10-Q

``` 11111

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

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: 001-34374

ARLINGTON ASSET INVESTMENT CORP.

(Exact name of Registrant as specified in its charter)

Virginia	54-1873198
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

6862 Elm Street, Suite 320 McLean, VA	22101
(Address of Principal Executive Offices)	(Zip Code)

(703) 373-0200

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock	AAIC	NYSE
7.00% Series B Cumulative Perpetual Redeemable Preferred Stock	AAIC PrB	NYSE
8.250% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock	AAIC PrC	NYSE
6.000% Senior Notes due 2026	AAIN	NYSE
6.75% Senior Notes due 2025	AIC	NYSE

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 (Sec. 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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Small 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 ☒

Number of shares outstanding of each of the registrant’s classes of common stock, as of October 31, 2022:

Title	Outstanding
Class A Common Stock	28,366,678 shares

ARLINGTON ASSET INVESTMENT CORP.

FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2022

INDEX

			Page
PART I — FINANCIAL INFORMATION
	Item 1.	Consolidated Financial Statements and Notes — (unaudited)	1
		Consolidated Balance Sheets	1
		Consolidated Statements of Comprehensive Income	2
		Consolidated Statements of Changes in Equity	3
		Consolidated Statements of Cash Flows	5
		Notes to Consolidated Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	58
	Item 4.	Controls and Procedures	63
PART II — OTHER INFORMATION
	Item 1.	Legal Proceedings	64
	Item 1A.	Risk Factors	64
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64
	Item 3.	Defaults Upon Senior Securities	65
	Item 4.	Mine Safety Disclosures	65
	Item 5.	Other Information	65
	Item 6.	Exhibits	65
		Signatures	68

i

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

ARLINGTON ASSET INVESTMENT CORP.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)

	September 30, 2022			December 31, 2021
ASSETS
Cash and cash equivalents (includes $560 and $2,118, respectively, from   consolidated VIEs)	$	13,803		$	20,543
Restricted cash		590			1,132
Restricted cash of consolidated VIEs		1,954			111
Sold securities receivable		—			28,219
Agency mortgage-backed securities, at fair value		445,122			483,927
MSR financing receivables, at fair value		164,585			125,018
Credit securities, at fair value		115,783			26,222
Mortgage loans, at fair value		29,375			29,697
Mortgage loans of consolidated VIEs, at fair value		203,456			7,442
Single-family residential real estate (net of $977 and $299, respectively, of   accumulated depreciation)		81,242			60,889
Deposits		3,228			4,549
Other assets (includes $1,413 and $547, respectively, from consolidated VIEs)		15,003			15,287
Total assets	$	1,074,141		$	803,036
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Repurchase agreements	$	429,910		$	446,624
Purchased securities payable		93,081			—
Secured debt of consolidated VIEs, at fair value		182,336			508
Long-term unsecured debt		86,302			85,994
Long-term debt secured by single-family properties		56,801			39,178
Other liabilities (includes $265 and $2, respectively, from consolidated VIEs)		11,501			6,605
Total liabilities		859,931			578,909
Commitments and contingencies
Stockholders’ Equity:
Series B Preferred stock, $0.01 par value, 379,668 and 373,610, shares issued    and outstanding, respectively (liquidation preference of $9,492 and $9,340,    respectively)		9,001			8,852
Series C Preferred stock, $0.01 par value, 964,823 and 1,117,034, shares issued    and outstanding, respectively (liquidation preference of $24,120 and $27,926,    respectively)		23,967			27,356
Class A common stock, $0.01 par value, 450,000,000 shares authorized, 28,628,959    and 30,676,931 shares issued and outstanding, respectively		286			307
Additional paid-in capital		2,024,746			2,030,315
Accumulated deficit		(1,843,790	)		(1,842,703	)
Total stockholders’ equity		214,210			224,127
Total liabilities and stockholders’ equity	$	1,074,141		$	803,036
	September 30, 2022			December 31, 2021
Assets and liabilities of consolidated VIEs
Cash and restricted cash	$	2,514		$	2,229
Mortgage loans, at fair value		203,456			7,442
Other assets		1,413			547
Secured debt, at fair value		(182,336	)		(508	)
Other liabilities		(265	)		(2	)
Net investment in consolidated VIEs	$	24,782		$	9,708

See notes to consolidated financial statements.

1

ARLINGTON ASSET INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands, except per share data)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Interest income
MSR financing receivables	$	3,608		$	1,945		$	10,973		$	3,693
Agency mortgage-backed securities		3,631			2,660			7,188			8,428
Credit securities and loans		2,736			1,247			4,580			4,286
Mortgage loans of consolidated VIEs		2,303			301			5,268			2,764
Other		110			193			548			479
Total interest and other income		12,388			6,346			28,557			19,650
Rent revenues from single-family properties		2,103			—			5,304			—
Interest expense
Repurchase agreements		2,863			306			3,902			1,197
Long-term debt secured by single-family properties		741			—			1,867			—
Long-term unsecured debt		1,456			1,435			4,226			3,736
Secured debt of consolidated VIEs		912			173			3,678			1,440
Total interest expense		5,972			1,914			13,673			6,373
Single-family property operating expenses		1,872			36			5,318			36
Net operating income		6,647			4,396			14,870			13,241
Investment and derivative gain (loss), net		1,235			(1,313	)		778			(17,108	)
General and administrative expenses
Compensation and benefits		2,256			1,888			6,645			5,124
Other general and administrative expenses		1,121			1,009			3,803			3,600
Total general and administrative expenses		3,377			2,897			10,448			8,724
Income (loss) before income taxes		4,505			186			5,200			(12,591	)
Income tax provision		1,074			436			4,163			758
Net income (loss)		3,431			(250	)		1,037			(13,349	)
Dividend on preferred stock		(675	)		(731	)		(2,124	)		(2,177	)
Net income (loss) available (attributable)   to common stock	$	2,756		$	(981	)	$	(1,087	)	$	(15,526	)
Basic earnings (loss) per common share	$	0.10		$	(0.03	)	$	(0.04	)	$	(0.47	)
Diluted earnings (loss) per common share	$	0.10		$	(0.03	)	$	(0.04	)	$	(0.47	)
Weighted-average common shares outstanding   (in thousands)
Basic		28,338			31,927			28,973			32,720
Diluted		28,913			31,927			28,973			32,720

See notes to consolidated financial statements.

2

ARLINGTON ASSET INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Dollars in thousands)

(Unaudited)

	Series B Preferred Stock (#)		Series B Preferred Amount ($)		Series C Preferred Stock (#)		Series C Preferred Amount ($)		Class A Common Stock (#)			Class A Amount ($)			Additional Paid-In Capital			Accumulated Deficit			Total
Balances, December 31, 2020		336,273	$	7,933		1,117,034	$	27,356		33,517,018		$	335		$	2,040,918		$	(1,830,272	)	$	246,270
Net loss		—		—		—		—		—			—			—			(6,040	)		(6,040	)
Issuance of Class A common   stock under stock-based   compensation plans		—		—		—		—		101,818			1			(1	)		—			—
Repurchase of Class A   common stock		—		—		—		—		(137,655	)		(1	)		(522	)		—			(523	)
Stock-based compensation		—		—		—		—		—			—			503			—			503
Dividends declared		—		—		—		—		—			—			—			(723	)		(723	)
Balances, March 31, 2021		336,273	$	7,933		1,117,034	$	27,356		33,481,181		$	335		$	2,040,898		$	(1,837,035	)	$	239,487
Net loss		—		—		—		—		—			—			—			(7,059	)		(7,059	)
Issuance of Class A common   stock under stock-based   compensation plans		—		—		—		—		76,592			1			(1	)		—			—
Forfeiture of Class A common   stock under stock-based   compensation plans		—		—		—		—		(22,000	)		—			—			—			—
Repurchase of Class A   common stock		—		—		—		—		(855,835	)		(9	)		(3,481	)		—			(3,490	)
Stock-based compensation		—		—		—		—		—			—			537			—			537
Dividends declared		—		—		—		—		—			—			—			(723	)		(723	)
Balances, June 30, 2021		336,273	$	7,933		1,117,034	$	27,356		32,679,938		$	327		$	2,037,953		$	(1,844,817	)	$	228,752
Net loss		—		—		—		—		—			—			—			(250	)		(250	)
Issuance of preferred stock		22,719		560		—		—		—			—			—			—			560
Repurchase of Class A common   stock		—		—		—		—		(1,059,980	)		(11	)		(4,084	)		—			(4,095	)
Issuance of Class A common   stock under stock-based   compensation plans		—		—		—		—		19,694			—			—			—			—
Repurchase of Class A common   stock under stock-based   compensation plans		—		—		—		—		(21,085	)		—			(79	)		—			(79	)
Stock-based compensation		—		—		—		—		—			—			520			—			520
Dividends declared		—		—		—		—		—			—			—			(731	)		(731	)
Balances, September 30, 2021		358,992	$	8,493		1,117,034	$	27,356		31,618,567		$	316		$	2,034,310		$	(1,845,798	)	$	224,677

See notes to consolidated financial statements.

3

ARLINGTON ASSET INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY - (continued)

(Dollars in thousands)

(Unaudited)

	Series B Preferred Stock (#)		Series B Preferred Amount ($)		Series C Preferred Stock (#)			Series C Preferred Amount ($)			Class A Common Stock (#)			Class A Amount ($)			Additional Paid-In Capital			Accumulated Deficit			Total
Balances, December 31, 2021		373,610	$	8,852		1,117,034		$	27,356			30,676,931		$	307		$	2,030,315		$	(1,842,703	)	$	224,127
Net loss		—		—		—			—			—			—			—			(2,701	)		(2,701	)
Issuance of Class A common   stock under stock-based   compensation plans		—		—		—			—			404,746			4			(4	)		—			—
Forfeiture of Class A common   stock under stock-based   compensation plans		—		—		—			—			(12,167	)		—			—			—			—
Repurchase of Class A   common stock		—		—		—			—			(1,009,566	)		(10	)		(3,487	)		—			(3,497	)
Issuance of preferred stock		6,058		149		—			—			—			—			—			—			149
Stock-based compensation		—		—		—			—			—			—			761			—			761
Dividends declared		—		—		—			—			—			—			—			(742	)		(742	)
Balances, March 31, 2022		379,668	$	9,001		1,117,034		$	27,356			30,059,944		$	301		$	2,027,585		$	(1,846,146	)	$	218,097
Net income		—		—		—			—			—			—			—			307			307
Repurchase of Class A   common stock		—		—		—			—			(947,570	)		(10	)		(3,232	)		—			(3,242	)
Repurchase of preferred stock		—		—		(72,363	)		(1,749	)		—			—			—			—			(1,749	)
Stock-based compensation		—		—		—			—			—			—			992			—			992
Dividends declared		—		—		—			—			—			—			—			(707	)		(707	)
Balances, June 30, 2022		379,668	$	9,001		1,044,671		$	25,607			29,112,374		$	291		$	2,025,345		$	(1,846,546	)	$	213,698
Net income		—		—		—			—			—			—			—			3,431			3,431
Issuance of Class A common   stock under stock-based   compensation plans		—		—		—			—			—			—			—			—			—
Repurchase of Class A   common stock		—		—		—			—			(472,357	)		(5	)		(1,488	)		—			(1,493	)
Repurchase of preferred stock		—		—		(79,848	)		(1,640	)		—			—			—			—			(1,640	)
Repurchase of Class A common   stock under stock-based   compensation plans		—		—		—			—			(11,058	)		—			(30	)		—			(30	)
Stock-based compensation		—		—		—			—			—			—			919			—			919
Dividends declared		—		—		—			—			—			—			—			(675	)		(675	)
Balances, September 30, 2022		379,668	$	9,001		964,823		$	23,967			28,628,959		$	286		$	2,024,746		$	(1,843,790	)	$	214,210

See notes to consolidated financial statements.

4

ARLINGTON ASSET INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Nine Months Ended September 30,
	2022			2021
Cash flows from operating activities:
Net income (loss)	$	1,037		$	(13,349	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
Investment and derivative (gain) loss, net		(778	)		17,108
Net (discount) premium (accretion) amortization		(7,607	)		(2,742	)
Other		4,959			1,700
Changes in operating assets
Interest receivable		(299	)		892
Other assets		(1,575	)		(339	)
Changes in operating liabilities
Interest payable and other liabilities		2,641			2,178
Accrued compensation and benefits		(739	)		(509	)
Net cash (used in) provided by operating activities		(2,361	)		4,939
Cash flows from investing activities:
Purchases of agency mortgage-backed securities		(582,111	)		(607,659	)
Purchases of credit securities		(128,779	)		(28,356	)
Purchases of MSR financing receivables		(61,693	)		(96,157	)
Purchases of single-family residential real estate		(134,391	)		(9,419	)
Purchases of loans		—			(29,967	)
Proceeds from sales of agency mortgage-backed securities		654,294			724,611
Proceeds from sales of credit securities		10,395			31,702
Proceeds from sales of single-family residential real estate		128,784			—
Receipt of principal payments on agency mortgage-backed securities		27,807			49,938
Receipt of principal payments on credit securities		6,223			70
Receipt of principal payments on loans		321			45,167
Receipt of principal payments on mortgage loans of consolidated VIE		34,267			78,861
Receipt of distributions on MSR financing receivables		68,601			3,816
Restricted cash balance of VIE upon consolidation		9,637			—
Proceeds from (payments for) derivatives and deposits, net		8,559			(2,481	)
Other		6,233			4,555
Net cash provided by investing activities		48,147			164,681
Cash flows from financing activities:
Repayments of repurchase agreements, net		(16,714	)		(101,229	)
Repayments of secured debt of consolidated VIE		(38,496	)		(86,467	)
Repurchase of common stock		(8,232	)		(8,109	)
Repurchase of preferred stock		(3,389	)		—
Proceeds from issuance of preferred stock		149			559
Proceeds from long-term debt secured by single-family properties		99,371			—
Issuance of long-term unsecured debt		—			36,316
Redemption of long-term unsecured debt		—			(23,821	)
Repayments of long-term debt secured by single-family properties		(81,790	)		—
Repurchase of long-term unsecured debt		—			(7	)
Dividends paid		(2,124	)		(2,177	)
Net cash used in financing activities		(51,225	)		(184,935	)
Net decrease in cash, cash equivalents and restricted cash		(5,439	)		(15,315	)
Cash, cash equivalents and restricted cash, beginning of period		21,786			39,965
Cash, cash equivalents and restricted cash, end of period	$	16,347		$	24,650
Supplemental cash flow information:
Cash payments for interest	$	12,134		$	6,111
Cash payments for income taxes	$	1,641		$	—
Non-cash investing activity:
Assets of VIE upon consolidation	$	287,282		$	—
Non-cash financing activity:
Liabilities of VIE upon consolidation	$	266,697		$	—

See notes to consolidated financial statements.

5

ARLINGTON ASSET INVESTMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

(Unaudited)

Note 1. Organization and Basis of Presentation

Arlington Asset Investment Corp. (“Arlington Asset”) and its consolidated subsidiaries (unless the context otherwise provides, collectively, the “Company”) is an investment firm that focuses primarily on investing in mortgage related assets and residential real estate. The Company’s investment capital is currently allocated between mortgage servicing right (“MSR”) related assets, credit investments, single-family residential (“SFR”) properties and agency mortgage-backed securities (“MBS”).

The Company’s MSR related assets represent investments for which the return is based on the economic performance of a pool of specific MSRs. The Company’s credit investments generally include investments in mortgage loans secured by either residential or commercial real property or MBS collateralized by residential or commercial mortgage loans (“non-agency MBS”) or asset-backed securities (“ABS”) collateralized by residential solar panel loans. The Company’s SFR investment strategy is to acquire, lease and operate single-family residential homes as rental properties. The Company’s agency MBS consist of residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by a U.S. government sponsored enterprise (“GSE”), such as the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”).

The Company is a Virginia corporation. The Company is internally managed and does not have an external investment advisor.

The Company has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). As a REIT, the Company is required to distribute annually 90% of its REIT taxable income (subject to certain adjustments). So long as the Company continues to qualify as a REIT, it will generally not be subject to U.S. Federal or state corporate income taxes on its taxable income that it distributes to its shareholders on a timely basis. At present, it is the Company’s intention to distribute 100% of its taxable income, although the Company will not be required to do so. The Company intends to make distributions of its taxable income within the time limits prescribed by the Internal Revenue Code, which may extend into the subsequent taxable year.

The unaudited interim consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. The Company’s unaudited interim consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

The Company’s consolidated financial statements include the accounts of Arlington Asset and all other entities in which the Company has a controlling financial interest. All intercompany accounts and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect amounts reported in the consolidated financial statements. Although the Company bases these estimates and assumptions on historical experience and all other reasonably available information that the Company believes to be relevant under the circumstances, such estimates frequently require management to exercise significant subjective judgment about matters that are inherently uncertain. Actual results may differ materially from these estimates.

Certain prior period amounts in the consolidated financial statements and the accompanying notes may have been reclassified to conform to the current year’s presentation. These reclassifications had no impact on the previously reported net income, total assets or total liabilities.

Note 2. Summary of Significant Accounting Policies

Cash Equivalents

Cash equivalents include demand deposits with banks, money market accounts and highly liquid investments with original maturities of three months or less. As of September 30, 2022 and December 31, 2021, approximately 75% and 67%, respectively, of the Company’s cash equivalents were invested in money market funds that invest primarily in U.S. Treasuries and other securities backed by the U.S. government.

6

Investment Security Purchases and Sales

Purchases and sales of investment securities are recorded on the settlement date of the transfer unless the trade qualifies as a “regular-way” trade and the associated commitment qualifies for an exemption from the accounting guidance applicable to derivative instruments. A regular-way trade is an investment security purchase or sale transaction that is expected to settle within the period of time following the trade date that is prevalent or traditional for that specific type of security. Any amounts payable or receivable for unsettled security trades are recorded as “sold securities receivable” or “purchased securities payable” in the consolidated balance sheets.

Interest Income Recognition for Investments in Agency MBS, Mortgage Loans of Consolidated VIEs and Credit Securities of High Credit Quality

The Company recognizes interest income for its investments in agency MBS, mortgage loans of consolidated variable interest entities (“VIEs”) and credit securities that are considered to be of high credit quality (that is, those with a Standard & Poor's rating of AA or higher or an equivalent rating from another rating agency) by applying the “interest method” permitted by GAAP, whereby purchase premiums and discounts are amortized and accreted, respectively, as an adjustment to contractual interest income accrued at each investment’s stated interest rate. The interest method is applied at the individual instrument level based upon each instrument’s effective interest rate. The Company calculates each instrument’s effective interest rate at the time of purchase or initial recognition by solving for the discount rate that equates the present value of that instrument's remaining contractual cash flows (assuming no principal prepayments) to its purchase cost. Because each instrument’s effective interest rate does not reflect an estimate of future prepayments, the Company refers to this manner of applying the interest method as the “contractual effective interest method.” When applying the contractual effective interest method, as principal prepayments occur, a proportional amount of the unamortized premium or unaccreted discount is recognized in interest income such that the contractual effective interest rate on any remaining security or loan balance is unaffected.

For mortgage loans of consolidated VIEs, the Company ceases the accrual of interest income (i.e., places the loan in non-accrual status) when it believes collectability of principal and interest in full is not reasonably assured, which generally occurs when a loan is three or more monthly payments past due, unless the loan is well secured and in the process of collection based upon an individual loan assessment. Upon placing a loan in non-accrual status, any previously accrued but uncollected interest is derecognized and a corresponding reduction to current period interest income is recorded. While a loan is in non-accrual status, the Company recognizes interest income only when interest payments occur.

Interest Income Recognition for Investments in Other Credit Securities and MSR Financing Receivables

The Company recognizes interest income for its investments in credit securities (other than those considered to be of high credit quality) and MSR financing receivables by applying the prospective level-yield methodology required by GAAP for financial assets that are either not of high credit quality at the time of acquisition or can be contractually prepaid or otherwise settled in such a way that the Company would not recover substantially all of its recorded investment. The amount of periodic interest income recognized is determined by applying the investment’s effective interest rate to its amortized cost basis (or “reference amount”). At the time of acquisition, the investment’s effective interest rate is calculated by solving for the single discount rate that equates the present value of the Company’s best estimate of the amount and timing of the cash flows expected to be collected from the investment to its purchase cost. To prepare its best estimate of cash flows expected to be collected, the Company develops a number of assumptions about the future performance of the pool of loans that serve as collateral for its investment, including assumptions about the timing and amount of prepayments and credit losses. For investments in MSR financing receivables, the Company's estimate of cash flows expected to be collected reflects all components of its mortgage servicing counterparty's payment obligation, which is comprised of cash flows referenced to the monthly net cash flows of the underlying reference pool of MSRs net of (i) the counterparty's periodic interest payments and principal repayments related to advances obtained via its third-party secured financing facility collateralized by MSRs to which the Company's MSR financing receivables are referenced and (ii) fees payable to the counterparty. In each subsequent quarterly reporting period, the amount and timing of cash flows expected to be collected from the investment are re-estimated based upon current information and events. The following table provides a description of how periodic changes in the estimate of cash flows expected to be collected affect interest income recognition prospectively for investments in credit securities and MSR financing receivables:

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Scenario:	Effect on Interest Income Recognition:
A positive change in cash flows occurs. Actual cash flows exceed prior estimates and/or a positive change occurs in the estimate of expected remaining cash flows.	A revised effective interest rate is calculated and applied prospectively such that the positive change in cash flows is recognized as incremental interest income over the remaining life of the investment.
	The amount of periodic interest income recognized over the remaining life of the investment will be reduced accordingly. Generally, the investment’s effective interest rate is reduced accordingly and applied on a prospective basis. However, if the revised effective interest rate is negative, the investment’s existing effective interest rate is retained while the reference amount to which the existing effective interest rate will be prospectively applied is reduced to the present value of cash flows expected to be collected, discounted at the investment’s existing effective interest rate.
An adverse change in cash flows occurs. Actual cash flows fall short of prior estimates and/or an adverse change occurs in the estimate of expected remaining cash flows.

Other Significant Accounting Policies

Certain of the Company’s other significant accounting policies are summarized in the following notes:

Investments in agency MBS, subsequent measurement	Note 3
Investments in credit securities, subsequent measurement Loans held for investment, subsequent measurement Investments in MSR financing receivables, subsequent measurement Investments in SFR properties	Note 4 Note 5 Note 6 Note 7
Consolidation of variable interest entities Borrowings	Note 8 Note 9
To-be-announced agency MBS transactions, including “dollar rolls”	Note 10
Derivative instruments	Note 10
Balance sheet offsetting	Note 11
Fair value measurements Income taxes	Note 12 Note 13
Stock-based compensation	Note 16

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Refer to the Company’s 2021 Annual Report on Form 10-K for a complete inventory and summary of the Company’s significant accounting policies.

Recent Accounting Pronouncements

The following table provides a brief description of recently issued accounting pronouncements and their actual or expected effect on the Company’s consolidated financial statements:

Standard	Description	Date of Adoption	Effect on the Consolidated Financial Statements
Recently Issued Accounting Guidance Not Yet Adopted
ASU Nos. 2020-04 and 2021-01, Reference Rate Reform (Topic 848)	The amendments in these updates provide optional practical expedients and exceptions for applying GAAP to the modification of receivables, debt or lease contracts as well as cash flow and fair value hedge accounting relationships that reference a rate, such as the London Interbank Offered Rate (“LIBOR”), that is expected to be discontinued because of reference rate reform. The practical expedients and exceptions provided by these updates are effective from March 12, 2020 through December 31, 2022.	Not yet adopted.	To date, any modifications due to reference rate reform have not had a material impact to the Company. The Company has not elected to apply hedge accounting for financial reporting purposes. The Company does not currently expect the adoption of ASU Nos. 2020-04 and 2021-01 to have a material effect on its consolidated financial statements.

Note 3. Investments in Agency MBS

The Company has elected to classify its investments in agency MBS as trading securities. Accordingly, the Company’s investments in agency MBS are reported in the accompanying consolidated balance sheets at fair value. As of September 30, 2022 and December 31, 2021, the fair value of the Company’s investments in agency MBS was $445,122 and $483,927, respectively. As of September 30, 2022, all the Company’s investments in agency MBS represent undivided (or “pass-through”) beneficial interests in specified pools of fixed-rate mortgage loans.

All periodic changes in the fair value of agency MBS that are not attributed to interest income are recognized as a component of “investment and derivative gain (loss), net” in the accompanying consolidated statements of comprehensive income. The following table provides additional information about the gains and losses recognized as a component of “investment and derivative gain (loss), net” in the Company’s consolidated statements of comprehensive income for the periods indicated with respect to investments in agency MBS:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net gains (losses) recognized in earnings for:
Agency MBS still held at period end	$	(24,430	)	$	(2,904	)	$	(26,911	)	$	(13,323	)
Agency MBS sold during the period		1,702			457			(32,365	)		(11,209	)
Total	$	(22,728	)	$	(2,447	)	$	(59,276	)	$	(24,532	)

The Company also invests in and finances fixed-rate agency MBS on a generic pool basis through sequential series of to-be-announced security transactions commonly referred to as “dollar rolls.” Dollar rolls are accounted for as a sequential series of derivative instruments. Refer to “Note 10. Derivative Instruments” for further information about dollar rolls.

Note 4. Investments in Credit Securities

The Company has elected to classify its investments in credit securities as trading securities. Accordingly, the Company’s investments in credit securities are reported in the accompanying consolidated balance sheets at fair value. As of September 30, 2022 and December 31, 2021, the fair value of the Company’s investments in credit securities was $115,783 and $26,222, respectively. As

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of September 30, 2022, the Company’s investments in credit securities primarily consist of non-agency MBS collateralized by pools of business purpose residential mortgage loans or commercial mortgage loans and ABS collateralized by pools of residential solar panel loans.

All periodic changes in the fair value of credit securities that are not attributed to interest income are recognized as a component of “investment and derivative gain (loss), net” in the accompanying consolidated statements of comprehensive income. The following table provides additional information about the gains and losses recognized as a component of “investment and derivative gain (loss), net” in the Company’s consolidated statements of comprehensive income for the periods indicated with respect to investments in credit securities:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net gains (losses) recognized in earnings for:
Credit securities still held at period end	$	(1,552	)	$	(165	)	$	(2,227	)	$	1,017
Credit securities sold during the period		—			90			(970	)		37
Total	$	(1,552	)	$	(75	)	$	(3,197	)	$	1,054

Note 5. Loans Held for Investment

As of September 30, 2022 and December 31, 2021, the Company held a loan secured by a first lien position in healthcare facilities and guaranteed by the operator of the facilities with an outstanding principal outstanding principal balance of $29,375 and $29,697, respectively. The loan bears interest at a floating note rate equal to SOFR plus 5.61%. The original maturity date of the loan was March 23, 2022 with a one-year extension available at the option of the borrower. On March 23, 2022, the borrower exercised its one-year extension option resulting in a new maturity date of March 23, 2023. The loan has monthly principal amortization based upon a 30-year amortization schedule with the remaining principal balance due at loan maturity.

The Company has elected to account for its loan held for investment at fair value on a recurring basis with periodic changes in fair value recognized as a component of “investment and derivative gain (loss), net” in the accompanying consolidated statements of comprehensive income. As of September 30, 2022 and December 31, 2021, the Company’s investment was $29,375 and $29,697, respectively, at fair value. The Company recognizes interest income on its loan investment based upon the effective interest rate of the loan which is equal to the contractual note rate of the loan.

As of September 30, 2022 and December 31, 2021, the Company was party to a participation agreement pursuant to which the Company has committed to fund up to $30,000 of a $130,000 revolving credit facility that matures on July 7, 2024. Under the terms of the participation agreement, the Company funds the last $30,000 of advances under the revolving credit facility. Any draws under the revolving credit facility bear interest at SOFR plus 3.86% with a SOFR floor of 1.00% and are secured by a first lien on all accounts receivable and a second lien on all other assets of the borrower. The borrower is also required to pay an unused commitment fee of 0.50%. As of September 30, 2022 and December 31, 2021, the Company's unfunded commitment was $30,000.

Note 6. Investments in MSR Financing Receivables

The Company does not hold the requisite licenses to purchase or hold MSRs directly. However, the Company has entered into agreements with a licensed, GSE approved residential mortgage loan servicer that enable the Company to garner the economic return of an investment in an MSR purchased by the mortgage servicing counterparty through an MSR financing transaction. Under the terms of the arrangement, for an MSR acquired by the mortgage servicing counterparty (i) the Company purchases the “excess servicing spread” from the mortgage servicer counterparty, entitling the Company to monthly distributions of the servicing fees collected by the mortgage servicing counterparty in excess of 12.5 basis points per annum (and to distributions of corresponding proceeds of sale of the MSRs), and (ii) the Company funds the balance of the MSR purchase price to the parent company of the mortgage servicing counterparty and, in exchange, has an unsecured right to payment of certain amounts determined by reference to the MSR, generally equal to the servicing fee revenue less the excess servicing spread and the costs of servicing (and to distributions of corresponding proceeds of sale of the MSRs), net of fees earned by the mortgage servicing counterparty and its affiliates including an incentive fee equal to a percentage of the total return of the MSR in excess of a hurdle rate of return. The Company has committed to invest a total minimum of $50,000 in capital with the counterparty with $25,000 of the minimum commitment expiring on December 31, 2023 and $25,000 of the minimum commitment expiring on April 1, 2024.

Under the arrangement, the Company is obligated to provide funds to the mortgage servicing counterparty to fund the counterparty’s advances of payments on the serviced pool of mortgage loans. The mortgage servicing counterparty is required to

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return to the Company subsequent servicing advances collected from the underlying borrowers. The mortgage servicing counterparty is entitled to reimbursement from the GSEs of any servicing advances that are not subsequently collected from the underlying borrowers. As of September 30, 2022 and December 31, 2021, the Company had provided funds of $2,244 and $3,731, respectively, to its mortgage servicing counterparty related to the counterparty’s servicing advances made pursuant to the MSRs to which the Company’s MSR financing receivables are referenced.

As a means to increase potential returns to the Company, at the Company’s election, it can request the mortgage servicing counterparty utilize leverage on the MSRs to which the Company’s MSR financing receivables are referenced to finance the purchase of additional MSRs. As of September 30, 2022 and December 31, 2021, the Company’s counterparty had drawn $27,863 and $40,398, respectively, of financing secured by the MSRs to which the Company’s MSR financing receivables are referenced.

The Company accounts for transactions executed under its arrangement with the mortgage servicing counterparty as financing transactions and reflects the associated financing receivables in the line item “MSR financing receivables” on its consolidated balance sheets. The Company has elected to account for its MSR financing receivables at fair value with changes in fair value that are not attributed to interest income recognized as a component of “investment and derivative gain (loss), net” in the accompanying consolidated statements of comprehensive income. As described in further detail in “Note 2. Summary of Significant Accounting Policies,” the Company recognizes interest income for MSR financing receivables by applying the prospective level-yield methodology required by GAAP for financial assets that are either not of high credit quality at the time of acquisition or can be contractually prepaid or otherwise settled in such a way that the Company would not recover substantially all of its recorded investment.

As of September 30, 2022 and December 31, 2021, the fair value of the Company’s investments in MSR financing receivables was $164,585 and $125,018, respectively. The following table presents activity related to the carrying value of the Company’s investments in MSR financing receivables for the periods indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Balance at period beginning	$	120,260		$	74,652		$	125,018		$	9,346
Capital investments		40,474			35,601			61,693			95,223
Capital distributions		(4,049	)		(3,816	)		(68,601	)		(3,816	)
Accretion of interest income		3,608			1,945			10,973			3,693
Changes in valuation inputs and assumptions		4,292			4,452			35,502			8,388
Balance at period end	$	164,585		$	112,834		$	164,585		$	112,834

Note 7. Investments in SFR Properties

The Company owns a portfolio of SFR homes that it operates as rental properties. The Company is party to an agreement with a third-party investment firm to identify, acquire and manage investments in SFR properties on behalf of the Company. Under the terms of the agreement, the Company has committed to fund up to $55,000 of capital to fund the acquisition of SFR properties. The Company is obligated to pay the third-party firm a minimum fee plus an incentive fee equal to a percentage of the total investment return in excess of a hurdle rate of return. If the Company were to terminate the commitment, the Company would incur a termination fee equal to a fixed amount less inception to date minimum fees paid to the third-party firm.

The Company’s investments in SFR properties are initially recognized on the settlement date of their acquisition at cost. The Company allocates the initial acquisition cost of each property to land and building on the basis of their relative fair values at the time of acquisition. To determine the relative fair value of land and building at the time of acquisition, the Company uses available market data, such as property specific county tax assessment records.

Subsequent to the acquisition of a property, expenditures which improve or extend the life of the property are capitalized as a component of the property’s cost basis. Expenditures for ordinary maintenance and repairs are recognized as an expense as incurred and are reported as a component of “single-family property operating expenses” in the Company’s consolidated statements of comprehensive income.

The Company subsequently recognizes depreciation of each property’s buildings and capitalized improvements over the expected useful lives of those assets. The Company calculates depreciation on a straight-line basis over a useful life of 27.5 years for buildings and useful lives ranging from five to 27.5 years for capitalized improvements. The Company reports depreciation expense as a component of “single-family property operating expenses” in the Company’s consolidated statements of comprehensive income.

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Pursuant to its SFR investment strategy, the Company leases its SFR properties to tenants who occupy the properties. The leases generally have terms of one year or more and are classified as operating leases. Rental revenue, net of any concessions, is recognized over the term of each lease on a straight-line basis. If the Company determines that collectability of lease payments is not probable, any lease receivables previously recognized are reversed and rental revenue is limited to cash received.

Costs directly associated with the origination of a lease, such as a commission paid to a property manager when a lease agreement is obtained, are deferred at the commencement of the lease and subsequently recognized ratably as an expense over the lease term, consistent with the recognition of rental revenue from the lease. The ratable expense recognition of lease direct costs is reported as a component of “single-family property operating expenses” in the Company’s consolidated statements of comprehensive income. In addition to the expense items previously mentioned, “single-family property operating expenses” also include accruals for, but not limited to, third-party property management fees, local real estate tax assessments, utilities, homeowners’ association dues and insurance.

The Company evaluates its SFR properties for impairment whenever circumstances indicate that their carrying amounts may not be recoverable. Significant indicators of potential impairment include, but are not limited to, declines in home values, adverse changes in rental or occupancy rates and relevant unfavorable changes in the broader economy. If indicators of potential impairment exist, the Company performs a recoverability test by comparing the property’s net carrying amount to its estimate of the undiscounted future net cash flows expected to be obtained from the use and eventual disposition of the property. If the property’s carrying amount exceeds the Company’s estimate of the undiscounted future net cash flows expected to be obtained from the property, the Company recognizes an impairment loss equal to the amount that the property’s net carrying amount exceeds the property’s estimated fair value. As of September 30, 2022 and December 31, 2021, the Company had not recognized any impairment losses for its investments in SFR properties.

From time to time, the Company may identify SFR properties to be sold. At the time that any such properties are identified, the Company performs an evaluation to determine whether or not such properties should be classified as held for sale. Factors considered as part of the Company's held for sale evaluation process include whether the following conditions have been met: (i) the Company has committed to a plan to sell a property; (ii) the property is immediately available for sale in its present condition; (iii) an active program to locate a buyer and other actions required to complete the plan to sell a property have been initiated; (iv) the sale of a property is probable within one year (generally determined based upon listing for sale); (v) the property is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (vi) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. To the extent that these factors are all present, the Company ceases depreciating the property, measures the property at the lower of its carrying amount or its fair value less estimated costs to sell, and presents the property separately on its consolidated balance sheets.

On August 19, 2022, the Company completed a sale of 371 SFR properties for a gross sale price of $130,026 for a gain of $14,407 that is net of accrued incentive fees to the Company's third-party investment firm. On May 1, 2022, the Company classified the 371 SFR properties as held for sale.

As of September 30, 2022 and December 31, 2021, the Company had investments in 246 and 214 SFR properties, respectively, for a total cost of $82,219 and $61,188, respectively. During the three and nine months ended September 30, 2022, the Company recognized $632 and $1,951, respectively, of depreciation expense related to its SFR properties. During the three and nine months ended September 30, 2021, the Company recognized $12 of depreciation expense related to its SFR properties. The following table summarizes the Company’s net carrying amount of its SFR properties by component as of the dates indicated:

	September 30, 2022			December 31, 2021
Investments in single-family residential real estate:
Land	$	13,646		$	10,128
Buildings and improvements		68,573			51,060
Investments in single-family residential real estate, at cost		82,219			61,188
Less: accumulated depreciation		(977	)		(299	)
Investments in single-family residential real estate, net	$	81,242		$	60,889

As of September 30, 2022, the Company had commitments to acquire five SFR properties for an aggregate purchase price of $1,523.

The Company conducts its SFR investment strategy through a wholly-owned subsidiary, McLean SFR Investment, LLC. On November 11, 2022, the Company entered into an agreement to sell McLean SFR Investment, LLC, which includes all of the

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Company's remaining investments in SFR properties and its long-term debt facility secured by SFR properties, for $87,330 including the assumption of the debt liability. The settlement of the sale is contingent upon lender approval as well as other customary settlement conditions. If ultimately consummated, the sale is expected to settle in the fourth quarter.

Note 8. Consolidation of Variable Interest Entities

The vehicles that issue the Company’s investments in securitized mortgage assets are considered VIEs. The Company is required to consolidate any VIE in which it holds a variable interest if it determines that it holds a controlling financial interest in the VIE and is, therefore, determined to be the primary beneficiary of the VIE. The Company is determined to be the primary beneficiary of a VIE in which it holds a variable interest if it both (i) holds the power to direct the activities that most significantly impact the VIE’s economic performance and (ii) has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The economic performance of the trusts that issue the Company’s investments in securitized mortgage assets is most significantly impacted by the performance of the mortgage loans that are held by the trusts. The party that is determined to have the most power to direct the loss mitigation actions that are taken with respect to delinquent or otherwise troubled mortgage loans held by the trust is, therefore, deemed to hold the most power to direct the activities that most significantly impact the trust’s economic performance. As a passive investor, the Company does not have the power to direct the loss mitigation activities of most of the trusts that have issued its securitized mortgage assets.

On September 30, 2020, the Company acquired for $10,693 an investment that represents a majority interest in the first loss position of a securitized pool of business purpose residential mortgage loans. As majority holder of the first loss position, the Company is required to approve any material loss mitigation action proposed by the servicer with respect to a troubled loan. The Company also has the option (but not the obligation) to purchase delinquent loans from the trust. As a result of these contractual rights, the Company determined that it is the party with the most power to direct the loss mitigation activities and, therefore, the economic performance of the trust. As holder of the majority of the first loss position issued by the trust, the Company has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the trust. Accordingly, the Company determined that it is the primary beneficiary of the trust and consolidated the trust’s assets and liabilities owed to third parties onto its consolidated balance sheets.

On February 3, 2022, the Company acquired for $20,585 investments in the first loss position and the excess interest-only strip of a securitized pool of recently originated, performing “non-qualified” residential mortgage loans. The Company’s investment in the excess interest-only strip provides it with the option (but not the obligation) to purchase delinquent loans from the trust. As a result of this contractual right, the Company determined that it has the power to circumvent the loss mitigation activities that would otherwise be performed by the servicer and, therefore, is the party with the most power to impact the economic performance of the trust. As a result of its investments, the Company also has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the trust. Accordingly, the Company determined that it is the primary beneficiary of the trust and consolidated the trust’s assets and liabilities owed to third parties onto its consolidated balance sheets.

The carrying values of the assets and liabilities of the consolidated VIEs, net of elimination entries, are as follows as of the dates indicated:

	September 30, 2022
	VIE of Business Purpose Residential Mortgage Loans			VIE of Residential Mortgage Loans			Total
Cash of consolidated VIEs	$	560		$	—		$	560
Restricted cash of consolidated VIEs (1)		29			1,925			1,954
Mortgage loans of consolidated VIEs, at fair value		3,750			199,706			203,456
Other assets of consolidated VIEs		689			724			1,413
Secured debt of consolidated VIEs, at fair value		(251	)		(182,085	)		(182,336	)
Other liabilities of consolidated VIEs		—			(265	)		(265	)
Net investment in consolidated VIEs	$	4,777		$	20,005		$	24,782

(1)Restricted cash represents cash collected by the trust that must be used solely to satisfy the liabilities of the VIE in the month following collection.

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	December 31, 2021
	VIE of Business Purpose Residential Mortgage Loans			VIE of Residential Mortgage Loans		Total
Cash of consolidated VIEs	$	2,118		$	—	$	2,118
Restricted cash of consolidated VIEs (1)		111			—		111
Mortgage loans of consolidated VIEs, at fair value		7,442			—		7,442
Other assets of consolidated VIEs		547			—		547
Secured debt of consolidated VIEs, at fair value		(508	)		—		(508	)
Other liabilities of consolidated VIEs		(2	)		—		(2	)
Net investment in consolidated VIEs	$	9,708		$	—	$	9,708

(1)Restricted cash represents cash collected by the trust that must be used solely to satisfy the liabilities of the VIE in the month following collection.

The debt of the Company’s consolidated VIEs have recourse solely to the assets of the respective VIE; it has no recourse to the general credit of the Company.

Consolidated VIE of Business Purpose Residential Mortgage Loans

The pool of business purpose residential mortgage loans and the third-party held debt obligations of the consolidated VIE had aggregate unpaid principal balances of $3,908 and $261, respectively, as of September 30, 2022. The trust is contractually entitled to receive monthly interest payments on each underlying mortgage loan net of a loan-specific servicing and asset management fee that is not remitted to the trust but is, rather, retained by the servicer. As of September 30, 2022, the weighted average net note rate to which the VIE was entitled was 6.00%.

The pool of business purpose residential mortgage loans held by the consolidated VIE consists of fixed-rate, short-term, interest-only mortgage loans (with the full amount of principal due at maturity) made to professional real estate investors and are secured by first lien positions in non-owner occupied residential real estate. The properties that secure these mortgage loans often require construction, repair or rehabilitation. The repayment of the mortgage loans is often largely based on the ability of the borrower to sell the mortgaged property or to convert the property for rental purposes and obtain refinancing in the form of a longer-term loan.

Consolidated VIE of Residential Mortgage Loans

The pool of mortgage loans and the third-party held debt obligations of the consolidated VIE had aggregate unpaid principal balances of $233,322 and $232,760, respectively, as of September 30, 2022. As of September 30, 2022, the weighted average contractual interest rates of the loans and consolidated debt held by third parties were 4.78% and 1.37%, respectively.

The pool of mortgage loans of the consolidated VIE consists of performing, first lien “non-qualified” residential mortgage loans. “Non-qualified” residential mortgage loans are loans that do not fully comply with the “ability-to-repay” rule and related guidelines of the Truth-in-Lending Act established by the Consumer Finance Protection Bureau pursuant to the authority granted under the Dodd-Frank Act. A “qualified” residential mortgage loan (i.e., a residential mortgage loan that fully complies with the “ability-to-repay” rule of the Truth-in-Lending Act) must meet certain debt-to-income ratio requirements and cannot have certain features, such as an interest-only period, negative amortization, balloon payments or terms longer than 30 years. Qualified mortgage loans have limited upfront fees and points and, generally, cannot have prepayment penalties except for limited circumstances. Lenders of qualified mortgage loans are afforded certain legal protections not available to non-qualified mortgage loan lenders.

Accounting for Consolidated VIEs

The Company has elected to account for the mortgage loans and debt of its consolidated VIEs at fair value with changes in fair value that are not attributed to interest income or interest expense, respectively, recognized as a component of “investment and derivative gain (loss), net” in the accompanying consolidated statements of comprehensive income.

As described in further detail in “Note 2. Summary of Significant Accounting Policies,” the Company recognizes interest income for the mortgage loans of its consolidated VIEs by applying the “interest method” permitted by GAAP, whereby the premium or discount recognized at the initial recognition of each loan is amortized or accreted as an adjustment to contractual interest income accrued at the loan’s contractual interest rate. The Company ceases the accrual of interest income for a mortgage loan (i.e., places the loan in non-accrual status) when it believes collectability of principal and interest in full is not reasonably assured, which generally

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occurs when a loan is three or more monthly payments past due, unless the loan is well secured and in the process of collection based upon an individual loan assessment. Upon placing a loan in non-accrual status, any previously accrued but uncollected interest is derecognized and a corresponding reduction to current period interest income is recorded.

The following table presents information about the accrual status of the loans of the Company’s consolidated VIE of business purpose residential mortgage loans as of September 30, 2022:

	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Difference
Less than 90 days past due and in accrual status	$	151	$	151	$	—
90 days or more past due and in non-accrual status		3,599		3,757		(158	)
Total mortgage loans of consolidated VIE	$	3,750	$	3,908	$	(158	)

The following table presents information about the accrual status of the loans of the Company’s consolidated VIE of residential mortgage loans as of September 30, 2022:

	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Difference
Less than 90 days past due and in accrual status	$	198,876	$	232,353	$	(33,477	)
90 days or more past due and in non-accrual status		830		969		(139	)
Total mortgage loans of consolidated VIE	$	199,706	$	233,322	$	(33,616	)

Note 9. Borrowings

Repurchase Agreements

The Company finances the purchase of mortgage investments through repurchase agreements, which are accounted for as collateralized borrowing arrangements. In a repurchase transaction, the Company sells a mortgage investment to a counterparty under a master repurchase agreement in exchange for cash and concurrently agrees to repurchase the same asset at a future date in an amount equal to the cash initially exchanged plus an agreed-upon amount of interest. Mortgage investments sold under agreements to repurchase remain on the Company’s consolidated balance sheets because the Company maintains effective control over such assets throughout the duration of the arrangement. Throughout the contractual term of a repurchase agreement, the Company recognizes a “repurchase agreement” liability on its consolidated balance sheets to reflect the obligation to repay to the counterparty the proceeds received upon the initial transfer of the mortgage investment. The difference between the proceeds received by the Company upon the initial transfer of the mortgage investment and the contractually agreed-upon repurchase price is recognized as interest expense ratably over the term of the repurchase arrangement.

Amounts borrowed pursuant to repurchase agreements are equal in value to a specified percentage of the fair value of the pledged collateral. The Company retains beneficial ownership of the pledged collateral throughout the term of the repurchase agreement. The counterparty to the repurchase agreements may require that the Company pledge additional securities or cash as additional collateral to secure borrowings when the value of the collateral declines.

The Company’s MBS repurchase agreement arrangements generally carry a fixed rate of interest and are short-term in nature with contract durations generally ranging from 30 to 60 days, but may be as short as one day or as long as one year. The Company’s mortgage loan repurchase agreement arrangement has a maturity date of August 23, 2023 and an interest rate that resets monthly at a rate equal to SOFR plus 2.61%. Under the terms of the Company’s mortgage loan repurchase agreement, the Company may request extensions of the maturity date of the agreement for up to 364 days, subject to the lender’s approval.

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The following table provides information regarding the Company’s outstanding repurchase agreement borrowings as of the dates indicated:

	September 30, 2022			December 31, 2021
Agency MBS repurchase financing:
Repurchase agreements outstanding	$	319,538		$	425,836
Agency MBS collateral, at fair value (1)		336,277			447,979
Net amount (2)		16,739			22,143
Weighted-average rate		3.02	%		0.14	%
Weighted-average term to maturity	13.0 days			13.0 days
Non-agency MBS repurchase financing:
Repurchase agreements outstanding	$	89,809		$	—
MBS collateral, at fair value		99,821			—
Net amount (2)		10,012			—
Weighted-average rate		3.68	%
Weighted-average term to maturity	26.5 days
Mortgage loans repurchase financing:
Repurchase agreements outstanding	$	20,563		$	20,788
Mortgage loans collateral, at fair value		29,375			29,697
Net amount (2)		8,812			8,909
Weighted-average rate		5.27	%		2.60	%
Weighted-average term to maturity	327.0 days			319.0 days
Total mortgage investments repurchase financing:
Repurchase agreements outstanding	$	429,910		$	446,624
Mortgage investments collateral, at fair value (1)		465,473			477,676
Net amount (2)		35,563			31,052
Weighted-average rate		3.27	%		0.25	%
Weighted-average term to maturity	30.8 days			27.2 days

(1)As of December 31, 2021, includes $28,219 at sale price of unsettled agency MBS sale commitments which is included in the line item “sold securities receivable” in the accompanying consolidated balance sheets.

(2)Net amount represents the value of collateral in excess of corresponding repurchase obligation. The amount of collateral at-risk is limited to the outstanding repurchase obligation and not the entire collateral balance.

The following table provides information regarding the Company’s outstanding repurchase agreement borrowings during the three and nine months ended September 30, 2022 and 2021:

	September 30, 2022			September 30, 2021
Weighted-average outstanding balance during the three months ended	$	430,792		$	599,224
Weighted-average rate during the three months ended		2.60	%		0.20	%
Weighted-average outstanding balance during the nine months ended	$	351,960		$	601,897
Weighted-average rate during the nine months ended		1.46	%		0.27	%

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Long-Term Unsecured Debt

As of September 30, 2022 and December 31, 2021, the Company had $86,302 and $85,994, respectively, of outstanding long-term unsecured debentures, net of unamortized debt issuance costs of $1,379 and $1,687, respectively. The Company’s long-term unsecured debentures consisted of the following as of the dates indicated:

	September 30, 2022									December 31, 2021
	Senior Notes Due 2025			Senior Notes Due 2026			Trust Preferred Debt			Senior Notes Due 2025			Senior Notes Due 2026			Trust Preferred Debt
Outstanding   Principal	$	34,931		$	37,750		$	15,000		$	34,931		$	37,750		$	15,000
Annual    Interest Rate		6.75	%		6.000	%	LIBOR+ 2.25 - 3.00 %				6.75	%		6.000	%	LIBOR+ 2.25 - 3.00 %
Interest    Payment    Frequency	Quarterly			Quarterly			Quarterly			Quarterly			Quarterly			Quarterly
Weighted-    Average    Interest Rate		6.75	%		6.000	%		5.26	%		6.75	%		6.000	%		2.87	%
Maturity	March 15, 2025			August 1, 2026			2033 - 2035			March 15, 2025			August 1, 2026			2033 - 2035

On July 15, 2021, the Company completed a public offering of $37,750 of 6.000% Senior Notes due 2026 and received net proceeds of $36,570 after deducting underwriter discounts. On August 6, 2021, the Company redeemed all $23,821 in principal amount of its outstanding Senior Notes due 2023 at a redemption price of 100% of the principal amount plus unpaid interest thereon.

The Senior Notes due 2025 and the Senior Notes due 2026 are publicly traded on the New York Stock Exchange under the ticker symbols “AIC” and “AAIN,” respectively. The Senior Notes due 2025 and Trust Preferred Debt may be redeemed in whole or in part at any time and from time to time at the Company’s option at a redemption price equal to the principal amount plus accrued and unpaid interest. The Senior Notes due 2026 may be redeemed in whole or in part at any time and from time to time at the Company’s option on or after August 1, 2023 at a redemption price equal to the principal amount plus accrued and unpaid interest. The indenture governing the Senior Notes contains certain covenants, including limitations on the Company’s ability to merge or consolidate with other entities or sell or otherwise dispose of all or substantially all of the Company’s assets.

Long-Term Debt Secured by Single-family Properties

On September 28, 2021, McLean SFR Investment, LLC (“McLean SFR”), a wholly-owned subsidiary of Arlington Asset, entered into a loan agreement with a third-party lender to fund McLean SFR’s purchases of SFR properties. Under the terms of the loan agreement, loan advances may be drawn up to 74% of the fair value of eligible SFR properties up to a maximum loan amount of $150,000. Advances under the loan agreement may be drawn during the advance period, which ends on the earlier of the date the outstanding principal balance equals the maximum loan amount or March 28, 2023. The outstanding principal balance is due on October 9, 2026 and advances under the loan agreement bear interest at a fixed rate of 2.76%. During the advance period, McLean SFR is subject to a commitment fee on the unfunded commitment if the outstanding loan balance is below certain thresholds. As of September 30, 2022 and December 31, 2021, the outstanding balance was $56,801 and $39,178, respectively, net of unamortized debt issuance costs of $223 and $264, respectively.

Through September 28, 2024, the outstanding principal balance may be prepaid in an amount equal to the excess of (i) the sum of the present value of all remaining scheduled payments of principal and interest on the principal amount of the loan being prepaid discounted using a U.S. Treasury rate over (ii) the outstanding principal balance of the loan. Subsequent to September 28, 2024, the outstanding principal balance may be prepaid in an amount equal to the outstanding principal balance plus accrued interest. On March 25, 2022, McLean SFR entered into a waiver agreement with the lender that waived any prepayment fee determined in accordance with the prior sentence on the portion of outstanding loan balance prepaid with the sale proceeds from the sale of 371 SFR properties consummated on August 19, 2022 in exchange for a one-time waiver fee of 0.80% of the outstanding principal balance prepaid (for further information, see "Note 7. Investments in SFR Properties").

The loan is secured by a first priority interest in all the assets of McLean SFR and a first priority pledge of the equity interest of McLean SFR. If the outstanding principal balance of the loan is greater than 74% of the fair value of the eligible collateral, McLean SFR is required to either pledge additional collateral or prepay the loan in an amount so that the outstanding principal balance does not exceed 74% of the fair value of the eligible collateral. Under the terms of the loan agreement, if McLean SFR does not maintain a

17

minimum debt service coverage ratio for a specified time period, then all available cash of McLean SFR will be held as additional collateral for the loan amount until the minimum debt service coverage ratio is met. The obligations under the loan agreement may become recourse to Arlington Asset upon the occurrence of certain enumerated acts committed by McLean SFR or Arlington Asset. The loan agreement contains a minimum net worth financial covenant of Arlington Asset.

Note 10. Derivative Instruments

In the normal course of its operations, the Company is a party to financial instruments that are accounted for as derivative instruments. Derivative instruments are recorded at fair value as either “other assets” or “other liabilities” in the consolidated balance sheets, with all periodic changes in fair value reflected as a component of “investment and derivative gain (loss), net” in the consolidated statements of comprehensive income. Cash receipts or payments related to derivative instruments are classified as investing activities within the consolidated statements of cash flows.

Types and Uses of Derivative Instruments

Interest Rate Hedging Instruments

The Company is party to interest rate hedging instruments that are intended to economically hedge changes, attributable to changes in benchmark interest rates, in certain MBS fair values and future interest cash flows on the Company’s short-term financing arrangements. Interest rate hedging instruments may include centrally cleared interest rate swaps, exchange-traded instruments, such as U.S. Treasury note futures, Eurodollar futures, interest rate swap futures and options on futures, and non-exchange-traded instruments such as options on agency MBS. While the Company uses its interest rate hedging instruments to economically hedge a portion of its interest rate risk, it has not designated such contracts as hedging instruments for financial reporting purposes.

The Company exchanges cash “variation margin” with the counterparties to its interest rate hedging instruments at least on a daily basis based upon daily changes in fair value as measured by the Chicago Mercantile Exchange (“CME”), the central clearinghouse through which those instruments are cleared. In addition, the CME requires market participants to deposit and maintain an “initial margin” amount which is determined by the CME and is generally intended to be set at a level sufficient to protect the CME from the maximum estimated single-day price movement in that market participant’s contracts. However, futures commission merchants may require “initial margin” in excess of the CME’s requirement. Receivables recognized for the right to reclaim cash initial margin posted in respect of interest rate hedging instruments are included in the line item “deposits” in the accompanying consolidated balance sheets.

The daily exchange of variation margin associated with a centrally cleared or exchange-traded hedging instrument is legally characterized as the daily settlement of the instrument itself, as opposed to a pledge of collateral. Accordingly, the Company accounts for the daily receipt or payment of variation margin associated with its interest rate swaps and futures as a direct reduction to the carrying value of the derivative asset or liability, respectively. The carrying amount of interest rate swaps and futures reflected in the Company’s consolidated balance sheets is equal to the unsettled fair value of such instruments; because variation margin is exchanged on a one-day lag, the unsettled fair value of such instruments generally represents the change in fair value that occurred on the last day of the reporting period.

To-Be-Announced Agency MBS Transactions, Including “Dollar Rolls”

In addition to interest rate hedging instruments that are used for interest rate risk management, the Company is a party to derivative instruments that economically serve as investments, such as forward commitments to purchase fixed-rate “pass-through” agency MBS on a non-specified pool basis, which are known as to-be-announced (“TBA”) securities. A TBA security is a forward commitment for the purchase or sale of a fixed-rate agency MBS at a predetermined price, face amount, issuer, coupon, and stated maturity for settlement on an agreed upon future date. The specific agency MBS that will be delivered to satisfy the TBA trade is not known at the inception of the trade. The specific agency MBS to be delivered is determined 48 hours prior to the settlement date. The Company accounts for TBA securities as derivative instruments because the Company cannot assert that it is probable at inception and throughout the term of an individual TBA commitment that its settlement will result in physical delivery of the underlying agency MBS, or the individual TBA commitment will not settle in the shortest time period possible.

The Company’s agency MBS investment portfolio may include net purchase (or “net long”) positions in TBA securities, which are primarily the result of executing sequential series of “dollar roll” transactions. The Company executes dollar roll transactions as a means of investing in and financing non-specified fixed-rate agency MBS. Such transactions involve effectively delaying (or “rolling”) the settlement of a forward purchase of a TBA agency MBS by entering into an offsetting sale with the same counterparty prior to the settlement date, net settling the “paired-off” positions in cash, and contemporaneously entering, with the same counterparty, another forward purchase of a TBA agency MBS of the same characteristics for a later settlement date. TBA securities purchased for a forward settlement month are generally priced at a discount relative to TBA securities sold for settlement in the

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current month. This discount, often referred to as the dollar roll “price drop,” reflects compensation for the net interest income (interest income less financing costs) that is foregone as a result of relinquishing beneficial ownership of the MBS for the duration of the dollar roll (also known as “dollar roll income”). By executing a sequential series of dollar roll transactions, the Company is able to create the economic experience of investing in an agency MBS, financed with a repurchase agreement, over a period of time. Forward purchases and sales of TBA securities are accounted for as derivative instruments in the Company’s financial statements. Accordingly, dollar roll income is recognized as a component of “investment and derivative gain (loss), net” along with all other periodic changes in the fair value of TBA commitments.

In addition to transacting in net long positions in TBA securities for investment purposes, the Company may also, from time to time, transact in net sale (or “net short”) positions in TBA securities for the purpose of economically hedging a portion of the sensitivity of the fair value of the Company’s investments in agency MBS to changes in interest rates.

In addition to TBA transactions, the Company may, from time to time, enter into commitments to purchase or sell specified agency MBS that do not qualify as regular-way security trades. Such commitments are also accounted for as derivative instruments.

Under the terms of commitments to purchase or sell TBAs or specified agency MBS, the daily exchange of variation margin may occur based on changes in the fair value of the underlying agency MBS if a party to the transaction demands it. Receivables recognized for the right to reclaim cash collateral posted by the Company in respect of agency MBS purchase or sale commitments is included in the line item “deposits” in the accompanying consolidated balance sheets. Liabilities recognized for the obligation to return cash collateral received by the Company in respect of agency MBS purchase or sale commitments is included in the line item “other liabilities” in the accompanying consolidated balance sheets.

Derivative Instrument Population and Fair Value

The following table presents the fair value of the Company’s derivative instruments as of the dates indicated:

	September 30, 2022					December 31, 2021
	Assets		Liabilities			Assets		Liabilities
Interest rate swaps	$	260	$	—		$	—	$	(107	)
10-year U.S. Treasury note futures		—		—			16		—
Options on U.S. Treasury note futures		—		—			4		—
TBA commitments		4,162		(139	)		230		(121	)
Total	$	4,422	$	(139	)	$	250	$	(228	)

Interest Rate Swaps

The Company’s LIBOR based interest rate swap agreements represent agreements to make semiannual interest payments based upon a fixed interest rate and receive quarterly variable interest payments based upon the prevailing three-month LIBOR as of the preceding reset date. The Company’s Secured Overnight Financing Rate (“SOFR”) based interest rate swap agreements represent agreements to make annual interest payments based upon a fixed interest rate and receive annual variable interest payments based upon the daily SOFR over the preceding annual period.

The following table presents information about the Company’s interest rate swap agreements that were in effect as of September 30, 2022:

			Weighted-average:
	Notional Amount		Fixed Pay Rate			Variable Receive Rate			Net Receive (Pay) Rate			Remaining Life (Years)		Fair Value
Years to maturity:
Less than 3 years	$	125,000		1.82	%		2.78	%		0.96	%		1.6	$	52
3 to less than 10 years		70,000		2.53	%		3.11	%		0.58	%		5.4		208
Total / weighted-average	$	195,000		2.07	%		2.90	%		0.83	%		3.0	$	260

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The following table presents information about the Company’s interest rate swap agreements that were in effect as of December 31, 2021:

			Weighted-average:
	Notional Amount		Fixed Pay Rate			Variable Receive Rate			Net Receive (Pay) Rate			Remaining Life (Years)		Fair Value
Years to maturity:
Less than 3 years	$	50,000		0.71	%		0.13	%		(0.58	)%		1.8	$	(5	)
3 to less than 10 years		100,000		0.90	%		0.13	%		(0.77	)%		6.6		(102	)
Total / weighted-average	$	150,000		0.84	%		0.13	%		(0.71	)%		5.0	$	(107	)

U.S. Treasury Note Futures

The Company may purchase (“long”) or sell (“short”) exchange-traded U.S. Treasury note futures with the objective of economically hedging a portion of its interest rate risk. Upon the maturity date of these futures contracts, the Company has the option to either net settle each contract in cash in an amount equal to the difference between the then-current fair value of the underlying U.S. Treasury note and the contractual sale price inherent to the futures contract, or to physically settle the contract by purchasing or delivering the underlying U.S. Treasury note.

