
20-year fixed-rate mortgages50,131 3,097 53,228 182 53,410 2.57 %1.08 %4.46
30-year fixed-rate mortgages626,021 30,738 656,759 25,765 (444)682,080 3.99 %2.35 %4.17
Adjustable rate mortgages6,171 159 6,330 124 6,454 3.66 %2.27 %3.42
Reverse mortgages89,383 5,152 94,535 3,123 (29)97,629 3.97 %2.37 %4.60
Interest only securitiesn/an/a43,406 5,808 (1,558)47,656 3.36 %10.01 %4.85
Non-Agency RMBS321,842 (131,083)190,759 15,880 (5,549)201,090 3.15 %6.40 %5.46
CMBS188,085 (61,763)126,322 1,655 (16,910)111,067 2.71 %7.47 %8.09
Non-Agency interest only securitiesn/an/a8,123 1,792 (305)9,610 1.17 %18.85 %3.49
CLOsn/an/a208,907 2,563 (30,199)181,271 3.67 %8.50 %3.50
ABS backed by consumer loans69,646 (24,936)44,710 221 (6)44,925 11.95 %18.57 %1.11
Corporate debt27,083 (23,187)3,896 1,296 (3)5,189 2.13 %6.75 %3.10
Corporate equityn/an/a1,604 376 (390)1,590 n/an/an/a
Total Long1,446,237 (199,280)1,508,997 60,617 (55,429)1,514,185 3.84 %4.88 %4.45
Short:
Corporate debt(200)(1)(201)(17)(218)5.09 %4.67 %6.42
European sovereign bonds(37,804)3,163 (34,641)(3,783)(38,424)0.23 %0.06 %3.11
Total Short(38,004)3,162 (34,842)(3,800)(38,642)0.26 %0.09 %3.13
Total$1,408,233 $(196,118)$1,474,155 $60,617 $(59,229)$1,475,543 3.92 %4.77 %4.49
(1)Weighted average coupon represents the weighted average coupons of the securities, rather than, in the case of collateralized securities, the coupon rates or loan rates on the underlying collateral.
(2)Expected average lives of MBS are generally shorter than stated contractual maturities. Average lives are affected by the contractual maturities of the underlying mortgages, scheduled periodic payments of principal, and unscheduled prepayments of principal.

29

The following tables detail weighted average life of the Company's Agency RMBS as of March 31, 2021 and December 31 2020.
March 31, 2021:
($ in thousands)Agency RMBSAgency Interest Only Securities
Estimated Weighted Average Life(1)
Fair ValueAmortized Cost
Weighted Average Coupon(2)
Fair ValueAmortized Cost
Weighted Average Coupon(2)
Less than three years$79,755 $77,736 4.44 %$6,335 $5,597 3.81 %
Greater than three years and less than seven years1,145,288 1,135,139 3.27 %35,542 33,166 3.87 %
Greater than seven years and less than eleven years213,688 217,238 2.53 %4,416 4,269 0.84 %
Greater than eleven years%2,758 1,835 1.16 %
Total$1,438,731 $1,430,113 3.22 %$49,051 $44,867 3.47 %
(1)Expected average lives of RMBS are generally shorter than stated contractual maturities. Average lives are affected by the contractual maturities of the underlying mortgages, scheduled periodic payments of principal, and unscheduled prepayments of principal.
(2)Weighted average coupon represents the weighted average coupons of the securities, rather than the coupon rates or loan rates on the underlying collateral.
December 31, 2020:
($ in thousands)Agency RMBSAgency Interest Only Securities
Estimated Weighted Average Life(1)
Fair ValueAmortized Cost
Weighted Average Coupon(2)
Fair ValueAmortized Cost
Weighted Average Coupon(2)
Less than three years$139,059 $135,844 4.15 %$8,143 $7,314 3.99 %
Greater than three years and less than seven years770,173 742,946 3.79 %32,669 29,362 3.74 %
Greater than seven years and less than eleven years2,555 2,480 3.01 %5,165 5,063 1.04 %
Greater than eleven years%1,679 1,667 0.83 %
Total$911,787 $881,270 3.84 %$47,656 $43,406 3.36 %
(1)Expected average lives of RMBS are generally shorter than stated contractual maturities. Average lives are affected by the contractual maturities of the underlying mortgages, scheduled periodic payments of principal, and unscheduled prepayments of principal.
(2)Weighted average coupon represents the weighted average coupons of the securities, rather than the coupon rates or loan rates on the underlying collateral.
The following tables detail weighted average life of the Company's long non-Agency RMBS, CMBS, and CLOs and other securities as of March 31, 2021 and December 31, 2020.
March 31, 2021:
($ in thousands)Non-Agency RMBS and CMBSNon-Agency IOs
CLOs and Other Securities(2)
Estimated Weighted Average Life(1)
Fair ValueAmortized Cost
Weighted Average Coupon(3)
Fair ValueAmortized Cost
Weighted Average Coupon(3)
Fair ValueAmortized Cost
Weighted Average Coupon(3)
Less than three years$56,973 $54,090 3.53 %$4,649 $3,333 0.94 %$100,024 $105,291 6.89 %
Greater than three years and less than seven years102,383 97,457 4.85 %4,600 4,266 1.44 %71,369 85,521 4.06 %
Greater than seven years and less than eleven years56,309 61,353 2.67 %%%
Greater than eleven years19,578 20,625 3.79 %1,340 1,319 0.30 %%
Total$235,243 $233,525 3.88 %$10,589 $8,918 1.08 %$171,393 $190,812 5.63 %
(1)Expected average lives of MBS are generally shorter than stated contractual maturities. Average lives are affected by the contractual maturities of the underlying mortgages, scheduled periodic payments of principal, and unscheduled prepayments of principal.
(2)Other Securities includes asset-backed securities, backed by consumer loans and corporate debt.
(3)Weighted average coupon represents the weighted average coupons of the securities, rather than the coupon rates or loan rates on the underlying collateral.

30

December 31, 2020:
($ in thousands)Non-Agency RMBS and CMBSNon-Agency IOs
CLOs and Other Securities(2)
Estimated Weighted Average Life(1)
Fair ValueAmortized Cost
Weighted Average Coupon(3)
Fair ValueAmortized Cost
Weighted Average Coupon(3)
Fair ValueAmortized Cost
Weighted Average Coupon(3)
Less than three years$58,350 $54,339 3.39 %$5,163 $3,754 0.92 %$89,235 $90,869 7.73 %
Greater than three years and less than seven years114,815 109,161 3.45 %4,447 4,369 1.37 %139,830 163,670 3.69 %
Greater than seven years and less than eleven years109,519 123,782 2.74 %%2,320 2,974 1.14 %
Greater than eleven years29,473 29,799 1.46 %%%
Total$312,157 $317,081 2.98 %$9,610 $8,123 1.17 %$231,385 $257,513 5.09 %
(1)Expected average lives of MBS are generally shorter than stated contractual maturities. Average lives are affected by the contractual maturities of the underlying mortgages, scheduled periodic payments of principal, and unscheduled prepayments of principal.
(2)Other Securities includes asset-backed securities, backed by consumer loans, corporate debt, and U.S. Treasury securities.
(3)Weighted average coupon represents the weighted average coupons of the securities, rather than the coupon rates or loan rates on the underlying collateral.
The following tables detail the components of interest income by security type for the three-month periods ended March 31, 2021 and 2020:
Three-Month Period Ended
(In thousands)March 31, 2021March 31, 2020
Security TypeCoupon InterestNet AmortizationInterest IncomeCoupon InterestNet AmortizationInterest Income
Agency RMBS$14,352 $(7,600)$6,752 $20,912 $(8,844)$12,068 
Non-Agency RMBS and CMBS3,756 1,467 5,223 4,053 713 4,766 
CLOs2,536 944 3,480 5,419 (1,011)4,408 
Other securities(1)
3,533 (657)2,876 2,925 (1,045)1,880 
Total$24,177 $(5,846)$18,331 $33,309 $(10,187)$23,122 
(1)Other securities includes ABS backed by consumer loans, corporate debt securities, and U.S. Treasury securities.
For the three-month periods ended March 31, 2021 and 2020, the Catch-Up Premium Amortization Adjustment was $(0.1) million and $(1.1) million, respectively.
The following tables present proceeds from sales and the resulting realized gains and (losses) of the Company's securities for the three-month periods ended March 31, 2021 and 2020.
Three-Month Period Ended
(In thousands)March 31, 2021March 31, 2020
Security Type
Proceeds(1)
Gross Realized Gains
Gross Realized Losses(2)
Net Realized Gain (Loss)
Proceeds(1)
Gross Realized GainsGross Realized LossesNet Realized Gain (Loss)
Agency RMBS$71,737 $424 $(395)$29 $1,285,482 $9,221 $(2,813)$6,408 
Non-Agency RMBS and CMBS123,208 6,609 (1,365)5,244 77,802 8,496 (1,056)7,440 
CLOs85,575 1,184 (191)993 34,542 1,122 (23)1,099 
Other securities(3)
9,306 512 (303)209 120,991 637 (200)437 
Total$289,826 $8,729 $(2,254)$6,475 $1,518,817 $19,476 $(4,092)$15,384 
(1)Includes proceeds on sales of securities not yet settled as of period end.
(2)Excludes realized losses of $(1.2) million for the three-month period ended March 31, 2021, related to adjustments to the cost basis of certain securities for which the Company has determined all or a portion of such securities cost basis to be uncollectible.
(3)Other securities includes ABS backed by consumer loans, corporate debt and equity, exchange-traded equity, and U.S. Treasury securities.

31

The following tables present the fair value and gross unrealized losses of our long securities, excluding those where there are expected credit losses as of the balance sheet date in relation to such securities' cost bases, by length of time that such securities have been in an unrealized loss position at March 31, 2021 and December 31, 2020.
March 31, 2021:
(In thousands)Less than 12 MonthsGreater than 12 MonthsTotal
Security TypeFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Agency RMBS$806,309 $(15,549)$629 $(33)$806,938 $(15,582)
Non-Agency RMBS and CMBS1,048 (103)16,209 (1,563)17,257 (1,666)
CLOs1,864 (16)1,364 (886)3,228 (902)
Other securities(1)
(5)(5)
Total$809,221 $(15,673)$18,202 $(2,482)$827,423 $(18,155)
(1)Other securities includes ABS backed by consumer loans and corporate debt and equity securities.
December 31, 2020:
(In thousands)Less than 12 MonthsGreater than 12 MonthsTotal
Security TypeFair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Agency RMBS$126,926 $(981)$832 $(44)$127,758 $(1,025)
Non-Agency RMBS and CMBS20,474 (2,616)2,599 (348)23,073 (2,964)
CLOs5,279 (753)1,196 (1,131)6,475 (1,884)
Other securities(1)
1,107 (8)1,107 (8)
Total$153,786 $(4,358)$4,627 $(1,523)$158,413 $(5,881)
(1)Other securities includes ABS backed by consumer loans, corporate debt and equity, and U.S. Treasury securities.
As described in Note 2, the Company evaluates the cost basis of its securities for impairment on at least a quarterly basis. As of March 31, 2021 and December 31, 2020, the Company had expected future credit losses, which it tracks for purposes of calculating interest income, of $19.7 million and $24.9 million, respectively, related to adverse changes in estimated future cash flows on its securities. Certain of the Company's securities, at the date of acquisition, have experienced or are expected to experience more-than-insignificant deterioration in credit quality since origination and the Company has established an initial estimate for credit losses on such securities; as of March 31, 2021 and December 31, 2020, the estimated credit losses on such securities was $0.6 million and $2.6 million, respectively. The Company has determined for certain securities that a portion of such securities cost basis is not collectible; for the three-month period ended March 31, 2021, the Company recognized realized losses on these securities of $1.2 million, which are reflected in Net realized gains (losses) on securities and loans, net, on the Condensed Consolidated Statement of Operations. No such realized losses were recognized for the three-month period ended March 31, 2020.
5. Investment in Loans
The Company invests in various types of loans, such as residential mortgage, commercial mortgage, consumer, and corporate loans. As discussed in Note 2, the Company has elected the FVO for its investments in loans. The following table is a summary of the Company's investments in loans as of March 31, 2021 and December 31, 2020:
As of
(In thousands)March 31, 2021December 31, 2020
Loan TypeUnpaid Principal BalanceFair
Value
Unpaid Principal BalanceFair
Value
Residential mortgage loans$1,236,923 $1,280,637 $1,150,303 $1,187,069 
Commercial mortgage loans235,077 235,948 212,716 213,031 
Consumer loans51,488 52,705 48,180 47,525 
Corporate loans13,226 13,226 5,855 5,855 
Total$1,536,714 $1,582,516 $1,417,054 $1,453,480 

32

The Company is subject to credit risk in connection with its investments in loans. The two primary components of credit risk are default risk, which is the risk that a borrower fails to make scheduled principal and interest payments, and severity risk, which is the risk of loss upon a borrower default on a mortgage loan or other secured or unsecured loan. Severity risk includes the risk of loss of value of the property or other asset, if any, securing the loan, as well as the risk of loss associated with taking over the property or other asset, if any, including foreclosure costs. Credit risk in our loan portfolio can be amplified by exogenous shocks impacting our borrowers such as man-made or natural disasters, including the COVID-19 pandemic.
The following table provides details, by accrual status, for loans that are 90 days or more past due as of March 31, 2021 and December 31, 2020:
As of
March 31, 2021December 31, 2020
(In thousands)Unpaid Principal BalanceFair ValueUnpaid Principal BalanceFair Value
90 days or more past due—non-accrual status
Residential mortgage loans$54,588 $50,646 $64,509 $60,381 
Commercial mortgage loans34,373 34,265 44,233 44,052 
Consumer loans900 665 1,015 930 
Residential Mortgage Loans
The tables below detail certain information regarding the Company's residential mortgage loans as of March 31, 2021 and December 31, 2020.
March 31, 2021:
Gross UnrealizedWeighted Average
($ in thousands)Unpaid Principal BalancePremium (Discount) Amortized Cost GainsLossesFair ValueCouponYield
Life (Years)(1)
Residential mortgage loans, held-for-investment(2)
$1,236,923 $18,997 $1,255,920 $29,604 $(4,887)$1,280,637 6.12 %4.21 %1.34
(1)Average lives of loans are generally shorter than stated contractual maturities. Average lives are affected by scheduled periodic payments of principal and unscheduled prepayments of principal.
(2)Includes $961.3 million of non-QM loans that have been securitized and are held in consolidated securitization trusts. Such loans had $27.5 million and $(0.2) million of gross unrealized gains and gross unrealized losses, respectively; such unrealized gains (losses) are included on the Company's Condensed Consolidated Statement of Operations in Unrealized gains (losses) on securities and loans, net. See Residential Mortgage Loan Securitizations in Note 10 for additional information.
December 31, 2020:
Gross UnrealizedWeighted Average
($ in thousands)Unpaid Principal BalancePremium (Discount) Amortized Cost GainsLossesFair ValueCouponYield
Life (Years)(1)
Residential mortgage loans, held-for-investment(2)
$1,150,303 $14,263 $1,164,566 $27,892 $(5,389)$1,187,069 6.19 %5.60 %1.90
(1)Average lives of loans are generally shorter than stated contractual maturities. Average lives are affected by scheduled periodic payments of principal and unscheduled prepayments of principal.
(2)Includes $801.3 million of non-QM loans that have been securitized and are held in consolidated securitization trusts. Such loans had $24.8 million and $(0.1) million of gross unrealized gains and gross unrealized losses, respectively; such unrealized gains (losses) are included on the Company's Condensed Consolidated Statement of Operations in Unrealized gains (losses) on securities and loans, net. See Residential Mortgage Loan Securitizations in Note 10 for additional information.

33

The table below summarizes the geographic distribution of the real estate collateral underlying the Company's residential mortgage loans as a percentage of total outstanding unpaid principal balance as of March 31, 2021 and December 31, 2020:
Property Location by U.S. StateMarch 31, 2021December 31, 2020
California42.8 %43.1 %
Florida15.5 %14.8 %
Texas9.9 %10.2 %
Colorado2.8 %3.1 %
Massachusetts2.8 %2.6 %
Oregon2.2 %2.2 %
Arizona2.2 %2.0 %
Nevada2.1 %1.9 %
Illinois1.9 %1.8 %
Utah1.6 %1.7 %
New York1.6 %1.6 %
Washington1.3 %1.4 %
New Jersey1.2 %1.4 %
Georgia1.2 %1.3 %
North Carolina1.2 %1.1 %
Connecticut1.1 %0.9 %
Maryland0.9 %1.0 %
Other7.7 %7.9 %
100.0 %100.0 %
The following table presents information on the Company's residential mortgage loans by re-performing or non-performing status, as of March 31, 2021 and December 31, 2020.
As of
March 31, 2021December 31, 2020
(In thousands)Unpaid Principal BalanceFair ValueUnpaid Principal BalanceFair Value
Re-performing$17,185 $15,821 $18,120 $16,741 
Non-performing53,289 49,586 62,009 58,169 
As described in Note 2, the Company evaluates the cost basis of its residential mortgage loans for impairment on at least a quarterly basis. As of March 31, 2021 and December 31, 2020, the Company had expected future credit losses, which it tracks for purposes of calculating interest income, of $1.6 million and $2.2 million, respectively, related to adverse changes in estimated future cash flows on its residential mortgage loans, primarily due to the economic impact of the COVID-19 pandemic. Certain of the Company's residential mortgage loans, at the date of acquisition, have experienced or are expected to experience more-than-insignificant deterioration in credit quality since origination and the Company has established an initial estimate for credit losses on such loans; as of both March 31, 2021 and December 31, 2020, the estimated credit losses on such loans was $0.2 million. The Company has determined for certain of its residential mortgage loans that a portion of such loans' cost basis is not collectible; for the three-month period ended March 31, 2021, the Company recognized realized losses on these loans of $33 thousand, which are reflected in Net realized gains (losses) on securities and loans, net, on the Condensed Consolidated Statement of Operations. No such realized losses were recognized for the three-month period ended March 31, 2020.
As of March 31, 2021 and December 31, 2020, the Company had residential mortgage loans that were in the process of foreclosure with a fair value of $16.4 million and $14.9 million, respectively.