As of September 30, 2022, the Company had no outstanding positions of U.S. Treasury note futures. As of December 31, 2021, the Company held long positions of 10-year U.S. Treasury note futures with an aggregate notional amount of $25,000 with a maturity date in March 2022.

Options on U.S. Treasury Note Futures

The Company may purchase or sell exchange-traded options on U.S. Treasury note futures contracts with the objective of economically hedging a portion of the sensitivity of its investments in agency MBS to significant changes in interest rates. The Company may purchase put or call options which provide the Company with the right to sell to a counterparty or purchase from a counterparty U.S. Treasury note futures, and the Company may also write put or call options that provide a counterparty with the option to sell to the Company or buy from the Company U.S. Treasury note futures. The options may be exercised at any time prior to their expiry, and if exercised, may be net settled in cash or through physical receipt or delivery of the underlying futures contracts.

As of September 30, 2022, the Company had no outstanding options on U.S. Treasury note futures contracts.

Information about the Company’s outstanding options on 10-year U.S. Treasury note futures contracts as of December 31, 2021 is as follows:

	Notional Amount Long/(Short)		Weighted-average Strike Price		Implied Strike Rate (1)			Net Fair Value
Purchased call options:
January 2022 expiration	$	25,000		134.5		1.00	%	$	4

(1)The implied strike rate is estimated based upon the weighted average strike price per contract and the price of an equivalent 10-year U.S. Treasury note futures contract.

TBA Commitments

The following tables present information about the Company’s TBA commitments as of the dates indicated:

	September 30, 2022
	Notional Amount: Net Purchase (Sale) Commitment			Contractual Forward Price			Market Price			Fair Value
3.5% 30-year MBS sale commitments	$	(60,000	)	$	(56,803	)	$	(53,897	)	$	2,906
4.0% 30-year MBS sale commitments		(100,000	)		(93,359	)		(92,680	)		679
4.5% 30-year MBS sale commitments		(95,000	)		(90,859	)		(90,421	)		438
Total TBA commitments, net	$	(255,000	)	$	(241,021	)	$	(236,998	)	$	4,023

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	December 31, 2021
	Notional Amount: Net Purchase (Sale) Commitment			Contractual Forward Price			Market Price			Fair Value
2.5% 30-year MBS purchase commitments	$	225,000		$	229,043		$	229,148		$	105
2.5% 30-year MBS sale commitments		(225,000	)		(229,152	)		(229,148	)		4
Total TBA commitments, net	$	—		$	(109	)	$	—		$	109

Derivative Instrument Gains and Losses

The following tables provide information about the derivative gains and losses recognized within the periods indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Interest rate derivatives:
Interest rate swaps:
Net interest income (expense) (1)	$	258		$	(379	)	$	(315	)	$	(2,276	)
Unrealized (losses) gains, net		(1,420	)		(3,951	)		5,277			3,597
Gains (losses) realized upon early termination, net		5,238			1,149			8,687			(122	)
Total interest rate swap gains (losses), net		4,076			(3,181	)		13,649			1,199
U.S. Treasury note futures, net		—			872			(782	)		3,582
Options on U.S. Treasury note futures, net		—			—			(4	)		(20	)
Total interest rate derivative gains (losses), net		4,076			(2,309	)		12,863			4,761
TBA commitments:
TBA dollar roll (expense) income (2)		(421	)		1,064			682			3,678
Other gains (losses) on TBA commitments, net		2,998			(2,082	)		(1,971	)		(12,204	)
Total gains (losses) on TBA commitments, net		2,577			(1,018	)		(1,289	)		(8,526	)
Total derivative gains (losses), net	$	6,653		$	(3,327	)	$	11,574		$	(3,765	)

(1)Represents the periodic net interest settlement incurred during the period (often referred to as “net interest carry”). Also includes “price alignment interest” income earned or expense incurred on cumulative variation margin paid or received, respectively, associated with centrally cleared interest rate swap agreements.

(2)Represents the price discount of forward-settling TBA purchases (sales) relative to a contemporaneously executed “spot” TBA sale (purchase), which economically equates to net interest income (expense) that is earned (incurred) ratably over the period beginning on the settlement date of the sale (purchase) and ending on the settlement date of the forward-settling purchase (sale).

Derivative Instrument Activity

The following tables summarize the volume of activity, in terms of notional amount, related to derivative instruments for the periods indicated:

	For the Three Months Ended September 30, 2022
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	230,000	$	90,000	$	—		$	(125,000	)	$	195,000
TBA commitments, net		155,000		535,000		(435,000	)		—			255,000

	For the Three Months Ended September 30, 2021
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	525,000	$	—	$	—		$	(310,000	)	$	215,000
10-year U.S. Treasury note futures		45,000		—		(45,000	)		—			—
TBA commitments, net		—		1,125,000		(1,100,000	)		—			25,000

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	For the Nine Months Ended September 30, 2022
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	150,000	$	235,000	$	—		$	(190,000	)	$	195,000
10-year U.S. Treasury note futures		25,000		50,000		(50,000	)		(25,000	)		—
Purchased call options on 10-year U.S.   Treasury note futures		25,000		—		(25,000	)		—			—
TBA commitments, net		—		1,290,000		(1,035,000	)		—			255,000

	For the Nine Months Ended September 30, 2021
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	275,000	$	450,000	$	—		$	(510,000	)	$	215,000
2-year U.S. Treasury note futures		—		50,000		(50,000	)		—			—
10-year U.S. Treasury note futures		—		540,100		(365,000	)		(175,100	)		—
Purchased call options on 10-year U.S.   Treasury note futures		—		65,200		(65,200	)		—			—
TBA commitments, net		—		2,490,000		(2,465,000	)		—			25,000

Cash Collateral Posted and Received for Derivative and Other Financial Instruments

The following table presents information about the cash collateral posted by the Company in respect of its derivative and other financial instruments, which is included in the line item “deposits” in the accompanying consolidated balance sheets, for the dates indicated:

	September 30, 2022		December 31, 2021
Cash collateral posted for:
Interest rate swaps (cash initial margin)	$	3,228	$	4,174
U.S. Treasury note futures (cash initial margin)		—		375
Total cash collateral posted, net	$	3,228	$	4,549

Note 11. Offsetting of Financial Assets and Liabilities

The agreements that govern certain of the Company’s derivative instruments and collateralized short-term financing arrangements provide for a right of setoff in the event of default or bankruptcy with respect to either party to such transactions. The Company presents derivative assets and liabilities as well as collateralized short-term financing arrangements on a gross basis.

Receivables recognized for the right to reclaim cash initial margin posted in respect of interest rate derivative instruments are included in the line item “deposits” in the accompanying consolidated balance sheets.

The daily exchange of variation margin associated with a centrally cleared or exchange-traded derivative instrument is legally characterized as the daily settlement of the derivative instrument itself, as opposed to a pledge of collateral. Accordingly, the Company accounts for the daily receipt or payment of variation margin associated with its interest rate swaps and futures as a direct reduction to the carrying value of derivative asset or liability, respectively. The carrying amount of interest rate swaps and futures reflected in the Company’s consolidated balance sheets is equal to the unsettled fair value of such instruments; because variation margin is exchanged on a one-day lag, the unsettled fair value of such instruments generally represents the change in fair value that occurred on the last day of the reporting period.

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The following tables present information, as of the dates indicated, about the Company’s derivative instruments, short-term borrowing arrangements, and associated collateral, including those subject to master netting (or similar) arrangements:

	As of September 30, 2022
	Gross Amount Recognized		Amount Offset in the Consolidated Balance Sheets		Net Amount Presented in the Consolidated Balance Sheets		Gross Amount Not Offset in the Consolidated Balance Sheets					Net Amount
							Financial Instruments (1)			Cash Collateral (2)
Assets:
Derivative instruments:
Interest rate swaps	$	260	$	—	$	260	$	—		$	—	$	260
TBA commitments		4,162		—		4,162		(139	)		—		4,023
Total derivative instruments		4,422		—		4,422		(139	)		—		4,283
Total assets	$	4,422	$	—	$	4,422	$	(139	)	$	—	$	4,283
Liabilities:
Derivative instruments:
TBA commitments	$	139	$	—	$	139	$	(139	)	$	—	$	—
Total derivative instruments		139		—		139		(139	)		—		—
Repurchase agreements		429,910		—		429,910		(429,910	)		—		—
Total liabilities	$	430,049	$	—	$	430,049	$	(430,049	)	$	—	$	—

	As of December 31, 2021
	Gross Amount Recognized		Amount Offset in the Consolidated Balance Sheets		Net Amount Presented in the Consolidated Balance Sheets		Gross Amount Not Offset in the Consolidated Balance Sheets						Net Amount
							Financial Instruments (1)			Cash Collateral (2)
Assets:
Derivative instruments:
TBA commitments	$	230	$	—	$	230	$	(105	)	$	—		$	125
10-year U.S. Treasury note futures		16		—		16		—			—			16
Options on U.S. Treasury note futures		4		—		4		—			—			4
Total derivative instruments		250		—		250		(105	)		—			145
Total assets	$	250	$	—	$	250	$	(105	)	$	—		$	145
Liabilities:
Derivative instruments:
Interest rate swaps	$	107	$	—	$	107	$	—		$	(107	)	$	—
TBA commitments		121		—		121		(105	)		—			16
Total derivative instruments		228		—		228		(105	)		(107	)		16
Repurchase agreements		446,624		—		446,624		(446,624	)		—			—
Total liabilities	$	446,852	$	—	$	446,852	$	(446,729	)	$	(107	)	$	16

(1)Does not include the fair value amount of financial instrument collateral pledged in respect of repurchase agreements that exceeds the associated liability presented in the consolidated balance sheets.

(2)Does not include the amount of cash collateral pledged in respect of derivative instruments and repurchase agreements that exceeds the associated liability presented in the consolidated balance sheets.

Note 12. Fair Value Measurements

Fair Value of Financial Instruments

The accounting principles related to fair value measurements define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial Accounting Standards Board Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, giving the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3) as described below:

Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible by the Company at the measurement date;

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Level 2 Inputs - Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and

Level 3 Inputs - Unobservable inputs for the asset or liability, including significant judgments made by the Company about the assumptions that a market participant would use.

The Company measures the fair value of the following assets and liabilities:

Investments in Financial Assets

Agency MBS - The Company’s investments in agency MBS are classified within Level 2 of the fair value hierarchy. Inputs to fair value measurements of the Company’s investments in agency MBS include price estimates obtained from third-party pricing services. In determining fair value, third-party pricing services use a market approach. The inputs used in the fair value measurements performed by the third-party pricing services are based upon readily observable transactions for securities with similar characteristics (such as issuer/guarantor, coupon rate, stated maturity, and collateral pool characteristics) occurring on the measurement date. The Company makes inquiries of the third-party pricing sources and reviews their documented valuation methodologies to understand the significant inputs and assumptions used to determine prices. The Company reviews the various third-party fair value estimates and performs procedures to validate their reasonableness, including comparison to recent trading activity for similar securities and an overall review for consistency with market conditions observed as of the measurement date.

Credit securities – The Company's investments in commercial MBS are classified within Level 2 of the fair value hierarchy. Inputs to fair value measurements of the Company's investments in commercial MBS include quoted prices for similar assets in recent market transactions and estimates obtained from third-party sources including pricing services and dealers. In determining fair value, third-party pricing sources use a market approach. The inputs used in the fair value measurements performed by third-party pricing sources are based upon observable transactions for securities with similar characteristics. The Company reviews the third-party fair value estimates and performs procedures to validate their reasonableness, including comparisons to recent trading activity observed for similar securities as well as an internally derived discounted future cash flow measurement. The Company’s investments in a non-agency MBS collateralized by a pool of business purpose residential mortgage loans and ABS collateralized by residential solar panel loans are classified within Level 3 of the fair value hierarchy.

To measure the fair value of the Company’s non-agency MBS investment secured by a pool of business purpose residential mortgage loans, the Company uses an income approach by preparing an estimate of the present value of the amount and timing of the cash flows expected to be collected from the security over its expected remaining life. To prepare the estimate of cash flows expected to be collected, the Company uses significant judgment to develop assumptions about the future performance of the pool of business purpose residential mortgage loans that serve as collateral, including loan-level probabilities of default and loss-given-default. As of September 30, 2022 and December 31, 2021, the remaining population of business purpose residential mortgage loans serving as collateral to the Company's non-agency MBS investment represented less than 5% and 10% of the original collateral pool, respectively. Because the repayment of business purpose residential mortgage loans is often largely based on the ability of the borrower to sell the mortgaged property or to convert the property for rental purposes and obtain refinancing in the form of a longer-term loan, relatively high delinquency and default rates are common and expected attributes of this asset class. The following table presents the weighted-average of the significant inputs to the fair value measurement of the Company’s non-agency MBS secured by business purpose residential mortgage loans as of dates indicated:

	September 30, 2022			December 31, 2021
Probability of default		18.2	%		77.7	%
Loss-given-default		18.4	%		15.8	%

Inputs to fair value measurements of the Company’s investments in ABS collateralized by residential solar panel loans includes quoted prices obtained from dealers and, when available, observable market information for the same or similar securities. In determining fair value, dealers may use a market approach or an income approach, depending upon the type and level of relevant market information available as of the measurement date. The significant inputs used in the fair value measurements performed by dealers are often unobservable as ABS collateralized by residential solar panel loans trade infrequently. The Company reviews the fair value estimates obtained from dealers and performs procedures to validate their reasonableness, including comparisons to an internally derived discounted future cash flow measurement and, when available, recent trading activity observed for similar securities.

Loans – The Company’s commercial mortgage loan investment is classified within Level 3 of the fair value hierarchy. To measure the fair value of its mortgage loan investment, the Company uses an income approach by preparing an estimate of the present value of the expected future cash flows of the loan over its expected remaining life, discounted at a current market rate. The significant unobservable inputs to the fair value measurement of the Company’s mortgage loan investment are the estimated

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probability of default and the discount rate, which is based on current market yields and interest rate spreads for a similar loan. As of September 30, 2022, the estimated probability of default and discount rate for the Company’s mortgage loan investment were 0% and 6.4%, respectively. As of December 31, 2021, the estimated probability of default and discount rate for the Company’s mortgage loan investment were 0% and 5.6%, respectively.

Mortgage loans and secured debt of consolidated VIEs – The Company has elected to apply a fair value measurement practical expedient permitted by GAAP to measure the fair value of the mortgage loans and debt obligations of its consolidated VIEs. The fair value measurement practical expedient is permitted to be applied to consolidated “collateralized financing entities,” which are VIEs for which the financial liabilities of the VIE have contractual recourse solely to the financial assets of the VIE.

As of September 30, 2022 and December 31, 2021, pursuant to the practical expedient, the Company measured the fair value of both the mortgage loans and the debt obligations of its consolidated VIE of business purpose residential mortgage loans based upon the fair value of the mortgage loans of the VIE. As of December 31, 2021, the senior debt obligations of the consolidated VIE had been fully extinguished and only the subordinate debt obligation of the consolidated VIE remained. The business purpose residential mortgage loans and subordinate debt obligation of the consolidated VIE are classified within Level 3 of the fair value hierarchy. To measure the fair value of the business purpose residential mortgage loans of the consolidated VIE as of September 30, 2022 and December 31, 2021, the Company used significant judgment to develop assumptions about the future performance of each business purpose residential mortgage loan, which included determining loan-level probabilities of default and loss-given-default. As of September 30, 2022 and December 31, 2021, the remaining population of business purpose residential mortgage loans represented less than 5% and 10% of the original collateral pool, respectively. Because the repayment of business purpose residential mortgage loans is often largely based on the ability of the borrower to sell the mortgaged property or to convert the property for rental purposes and obtain refinancing in the form of a longer-term loan, relatively high delinquency and default rates are common and expected attributes of this asset class. The following table presents the weighted-average of the significant inputs to the fair value measurement of the business purpose residential mortgage loans of the Company’s consolidated VIE as of the periods indicated:

	September 30, 2022			December 31, 2021
Probability of default		50.3	%		66.2	%
Loss-given-default		9.6	%		8.6	%

As of September 30, 2022, the Company measured the fair value of both the residential mortgage loans and the debt obligations of its consolidated VIE of residential mortgage loans based upon the fair value of the debt obligations as the fair value of the debt securities issued by the VIE were more observable to the Company than the fair value of the underlying mortgage loans.

The senior and mezzanine debt obligations of the consolidated VIE of residential mortgage loans are classified within Level 2 of the fair value hierarchy. Inputs to the fair value measurements of the senior and mezzanine debt obligations of the consolidated VIE include quoted prices for similar assets in recent market transactions and estimates obtained from third-party pricing sources, including pricing services and dealers. In determining fair value, third-party pricing sources use a market approach. The inputs used in the fair value measurements performed by third-party pricing sources were based upon observable transactions for securities with similar characteristics.

The residential mortgage loans and the subordinate and excess interest-only debt obligations of the consolidated VIE of residential mortgage loans (held by the Company as investments and eliminated against the associated debt of the VIE in consolidation) are classified within Level 3 of the fair value hierarchy. To measure the fair value of the subordinate and excess interest-only debt obligations of the consolidated VIE of residential mortgage loans, the Company uses an income approach by preparing an estimate of the present value of the amount and timing of the cash flows expected to be collected from each security over its expected remaining life. To prepare the estimate of cash flows expected to be collected, the Company uses significant judgment to develop assumptions about the future performance of the pool of residential mortgage loans that serve as collateral, including assumptions about the timing and amount of credit losses and prepayments. The significant unobservable inputs to the fair value measurement include the estimated rate of prepayment, rate of default and loss-given-default for the underlying pool of mortgage loans as well as the discount rate, which represents a market participant’s current required rate of return for a similar instrument. The following table presents the weighted-average of the significant inputs to the fair value measurement of the subordinate and excess interest-only debt obligations of its consolidated VIE of residential mortgage loans as of September 30, 2022:

	Subordinate Debt Obligation			Excess Interest-Only Debt Obligations
Annualized voluntary prepayment rate		17.3	%		17.3	%
Annualized default rate		0.5	%		0.5	%
Loss-given-default		17.5	%		17.5	%
Discount rate		7.8	%		17.7	%

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MSR financing receivables – The Company’s MSR financing receivables are classified within Level 3 of the fair value hierarchy. The Company uses a nationally recognized, independent third-party mortgage analytics and valuation firm to estimate the fair value of the underlying MSRs from which the Company’s MSR financing receivables primarily derive their value. The third-party valuation firm estimates the fair value of the underlying MSRs using a discounted cash flow analysis using their proprietary prepayment models and market analysis. The Company corroborates the third-party valuation firm’s estimate of the fair value of the underlying MSRs and evaluates the estimate for reasonableness. The significant unobservable inputs to the fair value measurement of the underlying MSRs include the following:

•the discount rate, which represents a market participant’s current required rate of return for similar MSRs;

•expected rates of prepayment within the serviced pools of mortgage loans; and

•annual per-loan cost of servicing.

The following table presents the significant unobservable inputs to the fair value measurement of the MSRs underlying the Company’s MSR financing receivables as of the periods indicated:

	September 30, 2022			December 31, 2021
Discount rate		8.5	%		9.0	%
Annualized prepayment rate		7.0	%		10.1	%
Annual per-loan cost of servicing (current loans)	$	65.00		$	65.00

Pursuant to the Company’s MSR financing receivable arrangements, upon the consummation of three-year performance periods ending December 31, 2023 and April 1, 2024, the Company’s mortgage servicing counterparty is entitled to an incentive fee payment equal to a percentage of the total return of the underlying MSRs in excess of a hurdle rate of return. Accordingly, the fair value of the Company’s MSR financing receivables reflects the present value of any expected incentive fee payment that would be owed to its counterparty. The present value of the expected incentive fee payment is estimated based upon the timing and amount of capital contributions from (and cash distributions to) the Company to (from) its mortgage servicing counterparty to date as well as the future expected cash flows from the MSR financing receivables over the remaining performance periods, which is derived from the current fair value of the underlying reference MSRs. As of September 30, 2022 and December 31, 2021, the present value of the expected incentive fee payment reflected in fair value of the Company’s MSR financing receivables was $13,057 and $3,820, respectively.

Derivative instruments

Exchange-traded derivative instruments - Exchange-traded derivative instruments, which include U.S. Treasury note futures, Eurodollar futures, interest rate swap futures, and options on futures, are classified within Level 1 of the fair value hierarchy as they are measured using quoted prices for identical instruments in liquid markets.

Interest rate swaps - Interest rate swaps are classified within Level 2 of the fair value hierarchy. The fair values of the Company’s centrally cleared interest rate swaps are measured using the daily valuations reported by the clearinghouse through which the instrument was cleared. In performing its end-of-day valuations, the clearinghouse constructs forward interest rate curves (for example, three-month LIBOR or SOFR forward rates) from its specific observations of that day’s trading activity. The clearinghouse uses the applicable forward interest rate curve to develop a market-based forecast of future remaining contractually required cash flows for each interest rate swap. Each market-based cash flow forecast is then discounted using the SOFR curve (sourced from the Federal Reserve Bank of New York) to determine a net present value amount which represents the instrument’s fair value.

Forward-settling purchases and sales of TBA securities – Forward-settling purchases and sales of TBA securities are classified within Level 2 of the fair value hierarchy. The fair value of each forward-settling TBA contract is measured using price estimates obtained from a third-party pricing service, which are based upon readily observable transaction prices occurring on the measurement date for forward-settling contracts to buy or sell TBA securities with the same guarantor, contractual maturity, and coupon rate for delivery on the same forward settlement date as the commitment under measurement.

Other

Long-term unsecured debt - As of September 30, 2022 and December 31, 2021, the carrying value of the Company’s long-term unsecured debt was $86,302 and $85,994, respectively, net of unamortized debt issuance costs, and consists of Senior Notes and trust preferred debt issued by the Company. The Company’s estimate of the fair value of long-term unsecured debt is $79,670 and $84,821 as of September 30, 2022 and December 31, 2021, respectively. The Company’s Senior Notes, which are publicly traded on the New York Stock Exchange, are classified within Level 1 of the fair value hierarchy. Trust preferred debt is classified within Level 2 of the fair value hierarchy as the fair value is estimated based on the quoted prices of the Company’s publicly traded Senior Notes.

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Long-term debt secured by single-family properties – As of September 30, 2022 and December 31, 2021, the carrying value of the Company’s long-term debt secured by single-family properties was $56,801 and $39,178, respectively, net of unamortized debt issuance costs. As of September 30, 2022 and December 31, 2021, the Company’s estimate of the fair value of its long-term debt secured by single-family properties was $49,438 and $38,562, respectively. The Company’s long-term debt secured by single-family properties is classified within Level 3 of the fair value hierarchy.

Investments in equity securities of publicly-traded companies – As of September 30, 2022 and December 31, 2021, the Company had investments in equity securities of publicly-traded companies at fair value of $352 and $5,267, respectively, which is included in the line item “other assets” in the accompanying consolidated balance sheets. Investments in publicly traded stock are classified within Level 1 of the fair value hierarchy as their fair value is measured based on unadjusted quoted prices in active exchange markets for identical assets.

Investments in equity securities of non-public companies and investment funds – As of September 30, 2022 and December 31, 2021, the Company had investments in equity securities of non-public companies and investment funds measured at fair value of $5,248 and $7,388, respectively, which are included in the line item “other assets” in the accompanying consolidated balance sheets.

Investments in equity securities of non-public companies and investment funds are classified within Level 3 of the fair value hierarchy. The fair values of the Company’s investments in equity securities of non-public companies and investment funds are not readily determinable. Accordingly, the Company estimates fair value by estimating the enterprise value of the investee which it then allocates to the investee’s securities in the order of their preference relative to one another. To estimate the enterprise value of the investee, the Company uses traditional valuation methodologies based on income and market approaches, including the consideration of recent investments in, or tender offers for, the equity securities of the investee, a discounted cash flow analysis and a comparable guideline public company valuation. The primary unobservable inputs used in estimating the fair value of an equity security of a non-public company include (i) a stock price to net asset multiple for similar public companies that is applied to the entity’s net assets, (ii) a discount factor for lack of marketability and control, and (iii) a cost of equity discount rate, used to discount to present value the equity cash flows available for distribution and the terminal value of the entity. As of September 30, 2022, the stock price to net asset multiple for similar public companies, the discount factor for lack of marketability and control, and the cost of equity discount rate used as inputs were 97 percent, 15 percent, and 16 percent, respectively. As of December 31, 2021, the stock price to net asset multiple for similar public companies, the discount factor for lack of marketability and control, and the cost of equity discount rate used as inputs were 95 percent, 15 percent, and 16 percent, respectively. For its investments in investment funds, the Company estimates fair value based upon the investee’s net asset value per share.

Financial assets and liabilities for which carrying value approximates fair value - Cash and cash equivalents, restricted cash, deposits, receivables, repurchase agreements, payables, and other assets (aside from those previously discussed) and liabilities are generally reflected in the consolidated balance sheets at their cost, which, due to the short-term nature of these instruments and their limited inherent credit risk, approximates fair value.

Fair Value Hierarchy

Financial Instruments Measured at Fair Value on a Recurring Basis

The following tables set forth financial instruments measured at fair value by level within the fair value hierarchy as of September 30, 2022 and December 31, 2021. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	September 30, 2022
	Total		Level 1		Level 2		Level 3
Financial assets:
Agency MBS	$	445,122	$	—	$	445,122	$	—
MSR financing receivables		164,585		—		—		164,585
Loans		29,375		—		—		29,375
Credit securities		115,783		—		108,330		7,453
Mortgage loans of consolidated VIEs		203,456		—		—		203,456
Derivative assets		4,422		—		4,422		—
Other assets		5,600		352		—		5,248
Financial liabilities:
Secured debt of consolidated VIEs		182,336		—		172,012		10,324
Derivative liabilities		139		—		139		—

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	December 31, 2021
	Total		Level 1		Level 2		Level 3
Financial assets:
Agency MBS	$	483,927	$	—	$	483,927	$	—
MSR financing receivables		125,018		—		—		125,018
Loans		29,697		—		—		29,697
Credit securities		26,222		—		—		26,222
Mortgage loans of consolidated VIE		7,442		—		—		7,442
Derivative assets		250		20		230		—
Other assets		12,655		5,267		—		7,388
Financial liabilities:
Secured debt of consolidated VIE		508		—		—		508
Derivative liabilities		228		—		228		—

Level 3 Financial Assets and Liabilities

The table below sets forth an attribution of the change in the fair value of the Company’s Level 3 financial assets that are measured at fair value on a recurring basis for the periods indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Beginning balance	$	393,501		$	206,729		$	195,767		$	166,428
Net (loss) gain included in "Investment and derivative    gain (loss), net"		(13,199	)		4,504			(11,583	)		9,639
Additions from consolidation of VIEs		—			—			276,594			—
Transfers to real estate owned by consolidated VIE		(78	)		—			(277	)		—
Purchases		40,474			35,601			61,693			128,614
Sales		—			—			(12,406	)		(1,662	)
Payments, net		(14,671	)		(68,810	)		(110,052	)		(128,350	)
Accretion (amortization) of discount (premium), net		4,090			2,411			10,381			5,766
Ending balance	$	410,117		$	180,435		$	410,117		$	180,435
Net unrealized (losses) gains included in earnings for the    period for Level 3 assets still held at the reporting date	$	(13,199	)	$	4,504		$	(10,552	)	$	9,719

The table below sets forth an attribution of the change in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis for the periods indicated:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2022			2021		2022			2021
Beginning balance	$	11,521		$	640	$	508		$	576
Net (gain) loss included in "Investment and derivative   gain (loss), net"		(808	)		9		(2,140	)		(1	)
Additions from consolidation of VIEs		—			—		14,278			—
Payments, net		(374	)		3		(2,170	)		3
(Amortization) accretion of (premium) discount, net		(15	)		—		(152	)		74
Ending balance	$	10,324		$	652	$	10,324		$	652
Net unrealized (gains) losses included in earnings for the    period for Level 3 liabilities still held at the reporting date	$	(808	)	$	9	$	(2,140	)	$	(1	)

Note 13. Income Taxes

The Company has elected to be taxed as a REIT under the Internal Revenue Code commencing upon filing its tax return for its taxable year ended December 31, 2019. As a REIT, the Company is required to distribute annually 90% of its REIT taxable income. So long as the Company continues to qualify as a REIT, it will generally not be subject to U.S. federal or state corporate income taxes on its taxable income to the extent that it distributes all of its annual taxable income to its shareholders on a timely basis. At present, it

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is the Company’s intention to distribute 100% of its taxable income, although the Company will not be required to do so. The Company intends to make distributions of its REIT taxable income within the time limits prescribed by the Internal Revenue Code, which may extend into the subsequent taxable year. Accordingly, the Company does not expect to incur an income tax liability on its REIT taxable income.

As of September 30, 2022, the Company had estimated federal net operating loss (“NOL”) carryforwards of $162,828 that can be used to offset future taxable ordinary income and reduce its REIT distribution requirements. NOL carryforwards totaling $14,588 expire in 2028 and NOL carryforwards totaling $148,240 have no expiration period. For the NOL carryforwards that have no expiration period, the Company is limited to utilizing NOL carryforwards to 80% of the taxable income in any one year. As of September 30, 2022, the Company had estimated federal net capital loss (“NCL”) carryforwards of $156,818 that can be used to offset future net capital gains. The scheduled expirations of the Company’s NCL carryforwards are $3,763 in 2022, $110,323 in 2023, $14,187 in 2026 and $28,545 in 2027. The Company’s estimated NOL and NCL carryforwards as of September 30, 2022 are subject to potential adjustments up to the time of filing of the Company’s income tax returns.

The Company and certain subsidiaries have made joint elections to treat such subsidiaries as taxable REIT subsidiaries (“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. As such, each of these TRSs is taxable as a C corporation and subject to federal, state and local income taxes based upon their taxable income. For the three months ended September 30, 2022 and 2021, the Company recognized a provision for income taxes of $1,074 and $436, respectively, on the pre-tax net income of its TRSs. For the nine months ended September 30, 2022 and 2021, the Company recognized a provision for income taxes of $4,163 and $758, respectively, on the pre-tax income of its TRSs.

The Company recognizes uncertain tax positions in the financial statements only when it is more-likely-than-not that the position will be sustained upon examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more-likely-than-not be realized upon settlement. A liability is established for differences between positions taken in a tax return and the financial statements. As of September 30, 2022 and December 31, 2021, the Company assessed the need for recording a provision for any uncertain tax position and has made the determination that such provision is not necessary. If the Company were to incur income tax related interest and penalties, the Company’s policy is to classify them as a component of provision for income taxes.

The Company is subject to examination by the Internal Revenue Service (“IRS”) and state and local authorities in jurisdictions where the Company has significant business operations. The Company’s federal tax returns for 2018 and forward remain subject to examination by the IRS.

Note 14. Earnings (Loss) Per Share

Basic earnings (loss) per share includes no dilution and is computed by dividing net income or loss applicable to common stock by the weighted-average number of common shares outstanding for the respective period. Diluted earnings per share includes the impact of dilutive securities such as unvested shares of restricted stock, restricted stock units, and performance share units. The following table presents the computations of basic and diluted earnings (loss) per share for the periods indicated:

	Three Months Ended September 30,					Nine Months Ended September 30,
(Shares in thousands)	2022		2021			2022			2021
Basic weighted-average common shares outstanding		28,338		31,927			28,973			32,720
Performance share units, unvested restricted stock units,    and unvested restricted stock		575		—			—			—
Diluted weighted-average common shares outstanding		28,913		31,927			28,973			32,720
Net income (loss) available (attributable) to common stock	$	2,756	$	(981	)	$	(1,087	)	$	(15,526	)
Basic earnings (loss) per common share	$	0.10	$	(0.03	)	$	(0.04	)	$	(0.47	)
Diluted earnings (loss) per common share	$	0.10	$	(0.03	)	$	(0.04	)	$	(0.47	)

The diluted loss per share for the nine months ended September 30, 2022 did not include the antidilutive effect of 530,673 shares of unvested shares of restricted stock, restricted stock units, and performance share units. The diluted loss per share for the three and nine months ended September 30, 2021 did not include the antidilutive effect of 315,576 and 312,371 shares of unvested shares of restricted stock, restricted stock units, and performance share units, respectively.

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Note 15. Stockholders’ Equity

Common Stock

The Company has authorized common share capital of 450,000,000 shares of Class A common stock, par value $0.01 per share, and 100,000,000 shares of Class B common stock, par value $0.01 per share. Holders of the Class A and Class B common stock are entitled to one vote and three votes per share, respectively, on all matters voted upon by the shareholders. Shares of Class B common stock are convertible into shares of Class A common stock on a one-for-one basis at the option of the Company in certain circumstances including either (i) upon sale or other transfer, or (ii) at the time the holder of such shares of Class B common stock ceases to be employed by the Company. As of September 30, 2022 and December 31, 2021, there were no outstanding shares of Class B common stock. The Class A common stock is publicly traded on the New York Stock Exchange under the ticker symbol “AAIC.”

Common Equity Distribution Agreements

On August 10, 2018, the Company entered into separate common equity distribution agreements with equity sales agents JMP Securities LLC, B. Riley FBR, Inc., JonesTrading Institutional Services LLC and Ladenburg Thalmann & Co. Inc. pursuant to which the Company may offer and sell, from time to time, up to 12,597,423 shares of the Company’s Class A common stock.

Pursuant to the common equity distribution agreements, shares of the Company’s common stock may be offered and sold through the equity sales agents in transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, including sales made directly on the NYSE or sales made to or through a market maker other than on an exchange or, subject to the terms of a written notice from the Company, in privately negotiated transactions.

During the three and nine months ended September 30, 2022 and the year ended December 31, 2021, there were no issuances of common stock under the common equity distribution agreements.

As of September 30, 2022, the Company had 11,302,160 shares of Class A common stock available for sale under the common equity distribution agreements.

Common Share Repurchase Program

On July 31, 2020, the Company announced that its Board of Directors authorized a share repurchase program pursuant to which the Company may repurchase up to 18,000,000 shares of Class A common stock (the "Repurchase Program"). Repurchases under the Repurchase Program may be made from time to time on the open market and in private transactions at management’s discretion in accordance with applicable federal securities laws. The timing of repurchases and the exact number of shares of Class A common stock to be repurchased will depend upon market conditions and other factors. The Repurchase Program is funded using the Company’s cash on hand and cash generated from operations. The Repurchase Program has no expiration date and may be suspended or terminated at any time without prior notice.

During the three and nine months ended September 30, 2022, the Company repurchased 472,357 and 2,429,493 shares of Class A common stock for a total purchase price of $1,493 and $8,232, respectively. During the year ended December 31, 2021, the Company repurchased 3,242,371 shares of Class A common stock for a total purchase price of $12,475. As of September 30, 2022, there remain available for repurchase 10,560,785 shares of Class A common stock under the Repurchase Program.

Preferred Stock

The Company has authorized preferred share capital of (i) 100,000 shares designated as Series A Preferred Stock that is unissued; (ii) 2,000,000 shares designated as 7.00% Series B Cumulative Perpetual Redeemable Preferred Stock (the “Series B Preferred Stock”), par value of $0.01 per share; (iii) 2,500,000 shares designated as 8.250% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”), par value of $0.01 per share; and (iv) 20,400,000 shares of undesignated preferred stock. The Company’s Board of Directors has the authority, without further action by the shareholders, to issue additional preferred stock in one or more series and to fix the terms and rights of the preferred stock. The Company’s preferred stock ranks senior to its common stock 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. The Company’s preferred stock ranks on parity with each other. The Series B Preferred Stock and Series C Preferred Stock are publicly traded on the New York Stock Exchange under the ticker symbols “AAIC PrB” and “AAIC PrC,” respectively.

The Series B Preferred Stock has no stated maturity, is not subject to any sinking fund and will remain outstanding indefinitely unless repurchased or redeemed by the Company. Holders of Series B Preferred Stock have no voting rights, except under limited conditions, and are entitled to receive a cumulative cash dividend at a rate of 7.00% per annum of their $25.00 per share liquidation

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preference (equivalent to $1.75 per annum per share). Shares of Series B Preferred Stock are redeemable at $25.00 per share, plus accumulated and unpaid dividends (whether or not authorized or declared), exclusively at the Company’s option. Dividends are payable quarterly in arrears on the 30th day of March, June, September and December of each year, when and as declared. The Company has declared and paid all required quarterly dividends on the Company’s Series B Preferred Stock to date in 2022.

The Series C Preferred Stock has no stated maturity, is not subject to any sinking fund and will remain outstanding indefinitely unless repurchased or redeemed by the Company. Holders of Series C Preferred Stock have no voting rights, except under limited conditions, and are entitled to receive a cumulative cash dividend (i) from and including the original issue date to, but excluding, March 30, 2024 at a fixed rate equal to 8.250% per annum of the $25.00 per share liquidation preference (equivalent to $2.0625 per annum per share) and (ii) from and including March 30, 2024, at a floating rate equal to three-month LIBOR plus a spread of 5.664% per annum of the $25.00 per share liquidation preference. Shares of Series C Preferred Stock are redeemable at $25.00 per share, plus accumulated and unpaid dividends (whether or not authorized or declared), exclusively at the Company’s option commencing on March 30, 2024 or earlier upon the occurrence of a change in control or under circumstances where it is necessary to preserve the Company’s qualification as a REIT. Dividends are payable quarterly in arrears on the 30th day of March, June, September and December of each year, when and as declared. The Company has declared and paid all required quarterly dividends on the Company’s Series C Preferred Stock to date in 2022.

During the three and nine months ended September 30, 2022, the Company repurchased 79,848 and 152,211 shares of Series C Preferred Stock for a total purchase price of $1,640 and $3,389, respectively. There were no shares of Series C Preferred Stock repurchased by the Company during the year ended December 31, 2021.

Preferred Equity Distribution Agreements

The Company is party to an amended and restated equity distribution agreement with JonesTrading Institutional Services LLC and Ladenburg Thalmann & Co. Inc., pursuant to which the Company may offer and sell, from time to time, up to 1,647,370 shares of the Company’s Series B Preferred Stock. Pursuant to the Series B preferred equity distribution agreement, shares of the Company’s Series B Preferred stock may be offered and sold through the preferred equity sales agents in transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, including sales made directly on the NYSE or sales made to or through a market maker other than on an exchange or, subject to the terms of a written notice from the Company, in privately negotiated transactions.

During the nine months ended September 30, 2022, the Company issued 6,058 shares of Series B Preferred Stock at a weighted average public offering price of $24.87 per share for proceeds net of selling commissions and expenses of $149 under the Series B preferred equity distribution agreement. There were no issuances of Series B Preferred Stock during the three months ended September 30, 2022. During the year ended December 31, 2021, the Company issued 37,337 shares of Series B preferred stock at a weighted average public offering price of $24.99 per share for proceeds net of selling commissions and expenses of $919 under the Series B preferred equity distribution agreement. As of September 30, 2022, the Company had 1,602,566 shares of Series B Preferred stock available for sale under the preferred equity distribution agreement.

Shareholder Rights Agreement

On June 1, 2009, the Board of Directors approved a shareholder rights agreement (“Rights Plan”) and the Company’s shareholders approved the Rights Plan at its annual meeting of shareholders on June 2, 2010. On April 9, 2018, the Board of Directors approved a first amendment to the Rights Plan (“First Amendment”) to extend the term for an additional three years and the Company’s shareholders approved the First Amendment at its annual meeting of shareholders on June 14, 2018. On April 11, 2022, the Board of Directors approved a second amendment to the Rights Plan (“Second Amendment”) to further extend the term until June 4, 2025 and the Company's shareholders approved the Second Amendment at its annual meeting of shareholders on June 16, 2022. The Second Amendment also decreased the Purchase Price (as defined under the Rights Plan) from $70.00 to $21.30.

Under the terms of the Rights Plan, in general, if a person or group acquires or commences a tender or exchange offer for beneficial ownership of 4.9% or more of the outstanding shares of our Class A common stock upon a determination by our Board of Directors (an “Acquiring Person”), all of our other Class A and Class B common shareholders will have the right to purchase securities from us at a discount to such securities’ fair market value, thus causing substantial dilution to the Acquiring Person.

The Board of Directors adopted the Rights Plan in an effort to protect against a possible limitation on the Company’s ability to use its NOL carryforwards, NCL carryforwards, and built-in losses under Sections 382 and 383 of the Internal Revenue Code. The Company’s ability to use its NOLs, NCLs and built-in losses would be limited if it experienced an “ownership change” under Section 382 of the Internal Revenue Code. In general, an “ownership change” would occur if there is a cumulative change in the ownership of the Company’s common stock of more than 50% by one or more “5% shareholders” during a three-year period. The Rights Plan was

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adopted to dissuade any person or group from acquiring 4.9% or more of the Company’s outstanding Class A common stock, each, an Acquiring Person, without the approval of the Board of Directors and triggering an “ownership change” as defined by Section 382.

The Rights Plan, as amended by the Second Amendment, and any outstanding rights will expire at the earliest of (i) June 4, 2025, (ii) the time at which the rights are redeemed or exchanged pursuant to the Rights Plan, (iii) the repeal of Section 382 and 383 of the Internal Revenue Code or any successor statute if the Board of Directors determines that the Rights Plan is no longer necessary for the preservation of the applicable tax benefits, or (iv) the beginning of a taxable year to which the Board of Directors determines that no applicable tax benefits may be carried forward.

Note 16. Long-Term Incentive Plan

The Company provides its employees and its non-employee directors with long-term incentive compensation in the form of stock-based awards. On April 29, 2021, the Board of Directors adopted the Arlington Asset Investment Corp. 2021 Long-Term Incentive Plan (the “2021 Plan”), which was approved by the Company’s shareholders and became effective on July 15, 2021. The 2021 Plan replaced the Arlington Asset Investment Corp. 2014 Long-Term Incentive Plan (the “2014 Plan”). No additional grants will be made under the 2014 Plan. However, previous grants under the 2014 Plan and any long-term incentive plans prior to the 2014 Plan (collectively, the “Prior Plans”) will remain in effect subject to the terms of the Prior Plans and the applicable award agreement.

Under the 2021 Plan, a maximum number of 5,256,076 shares of Class A common stock of the Company, subject to adjustment as set forth in the 2021 Plan, were authorized for issuance and may be issued to employees, directors, consultants, advisors and independent contractors who provide bona fide services to the Company and its affiliates. If an award under the 2021 Plan or Prior Plans is canceled, terminated, forfeited or otherwise settled without the issuance of shares subject to such award, those shares will be available for future grants under the 2021 Plan. In addition, shares delivered or withheld for tax obligations arising from an award, other than a stock option or stock appreciation right (“SAR”), will be available for future grants under the 2021 Plan. As of September 30, 2022, 4,361,753 shares remained available for issuance under the 2021 Plan; however, the shares remaining available for issuance would be reduced by the potential future issuance of shares of common stock for the settlement of outstanding performance-based stock awards and dividend equivalents for such awards. If these outstanding performance-based stock awards are earned at “target” level performance, an additional 1,844,097 shares would be issued resulting in 2,517,656 shares remaining available for issuance under the 2021 Plan as of September 30, 2022.

Under the 2021 Plan, the Compensation Committee of the Company’s Board of Directors may grant restricted stock, restricted stock units (“RSUs”), stock options, SARs and/or other stock-based awards. Under the 2021 Plan, shares issued upon the exercise of a stock option or SAR or shares subject to a restricted stock award and any shares issued in settlement of restricted stock unit award, reduced by the number of any shares withheld to satisfy withholding taxes, may not be sold or transferred before the earlier of (i) the first anniversary of the exercise of the option or SAR or vesting of the restricted stock award or the settlement of restricted stock unit award, or (ii) the date the participant is no longer employed by or providing services to the Company or an affiliate. Non-employee members of the Board of Directors may not be granted awards under the 2021 Plan during any twelve-month period with respect to the number of shares that have a fair market value on the date of grant that exceeds $160. The 2021 Plan will terminate on the tenth anniversary of its effective date unless sooner terminated by the Board of Directors.

Stock-based compensation costs are initially measured at the estimated fair value of the awards on the grant date developed using appropriate valuation methodologies, as adjusted for estimates of future award forfeitures. Valuation methodologies used and subsequent expense recognition is dependent upon each award’s service and performance conditions.

Performance-based Stock Awards

The Company has granted performance-based RSUs and performance stock units (collectively, “Performance-based Stock Awards”) to employees of the Company that are convertible into shares of Class A common stock following the achievement of performance goals over the applicable performance periods. Compensation costs for Performance-based Stock Awards subject to nonmarket-based performance conditions (i.e., performance not predicated on changes in the Company’s stock price) are measured at the closing stock price on the dates of grant, adjusted for the probability of achieving certain benchmarks included in the performance metrics. These initial cost estimates are recognized as expense over the requisite performance periods, as adjusted for changes in estimated, and ultimately actual, performance and forfeitures. Compensation costs for components of Performance-based Stock Awards subject to market-based performance conditions (i.e., performance predicated on changes in the Company’s stock price) are measured at the dates of grant using a Monte Carlo simulation model which incorporates into the valuation the inherent uncertainty regarding the achievement of the market-based performance metrics. These initial valuation amounts are recognized as expense over the requisite performance periods, subject only to adjustments for changes in estimated, and ultimately actual, forfeitures.

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During the nine months ended September 30, 2022 and 2021, the Compensation Committee granted Performance-based Stock Awards with performance goals based on (i) the compound annualized total shareholder return (i.e., share price change plus dividends on a reinvested basis) during the applicable performance period (“Absolute TSR Awards”), (ii) the compound annualized total shareholder return relative to a peer index during the applicable performance period (“Relative TSR Awards”), (iii) the compound annualized growth in the Company’s book value per share (i.e., book value change with such adjustments as determined and approved by the Compensation Committee plus dividends on a reinvested basis) during the applicable performance period (“Book Value Awards”), and (iv) the share price of the Company's common stock during the applicable performance period ("Stock Price Awards"). In addition, the Compensation Committee granted Performance-based Stock Awards in prior years with performance goals based on annual return on equity during the applicable performance period ("ROE Awards").

The Compensation Committee of the Board of Directors of the Company approved the following Performance-based Stock Award grants for the periods indicated:

	Nine Months Ended September 30,
	2022		2021
Absolute TSR Awards granted		174,581		90,711
Absolute TSR Award grant date fair value per share	$	6.03	$	6.89
Relative TSR Awards granted		87,291		47,710
Relative TSR Award grant date fair value per share	$	5.83	$	6.55
Book Value Awards granted		103,000		—
Book Value Award grant date fair value per share	$	3.37	$	—
Stock Price Awards granted		1,225,490		—
Stock Price Award grant date fair value per share	$	1.72	$	—

For the Company’s Book Value Awards and ROE Awards, the grant date fair value per share is based on the close price on the date of grant. For the Company’s Absolute TSR Awards, Relative TSR Awards and Stock Price Awards, the grant date fair value per share is based on a Monte Carlo simulation model. The following assumptions, determined as of the date of grant, were used in the Monte Carlo simulation model to measure the grant date fair value per share of the Company’s Absolute TSR Awards, Relative TSR Awards and Stock Price Awards for the periods indicated:

	Absolute TSR Awards						Relative TSR Awards						Stock Price Awards
	Nine Months Ended September 30,						Nine Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021			2022			2021
Closing stock price on date of grant	$	3.58		$	4.08		$	3.58		$	4.08		$	3.06		$	—
Beginning average stock price on   date of grant (1)	$	3.60		$	4.07		$	3.60		$	4.07		N/A			$	—
Expected volatility (2)		69.20	%		69.27	%		69.20	%		69.27	%		51.17	%		—
Dividend yield (3)		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		—
Risk-free rate (4)		1.01	%		0.34	%		1.01	%		0.34	%		2.97	%		—
Discount for illiquidity (5)		0.00	%		0.00	%		0.00	%		0.00	%		8.42	%		—

(1)Based upon the 30 trading days prior to and including the date of grant.

(2)Based upon the most recent three-year volatility as of the date of grant.

(3)Dividend equivalents are accrued during the performance period and deemed reinvested in additional stock units, which are to be paid out at the end of the performance period to the extent the underlying Performance-based Stock Award is earned. Applying dividend yield assumption of 0.00% in the Monte Carlo simulation is mathematically equivalent to reinvesting dividends on a continuous basis and including the value of the dividends in the final payout.

(4)Based upon the yield of a U.S. Treasury bond with a three-year maturity as of the date of grant.

(5)Based on restriction on ability to sell vested awards for one year after vesting.

The vesting of the Performance-based Stock Awards is subject to both continued employment under the terms of the award agreement and the achievement of the Company performance goals established by the Compensation Committee.

For Absolute TSR Awards and Relative TSR Awards granted during the nine months ended September 30, 2022 and 2021, the Compensation Committee established a three-year performance period. The actual number of shares of Class A common stock that will be issued to each participant at the end of the applicable performance period will vary between 0% and 250% of the number of the Absolute TSR Awards and Relative TSR Awards granted, depending on performance results. If the minimum threshold level of performance goals is not achieved, no awards are earned. To the extent the performance results are between the minimum threshold level and maximum level of performance goals, between 50% to 250% of the number of Absolute TSR Awards and Relative TSR

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Awards are earned. Upon settlement, vested Absolute TSR Awards and Relative TSR Awards are converted into shares of the Company’s Class A common stock on a one-for-one basis.

For Book Value Awards granted during the nine months ended September 30, 2022, the Compensation Committee established a one-year performance period. The actual number of shares of Class A common stock that will be issued to each participant at the end of the applicable performance period will vary between 0% and 100% of the number of Book Value Awards granted, depending on performance results. Any Book Value Awards earned at the end of the one-year performance period would be converted into an equal number of shares of restricted stock that will vest on the third anniversary of the original Book Value Award grant date subject to continued employment under the terms of the award agreement. If the threshold level of the annual performance goal is not achieved, no Book Value Awards are earned.

For Stock Price Awards granted during the nine months ended September 30, 2022, the Compensation Committee established a three-year performance period. If the market price of the Company's common stock is equal to or greater than a stock price performance goal for 45 consecutive trading days at any time during the performance period, between 75% to 300% of the number of Stock Price Awards are earned and converted into an equal number of shares of restricted stock that will vest ratably over a three-year period beginning on the third anniversary of the date of grant subject to continued employment under the terms of the award of the agreement. If the minimum threshold level of stock price performance goals are never achieved, no awards are earned.

For the ROE Awards granted in prior years, the Compensation Committee established a one-year performance period. Any ROE Awards earned at the end of the one-year performance period would be converted into an equal number of shares of restricted stock that will vest on the third anniversary of the original ROE Award grant date subject to continued employment under the terms of the award agreement. If the threshold level of the annual performance goal is not achieved, no ROE Awards are earned.

Performance-based Stock Awards do not have any voting rights. No dividends are paid on outstanding Performance-based Stock Awards during the applicable performance period. Instead, dividend equivalents are accrued on outstanding Performance-based Stock Awards during the applicable performance period, deemed invested in shares of Class A common stock and are paid out in shares of Class A common stock at the end of the performance period to the extent that the underlying Performance-based Stock Awards vest.

For the nine months ended September 30, 2022 and 2021, the Company recognized $902 and $298, respectively, of compensation expense related to Performance-based Stock Awards. As of September 30, 2022, the Company had 1,844,097 Performance-based stock awards outstanding. As disclosed above, the actual number of shares of common stock that could be issued for settlement of the Performance-based shares can be greater or less than the amount of Performance-based shares outstanding depending upon the actual results compared to the performance goals. As of September 30, 2022 and December 31, 2021, the Company had unrecognized compensation expense related to Performance-based Stock Awards of $3,650 and $878, respectively. The unrecognized compensation expense as of September 30, 2022 is expected to be recognized over a weighted average period of 3.4 years. For Absolute TSR Awards, Relative TSR Awards and Book Value Awards that had performance measurement periods ending during the nine months ended September 30, 2022 and 2021, none of the performance measures were met and therefore no awards were earned or vested during those periods. For the nine months ended September 30, 2022 and 2021, there were 0 and 82,124 ROE Awards, respectively, including dividend equivalents, that were earned and converted into an equal number of shares of restricted stock that will vest on the third anniversary of the original ROE Award grant date.

Employee Restricted Stock Awards

Compensation costs for restricted stock awards subject only to service conditions are measured at the closing stock price on the dates of grant and are recognized as expense on a straight-line basis over the requisite service periods for the awards, as adjusted for changes in estimated, and ultimately actual, forfeitures.

The Company grants restricted common shares to employees that either vest ratably over a three-year period or cliff vest at the end of a three-year period based on continued employment over these specified periods. A summary of these unvested restricted stock awards is presented below:

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	Number of Shares			Weighted-average Grant-date Fair Value		Weighted- average Remaining Vested Period
Share Balance as of December 31, 2020		547,688		$	4.89		1.5
Granted		365,592			3.89		—
Conversion of ROE Awards		82,124			5.65		—
Forfeitures		(22,000	)		6.54		—
Vestitures		(214,369	)		5.89		—
Share Balance as of December 31, 2021		759,035			4.16		1.5
Granted		384,291			3.42		—
Forfeitures		(12,167	)		3.57		—
Vestitures		(108,318	)		6.43
Share Balance as of September 30, 2022		1,022,841		$	3.65		1.2

For the nine months ended September 30, 2022 and 2021, the Company recognized $1,470 and $896, respectively, of compensation expense related to restricted stock awards. As of September 30, 2022 and December 31, 2021, the Company had unrecognized compensation expense related to restricted stock awards of $1,646 and $1,847, respectively. The unrecognized compensation expense as of September 30, 2022 is expected to be recognized over a weighted average period of 1.2 years. For the nine months ended September 30, 2022 and 2021, the intrinsic value of restricted stock awards that vested were $328 and $444, respectively.

In addition, as part of the Company’s satisfaction of incentive compensation earned for past service under the Company’s variable compensation programs, employees may receive restricted Class A common stock in lieu of cash payments. These restricted Class A common stock shares are issued to an irrevocable trust and are not returnable to the Company. No such shares were issued during the nine months ended September 30, 2022 and 2021. As of September 30, 2022 and December 31, 2021, the Company had 9,155 vested shares of the undistributed restricted stock issued to the trust.

Employee Restricted Stock Units

In connection with the announcement in June 2019 that the Company’s Executive Chairman would retire on December 31, 2019 from all positions with the Company, including its Board of Directors, the Company and its Executive Chairman entered into a consulting agreement to provide consulting services through January 1, 2022. Pursuant to the consulting agreement, the Company granted the Executive Chairman 87,847 RSUs with a grant date fair value of $6.83 per share. The grant date fair value of the award was based on the closing price of the Class A common stock on the New York Stock Exchange on the date of grant. The RSUs vested equally on each of January 1, 2020, July 1, 2020, January 1, 2021, July 1, 2021 and January 1, 2022, and were subject to the individual’s continued employment through December 31, 2019 and providing consulting services through January 1, 2022. Upon vesting, the RSUs were converted into shares of Class A common stock. The RSUs did not have any voting rights, and no dividends were paid on outstanding RSUs. Instead, dividend equivalents were accrued on outstanding RSUs, deemed invested in shares of Class A common stock and were paid out in shares of Class A common stock on the vesting date.

For the nine months ended September 30, 2022 and 2021, the Company recognized $0 and $66, respectively, of compensation expense related to employee restricted stock units. For the nine months ended September 30, 2022 and 2021, the intrinsic value of RSUs that were converted into shares of Class A common stock were $73 and $74, respectively. As of September 30, 2022 and December 31, 2021, the Company had 0 and 20,455, respectively, of employee restricted stock units outstanding.

Director Restricted Stock Units

Compensation costs for RSU awards subject only to service conditions are measured at the closing stock price on the dates of grant and are recognized as expense on a straight-line basis over the requisite service periods for the awards, as adjusted for changes in estimated, and ultimately actual, forfeitures. Compensation costs for RSUs that do not require future service conditions are expensed immediately.

The Company’s non-employee directors are compensated in both cash and RSUs. RSUs awarded to non-employee directors vest immediately on the award grant date and are convertible into shares of Class A common stock. For RSUs granted under the Company’s 2021 Plan, 2014 Plan, and certain of the Prior Plans, the RSUs are convertible into shares of Class A common stock at the later of the date the non-employee director ceases to be a member of the Company’s Board or the first anniversary of the grant date. For RSUs granted under certain Prior Plans, the RSUs are convertible into shares of Class A common stock one year after the

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non-employee director ceases to be a member of the Company’s Board. The non-employee director RSUs do not have any voting rights but are entitled to cash dividend equivalent payments. As of September 30, 2022 and December 31, 2021, the Company had 548,272 and 415,822, respectively, of non-employee director RSUs outstanding. A summary of the non-employee director RSUs grants is presented below for the periods indicated:

	Nine Months Ended September 30,
	2022		2021
RSUs granted		132,450		98,035
Grant date fair value	$	3.02	$	4.08

The grant date fair value is based on the closing price of the Class A common stock on the New York Stock Exchange on the date of grant. For the nine months ended September 30, 2022 and 2021, the Company recognized $300 and $300, respectively, of director fees related to these RSUs. There were no non-employee director RSUs that were converted into shares of Class A common stock for the nine months ended September 30, 2022 and 2021.

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

Unless the context otherwise requires or provides, references in this Quarterly Report on Form 10-Q to “we,” “us,” “our” and the “Company” refer to Arlington Asset Investment Corp. (“Arlington Asset”) and its subsidiaries. This discussion and analysis should be read in conjunction with our financial statements and accompanying notes included in Item 1 of this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021.

The discussion of our consolidated financial condition and results of operations below may contain forward-looking statements. These statements, which reflect management’s beliefs and expectations, are subject to risks and uncertainties that may cause actual results to differ materially. For a discussion of the risks and uncertainties that may affect our future results, please see “Cautionary Statement About Forward-Looking Information” in Item 3 of Part I of this Quarterly Report on Form 10-Q and the risk factors included in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2021 and our subsequent Quarterly Reports on Form 10-Q.

Our Company

We are an investment firm that focuses primarily on investing in mortgage related assets and residential real estate. Our investment capital is currently allocated between the following asset classes:

•mortgage servicing right (“MSR”) related assets

•credit investments

•single-family residential (“SFR”) properties

•agency mortgage-backed securities (“MBS”)

Our MSR related assets represent investments for which the return is based on the economic performance of a pool of specific MSRs. Our credit investments generally include investments in mortgage loans secured by either residential or commercial real property or MBS collateralized by residential or commercial mortgage loans (“non-agency MBS”) or asset-backed securities (“ABS”) collateralized by residential solar panel loans. Our SFR investment strategy is to acquire, lease and operate single-family residential homes as rental properties. Our agency MBS consist of residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by a U.S. government sponsored enterprise (“GSE”), such as the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”).

We may also invest in other asset classes that our management team believes may offer attractive risk adjusted returns outside the real estate or mortgage asset classes.

We are internally managed and do not have an external investment advisor.

Factors that Affect our Results of Operations and Financial Condition

Our business is materially affected by a variety of industry and economic factors, including:

•conditions in the global financial markets and economic conditions generally;

•the impacts of the coronavirus (“COVID-19”) pandemic;

•changes in interest rates and prepayment rates;

•conditions in the real estate and mortgage markets;

•actions taken by the U.S. government, U.S. Federal Reserve, the U.S. Treasury and foreign central banks;

•changes in laws and regulations and industry practices; and

•other market developments.

Current Market Conditions and Trends

The 10-year U.S. Treasury rate was 3.83% as of September 30, 2022, an 82 basis point increase from the prior quarter end. The interest rate curve, measured as the spread between the 2-year and 10-year U.S. Treasury, inverted to a negative 45 basis points as of September 30, 2022 as the increases in the short-term interest rates have outpaced the rise in long-term interest rates. With the rise in the 10-year U.S. Treasury rate, residential mortgage rates increased significantly evidenced by the Fannie Mae average primary mortgage rate increasing by 100 basis points during the third quarter to 6.70% as of September 30, 2022. The spread between the

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current coupon agency MBS and the 10-year swap rate widened 51 basis points during the third quarter of 2022. The rate of inflation continued to increase significantly with the Consumer Price Index rising 8.2% for the twelve month period ending September 30, 2022, one of the largest increases in over 40 years with the indices for energy and food being the largest contributors.