34

Commercial Mortgage Loans
The tables below detail certain information regarding the Company's commercial mortgage loans as of March 31, 2021 and December 31, 2020:
March 31, 2021:
Gross UnrealizedWeighted Average
($ in thousands)Unpaid Principal BalancePremium (Discount) Amortized Cost GainsLossesFair ValueCoupon
Yield(1)
Life (Years)(2)
Commercial mortgage loans, held-for-investment$235,077 $1,110 $236,187 $216 $(455)$235,948 8.19 %8.19 %0.83
(1)Excludes non-performing commercial mortgage loans, in non-accrual status, with a fair value of $34.3 million.
(2)Average lives of loans are generally shorter than stated contractual maturities. Average lives are affected by scheduled periodic payments of principal and unscheduled prepayments of principal.
December 31, 2020:
Gross UnrealizedWeighted Average
($ in thousands)Unpaid Principal BalancePremium (Discount) Amortized Cost GainsLossesFair ValueCoupon
Yield(1)
Life (Years)(2)
Commercial mortgage loans, held-for-investment$212,716 $290 $213,006 $479 $(454)$213,031 8.38 %8.28 %0.62
(1)Excludes commercial mortgage loans, held at par in non-accrual status, with a fair value of $31.5 million.
(2)Average lives of loans are generally shorter than stated contractual maturities. Average lives are affected by scheduled periodic payments of principal and unscheduled prepayments of principal.
The table below summarizes the geographic distribution of the real estate collateral underlying the Company's commercial mortgage loans as a percentage of total outstanding unpaid principal balance as of March 31, 2021 and December 31, 2020:
Property Location by U.S. StateMarch 31, 2021December 31, 2020
Florida27.6 %23.8 %
New York16.6 %15.2 %
Connecticut10.9 %11.2 %
Ohio8.8 %7.3 %
Missouri7.6 %7.9 %
Massachusetts5.9 %6.1 %
California5.7 %5.9 %
Arizona4.2 %4.3 %
Virginia4.1 %4.2 %
Indiana2.7 %2.8 %
North Carolina2.1 %2.2 %
Nevada1.8 %1.9 %
Illinois1.3 %1.4 %
New Jersey0.7 %5.8 %
100.0 %100.0 %
As of March 31, 2021, the Company had 4 non-performing commercial mortgage loans with an unpaid principal balance and fair value of $34.4 million and $34.3 million, respectively. As of December 31, 2020, the Company had 3 non-performing commercial mortgage loans with an unpaid principal balance and fair value of $31.8 million and $31.5 million, respectively.
As described in Note 2, the Company evaluates the cost basis of its commercial mortgage loans for impairment on at least a quarterly basis. As of both March 31, 2021 and December 31, 2020, the expected future credit losses, which the Company tracks for purposes of calculating interest income, of $0.4 million, related to adverse changes in estimated future cash flows on its commercial mortgage loans.

35

As of December 31, 2020, the Company had 1 commercial mortgage loans with a fair value of $10.5 million that was in the process of foreclosure. The Company did not have any commercial mortgage loans in the process of foreclosure as of March 31, 2021.
Consumer Loans
The tables below detail certain information regarding the Company's consumer loans as of March 31, 2021 and December 31, 2020:
March 31, 2021:
Gross UnrealizedWeighted Average
($ in thousands)Unpaid Principal BalancePremium (Discount)Amortized CostGainsLosses
Fair Value(1)
Life (Years)(2)
Delinquency (Days)
Consumer loans, held-for-investment$51,488 $1,616 $53,104 $990 $(1,389)$52,705 1.044
(1)Includes $0.5 million of charged-off loans for which the Company has determined that it is probable the servicer will be able to collect principal and interest.
(2)Average lives of loans are generally shorter than stated contractual maturities. Average lives are affected by scheduled periodic payments of principal and unscheduled prepayments of principal.
December 31, 2020:
Gross UnrealizedWeighted Average
($ in thousands)Unpaid Principal BalancePremium (Discount)Amortized CostGainsLosses
Fair Value(1)
Life (Years)(2)
Delinquency (Days)
Consumer loans, held-for-investment$48,180 $72 $48,252 $1,160 $(1,887)$47,525 1.047
(1)Includes $0.6 million of charged-off loans for which the Company has determined that it is probable the servicer will be able to collect principal and interest.
(2)Average lives of loans are generally shorter than stated contractual maturities. Average lives are affected by scheduled periodic payments of principal and unscheduled prepayments of principal.
The table below provides details on the delinquency status as a percentage of total unpaid principal balance of the Company's consumer loans, which the Company uses as an indicator of credit quality, as of March 31, 2021 and December 31, 2020:
Days Past DueMarch 31, 2021December 31, 2020
Current95.2 %90.4 %
30-59 Days2.0 %3.4 %
60-89 Days1.4 %3.3 %
90-119 Days1.3 %2.8 %
>120 Days0.1 %0.1 %
100.0 %100.0 %
During the three-month periods ended March 31, 2021 and 2020, the Company charged off $3.6 million and $4.9 million, respectively, of unpaid principal balance of consumer loans that were greater than 120 days delinquent. As of March 31, 2021 and December 31, 2020, the Company held charged-off consumer loans with an aggregate fair value of $0.5 million and $0.6 million, respectively, for which the Company has determined that it is probable the servicer will be able to collect principal and interest.
As described in Note 2, the Company evaluates the cost basis of its consumer loans for impairment on at least a quarterly basis. As of March 31, 2021 and December 31, 2020, the Company had expected future credit losses, which it tracks for purposes of calculating interest income, of $1.3 million and $2.9 million, respectively, on its consumer loans. The Company has determined for certain of its consumer loans that a portion of such loans' cost basis is not collectible; for the three-month period ended March 31, 2021, the Company recognized realized losses on these loans of $1.3 million. No such realized losses were recognized for the three-month period ended March, 31, 2020.

36

Corporate Loans
The tables below detail certain information regarding the Company's corporate loans as of March 31, 2021 and December 31, 2020:
March 31, 2021:
Weighted Average
($ in thousands)Unpaid
Principal Balance
Fair ValueRateRemaining Term (Years)
Corporate loans, held-for-investment(1)
$13,226 $13,226 21.02 %3.13
(1)See Note 21 for further details on the Company's unfunded commitments related to certain of its corporate loans.
December 31, 2020:
Weighted Average
($ in thousands)Unpaid
Principal Balance
Fair ValueRateRemaining Term (Years)
Corporate loans, held-for-investment(1)
$5,855 $5,855 20.00 %1.75
(1)See Note 21 for further details on the Company's unfunded commitments related to certain of its corporate loans.
6. Investments in Unconsolidated Entities
The Company has various equity investments in entities where it has the ability to exert significant influence over such entity, but does not control such entity. In these cases the criteria for consolidation have not been met and the Company is required to account for such investments under ASC 323-10; the Company has elected the FVO for its investments in unconsolidated entities. As of March 31, 2021 and December 31, 2020, the Company's investments in unconsolidated entities had an aggregate fair value of $147.7 million and $141.6 million, respectively, which is included on the Condensed Consolidated Balance Sheet in Investments in unconsolidated entities, at fair value. For the three month periods ended March 31, 2021 and 2020, the Company recognized $6.6 million and $(6.5) million, respectively, in Earnings (losses) from investments in unconsolidated entities, on its Condensed Consolidated Statement of Operations, primarily related to its investment in mortgage loan originators. As of March 31, 2021 and December 31, 2020, the Company had non-controlling equity interests in three loan originators with an aggregate fair value of $82.5 million and $79.5 million, respectively. Certain of the entities that the Company accounts for under ASC 323-10 are deemed to be VIEs, and the maximum amount at risk is generally limited to the Company's investment in the VIE. As of March 31, 2021 and December 31, 2020, the fair value of the Company's investments in unconsolidated entities that have been deemed to be VIEs was $14.0 million and $13.6 million, respectively.

37

The following table provides details about the Company's investments in unconsolidated entities as of March 31, 2021 and December 31, 2020:
Percentage Ownership
of Unconsolidated Entity
Investment in Unconsolidated EntityForm of InvestmentMarch 31, 2021December 31, 2020
Longbridge Financial, LLC(1)
Preferred shares49.7%49.7%
LendSure Mortgage Corp.(1)(2)
Common shares49.9%49.9%
Elizon TCG SBC 2017-1(1)
Membership Interest36.0%36.0%
Jepson Holdings Limited(1)
Membership Interest30.1%30.1%
Elizon DB 2015-1 LLC(1)(3)(4)
Membership Interest5.7%8.9%
Elizon NM CRE 2020-1 LLC(1)(3)(5)
Membership Interest26.2%0%
Other(6)(7)
Various8.0%–56.3%7.4%–56.3%
(1)See Note 13 for additional details on the Company's related party transactions.
(2)Excludes investment in warrants convertible into non-voting common shares; including such warrants the Company's additional non-voting stake in the entity was 15.0% as of both March 31, 2021 and December 31, 2020. See Note 13 Related Party Transactions—Transactions Involving Certain Loan Originators for additional information.
(3)The Company has evaluated this entity and determined that it meets the definition of a VIE. The Company evaluated its interest in the VIE and determined that the Company does not have the power to direct the activities of the VIE and does not have control of the underlying assets, where applicable. As a result, the Company determined that it is not the primary beneficiary of this VIE and therefore has not consolidated the VIE.
(4)As discussed in Note 13 Related Party Transactions—Participation in Multi-Borrower Financing Facilities, the Company and the Affiliated Entities (as defined in Note 13) each consolidate their segregated silos of the Joint Entity (as defined in Note 13). The Company's effective percentage ownership before the effects of consolidation of both its and the Affiliated Entities' respective segregated silos of the Joint Entity, was 50.1% and 58.2% as of March 31, 2021 and December 31, 2020, respectively.
(5)As discussed in Note 13 Related Party Transactions—Participation in Multi-Borrower Financing Facilities, the Company and the Affiliated Entities (as defined in Note 13) each consolidate their segregated silos of the Joint Entity (as defined in Note 13). The Company's effective percentage ownership before the effects of consolidation of both its and the Affiliated Entities' respective segregated silos of the Joint Entity, was 42.5% as of March 31, 2021.
(6)Includes interest in Consumer Risk Retention Vehicle, as defined in Note 10—Participation in Multi-Seller Consumer Loan Securitization. The Company has evaluated this entity and determined that it does not meet the definition of a VIE. The Company evaluated its interest in the entity under the voting interest model outlined in ASC 810, and has determined that the Company does not control this entity. As a result, the Company has not consolidated the entity. See Note 10 for additional details on the Company's securitization transactions.
(7)Includes interest in warehouse facilities; see Note 13—Participation in CLO Transactions, for additional details.
7. Real Estate Owned
As discussed in Note 2, the Company obtains possession of REO as a result of foreclosures on the associated mortgage loans. The following tables detail activity in the Company's carrying value of REO for the three-month periods ended March 31, 2021 and 2020:
Three-Month Period Ended
March 31, 2021March 31, 2020
Number of PropertiesCarrying ValueNumber of PropertiesCarrying Value
(In thousands)(In thousands)
Beginning Balance (December 31, 2020 and 2019, respectively)13 $23,598 15 $30,584 
Transfers from mortgage loans12,554 1,422 
Capital expenditures and other adjustments to cost473 114 
Adjustments to record at the lower of cost or fair value(790)(683)
Disposals(1)(278)(3)(6,383)
Ending Balance (March 31, 2021 and 2020, respectively)15 $35,557 16 $25,054 
During the three-month period ended March 31, 2021, the Company sold 1 REO property, realizing a net gain (loss) of approximately $61 thousand. During the three-month ended March 31, 2020, the Company sold 3 REO properties, realizing a net gain (loss) of approximately $0.4 million. Such realized gains (losses) are included in Realized gains (losses) on real estate owned, net, on the Company's Condensed Consolidated Statement of Operations. As of March 31, 2021 and December 31, 2020 all of the Company's REO had been obtained as a result of obtaining physical possession through foreclosure. As of March 31, 2021 and December 31, 2020, the Company had REO measured at fair value on a non-recurring basis of $23.0 million and $22.4 million, respectively.

38

8. Financial Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company manages certain risks associated with its investments and borrowings, including interest rate, credit, liquidity, and foreign exchange rate risk primarily by managing the amount, sources, and duration of its investments and borrowings, and through the use of derivative financial instruments. The Company's derivative financial instruments are used to manage differences in the amount, timing, and duration of its known or expected cash receipts and its known or expected cash payments principally related to its investments and borrowings.
The following table details the fair value of the Company's holdings of financial derivatives as of March 31, 2021 and December 31, 2020:
March 31, 2021December 31, 2020
(In thousands)
Financial derivatives–assets, at fair value:
TBA securities purchase contracts$$961 
TBA securities sale contracts3,408 
Fixed payer interest rate swaps5,331 125 
Fixed receiver interest rate swaps5,372 8,394 
Credit default swaps on asset-backed securities320 347 
Credit default swaps on asset-backed indices2,087 2,184 
Credit default swaps on corporate bond indices3,427 3,420 
Total return swaps
Futures2,704 
Forwards388 
Warrants42 36 
Total financial derivatives–assets, at fair value23,082 15,479 
Financial derivatives–liabilities, at fair value:
TBA securities purchase contracts(3,915)
TBA securities sale contracts(161)(925)
Fixed payer interest rate swaps(7,856)(15,109)
Fixed receiver interest rate swaps(1,028)(65)
Credit default swaps on asset-backed indices(127)(130)
Credit default swaps on corporate bonds(682)(747)
Credit default swaps on corporate bond indices(5,128)(6,438)
Total return swaps(338)(484)
Futures(163)(376)
Forwards(40)(279)
Total financial derivatives–liabilities, at fair value(19,438)(24,553)
Total$3,644 $(9,074)

39

Interest Rate Swaps
The following tables provide information about the Company's fixed payer interest rate swaps as of March 31, 2021 and December 31, 2020:
March 31, 2021:
Weighted Average
MaturityNotional AmountFair ValuePay RateReceive RateRemaining Years to Maturity
(In thousands)
2022$64,100 $(503)0.99 %0.18 %0.93
2023361,650 (3,788)0.74 0.19 2.00
2024251,700 669 0.38 0.16 2.94
202538,192 (123)0.92 0.18 4.21
202610,000 49 0.90 0.19 4.92
20279,732 464 0.49 0.19 6.24
202851,644 (52)1.40 0.19 6.95
202919,152 (643)1.98 0.20 8.30
203011,085 572 1.06 0.19 9.08
203153,945 1,412 1.46 0.15 9.92
2035500 67 0.78 0.09 14.56
20361,100 84 1.45 0.19 14.89
2040500 85 0.90 0.09 19.57
20495,796 (932)2.89 0.24 27.78
2050500 114 0.98 0.09 29.58
Total$879,596 $(2,525)0.79 %0.18 %3.59
December 31, 2020:
Weighted Average
MaturityNotional AmountFair ValuePay RateReceive RateRemaining Years to Maturity
(In thousands)
2021$17,500 $(231)2.75 %0.24 %0.22
202296,533 (1,535)1.19 0.22 1.14
2023146,012 (4,770)1.50 0.23 2.42
202566,503 (1,034)0.73 0.21 4.75
202611,216 (458)1.23 0.25 5.50
20279,732 60 0.49 0.24 6.48
202816,644 (2,169)2.39 0.24 7.32
202922,744 (2,289)1.94 0.23 8.61
203013,015 (369)1.13 0.22 9.29
2035500 15 0.78 0.09 14.81
20361,100 (47)1.45 0.25 15.13
2040500 20 0.90 0.09 19.82
20495,796 (2,208)2.89 0.23 28.02
2050500 31 0.98 0.09 29.82
Total$408,295 $(14,984)1.39 %0.23 %3.82

40

The following tables provide information about the Company's fixed receiver interest rate swaps as of March 31, 2021 and December 31, 2020:
March 31, 2021:
Weighted Average
MaturityNotional AmountFair ValuePay RateReceive RateRemaining Years to Maturity
(In thousands)
2021$12,950 $103 0.19 %1.75 %0.46
202253,974 887 0.19 1.85 0.92
202341,407 1,423 0.19 2.00 1.97
202476,342 2,959 0.22 1.57 3.55
202647,799 (725)0.18 0.69 4.90
20313,500 (38)0.19 1.63 9.95
2035500 (66)0.09 0.74 14.56
2040500 (85)0.09 0.84 19.57
2050500 (114)0.09 0.90 29.58
Total$237,472 $4,344 0.20 %1.54 %2.99
December 31, 2020:
Weighted Average
MaturityNotional AmountFair ValuePay RateReceive RateRemaining Years to Maturity
(In thousands)
2021$12,950 $205 0.24 %1.75 %0.71
2022103,974 1,413 0.22 1.07 1.48
202348,657 2,209 0.24 2.00 2.26
202486,342 4,567 0.22 1.65 3.73
2035500 (14)0.09 0.74 14.81
2040500 (20)0.09 0.84 19.82
2050500 (31)0.09 0.90 29.82
Total$253,423 $8,329 0.22 %1.48 %2.48

41

Credit Default Swaps
The following table provides information about the Company's credit default swaps as of March 31, 2021 and December 31, 2020:
As of
March 31, 2021December 31, 2020
Type(1)
NotionalFair ValueWeighted Average Remaining Term (Years)NotionalFair ValueWeighted Average Remaining Term (Years)
($ in thousands)
Asset:
Long:
Credit default swaps on asset-backed indices$555 $24.01$395 $16.99
Credit default swaps on corporate bond indices67,354 3,422 2.2767,779 3,296 2.52
Short:
Credit default swaps on asset-backed securities(927)320 14.46(957)347 14.70
Credit default swaps on asset-backed indices(13,705)2,081 43.97(12,888)2,179 39.61
Credit default swaps on corporate bond indices(1,642)2.72(2,173)124 2.97
Liability:
Long:
Credit default swaps on asset-backed indices293 (127)28.03479 (130)32.36
Short:
Credit default swaps on asset-backed indices(1)28.76(1)29.00
Credit default swaps on corporate bonds(8,400)(682)3.93(8,400)(747)4.17
Credit default swaps on corporate bond indices(93,661)(5,128)2.33(110,624)(6,438)2.78
$(50,134)$(103)13.90$(66,390)$(1,364)10.25
(1)Long notional represents contracts where the Company has written protection and short notional represents contracts where the Company has purchased protection.

42

Futures
The following table provides information about the Company's long and short positions in futures as of March 31, 2021 and December 31, 2020:
As of
March 31, 2021December 31, 2020
DescriptionNotional AmountFair ValueRemaining Months to ExpirationNotional AmountFair ValueRemaining Months to Expiration
(In thousands)(In thousands)
Assets:
Short Contracts:
U.S. Treasury futures$(178,500)$2,704 2.98 $(300)$2.70 
Liabilities:
Long Contracts:
U.S. Treasury futures1,900 (163)2.73 1,900 (9)2.70 
Short Contracts:
U.S. Treasury futures— (178,200)(367)2.94 
Total, net$(176,600)$2,541 2.98 $(176,600)$(374)2.94 
Warrants
The following table provides information about the Company's warrants contracts to purchase shares as of March 31, 2021 and December 31, 2020:
March 31, 2021December 31, 2020
DescriptionNumber of Shares Underlying WarrantFair ValueRemaining Years to ExpirationNumber of Shares Underlying WarrantFair ValueRemaining Years to Expiration
(In thousands)(In thousands)
Warrants1,897 $42 2.151,897 $36 2.40
TBAs
The Company transacts in the forward settling TBA market. Pursuant to these TBA transactions, the Company agrees to purchase or sell, for future delivery, Agency RMBS with certain principal and interest terms and certain types of underlying collateral, but the particular Agency RMBS to be delivered is not identified until shortly before the TBA settlement date. TBAs are generally liquid, have quoted market prices, and represent the most actively traded class of MBS. The Company uses TBAs to mitigate interest rate risk, usually by taking short positions. The Company also invests in TBAs as a means of acquiring additional exposure to Agency RMBS, or for investment purposes, including holding long positions.
The Company does not generally take delivery of TBAs; rather, it settles the associated receivable and payable with its trading counterparties on a net basis. Transactions with the same counterparty for the same TBA that result in a reduction of the position are treated as extinguished.

43

As of March 31, 2021 and December 31, 2020, the Company had outstanding TBA purchase and sale contracts as follows:
March 31, 2021December 31, 2020
TBA Securities
Notional Amount(1)
Cost
Basis(2)
Market Value(3)
Net Carrying Value(4)
Notional Amount(1)
Cost
Basis(2)
Market Value(3)
Net Carrying Value(4)
(In thousands)
Purchase contracts:
Assets$10,000 $10,039 $10,040 $$149,990 $155,008 $155,969 $961 
Liabilities174,890 178,474 174,559 (3,915)
184,890 188,513 184,599 (3,914)149,990 155,008 155,969 961 
Sale contracts:
Assets(810,574)(850,708)(847,300)3,408 (4,400)(4,765)(4,764)
Liabilities(108,046)(115,775)(115,936)(161)(499,667)(531,034)(531,959)(925)
(918,620)(966,483)(963,236)3,247 (504,067)(535,799)(536,723)(924)
Total TBA securities, net$(733,730)$(777,970)$(778,637)$(667)$(354,077)$(380,791)$(380,754)$37 
(1)Notional amount represents the principal balance of the underlying Agency RMBS.
(2)Cost basis represents the forward price to be paid (received) for the underlying Agency RMBS.
(3)Market value represents the current market value of the underlying Agency RMBS (on a forward delivery basis) as of period end.
(4)Net carrying value represents the difference between the market value of the TBA contract as of period end and the cost basis, and is reported in Financial derivatives-assets, at fair value and Financial derivatives-liabilities, at fair value on the Condensed Consolidated Balance Sheet.
Gains and losses on the Company's derivative contracts for the three-month periods ended March 31, 2021 and 2020 are summarized in the tables below:
Three-Month Period Ended March 31, 2021:
Derivative TypePrimary 
Risk
Exposure
Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps
Net Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate Swaps(1)
Net Realized Gains (Losses) on Financial Derivatives(1)
Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps
Change in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps(2)
Change in Net Unrealized Gains (Losses) on Financial Derivatives(2)
(In thousands)
Interest rate swapsInterest Rate$(816)$447 $(369)$410 $7,675 $8,085 
Credit default swaps on asset-backed securitiesCredit26 26 (27)(27)
Credit default swaps on asset-backed indicesCredit1,069 1,069 (958)(958)
Credit default swaps on corporate bond indicesCredit(924)(924)528 528 
Credit default swaps on corporate bondsCredit(72)(72)66 66 
Total return swapsCredit(341)(341)139 139 
TBAsInterest Rate5,319 5,319 (703)(703)
FuturesInterest Rate1,017 1,017 2,915 2,915 
ForwardsCurrency88 88 627 627 
WarrantsEquity Market/Credit
Total$(816)$6,629 $5,813 $410 $10,267 $10,677 
(1)Includes realized gain/(loss) on transactions involving foreign-currency-denominated financial derivatives in the amount of $18 thousand for the three-month period ended March 31, 2021, which is included on the Condensed Consolidated Statement of Operations in Other, net.
(2)Includes foreign currency remeasurement on financial derivatives in the amount of $(34) thousand for the three-month period ended March 31, 2021, which is included on the Condensed Consolidated Statement of Operations in Other, net.

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Three-Month Period Ended March 31, 2020:
Derivative TypePrimary 
Risk
Exposure
Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps
Net Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate Swaps(1)
Net Realized Gains (Losses) on Financial Derivatives(1)
Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps
Change in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps(2)
Change in Net Unrealized Gains (Losses) on Financial Derivatives(2)
(In thousands)
Interest rate swapsInterest Rate$143 $(6,384)$(6,241)$(111)$(20,020)$(20,131)
Credit default swaps on asset-backed securitiesCredit(994)(994)917 917 
Credit default swaps on asset-backed indicesCredit(556)(556)12,524 12,524 
Credit default swaps on corporate bond indicesCredit579 579 4,116 4,116 
Credit default swaps on corporate bondsCredit94 94 1,527 1,527 
Total return swapsCredit(1,571)(1,571)(213)(213)
TBAsInterest Rate(3,173)(3,173)(5,423)(5,423)
FuturesInterest Rate(1,122)(1,122)(6,115)(6,115)
ForwardsCurrency592 592 253 253 
WarrantsEquity Market/Credit20 20 
OptionsCredit2,558 2,558 
Total$143 $(12,535)$(12,392)$(111)$(9,856)$(9,967)
(1)Includes realized gain/(loss) on transactions involving foreign-currency-denominated financial derivatives in the amount of $14 thousand for the three-month period ended March 31, 2020, which is included on the Condensed Consolidated Statement of Operations in Other, net.
(2)Includes foreign currency remeasurement on financial derivatives in the amount of $17 thousand for the three-month period ended March 31, 2020, which is included on the Condensed Consolidated Statement of Operations in Other, net.
The table below details the average notional values of the Company's financial derivatives, using absolute value of month end notional values, for the three month-period ended March 31, 2021 and the year ended December 31, 2020:
Derivative TypeThree-Month
Period Ended
March 31, 2021
Year Ended
December 31, 2020
(In thousands)
TBAs$1,017,245 $713,634 
Interest rate swaps795,247 1,009,110 
Credit default swaps190,584 277,990 
Futures180,400 149,538 
Forwards24,177 26,413 
Total return swaps4,181 6,975 
Warrants1,897 1,570 
Options1,500 
From time to time the Company enters into credit derivative contracts for which the Company sells credit protection ("written credit derivatives"). As of March 31, 2021 and December 31, 2020, all of the Company's open written credit derivatives were credit default swaps on either mortgage/asset-backed indices (ABX and CMBX indices) or corporate bond indices (CDX), collectively referred to as credit indices, or on individual corporate bonds, for which the Company receives periodic payments at fixed rates from credit protection buyers, and is obligated to make payments to the credit protection buyer upon the occurrence of a "credit event" with respect to underlying reference assets.

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Written credit derivatives held by the Company at March 31, 2021 and December 31, 2020 are summarized below:
Credit DerivativesMarch 31, 2021December 31, 2020
(In thousands)
Fair Value of Written Credit Derivatives, Net$3,301 $3,171 
Notional Value of Written Credit Derivatives (1)
68,202 68,653 
(1)The notional value is the maximum amount that a seller of credit protection would be obligated to pay, and a buyer of credit protection would receive, upon occurrence of a "credit event." Movements in the value of credit default swap transactions may require the Company or the counterparty to post or receive collateral. Amounts due or owed under credit derivative contracts with an International Swaps and Derivatives Association, or "ISDA," counterparty may be offset against amounts due or owed on other credit derivative contracts with the same ISDA counterparty. As a result, the notional value of written credit derivatives involving a particular underlying reference asset or index has been reduced (but not below zero) by the notional value of any contracts where the Company has purchased credit protection on the same reference asset or index with the same ISDA counterparty.
A credit default swap on a credit index or a corporate bond typically terminates at the stated maturity date in the case of corporate indices or bonds, or, in the case of ABX and CMBX indices, the date that all of the reference assets underlying the index are paid off in full, retired, or otherwise cease to exist. Implied credit spreads may be used to determine the market value of such contracts and are reflective of the cost of buying/selling credit protection. Higher spreads would indicate a greater likelihood that a seller will be obligated to perform (i.e., make protection payments) under the contract. In situations where the credit quality of the underlying reference assets has deteriorated, the percentage of notional values that would be paid up front to enter into a new such contract ("points up front") is frequently used as an indication of credit risk. Credit protection sellers entering the market in such situations would expect to be paid points up front corresponding to the approximate fair value of the contract. For the Company's written credit derivatives that were outstanding at March 31, 2021 and December 31, 2020, implied credit spreads on such contracts ranged between 28.1 and 264.4 basis points and 40.0 and 274.8 basis points, respectively. Excluded from these spread ranges are contracts outstanding for which the individual spread is greater than 2,000 basis points. The Company believes that these contracts would be quoted based on estimated points up front. The total fair value of contracts with individual implied credit spreads in excess of 2,000 basis points was $(0.1) million as of both March 31, 2021 and December 31, 2020. Estimated points up front on these contracts as of both March 31, 2021 and December 31, 2020 ranged between 56.2 and 85.2. Total net up-front payments (paid) or received relating to written credit derivatives outstanding at both March 31, 2021 and December 31, 2020 were $(2.0) million.

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9. Consolidated VIEs
As discussed in Note 2, the Company has interests in entities that it has determined to be VIEs. The following table summarizes the assets and liabilities of the Company's consolidated VIEs that are included on the Company's Condensed Consolidated Balance Sheet as of March 31, 2021 and December 31, 2020. See Note 10 and Note 13 for additional information on the Company's consolidated VIEs.
(In thousands)March 31, 2021December 31, 2020
Assets
Cash and cash equivalents$661 $701 
Restricted cash175 175 
Securities, at fair value59,162 44,523 
Loans, at fair value1,556,716 1,435,067 
Investments in unconsolidated entities, at fair value10,642 6,345 
Real estate owned35,557 23,598 
Investment related receivables40,669 24,824 
Other assets2,511 2,001 
Total Assets$1,706,093 $1,537,234 
Liabilities
Repurchase agreements$267,429 $275,019 
Other secured borrowings64,506 51,062 
Other secured borrowings, at fair value911,256 754,921 
Interest payable359 776 
Accrued expenses and other liabilities952 1,103 
Total Liabilities1,244,502 1,082,881 
Total Stockholders' Equity441,115 430,554 
Non-controlling interests20,476 23,799 
Total Equity461,591 454,353 
Total Liabilities and Equity$1,706,093 $1,537,234 
10. Securitization Transactions
Participation in CLO Transactions
Since June 2017, an affiliate of Ellington has sponsored four CLO securitization transactions (the "Ellington-sponsored CLO Securitizations"), collateralized by corporate loans and managed by an affiliate of Ellington (the "CLO Manager"). Ellington, the Company, several other affiliates of Ellington, and in certain cases, third parties, participated in the Ellington-sponsored CLO Securitizations (collectively, the "CLO Co-Participants").
Pursuant to each Ellington-sponsored CLO Securitization, a newly formed securitization trust (each a "CLO Issuer") issued various classes of notes, which were in turn sold to unrelated third parties and the applicable CLO Co-Participants.
The CLO Issuers are each deemed to be a VIE. The Company evaluates its interests in the CLO Issuers under ASC 810, and while the Company retains credit risk in each of the securitization trusts through its beneficial ownership of a portion of the subordinated interests of each of the securitization trusts, which are the first to absorb credit losses on the securitized assets, the Company does not retain control of these assets or the power to direct the activities of the CLO Issuers that most significantly impact the CLO Issuers' economic performance. As a result, the Company determined that it is not the primary beneficiary of the CLO Issuers, and therefore the Company has not consolidated the CLO Issuers. The Company's maximum amount at risk is limited to the Company's investment in each of the CLO Issuers. As of March 31, 2021 and December 31, 2020, the fair value of the Company's investment in the notes issued by the CLO Issuers was $20.3 million and $17.3 million, respectively.
See Note 13 for further details on the Company's participation in CLO transactions.

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Residential Mortgage Loan Securitizations
Since November 2017, the Company, through certain wholly owned subsidiaries (each, a "Sponsor"), has sponsored several securitizations of non-QM loans. In each case, the applicable Sponsor transferred a pool of non-QM loans (each, a Collateral Pool") to a wholly owned entity (each, a "Depositor") and on the closing date such loans were deposited into newly created securitization trusts (collectively, the "Issuing Entities"). Pursuant to the securitizations, the Issuing Entities issued various classes of mortgage pass-through certificates (the "Certificates") which are backed by the cash flows from the underlying non-QM loans.
Under the Dodd-Frank Act, sponsors of securitizations are generally required to retain at least 5% of the economic interest in the credit risk of the securitized assets (the "Risk Retention Rules"). In order to comply with the Risk Retention Rules, in each securitization, the Company purchased and intends to hold, at a minimum, the requisite amount of the most subordinated classes of Certificates and the excess cash flow certificates. The applicable Sponsor also purchased the Certificates entitled to excess servicing fees in each securitization, while the remaining classes of Certificates were purchased by unrelated parties.
Notwithstanding that the Certificates carry final scheduled distribution dates in June 2059 or later, the applicable Depositor may, at its sole option, purchase all of the outstanding Certificates (an "Optional Redemption") following the earlier of (1) the applicable anniversary of the closing date (typically two or three years) of the respective securitization or (2) the date on which the aggregate unpaid principal balance of the applicable Collateral Pool has declined below 30% of the aggregate unpaid principal balance of the applicable Collateral Pool as of the date as of which such loans were originally transferred to the applicable Issuing Entity. The purchase price that the Depositor is required to pay in connection with an Optional Redemption is equal to the sum of the unpaid principal balance of each class of Certificates as of the redemption date and any accrued and unpaid interest thereon. In light of these Optional Redemption rights held by the applicable Depositor, the transfers of non-QM loans to each of the Issuing Entities do not qualify as sales under ASC 860-10.
In the event that certain breaches of representations or warranties are discovered with respect to any underlying non-QM loans, the Company could be required to repurchase or replace such loans.
Each Sponsor also serves as the servicing administrator of its respective securitization, for which it is entitled to receive a monthly fee equal to one-twelfth of the product of (a) 0.03% and (b) the unpaid principal balance of the underlying non-QM loans as of the first day of the related due period. Each Sponsor in its role as servicing administrator provides direction and consent for certain loss mitigation activities to the third-party servicer of the underlying non-QM loans. In certain circumstances, the servicing administrator will be required to reimburse the servicer for principal and interest advances and servicing advances made by the servicer.
In light of the Company's retained interests in each of the securitizations, together with the Optional Redemption rights and the Company's ability to direct the third-party servicer regarding certain loss mitigation activities, the Company is deemed to be the primary beneficiary of the Issuing Entities, which are VIEs, and has consolidated the Issuing Entities. Interest income from these loans and the expenses related to the servicing of these loans are included in Interest income and Investment related expenses—Servicing expense, respectively, on the Condensed Consolidated Statement of Operations.
The Issuing Entities each meet the definition of a CFE as defined in Note 2, and as a result the assets of each of the Issuing Entities have been valued using the fair value of the liabilities of the respective Issuing Entity, as such liabilities have been assessed to be more observable than such assets.
The debt of the Issuing Entities is included in Other secured borrowings, at fair value, on the Condensed Consolidated Balance Sheet and is shown net of the Certificates held by the Company.