In order to address the persistently high inflation, the U.S. Federal Reserve has continued to take actions with the objective of lowering inflation by significantly raising interest rates. At its July 27, 2022 meeting, the Federal Open Market Committee (“FOMC”) decided to raise its target range for the federal funds rate by 75 basis points to a range of 2.25% to 2.50%. At its September 21, 2022 meeting, the FOMC, decided to raise its target range for its federal funds rate by an additional 75 basis points to a range of 3.00% to 3.25% and that it anticipates ongoing increases in the target range will be appropriate. In addition, the FOMC announced that it will continue reducing its holdings of Treasury securities and agency debt and agency MBS. As of September 30, 2022, the market is expecting additional hikes totaling approximately 150 basis points in the next six months followed by rate cuts beginning in the second half of 2023 based on federal funds futures.

Prepayment speeds in the fixed-rate residential mortgage market decreased during the third quarter of 2022 primarily due to the rise in the primary mortgage rate driven by the increase in the 10-year U.S. Treasury rate. Pay-up premiums on agency MBS, which represent the price premium of agency MBS backed by specified pools over a TBA security, decreased during the third quarter of 2022 as a result of declining prepayment concerns. The spread between the market yield on agency MBS and benchmark interest rates widened during the third quarter of 2022 resulting in agency MBS underperforming relative to interest rate hedges. Conversely, valuation multiples of MSRs increased during the third quarter of 2022 driven primarily by declining prepayment speed expectations.

Housing price gains continue to remain historically high although they have begun to decelerate as evidenced by the Standard & Poor’s CoreLogic Case-Shiller U.S. National Home Price NSA index reporting a 13.0% annual gain in August 2022, down from 15.6% in the previous month. Although U.S. housing prices remain substantially above their year-ago levels, the last two monthly decelerations were the highest in the history of the index. As the Federal Reserve continues to likely increase interest rates, more expensive mortgage financing along with a challenging macroeconomic environment may cause housing prices to continue to decelerate in the near future.

The following table presents certain key market data as of the dates indicated:

	September 30, 2021			December 31, 2021			March 31, 2022			June 30, 2022			September 30, 2022			Change - Third Quarter 2022
30-Year FNMA Fixed Rate MBS (1)
2.5%	$	103.22		$	102.09		$	95.20		$	89.89		$	83.80		$	(6.09	)
3.0%		104.67			103.64			97.55			93.11			86.81			(6.30	)
3.5%		105.83			105.32			99.75			96.17			89.83			(6.34	)
4.0%		107.17			106.41			101.58			98.62			92.68			(5.94	)
4.5%		108.16			107.22			103.25			100.39			95.18			(5.21	)
5.0%		109.94			109.06			105.16			102.07			97.34			(4.73	)
Investment Spreads
FNMA Current Coupon vs.    10-year Swap Rate	46 bps			49 bps			108 bps			129 bps			180 bps			51 bps
30 Year Fixed Mortgage Rate
Freddie Mac Average Primary   Mortgage Rate		3.01	%		3.11	%		4.67	%		5.70	%		6.70	%	100 bps
U.S. Treasury Rates ("UST")
2-year UST		0.28	%		0.73	%		2.33	%		2.95	%		4.28	%	133 bps
5-year UST		0.96	%		1.26	%		2.46	%		3.04	%		4.09	%	105 bps
10-year UST		1.49	%		1.51	%		2.34	%		3.01	%		3.83	%	82 bps
2-year UST to 10-year UST spread	121 bps			78 bps			1 bps			6 bps			-45 bps			-51 bps
Interest Rate Swap Rates
2-year swap		0.38	%		0.94	%		2.55	%		3.28	%		4.55	%	127 bps
5-year swap		1.05	%		1.37	%		2.52	%		3.08	%		4.14	%	106 bps
10-year swap		1.51	%		1.58	%		2.41	%		3.09	%		3.88	%	79 bps
2-year swap to 2-year UST spread	10 bps			21 bps			22 bps			33 bps			27 bps			-6 bps
10-year swap to 10-year UST spread	2 bps			7 bps			7 bps			8 bps			5 bps			-3 bps
London Interbank Offered Rates ("LIBOR") and Secured Overnight Financing Rate ("SOFR")
1-month LIBOR		0.08	%		0.10	%		0.45	%		1.79	%		3.14	%	135 bps
3-month LIBOR		0.13	%		0.21	%		0.96	%		2.29	%		3.75	%	146 bps
SOFR		0.05	%		0.05	%		0.29	%		1.50	%		2.98	%	148 bps

(1)Generic 30-year FNMA TBA price information, sourced from Bloomberg, is provided for illustrative purposes only and is not meant to be reflective of the fair value of securities held by the Company.

Recent Regulatory Activity

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Elimination of LIBOR

On March 5, 2021, the FCA, which regulates LIBOR, announced that all LIBOR tenors relevant to us will cease to be published or will no longer be representative after June 30, 2023. The FCA's announcement coincides with the March 5, 2021 announcement of LIBOR's administrator, the IBA, indicating that, as a result of not having access to input data necessary to calculate LIBOR tenors relevant to us on a representative basis after June 30, 2023, IBA would have to cease publication of such LIBOR tenors immediately after the last publication on June 30, 2023. These announcements mean that any of our LIBOR-based financial instruments that extend beyond June 30, 2023 will need to be converted to a replacement rate.

The U.S. Federal Reserve and the Federal Reserve Bank of New York jointly convened the ARRC, a steering committee comprised of private sector entities, each with an important presence in markets effected by LIBOR, and official-sector entities, including banking and financial sector regulators. The ARCC’s initial objectives were to identify risk-free alternative reference rates for USD LIBOR, identify best practices for contract robustness and create an implementation plan. The ARRC has recommended SOFR, plus a recommended spread adjustment, as LIBOR's replacement.

The U.S. federal government enacted a legislative solution for certain LIBOR contracts, which in some cases inserts fallback language into the contract or provides a determining party with a safe harbor from litigation. Under the legislation, the Board of Governors of the Federal Reserve (the “Federal Reserve”) is required to promulgate rules designating a SOFR-based rate and incorporating the statutory spread adjustments for each LIBOR tenor (which match the ARRC/ISDA spread adjustments, including the 1-year transition period for consumer loans) as the replacement rates for covered LIBOR contracts. The Federal Reserve has proposed (i) SOFR compounded in arrears for derivatives, using the same methodology as the ISDA protocol, (ii) CME Term SOFR for all other covered non-GSE cash products and (iii) a 30-day compounded SOFR average for certain GSE contracts, but the proposed rules remain subject to public comment.

Any of our LIBOR-based borrowings that extend beyond June 30, 2023 will need to be converted to a replacement rate. The likely market transition away from LIBOR and towards SOFR is expected to be gradual and complicated. There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured lending rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities. If our LIBOR-based borrowings are converted to SOFR, the differences between LIBOR and SOFR, plus the recommended spread adjustment, could result in interest costs that are higher than if LIBOR remained available, which could have a material adverse effect on our operating results. Although SOFR is the ARRC's recommended replacement rate, it is also possible that lenders may instead choose alternative replacement rates that may differ from LIBOR in ways similar to SOFR or in other ways that would result in higher interest costs for us. Furthermore, lenders may select alternative rates sooner than June 30, 2023, either in amendments to existing facilities or as we decide to enter into new facilities. It is possible that not all of our assets and liabilities will transition away from LIBOR at the same time, and it is possible that not all of our assets and liabilities will transition to the same alternative reference rate, in each case increasing the difficulty of hedging. We and other market participants have less experience understanding and modeling SOFR-based assets and liabilities than LIBOR-based assets and liabilities, increasing the difficulty of investing, hedging, and risk management. The process of transition involves operational risks. We are still evaluating the potential effect of LIBOR's end on our borrowing costs and other operations, which remains uncertain given the varying replacement rates and timing.

We are party to various financial instruments which include LIBOR as a reference rate that mature or expire after June 30, 2023. As of September 30, 2022, these financial instruments include interest rate swap agreements and preferred stock and unsecured notes issued by us.

As of September 30, 2022, we had $105 million notional amount of interest rate swaps outstanding that expire after June 30, 2023 in which we make semiannual interest payments based upon a fixed interest rate and receive quarterly interest payments based upon the prevailing three-month LIBOR on the date of reset. The interest rate swap agreements are centrally cleared by the Chicago Mercantile Exchange (“CME”) which acts as the calculation agent with the terms and conditions of each interest rates swap agreement defined in the CME Rulebook and supplemented by the rules published by the International Swaps and Derivative Association, Inc. (“ISDA”). The fallback terms of interest rate swap agreements that have LIBOR as a reference rate were not originally designed to cover a permanent discontinuation of LIBOR. On October 23, 2020, ISDA amended its rules to provide LIBOR fallback protocols and provisions for bilateral interest rate swap agreements, including defining the LIBOR cessation triggering events and robust fallback provisions. Under the fallback provisions, the existing contractual rate based on LIBOR rate would fall back to a rate based on SOFR adjusted for the difference in tenor plus a spread adjustment for the historical differences between the two rates. On January 25, 2021, the CME amended its Rulebook to incorporate ISDA’s LIBOR fallback provisions for both new and legacy centrally cleared interest rate swap agreements.

As of September 30, 2022, we had $15.0 million of junior subordinated debt outstanding that require quarterly interest payments at three-month LIBOR plus a spread of 2.25% to 3.00% and matures between 2033 and 2035. Under the terms of the indenture agreement for the notes, if the publication of LIBOR is not available, the current fallback is for the independent calculation agent to obtain quotations for what LIBOR should be from major banks in the interbank market. If the calculation agent is unable to obtain such quotations, then the LIBOR in effect for future interest payments would be LIBOR in effect for the immediately preceding

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interest payment period. We expect the federal legislation to automatically invalidate such polling provisions and provide a safe harbor for those, like the calculation agent, who are contractually responsible for determining LIBOR replacements if the agent replaces LIBOR with the SOFR-based rate selected by the Federal Reserve. We expect that the Federal Reserve's final rules will affect the selection of the replacement rate under these instruments.

As of September 30, 2022, we had 964,823 shares of Series C Preferred Stock outstanding with a liquidation preference of $24.1 million. The Series C Preferred Stock is entitled to receive a cumulative cash dividend (i) from and including the original issue to, but excluding, March 30, 2024 at a fixed rate of 8.250% per annum of the $25.00 per share liquidation preference, and (ii) from and including March 30, 2024, at a floating rate equal to three-month LIBOR plus a spread of 5.664% per annum of the $25.00 liquidation preference. Under the terms of our Articles of Incorporation, if the publication of LIBOR is not available, the current fallback is for us to obtain quotations for what LIBOR should be from major banks in the interbank market. If we are unable to obtain such quotations, we are required to appoint an independent calculation agent, which will determine LIBOR based on sources it deems reasonable in its sole discretion. If the calculation agent is unable or unwilling to determine LIBOR, then the LIBOR in effect for future dividend payments would be LIBOR in effect for the immediately preceding dividend payment period. We expect all of these provisions to be invalidated by the federal legislation. If we determine that LIBOR has been discontinued, we will appoint an independent calculation agent to determine whether there is an industry accepted substitute or successor base rate to three-month LIBOR. If the calculation agent determines that there is an industry accepted substitute or successor base rate, the calculation agent shall use such substitute or successor base rate. We expect that the federal legislation and the Federal Reserve's final rules will affect the selection of the replacement rate under these instruments.

We are still evaluating the effect of any such rate replacement changes, any establishment of alternative reference rates and the potential for further reforms to LIBOR that may be implemented in the U.K. or elsewhere. While we expect LIBOR to be available through June 2023, if sufficient banks decline to make submissions to IBA, it is possible that LIBOR will become unavailable or nonrepresentative prior to that point. Uncertainty as to the nature of potential rate changes, alternative reference rates or other reforms may adversely affect the market for, or value of, any securities, loans, derivatives and other financial obligations on which the interest or dividend is determined by reference to LIBOR, which could negatively impact our overall financial condition or results of operations. More generally, any of the above changes or any other consequential changes to LIBOR or any other “benchmark” as a result of international, national or other proposals for reform or other initiatives or investigations, or any further uncertainty in relation to the timing and manner of implementation of such changes, could have a material adverse effect on the value of and return on any securities based on or linked to a “benchmark.”

Portfolio Overview

The following table summarizes our asset and capital allocation of our investment strategies as of September 30, 2022 (dollars in thousands):

	September 30, 2022
	Assets		Invested Capital Allocation (1)		Invested Capital Allocation (%)			Leverage (2)
MSR financing receivables	$	164,585	$	164,585		57	%		0.2
Single-family residential properties		82,219		26,726		9	%		2.1
Credit investments (3)		169,940		59,670		20	%		1.8
Agency MBS (4)		208,124		40,814		14	%		4.2
Total invested capital	$	624,868		291,795		100	%
Cash and other corporate capital, net				9,694
Total investable capital			$	301,489				1.2

(1)Our investable capital is calculated as the sum of our shareholders’ equity capital plus accumulated depreciation of our single-family residential properties and long-term unsecured debt.

(2)Our leverage is measured as the ratio of the sum of our repurchase agreement financing, long-term debt secured by single-family properties, net payable or receivable for unsettled securities, net contractual forward purchase or sale price of our TBA commitments and leverage within our MSR financing receivables less our cash and cash equivalents compared to our investable capital.

(3)Includes our net investment of $24,782 in VIEs with gross assets and liabilities of $207,383 and $182,601, respectively, that is consolidated for GAAP financial reporting purposes.

(4)Agency MBS assets include the fair value of the agency MBS which underlie the Company's TBA forward purchase and sale commitments. In accordance with GAAP, the Company's TBA forward commitments are reflected on the consolidated balance sheets as derivative assets and liabilities at fair value in the financial statement line items "other assets" and "other

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liabilities". As of September 30, 2022, the fair value of the underlying agency MBS that underlie the Company's net short position in TBA commitments had a fair value of $(236,998) with a net carrying value of $4,023.

MSR Financing Receivables

As of September 30, 2022, we had $164.6 million of MSR financing receivable investments at fair value. We are party to agreements with a licensed, GSE approved residential mortgage loan servicer that enable us to garner the economic return of an investment in an MSR purchased by the mortgage servicing counterparty. The arrangement allows us to participate in the economic benefits of investing in an MSR without holding the requisite licenses to purchase or hold MSRs directly. The transactions are accounted for as a financing receivable in our consolidated financial statements. The following tables present further information about our MSR financing receivable investments as of September 30, 2022 (dollars in thousands):

Amortized Cost Basis (1)		Unrealized Gain		Fair Value
$	114,899	$	49,686	$	164,585

(1)Represents capital investments plus accretion of interest income net of cash distributions.

MSR Financing Receivable Underlying Reference Amounts:
MSRs		Financing			Advances Receivable		Cash and Other Net Receivables		Counterparty Incentive Fee Accrual			MSR Financing Receivables		Implicit Leverage
$	190,085	$	(27,863	)	$	2,244	$	13,176	$	(13,057	)	$	164,585		0.2

Underlying Reference MSRs:
Holder of Loans	Unpaid Principal Balance		Weighted-Average Note Rate			Weighted-Average Servicing Fee			Weighted-Average Loan Age	Price			Multiple (1)		Fair Value
Fannie Mae	$	12,764,245		3.09	%		0.25	%	21 months		1.37	%		5.48	$	175,230
Freddie Mac		1,045,337		3.72	%		0.25	%	19 months		1.42	%		5.68		14,855
Total/weighted-average	$	13,809,582		3.14	%		0.25	%	21 months		1.38	%		5.50	$	190,085

(1)Calculated as the underlying MSR price divided by the weighted-average servicing fee.

Credit Investment Portfolio

As of September 30, 2022, our credit investment portfolio was primarily comprised of a $29.4 million commercial mortgage loan secured by a first lien position in healthcare facilities and $140.5 million in non-agency MBS or ABS investments collateralized by either commercial mortgage loans, business purpose residential mortgage loans, residential mortgage loans or residential solar panel loans, including a $24.8 million net investment in VIEs consolidated for GAAP financial reporting purposes. The following table presents further information about our credit investments as of September 30, 2022 (dollars in thousands):

	Fair Value (1)		Market Price		Leverage
Commercial MBS	$	108,330	$	99.84		4.9
Commercial mortgage loan		29,375		100.00		2.3
Residential MBS - interest-only (2)		18,970		8.24		—
Residential MBS (2)		1,035		63.86		—
Business purpose residential MBS (3)		9,882		91.16		—
Residential solar panel loan ABS		2,348		46.40		—
Total/weighted-average	$	169,940				1.8

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(1)For credit investments in securities, includes contractual accrued interest receivable.

(2)Residential MBS – interest-only and residential MBS, in combination, reflect our net investment at fair value of $20,005 in a VIE with gross assets and liabilities of $202,355 and $182,350, respectively, that is consolidated for GAAP financial reporting purposes.

(3)Includes our net investment of $4,777 in a VIE with gross assets and liabilities of $5,028 and $251, respectively, that is consolidated for GAAP financial reporting purposes.

SFR Rental Properties

The following tables present further information about our SFR rental properties as of September 30, 2022 (dollars in thousands):

Market	Number of Properties		Gross Book Value		Average Gross Book Value		Average Square Feet		Average Year Built
Atlanta, GA		56	$	20,082	$	359		2,099		2006
Dallas, TX		49		17,894		365		1,874		2015
Huntsville, AL		34		11,850		349		2,203		2016
Birmingham, AL		35		9,606		274		1,653		2017
Tulsa, OK		29		8,548		295		1,842		2016
Charlotte, NC		18		6,593		366		1,915		2009
Kansas City, MO		16		5,020		314		1,969		2014
Memphis, TN		9		2,626		292		1,761		2005
Total/weighted average		246	$	82,219	$	334		1,940		2013

Status of Property	Number of Properties		Gross Book Value
In rehabilitation		4	$	1,341
In marketing		25		8,706
Leased not yet occupied		3		1,030
Leased and occupied		214		71,142
Total		246	$	82,219

As of September 30, 2022, we also had commitments to acquire five properties for an aggregate purchase price of $1.5 million.

Agency MBS Investment Portfolio

Our agency MBS consisted of the following as of September 30, 2022 (dollars in thousands):

	Unpaid Principal Balance		Net Unamortized Purchase Premiums (Discounts)			Amortized Cost Basis		Net Unrealized Gain (Loss)			Fair Value		Market Price		Coupon			Weighted Average Expected Remaining Life
30-year fixed rate:
3.0%	$	69,786	$	(2,528	)	$	67,258	$	(6,307	)	$	60,951	$	87.34		3.00	%		10.3
4.0%		198,079		1,206			199,285		(15,079	)		184,206		93.00		4.00	%		9.3
4.5%		209,514		(4,032	)		205,482		(5,525	)		199,957		95.44		4.50	%		9.7
5.5%		7		—			7		1			8		102.82		5.50	%		6.2
Total/weighted-average	$	477,386	$	(5,354	)	$	472,032	$	(26,910	)	$	445,122	$	93.24		4.07	%		9.6

	Unpaid Principal Balance		Net Unamortized Purchase Premiums (Discounts)			Amortized Cost Basis		Net Unrealized Gain (Loss)			Fair Value		Market Price		Coupon			Weighted Average Expected Remaining Life
Fannie Mae	$	258,206	$	(3,883	)	$	254,323	$	(13,306	)	$	241,017	$	93.34		4.09	%		9.4
Freddie Mac		219,180		(1,471	)		217,709		(13,604	)		204,105		93.12		4.06	%		9.9
Total/weighted-average	$	477,386	$	(5,354	)	$	472,032	$	(26,910	)	$	445,122	$	93.24		4.07	%		9.6

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The annualized prepayment rate for our agency MBS was 6.36% for the three months ended September 30, 2022. As of September 30, 2022, our agency MBS was comprised of securities specifically selected for their relatively lower propensity for prepayment, which includes approximately 29% and 18% in specified pools of high loan-to-value and low balance loans, respectively, while the remainder includes specified pools of loans originated in certain geographical areas. Weighted average pay-up premiums on our agency MBS portfolio, which represent the estimated price premium of agency MBS backed by specified pools over a TBA agency MBS, were approximately 0.28 of a percentage point as of September 30, 2022.

Our agency MBS investment portfolio may also include net long TBA positions, which are primarily the result of executing sequential series of “dollar roll” transactions that are settled on a net basis. In addition to transacting in net long positions in TBA securities for investment purposes, we may also, from time to time, transact in net sale (or “net short”) positions in TBA securities for the purpose of economically hedging a portion of the sensitivity of the fair value of our investments in agency MBS to changes in interest rates. In accordance with GAAP, we account for our net long and net short TBA positions as derivative instruments. Information about our net long and net short TBA positions as of as of September 30, 2022 is as follows (dollars in thousands):

	Notional Amount:
	Net Long (Short)			Implied			Implied			Net Carrying
	Position (1)			Cost Basis (2)			Fair Value (3)			Amount (4)
3.5% 30-year MBS sale commitments	$	(60,000	)	$	(56,803	)	$	(53,897	)	$	2,906
4.0% 30-year MBS sale commitments		(100,000	)		(93,359	)		(92,680	)		679
4.5% 30-year MBS sale commitments		(95,000	)		(90,859	)		(90,421	)		438
Total net long (short) agency TBA positions	$	(255,000	)	$	(241,021	)	$	(236,998	)	$	4,023

(1)Notional amount represents the unpaid principal balance of the underlying agency MBS.

(2)Implied cost basis represents the contractual forward price for the underlying agency MBS.

(3)Implied fair value represents the current fair value of the underlying agency MBS.

(4)Net carrying amount represents the difference between the implied cost basis and the implied fair value of the underlying agency MBS. This amount is reflected on the Company's consolidated balance sheets as a component of "other assets" and "other liabilities".

Economic Hedging Instruments

We attempt to hedge a portion of our exposure to interest rate fluctuations associated with our agency MBS primarily through the use of interest rate hedging instruments. Specifically, these interest rate hedging instruments are intended to economically hedge changes, attributable to changes in benchmark interest rates, in agency MBS fair values and future interest cash flows on our short-term financing arrangements. As of September 30, 2022, the interest rate hedging instruments that we primarily used were interest rate swap agreements.

Our LIBOR-based interest rate swap agreements represent agreements to make semiannual interest payments based upon a fixed interest rate and receive quarterly variable interest payments based upon the prevailing three-month LIBOR as of the preceding reset date. Our SOFR-based interest rate swap agreements represent agreements to make annual interest payments based upon a fixed interest rate and receive annual variable interest payments based upon the daily SOFR over the preceding annual period. Information about our outstanding interest rate swap agreements in effect as of September 30, 2022 is as follows (dollars in thousands):

			Weighted-average:
	Notional Amount		Fixed Pay Rate			Variable Receive Rate			Net Receive (Pay) Rate			Remaining Life (Years)
Years to maturity:
Less than 3 years	$	125,000		1.82	%		2.78	%		0.96	%		1.6
3 to less than 10 years		70,000		2.53	%		3.11	%		0.58	%		5.4
Total / weighted-average	$	195,000		2.07	%		2.90	%		0.83	%		3.0

In addition to interest rate swap agreements, we may also use exchange-traded U.S. Treasury note futures that mature on a quarterly basis. Upon the maturity date of these futures contracts, we have the option to either net settle each contract in cash in an amount equal to the difference between the current fair value of the underlying U.S. Treasury note and the contractual sale price inherent to the futures contract, or to physically settle the contract by delivering the underlying U.S. Treasury note. As of September 30, 2022, we had no outstanding U.S. Treasury note futures.

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Results of Operations

Net Operating Income

Net operating income primarily represents the interest and other income recognized from our investments in financial assets and rent revenues recognized from SFR properties net of the interest expense incurred from repurchase agreement financing arrangements or other short and long-term borrowing transactions and SFR property operating expenses.

Net operating income does not include TBA agency MBS dollar roll income (expense), which we believe represents the economic equivalent of net interest income (expense) earned (incurred) from our investments in non-specified fixed-rate agency MBS, nor does it include the net interest income or expense of our interest rate swap agreements, which are not designated as hedging instruments for financial reporting purposes. In our consolidated statements of comprehensive income, TBA agency MBS dollar roll income (expense) and the net interest income or expense from our interest rate swap agreements are reported as a component of the overall periodic change in the fair value of derivative instruments within the line item “investment and derivative gain (loss), net.”

Investment and Derivative Gain (Loss), Net

“Investment and derivative gain (loss), net” primarily consists of periodic changes in the fair value (whether realized or unrealized) of our investments in financial assets and periodic changes in the fair value (whether realized or unrealized) of derivative instruments.

General and Administrative Expenses

“Compensation and benefits expense” includes base salaries, annual cash incentive compensation, and non-cash stock-based compensation. Annual cash incentive compensation is based on meeting estimated annual performance measures and discretionary components. Non-cash stock-based compensation includes expenses associated with stock-based awards granted to employees, including our performance share units to named executive officers that are earned only upon the attainment of Company performance measures over the relevant measurement period.

“Other general and administrative expenses” primarily consists of the following:

•professional services expenses, including accounting, legal, and consulting fees;

•insurance expenses, including liability and property insurance;

•occupancy and equipment expense, including rental costs for our facilities, and depreciation and amortization of equipment and software;

•fees and commissions related to transactions in interest rate derivative instruments;

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•Board of Director fees; and other operating expenses, including information technology expenses, business development costs, public company reporting expenses, proxy solicitation expenses, corporate registration fees, local license taxes, office supplies and other miscellaneous expenses.

Three and nine months ended September 30, 2022 compared to the three and nine months ended September 30, 2021

The following table presents the summary financial information for the three and nine months ended September 30, 2022 and 2021, respectively (dollars in thousands, except per share amounts):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Interest and other income	$	12,388		$	6,346		$	28,557		$	19,650
Rent revenues from single-family residential properties		2,103			—			5,304			—
Interest expense		(5,972	)		(1,914	)		(13,673	)		(6,373	)
Single-family residential property operating expenses		(1,872	)		(36	)		(5,318	)		(36	)
Net operating income		6,647			4,396			14,870			13,241
Investment and derivative gain (loss), net		1,235			(1,313	)		778			(17,108	)
General and administrative expenses		(3,377	)		(2,897	)		(10,448	)		(8,724	)
Income (loss) before income taxes		4,505			186			5,200			(12,591	)
Income tax provision		1,074			436			4,163			758
Net income (loss)		3,431			(250	)		1,037			(13,349	)
Dividend on preferred stock		(675	)		(731	)		(2,124	)		(2,177	)
Net income (loss) available (attributable) to   common stock	$	2,756		$	(981	)	$	(1,087	)	$	(15,526	)
Diluted earnings (loss) per common share	$	0.10		$	(0.03	)	$	(0.04	)	$	(0.47	)
Weighted-average diluted common shares   outstanding		28,913			31,927			28,973			32,720

Interest and Other Income

Interest and other income increased $6.1 million, or 96.8%, from $6.3 million for the three months ended September 30, 2021 to $12.4 million for the three months ended September 30, 2022. Interest and other income increased $8.9 million, or 45.2%, from $19.7 million for the nine months ended September 30, 2021 to $28.6 million for the nine months ended September 30, 2022. The increase from the comparative periods is primarily the result of a higher average investment balance in higher yielding MSR financing receivables as well as a higher average investment balance in mortgage loans of consolidated VIEs.

The components of interest and other income are summarized in the following tables for the periods indicated (dollars in thousands):

	Three Months Ended September 30,
	2022							2021
	Average		Interest &					Average		Interest &
	Balance		Other Income		Yield			Balance		Other Income		Yield
Agency MBS	$	365,212	$	3,631		3.98	%	$	700,865	$	2,660		1.52	%
Credit investments		145,485		2,736		7.52	%		65,419		1,247		7.62	%
Mortgage loans of consolidated VIEs		248,892		2,303		3.70	%		29,031		301		4.15	%
MSR financing receivables		90,490		3,608		15.95	%		87,933		1,945		8.85	%
Other		705		110					5,291		193
Total	$	850,784	$	12,388		5.82	%	$	888,539	$	6,346		2.86	%

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	Nine Months Ended September 30,
	2022							2021
	Average		Interest &					Average		Interest &
	Balance		Other Income		Yield			Balance		Other Income		Yield
Agency MBS	$	345,866	$	7,188		2.77	%	$	717,865	$	8,428		1.57	%
Credit investments		88,184		4,580		6.92	%		73,939		4,286		7.73	%
Mortgage loans of consolidated VIEs		233,711		5,268		3.01	%		55,275		2,764		6.67	%
MSR financing receivables		101,003		10,973		14.49	%		51,813		3,693		9.50	%
Other		2,599		548					5,309		479
Total	$	771,363	$	28,557		4.94	%	$	904,201	$	19,650		2.90	%

The effects of changes in the composition of our investments in financial assets on interest and other income are summarized below (dollars in thousands):

	Three Months Ended September 30, 2022									Nine Months Ended September 30, 2022
	vs.									vs.
	Three Months Ended September 30, 2021									Nine Months Ended September 30, 2021
	Rate			Volume			Total Change			Rate			Volume			Total Change
Agency MBS	$	2,245		$	(1,274	)	$	971		$	3,128		$	(4,368	)	$	(1,240	)
Credit investments		(450	)		1,939			1,489			(1,793	)		2,087			294
Mortgage loans of consolidated VIEs		(274	)		2,276			2,002			(6,416	)		8,920			2,504
MSR financing receivables		1,606			57			1,663			3,774			3,506			7,280
Other		84			(167	)		(83	)		314			(245	)		69
Total	$	3,211		$	2,831		$	6,042		$	(993	)	$	9,900		$	8,907

Rent Revenues from SFR Properties

We began to acquire SFR properties pursuant to our SFR property rental investment strategy in September 2021. The homes we acquire may require minor refurbishment prior to a tenant occupying the property. In addition, there is typically a lease marketing period prior to a new tenant occupying the home. We expect the time period between the date of settlement of the home purchase and the date the house is occupied by a tenant to average between 30 to 60 days. The timing of the earnings benefit to us will be dictated by the pace of home purchases, the level of any property level refurbishments and the length of the lease marketing period. For the three and nine months ended September 30, 2022, we had rental income of $2.1 million and $5.3 million, respectively.

Interest Expense

Interest expense increased $4.1 million, or 215.8%, from $1.9 million for the three months ended September 30, 2021 to $6.0 million for the three months ended September 30, 2022. Interest expense increased $7.3 million, or 114.1%, from $6.4 million for the nine months ended September 30, 2021 to $13.7 million for the nine months ended September 30, 2022. The increase from the comparative periods is primarily the result of a higher average balance in secured debt of consolidated VIEs, the addition of long-term debt secured by SFR properties and higher interest rates on repurchase agreement financings, partially offset by lower interest rates on secured debt of consolidated VIEs.

The components of interest expense are summarized in the following tables for the periods indicated (dollars in thousands):

	Three Months Ended September 30,
	2022							2021
	Average		Interest					Average		Interest
	Balance		Expense		Cost			Balance		Expense		Cost
Repurchase agreements	$	430,792	$	2,863		2.60	%	$	599,224	$	306		0.20	%
Long-term debt secured by SFR properties		96,677		741		3.00	%		—		—
Long-term unsecured debt		86,251		1,456		6.75	%		93,899		1,435		6.11	%
Secured debt of consolidated VIEs		232,657		912		1.57	%		16,452		173		4.21	%
Total	$	846,377	$	5,972		2.79	%	$	709,575	$	1,914		1.08	%

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	Nine Months Ended September 30,
	2022							2021
	Average		Interest					Average		Interest
	Balance		Expense		Cost			Balance		Expense		Cost
Repurchase agreements	$	351,960	$	3,902		1.46	%	$	601,897	$	1,197		0.26	%
Long-term debt secured by SFR properties		84,901		1,867		2.90	%		—		—
Long-term unsecured debt		86,154		4,226		6.54	%		80,000		3,736		6.23	%
Secured debt of consolidated VIEs		218,021		3,678		2.25	%		41,443		1,440		4.63	%
Total	$	741,036	$	13,673		2.45	%	$	723,340	$	6,373		1.17	%

The effects of changes in the composition of our debt obligations on interest expense are summarized below (dollars in thousands):

	Three Months Ended September 30, 2022									Nine Months Ended September 30, 2022
	vs.									vs.
	Three Months Ended September 30, 2021									Nine Months Ended September 30, 2021
	Rate			Volume			Total Change			Rate			Volume			Total Change
Repurchase agreements	$	(2,643	)	$	86		$	(2,557	)	$	(3,202	)	$	497		$	(2,705	)
Long-term debt secured by SFR properties		—			(741	)		(741	)		—			(1,867	)		(1,867	)
Long-term unsecured debt		(138	)		117			(21	)		(203	)		(287	)		(490	)
Secured debt of consolidated VIEs		1,530			(2,269	)		(739	)		3,899			(6,137	)		(2,238	)
Total	$	(1,251	)	$	(2,807	)	$	(4,058	)	$	494		$	(7,794	)	$	(7,300	)

SFR Properties Operating Expenses

We began to acquire SFR properties pursuant to our SFR property rental investment strategy in September 2021. The homes we acquire may require minor refurbishment prior to a tenant occupying the property. During the period prior to a lease commencement date as well as subsequently, we incur property costs such as real estate taxes, insurance, homeowner association fees and depreciation. For the three months ended September 30, 2022, we had property operating expenses of $1.9 million, including $0.6 million of depreciation expense. For the nine months ended September 30, 2022, we had property operating expenses of $5.3 million, including $2.0 million of depreciation expense.

Investment and Derivative Gain (Loss), Net

As prevailing longer-term interest rates increase (decrease), the fair value of our investments in fixed-rate agency MBS and TBA commitments generally decreases (increases). Conversely, the fair value of our interest rate derivative hedging instruments and MSR financing receivables generally increase (decrease) in response to increases (decreases) in prevailing interest rates. While our interest rate derivative hedging instruments are designed to mitigate the sensitivity of the fair value of our agency MBS portfolio to fluctuations in interest rates, they are not generally designed to mitigate the sensitivity of our net book value to spread risk, which is the risk of an increase of the market spread between the yield on our agency MBS and the benchmark yield on U.S. Treasury securities or interest rate swaps. Accordingly, irrespective of fluctuations in interest rates, an increase (decrease) in agency MBS spreads will generally result in the underperformance (outperformance) of the values of agency MBS relative to interest rate hedging instruments.

The following table presents information about the gains and losses recognized due to the changes in the fair value of our investments and interest rate hedging instruments for the periods indicated (dollars in thousands):

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	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Loss on agency MBS investments, net	$	(22,728	)	$	(2,447	)	$	(59,276	)	$	(24,532	)
(Loss) gain on credit investments, net		(1,246	)		546			(639	)		2,364
Gain on SFR properties, net		14,407			—			14,438			—
Gain on MSR financing receivables		4,292			4,452			35,502			8,388
TBA commitments, net:
TBA dollar roll (expense) income		(421	)		1,064			682			3,678
Other gain (loss) from TBA commitments, net		2,998			(2,082	)		(1,971	)		(12,204	)
Total gain (loss) on TBA commitments, net		2,577			(1,018	)		(1,289	)		(8,526	)
Interest rate derivatives:
Net interest income (expense) on interest rate swaps		258			(379	)		(315	)		(2,276	)
Other gain (loss) from interest rate derivative   instruments, net		3,818			(1,930	)		13,178			7,037
Total gain (loss) on interest rate derivatives, net		4,076			(2,309	)		12,863			4,761
Other investments, net		(143	)		(537	)		(821	)		437
Investment and derivative gain (loss), net	$	1,235		$	(1,313	)	$	778		$	(17,108	)

General and Administrative Expenses

General and administrative expenses increased by $0.5 million from $2.9 million for the three months ended September 30, 2021 to $3.4 million for the three months ended September 30, 2022. General and administrative expenses increased by $1.7 million from $8.7 million for the nine months ended September 30, 2021 to $10.4 million for the nine months ended September 30, 2022. The increase in general and administrative expenses for the three and nine months ended September 30, 2022 is primarily due to an increase in compensation and benefits expense primarily as a result of an increase in performance based management incentive compensation.

Income Tax Provision

Our TRSs are subject to U.S. federal and state corporate income taxes. As a result, for the three months ended September 30, 2022 and 2021, we recognized a provision for income taxes of $1.1 million and $0.4 million, respectively, on the pre-tax net income of our TRSs. For the nine months ended September 30, 2022 and 2021, we recognized a provision for income taxes of $4.2 million and $0.8 million, respectively, on the pre-tax net income of our TRSs. As noted in “Non-GAAP Earnings Available for Distribution” below, our computation of non-GAAP earnings available for distribution includes a provision for income taxes on the earnings available for distribution of our TRSs. TRS earnings available for distribution is comprised of net interest income generated by TRSs net of the TRSs’ general and administrative expenses. In our consolidated financial consolidated statements of comprehensive income prepared in accordance with GAAP, the “income tax provision (benefit)” includes (i) the income tax provision for TRS earnings available for distribution and (ii) an income tax provision for (or benefit from) periodic increases (or decreases) in the fair value of the investments of our TRSs, which are recognized in net income as a component of “investment and derivative gain (loss) net.” Below is a reconciliation of the income tax provision for TRS earnings available for distribution, a non-GAAP financial measure, to the income tax provision determined in accordance with GAAP for the periods indicated (dollars in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Income tax provision for TRS earnings available for   distribution	$	668	$	85	$	1,203	$	157
Income tax provision for TRS investment gains, net		406		351		2,960		601
GAAP income tax provision	$	1,074	$	436	$	4,163	$	758

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Non-GAAP Earnings Available for Distribution

In addition to the results of operations determined in accordance with GAAP, we also report a non-GAAP financial measure "earnings available for distribution" (formerly core operating income). We define earnings available for distribution as net income available to common stock determined in accordance with GAAP adjusted for the following items:

•Plus (less) realized and unrealized losses (gains) on investments and derivatives;

•Plus (less) income tax provision (benefit) for TRS realized and unrealized gains and losses on investments and derivatives

•Plus TBA dollar roll income

•Plus (less) interest rate swap net interest income (expense)

•Plus depreciation of single-family residential properties

•Plus stock-based compensation

Realized and unrealized gains and losses recognized with respect to our mortgage related investments and economic hedging instruments, which are reported in line item “investment and derivative gain (loss), net” of our consolidated statements of comprehensive income, other than TBA dollar roll income and interest rate swap net interest income or expense, are excluded from the computation of earnings available for distribution as such gains on losses are not reflective of the economic interest income earned or interest expense incurred from our interest-bearing financial assets and liabilities during the indicated reporting period. Because our long-term-focused investment strategy for our mortgage related investment portfolio is to generate a net spread on the leveraged assets while prudently hedging periodic changes in the fair value of those assets attributable to changes in benchmark interest rates, we generally expect the fluctuations in the fair value of our mortgage related investments and economic hedging instruments to largely offset one another over time. In addition, certain of our investments are held by our TRS which is subject to U.S. federal and state corporate income taxes. In calculating earnings available for distribution, any income tax provision or benefit associated with gains or losses on our mortgage related investments and economic hedging instruments are also excluded from earnings available for distribution.

TBA dollar roll income (expense) represents the economic equivalent of net interest income (expense) generated from our transactions in non-specified fixed-rate agency MBS, executed through sequential series of forward-settling purchase and sale transactions that are settled on a net basis (known as “dollar roll” transactions). Dollar roll income (expense) is generated (incurred) as a result of delaying, or “rolling,” the settlement of a forward-settling purchase (sale) of a TBA agency MBS by entering into an offsetting “spot” sale (purchase) with the same counterparty prior to the settlement date, net settling the “paired-off” positions in cash, and contemporaneously entering another forward-settling purchase (sale) with the same counterparty of a TBA agency MBS of the same essential characteristics for a later settlement date at a price discount relative to the spot sale (purchase). The price discount of the forward-settling purchase (sale) relative to the contemporaneously executed spot sale (purchase) reflects compensation to the seller for the interest income (inclusive of expected prepayments) that, at the time of sale, is expected to be foregone as a result of relinquishing beneficial ownership of the MBS from the settlement date of the spot sale until the settlement date of the forward purchase, net of implied repurchase financing costs. We calculate dollar roll income (expense) as the excess of the spot sale (purchase) price over the forward-settling purchase (sale) price and recognize this amount ratably over the period beginning on the settlement date of the sale (purchase) and ending on the settlement date of the forward purchase (sale). In our consolidated statements of comprehensive income prepared in accordance with GAAP, TBA agency MBS dollar roll income (expense) is reported as a component of the overall periodic change in the fair value of TBA forward commitments within the line item “investment and derivative gain (loss), net.”

We utilize interest rate swap agreements to economically hedge a portion of our exposure to variability in future interest cash flows, attributable to changes in benchmark interest rates, associated with future roll-overs of our short-term repurchase agreement financing arrangements. Accordingly, the net interest income earned or expense incurred (commonly referred to as “net interest carry”) from our interest rate swap agreements in combination with repurchase agreement interest expense recognized in accordance with GAAP represents our effective “economic interest expense.” In our consolidated statements of comprehensive income prepared in accordance with GAAP, the net interest income earned or expense incurred from interest rate swap agreements is reported as a component of the overall periodic change in the fair value of derivative instruments within the line item “investment and derivative gain (loss), net.”

The following table provides a reconciliation of GAAP net income (loss) to non-GAAP earnings available for distribution for the three and nine months ended September 30, 2022 and 2021 (amounts in thousands):

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	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net income (loss) available (attributable) to   common stock	$	2,756		$	(981	)	$	(1,087	)	$	(15,526	)
Add (less):
Investment and derivative (gain) loss, net		(1,235	)		1,313			(778	)		17,108
Income tax provision for TRS investment gain		406			351			2,960			601
Depreciation of single-family residential properties		632			12			1,951			12
Stock-based compensation expense		919			520			2,672			1,560
Add back:
TBA dollar roll (expense) income		(421	)		1,064			682			3,678
Interest rate swap net interest income (expense)		258			(379	)		(315	)		(2,276	)
Non-GAAP earnings available for distribution	$	3,315		$	1,900		$	6,085		$	5,157
Non-GAAP earnings available for distribution per   diluted common share	$	0.11		$	0.06		$	0.21		$	0.16
Weighted average diluted common shares   outstanding		28,913			32,243			29,504			33,032

Earnings available for distribution is used by management to evaluate the financial performance of our long-term-focused, net interest spread-based investment strategy and core business activities over periods of time as well as assist with the determination of the appropriate level of periodic dividends to common stockholders. In addition, we believe that earnings available for distribution assists investors in understanding and evaluating the financial performance of our long-term-focused, net interest spread-based investment strategy and core business activities over periods of time as well as its earnings capacity.

A limitation of utilizing this non-GAAP financial measure is that the effect of accounting for all events or transactions in accordance with GAAP does, in fact, reflect the financial results of our business and these effects should not be ignored when evaluating and analyzing our financial results. In addition, our calculation of earnings available for distribution may not be comparable to other similarly titled measures of other companies. Therefore, we believe that earnings available for distribution should be considered as a supplement to, and in conjunction with, net income and comprehensive income determined in accordance with GAAP. Furthermore, there may be differences between earnings available for distribution and taxable income determined in accordance with the Internal Revenue Code. As a REIT, we are required to distribute at least 90% of our REIT taxable income (subject to certain adjustments) to qualify as a REIT and all of our taxable income in order to not be subject to any U.S. federal or state corporate income taxes. Accordingly, earnings available for distribution may not equal our distribution requirements as a REIT.

Liquidity and Capital Resources

Liquidity is a measurement of our ability to meet potential cash requirements including ongoing commitments to repay borrowings, fund investments, meet margin calls on our short-term borrowings and hedging instruments, and for other general business purposes. Our primary sources of funds for liquidity consist of existing cash balances, short-term borrowings (for example, repurchase agreements), principal and interest payments from our mortgage investments, net rental payments from our SFR properties and proceeds from sales of mortgage investments. Other sources of liquidity include proceeds from the offering of common stock, preferred stock, debt securities, or other securities registered pursuant to our effective shelf registration statement filed with the Securities and Exchange Commission (“SEC”).

Liquidity, or ready access to funds, is essential to our business. Perceived liquidity issues may affect our counterparties’ willingness to engage in transactions with us. Our liquidity could be impaired due to circumstances that we may be unable to control, such as a general market disruption or an operational problem that affects us or third parties. Further, our ability to sell assets may be impaired if other market participants are seeking to sell similar assets at the same time. If we cannot obtain funding from third parties our results of operations could be negatively impacted.

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As of September 30, 2022, our debt-to-equity leverage ratio was 3.5 to 1 measured as the ratio of the sum of our total debt to our stockholders’ equity as reported on our consolidated balance sheet. In evaluating our liquidity and leverage ratios, we also monitor our “at risk” leverage ratio. Our “at risk” leverage ratio is measured as the ratio of the sum of our repurchase agreement financing, long-term debt secured by single-family properties, net payable or receivable for unsettled securities, net contractual forward price of our TBA purchase and sale commitments, leverage within our MSR financing receivable less our cash and cash equivalents compared to our investable capital. Our investable capital is calculated as the sum of our stockholders’ equity plus our accumulated depreciation of our SFR properties and long-term unsecured debt. As of September 30, 2022, our “at risk” leverage ratio was 1.2 to 1.

As of September 30, 2022, our liquid assets totaled $45.9 million consisting of cash and cash equivalents of $13.8 million and settled unencumbered agency MBS of $32.1 million at fair value.

Sources of Funding

We believe that our existing cash balances, net investments in mortgage investments, cash flows from operations, borrowing capacity, and other sources of liquidity will be sufficient to meet our cash requirements for at least the next twelve months. We may, however, seek debt or equity financings, in public or private transactions, to provide capital for corporate purposes and/or strategic business opportunities, including possible acquisitions, joint ventures, alliances or other business arrangements which could require substantial capital outlays. Our policy is to evaluate strategic business opportunities, including acquisitions and divestitures, as they arise. There can be no assurance that we will be able to generate sufficient funds from future operations, or raise sufficient debt or equity on acceptable terms, to take advantage of investment opportunities that become available. Should our needs ever exceed these sources of liquidity, we believe that most of our investments could be sold, in most circumstances, to provide cash. However, we may be required to sell our assets in such instances at depressed prices.

Cash Flows

As of September 30, 2022, our cash totaled $16.3 million, which included cash and cash equivalents of $13.8 million, restricted cash of $0.6 million, and restricted cash of consolidated VIEs of $1.9 million, representing a net decrease of $5.5 million from $21.8 million as of December 31, 2021. Cash used in operating activities of $2.4 million during the nine months ended September 30, 2022 was attributable primarily to net interest income less our general and administrative expenses. Cash provided by investing activities of $48.1 million during the nine months ended September 30, 2022 was primarily generated by sales of agency MBS and credit securities, sales of single-family properties, distributions received on our MSR financing receivables, receipt of principal payments from agency MBS and credit securities and principal receipts on loans and mortgage loans of consolidated VIEs, partially offset by purchases of new agency MBS, credit securities, MSR financing receivables and SFR properties. Cash used in financing activities of $51.2 million during the nine months ended September 30, 2022 was primarily from repayments of repurchase agreements, net repayments of secured debt of consolidated VIEs, repayments of long-term debt secured by single-family properties, dividend payments to stockholders and from repurchases of our common stock, partially offset by proceeds from long-term debt secured by single-family properties.

Debt Capital

Repurchase Agreements

We have short-term financing facilities that are structured as repurchase agreements with various financial institutions to fund our mortgage investments. We have obtained, and believe we will be able to continue to obtain, short-term financing in amounts and at interest rates consistent with our financing objectives. Funding for mortgage investments through repurchase agreements continues to be available to us at rates we consider to be attractive from multiple counterparties.

Our repurchase agreements to finance our acquisition of MBS include provisions contained in the standard master repurchase agreement as published by the Securities Industry and Financial Markets Association (“SIFMA”) and may be amended and supplemented in accordance with industry standards for repurchase facilities. Certain of our repurchase agreements include financial covenants, with which the failure to comply would constitute an event of default. Similarly, each repurchase agreement includes events of insolvency and events of default on other indebtedness as similar financial covenants. As provided in the standard master repurchase agreement as typically amended, upon the occurrence of an event of default or termination, the applicable counterparty has the option to terminate all repurchase transactions under such counterparty’s repurchase agreement and to demand immediate payment of any amount due from us.

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Our repurchase agreement to finance our acquisition of mortgage loans is subject to a master repurchase agreement between our wholly-owned subsidiary, for which we provide a full guarantee of performance, and a third party lender. The agreement contains financial covenants including our maintenance of a minimum level of net worth, liquidity and profitability, with which the failure to comply would constitute an event of default. Similarly, the agreement includes events of insolvency and events of default on other indebtedness as similar financial covenants. Upon the occurrence of an event of default or termination, the counterparty has the option to terminate all other indebtedness arrangements with us and to demand immediate payment of any amount due from us.

Under our repurchase agreements, we may be required to pledge additional assets to our repurchase agreement counterparties in the event the estimated fair value of the existing pledged collateral under such agreements declines and such lenders demand additional collateral (commonly referred to as a “margin call”), which may take the form of additional securities or cash. Margin calls on repurchase agreements collateralized by our mortgage investments primarily result from events such as declines in the value of the underlying mortgage collateral caused by factors such as rising interest rates, higher prepayments or higher actual or expected credit losses. Our repurchase agreements generally provide that valuations for mortgage investments securing our repurchase agreements are to be obtained from a generally recognized source agreed to by both parties. However, in certain circumstances and under certain of our repurchase agreements, our lenders have the sole discretion to determine the value of the mortgage investments securing our repurchase agreements. In such instances, our lenders are required to act in good faith in making determinations of value. Our repurchase agreements generally provide that in the event of a margin call, we must provide cash or additional securities on the same business day that the margin call is made if the lender provides us notice prior to the margin notice deadline on such day.

To date, we have not had any margin calls on our repurchase agreements that we were not able to satisfy with either cash or additional pledged collateral. However, should we encounter increases in interest rates, prepayments or expected credit losses, margin calls on our repurchase agreements could result in a material adverse change in our liquidity position.

Our repurchase agreement counterparties apply a “haircut” to the value of the pledged collateral, which means the collateral is valued, for the purposes of the repurchase agreement transaction, at less than fair value. Upon the renewal of a repurchase agreement financing at maturity, a lender could increase the “haircut” percentage applied to the value of the pledged collateral, thus reducing our liquidity.

Our repurchase agreements generally mature within 30 to 60 days, but may have maturities as short as one day and as long as one year. In the event that market conditions are such that we are unable to continue to obtain repurchase agreement financing for our mortgage investments in amounts and at interest rates consistent with our financing objectives, we may liquidate such investments and may incur significant losses on any such sales of mortgage investments.

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The following table provides information regarding our outstanding repurchase agreement borrowings as of the date and period indicated (dollars in thousands):

	September 30, 2022
Agency MBS repurchase financing:
Repurchase agreements outstanding	$	319,538
Agency MBS collateral, at fair value		336,277
Net amount (1)		16,739
Weighted-average rate		3.02	%
Weighted-average term to maturity	13.0 days
Non-agency MBS repurchase financing:
Repurchase agreements outstanding	$	89,809
MBS collateral, at fair value		99,821
Net amount (1)		10,012
Weighted-average rate		3.68	%
Weighted-average term to maturity	26.5 days
Mortgage loans repurchase financing:
Repurchase agreements outstanding	$	20,563
Mortgage loans collateral, at fair value		29,375
Net amount (1)		8,812
Weighted-average rate		5.27	%
Weighted-average term to maturity	327.0 days
Total mortgage investments repurchase financing:
Repurchase agreements outstanding	$	429,910
Mortgage investments collateral, at fair value		465,473
Net amount (1)		35,563
Weighted-average rate		3.27	%
Weighted-average term to maturity	30.8 days
Maximum amount outstanding at any month-end during the period	$	457,589

(1)Net amount represents the value of collateral in excess of corresponding repurchase obligation. The amount of collateral at-risk is limited to the outstanding repurchase obligation and not the entire collateral balance.

To limit our exposure to counterparty risk, we diversify our repurchase agreement funding across multiple counterparties. As of September 30, 2022, we had outstanding repurchase agreement balances with eight counterparties and have master repurchase agreements in place with a total of 14 counterparties located throughout North America, Europe and Asia. As of September 30, 2022, no more than 4.7% of our stockholders’ equity was at risk with any one counterparty, with the top five counterparties representing approximately 14.5% of our stockholders’ equity.

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Long-term Debt Secured by SFR Properties

McLean SFR Investment, LLC (“McLean SFR”), a wholly-owned subsidiary of Arlington Asset, is party to a loan agreement with a third-party lender to fund McLean SFR’s purchases of SFR properties. Under the terms of the loan agreement, loan advances may be drawn up to 74% of the fair value of eligible SFR properties up to a maximum loan amount of $150 million. Advances under the loan agreement may be drawn during the advance period, which ends on the earlier of the date the outstanding principal balance equals the maximum loan amount or March 28, 2023. The outstanding principal balance is due on October 9, 2026 and advances under the loan agreement bear interest at a fixed rate of 2.76%. During the advance period, McLean SFR is subject to a commitment fee on the unfunded commitment if the outstanding loan balance is below certain thresholds. As of September 30, 2022, the outstanding principal balance was $57.0 million.

Through September 28, 2024, the outstanding principal balance may be prepaid in an amount equal to the excess of (i) the sum of the present value of all remaining scheduled payments of principal and interest on the principal amount of the loan being prepaid discounted using a U.S. Treasury rate over (ii) the outstanding principal balance of the loan. Subsequent to September 28, 2024, the outstanding principal balance may be prepaid in an amount equal to the outstanding principal balance plus accrued interest. On March 25, 2022, McLean SFR entered into a waiver agreement with the lender that waived any prepayment fee determined in accordance with the prior sentence on the portion of outstanding loan balance prepaid with the sale proceeds from the sale of 371 SFR properties consummated on August 19, 2022 in exchange for a one-time waiver fee of 0.80% of the outstanding principal balance prepaid.

The loan is secured by a first priority interest in all the assets of McLean SFR and a first priority pledge of the equity interest of McLean SFR. If the outstanding principal balance of the loan is greater than 74% of the fair value of the eligible collateral, McLean SFR is required to either pledge additional collateral or prepay the loan in an amount so that the outstanding principal balance does not exceed 74% of the fair value of the eligible collateral. Under the terms of the loan agreement, if McLean SFR does not maintain a minimum debt service coverage ratio for a specified time period, then all available cash of McLean SFR will be held as additional collateral for the loan amount until the minimum debt service coverage ratio is met. The obligations under the loan agreement may become recourse to Arlington Asset upon the occurrence of certain enumerated acts committed by McLean SFR or Arlington Asset. The loan agreement contains a minimum net worth financial covenant of Arlington Asset.

Long-Term Unsecured Debt

As of September 30, 2022, we had $86.3 million of total long-term unsecured debt, net of unamortized debt issuance costs of $1.4 million. Our 6.75% Senior Notes due 2025 with a principal amount of $34.9 million outstanding as of September 30, 2022 accrue and require payment of interest quarterly at an annual rate of 6.75% and mature on March 15, 2025. Our 6.00% Senior Notes due 2026 with a principal amount of $37.8 million outstanding as of September 30, 2022 accrue and require payment of interest quarterly at an annual rate of 6.00% and mature on August 1, 2026. Our trust preferred debt with a principal amount of $15.0 million outstanding as of September 30, 2022 accrue and require the payment of interest quarterly at three-month LIBOR plus 2.25% to 3.00% and mature between 2033 and 2035. Our Senior Notes due 2025 and trust preferred debt may be redeemed in whole or part at any time and from time to time at our option at a redemption price equal to the principal amount plus accrued and unpaid interest. Our Senior Notes due 2026 may be redeemed in whole or in part at any time and from time to time at our option on or after August 1, 2023 at a redemption price equal to the principal amount plus accrued and unpaid interest.

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Derivative Instruments

In the normal course of our operations, we are a party to financial instruments that are accounted for as derivative financial instruments including (i) interest rate hedging instruments such as interest rate swaps, U.S. Treasury note futures, put and call options on U.S. Treasury note futures, Eurodollar futures, interest rate swap futures and options on agency MBS, and (ii) derivative instruments that economically serve as investments such as TBA purchase and sale commitments.

Interest Rate Hedging Instruments

We exchange cash variation margin with the counterparties to our interest rate hedging instruments at least on a daily basis based upon daily changes in fair value as measured by the central clearinghouse through which those derivatives are cleared. In addition, the central clearinghouse requires market participants to deposit and maintain an “initial margin” amount which is determined by the clearinghouse and is generally intended to be set at a level sufficient to protect the clearinghouse from the maximum estimated single-day price movement in that market participant’s contracts. However, the futures commission merchants (“FCMs”) through which we conduct trading of our cleared and exchanged-traded hedging instruments may require incremental initial margin in excess of the clearinghouse’s requirement. The clearing exchanges have the sole discretion to determine the value of our hedging instruments for the purpose of setting initial and variation margin requirements or otherwise. In the event of a margin call, we must generally provide additional collateral on the same business day. To date, we have not had any margin calls on our hedging agreements that we were not able to satisfy. However, if we encounter significant decreases in long-term interest rates, margin calls on our hedging agreements could result in a material adverse change in our liquidity position.

As of September 30, 2022, we had outstanding interest rate swaps with the following aggregate notional amount and corresponding initial margin held in collateral deposit with the FCM (dollars in thousands):

	September 30, 2022
	Notional		Collateral
	Amount		Deposit
Interest rate swaps	$	195,000	$	3,228

The FCMs through which we conduct trading of our hedging instruments may limit their exposure to us (due to an inherent one business day lag in the variation margin exchange process) by applying a maximum “ceiling” on their level of risk, either overall and/or by instrument type. The FCMs generally use the amount of initial margin that we have posted with them as a measure of their level of risk exposure to us. We currently have FCM relationships with two large financial institutions. To date, among our two FCM arrangements, we have had sufficient excess capacity above and beyond what we believe to be a sufficient and appropriate hedge position. However, if our FCMs substantially lowered their risk exposure thresholds, we could experience a material adverse change in our liquidity position and our ability to hedge appropriately.

TBA Dollar Roll Transactions

TBA dollar roll transactions represent a form of off-balance sheet financing accounted for as derivative instruments. In a TBA dollar roll transaction, we do not intend to take physical delivery of the underlying agency MBS and will generally enter into an offsetting position and net settle the paired-off positions in cash. However, under certain market conditions, it may be uneconomical for us to roll our TBA contracts into future months and we may need to take or make physical delivery of the underlying securities. If we were required to take physical delivery to settle a long TBA contract, we would have to fund our total purchase commitment with cash or other financing sources and our liquidity position could be negatively impacted.

Margin Requirements for Agency MBS Purchase and Sale Commitments

Our commitments to purchase and sell agency MBS, including TBA commitments, are subject to master securities forward transaction agreements published by SIFMA as well as supplemental terms and conditions with each counterparty. Under the terms of these agreements, we may be required to pledge collateral to our counterparty in the event the fair value of the agency MBS underlying our purchase and sale commitments change and such counterparty demands collateral through a margin call. Margin calls on agency MBS commitments are generally caused by factors such as rising interest rates or prepayments. Our agency MBS commitments provide that valuations for our commitments and any pledged collateral are to be obtained from a generally recognized source agreed to by both parties. However, in certain circumstances, our counterparties have the sole discretion to determine the value of the agency MBS commitment and any pledged collateral. In such instances, our counterparties are required to act in good faith in making determinations of value. In the event of a margin call, we must generally provide additional collateral on the same business day.

MSR Financing Receivable Commitments

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We are party to agreements with a licensed, GSE approved residential mortgage loan servicer that enables us to garner the economic return of an investment in an MSR purchased by the mortgage servicing counterparty through an MSR financing transaction. We have committed to invest a total minimum of $50 million of capital with the counterparty with $25 million of the minimum commitment expiring on December 31, 2023 and $25 million of the minimum commitment expiring on April 1, 2024. As of September 30, 2022, we have fully funded the total minimum commitment. At any time prior to the minimum commitment expiration dates, we have the option to request the mortgage servicing counterparty to sell the related MSR investments and repay us amounts owed to us under the MSR financing transaction less a minimum fee the mortgage servicing counterparty would have earned over the remaining original commitment periods.

At our election, we can request the mortgage servicing counterparty utilize leverage on the MSRs to which our MSR financing receivables are referenced to finance the purchase of additional MSRs to increase potential returns to us. As of September 30, 2022, our mortgage servicing counterparty has a $75 million credit facility that is secured by its MSRs including MSRs to which our MSR financing receivables are referenced. On October 15, 2022, our mortgage servicing counterparty increased its existing credit facility to $100 million. As of September 30, 2022, we had the ability to utilize approximately 89% of our mortgage servicing counterparty’s available capacity under its credit facility. In general, our mortgage servicing counterparty can obtain advances of up to 60% of the fair value of the MSR collateral value pledged. Under our mortgage servicing counterparty’s credit facility, if the fair value of the pledged MSR collateral declines and the lender demands additional collateral from our mortgage servicing counterparty through a margin call, we would be required to provide the mortgage servicing counterparty with additional funds to meet such margin call. If we were unable to satisfy such margin call, the lender could liquidate the MSR collateral position to which our MSR financing receivables are referenced to satisfy the loan obligation, thereby reducing the value of our MSR financing receivables. Draws under the facility bear interest at term SOFR plus 2.90% with a SOFR floor of 1.60% and a maturity date of April 28, 2023 with a one-year borrower extension option.