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The following table details the Company's outstanding consolidated residential mortgage loan securitizations:
Issuing EntityClosing DatePrincipal Balance of Loans Transferred to the DepositorTotal Face Amount of Certificates Issued
(In thousands)
Ellington Financial Mortgage Trust 2019-16/19$226,913 $226,913 (1)
Ellington Financial Mortgage Trust 2019-211/19267,255 267,255 (2)
Ellington Financial Mortgage Trust 2020-16/20259,273 259,273 (3)
Ellington Financial Mortgage Trust 2020-211/20219,732 219,732 (4)
Ellington Financial Mortgage Trust 2021-12/21251,771 251,771 (5)
(1)In order to comply with the Risk Retention Rules, the Sponsor purchased the two most subordinated classes of Certificates and the excess cash flow certificates, with an aggregate value as of the settlement date equal to 6.1% of the fair value of all Certificates issued. The Sponsor also purchased, for an aggregate purchase price of $1.2 million, the Certificates entitled to excess servicing fees, while the remaining classes of Certificates were purchased by unrelated third parties.
(2)In order to comply with the Risk Retention Rules, the Sponsor purchased the two most subordinated classes of Certificates and the excess cash flow certificates, with an aggregate value as of the settlement date equal to 6.4% of the fair value of all Certificates issued. The Sponsor also purchased, for an aggregate purchase price of $1.7 million, the Certificates entitled to excess servicing fees, while the remaining classes of Certificates were purchased by unrelated third parties.
(3)In order to comply with the Risk Retention Rules, the Sponsor purchased the two most subordinated classes of Certificates and the excess cash flow certificates, with an aggregate value as of the settlement date equal to 8.0% of the fair value of all Certificates issued. Additionally, the Sponsor purchased another subordinated class of Certificates with an aggregate value equal to 3.5% of the fair value of all Certificates issued as of the settlement date; the Company subsequently sold such securities to a third party. Finally, the Sponsor also purchased, for an aggregate purchase price of $1.9 million, the Certificates entitled to excess servicing fees, while the remaining classes of Certificates were purchased by unrelated third parties.
(4)In order to comply with the Risk Retention Rules, the Sponsor purchased the two most subordinated classes of Certificates and the excess cash flow certificates, with an aggregate value as of the settlement date equal to 7.6% of the fair value of all Certificates issued. The Sponsor also purchased, for an aggregate purchase price of $1.4 million, the Certificates entitled to excess servicing fees, while the remaining classes of Certificates were purchased by unrelated third parties.
(5)In order to comply with the Risk Retention Rules, the Sponsor purchased the two most subordinated classes of Certificates and the excess cash flow certificates, with an aggregate value as of the settlement date equal to 5.8% of the fair value of all Certificates issued. The Sponsor also purchased, for an aggregate purchase price of $1.6 million, the Certificates entitled to excess servicing fees, while the remaining classes of Certificates were purchased by unrelated third parties.
The following table details the assets and liabilities of the consolidated securitization trusts included in the Company's Condensed Consolidated Balance Sheet as of March 31, 2021 and December 31, 2020:
(In thousands)March 31, 2021December 31, 2020
Assets:
Loans, at fair value$961,332 $801,343 
Investment related receivables23,103 15,544 
Liabilities:
Other secured borrowings, at fair value911,256 754,921 
Participation in Multi-Seller Consumer Loan Securitization
In November 2020, the Company participated in a securitization whereby the Company, together with another entity managed by Ellington (the "Consumer Co-Participant"), sold consumer loans with an aggregate unpaid principal balance of approximately $205.1 million to a newly formed securitization trust (the "Consumer Securitization Issuer"). Of the $205.1 million in loans sold to the Consumer Securitization Issuer, the Company's share was 56.3% while the Consumer Co-Participant's share was 43.7%. The transfer was accounted for as a sale in accordance with ASC 860-10. Pursuant to the securitization, the Consumer Securitization Issuer issued senior and subordinated notes in the principal amounts of $158.4 million and $35.2 million, respectively. Trust certificates representing beneficial ownership of the Issuer were also issued. In connection with the transaction, and through a jointly owned newly formed entity (the "Consumer Risk Retention Vehicle"), the Company and the Consumer Co-Participant acquired certain of the subordinated notes as well as the trust certificates in the Issuer. The Company and the co-participant acquired 56.3% and 43.7%, respectively, of the interests in the Consumer Risk Retention Vehicle. As of March 31, 2021, the Company's total interest in the Consumer Risk Retention Vehicle, for which the Company has elected the FVO, was 56.3%, or $21.6 million. As of December 31, 2020, the Company's total interest in the Consumer Risk Retention Vehicle, for which the Company has elected the FVO, was 56.3% or $19.1 million. The fair value of the Consumer Risk Retention Vehicle is included on the Condensed Consolidated Balance Sheet in Investments in unconsolidated entities, at fair value.

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The notes and trust certificates issued by the Consumer Securitization Issuer are backed by the cash flows from the underlying consumer loans. If there are breaches of representations and warranties with respect to any underlying consumer loans, the Company could, under certain circumstances, be required to repurchase or replace such loans. Absent such breaches, the Company has no obligation to repurchase or replace any underlying consumer loans that become delinquent or otherwise default. In addition, another affiliate of Ellington acts as the administrator for the securitization and is paid a monthly fee for its services.
The Consumer Securitization Issuer is deemed to be a VIE. The Company has evaluated its interest in the Consumer Securitization Issuer under ASC 810, and while the Company retains credit risk in the securitization trust through its beneficial ownership of most of the subordinated interests of the securitization trust, which are the first to absorb credit losses on the securitized assets, neither the Company nor the Consumer Risk Retention Vehicle retains control of these assets or the power to direct the activities of the Consumer Securitization Issuer that most significantly impact the Consumer Securitization Issuer's economic performance. As a result, the Company determined that neither the Company nor the Consumer Risk Retention Vehicle is the primary beneficiary of the Consumer Securitization Issuer, and therefore the Company has not consolidated the Consumer Securitization Issuer. Additionally, the Company evaluated its interest in the Consumer Risk Retention Vehicle, which does not meet the criteria to be deemed a VIE, under the voting interest model provided by ASC 810 and determined the Company does not control the Consumer Risk Retention Vehicle. As a result, the Company has not consolidated the Consumer Risk Retention Vehicle.
11. Borrowings
Secured Borrowings
The Company's secured borrowings consist of repurchase agreements, Other secured borrowings, and Other secured borrowings, at fair value. As of March 31, 2021 and December 31, 2020, the Company's total secured borrowings were $2.9 billion and $2.3 billion, respectively.
Repurchase Agreements
The Company enters into repurchase agreements. A repurchase agreement involves the sale of an asset to a counterparty together with a simultaneous agreement to repurchase the transferred asset or similar asset from such counterparty at a future date. The Company accounts for its repurchase agreements as collateralized borrowings, with the transferred assets effectively serving as collateral for the related borrowing. The Company's repurchase agreements typically range in term from 30 to 180 days, although the Company also has repurchase agreements that provide for longer or shorter terms. The principal economic terms of each repurchase agreement—such as loan amount, interest rate, and maturity date—are typically negotiated on a transaction-by-transaction basis. Other terms and conditions, such as those relating to events of default, are typically governed under the Company's master repurchase agreements. Absent an event of default, the Company maintains beneficial ownership of the transferred securities during the term of the repurchase agreement and receives the related principal and interest payments. Interest rates on these borrowings are generally fixed based on prevailing rates corresponding to the terms of the borrowings, and for most repurchase agreements, interest is generally paid at the termination of the repurchase agreement, at which time the Company may enter into a new repurchase agreement at prevailing market rates with the same counterparty, repay that counterparty and possibly negotiate financing terms with a different counterparty, or choose to no longer finance the related asset. Some repurchase agreements provide for periodic payments of interest, such as monthly payments. In response to a decline in the fair value of the transferred securities, whether as a result of changes in market conditions, security paydowns, or other factors, repurchase agreement counterparties will typically make a margin call, whereby the Company will be required to post additional securities and/or cash as collateral with the counterparty in order to re-establish the agreed-upon collateralization requirements. In the event of increases in fair value of the transferred securities, the Company can generally require the counterparty to post collateral with it in the form of cash or securities. The Company is generally permitted to sell or re-pledge any securities posted by the counterparty as collateral; however, upon termination of the repurchase agreement, or other circumstance in which the counterparty is no longer required to post such margin, the Company must return to the counterparty the same security that had been posted.
At any given time, the Company seeks to have its outstanding borrowings under repurchase agreements with several different counterparties in order to reduce the exposure to any single counterparty. The Company had outstanding borrowings under repurchase agreements with 24 counterparties as of both March 31, 2021 and December 31, 2020.
As of March 31, 2021, remaining days to maturity on the Company's open repurchase agreements ranged from 1 day to 672 days. Interest rates on the Company's open repurchase agreements ranged from 0.15% to 5.00% as of March 31, 2021. As of December 31, 2020, remaining days to maturity on the Company's open repurchase agreements ranged from 4 days to 516 days. Interest rates on the Company's open repurchase agreements ranged from 0.20% to 5.00% as of December 31, 2020.

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The following table details the Company's outstanding borrowings under repurchase agreements for Agency RMBS and credit assets (which can include non-Agency RMBS, CMBS, CLOs, consumer loans, corporate debt, residential mortgage loans, and commercial mortgage loans and REO), by remaining maturity as of March 31, 2021 and December 31, 2020:
March 31, 2021December 31, 2020
Weighted AverageWeighted Average
Remaining MaturityOutstanding
Borrowings
Interest RateRemaining Days to MaturityOutstanding
Borrowings
Interest RateRemaining Days to Maturity
Agency RMBS:(In thousands)(In thousands)
30 Days or Less$223,518 0.23 %16$265,556 0.28 %17
31-60 Days549,479 0.20 %43385,141 0.25 %44
61-90 Days182,827 0.29 %73174,586 0.28 %70
91-120 Days7,520 1.03 %92%— 
121-150 Days152,660 0.20 %1352,692 0.27 %126
151-180 Days79,809 0.20 %16859,857 0.32 %162
181-360 Days240,693 0.21 %32634,030 0.32 %252
Total Agency RMBS1,436,506 0.22 %107921,862 0.27 %57
Credit:
30 Days or Less14,646 1.87 %1437,795 2.11 %17
31-60 Days147,187 3.03 %4284,554 2.23 %50
61-90 Days103,919 1.81 %76152,426 2.11 %75
91-120 Days78,396 2.22 %10689,931 2.47 %106
121-150 Days%— 66,412 4.75 %125
151-180 Days5,877 3.75 %16811,063 2.27 %165
181-360 Days41,885 2.98 %25638,640 2.90 %289
> 360 Days81,095 2.85 %44694,248 2.99 %447
Total Credit Assets473,005 2.57 %149575,069 2.69 %155
Total$1,909,511 0.80 %118$1,496,931 1.20 %94
Repurchase agreements involving underlying investments that the Company sold prior to period end, for settlement following period end, are shown using their contractual maturity dates even though such repurchase agreements may be expected to be terminated early upon settlement of the sale of the underlying investment.
As of March 31, 2021 and December 31, 2020, the fair value of investments transferred as collateral under outstanding borrowings under repurchase agreements was $2.160 billion and $1.831 billion, respectively. Collateral transferred under outstanding borrowings under repurchase agreements as of March 31, 2021 and December 31, 2020 include investments in the amount of $4.9 million and $1.4 million, respectively, that were sold prior to period end but for which such sale had not yet settled. In addition, as of March 31, 2021 and December 31, 2020, the Company posted net cash collateral of $66.1 million and $28.9 million, respectively, to its counterparties.
Amount at risk represents the excess, if any, for each counterparty of the fair value of collateral held by such counterparty over the amounts outstanding under repurchase agreements. As of both March 31, 2021 and December 31, 2020, there was no single counterparty for which the amount at risk relating to our repurchase agreements was greater than 10% of total equity.
Other Secured Borrowings
The Company has entered into agreements to finance a portfolio of unsecured loans through a recourse secured borrowing facility. The facility has a term ending in February 2022. The facility accrues interest on a floating-rate basis. As of March 31, 2021 and December 31, 2020, the Company had outstanding borrowings under this facility in the amount of $6.7 million and $8.7 million, respectively, which is included under the caption Other secured borrowings, on the Company's Condensed Consolidated Balance Sheet. The effective interest rate, inclusive of related deferred financing costs, was 2.11% and 2.30% as of March 31, 2021 and December 31, 2020. As of March 31, 2021 and December 31, 2020, the fair value of unsecured loans collateralizing this borrowing was $9.3 million and $11.5 million, respectively. There are a number of covenants, including several financial covenants, associated with this borrowing; as of March 31, 2021, the Company was in compliance with all of its covenants.

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The Company has a non-recourse secured borrowing facility that is used to finance a portfolio of unsecured loans. The facility includes a reinvestment period ending in March 2022 (or earlier following an early amortization event), whereby the Company can vary its borrowings based on the size of its portfolio, subject to certain maximum limits. Following the reinvestment period, the facility will begin to amortize based on the collections from the underlying loans. The facility accrues interest on a floating rate basis. As of March 31, 2021 and December 31, 2020, the Company had outstanding borrowings under this facility in the amount of $14.6 million and $7.0 million, respectively, which is included under the caption Other secured borrowings, on the Company's Condensed Consolidated Balance Sheet. The effective interest rate on this facility, inclusive of any related deferred financing costs, was 2.25% and 2.25%, as of March 31, 2021 and December 31, 2020, respectively. As of March 31, 2021 and December 31, 2020, the fair value of unsecured loans collateralizing this borrowing was $41.0 million and $31.8 million, respectively. There are a number of covenants, including several financial covenants, associated with this borrowing; as of both March 31, 2021 and December 31, 2020, the Company was in compliance with all of its covenants.
The Company has entered into an agreement to finance a portfolio of ABS backed by consumer loans through a recourse secured borrowing facility. The facility includes a revolving borrowing period ending in September 2022 (or earlier following a trigger event), whereby the Company can vary its borrowings based on the size of its portfolio, subject to certain maximum limits. Following the revolving borrowing period, the facility amortizes, with a final termination date in September 2024. The facility accrues interest on a floating rate basis. As of March 31, 2021 and December 31, 2020, the Company had outstanding borrowings under this facility in the amount of $35.7 million and $28.7 million, respectively, which is included under the caption Other secured borrowings, on the Company's Condensed Consolidated Balance Sheet.The effective interest rate on this facility, inclusive of related deferred financing costs, was 5.12% and 5.22% as of March 31, 2021 and December 31, 2020, respectively. As of March 31, 2021 and December 31, 2020, the fair value of ABS backed by consumer loans collateralizing this borrowing was $52.8 million and $44.5 million, respectively. There are a number of covenants, including several financial covenants, associated with this borrowing; as of both March 31, 2021 and December 31, 2020, the Company was in compliance with all of its covenants.
The Company has completed securitization transactions, as discussed in Note 10, whereby it financed portfolios of non-QM loans. As of March 31, 2021 and December 31, 2020, the fair value of the Company's outstanding liabilities associated with these securitization transactions was $911.3 million and $754.9 million, respectively, representing the fair value of the securitization trust certificates held by third parties as of such date, and is included on the Company's Condensed Consolidated Balance Sheet in Other secured borrowings, at fair value. The weighted average coupon of the Certificates held by third parties was 2.11% and 2.43% as of March 31, 2021 and December 31, 2020, respectively. As of March 31, 2021 and December 31, 2020, the fair value of non-QM loans held in the consolidated securitization trusts was $961.3 million and $801.3 million, respectively.
In March 2020, the Company entered into a participation agreement with an unrelated third-party, the "Junior Participant," whereby the Company transferred to the Junior Participant an interest in a small balance commercial mortgage loan, the "Partial Loan," (together with the Company's interest, the "Whole Commercial Loan"). The Partial Loan is subordinate to the interest in the loan held by the Company. In accordance with ASC 860-10, the Partial Loan transferred to the Junior Participant does not meet the definition of a participating interest and, as a result, the Company does not recognize the transfer of the Partial Loan to the Junior Participant as a sale. The Company has recorded the Whole Commercial Loan in Loans, at fair value, on the Condensed Consolidated Balance Sheet. As of March 31, 2021 and December 31, 2020, the fair value of the Whole Commercial Loan was $18.0 million and $17.3 million, respectively. The Company's liability to the Junior Participant as of both March 31, 2021 and December 31, 2020, was $7.5 million and $6.7 million, respectively, and is included in Other secured borrowings on the Company's Condensed Consolidated Balance Sheet. Under the terms of the participation agreement, the Junior Participant is entitled to a portion of the cashflows of the underlying commercial mortgage loan.
Unsecured Borrowings
Senior Notes
The Company has issued $86.0 million in aggregate principal amount of unsecured long-term debt, which is structured as a joint and several co-issuance by certain of the Company's consolidated subsidiaries and fully guaranteed by the Company (the "Senior Notes"). At any time, the Company is permitted to add others of its consolidated subsidiaries as co-issuers of the Senior Notes. The Senior Notes bear interest at a rate of 5.50%, subject to adjustment based on changes, if any, in the ratings of the Senior Notes. Interest on the Senior Notes is payable semi-annually in arrears on March 1 and September 1 of each year. The Senior Notes mature on September 1, 2022. The Company may redeem the Senior Notes, at its option, in whole or in part, prior to March 1, 2022 at a price equal to 100% of the principal amount thereof, plus the applicable "make-whole" premium as of the applicable date of redemption. At any time on or after March 1, 2022, the Company may redeem the Senior Notes, in whole or in part, at a redemption price equal to 100% of the aggregate principal amount of the Senior Notes to be redeemed, plus accrued and unpaid interest. The Senior Notes are carried at amortized cost. There are a number of covenants, including several

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financial covenants, associated with the Senior Notes. As of both March 31, 2021 and December 31, 2020, the Company was in compliance with all of its covenants.
The Company amortizes debt issuance costs over the life of the associated debt; the amortized portion of debt issuance costs is included in Interest expense on the Condensed Consolidated Statement of Operations. The Senior Notes have an effective interest rate of 5.80%, inclusive of debt issuance costs.
The Senior Notes are unsecured and are effectively subordinated to secured indebtedness of the Company, to the extent of the value of the collateral securing such indebtedness.
Schedule of Principal Repayments
The following table details the Company's principal repayment schedule, over the next 5 years, for outstanding borrowings as of March 31, 2021:
Year
Repurchase Agreements(1)
Other
Secured Borrowings(2)
Senior Notes(1)
Total
(In thousands)
Next Twelve Months$1,828,416 $458,602 $$2,287,018 
Year 281,095 260,649 86,000 427,744 
Year 3282,449 282,449 
Year 4
Year 5
Total$1,909,511 $1,001,700 $86,000 $2,997,211 
(1)Reflects the Company's contractual principal repayment dates.
(2)Includes $937.2 million of expected principal repayments related to the Company's consolidated residential mortgage loan securitizations, which are projected based upon the underlying assets' expected repayments and may be prior to the stated contractual maturities.
12. Income Taxes
The Company has elected to be taxed as a REIT under the Code. A REIT is generally not subject to U.S. federal, state, and local income tax on the portion of its income that is distributed to its owners if it distributes at least 90% of its REIT taxable income within the prescribed time frames, determined without regard to the deduction for dividends paid and excluding any net capital gains. The Company intends to operate in a manner which will allow it to continue to meet the requirements for qualification as a REIT. Accordingly, Ellington Financial Inc. does not believe that it will be subject to U.S. federal, state, and local income tax on the portion of its net taxable income that is distributed to its stockholders as long as certain asset, income, and share ownership tests are met.
Certain foreign and domestic subsidiaries of the Company have elected to be treated as TRSs and therefore are taxed as corporations for U.S. federal, state, and local income tax purposes. To the extent that those entities incur, or are expected to incur, U.S. federal, state, or local income taxes, or foreign income taxes, such taxes are recorded in the Company's condensed consolidated financial statements.
The Company accounts for income taxes in accordance with ASC 740, Income Taxes, or "ASC 740." Deferred income taxes reflect the net tax effects of temporary differences that may exist between the carrying amounts of assets and liabilities under U.S. GAAP and the carrying amounts used for income tax purposes. For the three-month periods ended March 31, 2021 and 2020, the Company recorded an income tax expense (benefit) of $2.0 million and $(0.5) million, respectively. The increase in income tax expense for the three-month period ended March 31, 2021, was primarily due to an increase in deferred tax liabilities related to net realized and unrealized gains on investments held in a domestic TRS.
13. Related Party Transactions
The Company is party to the Management Agreement (which may be amended from time to time), pursuant to which the Manager manages the assets, operations, and affairs of the Company, in consideration of which the Company pays the Manager management and incentive fees. The descriptions of the Base Management Fees and Incentive Fees are detailed below.

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Base Management Fees
The Operating Partnership pays the Manager 1.50% per annum of total equity of the Operating Partnership calculated in accordance with U.S. GAAP as of the end of each fiscal quarter (before deductions for base management fees and incentive fees payable with respect to such fiscal quarter), provided that total equity is adjusted to exclude one-time events pursuant to changes in U.S. GAAP, as well as non-cash charges after discussion between the Manager and the Company's independent directors, and approval by a majority of the Company's independent directors in the case of non-cash charges.
Pursuant to the Management Agreement, if the Company invests at issuance in the equity of any collateralized debt obligation that is managed, structured, or originated by Ellington or one of its affiliates, or if the Company invests in any other investment fund or other investment for which Ellington or one of its affiliates receives management, origination, or structuring fees, then, unless agreed otherwise by a majority of the Company's independent directors, the base management and incentive fees payable by the Company to its Manager will be reduced by an amount equal to the applicable portion (as described in the Management Agreement) of any such management, origination, or structuring fees.
For the three-month period ended March 31, 2021, the total base management fee incurred was $3.3 million, consisting of $3.5 million of total gross base management fee incurred, less $0.2 million of management fee rebates. For the three-month period ended March 31, 2020, the total base management fee incurred was $2.4 million consisting of $2.9 million of total gross base management fee incurred, less $0.5 million of management fee rebates. See "—Participation in CLO Transactions" below for details on management fee rebates.
Incentive Fees
The Manager is entitled to receive a quarterly incentive fee equal to the positive excess, if any, of (i) the product of (A) 25% and (B) the excess of (1) Adjusted Net Income (described below) for the Incentive Calculation Period (which means such fiscal quarter and the immediately preceding three fiscal quarters) over (2) the sum of the Hurdle Amounts (described below) for the Incentive Calculation Period, over (ii) the sum of the incentive fees already paid or payable for each fiscal quarter in the Incentive Calculation Period preceding such fiscal quarter.
For purposes of calculating the incentive fee, "Adjusted Net Income" for the Incentive Calculation Period means the net increase in equity from operations of the Operating Partnership, after all base management fees but before any incentive fees for such period, and excluding any non-cash equity compensation expenses for such period, as reduced by any Loss Carryforward (as described below) as of the end of the fiscal quarter preceding the Incentive Calculation Period.
For purposes of calculating the incentive fee, the "Loss Carryforward" as of the end of any fiscal quarter is calculated by determining the excess, if any, of (1) the Loss Carryforward as of the end of the immediately preceding fiscal quarter over (2) the Company's net increase in equity from operations (expressed as a positive number) or net decrease in equity from operations (expressed as a negative number) of the Operating Partnership for such fiscal quarter. As of both March 31, 2021 and December 31, 2020, there was 0 Loss Carryforward.
For purposes of calculating the incentive fee, the "Hurdle Amount" means, with respect to any fiscal quarter, the product of (i) one-fourth of the greater of (A) 9% and (B) 3% plus the 10-year U.S. Treasury rate for such fiscal quarter, (ii) the sum of (A) the weighted average gross proceeds per share of all common stock and OP Unit issuances since inception of the Company and up to the end of such fiscal quarter, with each issuance weighted by both the number of shares of common stock and OP Units issued in such issuance and the number of days that such issued shares of common stock and OP Units were outstanding during such fiscal quarter, using a first-in first-out basis of accounting (i.e. attributing any share of common stock and OP Unit repurchases to the earliest issuances first) and (B) the result obtained by dividing (I) retained earnings attributable to shares of common stock and OP Units at the beginning of such fiscal quarter by (II) the average number of shares of common stock and OP Units outstanding for each day during such fiscal quarter, and (iii) the sum of (x) the average number of shares of common stock and long term incentive plan units of the Company outstanding for each day during such fiscal quarter, and (y) the average number of Convertible Non-controlling Interests outstanding for each day during such fiscal quarter. For purposes of determining the Hurdle Amount, issuances of common stock, and Convertible Non-controlling Interests (a) as equity incentive awards, (b) to the Manager as part of its base management fee or incentive fee and (c) to the Manager or any of its affiliates in privately negotiated transactions, are excluded from the calculation. The payment of the incentive fee will be in a combination of shares of common stock and cash, provided that at least 10% of any quarterly payment will be made in shares of common stock.
The Company did not accrue an incentive fee for either of the three-month periods ended March 31, 2021 or 2020, since on a rolling four quarter basis, the Company's income did not exceed the prescribed hurdle amount.

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Termination Fees
The Management Agreement requires the Company to pay a termination fee to the Manager in the event of (1) the Company's termination or non-renewal of the Management Agreement without cause or (2) the Company's termination of the Management Agreement based on unsatisfactory performance by the Manager that is materially detrimental to the Company or (3) the Manager's termination of the Management Agreement upon a default by the Company in the performance of any material term of the Management Agreement. Such termination fee will be equal to the amount of three times the sum of (i) the average annual quarterly base management fee amounts paid or payable with respect to the 2 12-month periods ending on the last day of the latest fiscal quarter completed on or prior to the date of the notice of termination or non-renewal and (ii) the average annual quarterly incentive fee amounts paid or payable with respect to the 2 12-month periods ending on the last day of the latest fiscal quarter completed on or prior to the date of the notice of termination or non-renewal.
Expense Reimbursement
Under the terms of the Management Agreement the Company is required to reimburse the Manager for operating expenses related to the Company that are incurred by the Manager, including expenses relating to legal, accounting, due diligence, other services, and all other costs and expenses. The Company's reimbursement obligation is not subject to any dollar limitation. Expenses will be reimbursed in cash within 60 days following delivery of the expense statement by the Manager; provided, however, that such reimbursement may be offset by the Manager against amounts due to the Company from the Manager. The Company will not reimburse the Manager for the salaries and other compensation of the Manager's personnel except that the Company will be responsible for expenses incurred by the Manager in employing certain dedicated or partially dedicated personnel as further described below.
The Company reimburses the Manager for the allocable share of the compensation, including, without limitation, wages, salaries, and employee benefits paid or reimbursed, as approved by the Compensation Committee of the Board of Directors to certain dedicated or partially dedicated personnel who spend all or a portion of their time managing the Company's affairs, based upon the percentage of time devoted by such personnel to the Company's affairs. In their capacities as officers or personnel of the Manager or its affiliates, such personnel will devote such portion of their time to the Company's affairs as is necessary to enable the Company to operate its business.
For the three-month periods ended March 31, 2021 and 2020, the Company reimbursed the Manager $4.1 million and $2.7 million, respectively, for previously incurred operating expenses. As of March 31, 2021 and December 31, 2020, the outstanding payable to the Manager for operating expenses was $1.6 million and $2.5 million, respectively, which are included in Accrued expenses and other liabilities on the Condensed Consolidated Balance Sheet.
Transactions Involving Certain Loan Originators
As of March 31, 2021 and December 31, 2020, the loan originators in which the Company holds equity investments represent related parties. Transactions that have been entered into with these related party loan originators are summarized below.
The Company is a party to a mortgage loan purchase and sale flow agreement, with a mortgage originator in which the Company holds a non-controlling equity investment, whereby the Company purchases residential mortgage loans that satisfy certain specified criteria. The Company has also provided a $5.0 million line of credit to the mortgage originator. Under the terms of this line of credit, the Company has agreed to make advances to the mortgage originator solely for the purpose of funding specifically identified residential mortgage loans designated for sale to the Company. To the extent the advances are drawn by the mortgage originator, it must pay interest, at a rate of 15% per annum, on the outstanding balance of each advance from the date the advance is made until such advance is repaid in full. The mortgage originator is required to repay advances in full no later than two business days following the date that the Company purchases the related residential mortgage loans from the mortgage originator. As of both March 31, 2021 and December 31, 2020, there were 0 advances outstanding. The Company has also entered into two agreements whereby it guarantees the performance of such mortgage originator under third-party master repurchase agreements. See Note 21, Commitments and Contingencies, for further information on the Company's guarantees of the third-party borrowing arrangements. Additionally, in August 2020, the Company entered into a commitment agreement whereby the Company committed to purchase $150 million of residential mortgage loans that meet specified criteria, or the "Commitment Agreement." As of March 31, 2021, the Company had purchased the entire $150 million of eligible residential mortgage loans under the terms of the Commitment Agreement. In connection with the Commitment Agreement, the Company also entered into an agreement whereby the Company would be entitled to receive warrants proportionally as it satisfied its purchase commitment under the Commitment Agreement to purchase a maximum of 9.329 million shares of non-voting common stock. As of March 31, 2021, the Company has received warrants for the maximum 9.329 million shares; such warrants have a fair value of $4.2 million and $3.6 million as of March 31, 2021 and December 31, 2020, respectively, and are included in Investments in unconsolidated entities on the Condensed Consolidated Balance Sheet.

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The Company, through a related party of Ellington, or the "Loan Purchaser," is a party to a consumer loan purchase and sale flow agreement with a consumer loan originator in which the Company holds an investment in preferred stock and warrants to purchase additional preferred stock, whereby the Loan Purchaser purchases consumer loans that satisfy certain specified criteria. The Company has investments in participation certificates related to consumer loans titled in the name of the Loan Purchaser. Through its participation certificates, the Company has beneficial interests in the loan cash flows, net of servicing-related fees and expenses. The total fair value of the Company's participation certificates was $52.8 million and $44.5 million as of March 31, 2021 and December 31, 2020, respectively.
Consumer, Residential, and Commercial Loan Transactions with Affiliates
The Company purchases certain of its consumer loans through an affiliate, or the "Purchasing Entity." The Purchasing Entity has entered into purchase agreements, open-ended in duration, with third party consumer loan originators whereby it has agreed to purchase eligible consumer loans. The amount of loans purchased under these purchase agreements is dependent on, among other factors, the amount of loans originated in any given period by the selling originators. The Company and certain other affiliates of Ellington have entered into agreements with the Purchasing Entity whereby the Company and each of those other affiliates of Ellington have agreed to purchase their allocated portion (subject to monthly determination based on available capital and other factors) of the eligible loans acquired by the Purchasing Entity under each purchase agreement. Immediately after the Purchasing Entity purchases beneficial interests in the loans, the Company and other affiliates of Ellington purchase such beneficial interests from the Purchasing Entity, at the same price paid by the Purchasing Entity. During the three-month periods ended March 31, 2021 and 2020, the Company purchased loans under these agreements with an aggregate principal balance of $11.9 million and $48.1 million, respectively. As of March 31, 2021 and December 31, 2020, the estimated remaining contingent purchase obligations of the Company under these purchase agreements was approximately $66.4 million and $13.0 million, respectively, in principal balance.
The Company's beneficial interests in the consumer loans purchased through the Purchasing Entity are evidenced by participation certificates issued by trusts that hold legal title to the loans. These trusts are owned by a related party of Ellington and were established to hold such loans. Through its participation certificates, the Company participates in the cash flows of the underlying loans held by each trust. The total amount of consumer loans underlying the Company's participation certificates and held in the related party trusts was $50.8 million and $45.1 million as of March 31, 2021 and December 31, 2020, respectively.
The Company has beneficial interests in residential mortgage loans and REO held in a trust owned by a related party of Ellington. Through these beneficial interests, the Company participates in the cash flows of the underlying loans held by such trust. The total amount of residential mortgage loans and REO underlying the Company's beneficial interests and held in the related party trust was $321.1 million and $387.4 million as of March 31, 2021 and December 31, 2020, respectively.
The Company is a co-investor in certain small balance commercial mortgage loans with several other investors, including an unrelated third party and various affiliates of Ellington. These loans are beneficially owned by a consolidated subsidiary of the Company. As of March 31, 2021 and December 31, 2020, the aggregate fair value of the small balance commercial loans was $34.4 million and $34.0 million, respectively. As of March 31, 2021, the non-controlling interests held by the unrelated third party and the Ellington affiliates were $2.8 million and $6.1 million, respectively. As of December 31, 2020, the non-controlling interests held by the unrelated third party and the Ellington affiliates were $4.1 million and $8.9 million, respectively.
The Company is also a co-investor in certain small balance commercial mortgage loans and REO with other investors, including various unrelated third parties and various affiliates of Ellington. Each co-investor in a particular loan has an interest in the limited liability company that owns such loan or REO. As of March 31, 2021 and December 31, 2020, the aggregate fair value of the Company's investments in the jointly owned limited liability companies was approximately $38.7 million and $33.9 million, respectively. Such investments are included in Investments in unconsolidated entities, on the Condensed Consolidated Balance Sheet.
The consumer, residential mortgage, and certain commercial mortgage loans that are the subject of the foregoing loan transactions are held in trusts, each of which the Company has determined to be a VIE. The Company has evaluated each of these VIEs and determined that the Company has the power to direct the activities of each VIE that most significantly impact such VIE's economic performance and the Company has the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. As a result the Company has determined it is the primary beneficiary of each of these VIEs and has consolidated each VIE.
Equity Investment in Unconsolidated Entity
The Company was a co-investor, together with other affiliates of Ellington, in Jepson Holdings Limited, the parent of an entity (the "Right Holder Entity") that held a call right (the "Call Right") to a European mortgage loan securitization (the "Initial