Our mortgage servicing counterparty may also pledge MSRs subject to other similar MSR financing receivable relationships with other third parties as collateral under the same credit facility that have a pledge of the MSRs to which our MSR financing receivables are referenced. If such third party to another MSR financing receivable were unable to satisfy a margin call on its referenced pool of MSRs and the value of such MSRs were insufficient to satisfy the corresponding debt obligation to the lender, the lender would have recourse to the MSRs to which our MSR financing receivables are referenced. In such case, if the mortgage servicing counterparty to our MSR financing receivables fails to satisfy such third party’s shortfall, the lender could liquidate the MSRs to which our MSR financing receivables are referenced if we did not fund such remaining margin deficiency. As a result of this cross collateralization of our mortgage servicing counterparty’s credit facility, the value of our MSR financing receivables may be adversely impacted by the inability of our mortgage servicing counterparty’s other contracted parties to meet their margin calls.

Under the arrangement, we are obligated to provide funds to the mortgage servicing counterparty to fund its advances of payments on the serviced pool of mortgage loans within the referenced MSR. The mortgage servicing counterparty is required to return to us any subsequent servicing advances collected or reimbursed by the GSEs. At our option, we could request the mortgage servicing counterparty to fund any servicing advances with draws under its credit facility, subject to available borrowing capacity, while we would be required to fund such financing costs.

As of September 30, 2022, our mortgage servicing counterparty has drawn $40.6 million of financing under its credit facility, including $27.9 million attributable to us, collateralized by an estimated $247.9 million of MSRs, including $58.0 million attributable to us, and $2.8 million of servicer advances, including $0.7 million attributable to us.

Investment Commitments

We are party to an investment management agreement with a third party to invest up to a minimum $55 million of capital in SFR properties. As of September 30, 2022, we have fully funded the $55 million capital commitment. Under the terms of the investment management agreement, if we were to terminate the commitment, we would have to pay a termination fee equal to a fixed amount less inception to date fees paid.

As of September 30, 2022, we had commitments to acquire five SFR properties for an aggregate purchase price of $1.5 million.

As of September 30, 2022, we are a party to a participation agreement pursuant to which we have committed to fund up to $30 million of a $130 million revolving credit facility that matures on July 7, 2024. Under the terms of the participation agreement, we are obligated to fund the last $30 million of advances under the revolving credit facility. As of September 30, 2022, our unfunded commitment was $30.0 million.

Equity Capital

Common Equity Distribution Agreements

We are party to separate common equity distribution agreements with equity sales agents JMP Securities LLC, B. Riley FBR, Inc., JonesTrading Institutional Services LLC and Ladenburg Thalmann & Co. Inc. pursuant to which we may offer and sell, from

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time to time, shares of our common stock. Pursuant to the common equity distribution agreements, shares of our common stock may be offered and sold through the equity sales agents in transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, including sales made directly on the NYSE or sales made to or through a market maker other than on an exchange or, subject to the terms of a written notice from us, in privately negotiated transactions. As of September 30, 2022, we had 11,302,160 shares of Class A common stock available for sale under the common equity distribution agreements.

Preferred Stock

As of September 30, 2022, we had Series B Preferred Stock outstanding with a liquidation preference of $9.5 million. The Series B Preferred Stock is publicly traded on the New York Stock Exchange under the ticker symbol “AAIC PrB.” The Series B Preferred Stock has no stated maturity, is not subject to any sinking fund and will remain outstanding indefinitely unless repurchased or redeemed by us. Holders of Series B Preferred Stock have no voting rights, except under limited conditions and are entitled to receive a cumulative cash dividend at a rate of 7.00% per annum of their $25.00 per share liquidation preference (equivalent to $1.75 per annum per share). Shares of Series B Preferred Stock are redeemable at $25.00 per share, plus accumulated and unpaid dividends (whether or not authorized or declared) exclusively at our option. Dividends are payable quarterly in arrears on the 30th day of each December, March, June and September, when and as declared. We have declared and paid all required quarterly dividends on our Series B Preferred Stock to date.

As of September 30, 2022, we had Series C Preferred Stock outstanding with a liquidation preference of $24.1 million. The Series C Preferred Stock is publicly traded on the New York Stock Exchange under the ticker symbol “AAIC PrC.” The Series C Preferred Stock has no stated maturity, is not subject to any sinking fund and will remain outstanding indefinitely unless repurchased or redeemed by us. Holders of Series C Preferred Stock have no voting rights except under limited conditions and will be entitled to receive cumulative cash dividends (i) from and including the original issue date to, but excluding, March 30, 2024 at a fixed rate equal to 8.250% per annum of the $25.00 per share liquidation preference (equivalent to $2.0625 per annum per share) and (ii) from and including March 30, 2024, at a floating rate equal to three-month LIBOR plus a spread of 5.664% per annum. Shares of Series C Preferred Stock are redeemable at $25.00 per share, plus accumulated and unpaid dividends (whether or not authorized or declared) exclusively at our option commencing on March 30, 2024 or earlier upon the occurrence of a change in control or under circumstances where it is necessary to preserve our qualification as a REIT. Under certain circumstances upon a change of control, the Series C Preferred Stock is convertible into shares of our common stock. Dividends are payable quarterly in arrears on the 30th day of March, June, September and December of each year, when and as declared. We have declared and paid all required quarterly dividends on our Series C Preferred Stock to date.

Preferred Equity Distribution Agreement

We are party to an amended and restated equity distribution agreement with JonesTrading Institutional Services LLC and Ladenburg Thalmann & Co. Inc., pursuant to which we may offer and sell, from time to time, shares of our Series B Preferred Stock. Pursuant to the Series B preferred equity distribution agreement, shares of our Series B Preferred Stock may be offered and sold through the preferred equity sales agents in transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, including sales made directly on the NYSE or sales made to or through a market maker other than on an exchange or, subject to the terms of a written notice from us, in privately negotiated transactions.

During the nine months ended September 30, 2022, we issued 6,058 shares of Series B preferred stock for proceeds net of selling commissions and expenses of $0.1 million under the Series B preferred equity distribution agreement. As of September 30, 2022, we had 1,602,566 shares of Series B Preferred stock available for sale under the Series B preferred equity distribution agreement.

REIT Distribution Requirements

We have elected to be taxed as a REIT under the Internal Revenue Code. As a REIT, we are required to distribute annually 90% of our REIT taxable income (subject to certain adjustments) to our shareholders. So long as we continue to qualify as a REIT, we will generally not be subject to U.S. federal or state corporate income taxes on our taxable income that we distribute to our shareholders on a timely basis. At present, it is our intention to distribute 100% of our taxable income, although we will not be required to do so. We intend to make distributions of our taxable income within the time limits prescribed by the Internal Revenue Code, which may extend into the subsequent taxable year.

As of September 30, 2022, we had estimated NOL carryforwards of $162.8 million that can be used to offset future taxable ordinary income and reduce our future distribution requirements. As of September 30, 2022, we also had estimated NCL carryforwards of $156.8 million that can be used to offset future net capital gains.

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Off-Balance Sheet Arrangements and Other Commitments

As of September 30, 2022 and December 31, 2021, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance, or special purpose entities or VIEs, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Our economic interests held in unconsolidated VIEs are generally limited in nature to those of a passive holder of beneficial interests in securitized financial assets. As of September 30, 2022 and December 31, 2021, we had consolidated for financial reporting purposes two and one, respectively, securitization trusts for which we determined that our investments provided us with both (i) the power to direct the activities that most significantly impact the economic performance of the VIE and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. We were not required to consolidate for financial reporting purposes any other VIEs as of September 30, 2022 and December 31, 2021, as we did not have the power to direct the activities that most significantly impact the economic performance of such entities.

As of September 30, 2022 and December 31, 2021, we had not guaranteed any obligations of unconsolidated entities. As of September 30, 2022 and December 31, 2021, we had not entered into any commitment or intent to provide funding to unconsolidated entities other than the aforementioned asset-backed revolving credit facility funding commitment.

Critical Accounting Estimates

Refer to the heading titled “Critical Accounting Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2021 for a discussion of our critical accounting estimates.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk is the exposure to loss resulting from changes in market factors such as interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market risk sensitive instruments. The primary market risks that we are exposed to are interest rate risk, prepayment risk, extension risk, spread risk, credit risk, liquidity risk and regulatory risk. See “Item 1 — Business” in our Annual Report on Form 10-K for the year ended December 31, 2021 for discussion of our risk management strategies related to these market risks. The following is additional information regarding certain of these market risks.

Interest Rate Risk

We are exposed to interest rate risk in our agency MBS, MSR related asset and SFR investments. Our investments in mortgage investments are also financed with short-term borrowing facilities, such as repurchase agreements, which are interest rate sensitive financial instruments. Our exposure to interest rate risk fluctuates based upon changes in the level and volatility of interest rates, mortgage prepayments, and in the shape and slope of the yield curve, among other factors. Through the use of interest rate hedging instruments, we attempt to economically hedge a portion of our exposure to changes, attributable to changes in benchmark interest rates, in agency MBS fair values and future interest cash flows on our short-term financing arrangements. Our primary interest rate hedging instruments include interest rate swaps as well as U.S. Treasury note futures, options on U.S. Treasury note futures, and options on agency MBS.

Changes in both short- and long-term interest rates affect us in several ways, including our financial position. As interest rates rise, the value of fixed-rate agency MBS may be expected to decline, prepayment rates may be expected to decrease and duration may be expected to extend, while the values of our interest rate hedging instruments and MSR financing receivables are generally expected to increase due to lower expectations of prepayments in the referenced pools of mortgage loans. Increases in interest rates may also have an adverse impact on our SFR investments if we are unable to increase rents or acquire SFR homes with rates high enough to offset the increase in interest rates on our borrowings. In addition, an increase in interest rates could also negatively impact the value of our SFR investments as the affordability to individual home buyers would likely decrease. Conversely, if interest rates decline, the value of fixed-rate agency MBS is generally expected to increase while the value of our interest rate hedging instruments and MSR related assets are expected to decline. In addition, decreases in interest rates may lead to additional competition for the acquisition of SFR homes, which may lead to future acquisitions being more costly and resulting in lower yields. Also, our ability to obtain favorable interest rates on our financing structures may affect our SFR investment strategy. We manage our interest rate risk through investment allocation between our agency MBS and MSR related assets and the utilization of interest rate hedging instruments.

The tables that follow illustrate the estimated change in fair value for our current investments in agency MBS, MSR financing receivable and derivative instruments under several hypothetical scenarios of interest rate movements. For the purposes of this illustration, interest rates are defined by the U.S. Treasury yield curve. Changes in fair value are measured as percentage changes from their respective fair values presented in the column labeled “Value.” Our estimate of the change in the fair value of agency MBS is based upon the same assumptions we use to manage the impact of interest rates on the portfolio. The interest rate sensitivity of our agency MBS and TBA commitments is derived from The Yield Book, a third-party model. The interest rate sensitivity of our MSR

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financing receivable is derived from an internal model. Actual results could differ significantly from these estimates. The effective durations are based on observed fair value changes, as well as our own estimate of the effect of interest rate changes on the fair value of the investments, including assumptions regarding prepayments based, in part, on age and interest rate of the mortgages underlying the agency MBS, prior exposure to refinancing opportunities, and an overall analysis of historical prepayment patterns under a variety of historical interest rate conditions.

The interest rate sensitivity analyses illustrated by the tables that follow have certain limitations, most notably the following:

•The 50 and 100 basis point upward and downward shocks to interest rates that are applied in the analyses represent parallel shocks to the forward yield curve. The analyses do not consider the sensitivity of stockholders’ equity to changes in the shape or slope of the forward yield curve.

•The analyses assume that spreads remain constant and, therefore, do not reflect an estimate of the impact that changes in spreads would have on the value of our MBS investments or our LIBOR- or SOFR-based derivative instruments, such as our interest rate swap agreements.

•The analyses assume a static portfolio and do not reflect activities and strategic actions that management may take in the future to manage interest rate risk in response to significant changes in interest rates or other market conditions.

•The yield curve that results from applying an instantaneous parallel decrease in interest rates may reflect an interest rate of less than 0% in certain points of the curve. The results of the analyses included in the tables below reflect the effect of these negative interest rates.

•The analyses do not reflect an estimated changes in our income tax provision.

•The analyses do not reflect any estimated changes in the fair value of our credit investments or SFR properties.

These analyses are not intended to provide a precise forecast. Actual results could differ materially from these estimates (dollars in thousands, except per share amounts):

	September 30, 2022
			Value			Value
			with 50			with 50
			Basis Point			Basis Point
			Increase in			Decrease in
	Value		Interest Rates			Interest Rates
Agency MBS	$	445,122	$	433,884		$	455,644
TBA commitments		4,023		10,072			(1,579	)
MSR financing receivables		164,585		168,067			161,852
Interest rate swaps		260		2,826			(2,308	)
Equity available to common stock (1)		181,575		182,434			181,194
Equity available to common stock percent change				0.47	%		(0.21	)%

	September 30, 2022
			Value			Value
			with 100			with 100
			Basis Point			Basis Point
			Increase in			Decrease in
	Value		Interest Rates			Interest Rates
Agency MBS	$	445,122	$	421,838		$	464,973
TBA commitments		4,023		16,580			(6,498	)
MSR financing receivables		164,585		171,057			158,407
Interest rate swaps		260		5,393			(4,875	)
Equity available to common stock (1)		181,575		182,453			179,591
Equity available to common stock percent change				0.48	%		(1.09	)%

(1)Equity available to common stock is calculated as total equity plus accumulated depreciation of single-family residential real estate less the preferred stock liquidation preference.

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Spread Risk

Our mortgage investments expose us to “spread risk.” Spread risk, also known as “basis risk,” is the risk of an increase in the spread between market participants’ required rate of return (or “market yield”) on our mortgage investments and prevailing benchmark interest rates, such as the U.S. Treasury or interest rate swap rates.

The spread risk inherent to our investments in agency MBS and the resulting fluctuations in fair value of these securities can occur independent of changes in prevailing benchmark interest rates and may relate to other factors impacting the mortgage and fixed income markets, such as actual or anticipated monetary policy actions by the U. S. Federal Reserve, liquidity, or changes in market participants’ required rates of return on different assets. While we use interest rate hedging instruments to attempt to mitigate the sensitivity of our net book value to changes in prevailing benchmark interest rates, such instruments are generally not designed to mitigate spread risk inherent to our investment in agency MBS. Consequently, the value of our agency MBS and, in turn, our net book value, could decline independent of changes in interest rates.

The tables that follow illustrate the estimated change in fair value for our investments in agency MBS and TBA commitments under several hypothetical scenarios of agency MBS spread movements. Changes in fair value are measured as percentage changes from their respective fair values presented in the column labeled “Value.” The sensitivity of our agency MBS and TBA commitments to changes in MBS spreads is derived from The Yield Book, a third-party model. The analysis to follow reflects an assumed spread duration for our investment in agency MBS of 5.6 years, which is a model-based assumption that is dependent upon the size and composition of our investment portfolio as well as economic conditions present as of September 30, 2022.

These analyses are not intended to provide a precise forecast. Actual results could differ materially from these estimates (dollars in thousands, except per share amounts):

	September 30, 2022
			Value with			Value with
			10 Basis Point			10 Basis Point
			Increase in			Decrease In
			Agency MBS			Agency MBS
	Value		Spreads			Spreads
Agency MBS	$	445,122	$	442,517		$	447,727
TBA commitments		4,023		5,457			2,591
Equity available to common stock (1)		181,575		180,403			182,747
Equity available to common stock percent change				(0.65	)%		0.65	%

	September 30, 2022
			Value with			Value with
			25 Basis Point			25 Basis Point
			Increase in			Decrease In
			Agency MBS			Agency MBS
	Value		Spreads			Spreads
Agency MBS	$	445,122	$	438,610		$	451,634
TBA commitments		4,023		7,606			442
Equity available to common stock (1)		181,575		178,645			184,505
Equity available to common stock percent change				(1.61	)%		1.61	%

(1)Equity available to common stock is calculated as total equity plus accumulated depreciation of single-family residential real estate less the preferred stock liquidation preference.

Credit Risk

Unlike our agency MBS investments, our credit investments do not carry a credit guarantee from a GSE or government agency. Accordingly, our credit investments expose us to credit risk. Credit risk, sometimes referred to as non-performance or non-payment risk, is the risk that we will not receive, in full, the contractually required principal or interest cash flows stemming from our investments due to an underlying borrower’s or issuer’s default on their obligation. Upon a mortgage loan borrower’s default, a foreclosure sale or other liquidation of the underlying mortgaged property will result in a credit loss if the liquidation proceeds fall short of the mortgage loan’s unpaid principal balance and unpaid accrued interest.

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Some of our credit investments have credit enhancements that mitigate our exposure to the credit risk of the underlying mortgage loans. Credit losses incurred on the underlying mortgage loans collateralizing our investments in non-agency MBS are allocated on a “reverse sequential” basis. Accordingly, any credit losses realized on the underlying mortgage loans are first absorbed by the beneficial interests subordinate to our non-agency MBS, if any, to the extent of their respective principal balance, prior to being allocated to our investments.

Other of our non-agency MBS investments represent “first loss” positions. Accordingly, for such investments, credit losses realized on the underlying pool of mortgage loans are first allocated to our security, to the extent of its principal balance, prior to being allocated to the respective securitization’s more senior credit positions.

We accept exposure to credit risk at levels we deem prudent within our overall investment strategy and our evaluation of the potential risk-adjusted returns. We attempt to manage our exposure to credit risk through prudent asset selection resulting from pre-acquisition due diligence, on-going performance monitoring subsequent to acquisition, and the disposition of assets for which we identify negative credit trends.

There is no guarantee that our attempts to manage our credit risk will be successful. We could experience substantial losses if the credit performance of the mortgage loans to which we are exposed falls short of our expectations.

Cautionary Statement About Forward-Looking Information

When used in this Quarterly Report on Form 10-Q, in future filings with the SEC or in press releases or other written or oral communications, statements which are not historical in nature, including those containing words such as “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may” or similar expressions, are intended to identify “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and, as such, may involve known and unknown risks, uncertainties and assumptions. The forward-looking statements we make in this Quarterly Report on Form 10-Q include, but are not limited to, statements about the following:

•the availability and terms of, and our ability to deploy, capital and our ability to grow our business through our current strategy focused on acquiring either (i) residential MBS that are either issued by U.S. government agencies or guaranteed as to principal and interest by U.S. government agencies or U.S. government sponsored agencies (“agency MBS”), (ii) MSR related assets, (iii) credit investments that generally consist of mortgage loans secured by either residential or commercial real property or MBS collateralized by such mortgage loans, or (iv) SFR homes as rental properties;

•the uncertainty and economic impact of the ongoing COVID-19 pandemic and the measures taken by the government to address it, including the impact on our business, financial condition, liquidity and results of operations due to a significant decrease in economic activity and disruptions in our financing operations, among other factors;

•our ability to qualify and maintain our qualification as a REIT;

•our ability to forecast our tax attributes, which are based upon various facts and assumptions, and our ability to protect and use our net operating losses (“NOLs”) and net capital losses (“NCLs”) to offset future taxable income, including whether our shareholder rights plan, as amended (“Rights Plan”) will be effective in preventing an ownership change that would significantly limit our ability to utilize such losses;

•our business, acquisition, leverage, asset allocation, operational, investment, hedging and financing strategies and the success of, or changes in, these strategies;

•credit risks underlying our assets, including changes in the default rates and management’s assumptions regarding default rates on the mortgage loans securing our non-agency MBS;

•the effect of changes in prepayment rates, interest rates and default rates on our portfolio;

•our evaluation of SFR homes and the costs to operate SFR homes;

•the effect of governmental regulation and actions on our business, including, without limitation, changes to monetary and fiscal policy and tax laws;

•our ability to quantify and manage risk;

•our ability to roll our repurchase agreements on favorable terms, if at all;

•our liquidity;

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•our asset valuation policies;

•our decisions with respect to, and ability to make, future dividends;

•investing in assets other than mortgage investments or pursuing business activities other than investing in mortgage investments;

•our ability to successfully operate our business as a REIT;

•our ability to maintain our exclusion from the definition of “investment company” under the Investment Company Act of 1940, as amended; and

•the effect of general economic conditions on our business.

Forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account information currently in our possession. These beliefs, assumptions and expectations may change as a result of many possible events or factors, not all of which are known to us or are within our control. If a change occurs, the performance of our portfolio and our business, financial condition, liquidity and results of operations may vary materially from those expressed, anticipated or contemplated in our forward-looking statements. You should carefully consider these risks, along with the following factors that could cause actual results to vary from our forward-looking statements, before making an investment in our securities:

•the overall environment for interest rates, changes in interest rates, interest rate spreads, the yield curve and prepayment rates, including the timing of changes in the Federal Funds rate by the U.S. Federal Reserve;

•the effect of any changes to the London Interbank Offered Rate (“LIBOR”) and the Secured Overnight Financing Rate (“SOFR”) and establishment of alternative reference rates;

•current conditions and further adverse developments in the residential mortgage market and the overall economy;

•potential risk attributable to our mortgage-related portfolios, including changes in fair value;

•our use of leverage and our dependence on repurchase agreements and other short-term borrowings to finance our mortgage-related holdings;

•the availability of certain short-term liquidity sources;

•the sale of our SFR properties;

•competition for investment opportunities;

•U.S. Federal Reserve monetary policy;

•the federal conservatorship of Fannie Mae and Freddie Mac and related efforts, along with any changes in laws and regulations affecting the relationship between Fannie Mae and Freddie Mac and the federal government;

•mortgage loan prepayment activity, modification programs and future legislative action;

•changes in, and success of, our acquisition, hedging and leverage strategies, changes in our asset allocation and changes in our operational policies, all of which may be changed by us without shareholder approval;

•failure of sovereign or municipal entities to meet their debt obligations;

•fluctuations of the value of our hedge instruments;

•fluctuating quarterly operating results;

•changes in laws and regulations and industry practices that may adversely affect our business;

•volatility of the securities markets and activity in the secondary securities markets in the United States and elsewhere;

•our ability to qualify and maintain our qualification as a REIT for federal income tax purposes;

•our ability to successfully expand our business into areas other than investing in MBS and our expectations of the returns of expanding into any such areas; and

•the other important factors identified in our Quarterly Reports on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2021 under the caption “Item 1A — Risk Factors.”

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These and other risks, uncertainties and factors, including those described elsewhere in this Quarterly Report on Form 10-Q, could cause our actual results to differ materially from those projected in any forward-looking statements we make. All forward-looking statements speak only as of the date on which they are made. New risks and uncertainties arise over time and it is not possible to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Item 4. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, our management, with the participation of our Chief Executive Officer, J. Rock Tonkel, Jr., and our Chief Financial Officer, Richard E. Konzmann, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) pursuant to Rule 13a-15(b) of the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

We are from time to time involved in civil lawsuits, legal proceedings and arbitration matters that we consider to be in the ordinary course of our business. There can be no assurance that these matters individually or in the aggregate will not have a material adverse effect on our financial condition or results of operations in a future period. We are also subject to the risk of litigation, including litigation that may be without merit. As we intend to actively defend such litigation, significant legal expenses could be incurred. An adverse resolution of any future litigation against us could materially affect our financial condition, results of operations and liquidity. Furthermore, we operate in highly-regulated markets that currently are under intense regulatory scrutiny, and we have received, and we expect in the future that we may receive, inquiries and requests for documents and information from various federal, state and foreign regulators. In addition, one or more of our subsidiaries have received requests to repurchase loans from various parties in connection with the former securitization business conducted by a subsidiary. We believe that the continued scrutiny of MBS, structured finance, and derivative market participants increases the risk of additional inquiries and requests from regulatory or enforcement agencies and other parties. We cannot provide any assurance that these inquiries and requests will not result in further investigation of or the initiation of a proceeding against us or that, if any such investigation or proceeding were to arise, it would not materially adversely affect our Company.

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed in Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021. The materialization of any risks and uncertainties identified in our Cautionary Statement About Forward-Looking Information contained in this report together with those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021 or those that are presently unforeseen could result in significant adverse effects on our financial condition, results of operations and cash flows. See “Cautionary Statement About Forward-Looking Information” in Part I, Item 3 of this report or our Annual Report on Form 10-K for the year ended December 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities by the Issuer

On July 31, 2020, we announced that our Board of Directors authorized an increase to our share repurchase program (the “Repurchase Program”) pursuant to which we may purchase up to 18,000,000 shares of our common stock. As of September 30, 2022, we had repurchased 7,439,215 shares of our common stock and there remain available for repurchase 10,560,785 shares of our common stock under the current Repurchase Program.

The following table presents information with respect to our purchases of our common stock during the three months ended September 30, 2022 by us or any “affiliated purchaser” affiliated with us, as defined in Rule 10b-18(a)(3) under the Exchange Act:

Settlement Date	Total Number of Shares Purchased		Average Net Price Paid Per Share		Total Number of Shares Repurchased as Part of Repurchase Program		Maximum Number of Shares that May Yet be Purchased Under the Repurchase Program
July 1, 2022 - July 31, 2022		221,421	$	3.19		221,421		10,811,721
August 1, 2022 - August 31, 2022		111,010		3.19		111,010		10,700,711
September 1, 2022 - September 30, 2022		139,926		3.02		139,926		10,560,785
Total		472,357	$	3.14		472,357		10,560,785

On March 20, 2020, our Board of Directors authorized us to repurchase up to $25 million in the aggregate of our Series B Preferred Stock, Series C Preferred Stock, Senior Notes due 2023 and Senior Notes due 2025. As of September 30, 2022, we had repurchased an aggregate of $8.0 million of Preferred Stock and Senior Notes and had remaining authorization to repurchase up to $17.0 million of such securities.

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The following table presents information with respect to our purchases of our Series C Preferred Stock during the three months ended September 30, 2022 by us or any “affiliated purchaser” affiliated with us, as defined in Rule 10b-18(a)(3) under the Exchange Act:

Settlement Date	Total Number of Shares Purchased		Average Net Price Paid Per Share		Total Number of Shares Repurchased as Part of Repurchase Program		Maximum Number of Shares that May Yet be Purchased Under the Repurchase Program
July 1, 2022 - July 31, 2022		11,541	$	21.18		11,541	N/A
August 1, 2022 - August 31, 2022		46,911		20.72		46,911	N/A
September 1, 2022 - September 30, 2022		21,396		19.79		21,396	N/A
Total		79,848	$	20.54		79,848	N/A

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

On November 11, 2022, our Board of Directors approved our Amended and Restated Bylaws (our “Amended and Restated Bylaws”), effective as of the same date. Among other things, our Amended and Restated Bylaws enhance disclosure and procedural requirements in connection with shareholder nominations of directors, including by (i) requiring any shareholder submitting a director nomination notice to represent as to whether such shareholder intends to solicit proxies in support of director nominees, other than our nominees, in accordance with Rule 14a-19 under the Exchange Act, (ii) requiring such nominating shareholder to provide reasonable evidence, at our request, that certain requirements of Rule 14a-19 have been satisfied, (iii) permitting us to disregard proxies or votes solicited for such shareholder’s nominees if such shareholder fails to comply with the requirements of Exchange Act Rule 14a-19, (iv) limiting the number of director nominees a shareholder may nominate to the number of directors to be elected at the applicable meeting, and (v) incorporating other technical changes in light of the universal proxy rules adopted by the SEC.

The preceding summary of our Amended and Restated Bylaws is not complete and is qualified in its entirety by reference to, and should be read in connection with, the complete copy of our Amended and Restated Bylaws attached hereto as Exhibit 3.05 to this Quarterly Report on Form 10-Q and is incorporated by reference herein.

On November 11, 2022, we entered into an agreement (the “Interest Purchase Agreement”) with AVHS SFR II LLC to sell our wholly-owned subsidiary, McLean SFR Investment, LLC, which includes all of our investments in SFR properties and our long-term debt facility secured by SFR properties, for $87.33 million including the assumption of the debt liability. The settlement of the sale is contingent upon the approval of the creditor of the long-term secured debt facility as well as other normal settlement conditions. If ultimately consummated, the sale is expected to settle in the fourth quarter. The foregoing description of the Interest Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to a copy of the Interest Purchase Agreement filed as Exhibit 10.01 to this Quarterly Report on Form 10-Q, which is incorporated by reference herein.

Item 6. Exhibits

Exhibit Number	Exhibit Title
3.01	Amended and Restated Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q filed on November 9, 2009).
3.02	Articles of Amendment to the Amended and Restated Articles of Incorporation designating the shares of 7.00% Series B Cumulative Perpetual Redeemable Preferred Stock, $0.01 par value per share (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form 8-A filed on May 9, 2017).

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3.03	Articles of Amendment to the Amended and Restated Articles of Incorporation of Arlington Asset Investment Corp. designating the Company’s 8.250% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, par value $0.01 per share (incorporated by reference to Exhibit 3.3 to the Company’s Registration Statement on Form 8-A filed on March 11, 2019).
3.04	Articles of Amendment to the Amended and Restated Articles of Incorporation of Arlington Asset Investment Corp. (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 25, 2019).
3.05	Amended and Restated Bylaws.*
4.01	Indenture governing the Senior Debt Securities by and between the Company and The Bank of New York Mellon, as Trustee (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form S-3 (File No. 333-235885) filed on January 10, 2020).
4.02	Indenture governing the Subordinated Debt Securities by and between the Company and The Bank of New York Mellon, as Trustee (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form S-3 (File No. 333-235885) filed on January 10, 2020).
4.03	Indenture dated as of May 1, 2013 between the Company and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on May 1, 2013).
4.04	First Supplemental Indenture dated as of May 1, 2013 between the Company and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed on May 1, 2013).
4.05	Form of Senior Note. (incorporated by reference to Exhibit 4.6 to the Company’s Registration Statement on Form S-3 (File No. 333-235885) filed on January 10, 2020).
4.06	Form of Subordinated Note. (incorporated by reference to Exhibit 4.7 to the Company’s Registration Statement on Form S-3 (File No. 333-235885) filed on January 10, 2020).
4.07	Form of 6.625% Senior Notes due 2023 (incorporated by reference to Exhibit 4.3 to Current Report on Form 8-K filed by the Company on May 1, 2013).
4.08	Form of Certificate for Class A common stock (incorporated by reference to Exhibit 4.01 of the Annual Report on Form 10-K filed with the SEC on February 24, 2010).
4.09	Shareholder Rights Agreement, dated June 5, 2009 (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed with the SEC on June 5, 2009).
4.10	First Amendment to Shareholder Rights Agreement, dated as of April 13, 2018 (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed on April 13, 2018).
4.11	Second Supplemental Indenture, dated as of March 18, 2015, between the Company, Wells Fargo Bank, National Association, as Trustee and The Bank of New York Mellon, as Series Trustee (incorporated by reference to Exhibit 4.3 to the Company’s Form 8-A filed on March 18, 2015).
4.12	Form of 6.750% Notes due 2025 (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K filed by the Company on March 17, 2015).
4.13	Form of specimen certificate representing the shares of 7.00% Series B Perpetual Redeemable Preferred Stock (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 8-A filed on May 9, 2017).
4.14	Form of specimen certificate representing the shares of 8.250% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 8-A filed on March 11, 2019).
4.15	First Supplemental Indenture dated as of July 15, 2021 between the Company and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form 8-A filed on July 15, 2021).
4.16	Form of 6.000% Senior Notes Due 2026 (incorporated by reference to Exhibit 4.6 to the Company’s Registration Statement on Form 8-A filed on July 15, 2021).
4.17	Second Amendment to Shareholder Rights Agreement, dated as of April 11, 2022 (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed on April 12, 2022).

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10.01	Interest Purchase Agreement dated as of November 11, 2022, by and between McLean SFR Holdings, LLC and AVHS SFR II LLC.*
31.01	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.02	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.01	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.02	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.***
101.SCH	Inline XBRL Taxonomy Extension Schema Document***
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document***
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document***
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document***
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document***
104	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, has been formatted in Inline XBRL.

* Filed herewith.

** Furnished herewith.

*** Submitted electronically herewith. Attached as Exhibit 101 are the following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at September 30, 2022 and December 31, 2021; (ii) Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021; (iii) Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2022 and 2021, for the Three Months Ended June 30, 2022 and 2021, and for the Three Months Ended September 30, 2022 and 2021; and (iv) Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ARLINGTON ASSET INVESTMENT CORP.
	By:	/s/ RICHARD E. KONZMANN
		Richard E. Konzmann
		Executive Vice President, Chief Financial Officer and Treasurer
		(Principal Financial Officer)
Date: November 14, 2022

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EX-3.05

Exhibit 3.05

Amended and restated BYLAWS

OF

ARLINGTON ASSET INVESTMENT CORP.

(as amended and restated November 11, 2022)

ARTICLE I
MEETINGS OF SHAREHOLDERS

1.1.Place of Meetings. Meetings of shareholders of Arlington Asset Investment Corp. (the “Corporation”) shall be held at such place, either within or without the Commonwealth of Virginia, as may be provided in the notice of the meeting or in the waiver thereof. The Board of Directors may, in its sole discretion, permit shareholders to participate in any meeting of shareholders by means of remote communication as authorized by the Virginia Stock Corporation Act and subject to any guidelines and procedures as may be adopted by the Board of Directors. Any previously scheduled meeting of the shareholders may be postponed by action of the Board of Directors or any duly authorized committee thereof taken prior to the time previously scheduled for such meeting of shareholders.

1.2.Procedure. The Chairman or, in the absence of the Chairman, the Chief Executive Officer or, in the absence of the Chairman and the Chief Executive Officer, the President or, in the absence of the Chairman, the Chief Executive Officer and the President, such other officer as selected by the Board of Directors or a duly authorized committee thereof shall serve as chairman at all meetings of the shareholders. Inthe absence of the foregoing officers or if all of them decline to serve, a majority of the shares entitled to vote at a meeting may appoint any person entitled to vote at the meeting to act as chairman. The Secretary or, in his or her absence, an Assistant Secretary shall act as secretary at all meetings of the shareholders. In the event that neither the Secretary nor an Assistant Secretary is present, the chairman of the meeting may appoint any person to act as secretary of the meeting. The chairman of the meeting may adjourn or recess the meeting from time to time, whether or not there is a quorum. Without limiting the chairman’s authority, the holders of a majority of the shares entitled to be cast, even though less than a quorum, may adjourn the meeting, provided that no business except adjournment shall be transacted in the absence of a quorum.

The Board of Directors may adopt by resolution such rules, regulations and procedures for the conduct of any meeting of shareholders as the Board of Directors shall deem appropriate. Except to the extent inconsistent with any such rules, regulations and procedures as adopted by the Board of Directors, the chairman of the meeting shall have the authority to make such rules, regulations and procedures and to take such steps as he or she may deem necessary or desirable for the proper conduct of each meeting of the shareholders, including, without limitation, the authority to make the agenda and order of business and to establish rules, regulations and procedures for (i) dismissing of business not properly presented, (ii) maintaining of order and safety, (iii) placing limitations on the manner in which all persons attending the meeting may

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participate, including limitations on the time allotted to questions or comments from such persons, (iv) placing restrictions on attendance at a meeting by persons or classes of persons who are not shareholders or their proxies, (v) restricting entry to a meeting after the time prescribed for the commencement thereof and (vi) commencing, conducting and closing voting on any matter.

1.3.Annual Meeting. The annual meeting of shareholders shall be held on such date and at such time as may be fixed from time to time by resolution of the Board of Directors.

1.4.Special Meetings. Special meetings of the shareholders may be called only by the Board of Directors or by the Chairman, Chief Executive Officer or President. Only business within the purpose or purposes described in the notice of the special meeting delivered by the Corporation shall be conducted at a special meeting of shareholders.

1.5.Order of Business at Meetings of Shareholders.

(a)Annual Meetings of Shareholders. At any annual meeting of the shareholders, only such nominations of persons for election to the Board of Directors shall be made, and only such other business shall be conducted or considered, as shall have been properly brought before the meeting. For nominations to be properly made at an annual meeting, and proposals of other business to be properly brought before an annual meeting, nominations and proposals of other business must be (i) specified in the Corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly made at the annual meeting by or at the direction of the Board of Directors or (iii) otherwise properly requested to be brought before the annual meeting by a shareholder of the Corporation in accordance with these Bylaws. For nominations of persons for election to the Board of Directors or proposals of other business to be properly requested by a shareholder to be made at an annual meeting, a shareholder must (x) be a shareholder of record at the time the Corporation’s notice of such annual meeting was given and at the time of the annual meeting, (y) be entitled to vote at such annual meeting and (z) comply with the procedures set forth in these Bylaws as to such business or nomination. The immediately preceding sentence shall be the exclusive means for a shareholder to make nominations or other business proposals (other than matters properly brought under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and included in the Corporation’s notice of meeting) before an annual meeting of shareholders.

(b)Special Meetings of Shareholders. At any special meeting of the shareholders, only such business shall be conducted or considered as shall have been properly brought before the meeting pursuant to the Corporation’s notice of meeting. To be properly brought before a special meeting, proposals of business must be (i) specified in the Corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors or (ii) otherwise properly brought before the special meeting by or at the direction of the Board of Directors. Nominations of persons for election to the Board of Directors may be made at a special meeting of shareholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (A) by or at the direction of the Board of Directors or (B) provided that the Board of Directors has determined that directors shall be elected at such special meeting, by any shareholder of the Corporation who (x) is a shareholder of record at the time the

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Corporation’s notice of such special meeting was given and at the time of the special meeting, (y) is entitled to vote at the special meeting and (z) complies with the procedures set forth in these Bylaws as to such nomination. The immediately preceding sentence shall be the exclusive means for a shareholder to make nominations before a special meeting of shareholders.

(c)General. Except as otherwise provided by law, the Articles of Incorporation or these Bylaws, the chairman of the meeting shall have the power and duty to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with these Bylaws and, if any proposed nomination or other business is not in compliance with these Bylaws, to declare that no action shall be taken on such nomination or other proposal, and such nomination or other proposal shall be disregarded notwithstanding the fact that proxies or votes may have been received by the Corporation with respect thereto.

1.6.Advance Notice of Shareholder Business and Nominations.

(a)Annual Meeting of Shareholders. Without qualification or limitation, subject to Section 1.6(c)(5) of these Bylaws, for any nominations or any other business to be properly brought before an annual meeting by a shareholder pursuant to Section 1.5(a) of these Bylaws, the shareholder must have given timely notice thereof in proper form (including, in the case of nominations, the completed and signed questionnaire, representation and agreement required by Section 1.7 of these Bylaws) and timely updates and supplements thereof in writing to the Secretary and such other business must otherwise be a proper matter for shareholder action. To be timely, a shareholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day and not later than the close of business on the 90th day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the shareholder must be so delivered not earlier than the close of business on the 120th day prior to the date of such annual meeting and not later than the close of business on the later of the 90th day prior to the date of such annual meeting or, if the first public announcement of the date of such annual meeting is less than 100 days prior to the date of such annual meeting, the 10th day following the day on which public announcement of the date of such annual meeting is first made by the Corporation. In no event shall any adjournment or postponement of an annual meeting, or the public announcement thereof, commence a new time period for the giving of a shareholder’s notice as described above. Notwithstanding anything in the preceding two sentences to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased by the Board of Directors, and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least 100 days prior to the first anniversary of the preceding year’s annual meeting, a shareholder’s notice required by this Section 1.6(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation. In addition, to be timely, a shareholder’s notice shall further be updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting and as of

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the date that is 10 business days prior to the annual meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation not later than 5 business days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than 8 business days prior to the date for the meeting, any adjournment or postponement thereof in the case of the update and supplement required to be made as of 10 business days prior to the meeting or any adjournment or postponement thereof.

(b)Special Meetings of Shareholders. Subject to Section 1.6(c)(5) of these Bylaws, in the event the Corporation calls a special meeting of shareholders for the purpose of electing one or more directors to the Board of Directors, any shareholder may nominate a person or persons (as the case may be) for election to such position(s) to be elected as specified in the Corporation’s notice calling the special meeting, provided that the shareholder gives timely notice thereof in proper form (including the completed and signed questionnaire, representation and agreement required by Section 1.7 of these Bylaws) and timely updates and supplements thereof in writing to the Secretary. In order to be timely, a shareholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the 120th day prior to the date of such special meeting and not later than the close of business on the later of the 90th day prior to the date of such special meeting or, if the first public announcement of the date of such special meeting is less than 100 days prior to the date of such special meeting, the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. In no event shall any adjournment or postponement of a special meeting, or the public announcement thereof, commence a new time period for the giving of a shareholder’s notice as described above. In addition, to be timely, a shareholder’s notice shall further be updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the special meeting and as of the date that is 10 business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation not later than 5 business days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than 8 business days prior to the date for the meeting, any adjournment or postponement thereof in the case of the update and supplement required to be made as of 10 business days prior to the meeting or any adjournment or postponement thereof.

(c)Other Provisions.

(1)To be in proper form, a shareholder’s notice (whether given pursuant to Section 1.6(a) or Section 1.6(b) of these Bylaws) to the Secretary must include the following, as applicable:

(A)as to the shareholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made, a shareholder’s notice must set forth: (i) the name and address of such shareholder, as they appear on the Corporation’s books, of such beneficial owner, if any, and of their respective affiliates or associates or others acting in concert therewith, (ii) (A) the class or series and number of shares of the Corporation which are, directly or indirectly, owned beneficially and of

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record by such shareholder, such beneficial owner and their respective affiliates or associates or others acting in concert therewith, (B) any option, warrant, convertible security, stock appreciation right or similar right with a value derived, in whole or in part, from the value of any class or series of shares of the Corporation, or any contract, derivative, swap, synthetic arrangement or other transaction or series of transactions designed to produce economic benefits and risks that correspond substantially to the ownership of any class or series of shares of the Corporation, including due to the fact that the value of such contract, derivative, swap or other transaction or series of transactions is determined by reference to the price, value or volatility of any class or series of shares of the Corporation (any of the foregoing, a “Derivative Instrument”) directly or indirectly engaged in, entered into or owned beneficially by such shareholder, the beneficial owner, if any, or any affiliates or associates or others acting in concert therewith, (C) any proxy (other than a revocable proxy given in response to a solicitation made pursuant to, and in accordance with, Section 14(a) of the Exchange Act by way of a solicitation statement filed on Schedule 14A), voting agreement, voting trust or other contract, arrangement or understanding pursuant to which such shareholder, the beneficial owner, if any, or any affiliate or associate or others acting in concert therewith has a right to vote any class or series of shares of the Corporation, (D) any agreement, arrangement or understanding, including any put or repurchase or similar so-called “stock borrowing” agreement, engaged in, directly or indirectly, by such shareholder, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of any class or series of the shares of the Corporation by, manage the risk of share price changes for, or increase or decrease the voting power of, such shareholder with respect to any class or series of shares of the Corporation, or which provides, directly or indirectly, the opportunity to profit or share in any profit derived from any decrease in the price or value of any class or series of shares of the Corporation (any of the foregoing, “Short Interests”), (E) any rights to distributions on the shares of the Corporation owned beneficially by such shareholder, the beneficial owner, if any, or any affiliates or associates or others acting in concert therewith that are separated or separable from the underlying shares of the Corporation, (F) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such shareholder, beneficial owner, if any, or any affiliate or associate or others acting in concert therewith is a general partner or, directly or indirectly, beneficially owns an interest in a general partner of such general or limited partnership, (G) any performance-related fees (other than an asset-based fee) to which such shareholder, the beneficial owner, if any, or any affiliates or associates or others acting in concert therewith is entitled based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, (H) any direct or indirect interest of such shareholder, beneficial owner, if any, or any affiliate or associate or others acting in concert therewith in any contract with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, in any such case, any employment agreement or consulting agreement) and (I) a representation as to whether the shareholder, the beneficial owner, if any, or any of their respective affiliates or associates or others acting in concert therewith intends to solicit proxies in support of, as applicable, (1) such business or (2) director nominees other than the Board of Directors’ nominees in accordance with Rule 14a-19 promulgated under the Exchange

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Act (including the requirement to solicit the holders of shares representing at least 67% of the voting power of shares entitled to vote on the election of directors in support of director nominees other than the Board of Directors’ nominees), and if so, naming the participants (as defined in Item 4 of Schedule 14A under the Exchange Act) to such solicitation, and (iii) any other information relating to such shareholder and beneficial owner, if any, that would be required to be disclosed in a proxy statement and form of proxy or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder; provided, however, that the disclosures required by clauses (ii)(B) through (H) of this paragraph (A) shall not require any disclosures with respect to ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee solely as a result of being the stockholder of record and directed to prepare and submit the notice required by these Bylaws on behalf of the beneficial owner;

(B)if the notice relates to any business other than a nomination of a director or directors that the shareholder proposes to bring before the meeting, it must, in addition to the matters set forth in paragraph (A) above, also set forth: (i) a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest of such shareholder and beneficial owner, if any, and their respective affiliates and associates or others acting in concert therewith in such business, (ii) the text of the proposal or business (including the text of any resolutions proposed for consideration) and (iii) a description of all agreements, arrangements and understandings between such shareholder and beneficial owner, if any, and any other person or persons (including their names) in connection with the proposal of such business by such shareholder;

(C)as to each person, if any, whom the shareholder proposes to nominate for election or reelection to the Board of Directors, a shareholder’s notice must, in addition to the matters set forth in paragraph (A) above, also set forth: (i) all information relating to the proposed nominee that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (including such person’s written consent to being named in a proxy statement as a nominee and to serving as a director if elected) and (ii) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such shareholder and beneficial owner, if any, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the shareholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant; and

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(D)with respect to each person, if any, whom the shareholder proposes to nominate for election or reelection to the Board of Directors, a shareholder’s notice must, in addition to the matters set forth in paragraphs (A) and (C) above, also include a completed and signed questionnaire, representation and agreement required by Section 1.7 of these Bylaws. The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as an independent director of the Corporation or that could be material to a reasonable shareholder’s understanding of the independence, or lack thereof, of such nominee.

(2)For purposes of these Bylaws, “public announcement” shall mean disclosure in a press release reported by a national news service, including the Dow Jones News Service, the Associated Press, PR Newswire, Reuters Information Service or any comparable national news service, or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.

(3)Unless otherwise required by law, (i) no shareholder, beneficial owner, if any, on whose behalf a nomination is made, or any of their respective affiliates or associates or others acting in concert therewith or any other participant (as defined in Item 4 of Schedule 14A under the Exchange Act), shall solicit proxies in support of director nominees other than the Board of Directors’ nominees unless such person has complied with Rule 14a-19 promulgated under the Exchange Act in connection with the solicitation of such proxies, and (ii) if any shareholder, beneficial owner, if any, or any of their respective affiliates or associates or others acting in concert therewith or any other participant (A) provides notice pursuant to Rule 14a-19(b) promulgated under the Exchange Act or includes the information required by Rule 14a-19(b) in a preliminary or definitive proxy statement previously filed by such person (it being understood that such notice or filing shall be in addition to the notice required by Section 1.6(a) and Section 1.6(b), as applicable, of these Bylaws) and (B) subsequently fails to comply with the requirements of Rule 14a-19 promulgated under the Exchange Act, or fails to timely provide reasonable evidence sufficient to satisfy the Corporation that such person has met the requirements of Rule 14a-19 promulgated under the Exchange Act in accordance with the following sentence, then the Corporation shall disregard the nomination and any proxies or votes solicited for the shareholder’s or beneficial owner’s director nominees. If a shareholder, beneficial owner, if any, or any of their respective affiliates or associates or others acting in concert therewith provides notice pursuant to Rule 14a-19(b) promulgated under the Exchange Act or includes the information required by Rule 14a-19(b) in a preliminary or definitive proxy statement previously filed by such person, such person shall deliver to the Corporation, no later than seven (7) business days prior to the applicable meeting of shareholders, reasonable evidence that it has met the applicable requirements of Rule 14a-19 promulgated under the Exchange Act. In no event may any shareholder nominate a greater number of director candidates than are subject to election by the shareholders at the applicable meeting. Any shareholder or beneficial owner, if any, or their respective affiliates or associates, directly or indirectly soliciting proxies from other shareholders must use a proxy card color other than white, which shall be reserved for the exclusive use by the Board of Directors.

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(4)In addition to the other requirements set forth in these Bylaws, a shareholder shall also comply with all applicable requirements of the Articles of Incorporation and state and federal law, including the Exchange Act and the rules and regulations thereunder (including Rule 14a-19, as applicable), with respect to any business, nomination or other matters set forth in these Bylaws. For the avoidance of doubt, a shareholder’s obligation to update and/or supplement such shareholder’s notice pursuant to Section 1.6(a) and Section 1.6(b), as applicable, of these Bylaws shall not be deemed to permit such shareholder to cure any defects in any such notice existing as of the time required for the giving of such notice under these Bylaws or extend any applicable deadlines hereunder, nor shall a shareholder be permitted to amend, update or submit a new nomination or proposal, including by changing or adding nominees or proposals proposed to be brought before any meeting of the shareholders, after the time first required for the giving of the shareholder’s notice under these Bylaws.

(5)Nothing in these Bylaws shall be deemed to affect any rights (i) of shareholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act, (ii) of the holders of any series of preferred stock of the Corporation if and to the extent provided for under the Virginia Stock Corporation Act, the Articles of Incorporation or these Bylaws or (iii) of shareholders to act by unanimous written consent in accordance with the Articles of Incorporation and the Virginia Stock Corporation Act.

1.7.Submission of Questionnaire, Representation and Agreement. To be eligible to be nominated by a shareholder for election or reelection as a director of the Corporation, a person must deliver (in accordance with the time periods prescribed for delivery of notice under Section 1.6 of these Bylaws) to the Secretary at the principal executive offices of the Corporation a written questionnaire with respect to the background and qualification of such person (which questionnaire shall be provided by the Secretary upon written request of the shareholder), and a written representation and agreement (in the form provided by the Secretary upon written request of the shareholder) that such person (a) is not and will not become a party to (i) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (ii) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, (b) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein, and (C) in such person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply with all publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation.

1.8.Notice of Meetings. Except as otherwise required by the Virginia Stock Corporation Act, notice stating the place, date and time of the meeting of shareholders and, in the case of a special meeting, the purpose or purposes for which the special meeting is called, shall

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be given not less than 10 nor more than 60 days before the date of the meeting either personally, by mail or in any other manner permitted by applicable law, to each shareholder of record entitled to notice of such meeting. If mailed, such notice shall be deemed to be given when deposited in United States mail with postage thereon prepaid and addressed to the shareholder at the shareholder’s address as it appears on the share transfer books of the Corporation.

If a meeting of shareholders is adjourned to a different date, time or place, notice need not be given if the new date, time or place is announced at the meeting before adjournment. However, if a new record date for an adjourned meeting is fixed, notice of the adjourned meeting shall be given to shareholders as of the new record date unless a court provides otherwise.

1.9.Waiver of Notice; Attendance at Meeting. A shareholder may waive any notice required by law, the Articles of Incorporation or these Bylaws before or after the date and time of the meeting that is the subject of such notice. The waiver shall be in writing, be signed by the shareholder entitled to the notice and be delivered to the Secretary for inclusion in the minutes or filing with the corporate records.

A shareholder’s attendance at a meeting (i) waives objection to lack of notice or defective notice of the meeting unless the shareholder, at the beginning of the meeting, objects to holding the meeting or transacting business at the meeting and (ii) waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice unless the shareholder objects to considering the matter when it is presented.

1.10.Quorum and Voting Requirements. A nominee for director shall be elected as a director only if such nominee receives the affirmative vote of a majority of the total votes cast for and against such nominee at a meeting of shareholders duly called and at which a quorum is present. However, directors shall be elected by a plurality of votes cast at a meeting of shareholders duly called and at which a quorum is present for which (i) any shareholder has given notice of a director nomination in compliance with Section 1.6 and, as a result of which, the number of nominees is greater than the number of directors to be elected at the meeting, and (ii) such nomination has not been withdrawn by such shareholder on or before the close of business on the tenth day before the date of filing of the initial definitive proxy statement of the Corporation with the Securities and Exchange Commission. There shall be no cumulative voting.

A majority of the votes cast at a meeting of shareholders duly called and at which a quorum is present shall be sufficient to approve any other matter which may properly come before the meeting, unless more than a majority of the votes cast is required by statute or by the Articles of Incorporation. In all elections for directors, each share may be voted for as many individuals as there are directors to be elected and for whose election the share is entitled to be voted. Unless otherwise provided by statute or by the Articles of Incorporation, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. Voting on any question or in any election may be viva voce unless the chairman of the meeting shall order that voting be by ballot.

1.11.Proxies. A shareholder may vote such shareholder’s shares in person or by proxy. A shareholder may appoint a proxy to vote or otherwise act for the shareholder by

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signing an appointment form or by electronic transmission, either personally or by such shareholder’s attorney-in-fact. Any copy, facsimile telecommunication or other reliable reproduction of a writing or transmission created pursuant to this Bylaw may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission. An appointment of a proxy is effective when received by the Secretary or other officer or agent authorized to tabulate votes and is valid for eleven (11) months unless a longer period is expressly provided in the appointment form. An appointment of a proxy is revocable by the shareholder unless the appointment form or electronic transmission conspicuously states that it is irrevocable and the appointment is coupled with an interest.

The death or incapacity of the shareholder appointing a proxy does not affect the right of the Corporation to accept the proxy’s authority unless notice of the death or incapacity is received by the Secretary or other officer or agent authorized to tabulate votes before the proxy exercises authority under the appointment. An irrevocable appointment is revoked when the interest with which it is coupled is extinguished. A transferee for value of shares subject to an irrevocable appointment may revoke the appointment if the transferee did not know of its existence when the transferee acquired the shares and the existence of the irrevocable appointment was not noted conspicuously on the certificate representing the shares. Subject to any legal limitations on the right of the Corporation to accept the vote or other action of a proxy and to any express limitation on the proxy’s authority appearing on the face of the appointment form, the Corporation is entitled to accept the proxy’s vote or other action as that of the shareholder making the appointment. Any fiduciary who is entitled to vote any shares may vote such shares by proxy.

1.12.Voting List. After fixing a record date for a meeting, the Corporation shall prepare an alphabetical list of the names the shareholders who are entitled to notice of such shareholders’ meeting in accordance with applicable law. The shareholders’ list for notice shall be available for inspection by any shareholder, beginning two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting, at the Corporation’s principal office or at a place identified in the meeting notice in the county or city where the meeting will be held. In the event the Board of Directors has fixed a different record date to determine which shareholders are entitled to vote at such meeting, a shareholders’ list for voting shall be similarly available for inspection promptly after the record date for voting. A shareholder, or the shareholder’s agent or attorney, is entitled on written demand to inspect and, subject to the applicable provisions of the Virginia Stock Corporation Act, to copy the shareholders’ list, during the regular business hours and at the shareholder’s expense, during the period it is available for inspection. The Corporation shall make the list of shareholders entitled to vote available at the meeting, and any shareholder, or the shareholder’s agent or attorney, is entitled to inspect the list at any time during the meeting or any adjournment. The original share transfer books of the Corporation shall be prima facie evidence as to which shareholders are entitled to examine such list or transfer books or to vote at any meeting of the shareholders. Subject to applicable law, the refusal or failure to prepare or make available the shareholders’ list does not affect the validity of action taken at the meeting.

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1.13.Inspectors of Elections; Opening and Closing the Polls. The Board of Directors by resolution shall appoint one or more inspectors, which inspector or inspectors may include individuals who serve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives, to act at the meetings of shareholders and make a written report of the inspector’s determinations. One or more persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate has been appointed to act or is able to act at a meeting of shareholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall have the duties prescribed by law and shall perform such other duties as requested by the chairman of the meeting. The chairman of the meeting shall announce the opening and the closing of the polls for each matter upon which the shareholders will vote at the meeting. If no such announcement is made, the polls shall be deemed to have opened at the beginning of the meeting and closed upon the final adjournment of the meeting.

1.14.Fixing Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of the shareholders or any adjournment thereof, or entitled to receive payment for any distribution, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than seventy (70) days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a distribution, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such distribution is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof unless otherwise determined by the Board of Directors or required by applicable law. A record date fixed by the Board of Directors with respect to any meeting of the shareholders shall be the record date for determining shareholders entitled to notice of and to vote at such meeting, unless the Board of Directors, at the time it fixes the record date for shareholders entitled to notice of the meeting, fixes a later record date on or before the date of the meeting to determine the shareholders entitled to vote at the meeting.

ARTICLE II
DIRECTORS

2.1.General Powers. The Corporation shall have a Board of Directors. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation managed under the direction of, the Board of Directors.

2.2.Number and Term. The number of directors of the Corporation shall be six (6). By amendment of these Bylaws, the Board of Directors or the shareholders may increase or decrease the number of directors of the Corporation in accordance with applicable law. A decrease in number of directors shall not shorten the term of any incumbent director. Each director shall hold office until his or her death, resignation or removal or until such director’s

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successor is elected and qualified. No individual shall be named or elected as a director without his or her prior consent.

2.3.Vacancies. A vacancy on the Board of Directors, including a vacancy resulting from death, resignation, disqualification or removal or an increase in the number of directors, shall be filled by (i) the Board of Directors, (ii) the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors or (iii) the shareholders and may, in the case of a resignation that will become effective at a specified later date, be filled before the vacancy occurs but the new director may not take office until the vacancy occurs. The term of any director elected by the Board of Directors to fill a vacancy shall expire at the next annual meeting of shareholders except as otherwise provided in the Virginia Stock Corporation Act.

2.4.Resignations. Any director or member of a committee may resign at any time by delivering a written resignation to the Board of Directors, the Chairman or the Secretary of the Corporation. Such resignation shall take effect at the time specified therein, or if no time be specified, at the time of the receipt by the Board of Directors, the Chairman or the Secretary.

2.5.Annual and Regular Meetings. An annual meeting of the Board of Directors, which shall be considered a regular meeting, shall be held immediately following each annual meeting of shareholders, or at such other date and time as determined by the Board of Directors, for the purpose of electing officers and carrying on such other business as may properly come before the meeting. The Board of Directors may also adopt a schedule of additional meetings which shall be considered regular meetings. Regular meetings shall be held on such dates and at such times and places, within or without the Commonwealth of Virginia, as the Board of Directors shall designate from time to time. If no place is designated, regular meetings shall be held at the principal office of the Corporation.

2.6.Special Meetings. Special meetings of the Board of Directors may be called by the Chairman, Chief Executive Officer, President or a majority of the directors of the Corporation and shall be held at such times and at such places, within or without the Commonwealth of Virginia, as the person or persons calling the meetings shall designate. If no such place is designated in the notice of a meeting, it shall be held at the principal office of the Corporation.

2.7.Notice of Meetings. No notice need be given of regular meetings of the Board of Directors. Notices of special meetings of the Board of Directors shall be given to each director not less than 24 hours before the meeting either personally or by mail, messenger, telecopy, telegraph, electronic mail or other means of written communication or by telephoning such notice to the director. Neither the business to be transacted nor the purpose of any meeting need be specified in the notice of the meeting.

2.8.Waiver of Notice; Attendance at Meeting. A director may waive any notice required by law, the Articles of Incorporation or these Bylaws before or after the date and time stated in the notice and such waiver shall be equivalent to the giving of such notice. Except as provided in the next paragraph of this section, the waiver shall be in writing, signed by the director entitled to the notice and filed with the minutes or corporate records.

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A director’s attendance at or participation in a meeting waives any required notice to such director of the meeting unless the director, at the beginning of the meeting or promptly upon such director’s arrival, objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting.

2.9.Quorum; Voting. A majority of the number of directors fixed in these Bylaws shall constitute a quorum for the transaction of business at a meeting of the Board of Directors. If a quorum is present when a vote is taken, the affirmative vote of a majority of the directors present is the act of the Board of Directors. A director who is present at a meeting of the Board of Directors or a committee of the Board of Directors when corporate action is taken is deemed to have assented to the action taken unless (i) the director objects, at the beginning of the meeting or promptly upon his or her arrival, to holding it or transacting specified business at the meeting or (ii) the director votes against or abstains from the action taken.

2.10.Telephonic Meetings. The Board of Directors may permit any or all directors to participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting.

2.11.Action Without Meeting. Action required or permitted to be taken at a meeting of the Board of Directors may be taken without a meeting if the action is taken by all members of the Board. The action shall be evidenced by one or more written consents stating the action taken, signed by each director either before or after the action is taken and included in the minutes or filed with the corporate records. Action taken under this section shall be effective when the last director signs the consent unless the consent specifies a different effective date in which event the action taken is effective as of the date specified therein provided the consent states the date of execution by each director.

2.12.Compensation. The Board of Directors may fix the compensation of directors and may provide for the payment of all expenses incurred by them in attending meetings of the Board of Directors.

ARTICLE III
COMMITTEES OF DIRECTORS

3.1.Committees. The Board of Directors may create one or more committees and appoint members of the Board of Directors to serve on them. Each committee shall have two or more members who serve at the pleasure of the Board of Directors. The creation of a committee and appointment of members to it shall be approved by a majority of all of the directors in office when the action is taken.

3.2.Authority of Committees. To the extent specified by the Board of Directors, each committee may exercise the authority of the Board of Directors, except that a committee may not (i) approve or recommend to shareholders action that is required by law to be approved by shareholders unless such action is also approved or recommended by the Board of Directors, (ii) fill vacancies on the Board of Directors or on any of its committees, (iii) amend the Articles of

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Incorporation, (iv) adopt, amend, or repeal these Bylaws, (v) approve a plan of merger not requiring shareholder approval, (vi) authorize or approve a distribution, except according to a general formula or method prescribed by the Board of Directors or (vii) authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and relative rights, preferences, and limitations of a class or series of shares; provided, however, that, with respect to clause (vii), the Board of Directors may authorize a committee, or a senior executive officer of the Corporation, to do so within limits specifically prescribed by the Board of Directors or imposed under applicable law.

3.3.Executive Committee. The Board of Directors may appoint an Executive Committee consisting of not less than three directors which committee shall have all of the authority of the Board of Directors except to the extent such authority is limited by the provisions of Section 3.2 or applicable law.

3.4.Audit Committee. The Board of Directors shall appoint an Audit Committee consisting of not less than three directors, each of whom shall be independent directors in accordance with applicable law, rule or regulation of any applicable governmental authority or Self-Regulatory Organization (SRO) or other over-the-counter exchange on which the Corporation’s securities may be listed from time to time, which committee shall, among other things, regularly review the adequacy of the Corporation’s internal financial controls, review with the Corporation’s independent public accountants the annual audit and other financial statements and recommend the selection of the Corporation’s independent public accountants.

3.5.Committee Meetings; Miscellaneous. The provisions of these Bylaws which govern meetings, action without meetings, notice and waiver of notice, and quorum and voting requirements of the Board of Directors shall apply to committees of directors and their members as well, unless otherwise determined by the Board of Directors.

ARTICLE IV
OFFICERS

4.1.Officers. The officers of the Corporation may include a Chairman of the Board of Directors, a Chief Executive Officer, a President, a Secretary, a Treasurer, and, in the discretion of the Board of Directors, one or more Vice Presidents, one or more Assistant Secretaries and such other officers as may be required by law or deemed necessary or advisable to carry on the business of the Corporation. The Chairman shall be chosen from among the directors. Any two or more offices may be held by the same person.

4.2.Election; Term. Officers shall be elected by the Board of Directors. Officers shall hold office, unless sooner removed, until the next annual meeting of the Board of Directors or until their successors are elected. Any officer may resign at any time upon written notice to the Board of Directors and such resignation shall be effective when notice is delivered unless the notice specifies a later effective date.

4.3.Removal of Officers. The Board of Directors may remove any officer at any time, with or without cause.

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4.4.Duties of the Chairman. The Chairman shall have such powers and perform such duties as generally pertain to that position or as may, from time to time, be assigned to him or her by the Board of Directors.

4.5.Duties of the Chief Executive Officer. The Chief Executive Officer of the Corporation shall have general charge of and be charged with the duty of supervision of the business of the Corporation and shall perform such duties as may, from time to time, be assigned to him or her by the Board of Directors.

4.6.Duties of the President. The President shall have such powers and perform such duties as generally pertain to that position or as may, from time to time, be assigned to him or her by the Board of Directors.

4.7.Duties of the Secretary. The Secretary shall have the duty to see that a record of the proceedings of each meeting of the shareholders, the Board of Directors and any committee of the Board of Directors is properly recorded and that notices of all such meetings are duly given in accordance with the provisions of these Bylaws or as required by law; may affix or authorize to be affixed the corporate seal to any document the execution of which is duly authorized, and when so affixed may attest the same; and, in general, shall perform all duties incident to the office of secretary of a corporation, and such other duties as, from time to time, may be assigned to him or her by the Chairman, the President or the Board of Directors or as may be required by law.

4.8.Duties of the Treasurer. The Treasurer shall have charge of and be responsible for all securities, funds, receipts and disbursements of the Corporation and shall deposit or cause to be deposited, in the name of the Corporation, all monies or valuable effects in such banks, trust companies or other depositories as shall, from time to time, be selected by or under authority granted by the Board of Directors; shall be custodian of the financial records of the Corporation; shall keep or cause to be kept full and accurate records of all receipts and disbursements of the Corporation and shall render to the Chairman, the President or the Board of Directors, whenever requested, an account of the financial condition of the Corporation; and, shall perform such duties as may be assigned to him/her by the Chairman, the President or the Board of Directors.

4.9.Duties of Other Officers. The other officers of the Corporation shall have such authority and perform such duties as shall be prescribed by the Board of Directors or by officers authorized by the Board of Directors to appoint them to their respective offices. To the extent that such duties are not so stated, such officers shall have such authority and perform the duties which generally pertain to their respective offices, subject to the control of the Chairman, the President or the Board of Directors.

4.10.Voting Securities of Other Corporations. Anyone of the Chairman, the Chief Executive Officer, the President or the Treasurer shall have the power to act for and vote on behalf of the Corporation at all meetings of the shareholders of any corporation in which this Corporation holds stock or in connection with any consent of shareholders in lieu of any such meeting.

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4.11.Bonds. The Board of Directors may require that any or all officers, employees and agents of the Corporation give bond to the Corporation, with sufficient sureties, conditioned upon the faithful performance of the duties of their respective offices or positions.

4.12.Compensation. The compensation of the officers of the Corporation shall be fixed by the Board of Directors, or a committee thereof authorized by the Board of Directors, or by any officer(s) authorized by the Board of Directors to prescribe the compensation of such other officers.

ARTICLE V
SHARE CERTIFICATES

5.1.Form. Except to the extent that the Board of Directors authorizes the issuance of shares of the Corporation without certificates pursuant to Section 13.1-648 of the Virginia Stock Corporation Act (“Uncertificated Shares”), shares of the Corporation shall, when fully paid, be evidenced by certificates. Such certificates shall contain such information as is required by law and approved by the Board of Directors. Certificates shall be signed by the Chairman and the President, or by any two other officers of the Corporation as the Board of Directors may designate. Such certificates may (but need not) be sealed with the seal of the Corporation. The seal of the Corporation and any or all of the signatures on a share certificate may be facsimile. If any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar on the date of issue.

5.2.Transfer. The Board of Directors may make rules and regulations concerning the issue, registration and transfer of certificates representing the shares of the Corporation. Transfers of shares and of the certificates representing such shares shall be made upon the books of the Corporation by surrender of the certificates representing such shares accompanied by written assignments given by the owners or their attorneys-in-fact.

5.3.Restrictions on Transfer. A lawful restriction on the transfer or registration of transfer of shares is valid and enforceable against the holder or a transferee of the holder if the restriction complies with the requirements of law and its existence is noted conspicuously on the front or back of the certificate representing the shares or, in the case of Uncertificated Shares, is contained in the information statement required by Section 13.1-648B of the Virginia Stock Corporation Act. Unless so noted, a restriction is not enforceable against a person without knowledge of the restriction.

5.4.Lost or Destroyed Share Certificates. The Corporation may issue a new share certificate in the place of any certificate theretofore issued which is alleged to have been lost or destroyed and may require the owner of such certificate, or such owner’s legal representative, to give the Corporation a bond, with or without surety, or such other agreement, undertaking or security as the Board of Directors shall determine is appropriate, and/or to indemnify the Corporation against any claim that may be made against it on account of the alleged loss or destruction or the issuance of any such new certificate.

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ARTICLE VI
DistributionS

6.1.Declaration. Distributions upon the shares of stock of the Corporation may be declared by the Board of Directors, subject to applicable provisions of law and the Articles of Incorporation. Distributions may be paid in cash, property or shares of the Corporation, subject to applicable provision of law and the Articles of Incorporation.

6.2.Contingencies. Before payment of any distributions, there may be set aside out of any funds of the Corporation available for distributions such sum or sums as the Board of Directors may from time to time, in its absolute discretion, think proper as a reserve fund for contingencies, for equalizing distributions, for repairing or maintaining the property of the Corporation, its subsidiaries or any partnership for which it serves a general partner, or for such other purpose as the Board of Directors shall determine to be in the best interests of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.

ARTICLE VII
MISCELLANEOUS PROVISIONS

7.1.Principal Office. The principal office of the Corporation shall be located at 6862 Elm Street, Suite 320, McLean, Virginia 22101, or at any other place or places as the Board of Directors may designate.

7.2.Additional Offices. The Corporation may have additional offices at such places as the Board of Directors may from time to time determine or the business of the Corporation may require.

7.3.Corporate Seal. The corporate seal of the Corporation shall be circular and shall have inscribed thereon, within and around the circumference “Arlington Asset Investment Corp.” In the center shall be the word “SEAL.”

7.4.Fiscal Year. The fiscal year of the Corporation shall be determined in the discretion of the Board of Directors, but in the absence of any such determination it shall be the calendar year.

7.5.Amendments. These Bylaws may be amended or repealed, and new Bylaws may be made, by the Board of Directors or the shareholders. Bylaws made by the Board of Directors may be repealed or changed and new Bylaws may be made by the shareholders, and the shareholders may prescribe that any Bylaw made by them shall not be amended, repealed or reinstated by the Board of Directors.

ARTICLE VIII
CONTROL SHARE ACQUISITIONS

8.1.Control Share Acquisitions. The provisions of Article 14.1 of the Virginia Stock Corporation Act relating to “control share acquisitions” shall not apply to acquisitions of shares of the Corporation.

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*******************************

18

EX-10.01

Exhibit 10.01

INTEREST PURCHASE AGREEMENT

between

mclean sfr holdings, LLC,

a Delaware limited liability company,

as Seller

and

AVHS SFR II LLC,
a Delaware limited liability company

as Buyer

and, solely for the purpose set forth in Section 7.8 of this Agreement,

ARLINGTON ASSET INVESTMENT CORP.,

a Virginia corporation

Dated as of November 11, 2022

Sale of the limited liability company interests in
McLean SFR Equity, LLC, a Delaware limited liability company

TABLE OF CONTENTS

Page

Article I PURCHASE AND SALE		1
Section 1.1.	Purchase and Sale of the Interests.	1
Section 1.2.	Earnest Money.	1
Section 1.3.	Closing; Pre-Closing.	2
Section 1.4.	Prorations; Costs.	3
Section 1.5.	Procedures for Prorations.	5
Section 1.6.	Tax Treatment of Sale.	6
Section 1.7.	Withholding.	6
Article II INVESTIGATIONS		6
Section 2.1.	Access to Properties.	6
Section 2.2.	Available Documents.	6
Section 2.3.	DISCLAIMER OF WARRANTIES.	7
Article III REPRESENTATIONS AND WARRANTIES OF SELLER		8
Section 3.1.	Organization and Qualification.	8
Section 3.2.	Authority.	8
Section 3.3.	No Conflict; Required Filings and Consents.	8
Section 3.4.	Interests.	9
Section 3.5.	Capitalization.	9
Section 3.6.	Assets.	10
Section 3.7.	Litigation.	11
Section 3.8.	Brokers.	11
Section 3.9.	Agreements.	11
Section 3.10.	Organizational Documents.	11
Section 3.11.	Bankruptcy.	11
Section 3.12.	Accounts.	12
Section 3.13.	Insurance.	12
Section 3.14.	Financial Statements.	12
Section 3.15.	Loan Agreement.	13
Section 3.16.	No Restricted Person.	13
Section 3.17.	Title Policies.	13
Section 3.18.	Legal Compliance.	13
Section 3.19.	Environmental.	13
Section 3.20.	Intercompany Loans.	13
Section 3.21.	Knowledge Parties.	14
Section 3.22.	“AS IS” TRANSACTION.	14
Section 3.23.	Buyer’s Release.	14
Section 3.24.	Buyer Affiliates.	15

Article IV REPRESENTATIONS AND WARRANTIES OF Buyer		15
Section 4.1.	Organization.	15
Section 4.2.	Authority.	15
Section 4.3.	No Conflict; Required Filings and Consents; No Litigation.	15
Section 4.4.	Financing Solvency.	16
Section 4.5.	Brokers.	16
Section 4.6.	Investment Intent.	16
Section 4.7.	No Restricted Person.	17
Section 4.8.	Knowledge Parties.	17
Section 4.9.	Investigation; No Other Representations.	17
Article V COVENANTS		18
Section 5.1.	Conduct of the Business.	18
Section 5.2.	Inter-company Arrangements.	19
Section 5.3.	Bank Accounts.	19
Section 5.4.	No Claims Against Individuals.	20
Section 5.5.	Confidentiality and Standstill Period.	20
Section 5.6.	Cooperation.	21
Section 5.7.	UCC Policy.	21
Article VI CONDITIONS TO CLOSING		21
Section 6.1.	Conditions to Obligations of Buyer and Seller.	21
Section 6.2.	Conditions to Obligation of Seller.	22
Section 6.3.	Conditions to Obligation of Buyer.	23
Section 6.4.	Casualty and Condemnation.	24
Article VII INDEMNIFICATION		24
Section 7.1.	Survival of Representations and Warranties.	24
Section 7.2.	Indemnification by Seller.	25
Section 7.3.	Indemnification by Buyer.	25
Section 7.4.	Procedures.	26
Section 7.5.	Limits on Indemnification.	27
Section 7.6.	Exclusive Remedy; Survival.	28
Section 7.7.	Tax Treatment of Indemnity Payments.	29
Section 7.8.	Parent Guaranty.	30
Article VIII Termination		30
Section 8.1.	Termination.	30
Section 8.2.	Effect of Termination.	31
Article IX DEFINITIONS		32
Section 9.1.	Definition of Terms in Annex A.	32
Section 9.2.	Certain Defined Terms.	32

ii

Article X GENERAL PROVISIONS		36
Section 10.1.	Fees and Expenses.	36
Section 10.2.	Amendment and Modification.	36
Section 10.3.	Waiver; Survival.	36
Section 10.4.	Notices.	37
Section 10.5.	Interpretation.	38
Section 10.6.	Entire Agreement.	38
Section 10.7.	No Third-Party Beneficiaries.	38
Section 10.8.	Governing Law.	38
Section 10.9.	Assignment; Successors.	39
Section 10.10.	Survival.	39
Section 10.11.	Enforcement.	39
Section 10.12.	Severability.	39
Section 10.13.	Counterparts.	40
Section 10.14.	Facsimile Signature.	40
Section 10.15.	Time of Essence.	40
Section 10.16.	Headings.	40
Section 10.17.	Costs and Fees of Enforcement.	40
Section 10.18.	Schedules.	40
Section 10.19.	No Partnership.	40
Section 10.20.	No Recording or Lis Pendens.	40
Section 10.21.	Non-Liability.	41

Annex A Tax Provisions

Exhibits:

Exhibit A-1 Owned Properties

Exhibit A-2 Properties Under Contract

Exhibit B Form of Assignment of Interest Purchase Agreement

Exhibit C Form of Escrow Agreement

Exhibit D Form of Assignment of Limited Liability Company Interests

Exhibit E List of Organizational Documents

Exhibit F Organizational Chart

Exhibit G Joinder

Schedules:

Schedule A2.1 Taxes

Schedule 3.7 Litigation

Schedule 3.9 Contract Defaults

Schedule 3.13 Insurance Claims

Schedule 3.18 Compliance Matters

iii

TABLE OF DEFINITIONS

	Page
Acquired Companies	1
Acquired Company Information	18
Action	33
Affiliate	33
Agreed Tax Treatment	6
Agreement	1
Applicable Law	33
Applicable Limitation Date	25
Bankruptcy Code	17
Base Purchase Price	1
Basket	28
Business Day	33
Buyer	1
Buyer Deliverables	3
Buyer Indemnified Parties	25
Buyer’s Officer’s Certificate	23
Buyer’s Secretary’s Certificate	23
Cap	28
Closing	2
Closing Date	2
Closing Deliverables	3
Confidential Information	33
Control	33
controlled by	33
Defective Properties	24
Disclosing Party	33
Due Diligence Materials	34
Earnest Money	2
Effective Date	1
Effective Time	3
Environmental Laws	34
Equity Owner	1
ERISA	11
Escrow Agent	2
Exculpated Parties	41
Final Settlement	6
Final Statement	6
Financial Statements	13
Fundamental Breach Cap	28
Fundamental Representations	34
GAAP	34
Governmental Authority	34
Hazardous Substance	34
Indebtedness	34
Indemnified Party	26

iv

Indemnifying Party	27
Interest Assignment	3
Interests	1
Knowledge	35
Leases	3
Litigation	11
Loan Agreement	35
Loan Documents	35
Losses	26
Materially Damaged	25
MetLife	35
MetLife Approval	22
Non-Fundamental Breach Cap	28
OFAC	17
Party or Parties	35
Permits	10
Permitted Exceptions	35
Person	35
Private Action	36
Properties	1
Property Owner	1
Property Owner Interests	1
Prorated Amount	4
Purchase Price	1
Purchased Assets	6
Recipient	33
Representatives	36
Securities Act	17
Seller	1
Seller Deliverables	3
Seller Indemnified Parties	26
Seller’s Officer’s Certificate	23
Seller’s Secretary’s Certificate	24
Service Contracts	3
Settlement Statement	5
Surviving Covenant	25
Tax Representations	36
Third Party Claim	26
Title Policies	36
Transaction	36
Transfer Taxes	37
U.S. Dollars and $	36
under common control with	33

v

INTEREST PURCHASE AGREEMENT

This INTEREST PURCHASE AGREEMENT (this “Agreement”), dated as of November 11, 2022 (the “Effective Date”), is between MCLEAN SFR HOLDINGS, LLC, a Delaware limited liability company (“Seller”), and AVHS SFR II LLC, a Delaware limited liability company (“Buyer”) and, solely for the purpose set forth in of Section 7.8, ARLINGTON ASSET INVESTMENT CORP., a Virginia corporation (“Parent”).

RECITALS

A. Seller owns 100% of the issued and outstanding limited liability company interests (the “Interests”) of McLean SFR Equity, LLC, a Delaware limited liability company (“Equity Owner”).

B. Equity Owner owns 100% of the issued and outstanding limited liability company interests (the “Property Owner Interests”) of McLean SFR Investment, LLC, a Delaware limited liability company (“Property Owner” and together with Equity Owner, the “Acquired Companies”).

C. As of the Effective Date, Property Owner owns the Properties (as defined herein).

D. Seller desires to sell the Interests to Buyer, and Buyer desires to purchase the Interests, all on the terms and conditions set forth in this Agreement.

In consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the Parties agree as follows:

AGREEMENT

Article I
PURCHASE AND SALE

Section 1.1. Purchase and Sale of the Interests. Upon the terms and subject to the conditions of this Agreement, Seller shall sell, assign, transfer, convey and deliver the Interests to Buyer and Buyer shall purchase the Interests from Seller, for an aggregate purchase price equal to the sum of (a) $87,330,000.00 (the “Base Purchase Price”), plus (or minus, as the case may be) (b) the dollar value of the Prorated Amount as provided in Section 1.4 hereof (the Base Purchase Price, as adjusted by the Prorated Amount, is referred to as the “Purchase Price”). The Settlement Statement executed at the Closing shall state clause (a) above as the scheduled total consideration and clause (b) above as adjustments.

Section 1.2. Earnest Money. For the purpose of securing the performance of Buyer under the terms and provisions of this Agreement and as a condition precedent to Seller’s obligations hereunder, Buyer shall deliver to First American Title Insurance Company, 30 North LaSalle Street, Suite 2700, Chicago, IL 60602, c/o James McIntosh, jmcintosh@firstam.com, (312) 917-7220 (the “Escrow Agent”), by wire transfer in accordance with wire transfer instructions provided by Escrow Agent, within one (1) Business Day after execution of this Agreement, an earnest money deposit of Eight Million Seven Hundred Thousand and No/100 Dollars ($8,700,000.00)

1

(together with all interest accrued thereon, the “Earnest Money”). The Earnest Money shall be held in accordance with the escrow agreement in the form of Exhibit C attached hereto, which shall be executed and delivered by the Parties simultaneously herewith and which shall be accepted by the Escrow Agent. All interest accruing on the Earnest Money deposited under this Agreement shall become a part of and be added to the Earnest Money so that it shall be subject to disbursement or application in the same manner as is the principal of the Earnest Money. If Escrow Agent shall deposit the Earnest Money in an interest bearing account at a bank or savings institution, all interest accrued thereon shall be reported under Buyer’s federal tax identification number. Subject to the provisions of this Agreement related to the return of the Earnest Money, the Earnest Money shall be non-refundable to Buyer. If the Closing is not consummated in accordance with the terms hereof, the Earnest Money shall be returned to Buyer or delivered to Seller as provided in Article VIII. If the Closing is consummated in accordance with the terms hereof, the Earnest Money shall be paid to Seller and applied to the Purchase Price as a credit to Buyer. The Parties intend that, prior to the Closing, Buyer shall be treated for U.S. federal (and corresponding state and local) income Tax purposes as the owner of the Earnest Money and all interest and any other income recognized with respect to the Earnest Money, and the Parties shall not take any position on any Tax Return that is inconsistent with such intent except as required by law. Buyer’s deposit of the Earnest Money with the Escrow Agent within the prescribed time period is a condition precedent to the effectiveness of this Agreement; and, if Buyer fails to deliver the Earnest Money to the Escrow Agent within the time prescribed, this Agreement shall automatically terminate and be of no further force or effect.

Section 1.3. Closing; Pre-Closing.

(a) The sale and purchase of the Interests shall take place at a closing (the “Closing”) to be held on or before 5:00 p.m. (Eastern Time) on or before December 1, 2022 (such date on which the Closing actually occurs, the “Closing Date”) through an escrow established by the Escrow Agent and confirmedeither by telephone or by letter or email as the Parties shall agree, in writing, or conducted in person, at such place as the Parties shall agree, subject to the satisfaction or waiver of the conditions to closing set forth in Article VI of this Agreement. The Closing shall be effective at 12:01 a.m. on the Closing Date (the “Effective Time”).

(b) At the Closing, Buyer shall deliver to Seller (which may be delivered through the Escrow Agent) (i) an amount equal to the Purchase Price, in immediately available funds in United States dollars, which amount shall be credited with the amount of the Earnest Money, (ii) the Buyer’s Secretary’s Certificate, (iii) the Buyer’s Officer’s Certificate, (iv) any and all change of control or real estate transfer tax forms, if required by the Applicable Law of the jurisdictions in which the Properties are located, executed by Buyer, (v) an assignment of the Interests executed by Buyer in substantially the form attached hereto as Exhibit D (the “Interest Assignment”) and (vi) the Settlement Statement executed by Buyer (collectively, the “Buyer Deliverables”).

(c) At the Closing, Seller shall deliver to Buyer (which may be delivered through the Escrow Agent) (i) the Seller’s Secretary’s Certificate, (ii) the Seller’s Officer’s Certificate, (iii) a duly executed IRS Form W-9 of Seller (or, if Seller is a disregarded entity for U.S. federal income Tax purposes, the Person treated as the owner of the Interests for such purposes), (iv) the Interest Assignment executed by Seller, (v) written resignations of each manager and officer of each of the Acquired Companies in form and substance reasonably satisfactory to Seller and Buyer, (vi)

2

any and all change of control and real estate transfer tax forms, if required by the Applicable Law of the jurisdictions in which the Properties are located, executed by Seller, Equity Owner or Property Owner, as applicable, and (vii) the Settlement Statement executed by Seller (collectively, the “Seller Deliverables,” and together with the Buyer Deliverables, the “Closing Deliverables”).

(d) Upon the Closing, Seller shall make available to Buyer, to the extent not previously delivered to Buyer as part of the Due Diligence Materials prior to the date hereof, and to the extent within the possession or control of Seller or the Acquired Companies, originals of all leases with respect to the Properties (the “Leases”) that will be in effect after the Closing, copies of all contracts and agreements relating to the Properties or the Acquired Companies (“Service Contracts”) that will be in effect after the Closing, copies any agreements to purchase the Properties set forth on Exhibit A-2, copies of all material tenant correspondence, material correspondence with Governmental Authorities and material correspondence with owners associations, billing files and records for the Properties, plans, specifications, licenses and permits, keys, keycards and security codes and the like with respect to the Properties, and an electronic file of all resident and tenant ledgers with respect to the Properties, although Seller will be entitled to retain a copy of same for purposes relating to this Agreement and for its audit, financial and Tax recordkeeping purposes. Seller acknowledges and agrees that from and after the Closing, Buyer will be entitled to possession of all material books and records of the Acquired Companies (but not any books and records of any other entities), although Seller will be entitled to retain a copy of same for purposes relating to this Agreement and for its audit, financial and Tax recordkeeping purposes, and the Parties will reasonably cooperate with each other after the Closing in arranging for the efficient partitioning, transfer and copying of such books and records, which shall be performed as soon as reasonably practicable after Closing. After the Closing, Seller will promptly forward to Buyer at its address set forth herein any written correspondence that Seller receives from Governmental Authorities or owners associations relating to the Properties.

Section 1.4. Prorations; Costs. At the Closing, Buyer and Seller shall make certain prorations and other adjustments with respect to paid rents, security deposits, reserve accounts, property taxes and assessments, and other items of income and expense as set forth in this Section 1.4 and in Section 1.5. The items set forth in this Section 1.4 shall be prorated between Buyer and Seller as of the close of business on the day immediately preceding the Closing Date, the Closing Date being a day of income and expense to Buyer. The net amount owed to Seller or Buyer (the “Prorated Amount”), as applicable, shall increase the Purchase Price if the prorations result in a net credit to Seller or reduce the Purchase Price if the prorations result in a net credit to Buyer. Post-closing re-prorations and adjustments shall be paid in cash.

(a) Ad Valorem Taxes and Assessments. Buyer shall receive a credit against the Purchase Price for any accrued but unpaid real estate taxes exclusive of special assessments (“Ad Valorem Taxes”) imposed against any of the Properties and that are due and payable before the Closing Date. If the amount of any such Ad Valorem Taxes have not been determined as of the Closing Date, such credit shall be based on one hundred percent (100%) of the most recent ascertainable taxes. Such Ad Valorem Taxes shall be re-prorated upon issuance of the final tax bill. Buyer shall receive a credit against any portion of the Purchase Price for any special assessments which are levied or charged against any of the Properties with respect to any infrastructure improvements specifically made to serve the Properties, whether or not then due and payable. Any other special assessments shall be prorated only for the year of Closing.

3

(b) Rents. All Rents (as hereinafter defined) paid or payable by tenants under the Leases in connection with their occupancy of the Properties shall be adjusted and prorated on an “if, as and when collected” basis. Seller shall be entitled to all Rents under the Leases attributable to the period prior to the Closing Date and Buyer shall be entitled to all Rents under the Leases attributable to the period from and after the Closing Date, including the day of Closing. All rental checks from tenants actually received by or on behalf of Seller at or prior to the Closing shall be deemed collected by Seller for purposes of this Section 1.4(b). All prepaid Rents for periods of occupancy after Closing shall be credited to Buyer at Closing. Any Rents collected by Buyer or Seller after the Closing from any tenant who owes Rents for periods prior to the Closing shall be applied (i) first, in payment of Rents owed by such tenant for the month in which the Closing occurs, (ii) second, in payment of current Rents at the time of receipt, (iii) third, to delinquent Rents, if any, which became due after the Closing, and (iv) third, to delinquent Rents, if any, which became due and payable prior to the Closing or otherwise attributable to the period prior to the Closing. “Rents” for purposes of this Agreement shall mean (whether paid in advance of the date when such payment is due or otherwise) (x) all fixed rents and (y) other charges or amounts payable by tenants under the Leases or in connection with their use or occupancy of the Properties or any service or amenity relating thereto, including water, electricity, gas, sewage or other utilities charges or other pass-through fees and charges.

(c) With respect to each Property set forth on Exhibit A-2, to the extent the acquisition of such Property has not closed prior to the Closing, Purchaser will receive a credit against the Purchase Price in the amount of the contract purchase price for such Property and Seller will receive a credit for the amount of the earnest money deposit already paid by Property Owner for such Property, in each case as set forth on Exhibit A-2.

(d) Contracts. Amounts due under the Service Contracts will be prorated as of the Closing Date with Buyer to receive a credit at Closing for any amounts unpaid and attributable to the period prior to the Closing Date and Seller to receive a credit at Closing for any amounts previously paid and attributable to the period on and following the Closing Date.

(e) Security Deposits. The actual amounts of any Security Deposits that are refundable to tenants pursuant to the terms of the Leases (“Refundable Security Deposits”) and have not been applied by Seller prior to the Closing Date, if any, shall be credited to Buyer against the balance of the Purchase Price at Closing. Any such Refundable Security Deposits in a form other than cash (including letters of credit) shall be transferred to Buyer on the Closing Date by way of appropriate instruments of transfer or assignment; provided, that in the event any such Refundable Security Deposit is not assignable, Seller shall use commercially reasonable efforts after the Closing to provide Buyer with a replacement therefor for the benefit and at the sole expense of Buyer.

(f) Insurance Proceeds. Seller shall be entitled to all insurance proceeds related to insurance claims made prior to the date hereof with respect to the Property located at XXX XXX , XXX, XX, XXXXX.

(g) Other Expenses. All other items of income and expenses for the Properties shall be prorated between Seller and Buyer as of the close of business on the day immediately preceding the Closing Date.

4

(h) Post-Closing Corrections. Either Seller or Buyer shall be entitled to a post-Closing adjustment for any incorrect proration or adjustment, provided such adjustment is claimed by such party within ninety (90) days after Closing. The provisions of this Section 1.4 shall survive Closing.

Section 1.5. Procedures for Prorations.

(a) Settlement Statement. No later than five (5) Business Days prior to the Closing Date, Buyer and Seller shall use commercially reasonable efforts to prepare a schedule of tentative prorations with all detail and supporting information in accordance with Sections 1.4 and 1.5. All prorations and adjustments shall be based on the best available information. In the event that accurate prorations and other adjustments cannot be made at the Closing because current bills or statements are not obtainable (as, for example, utility bills), the Parties shall prorate and adjust based on the best available information, subject to adjustment upon receipt of the final bill or statement. A copy of the schedule of prorations and adjustments (the “Settlement Statement”) as agreed upon by Buyer and Seller shall be executed by the Parties at the Closing.

(b) Final Settlement. A final settlement (the “Final Settlement”) of the Closing prorations and adjustments required by Section 1.4 shall take place no later than ninety (90) days following the Closing Date. Buyer shall deliver a schedule of the prorations and adjustments (the “Final Statement”) to Seller setting forth Buyer’s determination of all adjustments to the Settlement Statement it believes are necessary to correct the prorations and adjustments as reflected in the Settlement Statement, which Final Settlement shall be accompanied with all detail and supporting information. Buyer and Seller shall cooperate in good faith to reconcile all items included on the Final Statement. For a period of fifteen (15) days after receipt of the Final Statement and supporting information, Seller shall have the right to review the Final Statement and supporting information reasonably requested by Seller. The Final Statement shall be binding and conclusive on all Parties hereto, unless within such fifteen (15) day review period, Seller notifies Buyer in writing that it seeks an adjustment in the Final Statement, and specifies in reasonable detail the items that it seeks to adjust and the reasons therefor. The Parties shall use good faith efforts to attempt to resolve such dispute; however, if Buyer and Seller have not resolved the request for adjustment within fifteen (15) Business Days after delivery of the original notice by Seller to Buyer, then the Parties shall submit such dispute to a firm of independent accountants of nationally recognized standing reasonably satisfactory to Buyer and Seller (who shall have no material relationship with Seller or Buyer). In making their calculation, the firm of independent accountants will include the non-disputed items and amounts set forth in each Parties’ calculation of the Final Statement, and shall consider affirming or adjusting only those items or amounts in the calculation of the Final Statement as to which the Parties have disagreed and any items and amounts affected by those disputed items and amounts. The determination of such accounting firm, which shall be made within thirty (30) days after submission, shall be conclusive and binding upon the Parties. The fees and expenses of such accounting firm shall be paid equally by Seller and Buyer. Within ten (10) Business Days after the Final Statement is agreed to or otherwise becomes binding, Seller shall pay to Buyer, or Buyer shall pay to Seller, as applicable, the amount to which it is entitled under the Final Statement.

Section 1.6. Tax Treatment of Sale. The purchase and sale of the Interests shall be treated, for U.S. federal (and applicable state and local) income tax purposes, as the purchase and sale of

5

the assets of Equity Owner (the “Purchased Assets”) (such treatment, the “Agreed Tax Treatment”), to the extent permitted by Applicable Law.

Section 1.7. Withholding. Buyer, Escrow Agent and their designees shall be entitled to deduct or withhold from any amounts payable or otherwise deliverable pursuant to this Agreement any amounts that may be or are required to be deducted or withheld therefrom under Applicable Law; provided, that Buyer shall use its commercially reasonable efforts to give at least five (5) Business Days prior written notice to, and shall consult with, Seller if it believes that any amount is required to be deducted and withheld under Applicable Law. To the extent that any amounts are so deducted or withheld, then such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction or withholding was made.

Article II
INVESTIGATIONS

Section 2.1. Access to Properties. From and after the Effective Date, Buyer and Buyer’s employees and representatives (including third party independent contractors) shall have no right to access or inspect the Properties.

Section 2.2. Available Documents. Prior to the Closing, to the extent not previously delivered to Buyer prior to the date hereof as part of the Due Diligence Materials, Seller (i) shall make available to Buyer documentation, to the extent reasonably requested by Buyer and in the reasonable possession and control of Seller, relating to the ownership, operation, assets, liabilities and maintenance of the Properties and the Acquired Companies and (ii) will reasonably cooperate with Buyer, at no cost to Seller, to make available to Buyer reports, files or other documents related to the Properties and the Acquired Companies which are in the possession or control of the Seller or the Acquired Companies. For avoidance of doubt, if Buyer shall request in writing tenant or resident information from Seller in addition to what Seller has otherwise already provided to Buyer as part of the Due Diligence Materials, Seller shall use commercially reasonable efforts to respond to Buyer’s requests; provided, however, Buyer acknowledges and agrees that Seller shall not be required to provide any information that (a) is proprietary in nature, (b) is protected by privacy laws, (c) is subject to a confidentiality agreement or other agreement limiting or prohibiting the distribution of such information, and/or (d) would violate attorney-client privilege or constitute a waiver of rights as to attorney work product or attorney-client privileged communications if disclosed. Seller shall promptly instruct, in writing (which may be via email), the Manager to furnish or make available to Buyer all information, reports, files or other documents related to the Properties and the Acquired Companies which are in the possession or control of the Manager, excluding any such items that Seller is not required to provide pursuant to clauses (a) through (d) of the immediately preceding sentence. If this Agreement is terminated for any reason, Buyer shall either destroy or return to Seller any studies, reports or other documents previously supplied to Buyer by Seller.

Section 2.3. DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED IN THE WRITTEN REPRESENTATIONS OF SELLER SET FORTH IN ARTICLE III OF THIS AGREEMENT, IN ARTICLE II OF ANNEX A AND/OR IN ANY CLOSING DOCUMENTS EXECUTED BY SELLER, AT THE CLOSING, SELLER HEREBY SPECIFICALLY DISCLAIMS ANY EXPRESS OR IMPLIED WARRANTY, GUARANTY OR

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REPRESENTATION, ORAL OR WRITTEN, PAST, PRESENT OR FUTURE. EXCEPT FOR THE WRITTEN REPRESENTATIONS AND WARRANTIES SPECIFICALLY SET FORTH IN ARTICLE III OF THIS AGREEMENT, IN ARTICLE II OF ANNEX A AND/OR IN THE DOCUMENTS EXECUTED BY SELLER AT THE CLOSING, BUYER ACKNOWLEDGES THAT HAVING BEEN GIVEN THE OPPORTUNITY TO INSPECT THE INFORMATION RELATING TO THE PROPERTIES AND THE INTERESTS, BUYER IS RELYING ON SUCH INFORMATION AT ITS OWN RISK. EXCEPT FOR THE WRITTEN REPRESENTATIONS AND WARRANTIES OF SELLER SPECIFICALLY SET FORTH IN ARTICLE III OF THIS AGREEMENT, IN ARTICLE II OF ANNEX A AND/OR IN THE DOCUMENTS EXECUTED BY SELLER AT THE CLOSING, BUYER FURTHER ACKNOWLEDGES THAT THE INFORMATION PROVIDED AND TO BE PROVIDED WITH RESPECT TO THE PROPERTIES AND THE INTERESTS WAS OBTAINED FROM A VARIETY OF SOURCES AND SELLER (A) HAS NOT MADE ANY INDEPENDENT INVESTIGATION OR VERIFICATION OF SUCH INFORMATION AND (B) HAS NOT MADE ANY EXPRESS OR IMPLIED, ORAL OR WRITTEN, REPRESENTATIONS AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. BUYER EXPRESSLY ACKNOWLEDGES THAT, IN CONSIDERATION OF THE AGREEMENTS OF SELLER HEREIN, EXCEPT AS OTHERWISE EXPRESSLY SPECIFIED IN THE REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED IN ARTICLE III OF THIS AGREEMENT AND/OR IN ARTICLE II OF ANNEX A, SELLER HAS NOT MADE AND DOES NOT HEREBY MAKE ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, ARISING BY OPERATION OF LAW OR OTHERWISE, WHATSOEVER WITH RESPECT TO THE CONDITION OF THE PROPERTIES OR THE DOCUMENTATION REGARDING THE INTERESTS, INCLUDING ANY REPRESENTATION OR WARRANTY REGARDING CONDITION, HABITABILITY, SUITABILITY, QUALITY OF CONSTRUCTION, WORKMANSHIP, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, AND BUYER ACKNOWLEDGES THAT IT IS ENTERING INTO THIS AGREEMENT WITHOUT RELYING UPON ANY ORAL STATEMENT OR REPRESENTATION MADE BY SELLER, ANY BROKER OR BY ANY OTHER PERSON EXCEPT AS SET FORTH IN THE REPRESENTATIONS AND WARRANTIES OF SELLER CONTAINED IN ARTICLE III HEREIN AND IN ARTICLE II OF ANNEX A. THE FOREGOING PROVISIONS ARE NOT INTENDED TO NEGATE THE REPRESENTATIONS AND WARRANTIES OF SELLER EXPRESSLY SET FORTH IN ARTICLE III HEREIN, IN ARTICLE II OF ANNEX A OR IN THE DOCUMENTS DELIVERED BY SELLER AT THE CLOSING.

(a) Buyer acknowledges that neither Seller, nor any of Seller’s disclosed or undisclosed officers, directors, managers, employees, trustees, equity owners, partners, members, principals, parents, subsidiaries or other Affiliates nor any of their agents or representatives, has made any representations or held out any inducements to Buyer except as set forth herein; and Seller hereby specifically disclaims any representation, oral or written, past, present or future, other than those specifically set forth in Article III herein and in Article II of Annex A.

(b) The provisions of this Section 2.3 shall survive the termination of this Agreement and the Closing.

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Article III
REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby represents and warrants to Buyer as of the date hereof and as of the Closing Date as follows:

Section 3.1. Organization and Qualification.

(a) Seller is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware and has all necessary limited liability company power and authority to enter into this Agreement, to carry out its obligations hereunder and to consummate the Transaction.

(b) Each of the Acquired Companies is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware, and has all necessary limited liability company power and authority to own, lease and operate the Properties and to carry on its business as it is now being conducted.

(c) Property Owner is in good standing under the laws of the State of Delaware and is duly qualified to do business (and is in good standing) in each jurisdiction where the Properties are located.

Section 3.2. Authority. Seller has the limited liability company power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transaction. The execution and delivery by Seller of this Agreement and the consummation by Seller of the Transaction have been duly and validly authorized by all necessary limited liability company action. This Agreement has been duly executed and delivered by Seller. This Agreement constitutes the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity. Seller has the right, authority and power to sell, assign and transfer the Interests to Buyer.

Section 3.3. No Conflict; Required Filings and Consents.

(a) The execution, delivery and performance by Seller of this Agreement and the consummation of the Transaction, do not and will not:

(i) conflict with or violate the Organizational Documents of Seller or the Organizational Documents of either of the Acquired Companies;

(ii) conflict with or violate any Applicable Law in any material respect with respect to Seller, the Acquired Companies or the Properties; or

(iii) conflict with, result in any breach of, constitute a default (or event which with the giving of notice or lapse of time, or both, would become a default) under, require any consent or notice under, or give to others any rights of termination, acceleration or cancellation of, any written agreement that is binding on an Acquired Company, except (A) for the Loan Documents

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and the MetLife Approval, (B) for such conflicts or violations that would not prevent or materially delay the consummation by Seller of the Transaction, result in any material liability to Buyer or an Acquired Company after the Closing or materially affect the business of the Acquired Companies, of which Buyer has been made aware in writing, or (C) with respect to those matters that will be released or terminated at Closing.

(b) To Seller’s Knowledge, neither Seller nor either of the Acquired Companies is required to file, seek or obtain any notice, authorization, approval, order, permit or consent of or with any Governmental Authority in connection with the execution, delivery and performance by Seller of this Agreement or the consummation of the Transaction or in order to prevent the termination of any material right, privilege, license or qualification of the Acquired Companies (that has not already been obtained or will not be obtained prior to the Closing), except for (i) such filings as may be required by any applicable federal or state securities or “blue sky” laws, (ii) the approval or consent of any Governmental Authority with respect to any licenses or permits of the Acquired Companies related to the operation of the Properties or the business of the Acquired Companies (“Permits”) resulting from a change in ownership or control of the Acquired Companies, or from a change in officers or managers of the Acquired Companies, and (iii) as may be necessary as a result of any facts or circumstances relating solely to Buyer or any of its Affiliates.

Section 3.4. Interests.

(a) As of the Effective Date and until Closing, the direct and indirect record and beneficial ownership of each of the Acquired Companies is as set forth on the Organizational Chart. Seller is the record and beneficial owner of the Interests and has good and valid title to the Interests, free and clear of any restriction, lien, encumbrance, collateral assignment, pledge, security interest or claim. Upon the Closing, Buyer will be the sole lawful owner of the Interests, free and clear of any and all encumbrances, restrictions, liens, security interests, adverse claims, options, voting trusts, proxies or other restrictions whatsoever.

(b) Equity Owner is the record and beneficial owner of the Property Owner Interests and has good and valid title to the Property Owner Interests, free and clear of any restriction, lien, encumbrance, collateral assignment, pledge, security interest or claim except for the liens, encumbrances, collateral assignments or security interests created by the Loan Documents (the “MetLife Liens”). Upon the Closing, Equity Owner will be the sole lawful owner of all of the outstanding equity interests in the Property Owner, free and clear of any and all encumbrances, restrictions, liens, security interests, adverse claims, options, voting trusts, proxies or other restrictions whatsoever, except for the MetLife Liens.

Section 3.5. Capitalization.

(a) All of the Interests are duly authorized and validly issued in compliance with all Applicable Laws and the Organizational Documents of Equity Owner, and such Interests are fully paid, nonassessable and free of preemptive rights. The Interests constitute all of the issued and outstanding limited liability company interests of Equity Owner, and except for this Agreement, there are no outstanding purchase agreements, purchase rights, options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any kind applicable to the

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Interests or obligating Equity Owner to issue or sell any of the Interests. There are no (i) outstanding contractual obligations of Equity Owner to repurchase, redeem or otherwise acquire any of the Interests or (ii) agreements or understandings in effect with respect to the voting or transfer of any of the Interests.

(b) All of the Property Owner Interests are duly authorized and validly issued in compliance with all Applicable Laws and the Organizational Documents of Property Owner, and such Interests are fully paid, nonassessable and free of preemptive rights. The Property Owner Interests constitute all of the issued and outstanding limited liability company interests of Property Owner, and except for this Agreement, there are no outstanding purchase agreements, purchase rights, options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any kind applicable to the Property Owner Interests or obligating Property Owner to issue or sell any of the Property Owner Interests. There are no (i) outstanding contractual obligations of Property Owner to repurchase, redeem or otherwise acquire any of the Property Owner Interests or (ii) agreements or understandings in effect with respect to the voting or transfer of any of the Property Owner Interests.

Section 3.6. Assets.

(a) Other than single family homes that were previously sold by Property Owner in the ordinary course of its business, Property Owner does not own, and has never owned, any property of any nature other than the Properties.

(b) Property Owner has never engaged in any business other than the acquisition, disposition, ownership, financing, operation, maintenance and leasing of the Properties or other single family homes that were previously sold by Property Owner in the ordinary course of its business.

(c) Equity Owner has never engaged in any business other than owning all of the issued and outstanding limited liability company interests of Property Owner, and has never owned any property of any nature other than the limited liability company interests of Property Owner.

(d) Neither Seller nor the Acquired Companies hold (and the Interests do not constitute), or is acting on behalf of an entity deemed to hold, “plan assets” within the meaning of the Department of Labor regulations located at 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and neither Seller nor either of the Acquired Companies is acting on behalf of (i) an “employee benefit plan” within the meaning of Section 3(3) of ERISA that is subject to Title I of ERISA, or (ii) a “plan” within the meaning of Section 4975 of the Internal Revenue Code of 1986, as amended, that is subject to Section 4975 of the Code.

(e) The Acquired Companies do not have and have never had any employees.

Section 3.7. Litigation. Except as described in Schedule 3.7, (i) there is no litigation, lawsuit, arbitration or legal proceeding (collectively, “Litigation”) pending or, to Seller’s Knowledge, threatened in writing (a) by or against an Acquired Company or against the Property or (b) that would materially adversely affect Seller’s ability to perform Seller’s obligations under this Agreement or the legality, validity or enforceability of this Agreement or prevent, enjoin, alter,

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prohibit or delay in any material respect the consummation of the Transaction, (ii) there is no material Litigation involving the Properties, and (iii) there are no judgments or orders entered against or pertaining to the Properties, the Seller or either of the Acquired Companies.

Section 3.8. Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Transaction based upon arrangements made by or on behalf of Seller or any of its Affiliates.

Section 3.9. Agreements. Except as listed on Schedule 3.9(i), there are no written agreements which will be binding on or enforceable against an Acquired Company or the Properties after the Closing, except for (a) the Loan Documents, (b) the agreements to purchase the Properties set forth in Exhibit A-2, true and correct copies of which have been provided to Buyer as part of the Due Diligence Materials, (c) any Service Contracts that are not terminated at the Closing, (d) the Leases, (e) any declarations, covenants, conditions and restrictions, easements, and other matters of record in the real estate records, (f) the Organizational Documents, (g) the Permits to the extent any of them constitute agreements, and (h) any new Service Contracts and Leases entered into prior to the Closing in accordance with this Agreement (the contracts listed on Schedule 3.9 and those referenced in clauses (a) through (h), collectively, the “Written Agreements”). Seller has provided or made available to Buyer as part of the Due Diligence Materials delivered to Buyer prior to the date hereof true, correct and complete copies of all Written Agreements. At Closing, there shall be no agreements affecting the Properties or the Acquired Companies except for the Written Agreements provided to Buyer prior to the date hereof or otherwise entered into in accordance with this Agreement. The Acquired Companies are not in breach of any of the Written Agreements except as disclosed on Schedule 3.9(ii).

Section 3.10. Organizational Documents. Seller has provided or made available to Buyer true, correct and complete copies of the certificate of formation and limited liability company agreement (or similar documents or agreements) of Seller and each of the Acquired Companies, in each case as amended to date. Such documents of the Seller and the Acquired Companies are in full force and effect as of the Effective Date, and shall remain true and correct until Closing occurs. The organizational documents listed on Exhibit E (the “Organizational Documents”) have been delivered to Buyer as part of the Due Diligence Materials prior to the Effective Date and are the only documents and/or agreements governing the affairs of the Acquired Companies and the rights and obligations of the members of the Acquired Companies.

Section 3.11. Bankruptcy. No attachments, execution proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization, or other proceedings are pending or, to Seller’s Knowledge, threatened in writing against Seller or an Acquired Company, nor are any such proceedings contemplated by Seller or an Acquired Company. None of Seller or the Acquired Companies is insolvent and will not become insolvent by executing or performing its obligations under this Agreement, or has made a general assignment for the benefit of creditors, filed any voluntary petition in bankruptcy, or admitted in writing its inability to pay its debts as they come due or made an offer of settlement, extension or composition to its creditors generally, and none of Seller or the Acquired Companies has received written notice of: (a) the filing of any involuntary petition by its creditors; (b) the appointment of a receiver to take possession of all, or substantially all, of its assets; or (c) the attachment or other judicial seizure of all, or substantially all, of its assets.

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Section 3.12. Accounts. On or prior to the date hereof Seller has provided Buyer with a true and complete list of all of the bank accounts of the Acquired Companies.

Section 3.13. Insurance. On or prior to the date hereof Seller has provided Buyer with certificates of insurance representing the insurance policies currently maintained by the Acquired Companies, such coverage is in full force and effect, and all premiums due thereunder have been paid (or will be paid, if payment first becomes due after the Effective Date and before the Closing Date) for a period extending through the Closing Date. As of the date hereof, Schedule 3.13 is a true, correct and complete list of any and all insurance claims made with respect to the Properties and the date on which such claims were made. All work required to be performed to address the claims set forth in Schedule 3.13 has been completed in a good and workmanlike manner and paid for in full.

Section 3.14. Financial Statements.

(a) Seller has made available to Buyer, prior to the execution of this Agreement, the true, correct and complete unaudited financial statements of the Acquired Companies for the fiscal year ended December 31, 2021, and the unaudited financial statements of the Acquired Companies for the period commencing January 1, 2022 and ended September 30, 2022 (the “Financial Statements”). The Financial Statements were prepared in the ordinary course of the Acquired Companies’ business and fairly and accurately reflect in all material respects the financial position of the Acquired Companies as of the dates thereof.

(b) The Acquired Companies have no material liabilities or material obligations except (i) liabilities or obligations that are reflected or reserved against in the Financial Statements or disclosed in any notes thereto, (ii) liabilities or obligations incurred in the ordinary course of the Acquired Companies’ business since the Financial Statements, as disclosed in writing to Buyer prior to the date of this Agreement, (iii) liabilities or obligations which arise out of the Leases, the Service Contracts or the other agreements described or referred to in Section 3.9, (iv) liabilities or obligations which arise out of the matters disclosed in Schedule 3.7, or (v) liabilities or obligations disclosed in the Due Diligence Materials delivered to Buyer (or its Affiliates or Representatives) prior to the date of this Agreement. This Section 3.14(b) does not apply to liabilities or obligations relating to matters specifically covered by any of the other representations and warranties provided in this Article III or relating to or arising from the physical or environmental condition and the tangible assets of the Acquired Companies or any other matter set forth in a recorded title document for the Properties.

(c) The Acquired Companies have no Indebtedness other than the Loan Agreement, and have not guaranteed the obligations or performance of any other person except as set forth in the Loan Documents.

Section 3.15. Loan Agreement. To Seller’s Knowledge, Property Owner is in compliance with the terms of the Loan Agreement and neither Seller nor any Acquired Company has received any written notice from Lender of any breach or default of or failure to comply with the terms of the Loan Agreement or any Loan Document. The Loan Documents constitute all of the loan documents entered into by and between Seller, the Acquired Companies or any affiliate thereof and/or MetLife in connection with the Loan (as defined in the Loan Agreement). Seller has

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provided to Buyer true, correct and complete copies of the Loan Documents as part of the Due Diligence Materials delivered to Buyer prior to the date hereof.

Section 3.16. No Restricted Person. Neither Seller, either of the Acquired Companies nor any of their Affiliates, are persons or entities with whom U.S. persons or entities are restricted from doing business under regulations of OFAC (including those named on OFAC’s especially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit or Support Terrorism), or other governmental action. It shall constitute an automatic default of this Agreement if Seller, either of the Acquired Companies or any of their affiliates is a person or entity with whom U.S. persons or entities are restricted from doing business under OFAC.

Section 3.17. Title Policies. Seller has, prior to the date hereof, provided to Buyer true, correct and complete copies of the existing owners title insurance policies obtained by Property Owner, which policies insure Property Owner as the fee simple owner of each of the Properties and which have been validly issued and fully paid (the “Title Policies”). Except as otherwise provided in the Title Policies, there are no rights, liens, encumbrances or other matters encumbering or affecting any of the Properties, except for the MetLife Liens. There are no agreements or encumbrances affecting any of the Properties which would prevent, limit or restrict the Closing of this Transaction, except for the Loan Documents and the MetLife Liens. Since the date of the Title Policies, Property Owner has not sold, assigned, conveyed or otherwise transferred the Properties. To Seller’s Knowledge, (i) none of the Properties are in violation of any rules imposed by any homeowner’s associations or other similar associations or any covenants, conditions or restrictions recorded against any of the Properties and (ii) there are no recorded or unrecorded leasing restrictions applicable to or affecting the Properties, which (A) prohibit or restrict leasing, or (B) would be violated or permit imposition of a fine, charge or penalty if Buyer completed its intended purchase and leasing of the Properties.

Section 3.18. Legal Compliance. Except as disclosed on Schedule 3.18, neither the Seller nor the Acquired Companies have received any written notice from any Governmental Authority of any violation of any Applicable Law.

Section 3.19. Environmental. Seller has made available to Buyer as part of the Due Diligence Materials delivered to Buyer prior to the date hereof copies of all material environmental reports concerning the Properties that are in Seller’s or the Acquired Companies’ possession or control. Neither Seller nor either of the Acquired Companies has received written notice of any violation of any Environmental Law with respect to Seller, the Acquired Companies or the Properties.

Section 3.20. Intercompany Loans. There are no intercompany loans between any of the Seller, the Equity Owner or the Property Owner.

Section 3.21. Knowledge Parties. The individual representatives of Seller set forth in the definition of “Knowledge” herein are the individuals at Seller who have the most knowledge of the information set forth in the representations and warranties of Seller set forth in this Article III.

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Section 3.22. “AS IS” TRANSACTION. BUYER HEREBY ACKNOWLEDGES AND AGREES THAT, EXCEPT AS SET FORTH IN THIS AGREEMENT OR IN CONNECTION WITH THE CLOSING AND THE CLOSING DOCUMENTS, SELLER MAKES NO (AND SELLER EXPRESSLY DISCLAIMS AND NEGATES ANY) REPRESENTATIONS OR WARRANTIES OF ANY KIND, WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED, WITH RESPECT TO THE INTERESTS, THE ACQUIRED COMPANIES AND THEIR RESPECTIVE ASSETS OR BUSINESSES, OR ANY OTHER MATTER WHATSOEVER. BUYER FURTHER ACKNOWLEDGES THAT BUYER HAS CONDUCTED AN INDEPENDENT INSPECTION AND INVESTIGATION OF THE INTERESTS, THE ACQUIRED COMPANIES AND THEIR RESPECTIVE ASSETS OR BUSINESSES AND ALL SUCH OTHER MATTERS RELATING TO OR AFFECTING SUCH ASSETS AND BUSINESSES AS BUYER DEEMED NECESSARY OR APPROPRIATE AND THAT BUYER IS PROCEEDING WITH ITS ACQUISITION OF THE INTERESTS BASED SOLELY UPON SUCH INDEPENDENT INSPECTIONS AND INVESTIGATIONS AND THE REPRESENTATIONS AND WARRANTIES PROVIDED HEREIN AND IN THE CLOSING DOCUMENTS. ACCORDINGLY, SUBJECT TO THE TERMS AND CONDITIONS EXPRESSLY SET FORTH IN THIS AGREEMENT AND THE CLOSING DOCUMENTS, BUYER WILL ACCEPT THE INTERESTS, THE ACQUIRED COMPANIES AND THEIR RESPECTIVE ASSETS OR BUSINESSES, AT THE CLOSING “AS IS,” “WHERE IS,” AND “WITH ALL FAULTS” AND WITHOUT RECOURSE AGAINST SELLER. THE PROVISIONS OF THIS SECTION ARE AN IMPORTANT BASIS OF THE BARGAIN INDUCING SELLER TO CONVEY THE INTERESTS. THE PROVISIONS OF THIS SECTION SHALL SURVIVE THE CLOSING OR ANY TERMINATION OF THIS AGREEMENT.

Section 3.23. Buyer’s Release. Except to the extent of any claim by Buyer made prior to the Applicable Limitation Date and arising out of the breach by Seller of any express covenant, indemnity, representation or warranty of Seller under this Agreement or any of the documents or agreements delivered by Seller at the Closing, Buyer hereby assumes the risk for, covenants and agrees not to sue Seller or any Representative of Seller and hereby permanently and irrevocably releases Seller and each Representative of Seller of and from and hereby permanently and irrevocably waives any claim, demand or other Action, including without limitation, any tort or strict liability claim or cause of action, known or unknown, contingent or non-contingent, that Buyer may have against Seller or any Representative of Seller, in each case under or relating to (i) any Environmental Law or common law right, now existing or hereafter enacted or promulgated, relating to environmental matters, environmental conditions, non-compliance with Environmental Laws or the existence of Hazardous Substances, in, on, at, under, about or migrating from or onto any of the Properties or any of the Improvements or (ii) any latent or patent defects in the Properties and all other physical conditions. Without limiting any other provisions of this Agreement relating to the survival of provisions under this Agreement, the terms and conditions of Section 3.22 and this Section 3.23 expressly survive the Closing without limitation, and will not merge with the provisions of any documents executed and/or delivered as part of the Closing and are hereby deemed incorporated into the Assignment of Interests as fully as if set forth at length therein. Each waiver, acknowledgement, representation and covenant of Buyer under Section 3.22 and this Section 3.23 shall also be deemed to have been made by any permitted assignee of Buyer, if applicable. Each disclaimer by Seller to Buyer under Section 3.22 and this Section 3.23 shall also be deemed to have been made to any permitted assignee of Buyer, if applicable.

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Section 3.24. Buyer Affiliates. Notwithstanding anything herein to the contrary, Buyer acknowledges and agrees that Seller shall not be liable (including, without limitation, under any indemnity set forth in Article VII of this Agreement) for any breach, default or violation of any representation, warranty or covenant of Seller or the Acquired Companies set forth in this Agreement (including, without limitation, any of the representations and warranties made by Seller in this Article III or in Article II of Annex A or any of the covenants of Seller set forth in Article V) (a) that is caused by, or results from, the actions or omissions of Buyer or any of its respective Representatives, or (b) to the extent that Buyer had Knowledge of such breach, default or violation as of the Effective Date.

Article IV
REPRESENTATIONS AND WARRANTIES OF Buyer

Buyer hereby represents and warrants to Seller as of the date hereof and as of the Closing Date as follows:

Section 4.1. Organization. Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware.

Section 4.2. Authority. Buyer has full limited liability company power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Transaction. The execution and delivery by Buyer of this Agreement and the consummation by Buyer of the Transaction have been duly and validly authorized by all necessary limited liability company action. This Agreement has been duly and validly executed and delivered by Buyer. This Agreement constitutes the legal, valid and binding obligations of Buyer, enforceable against Buyer in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.

Section 4.3. No Conflict; Required Filings and Consents; No Litigation.

(a) The execution, delivery and performance by Buyer of this Agreement and the consummation of the Transaction, do not and will not:

(i) conflict with or violate the certificate of formation, limited liability company agreement, or other organizational documents of Buyer;

(ii) conflict with or violate any Applicable Law in any material respect with respect to Buyer; or

(iii) result in any breach of, constitute a default (or an event that, with notice or lapse of time or both, would become a default) under, or require any consent of any Person pursuant to, any note, bond, mortgage, indenture, agreement, lease, license, permit, franchise, instrument, obligation or other contract to which Buyer is a party, except for any such conflicts, violations, breaches, defaults or other occurrences that would not, individually or in the aggregate, be reasonably likely to have a material adverse effect on the ability of Buyer to perform its obligations under this Agreement.

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(b) Buyer is not required to file, seek or obtain any notice, authorization, approval, order, permit or consent of or with any Governmental Authority in connection with the execution, delivery and performance by Buyer of this Agreement or the consummation of the Transaction, except for (i) such filings as may be required by any applicable federal or state securities or “blue sky” laws or (ii) as may be necessary as a result of any facts or circumstance relating solely to Seller or any of its Affiliates.

(c) As of the date hereof, there is no Action pending against, or to the knowledge of Buyer threatened in writing to be brought before any Governmental Authority against, Buyer that would prevent, enjoin, alter or delay in any material respect the consummation of the Transaction.

Section 4.4. Financing Solvency.

(a) Buyer will have sufficient funds to permit Buyer to consummate the Transaction and to pay the Purchase Price at the Closing.

(b) Buyer represents that, immediately after its purchase of the Interests, and assuming the accuracy of the representations and warranties of Seller contained herein, Buyer and its Affiliates will have a positive net worth and will not be insolvent (as defined under the U.S. Bankruptcy Code (the “Bankruptcy Code”)) and that Buyer’s purchase of the Interests and any borrowing by Buyer or its Affiliates (including the incurring of any obligation or granting of any security by the Acquired Companies in connection with such transactions) will not have the effect of defrauding any creditors of the Acquired Companies.