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Securitization"). The Right Holder Entity issued notes (the "Right Holder Notes") to the Company and its affiliates, and to an unrelated third party.
In March 2019, the Right Holder Entity assigned the Call Right to a newly formed entity, which exercised the Call Right and re-securitized the underlying European mortgage loan assets of the Initial Securitization through a new securitization trust (the "New Securitization"). In exchange for assigning the Call Right, the Right Holder Entity received a combination of (i) cash and (ii) certain notes issued by the New Securitization (the "New Securitization Notes"). The Right Holder Entity fully repaid the unrelated third party's Right Holder Note with a combination of cash and New Securitization Notes. The Right Holder Notes held by the Company and its affiliates were also fully repaid with cash and New Securitization Notes. Certain of the New Securitization Notes were distributed to the Company and its affiliates on a pro rata basis. The Right Holder Entity is expected to continue to hold certain of the New Securitization Notes in order to comply with European risk retention rules. As of March 31, 2021 and December 31, 2020, the Company's equity investment in Jepson Holdings Limited had a fair value of $1.9 million and $1.8 million, respectively. See Note 6 for additional details on this equity investment.
Participation in Multi-Borrower Financing Facilities
The Company is a co-participant with certain other entities managed by Ellington or its affiliates (the "Affiliated Entities") in various entities (each, a "Joint Entity"), which were formed in order to facilitate the financing of small balance commercial mortgage loans, residential mortgage loans, and REO (collectively, the "Mortgage Loan and REO Assets"), through repurchase agreements. Each Joint Entity has a master repurchase agreement with a particular financing counterparty.
In connection with the financing of the Mortgage Loan and REO Assets under repurchase agreements, each of the Company and the Affiliated Entities transferred certain of their respective Mortgage Loan and REO Assets to one of the Joint Entities in exchange for its pro rata share of the financing proceeds that the respective Joint Entity received from the financing counterparty. While the Company's Mortgage Loan and REO Assets were transferred to the Joint Entity, the Company's Mortgage Loan and REO Assets and the related debt were not derecognized for financial reporting purposes, in accordance with ASC 860-10, because the Company continued to retain the risks and rewards of ownership of its Mortgage Loan and REO Assets. As of March 31, 2021 and December 31, 2020, the Joint Entities had aggregate outstanding issued debt under the repurchase agreements in the amount of $296.0 million and $192.3 million, respectively. The Company's segregated silo of this debt as of March 31, 2021 and December 31, 2020 was $147.8 million and $116.1 million, respectively, and is included under the caption Repurchase agreements on the Company's Condensed Consolidated Balance Sheet. To the extent that there is a default under the repurchase agreements, all of the assets of each respective Joint Entity, including those beneficially owned by any non-defaulting owners of such Joint Entity, could be used to satisfy the outstanding obligations under such repurchase agreement. As of both March 31, 2021 and December 31, 2020, no party to any of the repurchase agreements was in default.
Each of the Joint Entities has been determined to be a VIE. The Company has evaluated each of these VIEs and determined that it continued to retain the risks and rewards of ownership of certain of the Mortgage Loan and REO Assets, where such Mortgage Loan and REO Assets and the related debt are segregated for the Company and each of the Affiliated Entities. On account of the segregation of certain of each co-participant's assets and liabilities within each of the Joint Entities, as well as the retention by each co-participant of control over its segregated Mortgage Loan and REO Assets within the Joint Entities, the Company has determined that it is the primary beneficiary of, and has consolidated its segregated silo of assets and liabilities within, each of the Joint Entities. See Note 9 and Note 11 for additional information.
Participation in CLO Transactions
As discussed in Note 10, the Company participated in a number of CLO securitization transactions, all managed by the CLO Manager.
The CLO Manager is entitled to receive management and incentive fees in accordance with the respective management agreements between the CLO Manager and the respective CLO Issuers. In accordance with the Management Agreement, the Manager rebates to the Company the portion of the management fees payable by each CLO Issuer to the CLO Manager that are allocable to the Company's participating interest in the unsecured subordinated notes issued by such CLO Issuer. For the three-month periods ended March 31, 2021 and 2020, the amount of such management fee rebates was $0.2 million and $0.5 million, respectively.
In addition, from time to time, the Company along with various other affiliates of Ellington, and in certain cases various third parties, advance funds in the form of loans ("Initial Funding Loans") to securitization vehicles to enable them to establish warehouse facilities for the purpose of acquiring the assets to be securitized. Pursuant to the terms of the warehouse facilities and the Initial Funding Loans, the applicable securitization trust is required, at the closing of each respective CLO securitization, first to repay the warehouse facility, then to repay the Initial Funding Loans, and then to distribute interest earned, net of any necessary reserves and/or interest expense, and the aggregate realized or unrealized gains, if any, on assets

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purchased into the warehouse facility. In the event that such CLO securitization fails to close, the assets held by the respective securitization vehicle would, subject to a cure period, be liquidated. As of March 31, 2021 and December 31, 2020, the Company's investment in such warehouse facilities was $2.1 million and $6.1 million, respectively, which are included on the Condensed Consolidated Balance Sheet in Investments in unconsolidated entities.
During the three-month periods ended March 31, 2021 and 2020, the Company purchased various underperforming corporate debt and equity securities from certain of the Ellington-sponsored CLO Securitizations at market prices determined through the procedures set forth in the indentures of the respective Ellington-sponsored CLO Securitization. The total amount of such debt and equity securities purchased during the three month periods ended March 31, 2021 and 2020 was $2.3 million and $0.3 million, respectively.
14. Long-Term Incentive Plan Units
OP LTIP Units subject to the Company's incentive plans are generally exercisable by the holder at any time after vesting. Each OP LTIP Unit is convertible into an OP Unit on a one-for-one basis. Subject to certain conditions, the OP Units are redeemable by the holder for an equivalent number of shares of common stock of the Company or for the cash value of such shares of common stock, at the Company's election. Costs associated with the OP LTIP Units issued under the Company's incentive plans are measured as of the grant date and expensed ratably over the vesting period. Total expense associated with OP LTIP Units issued under the Company's incentive plans for each of the three-month periods ended March 31, 2021 and 2020 was $0.2 million.
On March 3, 2021, the Company's Board of Directors authorized the issuance of 17,231 OP LTIP Units to certain of Ellington's personnel dedicated to the Company pursuant to the Company's 2017 Equity Incentive Plan.
The below table details unvested OP LTIP Units as of March 31, 2021:
Grant RecipientNumber of OP LTIP Units GrantedGrant Date
Vesting Date(1)
Directors:
22,840 September 10, 2020September 9, 2021
Dedicated or partially dedicated personnel:
10,067 December 13, 2019December 13, 2021
18,211 December 17, 2020December 17, 2021
9,834 March 4, 2020December 31, 2021
3,697 March 3, 2021December 31, 2021
14,598 December 17, 2020December 17, 2022
13,534 March 3, 2021December 31, 2022
Total unvested OP LTIP Units at March 31, 202192,781 
(1)Date at which such OP LTIP Units will vest and become non-forfeitable.
The following tables summarize issuance and exercise activity of OP LTIP Units for the three-month periods ended March 31, 2021 and 2020:
Three-Month Period Ended
March 31, 2021March 31, 2020
ManagerDirector/
Employee
TotalManagerDirector/
Employee
Total
OP LTIP Units Outstanding (December 31, 2020 and 2019, respectively)365,518 247,020 612,538 365,518 180,198 545,716 
Granted17,231 17,231 14,811 14,811 
Exercised
OP LTIP Units Outstanding (March 31, 2021 and 2020, respectively)365,518 264,251 629,769 365,518 195,009 560,527 
OP LTIP Units Unvested and Outstanding (March 31, 2021 and 2020, respectively)92,781 92,781 60,939 60,939 
OP LTIP Units Vested and Outstanding (March 31, 2021 and 2020, respectively)365,518 171,470 536,988 365,518 134,070 499,588 

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There were an aggregate of 1,743,981 and 1,761,212 shares of common stock of the Company underlying awards, including OP LTIP Units, available for future issuance under the Company's 2017 Equity Incentive Plan as of March 31, 2021 and December 31, 2020, respectively.
15. Non-controlling Interests
Operating Partnership
Non-controlling interests include the Convertible Non-controlling Interests in the Operating Partnership owned by an affiliate of our Manager, our directors, and certain current and former Ellington employees and their related parties in the form of OP LTIP Units. Income allocated to Convertible Non-controlling Interests is based on the non-controlling interest owners' ownership percentage of the Operating Partnership during the period, calculated using a daily weighted average of all shares of common stock of the Company and Convertible Non-controlling Interests outstanding during the period. Holders of Convertible Non-controlling Interests are entitled to receive the same distributions that holders of shares of common stock of the Company receive. Convertible Non-controlling Interests are non-voting with respect to matters as to which holders of common stock of the Company are entitled to vote.
On March 2, 2020, certain related parties of current Ellington employees converted 129,516 OP Units into shares of common stock.
As of March 31, 2021, the Convertible Non-controlling Interests consisted of the outstanding 629,769 OP LTIP Units and 48,409 OP Units, and represented an interest of approximately 1.3% in the Operating Partnership. As of December 31, 2020, the Convertible Non-controlling Interests consisted of the outstanding 612,538 OP LTIP Units and 48,409 OP Units, and represented an interest of approximately 1.3% in the Operating Partnership. As of March 31, 2021 and December 31, 2020, non-controlling interests related to all outstanding Convertible Non-controlling Interests was $12.4 million and $11.7 million, respectively.
Joint Venture Interests
Non-controlling interests also include the interests of joint venture partners in various consolidated subsidiaries of the Company. These subsidiaries hold the Company's investments in certain commercial mortgage loans and REO. The joint venture partners participate in the income, expense, gains and losses of such subsidiaries as set forth in the related operating agreements of the subsidiaries. The joint venture partners make capital contributions to the subsidiaries as new approved investments are purchased by the subsidiaries, and are generally entitled to distributions when investments are sold or otherwise disposed of. As of March 31, 2021 and December 31, 2020, the joint venture partners' interests in subsidiaries of the Company were $21.0 million and $24.5 million, respectively.
The joint venture partners' interests are not convertible into shares of common stock of the Company or OP Units, nor are the joint venture partners entitled to receive distributions that holders of shares of common stock of the Company receive.
16. Equity
Preferred Stock
The Company has authorized 100,000,000 shares of preferred stock, $0.001 par value per share. As of both March 31, 2021 and December 31, 2020, there were 4,600,000 shares of 6.750% Series A Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, $0.001 par value per share ("Series A Preferred Stock") outstanding.
The Company's Series A Preferred Stock ranks senior to its common stock and Convertible Non-controlling Interests with respect to the payment of dividends and the distribution of assets upon a voluntary or involuntary liquidation, dissolution or winding up of the Company. Additionally, the Company's Series A Preferred Stock has no stated maturity and is not subject to any sinking fund or mandatory redemption. The Series A Preferred Stock is not redeemable by the Company prior to October 30, 2024, except under circumstances where it is necessary to allow the Company to maintain its qualification as a REIT for U.S. federal income tax purposes and except in certain instances upon the occurrence of a change of control. Holders of the Company's Series A Preferred Stock generally do not have any voting rights.
Holders of the Series A Preferred Stock are entitled to receive cumulative cash dividends (i) from and including the original issue date to, but excluding, October 30, 2024, at a fixed rate equal to 6.750% per annum of the $25.00 per share liquidation preference and (ii) from and including October 30, 2024, at a floating rate equal to three-month LIBOR plus a spread of 5.196% per annum of the $25.00 per share liquidation preference. Dividends are payable quarterly in arrears on or about the 30th day of each January, April, July, and October. As of both March 31, 2021 and December 31, 2020, the total amount of cumulative preferred dividends in arrears was $1.3 million.

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Common Stock
The Company has authorized 100,000,000 shares of common stock, $0.001 par value per share. The Board of Directors may authorize the issuance of additional shares, subject to the approval of the holders of at least a majority of the shares of common stock then outstanding present in person or represented by proxy at a meeting of the stockholders. As of both March 31, 2021 and December 31, 2020, there were 43,781,684 shares of common stock outstanding.
On January 24, 2020, the Company completed a follow-on offering of 5,290,000 shares of its common stock, of which 690,000 shares were issued pursuant to the exercise of the underwriters' option. The issuance and sale of the 5,290,000 shares of common stock generated net proceeds, after underwriters' discount and offering costs, of $95.3 million.
The following table summarizes issuance, repurchase, and other activity with respect to the Company's common stock for the three-month periods ended March 31, 2021 and 2020:
Three-Month Period Ended
March 31, 2021March 31, 2020
Shares of Common Stock Outstanding
(December 31, 2020 and 2019, respectively)
43,781,684 38,647,943 
Share Activity:
Shares of common stock issued5,290,000 
Shares of common stock issued in connection with incentive fee payment637 
Shares of common stock repurchased(288,172)
OP Units exercised129,516 
Shares of Common Stock Outstanding
(March 31, 2021 and 2020, respectively)
43,781,684 43,779,924 
If all Convertible Non-controlling Interests that have been previously issued were to become fully vested and exchanged for shares of common stock as of March 31, 2021 and December 31, 2020, the Company's issued and outstanding shares of common stock would increase to 44,459,862 and 44,442,631 shares, respectively.
On June 13, 2018, the Board of Directors approved the adoption of a share repurchase program under which the Company is authorized to repurchase up to 1.55 million shares of common stock. The program, which is open-ended in duration, allows the Company to make repurchases from time to time on the open market or in negotiated transactions, including under Rule 10b5-1 plans. Repurchases are at the Company's discretion, subject to applicable law, share availability, price and financial performance, among other considerations. During the three-month period ended March 31, 2020, the Company repurchased 288,172 shares at an average price per share of $10.53 and a total cost of $3.0 million; no repurchases of common shares were made during the three-month period ended March 31, 2021. From inception of the current repurchase plan through March 31, 2021, the Company repurchased 701,965 shares at an average price per share of $13.36 and a total cost of $9.4 million.

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17. Earnings Per Share
The components of the computation of basic and diluted EPS are as follows:
Three-Month Period Ended
(In thousands except share amounts)March 31, 2021March 31, 2020
Net income (loss) attributable to common stockholders$37,856 $(129,398)
Add: Net income (loss) attributable to Convertible Non-controlling Interests(1)
577 (2,055)
Net income (loss) attributable to common stockholders and Convertible Non-controlling Interests38,433 (131,453)
Dividends Paid:
Common stockholders(13,134)(19,748)
Convertible Non-controlling Interests(200)(309)
Total dividends paid to common stockholders and Convertible Non-controlling Interests(13,334)(20,057)
Undistributed (Distributed in excess of) earnings:
Common stockholders24,722 (149,146)
Convertible Non-controlling Interests377 (2,364)
Total undistributed (distributed in excess of) earnings attributable to common stockholders and Convertible Non-controlling Interests$25,099 $(151,510)
Weighted average shares outstanding (basic and diluted):
Weighted average shares of common stock outstanding43,781,684 42,598,138 
Weighted average Convertible Non-controlling Interest Units outstanding666,499 685,500 
Weighted average shares of common stock and Convertible Non-controlling Interest Units outstanding44,448,183 43,283,638 
Basic earnings per share of common stock and Convertible Non-controlling Interest Unit:
Distributed$0.30 $0.45 
Undistributed (Distributed in excess of)0.56 (3.49)
$0.86 $(3.04)
Diluted earnings per share of common stock and Convertible Non-controlling Interest Unit:
Distributed$0.30 $0.45 
Undistributed (Distributed in excess of)0.56 (3.49)
$0.86 $(3.04)
(1)For the three-month periods ended March 31, 2021 and 2020, excludes net income (loss) of $0.9 million and $1.2 million, respectively, attributable to joint venture partners, which have non-participating interests as described in Note 15.
18. Restricted Cash
The Company is required to maintain a specific cash balance in a segregated account pursuant to a flow consumer loan purchase and sale agreement. As of both March 31, 2021 and December 31, 2020, the Company's restricted cash balance related to the flow consumer loan purchase and sale agreement was $0.2 million.
19. Offsetting of Assets and Liabilities
The Company generally records financial instruments at fair value as described in Note 2. Financial instruments are generally recorded on a gross basis on the Condensed Consolidated Balance Sheet. In connection with the vast majority of its derivative, reverse repurchase and repurchase agreements, and the related trading agreements, the Company and its counterparties are required to pledge collateral. Cash or other collateral is exchanged as required with each of the Company's counterparties in connection with open derivative positions, and reverse repurchase and repurchase agreements.