Section 4.5. Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the Transaction based upon arrangements made by or on behalf of Buyer or any of its Affiliates.

Section 4.6. Investment Intent.

(a) Buyer understands that the Interests have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) or the securities laws of any state. Buyer is acquiring the Interests for its own account for investment purposes only and not with a view to any public distribution thereof or with any intention of selling, distributing or otherwise disposing of the Interests in a manner that would violate the registration requirements of the Securities Act. Buyer agrees that the Interests may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of (i) except in compliance with the governing documents of the Acquired Companies, and (ii) without registration under the Securities Act and any applicable state securities laws except pursuant to an exemption from such registration under the Securities Act and such laws. Buyer is able to bear the economic risk of holding the Interests for an indefinite period (including total loss of its investment), and (either alone or together with its Representatives) has sufficient knowledge and experience in financial and business matters so as to be capable of independently evaluating the merits and risk of its investment.

(b) Buyer is not (and is not acting on behalf of) an employee benefit plan within the meaning of Section 3(3) of ERISA that is subject to Title I of ERISA, a plan within the meaning of Section 4975(e)(1) of the Code that is subject to Section 4975 of the Code, and Buyer is not an

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entity deemed to hold “plan assets” within the meaning of the Department of Labor regulations located at 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA.

Section 4.7. No Restricted Person. Neither Buyer nor any of its Affiliates, is a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”) (including those named on OFAC’s especially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit or Support Terrorism), or other governmental action. It shall constitute an automatic default of this Agreement if Buyer or any of its Affiliates is a person or entity with whom U.S. persons or entities are restricted from doing business under OFAC.

Section 4.8. Knowledge Parties. The individual representatives of Buyer set forth in the definition of “Knowledge” herein are the individuals at Buyer who have the most knowledge of the Properties (including, without limitation, the condition, management and operation thereof).

Section 4.9. Investigation; No Other Representations. Buyer has undertaken previously, or shall undertake prior to the Closing, such investigations and evaluations of such documents and information as it has deemed necessary to enable it to make an independent informed decision with respect to the execution, delivery and performance of this Agreement. Buyer acknowledges that Seller has made available to Buyer, or that Buyer has previously obtained or received access to financial statements of the Acquired Companies, organizational documents of the Acquired Companies, the Service Contracts, the prior Tax Returns, environmental reports, the Title Policies, surveys and various other documentation relating to the ownership, operation, assets, liabilities and maintenance of the Properties and the Acquired Companies as provided in Section 2.2 (the “Acquired Company Information”). Buyer acknowledges that, except as expressly set forth in Article III of this Agreement, Article II of Annex A and any document delivered by Seller in connection with the Closing, Seller does not make any representation or warranty with respect to (a) the Acquired Company Information or any other documentation related to the Acquired Companies, the Interests or the Properties, (b) any projections, estimates or budgets delivered to or made available to Buyer of future revenues, future results of operations (or any component thereof), future cash flows, future taxable income, future tax liability of the Acquired Companies’ equity owners or future financial condition (or any component thereof) of the Acquired Companies or the Properties or the future businesses and operations of the Acquired Companies or the Properties, or (c) any other information or documents made available to Buyer or its counsel, accountants or advisors with respect to the Acquired Companies or their businesses or operations or the Properties or their operations.

Article V
COVENANTS

Section 5.1. Conduct of the Business. From the date hereof until the Closing Date, Seller agrees that it shall cause the Acquired Companies to conduct their business in the ordinary course consistent with past practice and to (a) preserve intact business organizations and relationships with third parties pertaining to their respective businesses, and (b) comply in all material respects with Applicable Law. Prior to the Closing, Seller shall: (i) maintain the current levels of casualty and liability and other insurance with respect to the Properties, (ii) operate the Properties on a basis

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consistent with historical operations since Property Owner’s purchase of the Properties including undertaking reasonably required ordinary maintenance and repair of the Improvements (but not including any capital or extraordinary expenditures except in emergency situations), subject to ordinary wear and tear, casualty and condemnation as provided in Section 6.4 of this Agreement, (iii) comply in all material respects with the terms of the Leases, and (iv) cause the books and records of the Acquired Companies to be maintained substantially consistent with past practice (including accounting principles, procedures and methods).

Without limiting the generality of the foregoing, from the date hereof until the Closing Date, without Buyer’s consent, which consent may be withheld or conditioned in Buyer’s sole and absolute discretion, Seller will not permit either of the Acquired Companies:

(a) to amend or otherwise change the certificate of formation or limited liability company agreement of such Acquired Company;

(b) to issue or sell any equity interests in such Acquired Company, or any options, warrants, convertible securities or other rights of any kind to acquire any such equity interests in such Acquired Company;

(c) to admit any party as a member or manager of such Acquired Company or allow any transfers of existing direct equity interests in such Acquired Company;

(d) to transfer, assign, pledge, alienate or encumber any of the Interests;

(e) to reclassify, combine, split, subdivide or redeem, or purchase or otherwise acquire, any of the Interests;

(f) to acquire any corporation, partnership, limited liability company, other business organization or division thereof;

(g) to acquire or dispose of any assets, including but not limited to the Properties, of such Acquired Company, other than the acquisition of the Properties set forth on Exhibit A-2, or to remove, sell or dispose of any personal property located at the Properties unless replaced with personal property of similar or better quality; provided, however, such prohibition does not apply to personal property owned by tenants or residents of the Properties; provided, further, that the accounts receivable on the Financial Statements related to the refunds for insurance premium previously paid on account of the Properties and other properties previously sold by the Property owner shall be paid to Seller and are not assets of the Acquired Companies subject to this restriction;

(h) to terminate, dissolve or liquidate, or to adopt a plan of complete or partial liquidation, dissolution, merger, consolidation or recapitalization;

(i) to enter into any lease, contract, agreement, license, or arrangement other than any such leases, contracts, agreements, licenses, or arrangements that are contemplated or required by this Agreement or that are entered into in the ordinary course of business; provided, however, (i) Seller shall promptly provide Buyer with a copy of any such item entered into after the Effective Date, (ii) the prior consent of Buyer will be required before entering into any new Lease with respect to

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any of the Properties that does not comply with the then current leasing guidelines as disclosed to Buyer from time to time, and (iii) the prior consent of Buyer will be required before entering into any new Service Contract for the Properties (other than Service Contracts that are terminable upon thirty (30) days’ (or less) written notice without any penalty or termination fee);

(j) to hire any employees;

(k) to make any material change in any method of accounting or accounting practice or policy, except as required by generally accepted accounting principles;

(l) to incur any Indebtedness except pursuant to the Loan Agreement;

(m) to breach any of the Loan Documents;

(n) to grant any new lien or security interest on its assets or to grant any new real estate easement, right-of-way or restrictive covenant on the Properties, other than as required by any Applicable Law or Governmental Authority;

(o) to (i) make, rescind, or revoke any Tax election, (ii) change or adopt a method of Tax accounting, (iii) settle or compromise any Tax liability, audit, claim or assessment, (iv) amend any Tax Return (except as required by Applicable Law), (v) enter into any agreement related to Taxes with any taxing authority, (vi) surrender any right to claim any Tax refund or (vii) file any Tax Return in a manner inconsistent with past practice, except as required by Applicable Law;

(p) make to any third party, any loans or advances to, or investments in, any other Person (including to any of its officers, directors, employees, Affiliates, agents or consultants) unless such loans, advances or investments will be repaid in full prior to Closing; or

(q) to enter into any new line of business.

Section 5.2. Inter-company Arrangements. Seller shall cause all inter-company and intra-company accounts or contracts between an Acquired Company, on the one hand, and Seller and its Affiliates (other than the Acquired Companies), on the other hand, to be fully paid, assumed, released or cancelled without the need for any further documentation, immediately prior to the Closing, so that the Acquired Companies have no further liabilities or obligations after Closing with respect to such accounts or contracts.

Section 5.3. Bank Accounts. Effective as of Closing, all authorized signatories for the existing bank accounts of the Acquired Companies shall be updated so that all of the authorized signatories for such accounts on file with the applicable banks are Persons designated by Buyer, and Seller and Buyer shall cooperate with each other in good faith in an effort to cause such update to occur.

Section 5.4. No Claims Against Individuals. Buyer covenants, for itself and its Affiliates (including the Acquired Companies after the Closing), that it and they shall not institute any action or proceeding in any court or before any administrative agency or before any other tribunal against any of the current managers or officers of, or any individuals named in the definition of “Knowledge” or employed by, Seller or any of its Affiliates (including the Acquired Companies)

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with respect to any liabilities, actions or causes of action relating to, arising out of or resulting from this Agreement or the Transaction, excluding any common law liability of Seller or any of its Affiliates (including the Acquired Companies) for fraud in the event Seller or any of its Affiliates (including the Acquired Companies) are finally determined by a court of competent jurisdiction to have willfully and knowingly committed fraud against Buyer with a specific intent to deceive and mislead Buyer with respect to the representations and warranties made in this Agreement. Seller covenants, for itself and its Affiliates (excluding the Acquired Companies after the Closing), that it and they shall not institute any action or proceeding in any court or before any administrative agency or before any other tribunal against any of the current managers or officers of, or any individuals employed by, Buyer or any of its Affiliates (including the Acquired Companies after the Closing) with respect to any liabilities, actions or causes of action relating to, arising out of or resulting from this Agreement or the Transaction, excluding any common law liability of Seller or any of its Affiliates (including the Acquired Companies) for fraud in the event Seller or any of its Affiliates (including the Acquired Companies) are finally determined by a court of competent jurisdiction to have willfully and knowingly committed fraud against Buyer with a specific intent to deceive and mislead Buyer with respect to the representations and warranties made in this Agreement.

Section 5.5. Confidentiality and Standstill Period.

(a) Each of the Parties shall, until the expiration of one (1) year after the Closing Date, hold, and shall cause its Representatives to hold, in strict confidence all Confidential Information except that either Party may disclose the Confidential Information to its Representatives and any employee or Affiliate of the foregoing provided, however, that each such Person is directed to keep the same confidential. In the event that a Party is requested or required by Applicable Law or Governmental Authority to disclose any Confidential Information, such Party will provide the other Party with prompt written notice of such request or requirement so that the other Party may seek an appropriate protective order, provided, however, that the foregoing notice obligation shall not apply with respect to routine regulatory examinations and inquiries or to any filings required under the Securities Act or similar laws. If, in the absence of entry of a protective order, a Party is required to disclose Confidential Information, such Party may disclose that portion of the Confidential Information that the Party is required to disclose and will exercise commercially reasonable efforts to obtain assurance that confidential treatment will be accorded to that portion of the Confidential Information that is being disclosed. In any event, neither Party will oppose action by the other Party to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information. Further, no press releases shall be issued by either Party prior to the Closing, and Seller and Buyer will each have the right to approve any press release of the other Party issued after the Closing, which approval will not be unreasonably withheld; provided, however, unless required by Applicable Law (including the Securities Act and similar laws), in no event shall such press release disclose the Purchase Price, any material terms of this Agreement or the identity of Buyer or its Affiliates without the prior written consent of Buyer or disclose the Purchase Price, any material terms of this Agreement or identify Seller or its Affiliates without the prior written consent of Seller, which consent may be withheld in Seller’s sole discretion.

(b) Seller will not, at any time on or after the Effective Date and prior to the earliest of (i) the Closing, or (ii) the termination of this Agreement, market for sale all or any portion of the

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Interests in any way or solicit proposals from or enter into or continue with negotiations with any other person or entity regarding the possible sale of the Interests, the Acquired Companies or any of their businesses or assets (including, directly or indirectly, the Properties).

Section 5.6. Cooperation. Seller and Buyer shall each use commercially reasonable efforts to obtain (and shall use commercially reasonable efforts to cooperate with each other in obtaining) MetLife Approval, including having Parent released as guarantor under the Loan Documents and having a Buyer Affiliate approved as replacement guarantor under the Loan Documents.

Section 5.7. UCC Policy. Buyer shall have the right to obtain from a reputable title company a commitment to issue to Buyer upon Closing a buyer’s UCC insurance title policy, dated as of the date of the Closing, insuring Buyer’s ownership (together with any subsidiary of Buyer which acquires the Interests, as applicable) of one hundred percent (100%) of the issued and outstanding equity interest in the Acquired Companies in the amount of the Purchase Price, free and clear of any and all encumbrances, liens, claims, proxies and voting or other agreements of any kind or nature. Seller shall use commercially reasonably efforts to cooperate with Buyer’s efforts to obtain such UCC insurance title policy, including providing any documents and affidavits to the title company as requested; provided that Buyer shall bear all costs and expenses related to such UCC insurance title policy and shall reimburse Seller for any actual, documented out of pocket costs incurred in cooperation with such requests.

Article VI
CONDITIONS TO CLOSING

Section 6.1. Conditions to Obligations of Buyer and Seller. The respective obligations of Buyer and Seller to consummate the Closing shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions, any one or more of which may, to the extent permitted by Applicable Law, be waived in writing by either Party in its sole discretion (provided, however, that such waiver shall only be effective as to the obligations of the other Party):

(a) No Injunction or Prohibition. No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Applicable Law or any order thereunder (whether temporary, preliminary or permanent) that is in effect and that enjoins, restrains, makes illegal or otherwise prohibits the consummation of the Transaction.

(b) No Actions. There shall be no Action pending against or, to Seller’s Knowledge, threatened against or affecting Seller or the Acquired Companies before any Governmental Authority which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the consummation of the Transaction.

(c) MetLife Approval. MetLife shall have consented to the Transaction, released Parent as guarantor under the Loan Documents with respect to any acts, events or omissions occurring or obligations arising after Closing, approved a replacement guarantor under the Loan Documents with respect to any acts, events or omissions occurring or obligations arising after Closing, and executed and delivered definitive written agreements, in form approved by Buyer, pursuant to which MetLife consents to the Transaction, amends the Loan Documents and replaces

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the guarantor under the Loan Documents with respect to any acts, events or omissions occurring or obligations arising after Closing (such written agreements, the “MetLife Approval”).

Section 6.2. Conditions to Obligation of Seller. The obligation of Seller to consummate the Closing shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions, any one or more of which may be waived in writing by Seller in its sole discretion:

(a) Representations, Warranties and Covenants. The representations and warranties of Buyer contained in this Agreement or any schedule, certificate or other document delivered pursuant hereto that are not qualified by the term “material” and similar terms shall be true and correct in all material respects as of the date hereof and as of the Closing Date (except for such representations and warranties that are made as of a specified date, which shall be true and correct in all material respects as of such specified date) and the representations and warranties of Buyer contained in this Agreement or any schedule, certificate or other document delivered pursuant hereto that are qualified by the term “material” and similar terms shall be true and correct in all respects as of the date hereof and the Closing Date (except for such representations and warranties that are made as of a specified date, which shall be true and correct in all respects as of such specified date). Buyer shall have performed in all material respects all obligations and agreements and complied with all covenants required by this Agreement to be performed or complied with by the Closing. Seller shall have received from Buyer a certificate to the effect set forth in the preceding sentences, signed by a duly authorized officer thereof (the “Buyer’s Officer’s Certificate”).

(b) Secretary’s Certificate. Buyer shall have delivered to Seller a certificate in form and substance reasonably acceptable to Seller, executed by the secretary of Buyer and dated as of the Closing Date (the “Buyer’s Secretary’s Certificate”), certifying (i) the resolutions adopted by Buyer’s members, managers or other governing authority authorizing this Agreement and the Transaction, and (ii) the certificate of formation and redacted limited liability company agreement of Buyer.

(c) Buyer Deliverables. Buyer shall have delivered at the Closing the Buyer Deliverables.

(d) Buyer Performance. Buyer shall have performed in all material respects its obligations under this Agreement that are required to be performed by Buyer at or prior to Closing.

Section 6.3. Conditions to Obligation of Buyer. The obligation of Buyer to consummate the Closing shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions, any of which may be waived in writing by Buyer in its sole discretion:

(a) Representations, Warranties and Covenants. The representations and warranties of Seller contained in this Agreement (including Annex A) or any schedule, certificate or other document delivered pursuant hereto that are not qualified by the term “material” and similar terms shall be true and correct in all material respects as of the date hereof and as of the Closing Date (except for such representations and warranties that are made as of a specified date, which shall be true and correct in all material respects as of such specified date) and the representations and warranties of Seller contained in this Agreement or any schedule, certificate or other document

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delivered pursuant hereto that are qualified by the term “material” and similar terms shall be true and correct in all respects as of the date hereof and the Closing Date (except for such representations and warranties that are made as of a specified date, which shall be true and correct in all respects as of such specified date), subject, in each case, to Seller’s right to update such representations and warranties as described below in this paragraph (a). Seller shall have performed in all material respects all obligations and agreements and complied in all material respects with all covenants required by this Agreement to be performed or complied with by it prior to or at the Closing. Buyer shall have received from Seller a certificate to the effect set forth in the preceding sentences, signed by a duly authorized officer thereof (the “Seller’s Officer’s Certificate”); provided that, notwithstanding the foregoing, Seller shall have the right to update its representations and warranties as of only the Closing Date in the Seller’s Officer’s Certificate to reflect any events that occurred since the Effective Date so long as such events do not constitute a default by Seller of its express covenants under this Agreement and such updating does not result in a material adverse change in the Seller’s representations and warranties; provided, however, for avoidance of doubt, if such updating by Seller discloses a default by Seller of its express covenants under this Agreement or results in a material adverse change in the Seller’s representations and warranties, then subject to any notice and cure rights of Seller set forth in this Agreement, Buyer shall have the right to terminate the Agreement pursuant to Section 8.1(c) or (e) of this Agreement.

(b) Secretary’s Certificate. Seller shall have delivered to Buyer a certificate in form and substance reasonably acceptable to Buyer, executed by the secretary of Seller and dated as of the Closing Date (the “Seller’s Secretary’s Certificate”), certifying (i) the resolutions adopted by Seller’s managing member authorizing this Agreement and the Transaction, and (ii) the certificate of formation and limited liability company agreement of Seller.

(c) Seller Deliverables. Seller shall have delivered at the Closing the Seller Deliverables.

(d) Seller Performance. Seller shall have performed in all material respects its obligations under this Agreement that are required to be performed by Seller at or prior to Closing.

(e) Termination of Property Management Agreements. Seller shall have (i) delivered written termination notices to the property managers under all existing property management agreements affecting the Properties (the “Property Management Agreements”) specifying December 15, 2022 as the effective date of termination of each Property Management Agreement, (ii) provided evidence acceptable to Buyer of such termination notices at or prior to the Closing, and (iii) directed the property manager(s) under the Property Management Agreements to return to the Acquired Companies any and all funds being held on behalf of the Acquired Companies with respect to the Properties and related to the period prior to the Closing and such amounts shall be handled through the Final Settlement Statement.

Section 6.4. Casualty and Condemnation. Risk of loss resulting from any condemnation or eminent domain proceeding that is commenced or has been threatened before the Closing, and risk of loss to each Property due to fire, flood, or any other cause before Closing, will remain with Seller. If after the date hereof and before Closing a Property or any portion thereof is Materially Damaged (as set forth below), or if a Property or any portion thereof is subjected to a threat of condemnation or becomes the subject of any proceedings, judicial, administrative, or otherwise,

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with respect to the taking by eminent domain or condemnation, then Seller will promptly provide written notice to Buyer. Within five (5) days after Buyer learns of the damage or taking, Buyer may exclude the affected Property by delivering to Seller a written notice of such exclusion and the total Purchase Price will be adjusted downward by an amount agreed upon by Buyer and Seller in writing. If the Closing Date is within this five (5) day period, the Closing will be extended to the next Business Day following the end of such period. If no such notice is timely delivered by Buyer, (i) this Agreement will remain in full force and effect, (ii) the purchase of the affected Property, less any interest taken by eminent domain or condemnation, will be effected with no further adjustment, (iii) upon Closing, Seller will assign to Buyer all of the right, title, and interest of Seller in and to any awards that have been or may thereafter be made for such taking, and (iv) Seller will assign to Buyer any insurance proceeds that may thereafter be made for such damage or destruction, giving Buyer a credit at Closing for any deductible under the relevant insurance policies. As used in this Agreement, the term “Materially Damaged” means that a Property has suffered damage which (A) the cost of repair exceeds 20% of the applicable value of such Propety, as estimated by an independent general contractor designated by Seller and approved by Buyer in its reasonable discretion, or (B) is not fully covered by Seller’s insurance policies. If after the date hereof and before Closing, a Property or any portion thereof is damaged by casualty, but not Materially Damaged, or to the extent the Loan Documents do not allow or permit the exclusion of any Materially Damaged Property from the Transaction or Buyer does not elect to exclude such Materially Damaged Property in accordance this Section 6.4, then Seller will promptly provide written notice thereof to Buyer, Seller will assign to Buyer at Closing any insurance proceeds that may thereafter be made for such damage or destruction, giving Buyer a credit at Closing for any deductible under the relevant insurance policies, and the Closing will proceed in accordance with the remaining terms of this Agreement.

Article VII
INDEMNIFICATION

Section 7.1. Survival of Representations and Warranties. The representations and warranties of Seller and Buyer set forth in this Agreement shall in each case survive Closing until the Applicable Limitation Date. With respect to (a) the representations and warranties contained in this Agreement, (b) any claims for indemnity under this Agreement and (c) the covenants and agreements contained in this Agreement that by their terms contemplate compliance or performance at or before the Closing and that this Agreement expressly provides will survive the Closing (each, a “Surviving Covenant”), neither Buyer, nor any other Person on behalf of Buyer, nor Seller, nor any other Person on behalf of Seller, shall be entitled to recover for any Losses pursuant to this Agreement unless written notice of a claim therefor is delivered to the Party against whom indemnity is sought before the Applicable Limitation Date, in which case a claim for indemnity in respect of the breach of such representation, warranty or Surviving Covenant or other claim for indemnity shall survive until such claim has been finally resolved. For purposes of this Article VII, the term “Applicable Limitation Date” shall mean the date (A) that is three hundred sixty-five (365) days after the Closing Date with respect to all claims for indemnity arising from the breach of any representation, warranty or Surviving Covenant pursuant to Section 7.2 or Section 7.3 (including any indemnity arising under Section 7.2(c) or (d)), other than the Fundamental Representations and Tax Representations, (B) that is six (6) years after the Closing Date with respect to all claims for indemnity arising from the breach of any Fundamental

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Representation, and (C) on which the applicable statute of limitations expires with respect to all claims for indemnity arising from the breach of any Tax Representation.

Section 7.2. Indemnification by Seller. Subject to Sections 7.1, 7.4 and 7.5, after the Closing, Seller shall save, defend, indemnify and hold harmless Buyer and its Affiliates (including the Acquired Companies) and their respective Representatives, successors and assigns of each of the foregoing (collectively with Buyer, the “Buyer Indemnified Parties”) from and against any and all reasonable, out of pocket losses, damages, liabilities, deficiencies, claims, interest, awards, judgments, penalties, costs and expenses (including reasonable out-of-pocket attorneys’ fees, costs and other reasonable out-of-pocket expenses incurred in investigating or defending the foregoing) (hereinafter collectively, “Losses”) asserted against, incurred, sustained or suffered by any of the Buyer Indemnified Parties as a result of:

(a) any breach of any representation or warranty made by Seller contained in Article III of this Agreement or in Annex A or in any document delivered by Seller at the Closing;

(b) any breach of any Surviving Covenant of Seller contained in this Agreement, but only to the extent Buyer did not have Knowledge of such breach at or prior to Closing and Buyer did not waive such breach in accordance with the terms and provisions of this Agreement; and

(c) any Private Action or Action brought by a Governmental Authority with respect to either of the Acquired Companies or the Properties, but only to the extent attributable or relating to any time period prior to the Closing and only to the extent Buyer did not have Knowledge of such Private Action or Action at or prior to Closing.

Any claim pursuant to the indemnity set forth in this Section 7.2 must be made prior to the Applicable Limitation Date, as provided in Sections 7.1 and 7.5(a).

Section 7.3. Indemnification by Buyer. Subject to Sections 7.1, 7.4 and 7.5, after the Closing, Buyer shall save, defend, indemnify and hold harmless Seller, its Affiliates, its direct and indirect owners and their respective Representatives, successors and assigns of each of the foregoing (collectively with Seller, the “Seller Indemnified Parties”) from and against any and all Losses asserted against, incurred, sustained or suffered by any of the Seller Indemnified Parties as a result of:

(a) any breach of any representation, warranty or Surviving Covenant made by Buyer contained in this Agreement or any document delivered by the Buyer at the Closing;

(b) any Private Action or Action brought by a Governmental Authority with respect to either of the Acquired Companies or the Properties, but only to the extent attributable or relating to any time period from and after the Closing; and

(c) any contractual liabilities or obligations of the Acquired Companies to the extent attributable to the period after the Closing or any other contractual liabilities or obligations of the Acquired Companies to the extent (i) Buyer has received a credit against the Purchase Price therefor, or (ii) Buyer has created or expressly assumed such contractual liabilities or obligations under this Agreement (including without limitation any other obligations for which the Acquired Companies remains specifically liable under this Agreement to pay or perform after the Closing).

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Any claim pursuant to the indemnity set forth in this Section 7.3 must be made prior to the Applicable Limitation Date, as provided in Sections 7.1 and 7.5(a).

Section 7.4. Procedures.

(a) In order for a Seller Indemnified Party or Buyer Indemnified Party (an “Indemnified Party”) to be entitled to any indemnification provided for under this Agreement as a result of a Loss or a claim or demand made by any person against the Indemnified Party including any Private Action or Action by a Governmental Authority (a “Third Party Claim”), such Indemnified Party shall deliver written notice thereof to the Party against whom indemnity is or may be sought (the “Indemnifying Party”) with reasonable promptness after the Indemnified Party obtains knowledge of the Loss or receives written notice of a Third Party Claim and shall provide the Indemnifying Party with such information in the Indemnified Party’s possession with respect thereto as the Indemnifying Party may reasonably request. The failure to provide such notice or information, however, shall not release the Indemnifying Party from any of its obligations under this Article VII except to the extent that the Indemnifying Party is materially prejudiced by such failure and shall not relieve the Indemnifying Party from any other obligation or liability that it may have to the Indemnified Party pursuant to this Article VII or otherwise.

(b) If the Indemnifying Party acknowledges in writing its obligation to indemnify the Indemnified Party against the entirety of any Losses (subject to the limitations and any rights to recovery or offset pursuant to Section 7.5) that may result from a Third Party Claim pursuant to the terms of this Agreement, the Indemnifying Party shall have the right, upon written notice to the Indemnified Party within fifteen (15) days of receipt of notice from the Indemnified Party of the commencement of such Third Party Claim, to assume the defense thereof at the expense of the Indemnifying Party with counsel selected by the Indemnifying Party and reasonably satisfactory to the Indemnified Party; provided, however, that the Indemnifying Party shall not be entitled to assume the defense of such Third Party Claim if (i) such Third Party Claim seeks an order, injunction or other equitable relief or relief for other than monetary damages against the Indemnified Party, (ii) such Third Party Claim involves any criminal proceeding, action, indictment, allegation or investigation or (iii) outside counsel to the Indemnified Party shall reasonably conclude that there is a conflict of interest between the Indemnified Party and the Indemnifying Party in the conduct of the defense of such Third Party Claim. If the Indemnifying Party assumes the defense of such Third Party Claim, the Indemnified Party shall have the right to employ separate counsel and to participate in the defense thereof, but the fees, expenses and other costs of such counsel shall be at the expense of the Indemnified Party. If the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnified Party shall, at the Indemnifying Party’s expense, cooperate with the Indemnifying Party in such defense and make available to the Indemnifying Party all witnesses, pertinent records, materials and information in the Indemnified Party’s possession or under the Indemnified Party’s control relating thereto as is reasonably required by the Indemnifying Party. If the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnified Party shall not admit any liability with respect to, or settle, compromise or discharge, or offer to compromise, settle or discharge, such Third Party Claim without the Indemnifying Party’s prior written consent unless the Indemnifying Party withdraws from or fails to diligently proceed with the defense of such Third Party Claim or unless a final judgment from which no appeal may be taken by or on behalf of the Indemnifying Party is entered against the Indemnified Party for such Third Party Claim. If the Indemnifying Party assumes the

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defense of any Third Party Claim, the Indemnifying Party shall not settle, compromise or discharge, or offer to compromise, settle or discharge, such Third Party Claim without the Indemnified Party’s prior written consent unless such settlement expressly and unconditionally releases the Indemnified Party from all liabilities with respect to such Third Party Claim. If the Indemnified Party assumes the defense of any such claims or proceeding pursuant to this Section 7.4 and proposes to settle such claims or proceeding prior to a final judgment thereon or to forgo any appeal with respect thereto, then the Indemnified Party shall give the Indemnifying Party prompt written notice thereof and the Indemnifying Party shall have the right to participate in the settlement or assume or reassume the defense of such claims or proceeding.

(c) In the event any Indemnified Party should have a claim against any Indemnifying Party hereunder that does not involve a Third Party Claim being asserted against or sought to be collected from such Indemnified Party, the Indemnified Party shall deliver notice of such claim with reasonable promptness to the Indemnifying Party. The failure to provide such notice, however, shall not release the Indemnifying Party from any of its obligations under this Article VII except to the extent that the Indemnifying Party is materially prejudiced by such failure and shall not relieve the Indemnifying Party from any other obligation or liability that it may have to the Indemnified Party pursuant to this Article VII or otherwise.

Section 7.5. Limits on Indemnification.

(a) No claim may be asserted nor may any Action be commenced against Seller for breach of any representation, warranty or Surviving Covenant contained herein or any schedule, certificate or other document delivered pursuant hereto or thereto or in connection with the Transaction, unless written notice of such claim or action is received by Seller, describing in reasonable detail the facts and circumstances with respect to the subject matter of such claim or Action on or prior to the Applicable Limitation Date with respect to such representation, warranty or Surviving Covenant, irrespective of whether the subject matter of such claim or Action shall have occurred before or after such date.

(b) Notwithstanding anything to the contrary contained in this Agreement, the obligations of Seller and Buyer under Sections 7.2 and 7.3 of this Agreement are subject to the following limitations:

(i) The maximum aggregate amount of indemnifiable Losses which may be recovered from Seller by all Buyer Indemnified Parties (a) pursuant to claims for indemnification under Section 7.2(a) (other than claims for indemnification resulting from a breach by Seller of any of the Fundamental Representations), (b) and (c) of this Agreement shall be an aggregate amount not exceeding two percent (2%) of the Base Purchase Price (the “Non-Fundamental Breach Cap”) and (b) pursuant to claims for indemnification resulting from the breach by Seller of any of the Fundamental Representations shall be an aggregate amount not exceeding the Base Purchase Price (the “Fundamental Breach Cap”, and together with the Non-Fundamental Breach Cap, collectively, the “Cap”).

(ii) Seller shall not be liable for any claim for indemnification pursuant to Section 7.2 of this Agreement unless and until the aggregate amount of indemnifiable Losses which may be recovered from Seller equals or exceeds $50,000 (the “Basket”), in which case Seller shall be

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liable for all Losses including the aggregate Basket. For avoidance of doubt, the Basket shall apply to the Seller’s indemnity obligations under all of Section 7.2, including without limitation Section 7.2(c) and (d) of this Agreement.

(iii) The foregoing provisions of paragraphs (b)(i) and (ii) shall not apply to any proration and other adjustments to the Purchase Price effected pursuant to Sections 1.4 and 1.5 of this Agreement or to Seller’s obligations arising under Section 10.1 or 10.17.

(iv) No Party hereto shall have any liability under any provision of this Agreement or otherwise for any punitive, incidental, consequential, special, indirect or exemplary damages.

(v) After the Closing, no breach by Seller of any representation or warranty, or any covenant or obligation required to be performed by Seller prior to Closing (including, without limitation, any Surviving Covenant) in this Agreement or any schedule, certificate or other document delivered pursuant hereto or thereto or in connection with the Transaction shall be deemed to be a breach of this Agreement or any schedule, certificate or other document delivered pursuant hereto or thereto or in connection with the Transaction for any purpose hereunder, and no Buyer Indemnified Party shall have any claim or recourse against Seller or its directors, officers, employees, Affiliates, controlling persons or Representatives with respect to such breach, under this Article VII or otherwise, if Buyer had, at the Closing, Knowledge of such breach or if such breach was disclosed in any Due Diligence Materials actually made available to Buyer prior to Closing.

(c) For all purposes of this Article VII, “Losses” shall be net (without duplication of the following amounts to the extent otherwise already included in the definition of Losses) of any insurance or other recoveries received by the Indemnified Party or its Affiliates in connection with the facts giving rise to the right of indemnification, net of reasonable costs of realizing such insurance proceeds.

(d) Buyer and Seller shall cooperate with each other with respect to resolving any claim, liability or Loss subject to indemnification hereunder, including by making commercially reasonable efforts to mitigate or resolve any such claim, liability or Loss. In the event that Buyer or Seller shall fail to make such commercially reasonable efforts to mitigate or resolve any such claim, liability or Loss, then notwithstanding anything else to the contrary contained herein, the other Party shall not be required to indemnify any person for the portion of any claim, liability or Loss that could reasonably be expected to have been avoided if Buyer or Seller, as the case may be, had made such efforts. Notwithstanding the foregoing, Sections 3.2 and 3.3 of Annex A set forth the Parties’ respective obligations to cooperate with respect to Tax audits, examinations and proceedings.

(e) Without limiting the generality of the foregoing, Buyer and Seller shall, and shall cause their respective subsidiaries to, use commercially reasonable efforts to seek full recovery under all insurance policies covering any Loss to the same extent as they would if such Loss were not subject to indemnification hereunder. If an Indemnified Party receives such insurance or indemnity payments prior to being indemnified, held harmless and reimbursed with respect to such Losses, the Losses shall be reduced (but not below zero) by the amount of such insurance proceeds or indemnity payments to the extent related to such Losses, net of attorney’s fees and other

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expenses incurred in connection with such recovery. If an Indemnified Party receives such insurance proceeds or indemnity payments after being indemnified and held harmless with respect to such Losses, the Indemnified Party shall pay promptly to the Indemnifying Party (up to a maximum of the total amount paid by the Indemnifying Party to the Indemnified Party in respect of such Losses) the amount of such insurance proceeds or indemnity payments to the extent related to such Losses, net of attorney’s fees and other expenses incurred in connection with such recovery. If any Indemnified Party receives payment from an Indemnifying Party on account of a claim for Losses that the Indemnifying Party believes in good faith is covered by an insurance policy or an indemnification obligation of another Person (other than an Affiliate of such Indemnified Party) and the Indemnifying Party believes in good faith that the Indemnified Party is not using commercially reasonable efforts to seek recovery on such insurance policy or indemnification obligation, the Indemnifying Party may elect to notify the Indemnified Party of its belief and that, if such failure to use commercially reasonable efforts continues, it intends to request the Indemnified Party to assign its rights under such insurance policy or indemnification obligation to the Indemnifying Party. After thirty (30) days after such notice has been received by the Indemnified Party, if the Indemnified Party has continued to fail to use commercially reasonable efforts to seek such recovery, the Indemnifying Party may send a written request to the Indemnified Party for such assignment of rights, and, upon receipt of such request, the Indemnified Party shall (i) promptly assign, to the extent assignable, its rights under such insurance policy or indemnification obligation with respect to such claim for Losses to the Indemnifying Party (to the extent of such payment by the Indemnifying Party) and (ii) be relieved of any further obligation to pursue collection of such insurance or indemnification (except that, if requested to do so by the Indemnifying Party, the Indemnified Party shall reasonably cooperate with the Indemnifying Party, at the Indemnifying Party’s sole expense, to collect any such insurance or indemnification).

Section 7.6. Exclusive Remedy; Survival. After the Closing, this Article VII and Section 10.17 will provide the sole and exclusive remedies of any Party for any breach by the other Party of any representation, warranty or Surviving Covenant arising under this Agreement or any other document delivered pursuant hereto. All of the provisions of this Article VII shall survive the Closing, subject in each case to the Applicable Limitation Date.

Section 7.7. Tax Treatment of Indemnity Payments. Any payment pursuant to this Article VII shall be treated as an adjustment to the Purchase Price for Tax purposes unless otherwise required by Applicable Law.

Section 7.8. Parent Guaranty. By execution of the Joinder by Guarantor attached hereto as Exhibit “G”, Guarantor acknowledges and agrees that it receives a material direct or indirect benefit from the transactions contemplated by this Agreement and, accordingly, Guarantor hereby unconditionally and irrevocably guarantees Seller’s indemnification obligations under this Article VII. The provisions of this Section 7.8 shall survive the termination of this Agreement and the Closing.

Section 7.9. Specific Post-Closing Indemnification Matters. Notwithstanding anything to the contrary contained herein, and in addition to any and all other indemnification obligations of Seller set forth in this Agreement,Seller shall save, defend, indemnify and hold harmless the Buyer Indemnified Parties from and against any and all Losses asserted against, incurred, sustained or suffered by any of the Buyer Indemnified Parties as a result of, or in connection with, the matters

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disclosed on Schedule A2.1 (collectively, the “Post-Closing Matters”). Seller’s indemnification obligations set forth in this Section 7.9 shall not be subject to Section 7.5(b)(v) of this Agreement and shall not be waived or otherwise affected by Seller’s disclosure of the Post-Closing Matters on Schedule A2.1. The provisions of this Section 7.9 shall survive the Closing.

Article VIII
Termination

Section 8.1. Termination. This Agreement may be terminated at any time prior to the Closing:

(a) by mutual written consent of Buyer and Seller at any time;

(b) by Seller, in the event of a Buyer Default. A “Buyer Default” shall mean the occurrence of any one or more of the following events: (i) Buyer shall fail to pay any sum of money under this Agreement when due and payable and such failure shall continue for five (5) business days after Sellers gives Buyer written notice of such failure (but in no event shall such cure period extend beyond the Closing Date), except that if such failure relates to the payment of the Deposit or amounts to be paid at the Closing, there shall be no grace or cure period; (ii) Buyer shall fail to perform any of its other covenants and agreements contained in this Agreement when required to be performed hereunder and such failure shall continue for ten (10) business days after Sellers gives Buyer written notice of such failure (iii) on the scheduled Closing Date, Buyer fails to deliver any of the documents and instruments required by the terms of Section 1.3(b); or (iv) any representation or warranty of Buyer contained in this Agreement shall prove to have been materially false or incorrect when made;

(c) by Buyer, in the event of a Seller Default. A “Seller Default” shall mean the occurrence of any one or more of the following events: (i) Sellers shall fail to perform any of its material covenants and agreements contained in this Agreement when required to be performed hereunder and such failure shall continue for ten (10) business days after Buyer gives Sellers written notice of such failure, (ii) on the scheduled Closing Date, Sellers fail to deliver any of the documents and instruments required by the terms of Section 1.3(c) and (d); or (iii) any representations and warranties of Seller are, in the aggregate, untrue, inaccurate or incorrect in any material respect, and any such circumstance described in this clause (c) continues for ten (10) business days after written notice (which written notice shall detail such default or breach);

(d) by Seller, if any of the conditions set forth in Section 6.1 or Section 6.2 shall not have been fulfilled (or waived, in the sole discretion of Seller) and the Closing has not occurred prior to 11:59 p.m. (New York, New York time) on or before December 8, 2022; provided, however, that the right to terminate this Agreement pursuant to this Section 8.1(d) shall not be available if a Seller Default shall have been the cause of the failure of such condition to be satisfied on or prior to such date; provided however, Seller shall not be obligated to deliver the Seller Deliverables if Seller has notified Buyer that Buyer has failed to fulfill its obligations;

(e) by Buyer, if any of the conditions set forth in Section 6.1 or Section 6.3 shall not have been fulfilled (or waived, in the sole discretion of Buyer or as otherwise contemplated by this Agreement) and the Closing has not occurred prior to 11:59 p.m. (New York, New York time) on

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December 8, 2022; provided, however, that the right to terminate this Agreement pursuant to this Section 8.1(e) shall not be available if a Buyer Default shall have been the cause of the failure of such condition to be satisfied on or prior to such date, provided however, Buyer shall not be obligated to deliver the Buyer Deliverables if Buyer has notified Seller that Seller has failed to fulfill its obligations; or

(f) by either Seller or Buyer in the event that any Governmental Authority shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and nonappealable.

The Party seeking to terminate this Agreement pursuant to this Section 8.1 (other than by mutual consent under Section 8.1(a)) shall give prompt written notice of such termination to the other Party.

Section 8.2. Effect of Termination.

(a) In the event of termination of this Agreement as provided in Section 8.1, this Agreement shall forthwith become void and there shall be no liability on the part of either Party except, (i) Section 5.5 (relating to confidentiality), Section 10.1 (relating to fees and expenses), Section 10.4 (relating to notices), Section 10.7 (relating to third-party beneficiaries), Section 10.8 (relating to governing law), Section 10.9 (relating to assignments), Section 10.17 (relating to costs and fees of enforcement of this Agreement), Section 10.19 (relating to recording and lis pendens), Section 10.19 (relating to non-liability) and this Section 8.2 shall survive and continue to be in full force and effect, and (ii) that, subject to Section 8.2(b) below, nothing herein shall relieve any party from liability for any breach of this Agreement that occurred prior to such termination. If this Agreement is terminated as provided herein, each Party will redeliver all documents and other material of the other Party relating to the Properties, the Acquired Companies, or the Transaction contemplated hereby, whether obtained before or after the execution hereof, to the Party furnishing the same (or destroy such materials, in which case such destroying Party shall provide a certification to the other Party as to such destruction).

(b) In the event of termination of this Agreement as provided for in Section 8.1(b), Seller shall be entitled to receive the Earnest Money and any interest accrued thereon, and Buyer shall cause the Escrow Agent to pay the Earnest Money to Seller as Seller’s sole and exclusive remedy. In the event of termination of this Agreement as provided in Section 8.1(a), Section 8.1(c), Section 8.1(d), Section 8.1(e) and Section 8.1(f), Seller shall cause the Escrow Agent to refund the Earnest Money and any interest accrued thereon immediately to Buyer. The Parties recognize that it will be extremely difficult and impractical, if not impossible, to ascertain with any degree of certainty the amount of damages that would be suffered by Seller in the event of Buyer’s breach of its representations, warranties and covenants under this Agreement, and the Parties agree that a reasonable estimate of the damages of Seller in such event is the amount of the Earnest Money and any interest accrued thereon, which shall be disbursed to Seller by the Escrow Agent as liquidated damages. Seller and Buyer also have the rights of specific performance provided in Section 10.11. Additionally, if Buyer elects to terminate this Agreement as provided for in Section 8.1(c), then Seller shall reimburse Buyer for Buyer’s actual, documented out of pocket cash expenditures incurred directly in connection with this Agreement and the transaction

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contemplated hereby, including but not limited to negotiating this Agreement and conducting due diligence activities related to the Interests and the Properties, not to exceed $150,000. Notwithstanding the foregoing, if a Deliberate Breach occurs, then Seller shall reimburse Buyer for all of Buyer’s actual, documents out-of-pocket costs and expenses incurred directly in connection with this Agreement not to exceed $150,000, and the transactions contemplated hereby, and Seller shall pay to Buyer liquidated damages in the amount of $3,000,000, and neither party shall have any further right or obligation hereunder other than any obligations that explicitly survive Closing hereunder. Notwithstanding anything to the contrary in this Agreement, prior to the consummation of the Closing, Buyer acknowledges and agrees that the remedies provided in Sections 8.1, 8.2, 10.11 and 10.17 shall be the sole and exclusive remedies of Buyer for any breach, default, violation or failure to perform by Seller under this Agreement that occurs prior to Closing.

Article IX
DEFINITIONS

Section 9.1. Definition of Terms in Annex A. All capitalized terms defined in Annex A to this Agreement shall have the meanings set forth in Annex A.

Section 9.2. Certain Defined Terms. For purposes of this Agreement:

“Action” means any claim, action, suit, inquiry, proceeding, audit or investigation by or before any Governmental Authority, or any other arbitration, mediation or similar proceeding.

“Affiliate” means with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.

“Applicable Law” means, with respect to any Person, any domestic or foreign federal, state, provincial or local statute, law, ordinance, policy, rule, administrative interpretation, regulation, code, executive or other order, injunction, directive, judgment, decree or other requirement of any Governmental Authority applicable to such Person or any of its properties.

“Business Day” means any day that is not a Saturday, a Sunday or other day on which commercial banks are required or authorized by Applicable Law to be closed in New York, New York.

“Confidential Information” means, as to any Party hereto (the “Disclosing Party”), all information concerning the Properties or the Disclosing Party and its Affiliates that is or has been furnished to the other Party hereto (the “Recipient”), together with analyses, compilations, studies or other documents prepared by the Recipient or any of its Representatives that contain or otherwise reflect such information. The term “Confidential Information” does not include information that (a) was or becomes generally available to the public other than as a result of a disclosure by the Recipient or its Representatives in violation of this Agreement, (b) was or becomes available to the Recipient on a non-confidential basis from a source other than the Disclosing Party or its Representatives, provided, however, that such source was not known by the Recipient to be bound by any agreement with the Disclosing Party or its Affiliates to keep such information confidential, or otherwise prohibited from transmitting the information to the Recipient by a contractual, legal or fiduciary obligation, or (c) is independently developed by the

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Recipient or on the Recipient’s behalf without violating any of the Recipient’s obligations hereunder. The existence and terms of this Agreement shall also be deemed to be Confidential Information. In addition, after the Closing, information that relates specifically to the Acquired Companies and their respective assets shall only be required to be treated as Confidential Information hereunder by Seller and its Representatives. Notwithstanding the foregoing, Buyer shall not be obligated to keep confidential any Confidential Information with respect to the Properties subsequent to the Closing.

“Control” including the terms “controlled by” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, as trustee or executor, as general partner or managing member, by contract or otherwise, including the ownership, directly or indirectly, of securities having the power to elect a majority of the board of directors or similar body governing the affairs of such Person.

“Deliberate Breach” means (and shall be deemed to have occurred) if on or before the earlier to occur of (x) the Closing and (y) the termination of this Agreement, Seller, either of the Acquired Companies or any affiliate of the foregoing shall knowingly and intentionally take (or enter into an agreement with obligates them to take) any action that constitutes a breach of this Agreement that would give rise to Buyer’s right to terminate this Agreement under Section 8.1(c) hereof, including, without limitation, if Seller shall intentionally convey or sell, or enter int a contract to sell, all or a portion of the Interests or all or a portion of the Properties to a person other than Buyer or an affiliate thereof.

“Due Diligence Materials” means, collectively, any and all documents, agreements, contracts, certificates, memoranda, notes, analyses, reports, compilations and any other written or oral information and due diligence materials, as well as any electronically transmitted data (including electronic mail), in each case relating to the Properties, the Seller, the Acquired Companies and/or the Interests and previously furnished to, obtained by or otherwise in the possession or control of Buyer or any direct or indirect officer, director, employee, agent, representative, affiliate, advisor, consultant or attorney of Buyer.

“Environmental Laws” means all Applicable Laws now or hereafter in effect pertaining to Hazardous Substances, workplace or public health and safety, or protection of the environment, including but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. § 9601 et seq.), the Hazardous Substances Transportation Act (49 U.S.C. § 1802 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), as amended by the Hazardous and Solid Wastes Amendments of 1984, the Water Pollution Control Act (33 U.S.C. § 1251 et seq.), the Safe Drinking Water Act (42 U.S.C. § 300f et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Solid Waste Disposal Act (42 U.S.C. § 6901 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the Emergency Planning and Community Right-to-Know Act of 1986 (42 U.S.C. § 11001 et seq.), the Radon Gas and Indoor Air Quality Research Act of 1986 (42 U.S.C. § 7401 et seq.), the National Environmental Policy Act (42 U.S.C. § 4321 et seq.), the Superfund Amendment Reauthorization Act of 1986 (42 U.S.C. § 9601 et seq.), and the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.).

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“Fundamental Representations” means the representations and warranties of (a) Seller contained in Sections 3.1, 3.2, 3.4, 3.5, 3.6 and 3.10, and (b) Buyer contained in Sections 4.1,4.2 and 4.4.

“GAAP” means generally accepted accounting principles in the United States of America, consistently applied.

“Governmental Authority” means any United States or non-United States federal, national, supranational, state, territorial, provincial, local or similar government, governmental authority, regulatory or administrative authority, agency, commission or other instrumentality, court, tribunal or judicial body (including any grand jury or its equivalent).

“Hazardous Substance” and “Hazardous Substances” means, as the case may be, any waste, substance, pollutant, contaminant or material, including, without limitation, any substances or materials defined as or included within the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” or “toxic substances” under any Environmental Laws, and including, but not limited to, asbestos, mold, methane, lead, polychlorinated biphenyls, petroleum and petroleum based products.

“Indebtedness” means at a particular time, without duplication, (a) any obligations under any indebtedness for borrowed money (including all principal, interest premiums, penalties, fees, expenses and brokerage costs), (b) any indebtedness evidenced by any note, bond, debenture or other debt security, (c) any indebtedness pursuant to a guarantee of indebtedness for borrowed money, and (d) any indebtedness secured by a lien on any of the Properties or the Acquired Companies’ assets.

“Knowledge” means (a) with respect to Seller, the actual conscious awareness, without investigation, and not any implied, imputed or constructive knowledge, of Richard Konzmann and Brent Hodges as of the date of this Agreement (or, with respect to a certificate delivered pursuant to this Agreement, as of the date of delivery of such certificate) or (b) with respect to Buyer, the actual conscious awareness, without investigation and not any implied, imputed or constructive knowledge, of Joshua Hostetter as of the date of this Agreement (or, with respect to a certificate delivered pursuant to this Agreement, as of the date of delivery of such certificate). None of the foregoing persons listed in this definition will have any personal liability in any manner whatsoever hereunder or otherwise related to the transactions contemplated hereby.

“Loan Agreement” means that certain Loan Agreement, dated as of September 28, 2021, by and between Property Owner and MetLife.

“Loan Documents” means the Loan Agreement, the Note, the Equity Owner Guaranty, the Environmental Indemnity, the Borrower Security Agreement, the Equity Owner Security Agreement, the Rent Deposit Account Control Agreement, the Cash Management Agreement and each Assignment of Management Agreement, each as defined in the Loan Agreement, and all other agreements, instruments and documents delivered pursuant thereto or in connection therewith.

“MetLife” means Metropolitan Life Insurance Company.

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“Organizational Chart” means that certain true, correct and complete organizational chart of Seller and the Acquired Companies, dated as of the Effective Date and attached hereto as Exhibit F.

“Parent” means Arlington Asset Investment Corp.

“Party” or “Parties” shall mean Buyer and/or Seller, as the context requires.

“Permitted Exceptions” shall mean (a) all applicable building and zoning ordinances; (b) the rights of the tenants, as tenants only, under the Leases; (c) the lien of taxes and assessments not yet due and payable or that are being contested in good faith and for which adequate reserves have been established in accordance with GAAP; (d) all liens, claims, encumbrances, restrictions, covenants, conditions, matters or exceptions to title that are set forth in the Title Policies; and (e) all matters which would be disclosed by a physical inspection and/or survey of the Properties.

“Person” means an individual, corporation, partnership, limited liability company, limited liability partnership, syndicate, person, trust, association, organization or other entity, including any Governmental Authority, and including any successor, by merger or otherwise, of any of the foregoing.

“Private Action” means any Action instituted by a private third-party (i.e., any party that is not an Affiliate of Buyer, other than a Governmental Authority) against either of the Acquired Companies or pertaining to the Properties.

“Properties” means the 249 single family rental homes described in Exhibit A-1 attached hereto and the 2 single family rental homes described in Exhibit A-2 (together with the homes set forth in Exhibit A-1, the “Homes”) for which Property Owner has entered into agreements to purchase and made earnest money deposits, together with (i) the real property on which the Homes are located (the “Real Property”), (ii) any and all other improvements, structures, fixtures, and building situated on the Real Property (the “Improvements”), (iii) any and all rights, titles, powers, privileges, easements, licenses, rights-of-way and interests appurtenant to the Homes, the Real Property and the Improvements, (iv) all rights, titles, powers, privileges, licenses, easements, rights-of-way and interests, if any, of Seller or the Acquired Companies, either at law or in equity, in possession or in expectancy, in and to any real estate lying in the streets, highways, roads, alleys, rights-of-way or sidewalks, open or proposed; in front of, above, over, under, through or adjoining the Real Property and in and to any strips or gores of real estate adjoining the Real Property, (v) all rights, titles, powers, privileges, interests, licenses, easements and rights-of-way appurtenant or incident to any of the foregoing, and (vi) any and all right, title and interest in and to all fixtures, appliances and other tangible personal property of whatever kind or character owned by Seller and/or the Acquired Companies and attached to, installed on or in or otherwise used in connection with the Homes, the Real Property or the Improvements, to the extent owned by Seller and either located upon or related to the Real Property, but expressly excluding any of the foregoing owned or leased by any tenant and any personal property owned by a third party and leased to Seller and/or the Acquired Companies.

“Representatives” shall mean, as to a Party, such Party’s Affiliates, partners, managers, members, directors, officers, employees, agents or advisers (including attorneys, accountants,

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consultants, bankers, financial advisers, potential equity and debt financing sources and operating partners, and any representatives of such Party’s advisers). For the avoidance of doubt, the Representatives of Seller shall not include any Affiliates of Buyer.

“Tax Representations” means the representations and warranties of Seller contained in Section 2.1 of Annex A of this Agreement.

“Tax Return” means any return, declaration, report, claim for refund, or information return or statement related to Taxes or any other document filed with or submitted or required to be filed with or submitted with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

“Title Policies” shall mean the owner title insurance policies previously issued for each Property listing an Acquired Company as the insured party.

“Transaction” means the transaction contemplated by this Agreement.

“U.S. Dollars” and “$”mean the lawful currency of the United States of America.

All other capitalized terms used in this Agreement shall have the definitions provided where such terms are otherwise defined in this Agreement. The defined terms set forth in this Article IX shall survive the Closing to the extent any such defined terms are used or incorporated into any other provisions of this Agreement that expressly survive the Closing.

Article X
GENERAL PROVISIONS

Section 10.1. Fees and Expenses. Except as otherwise provided herein, all fees and expenses incurred in connection with or related to this Agreement and the Transaction shall be paid by the Party incurring such fees or expenses. All sales, transfer, use, stamp, registration and other Taxes, and all conveyance fees, recording charges and other fees and charges (including penalties and interest), incurred in connection with the consummation of the transactions contemplated by this Agreement (“Transfer Taxes”) shall be borne and paid by Buyer or by Seller when due in accordance with local custom where the Properties are located, and any Tax Returns required with respect to such Transfer Taxes shall be prepared and filed by the Party required to do so under Applicable Law. Seller shall pay one-half of any escrow fees and costs charged by Escrow Agent. Buyer shall pay any one-half of any escrow fees and costs charged by Escrow Agent. Each Party shall pay its own attorneys’ fees.

Section 10.2. Amendment and Modification. This Agreement may not be amended, modified or supplemented in any manner, whether by course of conduct or otherwise, except by an instrument in writing signed on behalf of each Party.

Section 10.3. Waiver; Survival. Except to the extent specifically set forth herein, no failure or delay of either Party in exercising any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, or any course of conduct, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Parties hereunder are cumulative and are not exclusive of any rights or remedies

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which they would otherwise have hereunder. Any agreement on the part of either Party to any such waiver shall be valid only if set forth in a written instrument executed and delivered by a duly authorized officer on behalf of such Party.

Section 10.4. Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally or by e‑mail, upon the entrance of such e-mail into the information processing system designated by the recipient’s electronic mail below, (b) on the first Business Day following the date of dispatch if delivered by a recognized next-day courier service or (c) on the earlier of confirmed receipt or the fifth (5th) Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. Any formal notice of a breach, default or termination of this Agreement by either Party that is sent via e‑mail in accordance with clause (a) above shall be followed by a copy of such notice being promptly sent by any nationally recognized overnight delivery service with proof of delivery unless the recipient of such notice acknowledges or confirms the receipt of the notice sent via e‑mail. All notices hereunder shall be delivered to the addresses set forth below, or pursuant to such other instructions as may be designated in writing by the Party to receive such notice:

if to Seller, to:

McLean SFR Holdings, LLC

c/o Arlington Asset Investment Corp.

6862 Elm Street, Suite 320

McLean, VA 22101

Attention: Richard Konzmann

x

with a copy (which shall not constitute notice) to:

Hunton Andrews Kurth LLP

951 E. Byrd Street

Richmond, VA 23219
Attention: Michael P. Goldman and Andrew J. Blanchard

if to Buyer, to:

AVHS SFR II LLC

c/o HomeSource

8615 Cliff Cameron Drive, Ste 200

Charlotte, NC 28269

Attention: Adam Levinson

and

Acre Valley Real Estate Capital LLC

945 W. Washington Blvd, Suite 415

Chicago, Illinois 60607

Attention Andrew Hananel, Joshua Hostetter, Eric Gordon

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with a copy (which shall not constitute notice) to:

Greenberg Traurig LLP

77 West Wacker Drive, Suite 3100

Chicago, IL 60601

Attention: Michael T. Fishman

Section 10.5. Interpretation. When a reference is made in this Agreement to a Section or Article such reference shall be to a Section or Article of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for convenience of reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. The word “including” and words of similar import when used in this Agreement will mean “including, without limitation”, unless otherwise specified.

Section 10.6. Entire Agreement. Annex A and the exhibits and schedules attached to this Agreement are part of and incorporated into this Agreement. This Agreement and the other agreements and instruments delivered in connection herewith constitute the entire agreement, and supersede all prior written agreements, arrangements, communications and understandings and all prior and contemporaneous oral agreements, arrangements, communications and understandings among the Parties with respect to the subject matter of this Agreement. Notwithstanding any oral agreement of the Parties or their Representatives to the contrary, no Party to this Agreement shall be under any legal obligation to enter into this Agreement or complete the Transaction unless and until this Agreement shall have been signed by each of the Parties. The Parties hereto agree that the submission of a draft of this Agreement by one party to another is not intended by either party to be an offer to enter into a legally binding contract with respect to the purchase and sale of the Interests.

Section 10.7. No Third-Party Beneficiaries. This Agreement shall be binding upon and inure solely to the benefit only of each Party and its respective successors and assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature under or by reason of this Agreement, except as provided in Article VII.

Section 10.8. Governing Law.

(a) This Agreement and all disputes or controversies arising out of or relating to this Agreement or any schedule, certificate or other document delivered pursuant hereto or in connection with the Transaction shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of New York.

(b) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING PURSUANT TO THIS AGREEMENT.

Section 10.9. Assignment; Successors. Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned or delegated, in whole or in part, by

38

operation of law or otherwise, by either Party without the prior written consent of the other Party, and any such assignment without such prior written consent shall be null and void; provided, however, that (i) Seller may assign its right to receive the Purchase Price at Closing, to one or more Affiliates of Seller without the consent of Buyer, and (ii) Buyer may assign its rights under this Agreement to an Affiliate of Buyer or Acre Valley Real Estate Capital LLC; provided that, in the event of such an assignment or transfer, the transferee shall assume in writing all of Buyer’s obligations hereunder, and no assignment shall limit the assignor’s obligations hereunder. In the event Buyer elects to assign its rights under this Agreement to an Affiliate of Buyer, or if Seller consents to an assignment by Buyer to a non-Affiliate, Buyer and its assignee shall execute and deliver an Assignment of Interest Purchase Agreement in the form attached hereto as Exhibit B. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and assigns.

Section 10.10. Survival. Except for those provisions in this Agreement that are expressly stated to survive the Closing, no representations, warranties, covenants or agreements contained herein will survive the Closing.

Section 10.11. Enforcement. The Parties agree that irreparable damage would occur in the event that any provision of this Agreement is not performed in accordance with its specific terms or is otherwise breached. Accordingly, each of the Parties shall be entitled to specific performance of the terms hereof, including an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement. Each of the Parties further hereby waives (a) any defense in any action for specific performance that a remedy at law would be adequate and (b) any requirement under any law to post security as a prerequisite to obtaining equitable relief. Notwithstanding the foregoing provisions of this Section 10.11, the remedy of specific performance for Seller shall not apply to Buyer’s obligation to close the Transaction.

Section 10.12. Severability. Whenever possible, each provision or portion of any provision of this Agreement shall be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any Applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or portion of any provision in such jurisdiction, and this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.

Section 10.13. Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party.

Section 10.14. Facsimile Signature. This Agreement may be executed through delivery of a photocopy or .pdf copy of an executed signature page sent via telecopier or electronic mail and such facsimile or .pdf signature page shall constitute an original for all purposes.

39

Section 10.15. Time of Essence. Time is of the essence with regard to all dates and time periods for the performance of each of Buyer’s and Seller’s obligations set forth or referred to in this Agreement. If the last day of any time period stated herein shall fall on a day other than a Business Day, then the duration of such time period shall be extended so that it shall end on the next succeeding Business Day.