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The following tables present information about certain assets and liabilities representing financial instruments as of March 31, 2021 and December 31, 2020. The Company has not entered into master netting agreements with any of its counterparties. Certain of the Company's reverse repurchase and repurchase agreements and financial derivative transactions are governed by underlying agreements that generally provide a right of net settlement, as well as a right of offset in the event of default or in the event of a bankruptcy of either party to the transaction.
March 31, 2021:
Description
Amount of Assets (Liabilities) Presented in the Condensed Consolidated Balance Sheet(1)
Financial Instruments Available for Offset
Financial Instruments Transferred or Pledged as Collateral(2)(3)
Cash Collateral (Received) Pledged(2)(3)
Net Amount
(In thousands)
Assets
Financial derivatives–assets$23,082 $(14,703)$$(2,919)$5,460 
Reverse repurchase agreements96,783 (96,783)
Liabilities
Financial derivatives–liabilities(19,438)14,703 969 (3,766)
Repurchase agreements(1,909,511)1,909,511 (28,884)28,884 
(1)In the Company's Condensed Consolidated Balance Sheet, all balances associated with repurchase agreements, reverse repurchase agreements, and financial derivatives are presented on a gross basis.
(2)For the purpose of this presentation, for each row the total amount of financial instruments transferred or pledged and cash collateral (received) or pledged may not exceed the applicable gross amount of assets or (liabilities) as presented here. Therefore, the Company has reduced the amount of financial instruments transferred or pledged as collateral related to the Company's repurchase agreements and cash collateral pledged on the Company's financial derivative liabilities. Total financial instruments transferred or pledged as collateral on the Company's repurchase agreements as of March 31, 2021 was $2.2 billion. As of March 31, 2021, total cash collateral on financial derivative assets and liabilities excludes excess net cash collateral pledged (received) of $17.7 million and $1.8 million, respectively.
(3)When collateral is pledged to or pledged by a counterparty, it is often pledged or posted with respect to all positions with such counterparty, and in such cases such collateral cannot be specifically identified as relating to a particular asset or liability. As a result, in preparing the above tables, the Company has made assumptions in allocating pledged or posted collateral among the various rows.
December 31, 2020:
Description
Amount of Assets (Liabilities) Presented in the Condensed Consolidated Balance Sheet(1)
Financial Instruments Available for Offset
Financial Instruments Transferred or Pledged as Collateral(2)(3)
Cash Collateral (Received) Pledged(2)(3)
Net Amount
(In thousands)
Assets
Financial derivatives–assets$15,479 $(12,579)$$(1,404)$1,496 
Reverse repurchase agreements38,640 (38,640)
Liabilities
Financial derivatives–liabilities(24,553)12,579 10,694 (1,280)
Repurchase agreements(1,496,931)1,496,931 (28,884)28,884 
(1)In the Company's Condensed Consolidated Balance Sheet, all balances associated with repurchase agreements, reverse repurchase agreements, and financial derivatives are presented on a gross basis.
(2)For the purpose of this presentation, for each row the total amount of financial instruments transferred or pledged and cash collateral (received) or pledged may not exceed the applicable gross amount of assets or (liabilities) as presented here. Therefore, the Company has reduced the amount of financial instruments transferred or pledged as collateral related to the Company's repurchase agreements and cash collateral pledged on the Company's financial derivative liabilities. Total financial instruments transferred or pledged as collateral on the Company's repurchase agreements as of December 31, 2020 was $1.8 billion. As of December 31, 2020, total cash collateral on financial derivative assets and liabilities excludes excess net cash collateral pledged of $4.5 million and $10.3 million, respectively.
(3)When collateral is pledged to or pledged by a counterparty, it is often pledged or posted with respect to all positions with such counterparty, and in such cases such collateral cannot be specifically identified as relating to a particular asset or liability. As a result, in preparing the above tables, the Company has made assumptions in allocating pledged or posted collateral among the various rows.

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20. Counterparty Risk
The Company is exposed to concentrations of counterparty risk. It seeks to mitigate such risk by diversifying its exposure among various counterparties, when appropriate. The following table summarizes the Company's exposure to counterparty risk as of March 31, 2021 and December 31, 2020.
March 31, 2021:
Amount of ExposureNumber of Counterparties with Exposure
Maximum Percentage of Exposure to a Single Counterparty(1)
(In thousands)
Cash and cash equivalents$149,350 26.1 %
Collateral on repurchase agreements held by dealers(2)
2,226,054 24 16.6 %
Due from brokers91,814 23 25.4 %
Receivable for securities sold(3)
5,147 95.8 %
(1)Each counterparty is a large creditworthy financial institution.
(2)Includes securities, loans, and REO as well as cash posted as collateral for repurchase agreements.
(3)Included in Investment related receivables on the Condensed Consolidated Balance Sheet.
December 31, 2020:
Amount of ExposureNumber of Counterparties with Exposure
Maximum Percentage of Exposure to a Single Counterparty(1)
(In thousands)
Cash and cash equivalents$111,647 40.1 %
Collateral on repurchase agreements held by dealers(2)
1,860,059 24 15.3 %
Due from brokers63,147 22 28.9 %
Receivable for securities sold(3)
1,416 94.5 %
(1)Each counterparty is a large creditworthy financial institution.
(2)Includes securities, loans, and REO as well as cash posted as collateral for repurchase agreements.
(3)Included in Investment related receivables on the Condensed Consolidated Balance Sheet.
21. Commitments and Contingencies
The Company provides current directors and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Company.
In the normal course of business the Company may also enter into contracts that contain a variety of representations, warranties, and general indemnifications. The Company's maximum exposure under these arrangements, including future claims that may be made against the Company that have not yet occurred, is unknown. The Company has not incurred any costs to defend lawsuits or settle claims related to these indemnification agreements. As of both March 31, 2021 and December 31, 2020, the Company has no liabilities recorded for these agreements.
The Company's maximum risk of loss from credit events on its securities (excluding Agency securities, which are guaranteed by the issuing government agency or government-sponsored enterprise), loans, and investments in unconsolidated entities is limited to the amount paid for such investment.
Commitments and Contingencies Related to Investments in Residential Mortgage Loans
In connection with certain of the Company's investments in residential mortgage loans, the Company has unfunded commitments in the amount of $8.4 million and $4.7 million as of March 31, 2021 and December 31, 2020, respectively.
Commitments and Contingencies Related to Investments in Mortgage Loan Originators
In connection with certain of its investments in mortgage loan originators, the Company has outstanding commitments and contingencies as described below.
As described in Note 13, the Company is party to a flow mortgage loan purchase and sale agreement with a mortgage loan originator. The Company has entered into two agreements whereby it guarantees the performance of this mortgage loan

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originator under master repurchase agreements. The Company's maximum guarantees are capped at $25.0 million. As of March 31, 2021 and December 31, 2020, the mortgage loan originator had $6.3 million and $5.3 million, respectively, of outstanding borrowings under the agreements guaranteed by the Company. The Company's obligations under these arrangements are deemed to be guarantees under ASC 460-10. The Company has elected the FVO for its guarantees, which are included in Accrued expenses and other liabilities on the Condensed Consolidated Balance Sheet. As of both March 31, 2021 and December 31, 2020, the estimated fair value of such guarantees was insignificant.
Commitments and Contingencies Related to Corporate Loans
The Company has investments in certain corporate loans whereby the borrowers can request additional funds under the respective agreements. As of March 31, 2021 and December 31, 2020, the Company had unfunded commitments related to such investments in the amount of $4.3 million and $0.1 million, respectively.
The Company has extended a line of credit whereby the borrower can draw funds up to $1.0 million. As of March 31, 2021, the Company had unfunded commitments related to such line of credit in the amount of $0.9 million.
22. Subsequent Events
On April 4, 2021, the Board of Directors approved a dividend in the amount of $0.14 per share of common stock payable on May 25, 2021 to stockholders of record as of April 30, 2021 and a dividend in the amount of $0.421875 per share of Series A Preferred Stock payable on April 30, 2021 to stockholders of record as of April 19, 2021.
On May 6, 2021, the Board of Directors approved a dividend in the amount of $0.15 per share of common stock payable on June 25, 2021 to stockholders of record as of May 28, 2021.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Except where the context suggests otherwise, references in this Quarterly Report on Form 10-Q to "EFC," "we," "us," and "our" refer to Ellington Financial Inc. and its consolidated subsidiaries, including Ellington Financial Operating Partnership LLC, our operating partnership subsidiary, which we refer to as our "Operating Partnership." We conduct all of our operations and business activities through our Operating Partnership. Our "Manager" refers to Ellington Financial Management LLC, our external manager, "Ellington" refers to Ellington Management Group, L.L.C. and its affiliated investment advisory firms, including our Manager, and "Manager Group" refers collectively to officers and directors of EFC, and partners and affiliates of Ellington (including families and family trusts of the foregoing). In certain instances, references to our Manager and services to be provided to us by our Manager may also include services provided by Ellington and its other affiliates from time to time.
Special Note Regarding Forward-Looking Statements
When used in this Quarterly Report on Form 10-Q, in future filings with the Securities and Exchange Commission, or the "SEC," or in press releases or other written or oral communications, statements which are not historical in nature, including those containing words such as "believe," "expect," "anticipate," "estimate," "project," "plan," "continue," "intend," "should," "would," "could," "goal," "objective," "will," "may," "seek," 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 the "Exchange Act," and, as such, may involve known and unknown risks, uncertainties, and assumptions.
Forward-looking statements are based on our beliefs, assumptions, and expectations of our future operations, business strategies, performance, financial condition, liquidity and prospects, taking into account information currently available to us. These beliefs, assumptions, and expectations are subject to risks and uncertainties 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, results of operations and strategies may vary materially from those expressed or implied in our forward-looking statements. The following factors are examples of those that could cause actual results to vary from our forward-looking statements: changes in interest rates and the market value of our investments; market volatility; changes in the prepayment rates on the mortgage loans underlying the securities owned by us for which the principal and interest payments are guaranteed by a U.S. government agency or a U.S. government-sponsored entity; increased rates of default and/or decreased recovery rates on our assets; our ability to borrow to finance our assets; changes in government regulations affecting our business; our ability to maintain our exclusion from registration under the Investment Company Act of 1940, as amended, or the "Investment Company Act"; our ability to maintain our qualification as a real estate investment trust, or "REIT"; and risks associated with investing in real estate assets, including changes in business conditions and the general economy, such as those resulting from the economic effects related to the COVID-19 pandemic, and associated responses to the pandemic. These and other risks, uncertainties and factors, including the risk factors described under Item 1A of our Annual Report on Form 10-K, could cause our actual results to differ materially from those projected or implied 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.
Executive Summary
We invest in a diverse array of real-estate-related and other financial assets, including residential and commercial mortgage loans, residential mortgage-backed securities, or "RMBS," commercial mortgage-backed securities, or "CMBS," consumer loans and asset-backed securities, or "ABS," including ABS backed by consumer loans, collateralized loan obligations, or "CLOs," non-mortgage- and mortgage-related derivatives, equity investments in loan origination companies, and other strategic investments. We are externally managed and advised by our Manager, an affiliate of Ellington. Ellington is a registered investment adviser with a 26-year history of investing in the Agency and credit markets.
We conduct all of our operations and business activities through the Operating Partnership. As of March 31, 2021, we have an ownership interest of approximately 98.7% in the Operating Partnership. The remaining ownership interest of approximately 1.3% in the Operating Partnership represents the interests in the Operating Partnership that are owned by an affiliate of our Manager, our directors, and certain current and former Ellington employees and their related parties, and is reflected in our financial statements as a non-controlling interest.
Our primary objective is to generate attractive, risk-adjusted total returns for our stockholders. We seek to attain this objective by utilizing an opportunistic strategy to make investments, without restriction as to ratings, structure, or position in the capital structure, that we believe compensate us appropriately for the risks associated with them rather than targeting a specific yield. Our evaluation of the potential risk-adjusted return of any potential investment typically involves weighing the potential returns of such investment under a variety of economic scenarios against the perceived likelihood of the various

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scenarios. Potential investments subject to greater risk (such as those with lower credit ratings and/or those with a lower position in the capital structure) will generally require a higher potential return to be attractive in comparison to investment alternatives with lower potential return and a lower degree of risk. However, at any particular point in time, depending on how we perceive the market's pricing of risk both generally and across sectors, we may favor higher-risk assets or we may favor lower-risk assets, or a combination of the two, in the interests of portfolio diversification or other considerations.
Through March 31, 2021, our credit portfolio, which includes all of our investments other than RMBS for which the principal and interest payments are guaranteed by a U.S. government agency or a U.S. government-sponsored entity, or "Agency RMBS," has been the primary driver of our risk and return, and we expect that this will continue in the near- to medium-term. For more information on our targeted assets, see "—Our Targeted Asset Classes" below. We believe that Ellington's capabilities allow our Manager to identify attractive assets in these classes, value these assets, monitor and forecast the performance of these assets, and opportunistically hedge our risk with respect to these assets.
We continue to maintain a highly leveraged portfolio of Agency RMBS to take advantage of opportunities in that market sector, to help maintain our exclusion from registration as an investment company under the Investment Company Act, and to help maintain our qualification as a REIT. Unless we acquire very substantial amounts of whole mortgage loans or there are changes to the rules and regulations applicable to us under the Investment Company Act and/or to our qualification as a REIT, we expect that we will continue to maintain some amount of Agency RMBS.
The strategies that we employ are intended to capitalize on opportunities in the current market environment. Subject to maintaining our qualification as a REIT, we intend to adjust our strategies to changing market conditions by shifting our asset allocations across various asset classes as credit and liquidity trends evolve over time. We believe that this flexibility, combined with Ellington's experience, will help us generate more consistent returns on our capital throughout changing market cycles.
Subject to maintaining our qualification as a REIT, we opportunistically hedge our credit risk, interest rate risk, and foreign currency risk; however, at any point in time we may choose not to hedge all or a portion of these risks, and we will generally not hedge those risks that we believe are appropriate for us to take at such time, or that we believe would be impractical or prohibitively expensive to hedge.
We also use leverage in our credit strategy, albeit significantly less leverage than that used in our Agency RMBS strategy. Through March 31, 2021, we financed the vast majority of our Agency RMBS assets, and a portion of our credit assets, through repurchase agreements, which we sometimes refer to as "repos," which we account for as collateralized borrowings. We expect to continue to finance the vast majority of our Agency RMBS through the use of repos. In addition to financing assets through repos, we also enter into other secured borrowing transactions, which are accounted for as collateralized borrowings, to finance certain of our loan assets. We have also obtained, through the securitization markets, term financing for certain of our non-qualified mortgage, or "non-QM," loans, certain of our consumer loans, and certain of our leveraged corporate loans. Additionally, we have issued unsecured long-term debt.
As of March 31, 2021, outstanding borrowings under repos and Total other secured borrowings (which include Other secured borrowings and Other secured borrowings, at fair value, as presented on our Condensed Consolidated Balance Sheet) were $2.9 billion, of which approximately 50%, or $1.4 billion, relates to our Agency RMBS holdings. The remaining outstanding borrowings relate to our credit portfolio.
As of March 31, 2021, we also had $86.0 million outstanding of unsecured long-term debt, maturing in September of 2022, or the "Senior Notes." The Senior Notes bear interest at a rate of 5.50%, subject to adjustment based on changes, if any, in the ratings of the Senior Notes. The indenture governing the Senior Notes contains a number of covenants, including several financial covenants. The Senior Notes are rated A by Egan-Jones Rating Company1. See Note 11 of the notes to our condensed consolidated financial statements for further detail on the Senior Notes.
1A rating is not a recommendation to buy, sell or hold securities. Ratings may be subject to revision or withdrawal at any time by the assigning rating organization. Each rating should be evaluated independently of any other rating.


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As of March 31, 2021, our book value per share of common stock, calculated using Total Stockholders' Equity less the aggregate liquidation preference of outstanding preferred stock, was $18.16. Our debt-to-equity ratio was 3.1:1 as of March 31, 2021. Our debt-to-equity ratio does not account for liabilities other than debt financings and does not include debt associated with securitization transactions accounted for as sales. Our recourse debt-to-equity ratio was 2.0:1 as of March 31, 2021. Adjusted for unsettled purchases and sales, the debt-to-equity ratio and total recourse debt-to-equity ratio were 3.2:1 and 2.0:1, respectively as of March 31, 2021.
We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or "the Code," commencing with our taxable year ended December 31, 2019. Provided that we maintain our qualification as a REIT, we generally will not be subject to U.S. federal, state, and local income tax on our REIT taxable income that is currently distributed to our stockholders. Any taxes paid by a domestic taxable REIT subsidiary, or "TRS," will reduce the cash available for distribution to our stockholders. REITs are subject to a number of organizational and operational requirements, including a requirement that they currently distribute at least 90% of their annual REIT taxable income excluding net capital gains.
Our Targeted Asset Classes
Our targeted asset classes currently include investments in the U.S. and Europe (as applicable) in the categories listed below. Subject to maintaining our qualification as a REIT, we expect to continue to invest in these targeted asset classes. Also, we expect to continue to hold certain of our targeted assets through one or more TRSs. As a result, a portion of the income from such assets will be subject to U.S. federal and certain state corporate income taxes, as applicable.

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Asset ClassPrincipal Assets
Agency RMBS.Whole pool pass-through certificates;
.Partial pool pass-through certificates;
.Agency collateralized mortgage obligations, or "CMOs," including interest only securities, or "IOs," principal only securities, or "POs," inverse interest only securities, or "IIOs"; and
CLOs.Retained tranches from CLO securitizations, including participating in the accumulation of the underlying assets for such securitization by providing capital to the vehicle accumulating assets; and
.Other CLO debt and equity tranches.
CMBS and Commercial Mortgage Loans.CMBS; and
.Commercial mortgage loans and other commercial real estate debt.
Consumer Loans and ABS.Consumer loans;
.ABS, including ABS backed by consumer loans; and
.Retained tranches from securitizations to which we have contributed assets.
Mortgage-Related Derivatives.To-Be-Announced mortgage pass-through certificates, or "TBAs";
.Credit default swaps, or "CDS," on individual RMBS, on the ABX, CMBX and PrimeX indices and on other mortgage-related indices; and
.Other mortgage-related derivatives.
Non-Agency RMBS.RMBS backed by prime jumbo, Alt-A, non-QM, manufactured housing, and subprime mortgages;
.RMBS backed by fixed rate mortgages, Adjustable rate mortgages, or "ARMs," Option-ARMs, and Hybrid ARMs;
.RMBS backed by mortgages on single-family-rental properties;
.RMBS backed by first lien and second lien mortgages;
.Investment grade and non-investment grade securities;
.Senior and subordinated securities;
.IOs, POs, IIOs, and inverse floaters;
.Collateralized debt obligations, or "CDOs";
.RMBS backed by European residential mortgages, or "European RMBS"; and
.Retained tranches from securitizations in which we have participated.
Residential Mortgage Loans.Residential non-performing mortgage loans, or "NPLs";
.Re-performing loans, or "RPLs," which generally are loans that were modified and/or formerly NPLs where the borrower has resumed making payments in some form or amount;
.Residential "transition loans," such as residential bridge loans and residential "fix-and-flip" loans;
.Non-QM loans; and
.Retained tranches from securitizations to which we have contributed assets.
Other.Real estate, including commercial and residential real property;
.Strategic debt and/or equity investments in loan originators and mortgage-related entities;
.Corporate debt and equity securities and corporate loans;
.Mortgage servicing rights, or "MSRs";
.Credit risk transfer securities, or "CRTs"; and
.Other non-mortgage-related derivatives.

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Agency RMBS
Our Agency RMBS assets consist primarily of whole pool (and to a lesser extent, partial pool) pass-through certificates, the principal and interest of which are guaranteed by a federally chartered corporation, such as the Federal National Mortgage Association, or "Fannie Mae," the Federal Home Loan Mortgage Corporation, or "Freddie Mac," or the Government National Mortgage Association, within the U.S. Department of Housing and Urban Development, or "Ginnie Mae," and which are backed by ARMs, Hybrid ARMs, or fixed-rate mortgages. In addition to investing in pass-through certificates which are backed by traditional mortgages, we have also invested in Agency RMBS backed by reverse mortgages. Reverse mortgages are mortgage loans for which neither principal nor interest is due until the borrower dies, the home is sold, or other trigger events occur. Mortgage pass-through certificates are securities representing undivided interests in pools of mortgage loans secured by real property where payments of both interest and principal, plus prepaid principal, on the securities are made monthly to holders of the security, in effect "passing through" monthly payments made by the individual borrowers on the mortgage loans that underlie the securities, net of fees paid to the issuer/guarantor and servicers of the securities. Whole pool pass-through certificates are mortgage pass-through certificates that represent the entire ownership of (as opposed to merely a partial undivided interest in) a pool of mortgage loans.
Our Agency RMBS assets are typically concentrated in specified pools. Specified pools are fixed-rate Agency pools consisting of mortgages with special characteristics, such as mortgages with low loan balances, mortgages backed by investor properties, mortgages originated through the government-sponsored "Making Homes Affordable" refinancing programs, and mortgages with various other characteristics. Our Agency strategy also includes RMBS that are backed by ARMs or Hybrid ARMs and reverse mortgages, and CMOs, including IOs, POs, and IIOs.
CLOs
CLOs are a form of asset-backed security collateralized by syndicated corporate loans. We have retained, and may retain in the future, tranches from CLO securitizations for which we have participated in the accumulation of the underlying assets, typically by providing capital to a vehicle accumulating assets for such CLO securitization. Such vehicles may enter into warehouse financing facilities in order to facilitate such accumulation. Securitizations can effectively provide us with long-term, locked-in financing on the related collateral pool, with an effective cost of funds well below the expected yield on the collateral pool. Our CLO holdings may include both debt and equity interests.
CMBS
We acquire CMBS, which are securities collateralized by mortgage loans on commercial properties. The majority of CMBS issued are fixed rate securities backed by fixed rate loans made to multiple borrowers on a variety of property types, though single-borrower CMBS and floating rate CMBS have also been issued.
The majority of CMBS utilize senior/subordinate structures, similar to those found in non-Agency RMBS. Subordination levels vary so as to provide for one or more AAA credit ratings on the most senior classes, with less senior securities rated investment grade and non-investment grade, including a first loss component which is typically unrated. This first loss component is commonly referred to as the "B-piece," which is the most subordinated (and therefore highest yielding and riskiest) tranche of a CMBS securitization. Much of our focus within the CMBS sector has been on B-pieces, but we also acquire other CMBS with more senior credit priority.
Commercial Mortgage Loans and Other Commercial Real Estate Debt
We acquire commercial mortgage loans, which are loans secured by liens on commercial properties, including hotel, industrial, multi-family, office and retail properties. Loans may be fixed or floating rate and will generally have maturities ranging from one to ten years. We typically acquire first lien loans but may also acquire subordinated loans. As of March 31, 2021, all of our commercial mortgage loans were first lien loans. Commercial real estate debt typically limits the borrower's right to freely prepay for a period of time through provisions such as prepayment fees, lockout, yield maintenance, or defeasance provisions. Some of the commercial mortgage loans that we acquire may be non-performing, underperforming, or otherwise distressed; these loans are typically acquired at a discount both to their unpaid principal balances and to the value of the underlying real estate.
We also participate in the origination of "bridge" loans, which have shorter terms and higher interest rates than more traditional commercial mortgage loans. Bridge loans are typically secured by properties in transition, where the borrower is in the process of either re-developing or stabilizing operations at the property. Properties securing these loans may include multi-family, retail, office, industrial, and other commercial property types.
Within both our loan acquisition and loan origination strategies, we generally focus on smaller balance loans and/or loan packages that are less-competitively-bid. These loans typically have balances that are less than $20 million, and are secured by

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real estate and, in some cases, a personal guarantee from the borrower.
Consumer Loans and ABS
We acquire U.S. consumer whole loans and ABS, including ABS backed by U.S. consumer loans. Our U.S. consumer loan portfolio primarily consists of unsecured loans, but also includes secured auto loans. We are currently purchasing newly originated consumer loans under flow agreements with originators, as well as seasoned consumer loans in the secondary market, and we continue to evaluate new opportunities.
TBAs and Other Mortgage-Related Derivatives
In addition to investing in specified pools of Agency RMBS, we utilize TBA transactions, whereby we agree to purchase or sell, for future delivery, Agency RMBS with certain principal and interest terms and certain types of underlying collateral, but the particular Agency RMBS to be delivered is not identified until shortly before the TBA settlement date. TBAs are liquid and have quoted market prices and represent the most actively traded class of mortgage-backed securities, or "MBS." TBA trading is based on the assumption that mortgage pools that are eligible to be delivered at TBA settlement are fungible and thus the specific mortgage pools to be delivered do not need to be explicitly identified at the time a trade is initiated.
We generally engage in TBA transactions for purposes of managing certain risks associated with our investment strategies. Other than with respect to TBA transactions entered into by our TRSs, most of our TBA transactions are treated for tax purposes as hedging transactions used to hedge indebtedness incurred to acquire or carry real estate assets, or "qualifying liability hedges." The principal risks that we use TBAs to mitigate are interest rate and yield spread risks. For example, we may hedge the interest rate and/or yield spread risk inherent in our long Agency RMBS by taking short positions in TBAs that are similar in character. Alternatively, we may opportunistically engage in TBA transactions because we find them attractive in their own right, from a relative value perspective or otherwise. For accounting purposes, in accordance with generally accepted accounting principles in the United States of America, or "U.S. GAAP," we classify TBA transactions as derivatives.
We also take long and short positions in various other mortgage-related derivative instruments, including mortgage-related credit default swaps. A credit default swap is a credit derivative contract in which one party (the protection buyer) pays an ongoing periodic premium (and often an upfront payment as well) to another party (the protection seller) in return for compensation for default (or similar credit event) by a reference entity. In this case, the reference entity can be an individual MBS or an index of several MBS, such as an ABX, PrimeX, or CMBX index. Payments from the protection seller to the protection buyer typically occur if a credit event takes place. A credit event can be triggered by, among other things, the reference entity's failure to pay its principal obligations or a severe ratings downgrade of the reference entity.
Non-Agency RMBS
We acquire non-Agency RMBS backed by prime jumbo, Alt-A, non-QM, manufactured housing, subprime residential, and single-family-rental mortgage loans. Our non-Agency RMBS holdings can include investment-grade and non-investment grade classes, including non-rated classes.
Non-Agency RMBS are generally debt obligations issued by private originators of, or investors in, residential mortgage loans. Non-Agency RMBS generally are issued as CMOs and are backed by pools of whole mortgage loans or by mortgage pass-through certificates. Non-Agency RMBS generally are securitized in senior/subordinated structures, or in excess spread/over-collateralization structures. In senior/subordinated structures, the subordinated tranches generally absorb all losses on the underlying mortgage loans before any losses are borne by the senior tranches. In excess spread/over-collateralization structures, losses are first absorbed by any existing over-collateralization, then borne by subordinated tranches and excess spread, which represents the difference between the interest payments received on the mortgage loans backing the RMBS and the interest due on the RMBS debt tranches, and finally by senior tranches and any remaining excess spread.
We also have acquired, and may acquire in the future, European RMBS, including retained tranches from European RMBS securitizations in which we have participated.
Residential Mortgage Loans
Our residential mortgage loans include newly originated non-QM loans, residential transition loans, as well as legacy residential NPLs and RPLs. A non-QM loan is not necessarily high-risk, or subprime, but is instead a loan that does not conform to the complex Qualified Mortgage, or "QM," rules of the Consumer Financial Protection Bureau. For example, many non-QM loans are made to creditworthy borrowers who cannot provide traditional documentation for income, such as borrowers who are self-employed. There is also demand from certain creditworthy borrowers for loans above the QM 43% debt-to-income ratio limit that still meet all ability-to-repay standards. We hold an equity investment in a non-QM originator,

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and to date we have purchased the vast majority of our non-QM loans from this originator, although we could potentially purchase a greater share of non-QM loans from other sources in the future.
The residential transition loans that we originate or purchase include: (i) "fix and flip" loans, which are made to real estate investors for the purpose of acquiring residential homes, making value-add improvements to such homes, and reselling the newly rehabilitated homes for a potential profit, and (ii) loans made to real estate investors for a "business purpose," such as purchasing a rental investment property, financing or refinancing a fully rehabilitated home awaiting sale, or securing short-term financing pending qualification for longer-term lower-rate financing. Our residential transition loans are secured by non-owner occupied properties, and are typically structured as fixed-rate, interest-only loans with terms to maturity between 6 and 24 months. Our underwriting guidelines focus on both the "as is" and "as repaired" property values, borrower experience as a real estate investor, and asset verification.
We remain active in the market for residential NPLs and RPLs. The market for large residential NPL and RPL pools has remained highly concentrated, with the great majority having traded to only a handful of large players who typically securitize the residential NPLs and RPLs that they purchase. As a result, we have continued to focus our acquisitions on less-competitively-bid, and more attractively-priced mixed legacy pools sourced from motivated sellers.
Other Investment Assets
Our other investment assets include real estate, including residential and commercial real property, strategic debt and/or equity investments in loan originators, corporate debt and equity securities, corporate loans, which can include litigation finance loans, CRTs, and other non-mortgage-related derivatives. We do not typically purchase real property directly; rather, our real estate ownership usually results from foreclosure activity with respect to our acquired residential and commercial loans. We have made, and in the future may make additional, investments in loan originators and other related entities in the form of debt and/or equity and, to date, our investments have represented non-controlling interests. We have also entered into flow agreements with certain of the loan originators in which we have invested. We have not yet acquired mortgage servicing rights directly, but we may do so in the future.
Hedging Instruments
Interest Rate Hedging
We opportunistically hedge our interest rate risk by using various hedging strategies, subject to maintaining our qualification as a REIT. The interest rate hedging instruments that we use and may use in the future include, without limitation:
TBAs;
interest rate swaps (including floating-to-fixed, fixed-to-floating, floating-to-floating, or more complex swaps such as floating-to-inverse floating, callable or non-callable);
CMOs;
U.S. Treasury securities;
swaptions, caps, floors, and other derivatives on interest rates;
futures and forward contracts; and
options on any of the foregoing.
Because fluctuations in short-term interest rates may expose us to fluctuations in the spread between the interest we earn on our investments and the interest we pay on our borrowings, we may seek to manage such exposure by entering into short positions in interest rate swaps. An interest rate swap is an agreement to exchange interest rate cash flows, calculated on a notional principal amount, at specified payment dates during the life of the agreement. Typically, one party pays a fixed interest rate and receives a floating interest rate and the other party pays a floating interest rate and receives a fixed interest rate. Each party's payment obligation is computed using a different interest rate. In an interest rate swap, the notional principal is generally not exchanged.
Credit Risk Hedging
We enter into credit-hedging positions in order to protect against adverse credit events with respect to our credit investments, subject to maintaining our qualification as a REIT. Our credit hedging portfolio can vary significantly from period to period, and can encompass a wide variety of financial instruments, including corporate debt or equity-related instruments, RMBS- or CMBS-related instruments, or instruments involving other markets. Our hedging instruments can include both "single-name" instruments (i.e., instruments referencing one underlying entity or security) and hedging instruments referencing indices.

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Currently, our credit hedges consist primarily of financial instruments tied to corporate credit, such as CDS on corporate bond indices, short positions in and CDS on corporate bonds; and positions involving exchange traded funds, or "ETFs," of corporate bonds. Our credit hedges also currently include CDS tied to individual MBS or an index of several MBS, such as CDS on CMBS indices, or "CMBX."
Foreign Currency Hedging
To the extent that we hold instruments denominated in currencies other than U.S. dollars, we may enter into transactions to offset the potential adverse effects of changes in currency exchange rates, subject to maintaining our qualification as a REIT. In particular, we may use currency forward contracts and other currency-related derivatives to mitigate this risk.
Trends and Recent Market Developments
Market Overview
The U.S. Federal Reserve, or the "Federal Reserve," continued its accommodative monetary policy in the first quarter. At its January and March meetings, the Federal Reserve maintained its target range of 0.00%–0.25% for the federal funds rate, noting in March that “indicators of economic activity and employment have turned up recently, although the sectors most adversely affected by the pandemic remain weak.” Additionally, at both meetings, the Federal Reserve continued to direct the Open Market Desk to increase its holdings of Treasury securities by $80 billion per month, and of Agency RMBS by $40 billion per month, "until substantial further progress has been made toward the Committee’s maximum employment and price stability goals." Also during the quarter, the U.S. Congress and the administration passed the American Rescue Plan Act of 2021, which provided for an additional $1.9 trillion of COVID-related stimulus and economic aid.
In the first quarter, long-term interest rates rose significantly and the U.S. Treasury yield curve continued to steepen, with the 10-year U.S. Treasury yield increasing 83 basis points to finish the quarter at 1.74%, and the 2-year U.S. Treasury yield up just 4 basis points to 0.16%. The yield spread between the 2-year and 10-year U.S. Treasury increased to 158 basis points, which was its widest level since 2015, up from 79 basis points at year end. Interest rate volatility also increased during the quarter, with the MOVE index reaching a 10-month high in February.
After declining to all-time lows over the course of 2020, mortgage rates reversed course during the first quarter of 2021 as long-term interest rates rose. The Freddie Mac survey 30-year mortgage rate rose steadily throughout the quarter, increasing to 3.18% as of April 1st, as compared to 2.67% at year end. Although still elevated on an historical basis, refinancing applications declined during the quarter, with the Mortgage Bankers Association's Refinance Index decreasing 21.7% between January 1st and April 2nd of 2021. Still, overall Fannie Mae 30-year MBS prepayments remained well above pre-pandemic levels, declining slightly from a CPR of 35.1 in December 2020 to 30.8 in January 2021, before increasing to 31.8 in February 2021 and 35.4 in March 2021.
LIBOR rates, which drive many of our financing costs, remained very low in the first quarter. One-month LIBOR decreased 3 basis points to end the quarter at 0.11%, and three-month LIBOR fell 4 basis points to 0.19%.
Real GDP grew for the third-consecutive quarter, increasing at an estimated annualized rate of 6.4% in the first quarter of 2021, following the sharp decline in the first half of 2020 related to the onset of the COVID-19 pandemic. Meanwhile, the unemployment rate declined to 6.0% as of March 31, 2021, from 6.7% at year end.
Forbearance rates on residential mortgages continued to decline in the first quarter. According to the Mortgage Bankers Association, the total forbearance rate decreased to 5.0% at March 28, 2021 from 5.5% at January 3, 2021.
For the first quarter, the Bloomberg Barclays U.S. MBS Index generated a negative return of (1.10%), driven by rising interest rates, but a positive excess return (on a duration adjusted basis) of 0.15% relative to the Bloomberg Barclays U.S. Treasury Index. The Bloomberg Barclays U.S. Corporate Bond Index generated a negative return of (4.65%), but a positive excess return of 0.95%, while the Bloomberg Barclays U.S. Corporate High Yield Bond Index generated a gain of 0.85%, and an excess return of 2.60%.
The strong performance of U.S. equities continued into the first quarter of 2021, driven by an improving economic picture, expectations of additional stimulus, and accelerating vaccine distribution. The S&P 500 hit new record highs in each month of the quarter, rising 5.8% overall, while the Dow Jones Industrial Average ("DJIA") increased 7.8% and the NASDAQ rose 2.8% quarter over quarter. The VIX volatility index spiked briefly at the end of January, and again at the end of February and early March, before declining into quarter end. Meanwhile, London's FTSE 100 index increased 3.9% and the MSCI World global equity index rose 4.5% quarter over quarter.

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Portfolio Overview and Outlook
The following tables summarize the Company's investment portfolio as of March 31, 2021 and December 31, 2020.
Credit Portfolio(1)
March 31, 2021December 31, 2020
($ in thousands)Fair Value% of Total Long Credit PortfolioFair Value% of Total Long Credit Portfolio
Dollar Denominated:
CLOs(2)
$104,201 4.8 %$181,229 8.3 %