Section 10.16. Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement.

Section 10.17. Costs and Fees of Enforcement. If any action shall be instituted between Seller and Buyer in connection with this Agreement or in connection with the enforcement of any indemnity under this Agreement (including appeals), the party prevailing in such action shall be entitled to recover from the other party all of its costs of action, including actual, reasonable consultants’ and attorneys’ fees and attorneys’ and court costs. The provisions of this Section 10.17 shall survive the termination of this Agreement or the Closing.

Section 10.18. Schedules. Any matters disclosed on any Schedule to this Agreement which also relate to any other Schedules to this Agreement shall be deemed disclosed on such other Schedules, and Buyer is deemed to have Knowledge of the matters disclosed on any Schedule to this Agreement.

Section 10.19. No Partnership. Nothing contained in this Agreement shall be deemed or construed to make the Parties hereto partners or joint venturers, it being the intention of the Parties to merely create the relationship of Seller and Buyer with respect to the Interests to be conveyed as contemplated hereby.

Section 10.20. No Recording or Lis Pendens. The Parties hereto agree that neither this Agreement nor any memorandum or notice hereof shall be recorded, and except as required by law to enforce its remedies under this Agreement, Buyer agrees not to file any lis pendens or other instrument against the Property or the Acquired Companies in connection herewith. In furtherance of the foregoing, Buyer (i) acknowledges that the filing of a lis pendens or other evidence of Buyer’s rights or the existence of this Agreement against the Property or the Acquired Companies, could cause significant monetary and other damages to Seller and (ii) hereby indemnifies and agrees to defend and hold harmless Seller (and each Seller Indemnified Party) from and against any and all Losses arising out of the breach by Buyer of any of Buyer’s obligations under this Section 10.20. The provisions of this Section 10.20 shall survive the termination of this Agreement.

Section 10.21. Non-Liability. Notwithstanding anything to the contrary contained in this Agreement, no director, officer, employee, shareholder, member, manager, partner or agent of Buyer, Seller or the Acquired Companies nor any of the directors, officers, employees, shareholders, members, managers, partners, joint venturers or agents of any of the directors, officers, employees, shareholders, members, managers, partners, joint venturers or agents of Buyer, Seller or the Acquired Companies nor any other person, partnership, limited liability company, corporation, joint venture or trust, as principal of Buyer, Seller or the Acquired Companies, whether disclosed or undisclosed (each, an “Exculpated Party”) shall have any

40

personal obligation or liability hereunder, and neither Seller nor Buyer shall seek to assert any claim (except for any claim for fraud in the event Seller, any of the Acquired Companies, or any of their Affiliates, is finally determined by a court of competent jurisdiction to have willfully and knowingly committed fraud against Buyer with a specific intent to deceive and mislead Buyer with respect to the representations and warranties made in this Agreement) or enforce any of its rights hereunder against any Exculpated Party.

[The remainder of this page is intentionally left blank.]

41

IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

SELLER:

MCLEAN SFR HOLDINGS, LLC,

a Delaware limited liability company

By: /s/ RICHARD KONZMANN

Name: Richard Konzmann

Title: Executive Vice President, Chief Financial Officer & Treasurer

PARENT:

Solely for the purpose set forth in Section 7.8 of this Agreement,

ARLINGTON ASSET INVESTMENT CORP.,
a Virginia corporation

By: /s/ RICHARD KONZMANN

Name: Richard Konzmann

Title: Executive Vice President, Chief Financial Officer & Treasurer

BUYER:

AVHS SFR II LLC,

a Delaware limited liability company

By: /s/ ANDREW HANANEL

Name: Andrew Hananel

EX-31.01

Exhibit 31.01

CERTIFICATION

I, J. Rock Tonkel, Jr., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 of Arlington Asset Investment Corp.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2022	/s/ J. ROCK TONKEL, JR.
	J. Rock Tonkel, Jr. President and Chief Executive Officer (Principal Executive Officer)

EX-31.02

Exhibit 31.02

CERTIFICATION

I, Richard E. Konzmann, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 of Arlington Asset Investment Corp.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2022	/s/ RICHARD E. KONZMANN
	Richard E. Konzmann Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)

EX-32.01

Exhibit 32.01

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Arlington Asset Investment Corp. (the “Company”) for the period ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, J. Rock Tonkel, Jr., Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 14, 2022	/s/ J. ROCK TONKEL, JR.
	J. Rock Tonkel, Jr.
	President and Chief Executive Officer (Principal Executive Officer)

EX-32.02

Exhibit 32.02

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Arlington Asset Investment Corp. (the “Company”) for the period ended September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard E. Konzmann, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 14, 2022	/s/ RICHARD E. KONZMANN
	Richard E. Konzmann
	Executive Vice President,
	Chief Financial Officer and Treasurer
	(Principal Financial Officer)

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2022	Oct. 31, 2022
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2022
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q3
Entity Registrant Name	ARLINGTON ASSET INVESTMENT CORP.
Entity Central Index Key	0001209028
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Shell Company	false
Entity File Number	001-34374
Entity Incorporation, State or Country Code	VA
Entity Tax Identification Number	54-1873198
Entity Common Stock, Shares Outstanding		28,366,678
Entity Address, Address Line One	6862 Elm Street
Entity Address, Address Line Two	Suite 320
Entity Address, City or Town	McLean
Entity Address, State or Province	VA
Entity Address, Postal Zip Code	22101
City Area Code	703
Local Phone Number	373-0200
Document Quarterly Report	true
Document Transition Report	false
Class A Common
Document Information [Line Items]
Title of 12(b) Security	Class A Common Stock
Security Exchange Name	NYSE
Trading Symbol	AAIC
7.00% Series B Cumulative Perpetual Redeemable Preferred Stock
Document Information [Line Items]
Title of 12(b) Security	7.00% Series B Cumulative Perpetual Redeemable Preferred Stock
Security Exchange Name	NYSE
Trading Symbol	AAIC PrB
8.250% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock
Document Information [Line Items]
Title of 12(b) Security	8.250% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock
Security Exchange Name	NYSE
Trading Symbol	AAIC PrC
6.000% Senior Notes due 2026
Document Information [Line Items]
Title of 12(b) Security	6.000% Senior Notes due 2026
Security Exchange Name	NYSE
Trading Symbol	AAIN
6.75% Senior Notes due 2025
Document Information [Line Items]
Title of 12(b) Security	6.75% Senior Notes due 2025
Security Exchange Name	NYSE
Trading Symbol	AIC

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2022		Dec. 31, 2021
ASSETS
Cash and cash equivalents (includes $560 and $2,118, respectively, from consolidated VIEs)	$ 13,803		$ 20,543
Restricted cash	590		1,132
Sold securities receivable			28,219
MSR financing receivables, at fair value	164,585		125,018
Credit securities, at fair value	115,783		26,222
Loans, at fair value	29,375		29,697
Single-family residential real estate (net of $977 and $299, respectively, of accumulated depreciation)	81,242		60,889
Deposits	3,228		4,549
Other assets (includes $1,413 and $547, respectively, from consolidated VIEs)	15,003		15,287
Total assets	1,074,141		803,036
Liabilities:
Repurchase agreements	429,910		446,624
Purchased Securities Payable	93,081
Long-term unsecured debt	86,302		85,994
Long-term debt secured by single-family properties	56,801		39,178
Other liabilities (includes $265 and $2, respectively, from consolidated VIEs)	11,501		6,605
Total liabilities	859,931		578,909
Commitments and contingencies
Stockholders’ Equity:
Additional paid-in capital	2,024,746		2,030,315
Accumulated deficit	(1,843,790)		(1,842,703)
Total stockholders’ equity	214,210		224,127
Total liabilities and stockholders’ equity	1,074,141		803,036
Variable Interest Entity, Primary Beneficiary
ASSETS
Cash and cash equivalents (includes $560 and $2,118, respectively, from consolidated VIEs)	560		2,118
Restricted cash	1,954	[1]	111	[2]
Loans, at fair value	203,456		7,442
Other assets (includes $1,413 and $547, respectively, from consolidated VIEs)	1,413		547
Liabilities:
Secured debt of consolidated VIEs, at fair value	182,336		508
Other liabilities (includes $265 and $2, respectively, from consolidated VIEs)	265		2
Agency MBS
ASSETS
Agency mortgage-backed securities, at fair value	445,122		483,927
Liabilities:
Repurchase agreements	319,538		425,836
Series B Preferred Stock
Stockholders’ Equity:
Preferred stock	9,001		8,852
Series C Preferred Stock
Stockholders’ Equity:
Preferred stock	23,967		27,356
Common Class A
Stockholders’ Equity:
Common stock	$ 286		$ 307

[1] Restricted cash represents cash collected by the trust that must be used solely to satisfy the liabilities of the VIE in the month following collection.

[2] Restricted cash represents cash collected by the trust that must be used solely to satisfy the liabilities of the VIE in the month following collection.

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Mortgage loans, at fair value	$ 29,375	$ 29,697
Other assets	15,003	15,287
Other liabilities	(11,501)	(6,605)
Cash and cash equivalents of consolidated VIE	13,803	20,543
Single-family residential real estate, accumulated depreciation	$ 977	$ 299
Common stock, shares outstanding (in shares)	0	0
Single-family Residential Real Estate [Member]
Single-family residential real estate, accumulated depreciation	$ 977	$ 299
Series B Preferred Stock
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, issued (in shares)	379,668	373,610
Preferred stock, outstanding (in shares)	379,668	373,610
Preferred stock, liquidation preference	$ 9,492	$ 9,340
Series C Preferred Stock
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, issued (in shares)	964,823	1,117,034
Preferred stock, outstanding (in shares)	964,823	1,117,034
Preferred stock, liquidation preference	$ 24,120	$ 27,926
Common Class A
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	450,000,000	450,000,000
Common stock, shares issued (in shares)	28,628,959	30,676,931
Common stock, shares outstanding (in shares)	28,628,959	30,676,931
Variable Interest Entity, Primary Beneficiary
Cash and restricted cash	$ 2,514	$ 2,229
Mortgage loans, at fair value	203,456	7,442
Other assets	1,413	547
Secured debt, at fair value	(182,336)	(508)
Other liabilities	(265)	(2)
Net investment in consolidated VIEs	24,782	9,708
Cash and cash equivalents of consolidated VIE	$ 560	$ 2,118

XML

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Interest income
MSR financing receivables	$ 3,608	$ 1,945	$ 10,973	$ 3,693
Credit securities and loans	2,736	1,247	4,580	4,286
Other	110	193	548	479
Total interest and other income	12,388	6,346	28,557	19,650
Rent revenues from single-family properties	2,103		5,304
Interest expense
Repurchase agreements	2,863	306	3,902	1,197
Total interest expense	5,972	1,914	13,673	6,373
Net operating income	6,647	4,396	14,870	13,241
Investment and derivative (gain) loss, net	1,235	(1,313)	778	(17,108)
General and administrative expenses
Compensation and benefits	2,256	1,888	6,645	5,124
Other general and administrative expenses	1,121	1,009	3,803	3,600
Total general and administrative expenses	3,377	2,897	10,448	8,724
Income (loss) before income taxes	4,505	186	5,200	(12,591)
Income tax provision	1,074	436	4,163	758
Net income (loss)	3,431	(250)	1,037	(13,349)
Dividend on preferred stock	(675)	(731)	(2,124)	(2,177)
Net income (loss) available (attributable) to common stock	$ 2,756	$ (981)	$ (1,087)	$ (15,526)
Basic earnings (loss) per common share	$ 0.10	$ (0.03)	$ (0.04)	$ (0.47)
Diluted earnings (loss) per common share	$ 0.10	$ (0.03)	$ (0.04)	$ (0.47)
Weighted-average common shares outstanding (in thousands)
Basic	28,338	31,927	28,973	32,720
Diluted	28,913	31,927	28,973	32,720
Single Family properties
Interest expense
Single-family property operating expenses	$ 1,872	$ 36	$ 5,318	$ 36
Variable Interest Entity, Primary Beneficiary
Interest income
Loans	2,303	301	5,268	2,764
Secured Debt | Single Family properties
Interest expense
Long-term debt	741		1,867
Secured Debt | Variable Interest Entity, Primary Beneficiary
Interest expense
Secured debt of consolidated VIEs	912	173	3,678	1,440
Unsecured Debt
Interest expense
Long-term debt	1,456	1,435	4,226	3,736
Agency MBS
Interest income
Mortgage-backed credit securities	$ 3,631	$ 2,660	$ 7,188	$ 8,428

XML

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited) - USD ($) $ in Thousands	Total	Common Class A	Preferred Stock	Preferred Stock Series B Preferred Stock	Preferred Stock Series C Preferred Stock	Common Stock Common Class A	Additional Paid-in Capital	Accumulated Deficit
Balances at Dec. 31, 2020	$ 246,270			$ 7,933	$ 27,356	$ 335	$ 2,040,918	$ (1,830,272)
Balances (in shares) at Dec. 31, 2020				336,273	1,117,034	33,517,018
Net loss	(6,040)							(6,040)
Issuance of Class A common stock under stock-based compensation plans						$ 1	(1)
Issuance of Class A common stock under stock-based compensation plans (in shares)						101,818
Repurchase of Class A common stock		$ (523)				$ (1)	(522)
Repurchase of Class A common stock (in shares)						(137,655)
Stock-based compensation	503						503
Dividends declared	(723)							(723)
Balances at Mar. 31, 2021	239,487			$ 7,933	$ 27,356	$ 335	2,040,898	(1,837,035)
Balances (in shares) at Mar. 31, 2021				336,273	1,117,034	33,481,181
Balances at Dec. 31, 2020	246,270			$ 7,933	$ 27,356	$ 335	2,040,918	(1,830,272)
Balances (in shares) at Dec. 31, 2020				336,273	1,117,034	33,517,018
Net loss	(13,349)
Balances at Sep. 30, 2021	224,677			$ 8,493	$ 27,356	$ 316	2,034,310	(1,845,798)
Balances (in shares) at Sep. 30, 2021				358,992	1,117,034	31,618,567
Balances at Dec. 31, 2020	246,270			$ 7,933	$ 27,356	$ 335	2,040,918	(1,830,272)
Balances (in shares) at Dec. 31, 2020				336,273	1,117,034	33,517,018
Repurchase of Class A common stock		(12,475)
Repurchase of Class A common stock (in shares)					0	(3,242,371)
Balances at Dec. 31, 2021	224,127			$ 8,852	$ 27,356	$ 307	2,030,315	(1,842,703)
Balances (in shares) at Dec. 31, 2021				373,610	1,117,034	30,676,931
Balances at Mar. 31, 2021	239,487			$ 7,933	$ 27,356	$ 335	2,040,898	(1,837,035)
Balances (in shares) at Mar. 31, 2021				336,273	1,117,034	33,481,181
Net loss	(7,059)							(7,059)
Issuance of Class A common stock under stock-based compensation plans						$ 1	(1)
Issuance of Class A common stock under stock-based compensation plans (in shares)						76,592
Forfeiture of Class A common stock under stock-based compensation plans (in shares)						(22,000)
Repurchase of Class A common stock		(3,490)				$ (9)	(3,481)
Repurchase of Class A common stock (in shares)						(855,835)
Stock-based compensation	537						537
Dividends declared	(723)							(723)
Balances at Jun. 30, 2021	228,752			$ 7,933	$ 27,356	$ 327	2,037,953	(1,844,817)
Balances (in shares) at Jun. 30, 2021				336,273	1,117,034	32,679,938
Net loss	(250)							(250)
Issuance of Class A common stock under stock-based compensation plans (in shares)						19,694
Repurchase of Class A common stock under stock-based compensation plans	(79)						(79)
Repurchase of Class A common stock under stock-based compensation plans (in shares)						(21,085)
Repurchase of Class A common stock	(4,095)					$ (11)	(4,084)
Repurchase of Class A common stock (in shares)						(1,059,980)
Issuance of preferred stock	560			$ 560
Issuance of preferred stock (in shares)				22,719
Stock-based compensation	520						520
Dividends declared	(731)							(731)
Balances at Sep. 30, 2021	224,677			$ 8,493	$ 27,356	$ 316	2,034,310	(1,845,798)
Balances (in shares) at Sep. 30, 2021				358,992	1,117,034	31,618,567
Balances at Dec. 31, 2021	224,127			$ 8,852	$ 27,356	$ 307	2,030,315	(1,842,703)
Balances (in shares) at Dec. 31, 2021				373,610	1,117,034	30,676,931
Net loss	(2,701)							(2,701)
Issuance of Class A common stock under stock-based compensation plans						$ 4	(4)
Issuance of Class A common stock under stock-based compensation plans (in shares)						404,746
Forfeiture of Class A common stock under stock-based compensation plans (in shares)						(12,167)
Repurchase of Class A common stock		(3,497)				$ (10)	(3,487)
Repurchase of Class A common stock (in shares)						(1,009,566)
Issuance of preferred stock	149			$ 149
Issuance of preferred stock (in shares)				6,058
Stock-based compensation	761						761
Dividends declared	(742)							(742)
Balances at Mar. 31, 2022	218,097			$ 9,001	$ 27,356	$ 301	2,027,585	(1,846,146)
Balances (in shares) at Mar. 31, 2022				379,668	1,117,034	30,059,944
Balances at Dec. 31, 2021	224,127			$ 8,852	$ 27,356	$ 307	2,030,315	(1,842,703)
Balances (in shares) at Dec. 31, 2021				373,610	1,117,034	30,676,931
Net loss	1,037
Repurchase of Class A common stock		(8,232)			$ (3,389)
Repurchase of Class A common stock (in shares)					(152,211)	(2,429,493)
Balances at Sep. 30, 2022	214,210			$ 9,001	$ 23,967	$ 286	2,024,746	(1,843,790)
Balances (in shares) at Sep. 30, 2022				379,668	964,823	28,628,959
Balances at Mar. 31, 2022	218,097			$ 9,001	$ 27,356	$ 301	2,027,585	(1,846,146)
Balances (in shares) at Mar. 31, 2022				379,668	1,117,034	30,059,944
Net loss	307							307
Repurchase of Class A common stock		(3,242)	$ (1,749)		$ (1,749)	$ (10)	(3,232)
Repurchase of Class A common stock (in shares)					(72,363)	(947,570)
Stock-based compensation	992						992
Dividends declared	(707)							(707)
Balances at Jun. 30, 2022	213,698			$ 9,001	$ 25,607	$ 291	2,025,345	(1,846,546)
Balances (in shares) at Jun. 30, 2022				379,668	1,044,671	29,112,374
Net loss	3,431							3,431
Repurchase of Class A common stock under stock-based compensation plans	(30)						(30)
Repurchase of Class A common stock under stock-based compensation plans (in shares)						(11,058)
Repurchase of Class A common stock		$ (1,493)	$ (1,640)		$ (1,640)	$ (5)	(1,488)
Repurchase of Class A common stock (in shares)					(79,848)	(472,357)
Stock-based compensation	919						919
Dividends declared	(675)							(675)
Balances at Sep. 30, 2022	$ 214,210			$ 9,001	$ 23,967	$ 286	$ 2,024,746	$ (1,843,790)
Balances (in shares) at Sep. 30, 2022				379,668	964,823	28,628,959

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Cash flows from operating activities:
Net income (loss)	$ 1,037	$ (13,349)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities
Investment and derivative loss, net	(778)	17,108
Net (discount) premium (accretion) amortization	(7,607)	(2,742)
Other	4,959	1,700
Changes in operating assets
Interest receivable	(299)	892
Other assets	(1,575)	(339)
Changes in operating liabilities
Interest payable and other liabilities	2,641	2,178
Accrued compensation and benefits	(739)	(509)
Net cash (used in) provided by operating activities	(2,361)	4,939
Cash flows from investing activities:
Purchases of credit securities	(128,779)	(28,356)
Purchases of MSR financing receivables	(61,693)	(96,157)
Purchases of single-family residential real estate	(134,391)	(9,419)
Purchases of loans		(29,967)
Proceeds from sales of agency mortgage-backed securities	654,294	724,611
Proceeds from sales of credit securities	10,395	31,702
Proceeds from sales of single-family residential real estate	128,784
Receipt of principal payments on agency mortgage-backed securities	27,807	49,938
Receipt of principal payments on credit securities	6,223	70
Receipt of principal payments on loans	321	45,167
Receipt of principal payments on mortgage loans of consolidated VIE	34,267	78,861
Receipt of distributions on MSR financing receivables	68,601	3,816
Restricted cash balance of VIE upon consolidation	9,637
Proceeds from (payments for) derivatives and deposits, net	8,559	(2,481)
Other	6,233	4,555
Net cash provided by investing activities	48,147	164,681
Cash flows from financing activities:
Repayments of repurchase agreements, net	(16,714)	(101,229)
Repayments of secured debt of consolidated VIE	(38,496)	(86,467)
Repurchase of common stock	(8,232)	(8,109)
Repurchase of preferred stock	(3,389)
Proceeds from issuance of preferred stock	149	559
Proceeds from long-term debt secured by single-family properties	99,371	0
Issuance of long-term unsecured debt		36,316
Redemption of long-term unsecured debt		(23,821)
Repayments of long-term debt secured by single-family properties	(81,790)
Repurchase of long-term unsecured debt		(7)
Dividends paid	(2,124)	(2,177)
Net cash used in financing activities	(51,225)	(184,935)
Net decrease in cash, cash equivalents and restricted cash	(5,439)	(15,315)
Cash, cash equivalents and restricted cash, beginning of period	21,786	39,965
Cash, cash equivalents and restricted cash, end of period	16,347	24,650
Supplemental cash flow information:
Cash payments for interest	12,134	6,111
Cash payments for income taxes	1,641
Non Cash Investing And Financing activity
Assets of VIE upon consolidation	287,282
Liabilities of VIE upon consolidation	266,697
Agency MBS
Cash flows from investing activities:
Purchases of agency mortgage-backed securities	$ (582,111)	$ (607,659)

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Organization and Basis of Presentation

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Basis of Presentation

Note 1. Organization and Basis of Presentation

Arlington Asset Investment Corp. (“Arlington Asset”) and its consolidated subsidiaries (unless the context otherwise provides, collectively, the “Company”) is an investment firm that focuses primarily on investing in mortgage related assets and residential real estate. The Company’s investment capital is currently allocated between mortgage servicing right (“MSR”) related assets, credit investments, single-family residential (“SFR”) properties and agency mortgage-backed securities (“MBS”).

The Company’s MSR related assets represent investments for which the return is based on the economic performance of a pool of specific MSRs. The Company’s credit investments generally include investments in mortgage loans secured by either residential or commercial real property or MBS collateralized by residential or commercial mortgage loans (“non-agency MBS”) or asset-backed securities (“ABS”) collateralized by residential solar panel loans. The Company’s SFR investment strategy is to acquire, lease and operate single-family residential homes as rental properties. The Company’s agency MBS consist of residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by a U.S. government sponsored enterprise (“GSE”), such as the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”).

The Company is a Virginia corporation. The Company is internally managed and does not have an external investment advisor.

The Company has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). As a REIT, the Company is required to distribute annually 90% of its REIT taxable income (subject to certain adjustments). So long as the Company continues to qualify as a REIT, it will generally not be subject to U.S. Federal or state corporate income taxes on its taxable income that it distributes to its shareholders on a timely basis. At present, it is the Company’s intention to distribute 100% of its taxable income, although the Company will not be required to do so. The Company intends to make distributions of its taxable income within the time limits prescribed by the Internal Revenue Code, which may extend into the subsequent taxable year.

The unaudited interim consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. The Company’s unaudited interim consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited annual consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

The Company’s consolidated financial statements include the accounts of Arlington Asset and all other entities in which the Company has a controlling financial interest. All intercompany accounts and transactions have been eliminated in consolidation.

The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect amounts reported in the consolidated financial statements. Although the Company bases these estimates and assumptions on historical experience and all other reasonably available information that the Company believes to be relevant under the circumstances, such estimates frequently require management to exercise significant subjective judgment about matters that are inherently uncertain. Actual results may differ materially from these estimates.

Certain prior period amounts in the consolidated financial statements and the accompanying notes may have been reclassified to conform to the current year’s presentation. These reclassifications had no impact on the previously reported net income, total assets or total liabilities.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2. Summary of Significant Accounting Policies

Cash Equivalents

Cash equivalents include demand deposits with banks, money market accounts and highly liquid investments with original maturities of three months or less. As of September 30, 2022 and December 31, 2021, approximately 75% and 67%, respectively, of the Company’s cash equivalents were invested in money market funds that invest primarily in U.S. Treasuries and other securities backed by the U.S. government.

Investment Security Purchases and Sales

Purchases and sales of investment securities are recorded on the settlement date of the transfer unless the trade qualifies as a “regular-way” trade and the associated commitment qualifies for an exemption from the accounting guidance applicable to derivative instruments. A regular-way trade is an investment security purchase or sale transaction that is expected to settle within the period of time following the trade date that is prevalent or traditional for that specific type of security. Any amounts payable or receivable for unsettled security trades are recorded as “sold securities receivable” or “purchased securities payable” in the consolidated balance sheets.

Interest Income Recognition for Investments in Agency MBS, Mortgage Loans of Consolidated VIEs and Credit Securities of High Credit Quality

The Company recognizes interest income for its investments in agency MBS, mortgage loans of consolidated variable interest entities (“VIEs”) and credit securities that are considered to be of high credit quality (that is, those with a Standard & Poor's rating of AA or higher or an equivalent rating from another rating agency) by applying the “interest method” permitted by GAAP, whereby purchase premiums and discounts are amortized and accreted, respectively, as an adjustment to contractual interest income accrued at each investment’s stated interest rate. The interest method is applied at the individual instrument level based upon each instrument’s effective interest rate. The Company calculates each instrument’s effective interest rate at the time of purchase or initial recognition by solving for the discount rate that equates the present value of that instrument's remaining contractual cash flows (assuming no principal prepayments) to its purchase cost. Because each instrument’s effective interest rate does not reflect an estimate of future prepayments, the Company refers to this manner of applying the interest method as the “contractual effective interest method.” When applying the contractual effective interest method, as principal prepayments occur, a proportional amount of the unamortized premium or unaccreted discount is recognized in interest income such that the contractual effective interest rate on any remaining security or loan balance is unaffected.

For mortgage loans of consolidated VIEs, the Company ceases the accrual of interest income (i.e., places the loan in non-accrual status) when it believes collectability of principal and interest in full is not reasonably assured, which generally occurs when a loan is three or more monthly payments past due, unless the loan is well secured and in the process of collection based upon an individual loan assessment. Upon placing a loan in non-accrual status, any previously accrued but uncollected interest is derecognized and a corresponding reduction to current period interest income is recorded. While a loan is in non-accrual status, the Company recognizes interest income only when interest payments occur.

Interest Income Recognition for Investments in Other Credit Securities and MSR Financing Receivables

The Company recognizes interest income for its investments in credit securities (other than those considered to be of high credit quality) and MSR financing receivables by applying the prospective level-yield methodology required by GAAP for financial assets that are either not of high credit quality at the time of acquisition or can be contractually prepaid or otherwise settled in such a way that the Company would not recover substantially all of its recorded investment. The amount of periodic interest income recognized is determined by applying the investment’s effective interest rate to its amortized cost basis (or “reference amount”). At the time of acquisition, the investment’s effective interest rate is calculated by solving for the single discount rate that equates the present value of the Company’s best estimate of the amount and timing of the cash flows expected to be collected from the investment to its purchase cost. To prepare its best estimate of cash flows expected to be collected, the Company develops a number of assumptions about the future performance of the pool of loans that serve as collateral for its investment, including assumptions about the timing and amount of prepayments and credit losses. For investments in MSR financing receivables, the Company's estimate of cash flows expected to be collected reflects all components of its mortgage servicing counterparty's payment obligation, which is comprised of cash flows referenced to the monthly net cash flows of the underlying reference pool of MSRs net of (i) the counterparty's periodic interest payments and principal repayments related to advances obtained via its third-party secured financing facility collateralized by MSRs to which the Company's MSR financing receivables are referenced and (ii) fees payable to the counterparty. In each subsequent quarterly reporting period, the amount and timing of cash flows expected to be collected from the investment are re-estimated based upon current information and events. The following table provides a description of how periodic changes in the estimate of cash flows expected to be collected affect interest income recognition prospectively for investments in credit securities and MSR financing receivables:

Scenario:	Effect on Interest Income Recognition:
A positive change in cash flows occurs. Actual cash flows exceed prior estimates and/or a positive change occurs in the estimate of expected remaining cash flows.	A revised effective interest rate is calculated and applied prospectively such that the positive change in cash flows is recognized as incremental interest income over the remaining life of the investment.
	The amount of periodic interest income recognized over the remaining life of the investment will be reduced accordingly. Generally, the investment’s effective interest rate is reduced accordingly and applied on a prospective basis. However, if the revised effective interest rate is negative, the investment’s existing effective interest rate is retained while the reference amount to which the existing effective interest rate will be prospectively applied is reduced to the present value of cash flows expected to be collected, discounted at the investment’s existing effective interest rate.
An adverse change in cash flows occurs. Actual cash flows fall short of prior estimates and/or an adverse change occurs in the estimate of expected remaining cash flows.

Other Significant Accounting Policies

Certain of the Company’s other significant accounting policies are summarized in the following notes:

Investments in agency MBS, subsequent measurement	Note 3
Investments in credit securities, subsequent measurement Loans held for investment, subsequent measurement Investments in MSR financing receivables, subsequent measurement Investments in SFR properties	Note 4 Note 5 Note 6 Note 7
Consolidation of variable interest entities Borrowings	Note 8 Note 9
To-be-announced agency MBS transactions, including “dollar rolls”	Note 10
Derivative instruments	Note 10
Balance sheet offsetting	Note 11
Fair value measurements Income taxes	Note 12 Note 13
Stock-based compensation	Note 16

Refer to the Company’s 2021 Annual Report on Form 10-K for a complete inventory and summary of the Company’s significant accounting policies.

Recent Accounting Pronouncements

The following table provides a brief description of recently issued accounting pronouncements and their actual or expected effect on the Company’s consolidated financial statements:

Standard	Description	Date of Adoption	Effect on the Consolidated Financial Statements
Recently Issued Accounting Guidance Not Yet Adopted
ASU Nos. 2020-04 and 2021-01, Reference Rate Reform (Topic 848)	The amendments in these updates provide optional practical expedients and exceptions for applying GAAP to the modification of receivables, debt or lease contracts as well as cash flow and fair value hedge accounting relationships that reference a rate, such as the London Interbank Offered Rate (“LIBOR”), that is expected to be discontinued because of reference rate reform. The practical expedients and exceptions provided by these updates are effective from March 12, 2020 through December 31, 2022.	Not yet adopted.	To date, any modifications due to reference rate reform have not had a material impact to the Company. The Company has not elected to apply hedge accounting for financial reporting purposes. The Company does not currently expect the adoption of ASU Nos. 2020-04 and 2021-01 to have a material effect on its consolidated financial statements.

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Investments in Agency MBS

9 Months Ended

Sep. 30, 2022

Agency MBS

Investments in Credit Securities

Note 3. Investments in Agency MBS

The Company has elected to classify its investments in agency MBS as trading securities. Accordingly, the Company’s investments in agency MBS are reported in the accompanying consolidated balance sheets at fair value. As of September 30, 2022 and December 31, 2021, the fair value of the Company’s investments in agency MBS was $445,122 and $483,927, respectively. As of September 30, 2022, all the Company’s investments in agency MBS represent undivided (or “pass-through”) beneficial interests in specified pools of fixed-rate mortgage loans.

All periodic changes in the fair value of agency MBS that are not attributed to interest income are recognized as a component of “investment and derivative gain (loss), net” in the accompanying consolidated statements of comprehensive income. The following table provides additional information about the gains and losses recognized as a component of “investment and derivative gain (loss), net” in the Company’s consolidated statements of comprehensive income for the periods indicated with respect to investments in agency MBS:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net gains (losses) recognized in earnings for:
Agency MBS still held at period end	$	(24,430	)	$	(2,904	)	$	(26,911	)	$	(13,323	)
Agency MBS sold during the period		1,702			457			(32,365	)		(11,209	)
Total	$	(22,728	)	$	(2,447	)	$	(59,276	)	$	(24,532	)

The Company also invests in and finances fixed-rate agency MBS on a generic pool basis through sequential series of to-be-announced security transactions commonly referred to as “dollar rolls.” Dollar rolls are accounted for as a sequential series of derivative instruments. Refer to “Note 10. Derivative Instruments” for further information about dollar rolls.

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Investments in Credit Securities

9 Months Ended

Sep. 30, 2022

Credit Securities

Investments in Credit Securities

Note 4. Investments in Credit Securities

The Company has elected to classify its investments in credit securities as trading securities. Accordingly, the Company’s investments in credit securities are reported in the accompanying consolidated balance sheets at fair value. As of September 30, 2022 and December 31, 2021, the fair value of the Company’s investments in credit securities was $115,783 and $26,222, respectively. As

of September 30, 2022, the Company’s investments in credit securities primarily consist of non-agency MBS collateralized by pools of business purpose residential mortgage loans or commercial mortgage loans and ABS collateralized by pools of residential solar panel loans.

All periodic changes in the fair value of credit securities that are not attributed to interest income are recognized as a component of “investment and derivative gain (loss), net” in the accompanying consolidated statements of comprehensive income. The following table provides additional information about the gains and losses recognized as a component of “investment and derivative gain (loss), net” in the Company’s consolidated statements of comprehensive income for the periods indicated with respect to investments in credit securities:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net gains (losses) recognized in earnings for:
Credit securities still held at period end	$	(1,552	)	$	(165	)	$	(2,227	)	$	1,017
Credit securities sold during the period		—			90			(970	)		37
Total	$	(1,552	)	$	(75	)	$	(3,197	)	$	1,054

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Loans Held for Investment

9 Months Ended

Sep. 30, 2022

Investments, Debt and Equity Securities [Abstract]

Loans Held for Investment

Note 5. Loans Held for Investment

As of September 30, 2022 and December 31, 2021, the Company held a loan secured by a first lien position in healthcare facilities and guaranteed by the operator of the facilities with an outstanding principal outstanding principal balance of $29,375 and $29,697, respectively. The loan bears interest at a floating note rate equal to SOFR plus 5.61%. The original maturity date of the loan was March 23, 2022 with a one-year extension available at the option of the borrower. On March 23, 2022, the borrower exercised its one-year extension option resulting in a new maturity date of March 23, 2023. The loan has monthly principal amortization based upon a 30-year amortization schedule with the remaining principal balance due at loan maturity.

The Company has elected to account for its loan held for investment at fair value on a recurring basis with periodic changes in fair value recognized as a component of “investment and derivative gain (loss), net” in the accompanying consolidated statements of comprehensive income. As of September 30, 2022 and December 31, 2021, the Company’s investment was $29,375 and $29,697, respectively, at fair value. The Company recognizes interest income on its loan investment based upon the effective interest rate of the loan which is equal to the contractual note rate of the loan.

As of September 30, 2022 and December 31, 2021, the Company was party to a participation agreement pursuant to which the Company has committed to fund up to $30,000 of a $130,000 revolving credit facility that matures on July 7, 2024. Under the terms of the participation agreement, the Company funds the last $30,000 of advances under the revolving credit facility. Any draws under the revolving credit facility bear interest at SOFR plus 3.86% with a SOFR floor of 1.00% and are secured by a first lien on all accounts receivable and a second lien on all other assets of the borrower. The borrower is also required to pay an unused commitment fee of 0.50%. As of September 30, 2022 and December 31, 2021, the Company's unfunded commitment was $30,000.

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Investments in MSR Financing Receivables

9 Months Ended

Sep. 30, 2022

Receivables [Abstract]

Investments in MSR Financing Receivables

Note 6. Investments in MSR Financing Receivables

The Company does not hold the requisite licenses to purchase or hold MSRs directly. However, the Company has entered into agreements with a licensed, GSE approved residential mortgage loan servicer that enable the Company to garner the economic return of an investment in an MSR purchased by the mortgage servicing counterparty through an MSR financing transaction. Under the terms of the arrangement, for an MSR acquired by the mortgage servicing counterparty (i) the Company purchases the “excess servicing spread” from the mortgage servicer counterparty, entitling the Company to monthly distributions of the servicing fees collected by the mortgage servicing counterparty in excess of 12.5 basis points per annum (and to distributions of corresponding proceeds of sale of the MSRs), and (ii) the Company funds the balance of the MSR purchase price to the parent company of the mortgage servicing counterparty and, in exchange, has an unsecured right to payment of certain amounts determined by reference to the MSR, generally equal to the servicing fee revenue less the excess servicing spread and the costs of servicing (and to distributions of corresponding proceeds of sale of the MSRs), net of fees earned by the mortgage servicing counterparty and its affiliates including an incentive fee equal to a percentage of the total return of the MSR in excess of a hurdle rate of return. The Company has committed to invest a total minimum of $50,000 in capital with the counterparty with $25,000 of the minimum commitment expiring on December 31, 2023 and $25,000 of the minimum commitment expiring on April 1, 2024.

Under the arrangement, the Company is obligated to provide funds to the mortgage servicing counterparty to fund the counterparty’s advances of payments on the serviced pool of mortgage loans. The mortgage servicing counterparty is required to

return to the Company subsequent servicing advances collected from the underlying borrowers. The mortgage servicing counterparty is entitled to reimbursement from the GSEs of any servicing advances that are not subsequently collected from the underlying borrowers. As of September 30, 2022 and December 31, 2021, the Company had provided funds of $2,244 and $3,731, respectively, to its mortgage servicing counterparty related to the counterparty’s servicing advances made pursuant to the MSRs to which the Company’s MSR financing receivables are referenced.

As a means to increase potential returns to the Company, at the Company’s election, it can request the mortgage servicing counterparty utilize leverage on the MSRs to which the Company’s MSR financing receivables are referenced to finance the purchase of additional MSRs. As of September 30, 2022 and December 31, 2021, the Company’s counterparty had drawn $27,863 and $40,398, respectively, of financing secured by the MSRs to which the Company’s MSR financing receivables are referenced.

The Company accounts for transactions executed under its arrangement with the mortgage servicing counterparty as financing transactions and reflects the associated financing receivables in the line item “MSR financing receivables” on its consolidated balance sheets. The Company has elected to account for its MSR financing receivables at fair value with changes in fair value that are not attributed to interest income recognized as a component of “investment and derivative gain (loss), net” in the accompanying consolidated statements of comprehensive income. As described in further detail in “Note 2. Summary of Significant Accounting Policies,” the Company recognizes interest income for MSR financing receivables by applying the prospective level-yield methodology required by GAAP for financial assets that are either not of high credit quality at the time of acquisition or can be contractually prepaid or otherwise settled in such a way that the Company would not recover substantially all of its recorded investment.

As of September 30, 2022 and December 31, 2021, the fair value of the Company’s investments in MSR financing receivables was $164,585 and $125,018, respectively. The following table presents activity related to the carrying value of the Company’s investments in MSR financing receivables for the periods indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Balance at period beginning	$	120,260		$	74,652		$	125,018		$	9,346
Capital investments		40,474			35,601			61,693			95,223
Capital distributions		(4,049	)		(3,816	)		(68,601	)		(3,816	)
Accretion of interest income		3,608			1,945			10,973			3,693
Changes in valuation inputs and assumptions		4,292			4,452			35,502			8,388
Balance at period end	$	164,585		$	112,834		$	164,585		$	112,834

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Investments in SFR Properties

9 Months Ended

Sep. 30, 2022

SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation Disclosure [Abstract]

Investments in SFR Properties

Note 7. Investments in SFR Properties

The Company owns a portfolio of SFR homes that it operates as rental properties. The Company is party to an agreement with a third-party investment firm to identify, acquire and manage investments in SFR properties on behalf of the Company. Under the terms of the agreement, the Company has committed to fund up to $55,000 of capital to fund the acquisition of SFR properties. The Company is obligated to pay the third-party firm a minimum fee plus an incentive fee equal to a percentage of the total investment return in excess of a hurdle rate of return. If the Company were to terminate the commitment, the Company would incur a termination fee equal to a fixed amount less inception to date minimum fees paid to the third-party firm.

The Company’s investments in SFR properties are initially recognized on the settlement date of their acquisition at cost. The Company allocates the initial acquisition cost of each property to land and building on the basis of their relative fair values at the time of acquisition. To determine the relative fair value of land and building at the time of acquisition, the Company uses available market data, such as property specific county tax assessment records.

Subsequent to the acquisition of a property, expenditures which improve or extend the life of the property are capitalized as a component of the property’s cost basis. Expenditures for ordinary maintenance and repairs are recognized as an expense as incurred and are reported as a component of “single-family property operating expenses” in the Company’s consolidated statements of comprehensive income.

The Company subsequently recognizes depreciation of each property’s buildings and capitalized improvements over the expected useful lives of those assets. The Company calculates depreciation on a straight-line basis over a useful life of 27.5 years for buildings and useful lives ranging from five to 27.5 years for capitalized improvements. The Company reports depreciation expense as a component of “single-family property operating expenses” in the Company’s consolidated statements of comprehensive income.

Pursuant to its SFR investment strategy, the Company leases its SFR properties to tenants who occupy the properties. The leases generally have terms of one year or more and are classified as operating leases. Rental revenue, net of any concessions, is recognized over the term of each lease on a straight-line basis. If the Company determines that collectability of lease payments is not probable, any lease receivables previously recognized are reversed and rental revenue is limited to cash received.

Costs directly associated with the origination of a lease, such as a commission paid to a property manager when a lease agreement is obtained, are deferred at the commencement of the lease and subsequently recognized ratably as an expense over the lease term, consistent with the recognition of rental revenue from the lease. The ratable expense recognition of lease direct costs is reported as a component of “single-family property operating expenses” in the Company’s consolidated statements of comprehensive income. In addition to the expense items previously mentioned, “single-family property operating expenses” also include accruals for, but not limited to, third-party property management fees, local real estate tax assessments, utilities, homeowners’ association dues and insurance.

The Company evaluates its SFR properties for impairment whenever circumstances indicate that their carrying amounts may not be recoverable. Significant indicators of potential impairment include, but are not limited to, declines in home values, adverse changes in rental or occupancy rates and relevant unfavorable changes in the broader economy. If indicators of potential impairment exist, the Company performs a recoverability test by comparing the property’s net carrying amount to its estimate of the undiscounted future net cash flows expected to be obtained from the use and eventual disposition of the property. If the property’s carrying amount exceeds the Company’s estimate of the undiscounted future net cash flows expected to be obtained from the property, the Company recognizes an impairment loss equal to the amount that the property’s net carrying amount exceeds the property’s estimated fair value. As of September 30, 2022 and December 31, 2021, the Company had not recognized any impairment losses for its investments in SFR properties.

From time to time, the Company may identify SFR properties to be sold. At the time that any such properties are identified, the Company performs an evaluation to determine whether or not such properties should be classified as held for sale. Factors considered as part of the Company's held for sale evaluation process include whether the following conditions have been met: (i) the Company has committed to a plan to sell a property; (ii) the property is immediately available for sale in its present condition; (iii) an active program to locate a buyer and other actions required to complete the plan to sell a property have been initiated; (iv) the sale of a property is probable within one year (generally determined based upon listing for sale); (v) the property is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and (vi) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. To the extent that these factors are all present, the Company ceases depreciating the property, measures the property at the lower of its carrying amount or its fair value less estimated costs to sell, and presents the property separately on its consolidated balance sheets.

On August 19, 2022, the Company completed a sale of 371 SFR properties for a gross sale price of $130,026 for a gain of $14,407 that is net of accrued incentive fees to the Company's third-party investment firm. On May 1, 2022, the Company classified the 371 SFR properties as held for sale.

As of September 30, 2022 and December 31, 2021, the Company had investments in 246 and 214 SFR properties, respectively, for a total cost of $82,219 and $61,188, respectively. During the three and nine months ended September 30, 2022, the Company recognized $632 and $1,951, respectively, of depreciation expense related to its SFR properties. During the three and nine months ended September 30, 2021, the Company recognized $12 of depreciation expense related to its SFR properties. The following table summarizes the Company’s net carrying amount of its SFR properties by component as of the dates indicated:

	September 30, 2022			December 31, 2021
Investments in single-family residential real estate:
Land	$	13,646		$	10,128
Buildings and improvements		68,573			51,060
Investments in single-family residential real estate, at cost		82,219			61,188
Less: accumulated depreciation		(977	)		(299	)
Investments in single-family residential real estate, net	$	81,242		$	60,889

As of September 30, 2022, the Company had commitments to acquire five SFR properties for an aggregate purchase price of $1,523.

The Company conducts its SFR investment strategy through a wholly-owned subsidiary, McLean SFR Investment, LLC. On November 11, 2022, the Company entered into an agreement to sell McLean SFR Investment, LLC, which includes all of the

Company's remaining investments in SFR properties and its long-term debt facility secured by SFR properties, for $87,330 including the assumption of the debt liability. The settlement of the sale is contingent upon lender approval as well as other customary settlement conditions. If ultimately consummated, the sale is expected to settle in the fourth quarter.

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Consolidation of Variable Interest Entities

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Consolidation of Variable Interest Entities

Note 8. Consolidation of Variable Interest Entities

The vehicles that issue the Company’s investments in securitized mortgage assets are considered VIEs. The Company is required to consolidate any VIE in which it holds a variable interest if it determines that it holds a controlling financial interest in the VIE and is, therefore, determined to be the primary beneficiary of the VIE. The Company is determined to be the primary beneficiary of a VIE in which it holds a variable interest if it both (i) holds the power to direct the activities that most significantly impact the VIE’s economic performance and (ii) has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The economic performance of the trusts that issue the Company’s investments in securitized mortgage assets is most significantly impacted by the performance of the mortgage loans that are held by the trusts. The party that is determined to have the most power to direct the loss mitigation actions that are taken with respect to delinquent or otherwise troubled mortgage loans held by the trust is, therefore, deemed to hold the most power to direct the activities that most significantly impact the trust’s economic performance. As a passive investor, the Company does not have the power to direct the loss mitigation activities of most of the trusts that have issued its securitized mortgage assets.

On September 30, 2020, the Company acquired for $10,693 an investment that represents a majority interest in the first loss position of a securitized pool of business purpose residential mortgage loans. As majority holder of the first loss position, the Company is required to approve any material loss mitigation action proposed by the servicer with respect to a troubled loan. The Company also has the option (but not the obligation) to purchase delinquent loans from the trust. As a result of these contractual rights, the Company determined that it is the party with the most power to direct the loss mitigation activities and, therefore, the economic performance of the trust. As holder of the majority of the first loss position issued by the trust, the Company has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the trust. Accordingly, the Company determined that it is the primary beneficiary of the trust and consolidated the trust’s assets and liabilities owed to third parties onto its consolidated balance sheets.

On February 3, 2022, the Company acquired for $20,585 investments in the first loss position and the excess interest-only strip of a securitized pool of recently originated, performing “non-qualified” residential mortgage loans. The Company’s investment in the excess interest-only strip provides it with the option (but not the obligation) to purchase delinquent loans from the trust. As a result of this contractual right, the Company determined that it has the power to circumvent the loss mitigation activities that would otherwise be performed by the servicer and, therefore, is the party with the most power to impact the economic performance of the trust. As a result of its investments, the Company also has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the trust. Accordingly, the Company determined that it is the primary beneficiary of the trust and consolidated the trust’s assets and liabilities owed to third parties onto its consolidated balance sheets.

The carrying values of the assets and liabilities of the consolidated VIEs, net of elimination entries, are as follows as of the dates indicated:

	September 30, 2022
	VIE of Business Purpose Residential Mortgage Loans			VIE of Residential Mortgage Loans			Total
Cash of consolidated VIEs	$	560		$	—		$	560
Restricted cash of consolidated VIEs (1)		29			1,925			1,954
Mortgage loans of consolidated VIEs, at fair value		3,750			199,706			203,456
Other assets of consolidated VIEs		689			724			1,413
Secured debt of consolidated VIEs, at fair value		(251	)		(182,085	)		(182,336	)
Other liabilities of consolidated VIEs		—			(265	)		(265	)
Net investment in consolidated VIEs	$	4,777		$	20,005		$	24,782

(1)Restricted cash represents cash collected by the trust that must be used solely to satisfy the liabilities of the VIE in the month following collection.

	December 31, 2021
	VIE of Business Purpose Residential Mortgage Loans			VIE of Residential Mortgage Loans		Total
Cash of consolidated VIEs	$	2,118		$	—	$	2,118
Restricted cash of consolidated VIEs (1)		111			—		111
Mortgage loans of consolidated VIEs, at fair value		7,442			—		7,442
Other assets of consolidated VIEs		547			—		547
Secured debt of consolidated VIEs, at fair value		(508	)		—		(508	)
Other liabilities of consolidated VIEs		(2	)		—		(2	)
Net investment in consolidated VIEs	$	9,708		$	—	$	9,708

(1)Restricted cash represents cash collected by the trust that must be used solely to satisfy the liabilities of the VIE in the month following collection.

The debt of the Company’s consolidated VIEs have recourse solely to the assets of the respective VIE; it has no recourse to the general credit of the Company.

Consolidated VIE of Business Purpose Residential Mortgage Loans

The pool of business purpose residential mortgage loans and the third-party held debt obligations of the consolidated VIE had aggregate unpaid principal balances of $3,908 and $261, respectively, as of September 30, 2022. The trust is contractually entitled to receive monthly interest payments on each underlying mortgage loan net of a loan-specific servicing and asset management fee that is not remitted to the trust but is, rather, retained by the servicer. As of September 30, 2022, the weighted average net note rate to which the VIE was entitled was 6.00%.

The pool of business purpose residential mortgage loans held by the consolidated VIE consists of fixed-rate, short-term, interest-only mortgage loans (with the full amount of principal due at maturity) made to professional real estate investors and are secured by first lien positions in non-owner occupied residential real estate. The properties that secure these mortgage loans often require construction, repair or rehabilitation. The repayment of the mortgage loans is often largely based on the ability of the borrower to sell the mortgaged property or to convert the property for rental purposes and obtain refinancing in the form of a longer-term loan.

Consolidated VIE of Residential Mortgage Loans

The pool of mortgage loans and the third-party held debt obligations of the consolidated VIE had aggregate unpaid principal balances of $233,322 and $232,760, respectively, as of September 30, 2022. As of September 30, 2022, the weighted average contractual interest rates of the loans and consolidated debt held by third parties were 4.78% and 1.37%, respectively.

The pool of mortgage loans of the consolidated VIE consists of performing, first lien “non-qualified” residential mortgage loans. “Non-qualified” residential mortgage loans are loans that do not fully comply with the “ability-to-repay” rule and related guidelines of the Truth-in-Lending Act established by the Consumer Finance Protection Bureau pursuant to the authority granted under the Dodd-Frank Act. A “qualified” residential mortgage loan (i.e., a residential mortgage loan that fully complies with the “ability-to-repay” rule of the Truth-in-Lending Act) must meet certain debt-to-income ratio requirements and cannot have certain features, such as an interest-only period, negative amortization, balloon payments or terms longer than 30 years. Qualified mortgage loans have limited upfront fees and points and, generally, cannot have prepayment penalties except for limited circumstances. Lenders of qualified mortgage loans are afforded certain legal protections not available to non-qualified mortgage loan lenders.

Accounting for Consolidated VIEs

The Company has elected to account for the mortgage loans and debt of its consolidated VIEs at fair value with changes in fair value that are not attributed to interest income or interest expense, respectively, recognized as a component of “investment and derivative gain (loss), net” in the accompanying consolidated statements of comprehensive income.

As described in further detail in “Note 2. Summary of Significant Accounting Policies,” the Company recognizes interest income for the mortgage loans of its consolidated VIEs by applying the “interest method” permitted by GAAP, whereby the premium or discount recognized at the initial recognition of each loan is amortized or accreted as an adjustment to contractual interest income accrued at the loan’s contractual interest rate. The Company ceases the accrual of interest income for a mortgage loan (i.e., places the loan in non-accrual status) when it believes collectability of principal and interest in full is not reasonably assured, which generally

occurs when a loan is three or more monthly payments past due, unless the loan is well secured and in the process of collection based upon an individual loan assessment. Upon placing a loan in non-accrual status, any previously accrued but uncollected interest is derecognized and a corresponding reduction to current period interest income is recorded.

The following table presents information about the accrual status of the loans of the Company’s consolidated VIE of business purpose residential mortgage loans as of September 30, 2022:

	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Difference
Less than 90 days past due and in accrual status	$	151	$	151	$	—
90 days or more past due and in non-accrual status		3,599		3,757		(158	)
Total mortgage loans of consolidated VIE	$	3,750	$	3,908	$	(158	)

The following table presents information about the accrual status of the loans of the Company’s consolidated VIE of residential mortgage loans as of September 30, 2022:

	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Difference
Less than 90 days past due and in accrual status	$	198,876	$	232,353	$	(33,477	)
90 days or more past due and in non-accrual status		830		969		(139	)
Total mortgage loans of consolidated VIE	$	199,706	$	233,322	$	(33,616	)

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Borrowings

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Borrowings

Note 9. Borrowings

Repurchase Agreements

The Company finances the purchase of mortgage investments through repurchase agreements, which are accounted for as collateralized borrowing arrangements. In a repurchase transaction, the Company sells a mortgage investment to a counterparty under a master repurchase agreement in exchange for cash and concurrently agrees to repurchase the same asset at a future date in an amount equal to the cash initially exchanged plus an agreed-upon amount of interest. Mortgage investments sold under agreements to repurchase remain on the Company’s consolidated balance sheets because the Company maintains effective control over such assets throughout the duration of the arrangement. Throughout the contractual term of a repurchase agreement, the Company recognizes a “repurchase agreement” liability on its consolidated balance sheets to reflect the obligation to repay to the counterparty the proceeds received upon the initial transfer of the mortgage investment. The difference between the proceeds received by the Company upon the initial transfer of the mortgage investment and the contractually agreed-upon repurchase price is recognized as interest expense ratably over the term of the repurchase arrangement.

Amounts borrowed pursuant to repurchase agreements are equal in value to a specified percentage of the fair value of the pledged collateral. The Company retains beneficial ownership of the pledged collateral throughout the term of the repurchase agreement. The counterparty to the repurchase agreements may require that the Company pledge additional securities or cash as additional collateral to secure borrowings when the value of the collateral declines.

The Company’s MBS repurchase agreement arrangements generally carry a fixed rate of interest and are short-term in nature with contract durations generally ranging from 30 to 60 days, but may be as short as one day or as long as one year. The Company’s mortgage loan repurchase agreement arrangement has a maturity date of August 23, 2023 and an interest rate that resets monthly at a rate equal to SOFR plus 2.61%. Under the terms of the Company’s mortgage loan repurchase agreement, the Company may request extensions of the maturity date of the agreement for up to 364 days, subject to the lender’s approval.

The following table provides information regarding the Company’s outstanding repurchase agreement borrowings as of the dates indicated:

	September 30, 2022			December 31, 2021
Agency MBS repurchase financing:
Repurchase agreements outstanding	$	319,538		$	425,836
Agency MBS collateral, at fair value (1)		336,277			447,979
Net amount (2)		16,739			22,143
Weighted-average rate		3.02	%		0.14	%
Weighted-average term to maturity	13.0 days			13.0 days
Non-agency MBS repurchase financing:
Repurchase agreements outstanding	$	89,809		$	—
MBS collateral, at fair value		99,821			—
Net amount (2)		10,012			—
Weighted-average rate		3.68	%
Weighted-average term to maturity	26.5 days
Mortgage loans repurchase financing:
Repurchase agreements outstanding	$	20,563		$	20,788
Mortgage loans collateral, at fair value		29,375			29,697
Net amount (2)		8,812			8,909
Weighted-average rate		5.27	%		2.60	%
Weighted-average term to maturity	327.0 days			319.0 days
Total mortgage investments repurchase financing:
Repurchase agreements outstanding	$	429,910		$	446,624
Mortgage investments collateral, at fair value (1)		465,473			477,676
Net amount (2)		35,563			31,052
Weighted-average rate		3.27	%		0.25	%
Weighted-average term to maturity	30.8 days			27.2 days

(1)As of December 31, 2021, includes $28,219 at sale price of unsettled agency MBS sale commitments which is included in the line item “sold securities receivable” in the accompanying consolidated balance sheets.

(2)Net amount represents the value of collateral in excess of corresponding repurchase obligation. The amount of collateral at-risk is limited to the outstanding repurchase obligation and not the entire collateral balance.

The following table provides information regarding the Company’s outstanding repurchase agreement borrowings during the three and nine months ended September 30, 2022 and 2021:

	September 30, 2022			September 30, 2021
Weighted-average outstanding balance during the three months ended	$	430,792		$	599,224
Weighted-average rate during the three months ended		2.60	%		0.20	%
Weighted-average outstanding balance during the nine months ended	$	351,960		$	601,897
Weighted-average rate during the nine months ended		1.46	%		0.27	%

Long-Term Unsecured Debt

As of September 30, 2022 and December 31, 2021, the Company had $86,302 and $85,994, respectively, of outstanding long-term unsecured debentures, net of unamortized debt issuance costs of $1,379 and $1,687, respectively. The Company’s long-term unsecured debentures consisted of the following as of the dates indicated:

	September 30, 2022									December 31, 2021
	Senior Notes Due 2025			Senior Notes Due 2026			Trust Preferred Debt			Senior Notes Due 2025			Senior Notes Due 2026			Trust Preferred Debt
Outstanding   Principal	$	34,931		$	37,750		$	15,000		$	34,931		$	37,750		$	15,000
Annual    Interest Rate		6.75	%		6.000	%	LIBOR+ 2.25 - 3.00 %				6.75	%		6.000	%	LIBOR+ 2.25 - 3.00 %
Interest    Payment    Frequency	Quarterly			Quarterly			Quarterly			Quarterly			Quarterly			Quarterly
Weighted-    Average    Interest Rate		6.75	%		6.000	%		5.26	%		6.75	%		6.000	%		2.87	%
Maturity	March 15, 2025			August 1, 2026			2033 - 2035			March 15, 2025			August 1, 2026			2033 - 2035

On July 15, 2021, the Company completed a public offering of $37,750 of 6.000% Senior Notes due 2026 and received net proceeds of $36,570 after deducting underwriter discounts. On August 6, 2021, the Company redeemed all $23,821 in principal amount of its outstanding Senior Notes due 2023 at a redemption price of 100% of the principal amount plus unpaid interest thereon.

The Senior Notes due 2025 and the Senior Notes due 2026 are publicly traded on the New York Stock Exchange under the ticker symbols “AIC” and “AAIN,” respectively. The Senior Notes due 2025 and Trust Preferred Debt may be redeemed in whole or in part at any time and from time to time at the Company’s option at a redemption price equal to the principal amount plus accrued and unpaid interest. The Senior Notes due 2026 may be redeemed in whole or in part at any time and from time to time at the Company’s option on or after August 1, 2023 at a redemption price equal to the principal amount plus accrued and unpaid interest. The indenture governing the Senior Notes contains certain covenants, including limitations on the Company’s ability to merge or consolidate with other entities or sell or otherwise dispose of all or substantially all of the Company’s assets.

Long-Term Debt Secured by Single-family Properties

On September 28, 2021, McLean SFR Investment, LLC (“McLean SFR”), a wholly-owned subsidiary of Arlington Asset, entered into a loan agreement with a third-party lender to fund McLean SFR’s purchases of SFR properties. Under the terms of the loan agreement, loan advances may be drawn up to 74% of the fair value of eligible SFR properties up to a maximum loan amount of $150,000. Advances under the loan agreement may be drawn during the advance period, which ends on the earlier of the date the outstanding principal balance equals the maximum loan amount or March 28, 2023. The outstanding principal balance is due on October 9, 2026 and advances under the loan agreement bear interest at a fixed rate of 2.76%. During the advance period, McLean SFR is subject to a commitment fee on the unfunded commitment if the outstanding loan balance is below certain thresholds. As of September 30, 2022 and December 31, 2021, the outstanding balance was $56,801 and $39,178, respectively, net of unamortized debt issuance costs of $223 and $264, respectively.

Through September 28, 2024, the outstanding principal balance may be prepaid in an amount equal to the excess of (i) the sum of the present value of all remaining scheduled payments of principal and interest on the principal amount of the loan being prepaid discounted using a U.S. Treasury rate over (ii) the outstanding principal balance of the loan. Subsequent to September 28, 2024, the outstanding principal balance may be prepaid in an amount equal to the outstanding principal balance plus accrued interest. On March 25, 2022, McLean SFR entered into a waiver agreement with the lender that waived any prepayment fee determined in accordance with the prior sentence on the portion of outstanding loan balance prepaid with the sale proceeds from the sale of 371 SFR properties consummated on August 19, 2022 in exchange for a one-time waiver fee of 0.80% of the outstanding principal balance prepaid (for further information, see "Note 7. Investments in SFR Properties").

The loan is secured by a first priority interest in all the assets of McLean SFR and a first priority pledge of the equity interest of McLean SFR. If the outstanding principal balance of the loan is greater than 74% of the fair value of the eligible collateral, McLean SFR is required to either pledge additional collateral or prepay the loan in an amount so that the outstanding principal balance does not exceed 74% of the fair value of the eligible collateral. Under the terms of the loan agreement, if McLean SFR does not maintain a

minimum debt service coverage ratio for a specified time period, then all available cash of McLean SFR will be held as additional collateral for the loan amount until the minimum debt service coverage ratio is met. The obligations under the loan agreement may become recourse to Arlington Asset upon the occurrence of certain enumerated acts committed by McLean SFR or Arlington Asset. The loan agreement contains a minimum net worth financial covenant of Arlington Asset.

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Derivative Instruments

9 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

Note 10. Derivative Instruments

In the normal course of its operations, the Company is a party to financial instruments that are accounted for as derivative instruments. Derivative instruments are recorded at fair value as either “other assets” or “other liabilities” in the consolidated balance sheets, with all periodic changes in fair value reflected as a component of “investment and derivative gain (loss), net” in the consolidated statements of comprehensive income. Cash receipts or payments related to derivative instruments are classified as investing activities within the consolidated statements of cash flows.

Types and Uses of Derivative Instruments

Interest Rate Hedging Instruments

The Company is party to interest rate hedging instruments that are intended to economically hedge changes, attributable to changes in benchmark interest rates, in certain MBS fair values and future interest cash flows on the Company’s short-term financing arrangements. Interest rate hedging instruments may include centrally cleared interest rate swaps, exchange-traded instruments, such as U.S. Treasury note futures, Eurodollar futures, interest rate swap futures and options on futures, and non-exchange-traded instruments such as options on agency MBS. While the Company uses its interest rate hedging instruments to economically hedge a portion of its interest rate risk, it has not designated such contracts as hedging instruments for financial reporting purposes.

The Company exchanges cash “variation margin” with the counterparties to its interest rate hedging instruments at least on a daily basis based upon daily changes in fair value as measured by the Chicago Mercantile Exchange (“CME”), the central clearinghouse through which those instruments are cleared. In addition, the CME requires market participants to deposit and maintain an “initial margin” amount which is determined by the CME and is generally intended to be set at a level sufficient to protect the CME from the maximum estimated single-day price movement in that market participant’s contracts. However, futures commission merchants may require “initial margin” in excess of the CME’s requirement. Receivables recognized for the right to reclaim cash initial margin posted in respect of interest rate hedging instruments are included in the line item “deposits” in the accompanying consolidated balance sheets.

The daily exchange of variation margin associated with a centrally cleared or exchange-traded hedging instrument is legally characterized as the daily settlement of the instrument itself, as opposed to a pledge of collateral. Accordingly, the Company accounts for the daily receipt or payment of variation margin associated with its interest rate swaps and futures as a direct reduction to the carrying value of the derivative asset or liability, respectively. The carrying amount of interest rate swaps and futures reflected in the Company’s consolidated balance sheets is equal to the unsettled fair value of such instruments; because variation margin is exchanged on a one-day lag, the unsettled fair value of such instruments generally represents the change in fair value that occurred on the last day of the reporting period.

To-Be-Announced Agency MBS Transactions, Including “Dollar Rolls”

In addition to interest rate hedging instruments that are used for interest rate risk management, the Company is a party to derivative instruments that economically serve as investments, such as forward commitments to purchase fixed-rate “pass-through” agency MBS on a non-specified pool basis, which are known as to-be-announced (“TBA”) securities. A TBA security is a forward commitment for the purchase or sale of a fixed-rate agency MBS at a predetermined price, face amount, issuer, coupon, and stated maturity for settlement on an agreed upon future date. The specific agency MBS that will be delivered to satisfy the TBA trade is not known at the inception of the trade. The specific agency MBS to be delivered is determined 48 hours prior to the settlement date. The Company accounts for TBA securities as derivative instruments because the Company cannot assert that it is probable at inception and throughout the term of an individual TBA commitment that its settlement will result in physical delivery of the underlying agency MBS, or the individual TBA commitment will not settle in the shortest time period possible.

The Company’s agency MBS investment portfolio may include net purchase (or “net long”) positions in TBA securities, which are primarily the result of executing sequential series of “dollar roll” transactions. The Company executes dollar roll transactions as a means of investing in and financing non-specified fixed-rate agency MBS. Such transactions involve effectively delaying (or “rolling”) the settlement of a forward purchase of a TBA agency MBS by entering into an offsetting sale with the same counterparty prior to the settlement date, net settling the “paired-off” positions in cash, and contemporaneously entering, with the same counterparty, another forward purchase of a TBA agency MBS of the same characteristics for a later settlement date. TBA securities purchased for a forward settlement month are generally priced at a discount relative to TBA securities sold for settlement in the

current month. This discount, often referred to as the dollar roll “price drop,” reflects compensation for the net interest income (interest income less financing costs) that is foregone as a result of relinquishing beneficial ownership of the MBS for the duration of the dollar roll (also known as “dollar roll income”). By executing a sequential series of dollar roll transactions, the Company is able to create the economic experience of investing in an agency MBS, financed with a repurchase agreement, over a period of time. Forward purchases and sales of TBA securities are accounted for as derivative instruments in the Company’s financial statements. Accordingly, dollar roll income is recognized as a component of “investment and derivative gain (loss), net” along with all other periodic changes in the fair value of TBA commitments.

In addition to transacting in net long positions in TBA securities for investment purposes, the Company may also, from time to time, transact in net sale (or “net short”) positions in TBA securities for the purpose of economically hedging a portion of the sensitivity of the fair value of the Company’s investments in agency MBS to changes in interest rates.

In addition to TBA transactions, the Company may, from time to time, enter into commitments to purchase or sell specified agency MBS that do not qualify as regular-way security trades. Such commitments are also accounted for as derivative instruments.

Under the terms of commitments to purchase or sell TBAs or specified agency MBS, the daily exchange of variation margin may occur based on changes in the fair value of the underlying agency MBS if a party to the transaction demands it. Receivables recognized for the right to reclaim cash collateral posted by the Company in respect of agency MBS purchase or sale commitments is included in the line item “deposits” in the accompanying consolidated balance sheets. Liabilities recognized for the obligation to return cash collateral received by the Company in respect of agency MBS purchase or sale commitments is included in the line item “other liabilities” in the accompanying consolidated balance sheets.

Derivative Instrument Population and Fair Value

The following table presents the fair value of the Company’s derivative instruments as of the dates indicated:

	September 30, 2022					December 31, 2021
	Assets		Liabilities			Assets		Liabilities
Interest rate swaps	$	260	$	—		$	—	$	(107	)
10-year U.S. Treasury note futures		—		—			16		—
Options on U.S. Treasury note futures		—		—			4		—
TBA commitments		4,162		(139	)		230		(121	)
Total	$	4,422	$	(139	)	$	250	$	(228	)

Interest Rate Swaps

The Company’s LIBOR based interest rate swap agreements represent agreements to make semiannual interest payments based upon a fixed interest rate and receive quarterly variable interest payments based upon the prevailing three-month LIBOR as of the preceding reset date. The Company’s Secured Overnight Financing Rate (“SOFR”) based interest rate swap agreements represent agreements to make annual interest payments based upon a fixed interest rate and receive annual variable interest payments based upon the daily SOFR over the preceding annual period.

The following table presents information about the Company’s interest rate swap agreements that were in effect as of September 30, 2022:

			Weighted-average:
	Notional Amount		Fixed Pay Rate			Variable Receive Rate			Net Receive (Pay) Rate			Remaining Life (Years)		Fair Value
Years to maturity:
Less than 3 years	$	125,000		1.82	%		2.78	%		0.96	%		1.6	$	52
3 to less than 10 years		70,000		2.53	%		3.11	%		0.58	%		5.4		208
Total / weighted-average	$	195,000		2.07	%		2.90	%		0.83	%		3.0	$	260

The following table presents information about the Company’s interest rate swap agreements that were in effect as of December 31, 2021:

			Weighted-average:
	Notional Amount		Fixed Pay Rate			Variable Receive Rate			Net Receive (Pay) Rate			Remaining Life (Years)		Fair Value
Years to maturity:
Less than 3 years	$	50,000		0.71	%		0.13	%		(0.58	)%		1.8	$	(5	)
3 to less than 10 years		100,000		0.90	%		0.13	%		(0.77	)%		6.6		(102	)
Total / weighted-average	$	150,000		0.84	%		0.13	%		(0.71	)%		5.0	$	(107	)

U.S. Treasury Note Futures

The Company may purchase (“long”) or sell (“short”) exchange-traded U.S. Treasury note futures with the objective of economically hedging a portion of its interest rate risk. Upon the maturity date of these futures contracts, the Company has the option to either net settle each contract in cash in an amount equal to the difference between the then-current fair value of the underlying U.S. Treasury note and the contractual sale price inherent to the futures contract, or to physically settle the contract by purchasing or delivering the underlying U.S. Treasury note.

As of September 30, 2022, the Company had no outstanding positions of U.S. Treasury note futures. As of December 31, 2021, the Company held long positions of 10-year U.S. Treasury note futures with an aggregate notional amount of $25,000 with a maturity date in March 2022.

Options on U.S. Treasury Note Futures

The Company may purchase or sell exchange-traded options on U.S. Treasury note futures contracts with the objective of economically hedging a portion of the sensitivity of its investments in agency MBS to significant changes in interest rates. The Company may purchase put or call options which provide the Company with the right to sell to a counterparty or purchase from a counterparty U.S. Treasury note futures, and the Company may also write put or call options that provide a counterparty with the option to sell to the Company or buy from the Company U.S. Treasury note futures. The options may be exercised at any time prior to their expiry, and if exercised, may be net settled in cash or through physical receipt or delivery of the underlying futures contracts.

As of September 30, 2022, the Company had no outstanding options on U.S. Treasury note futures contracts.

Information about the Company’s outstanding options on 10-year U.S. Treasury note futures contracts as of December 31, 2021 is as follows:

	Notional Amount Long/(Short)		Weighted-average Strike Price		Implied Strike Rate (1)			Net Fair Value
Purchased call options:
January 2022 expiration	$	25,000		134.5		1.00	%	$	4

(1)The implied strike rate is estimated based upon the weighted average strike price per contract and the price of an equivalent 10-year U.S. Treasury note futures contract.

TBA Commitments

The following tables present information about the Company’s TBA commitments as of the dates indicated:

	September 30, 2022
	Notional Amount: Net Purchase (Sale) Commitment			Contractual Forward Price			Market Price			Fair Value
3.5% 30-year MBS sale commitments	$	(60,000	)	$	(56,803	)	$	(53,897	)	$	2,906
4.0% 30-year MBS sale commitments		(100,000	)		(93,359	)		(92,680	)		679
4.5% 30-year MBS sale commitments		(95,000	)		(90,859	)		(90,421	)		438
Total TBA commitments, net	$	(255,000	)	$	(241,021	)	$	(236,998	)	$	4,023

	December 31, 2021
	Notional Amount: Net Purchase (Sale) Commitment			Contractual Forward Price			Market Price			Fair Value
2.5% 30-year MBS purchase commitments	$	225,000		$	229,043		$	229,148		$	105
2.5% 30-year MBS sale commitments		(225,000	)		(229,152	)		(229,148	)		4
Total TBA commitments, net	$	—		$	(109	)	$	—		$	109

Derivative Instrument Gains and Losses

The following tables provide information about the derivative gains and losses recognized within the periods indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Interest rate derivatives:
Interest rate swaps:
Net interest income (expense) (1)	$	258		$	(379	)	$	(315	)	$	(2,276	)
Unrealized (losses) gains, net		(1,420	)		(3,951	)		5,277			3,597
Gains (losses) realized upon early termination, net		5,238			1,149			8,687			(122	)
Total interest rate swap gains (losses), net		4,076			(3,181	)		13,649			1,199
U.S. Treasury note futures, net		—			872			(782	)		3,582
Options on U.S. Treasury note futures, net		—			—			(4	)		(20	)
Total interest rate derivative gains (losses), net		4,076			(2,309	)		12,863			4,761
TBA commitments:
TBA dollar roll (expense) income (2)		(421	)		1,064			682			3,678
Other gains (losses) on TBA commitments, net		2,998			(2,082	)		(1,971	)		(12,204	)
Total gains (losses) on TBA commitments, net		2,577			(1,018	)		(1,289	)		(8,526	)
Total derivative gains (losses), net	$	6,653		$	(3,327	)	$	11,574		$	(3,765	)

(1)Represents the periodic net interest settlement incurred during the period (often referred to as “net interest carry”). Also includes “price alignment interest” income earned or expense incurred on cumulative variation margin paid or received, respectively, associated with centrally cleared interest rate swap agreements.

(2)Represents the price discount of forward-settling TBA purchases (sales) relative to a contemporaneously executed “spot” TBA sale (purchase), which economically equates to net interest income (expense) that is earned (incurred) ratably over the period beginning on the settlement date of the sale (purchase) and ending on the settlement date of the forward-settling purchase (sale).

Derivative Instrument Activity

The following tables summarize the volume of activity, in terms of notional amount, related to derivative instruments for the periods indicated:

	For the Three Months Ended September 30, 2022
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	230,000	$	90,000	$	—		$	(125,000	)	$	195,000
TBA commitments, net		155,000		535,000		(435,000	)		—			255,000

	For the Three Months Ended September 30, 2021
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	525,000	$	—	$	—		$	(310,000	)	$	215,000
10-year U.S. Treasury note futures		45,000		—		(45,000	)		—			—
TBA commitments, net		—		1,125,000		(1,100,000	)		—			25,000

	For the Nine Months Ended September 30, 2022
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	150,000	$	235,000	$	—		$	(190,000	)	$	195,000
10-year U.S. Treasury note futures		25,000		50,000		(50,000	)		(25,000	)		—
Purchased call options on 10-year U.S.   Treasury note futures		25,000		—		(25,000	)		—			—
TBA commitments, net		—		1,290,000		(1,035,000	)		—			255,000

	For the Nine Months Ended September 30, 2021
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	275,000	$	450,000	$	—		$	(510,000	)	$	215,000
2-year U.S. Treasury note futures		—		50,000		(50,000	)		—			—
10-year U.S. Treasury note futures		—		540,100		(365,000	)		(175,100	)		—
Purchased call options on 10-year U.S.   Treasury note futures		—		65,200		(65,200	)		—			—
TBA commitments, net		—		2,490,000		(2,465,000	)		—			25,000

Cash Collateral Posted and Received for Derivative and Other Financial Instruments

The following table presents information about the cash collateral posted by the Company in respect of its derivative and other financial instruments, which is included in the line item “deposits” in the accompanying consolidated balance sheets, for the dates indicated:

	September 30, 2022		December 31, 2021
Cash collateral posted for:
Interest rate swaps (cash initial margin)	$	3,228	$	4,174
U.S. Treasury note futures (cash initial margin)		—		375
Total cash collateral posted, net	$	3,228	$	4,549

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Offsetting of Financial Assets and Liabilities

9 Months Ended

Sep. 30, 2022

Offsetting [Abstract]

Offsetting of Financial Assets and Liabilities

Note 11. Offsetting of Financial Assets and Liabilities

The agreements that govern certain of the Company’s derivative instruments and collateralized short-term financing arrangements provide for a right of setoff in the event of default or bankruptcy with respect to either party to such transactions. The Company presents derivative assets and liabilities as well as collateralized short-term financing arrangements on a gross basis.

Receivables recognized for the right to reclaim cash initial margin posted in respect of interest rate derivative instruments are included in the line item “deposits” in the accompanying consolidated balance sheets.

The daily exchange of variation margin associated with a centrally cleared or exchange-traded derivative instrument is legally characterized as the daily settlement of the derivative instrument itself, as opposed to a pledge of collateral. Accordingly, the Company accounts for the daily receipt or payment of variation margin associated with its interest rate swaps and futures as a direct reduction to the carrying value of derivative asset or liability, respectively. The carrying amount of interest rate swaps and futures reflected in the Company’s consolidated balance sheets is equal to the unsettled fair value of such instruments; because variation margin is exchanged on a one-day lag, the unsettled fair value of such instruments generally represents the change in fair value that occurred on the last day of the reporting period.

The following tables present information, as of the dates indicated, about the Company’s derivative instruments, short-term borrowing arrangements, and associated collateral, including those subject to master netting (or similar) arrangements:

	As of September 30, 2022
	Gross Amount Recognized		Amount Offset in the Consolidated Balance Sheets		Net Amount Presented in the Consolidated Balance Sheets		Gross Amount Not Offset in the Consolidated Balance Sheets					Net Amount
							Financial Instruments (1)			Cash Collateral (2)
Assets:
Derivative instruments:
Interest rate swaps	$	260	$	—	$	260	$	—		$	—	$	260
TBA commitments		4,162		—		4,162		(139	)		—		4,023
Total derivative instruments		4,422		—		4,422		(139	)		—		4,283
Total assets	$	4,422	$	—	$	4,422	$	(139	)	$	—	$	4,283
Liabilities:
Derivative instruments:
TBA commitments	$	139	$	—	$	139	$	(139	)	$	—	$	—
Total derivative instruments		139		—		139		(139	)		—		—
Repurchase agreements		429,910		—		429,910		(429,910	)		—		—
Total liabilities	$	430,049	$	—	$	430,049	$	(430,049	)	$	—	$	—

	As of December 31, 2021
	Gross Amount Recognized		Amount Offset in the Consolidated Balance Sheets		Net Amount Presented in the Consolidated Balance Sheets		Gross Amount Not Offset in the Consolidated Balance Sheets						Net Amount
							Financial Instruments (1)			Cash Collateral (2)
Assets:
Derivative instruments:
TBA commitments	$	230	$	—	$	230	$	(105	)	$	—		$	125
10-year U.S. Treasury note futures		16		—		16		—			—			16
Options on U.S. Treasury note futures		4		—		4		—			—			4
Total derivative instruments		250		—		250		(105	)		—			145
Total assets	$	250	$	—	$	250	$	(105	)	$	—		$	145
Liabilities:
Derivative instruments:
Interest rate swaps	$	107	$	—	$	107	$	—		$	(107	)	$	—
TBA commitments		121		—		121		(105	)		—			16
Total derivative instruments		228		—		228		(105	)		(107	)		16
Repurchase agreements		446,624		—		446,624		(446,624	)		—			—
Total liabilities	$	446,852	$	—	$	446,852	$	(446,729	)	$	(107	)	$	16

(1)Does not include the fair value amount of financial instrument collateral pledged in respect of repurchase agreements that exceeds the associated liability presented in the consolidated balance sheets.

(2)Does not include the amount of cash collateral pledged in respect of derivative instruments and repurchase agreements that exceeds the associated liability presented in the consolidated balance sheets.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 12. Fair Value Measurements

Fair Value of Financial Instruments

The accounting principles related to fair value measurements define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial Accounting Standards Board Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, giving the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3) as described below:

Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible by the Company at the measurement date;

Level 2 Inputs - Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and

Level 3 Inputs - Unobservable inputs for the asset or liability, including significant judgments made by the Company about the assumptions that a market participant would use.

The Company measures the fair value of the following assets and liabilities:

Investments in Financial Assets

Agency MBS - The Company’s investments in agency MBS are classified within Level 2 of the fair value hierarchy. Inputs to fair value measurements of the Company’s investments in agency MBS include price estimates obtained from third-party pricing services. In determining fair value, third-party pricing services use a market approach. The inputs used in the fair value measurements performed by the third-party pricing services are based upon readily observable transactions for securities with similar characteristics (such as issuer/guarantor, coupon rate, stated maturity, and collateral pool characteristics) occurring on the measurement date. The Company makes inquiries of the third-party pricing sources and reviews their documented valuation methodologies to understand the significant inputs and assumptions used to determine prices. The Company reviews the various third-party fair value estimates and performs procedures to validate their reasonableness, including comparison to recent trading activity for similar securities and an overall review for consistency with market conditions observed as of the measurement date.

Credit securities – The Company's investments in commercial MBS are classified within Level 2 of the fair value hierarchy. Inputs to fair value measurements of the Company's investments in commercial MBS include quoted prices for similar assets in recent market transactions and estimates obtained from third-party sources including pricing services and dealers. In determining fair value, third-party pricing sources use a market approach. The inputs used in the fair value measurements performed by third-party pricing sources are based upon observable transactions for securities with similar characteristics. The Company reviews the third-party fair value estimates and performs procedures to validate their reasonableness, including comparisons to recent trading activity observed for similar securities as well as an internally derived discounted future cash flow measurement. The Company’s investments in a non-agency MBS collateralized by a pool of business purpose residential mortgage loans and ABS collateralized by residential solar panel loans are classified within Level 3 of the fair value hierarchy.

To measure the fair value of the Company’s non-agency MBS investment secured by a pool of business purpose residential mortgage loans, the Company uses an income approach by preparing an estimate of the present value of the amount and timing of the cash flows expected to be collected from the security over its expected remaining life. To prepare the estimate of cash flows expected to be collected, the Company uses significant judgment to develop assumptions about the future performance of the pool of business purpose residential mortgage loans that serve as collateral, including loan-level probabilities of default and loss-given-default. As of September 30, 2022 and December 31, 2021, the remaining population of business purpose residential mortgage loans serving as collateral to the Company's non-agency MBS investment represented less than 5% and 10% of the original collateral pool, respectively. Because the repayment of business purpose residential mortgage loans is often largely based on the ability of the borrower to sell the mortgaged property or to convert the property for rental purposes and obtain refinancing in the form of a longer-term loan, relatively high delinquency and default rates are common and expected attributes of this asset class. The following table presents the weighted-average of the significant inputs to the fair value measurement of the Company’s non-agency MBS secured by business purpose residential mortgage loans as of dates indicated:

	September 30, 2022			December 31, 2021
Probability of default		18.2	%		77.7	%
Loss-given-default		18.4	%		15.8	%

Inputs to fair value measurements of the Company’s investments in ABS collateralized by residential solar panel loans includes quoted prices obtained from dealers and, when available, observable market information for the same or similar securities. In determining fair value, dealers may use a market approach or an income approach, depending upon the type and level of relevant market information available as of the measurement date. The significant inputs used in the fair value measurements performed by dealers are often unobservable as ABS collateralized by residential solar panel loans trade infrequently. The Company reviews the fair value estimates obtained from dealers and performs procedures to validate their reasonableness, including comparisons to an internally derived discounted future cash flow measurement and, when available, recent trading activity observed for similar securities.

Loans – The Company’s commercial mortgage loan investment is classified within Level 3 of the fair value hierarchy. To measure the fair value of its mortgage loan investment, the Company uses an income approach by preparing an estimate of the present value of the expected future cash flows of the loan over its expected remaining life, discounted at a current market rate. The significant unobservable inputs to the fair value measurement of the Company’s mortgage loan investment are the estimated

probability of default and the discount rate, which is based on current market yields and interest rate spreads for a similar loan. As of September 30, 2022, the estimated probability of default and discount rate for the Company’s mortgage loan investment were 0% and 6.4%, respectively. As of December 31, 2021, the estimated probability of default and discount rate for the Company’s mortgage loan investment were 0% and 5.6%, respectively.

Mortgage loans and secured debt of consolidated VIEs – The Company has elected to apply a fair value measurement practical expedient permitted by GAAP to measure the fair value of the mortgage loans and debt obligations of its consolidated VIEs. The fair value measurement practical expedient is permitted to be applied to consolidated “collateralized financing entities,” which are VIEs for which the financial liabilities of the VIE have contractual recourse solely to the financial assets of the VIE.

As of September 30, 2022 and December 31, 2021, pursuant to the practical expedient, the Company measured the fair value of both the mortgage loans and the debt obligations of its consolidated VIE of business purpose residential mortgage loans based upon the fair value of the mortgage loans of the VIE. As of December 31, 2021, the senior debt obligations of the consolidated VIE had been fully extinguished and only the subordinate debt obligation of the consolidated VIE remained. The business purpose residential mortgage loans and subordinate debt obligation of the consolidated VIE are classified within Level 3 of the fair value hierarchy. To measure the fair value of the business purpose residential mortgage loans of the consolidated VIE as of September 30, 2022 and December 31, 2021, the Company used significant judgment to develop assumptions about the future performance of each business purpose residential mortgage loan, which included determining loan-level probabilities of default and loss-given-default. As of September 30, 2022 and December 31, 2021, the remaining population of business purpose residential mortgage loans represented less than 5% and 10% of the original collateral pool, respectively. Because the repayment of business purpose residential mortgage loans is often largely based on the ability of the borrower to sell the mortgaged property or to convert the property for rental purposes and obtain refinancing in the form of a longer-term loan, relatively high delinquency and default rates are common and expected attributes of this asset class. The following table presents the weighted-average of the significant inputs to the fair value measurement of the business purpose residential mortgage loans of the Company’s consolidated VIE as of the periods indicated:

	September 30, 2022			December 31, 2021
Probability of default		50.3	%		66.2	%
Loss-given-default		9.6	%		8.6	%

As of September 30, 2022, the Company measured the fair value of both the residential mortgage loans and the debt obligations of its consolidated VIE of residential mortgage loans based upon the fair value of the debt obligations as the fair value of the debt securities issued by the VIE were more observable to the Company than the fair value of the underlying mortgage loans.

The senior and mezzanine debt obligations of the consolidated VIE of residential mortgage loans are classified within Level 2 of the fair value hierarchy. Inputs to the fair value measurements of the senior and mezzanine debt obligations of the consolidated VIE include quoted prices for similar assets in recent market transactions and estimates obtained from third-party pricing sources, including pricing services and dealers. In determining fair value, third-party pricing sources use a market approach. The inputs used in the fair value measurements performed by third-party pricing sources were based upon observable transactions for securities with similar characteristics.

The residential mortgage loans and the subordinate and excess interest-only debt obligations of the consolidated VIE of residential mortgage loans (held by the Company as investments and eliminated against the associated debt of the VIE in consolidation) are classified within Level 3 of the fair value hierarchy. To measure the fair value of the subordinate and excess interest-only debt obligations of the consolidated VIE of residential mortgage loans, the Company uses an income approach by preparing an estimate of the present value of the amount and timing of the cash flows expected to be collected from each security over its expected remaining life. To prepare the estimate of cash flows expected to be collected, the Company uses significant judgment to develop assumptions about the future performance of the pool of residential mortgage loans that serve as collateral, including assumptions about the timing and amount of credit losses and prepayments. The significant unobservable inputs to the fair value measurement include the estimated rate of prepayment, rate of default and loss-given-default for the underlying pool of mortgage loans as well as the discount rate, which represents a market participant’s current required rate of return for a similar instrument. The following table presents the weighted-average of the significant inputs to the fair value measurement of the subordinate and excess interest-only debt obligations of its consolidated VIE of residential mortgage loans as of September 30, 2022:

	Subordinate Debt Obligation			Excess Interest-Only Debt Obligations
Annualized voluntary prepayment rate		17.3	%		17.3	%
Annualized default rate		0.5	%		0.5	%
Loss-given-default		17.5	%		17.5	%
Discount rate		7.8	%		17.7	%

MSR financing receivables – The Company’s MSR financing receivables are classified within Level 3 of the fair value hierarchy. The Company uses a nationally recognized, independent third-party mortgage analytics and valuation firm to estimate the fair value of the underlying MSRs from which the Company’s MSR financing receivables primarily derive their value. The third-party valuation firm estimates the fair value of the underlying MSRs using a discounted cash flow analysis using their proprietary prepayment models and market analysis. The Company corroborates the third-party valuation firm’s estimate of the fair value of the underlying MSRs and evaluates the estimate for reasonableness. The significant unobservable inputs to the fair value measurement of the underlying MSRs include the following:

•the discount rate, which represents a market participant’s current required rate of return for similar MSRs;

•expected rates of prepayment within the serviced pools of mortgage loans; and

•annual per-loan cost of servicing.

The following table presents the significant unobservable inputs to the fair value measurement of the MSRs underlying the Company’s MSR financing receivables as of the periods indicated:

	September 30, 2022			December 31, 2021
Discount rate		8.5	%		9.0	%
Annualized prepayment rate		7.0	%		10.1	%
Annual per-loan cost of servicing (current loans)	$	65.00		$	65.00

Pursuant to the Company’s MSR financing receivable arrangements, upon the consummation of three-year performance periods ending December 31, 2023 and April 1, 2024, the Company’s mortgage servicing counterparty is entitled to an incentive fee payment equal to a percentage of the total return of the underlying MSRs in excess of a hurdle rate of return. Accordingly, the fair value of the Company’s MSR financing receivables reflects the present value of any expected incentive fee payment that would be owed to its counterparty. The present value of the expected incentive fee payment is estimated based upon the timing and amount of capital contributions from (and cash distributions to) the Company to (from) its mortgage servicing counterparty to date as well as the future expected cash flows from the MSR financing receivables over the remaining performance periods, which is derived from the current fair value of the underlying reference MSRs. As of September 30, 2022 and December 31, 2021, the present value of the expected incentive fee payment reflected in fair value of the Company’s MSR financing receivables was $13,057 and $3,820, respectively.

Derivative instruments

Exchange-traded derivative instruments - Exchange-traded derivative instruments, which include U.S. Treasury note futures, Eurodollar futures, interest rate swap futures, and options on futures, are classified within Level 1 of the fair value hierarchy as they are measured using quoted prices for identical instruments in liquid markets.

Interest rate swaps - Interest rate swaps are classified within Level 2 of the fair value hierarchy. The fair values of the Company’s centrally cleared interest rate swaps are measured using the daily valuations reported by the clearinghouse through which the instrument was cleared. In performing its end-of-day valuations, the clearinghouse constructs forward interest rate curves (for example, three-month LIBOR or SOFR forward rates) from its specific observations of that day’s trading activity. The clearinghouse uses the applicable forward interest rate curve to develop a market-based forecast of future remaining contractually required cash flows for each interest rate swap. Each market-based cash flow forecast is then discounted using the SOFR curve (sourced from the Federal Reserve Bank of New York) to determine a net present value amount which represents the instrument’s fair value.

Forward-settling purchases and sales of TBA securities – Forward-settling purchases and sales of TBA securities are classified within Level 2 of the fair value hierarchy. The fair value of each forward-settling TBA contract is measured using price estimates obtained from a third-party pricing service, which are based upon readily observable transaction prices occurring on the measurement date for forward-settling contracts to buy or sell TBA securities with the same guarantor, contractual maturity, and coupon rate for delivery on the same forward settlement date as the commitment under measurement.

Other

Long-term unsecured debt - As of September 30, 2022 and December 31, 2021, the carrying value of the Company’s long-term unsecured debt was $86,302 and $85,994, respectively, net of unamortized debt issuance costs, and consists of Senior Notes and trust preferred debt issued by the Company. The Company’s estimate of the fair value of long-term unsecured debt is $79,670 and $84,821 as of September 30, 2022 and December 31, 2021, respectively. The Company’s Senior Notes, which are publicly traded on the New York Stock Exchange, are classified within Level 1 of the fair value hierarchy. Trust preferred debt is classified within Level 2 of the fair value hierarchy as the fair value is estimated based on the quoted prices of the Company’s publicly traded Senior Notes.

Long-term debt secured by single-family properties – As of September 30, 2022 and December 31, 2021, the carrying value of the Company’s long-term debt secured by single-family properties was $56,801 and $39,178, respectively, net of unamortized debt issuance costs. As of September 30, 2022 and December 31, 2021, the Company’s estimate of the fair value of its long-term debt secured by single-family properties was $49,438 and $38,562, respectively. The Company’s long-term debt secured by single-family properties is classified within Level 3 of the fair value hierarchy.

Investments in equity securities of publicly-traded companies – As of September 30, 2022 and December 31, 2021, the Company had investments in equity securities of publicly-traded companies at fair value of $352 and $5,267, respectively, which is included in the line item “other assets” in the accompanying consolidated balance sheets. Investments in publicly traded stock are classified within Level 1 of the fair value hierarchy as their fair value is measured based on unadjusted quoted prices in active exchange markets for identical assets.

Investments in equity securities of non-public companies and investment funds – As of September 30, 2022 and December 31, 2021, the Company had investments in equity securities of non-public companies and investment funds measured at fair value of $5,248 and $7,388, respectively, which are included in the line item “other assets” in the accompanying consolidated balance sheets.

Investments in equity securities of non-public companies and investment funds are classified within Level 3 of the fair value hierarchy. The fair values of the Company’s investments in equity securities of non-public companies and investment funds are not readily determinable. Accordingly, the Company estimates fair value by estimating the enterprise value of the investee which it then allocates to the investee’s securities in the order of their preference relative to one another. To estimate the enterprise value of the investee, the Company uses traditional valuation methodologies based on income and market approaches, including the consideration of recent investments in, or tender offers for, the equity securities of the investee, a discounted cash flow analysis and a comparable guideline public company valuation. The primary unobservable inputs used in estimating the fair value of an equity security of a non-public company include (i) a stock price to net asset multiple for similar public companies that is applied to the entity’s net assets, (ii) a discount factor for lack of marketability and control, and (iii) a cost of equity discount rate, used to discount to present value the equity cash flows available for distribution and the terminal value of the entity. As of September 30, 2022, the stock price to net asset multiple for similar public companies, the discount factor for lack of marketability and control, and the cost of equity discount rate used as inputs were 97 percent, 15 percent, and 16 percent, respectively. As of December 31, 2021, the stock price to net asset multiple for similar public companies, the discount factor for lack of marketability and control, and the cost of equity discount rate used as inputs were 95 percent, 15 percent, and 16 percent, respectively. For its investments in investment funds, the Company estimates fair value based upon the investee’s net asset value per share.

Financial assets and liabilities for which carrying value approximates fair value - Cash and cash equivalents, restricted cash, deposits, receivables, repurchase agreements, payables, and other assets (aside from those previously discussed) and liabilities are generally reflected in the consolidated balance sheets at their cost, which, due to the short-term nature of these instruments and their limited inherent credit risk, approximates fair value.

Fair Value Hierarchy

Financial Instruments Measured at Fair Value on a Recurring Basis

The following tables set forth financial instruments measured at fair value by level within the fair value hierarchy as of September 30, 2022 and December 31, 2021. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	September 30, 2022
	Total		Level 1		Level 2		Level 3
Financial assets:
Agency MBS	$	445,122	$	—	$	445,122	$	—
MSR financing receivables		164,585		—		—		164,585
Loans		29,375		—		—		29,375
Credit securities		115,783		—		108,330		7,453
Mortgage loans of consolidated VIEs		203,456		—		—		203,456
Derivative assets		4,422		—		4,422		—
Other assets		5,600		352		—		5,248
Financial liabilities:
Secured debt of consolidated VIEs		182,336		—		172,012		10,324
Derivative liabilities		139		—		139		—

	December 31, 2021
	Total		Level 1		Level 2		Level 3
Financial assets:
Agency MBS	$	483,927	$	—	$	483,927	$	—
MSR financing receivables		125,018		—		—		125,018
Loans		29,697		—		—		29,697
Credit securities		26,222		—		—		26,222
Mortgage loans of consolidated VIE		7,442		—		—		7,442
Derivative assets		250		20		230		—
Other assets		12,655		5,267		—		7,388
Financial liabilities:
Secured debt of consolidated VIE		508		—		—		508
Derivative liabilities		228		—		228		—

Level 3 Financial Assets and Liabilities

The table below sets forth an attribution of the change in the fair value of the Company’s Level 3 financial assets that are measured at fair value on a recurring basis for the periods indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Beginning balance	$	393,501		$	206,729		$	195,767		$	166,428
Net (loss) gain included in "Investment and derivative    gain (loss), net"		(13,199	)		4,504			(11,583	)		9,639
Additions from consolidation of VIEs		—			—			276,594			—
Transfers to real estate owned by consolidated VIE		(78	)		—			(277	)		—
Purchases		40,474			35,601			61,693			128,614
Sales		—			—			(12,406	)		(1,662	)
Payments, net		(14,671	)		(68,810	)		(110,052	)		(128,350	)
Accretion (amortization) of discount (premium), net		4,090			2,411			10,381			5,766
Ending balance	$	410,117		$	180,435		$	410,117		$	180,435
Net unrealized (losses) gains included in earnings for the    period for Level 3 assets still held at the reporting date	$	(13,199	)	$	4,504		$	(10,552	)	$	9,719

The table below sets forth an attribution of the change in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis for the periods indicated:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2022			2021		2022			2021
Beginning balance	$	11,521		$	640	$	508		$	576
Net (gain) loss included in "Investment and derivative   gain (loss), net"		(808	)		9		(2,140	)		(1	)
Additions from consolidation of VIEs		—			—		14,278			—
Payments, net		(374	)		3		(2,170	)		3
(Amortization) accretion of (premium) discount, net		(15	)		—		(152	)		74
Ending balance	$	10,324		$	652	$	10,324		$	652
Net unrealized (gains) losses included in earnings for the    period for Level 3 liabilities still held at the reporting date	$	(808	)	$	9	$	(2,140	)	$	(1	)

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Income Taxes

9 Months Ended

Sep. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 13. Income Taxes

The Company has elected to be taxed as a REIT under the Internal Revenue Code commencing upon filing its tax return for its taxable year ended December 31, 2019. As a REIT, the Company is required to distribute annually 90% of its REIT taxable income. So long as the Company continues to qualify as a REIT, it will generally not be subject to U.S. federal or state corporate income taxes on its taxable income to the extent that it distributes all of its annual taxable income to its shareholders on a timely basis. At present, it

is the Company’s intention to distribute 100% of its taxable income, although the Company will not be required to do so. The Company intends to make distributions of its REIT taxable income within the time limits prescribed by the Internal Revenue Code, which may extend into the subsequent taxable year. Accordingly, the Company does not expect to incur an income tax liability on its REIT taxable income.

As of September 30, 2022, the Company had estimated federal net operating loss (“NOL”) carryforwards of $162,828 that can be used to offset future taxable ordinary income and reduce its REIT distribution requirements. NOL carryforwards totaling $14,588 expire in 2028 and NOL carryforwards totaling $148,240 have no expiration period. For the NOL carryforwards that have no expiration period, the Company is limited to utilizing NOL carryforwards to 80% of the taxable income in any one year. As of September 30, 2022, the Company had estimated federal net capital loss (“NCL”) carryforwards of $156,818 that can be used to offset future net capital gains. The scheduled expirations of the Company’s NCL carryforwards are $3,763 in 2022, $110,323 in 2023, $14,187 in 2026 and $28,545 in 2027. The Company’s estimated NOL and NCL carryforwards as of September 30, 2022 are subject to potential adjustments up to the time of filing of the Company’s income tax returns.

The Company and certain subsidiaries have made joint elections to treat such subsidiaries as taxable REIT subsidiaries (“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. As such, each of these TRSs is taxable as a C corporation and subject to federal, state and local income taxes based upon their taxable income. For the three months ended September 30, 2022 and 2021, the Company recognized a provision for income taxes of $1,074 and $436, respectively, on the pre-tax net income of its TRSs. For the nine months ended September 30, 2022 and 2021, the Company recognized a provision for income taxes of $4,163 and $758, respectively, on the pre-tax income of its TRSs.

The Company recognizes uncertain tax positions in the financial statements only when it is more-likely-than-not that the position will be sustained upon examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more-likely-than-not be realized upon settlement. A liability is established for differences between positions taken in a tax return and the financial statements. As of September 30, 2022 and December 31, 2021, the Company assessed the need for recording a provision for any uncertain tax position and has made the determination that such provision is not necessary. If the Company were to incur income tax related interest and penalties, the Company’s policy is to classify them as a component of provision for income taxes.

The Company is subject to examination by the Internal Revenue Service (“IRS”) and state and local authorities in jurisdictions where the Company has significant business operations. The Company’s federal tax returns for 2018 and forward remain subject to examination by the IRS.

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Earnings (Loss) Per Share

9 Months Ended

Sep. 30, 2022

Earnings Per Share [Abstract]

Earnings (Loss) Per Share

Note 14. Earnings (Loss) Per Share

Basic earnings (loss) per share includes no dilution and is computed by dividing net income or loss applicable to common stock by the weighted-average number of common shares outstanding for the respective period. Diluted earnings per share includes the impact of dilutive securities such as unvested shares of restricted stock, restricted stock units, and performance share units. The following table presents the computations of basic and diluted earnings (loss) per share for the periods indicated:

	Three Months Ended September 30,					Nine Months Ended September 30,
(Shares in thousands)	2022		2021			2022			2021
Basic weighted-average common shares outstanding		28,338		31,927			28,973			32,720
Performance share units, unvested restricted stock units,    and unvested restricted stock		575		—			—			—
Diluted weighted-average common shares outstanding		28,913		31,927			28,973			32,720
Net income (loss) available (attributable) to common stock	$	2,756	$	(981	)	$	(1,087	)	$	(15,526	)
Basic earnings (loss) per common share	$	0.10	$	(0.03	)	$	(0.04	)	$	(0.47	)
Diluted earnings (loss) per common share	$	0.10	$	(0.03	)	$	(0.04	)	$	(0.47	)

The diluted loss per share for the nine months ended September 30, 2022 did not include the antidilutive effect of 530,673 shares of unvested shares of restricted stock, restricted stock units, and performance share units. The diluted loss per share for the three and nine months ended September 30, 2021 did not include the antidilutive effect of 315,576 and 312,371 shares of unvested shares of restricted stock, restricted stock units, and performance share units, respectively.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2022

Equity [Abstract]

Stockholders' Equity

Note 15. Stockholders’ Equity

Common Stock

The Company has authorized common share capital of 450,000,000 shares of Class A common stock, par value $0.01 per share, and 100,000,000 shares of Class B common stock, par value $0.01 per share. Holders of the Class A and Class B common stock are entitled to one vote and three votes per share, respectively, on all matters voted upon by the shareholders. Shares of Class B common stock are convertible into shares of Class A common stock on a one-for-one basis at the option of the Company in certain circumstances including either (i) upon sale or other transfer, or (ii) at the time the holder of such shares of Class B common stock ceases to be employed by the Company. As of September 30, 2022 and December 31, 2021, there were no outstanding shares of Class B common stock. The Class A common stock is publicly traded on the New York Stock Exchange under the ticker symbol “AAIC.”

Common Equity Distribution Agreements

On August 10, 2018, the Company entered into separate common equity distribution agreements with equity sales agents JMP Securities LLC, B. Riley FBR, Inc., JonesTrading Institutional Services LLC and Ladenburg Thalmann & Co. Inc. pursuant to which the Company may offer and sell, from time to time, up to 12,597,423 shares of the Company’s Class A common stock.

Pursuant to the common equity distribution agreements, shares of the Company’s common stock may be offered and sold through the equity sales agents in transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, including sales made directly on the NYSE or sales made to or through a market maker other than on an exchange or, subject to the terms of a written notice from the Company, in privately negotiated transactions.

During the three and nine months ended September 30, 2022 and the year ended December 31, 2021, there were no issuances of common stock under the common equity distribution agreements.

As of September 30, 2022, the Company had 11,302,160 shares of Class A common stock available for sale under the common equity distribution agreements.

Common Share Repurchase Program

On July 31, 2020, the Company announced that its Board of Directors authorized a share repurchase program pursuant to which the Company may repurchase up to 18,000,000 shares of Class A common stock (the "Repurchase Program"). Repurchases under the Repurchase Program may be made from time to time on the open market and in private transactions at management’s discretion in accordance with applicable federal securities laws. The timing of repurchases and the exact number of shares of Class A common stock to be repurchased will depend upon market conditions and other factors. The Repurchase Program is funded using the Company’s cash on hand and cash generated from operations. The Repurchase Program has no expiration date and may be suspended or terminated at any time without prior notice.

During the three and nine months ended September 30, 2022, the Company repurchased 472,357 and 2,429,493 shares of Class A common stock for a total purchase price of $1,493 and $8,232, respectively. During the year ended December 31, 2021, the Company repurchased 3,242,371 shares of Class A common stock for a total purchase price of $12,475. As of September 30, 2022, there remain available for repurchase 10,560,785 shares of Class A common stock under the Repurchase Program.

Preferred Stock

The Company has authorized preferred share capital of (i) 100,000 shares designated as Series A Preferred Stock that is unissued; (ii) 2,000,000 shares designated as 7.00% Series B Cumulative Perpetual Redeemable Preferred Stock (the “Series B Preferred Stock”), par value of $0.01 per share; (iii) 2,500,000 shares designated as 8.250% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”), par value of $0.01 per share; and (iv) 20,400,000 shares of undesignated preferred stock. The Company’s Board of Directors has the authority, without further action by the shareholders, to issue additional preferred stock in one or more series and to fix the terms and rights of the preferred stock. The Company’s preferred stock ranks senior to its common stock 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. The Company’s preferred stock ranks on parity with each other. The Series B Preferred Stock and Series C Preferred Stock are publicly traded on the New York Stock Exchange under the ticker symbols “AAIC PrB” and “AAIC PrC,” respectively.

The Series B Preferred Stock has no stated maturity, is not subject to any sinking fund and will remain outstanding indefinitely unless repurchased or redeemed by the Company. Holders of Series B Preferred Stock have no voting rights, except under limited conditions, and are entitled to receive a cumulative cash dividend at a rate of 7.00% per annum of their $25.00 per share liquidation

preference (equivalent to $1.75 per annum per share). Shares of Series B Preferred Stock are redeemable at $25.00 per share, plus accumulated and unpaid dividends (whether or not authorized or declared), exclusively at the Company’s option. Dividends are payable quarterly in arrears on the 30th day of March, June, September and December of each year, when and as declared. The Company has declared and paid all required quarterly dividends on the Company’s Series B Preferred Stock to date in 2022.

The Series C Preferred Stock has no stated maturity, is not subject to any sinking fund and will remain outstanding indefinitely unless repurchased or redeemed by the Company. Holders of Series C Preferred Stock have no voting rights, except under limited conditions, and are entitled to receive a cumulative cash dividend (i) from and including the original issue date to, but excluding, March 30, 2024 at a fixed rate equal to 8.250% per annum of the $25.00 per share liquidation preference (equivalent to $2.0625 per annum per share) and (ii) from and including March 30, 2024, at a floating rate equal to three-month LIBOR plus a spread of 5.664% per annum of the $25.00 per share liquidation preference. Shares of Series C Preferred Stock are redeemable at $25.00 per share, plus accumulated and unpaid dividends (whether or not authorized or declared), exclusively at the Company’s option commencing on March 30, 2024 or earlier upon the occurrence of a change in control or under circumstances where it is necessary to preserve the Company’s qualification as a REIT. Dividends are payable quarterly in arrears on the 30th day of March, June, September and December of each year, when and as declared. The Company has declared and paid all required quarterly dividends on the Company’s Series C Preferred Stock to date in 2022.

During the three and nine months ended September 30, 2022, the Company repurchased 79,848 and 152,211 shares of Series C Preferred Stock for a total purchase price of $1,640 and $3,389, respectively. There were no shares of Series C Preferred Stock repurchased by the Company during the year ended December 31, 2021.

Preferred Equity Distribution Agreements

The Company is party to an amended and restated equity distribution agreement with JonesTrading Institutional Services LLC and Ladenburg Thalmann & Co. Inc., pursuant to which the Company may offer and sell, from time to time, up to 1,647,370 shares of the Company’s Series B Preferred Stock. Pursuant to the Series B preferred equity distribution agreement, shares of the Company’s Series B Preferred stock may be offered and sold through the preferred equity sales agents in transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, including sales made directly on the NYSE or sales made to or through a market maker other than on an exchange or, subject to the terms of a written notice from the Company, in privately negotiated transactions.

During the nine months ended September 30, 2022, the Company issued 6,058 shares of Series B Preferred Stock at a weighted average public offering price of $24.87 per share for proceeds net of selling commissions and expenses of $149 under the Series B preferred equity distribution agreement. There were no issuances of Series B Preferred Stock during the three months ended September 30, 2022. During the year ended December 31, 2021, the Company issued 37,337 shares of Series B preferred stock at a weighted average public offering price of $24.99 per share for proceeds net of selling commissions and expenses of $919 under the Series B preferred equity distribution agreement. As of September 30, 2022, the Company had 1,602,566 shares of Series B Preferred stock available for sale under the preferred equity distribution agreement.

Shareholder Rights Agreement

On June 1, 2009, the Board of Directors approved a shareholder rights agreement (“Rights Plan”) and the Company’s shareholders approved the Rights Plan at its annual meeting of shareholders on June 2, 2010. On April 9, 2018, the Board of Directors approved a first amendment to the Rights Plan (“First Amendment”) to extend the term for an additional three years and the Company’s shareholders approved the First Amendment at its annual meeting of shareholders on June 14, 2018. On April 11, 2022, the Board of Directors approved a second amendment to the Rights Plan (“Second Amendment”) to further extend the term until June 4, 2025 and the Company's shareholders approved the Second Amendment at its annual meeting of shareholders on June 16, 2022. The Second Amendment also decreased the Purchase Price (as defined under the Rights Plan) from $70.00 to $21.30.

Under the terms of the Rights Plan, in general, if a person or group acquires or commences a tender or exchange offer for beneficial ownership of 4.9% or more of the outstanding shares of our Class A common stock upon a determination by our Board of Directors (an “Acquiring Person”), all of our other Class A and Class B common shareholders will have the right to purchase securities from us at a discount to such securities’ fair market value, thus causing substantial dilution to the Acquiring Person.

The Board of Directors adopted the Rights Plan in an effort to protect against a possible limitation on the Company’s ability to use its NOL carryforwards, NCL carryforwards, and built-in losses under Sections 382 and 383 of the Internal Revenue Code. The Company’s ability to use its NOLs, NCLs and built-in losses would be limited if it experienced an “ownership change” under Section 382 of the Internal Revenue Code. In general, an “ownership change” would occur if there is a cumulative change in the ownership of the Company’s common stock of more than 50% by one or more “5% shareholders” during a three-year period. The Rights Plan was

adopted to dissuade any person or group from acquiring 4.9% or more of the Company’s outstanding Class A common stock, each, an Acquiring Person, without the approval of the Board of Directors and triggering an “ownership change” as defined by Section 382.

The Rights Plan, as amended by the Second Amendment, and any outstanding rights will expire at the earliest of (i) June 4, 2025, (ii) the time at which the rights are redeemed or exchanged pursuant to the Rights Plan, (iii) the repeal of Section 382 and 383 of the Internal Revenue Code or any successor statute if the Board of Directors determines that the Rights Plan is no longer necessary for the preservation of the applicable tax benefits, or (iv) the beginning of a taxable year to which the Board of Directors determines that no applicable tax benefits may be carried forward.

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Long-Term Incentive Plan

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

Long-Term Incentive Plan

Note 16. Long-Term Incentive Plan

The Company provides its employees and its non-employee directors with long-term incentive compensation in the form of stock-based awards. On April 29, 2021, the Board of Directors adopted the Arlington Asset Investment Corp. 2021 Long-Term Incentive Plan (the “2021 Plan”), which was approved by the Company’s shareholders and became effective on July 15, 2021. The 2021 Plan replaced the Arlington Asset Investment Corp. 2014 Long-Term Incentive Plan (the “2014 Plan”). No additional grants will be made under the 2014 Plan. However, previous grants under the 2014 Plan and any long-term incentive plans prior to the 2014 Plan (collectively, the “Prior Plans”) will remain in effect subject to the terms of the Prior Plans and the applicable award agreement.

Under the 2021 Plan, a maximum number of 5,256,076 shares of Class A common stock of the Company, subject to adjustment as set forth in the 2021 Plan, were authorized for issuance and may be issued to employees, directors, consultants, advisors and independent contractors who provide bona fide services to the Company and its affiliates. If an award under the 2021 Plan or Prior Plans is canceled, terminated, forfeited or otherwise settled without the issuance of shares subject to such award, those shares will be available for future grants under the 2021 Plan. In addition, shares delivered or withheld for tax obligations arising from an award, other than a stock option or stock appreciation right (“SAR”), will be available for future grants under the 2021 Plan. As of September 30, 2022, 4,361,753 shares remained available for issuance under the 2021 Plan; however, the shares remaining available for issuance would be reduced by the potential future issuance of shares of common stock for the settlement of outstanding performance-based stock awards and dividend equivalents for such awards. If these outstanding performance-based stock awards are earned at “target” level performance, an additional 1,844,097 shares would be issued resulting in 2,517,656 shares remaining available for issuance under the 2021 Plan as of September 30, 2022.

Under the 2021 Plan, the Compensation Committee of the Company’s Board of Directors may grant restricted stock, restricted stock units (“RSUs”), stock options, SARs and/or other stock-based awards. Under the 2021 Plan, shares issued upon the exercise of a stock option or SAR or shares subject to a restricted stock award and any shares issued in settlement of restricted stock unit award, reduced by the number of any shares withheld to satisfy withholding taxes, may not be sold or transferred before the earlier of (i) the first anniversary of the exercise of the option or SAR or vesting of the restricted stock award or the settlement of restricted stock unit award, or (ii) the date the participant is no longer employed by or providing services to the Company or an affiliate. Non-employee members of the Board of Directors may not be granted awards under the 2021 Plan during any twelve-month period with respect to the number of shares that have a fair market value on the date of grant that exceeds $160. The 2021 Plan will terminate on the tenth anniversary of its effective date unless sooner terminated by the Board of Directors.

Stock-based compensation costs are initially measured at the estimated fair value of the awards on the grant date developed using appropriate valuation methodologies, as adjusted for estimates of future award forfeitures. Valuation methodologies used and subsequent expense recognition is dependent upon each award’s service and performance conditions.

Performance-based Stock Awards

The Company has granted performance-based RSUs and performance stock units (collectively, “Performance-based Stock Awards”) to employees of the Company that are convertible into shares of Class A common stock following the achievement of performance goals over the applicable performance periods. Compensation costs for Performance-based Stock Awards subject to nonmarket-based performance conditions (i.e., performance not predicated on changes in the Company’s stock price) are measured at the closing stock price on the dates of grant, adjusted for the probability of achieving certain benchmarks included in the performance metrics. These initial cost estimates are recognized as expense over the requisite performance periods, as adjusted for changes in estimated, and ultimately actual, performance and forfeitures. Compensation costs for components of Performance-based Stock Awards subject to market-based performance conditions (i.e., performance predicated on changes in the Company’s stock price) are measured at the dates of grant using a Monte Carlo simulation model which incorporates into the valuation the inherent uncertainty regarding the achievement of the market-based performance metrics. These initial valuation amounts are recognized as expense over the requisite performance periods, subject only to adjustments for changes in estimated, and ultimately actual, forfeitures.

During the nine months ended September 30, 2022 and 2021, the Compensation Committee granted Performance-based Stock Awards with performance goals based on (i) the compound annualized total shareholder return (i.e., share price change plus dividends on a reinvested basis) during the applicable performance period (“Absolute TSR Awards”), (ii) the compound annualized total shareholder return relative to a peer index during the applicable performance period (“Relative TSR Awards”), (iii) the compound annualized growth in the Company’s book value per share (i.e., book value change with such adjustments as determined and approved by the Compensation Committee plus dividends on a reinvested basis) during the applicable performance period (“Book Value Awards”), and (iv) the share price of the Company's common stock during the applicable performance period ("Stock Price Awards"). In addition, the Compensation Committee granted Performance-based Stock Awards in prior years with performance goals based on annual return on equity during the applicable performance period ("ROE Awards").

The Compensation Committee of the Board of Directors of the Company approved the following Performance-based Stock Award grants for the periods indicated:

	Nine Months Ended September 30,
	2022		2021
Absolute TSR Awards granted		174,581		90,711
Absolute TSR Award grant date fair value per share	$	6.03	$	6.89
Relative TSR Awards granted		87,291		47,710
Relative TSR Award grant date fair value per share	$	5.83	$	6.55
Book Value Awards granted		103,000		—
Book Value Award grant date fair value per share	$	3.37	$	—
Stock Price Awards granted		1,225,490		—
Stock Price Award grant date fair value per share	$	1.72	$	—

For the Company’s Book Value Awards and ROE Awards, the grant date fair value per share is based on the close price on the date of grant. For the Company’s Absolute TSR Awards, Relative TSR Awards and Stock Price Awards, the grant date fair value per share is based on a Monte Carlo simulation model. The following assumptions, determined as of the date of grant, were used in the Monte Carlo simulation model to measure the grant date fair value per share of the Company’s Absolute TSR Awards, Relative TSR Awards and Stock Price Awards for the periods indicated:

	Absolute TSR Awards						Relative TSR Awards						Stock Price Awards
	Nine Months Ended September 30,						Nine Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021			2022			2021
Closing stock price on date of grant	$	3.58		$	4.08		$	3.58		$	4.08		$	3.06		$	—
Beginning average stock price on   date of grant (1)	$	3.60		$	4.07		$	3.60		$	4.07		N/A			$	—
Expected volatility (2)		69.20	%		69.27	%		69.20	%		69.27	%		51.17	%		—
Dividend yield (3)		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		—
Risk-free rate (4)		1.01	%		0.34	%		1.01	%		0.34	%		2.97	%		—
Discount for illiquidity (5)		0.00	%		0.00	%		0.00	%		0.00	%		8.42	%		—

(1)Based upon the 30 trading days prior to and including the date of grant.

(2)Based upon the most recent three-year volatility as of the date of grant.

(3)Dividend equivalents are accrued during the performance period and deemed reinvested in additional stock units, which are to be paid out at the end of the performance period to the extent the underlying Performance-based Stock Award is earned. Applying dividend yield assumption of 0.00% in the Monte Carlo simulation is mathematically equivalent to reinvesting dividends on a continuous basis and including the value of the dividends in the final payout.

(4)Based upon the yield of a U.S. Treasury bond with a three-year maturity as of the date of grant.

(5)Based on restriction on ability to sell vested awards for one year after vesting.

The vesting of the Performance-based Stock Awards is subject to both continued employment under the terms of the award agreement and the achievement of the Company performance goals established by the Compensation Committee.

For Absolute TSR Awards and Relative TSR Awards granted during the nine months ended September 30, 2022 and 2021, the Compensation Committee established a three-year performance period. The actual number of shares of Class A common stock that will be issued to each participant at the end of the applicable performance period will vary between 0% and 250% of the number of the Absolute TSR Awards and Relative TSR Awards granted, depending on performance results. If the minimum threshold level of performance goals is not achieved, no awards are earned. To the extent the performance results are between the minimum threshold level and maximum level of performance goals, between 50% to 250% of the number of Absolute TSR Awards and Relative TSR

Awards are earned. Upon settlement, vested Absolute TSR Awards and Relative TSR Awards are converted into shares of the Company’s Class A common stock on a one-for-one basis.

For Book Value Awards granted during the nine months ended September 30, 2022, the Compensation Committee established a one-year performance period. The actual number of shares of Class A common stock that will be issued to each participant at the end of the applicable performance period will vary between 0% and 100% of the number of Book Value Awards granted, depending on performance results. Any Book Value Awards earned at the end of the one-year performance period would be converted into an equal number of shares of restricted stock that will vest on the third anniversary of the original Book Value Award grant date subject to continued employment under the terms of the award agreement. If the threshold level of the annual performance goal is not achieved, no Book Value Awards are earned.

For Stock Price Awards granted during the nine months ended September 30, 2022, the Compensation Committee established a three-year performance period. If the market price of the Company's common stock is equal to or greater than a stock price performance goal for 45 consecutive trading days at any time during the performance period, between 75% to 300% of the number of Stock Price Awards are earned and converted into an equal number of shares of restricted stock that will vest ratably over a three-year period beginning on the third anniversary of the date of grant subject to continued employment under the terms of the award of the agreement. If the minimum threshold level of stock price performance goals are never achieved, no awards are earned.

For the ROE Awards granted in prior years, the Compensation Committee established a one-year performance period. Any ROE Awards earned at the end of the one-year performance period would be converted into an equal number of shares of restricted stock that will vest on the third anniversary of the original ROE Award grant date subject to continued employment under the terms of the award agreement. If the threshold level of the annual performance goal is not achieved, no ROE Awards are earned.

Performance-based Stock Awards do not have any voting rights. No dividends are paid on outstanding Performance-based Stock Awards during the applicable performance period. Instead, dividend equivalents are accrued on outstanding Performance-based Stock Awards during the applicable performance period, deemed invested in shares of Class A common stock and are paid out in shares of Class A common stock at the end of the performance period to the extent that the underlying Performance-based Stock Awards vest.

For the nine months ended September 30, 2022 and 2021, the Company recognized $902 and $298, respectively, of compensation expense related to Performance-based Stock Awards. As of September 30, 2022, the Company had 1,844,097 Performance-based stock awards outstanding. As disclosed above, the actual number of shares of common stock that could be issued for settlement of the Performance-based shares can be greater or less than the amount of Performance-based shares outstanding depending upon the actual results compared to the performance goals. As of September 30, 2022 and December 31, 2021, the Company had unrecognized compensation expense related to Performance-based Stock Awards of $3,650 and $878, respectively. The unrecognized compensation expense as of September 30, 2022 is expected to be recognized over a weighted average period of 3.4 years. For Absolute TSR Awards, Relative TSR Awards and Book Value Awards that had performance measurement periods ending during the nine months ended September 30, 2022 and 2021, none of the performance measures were met and therefore no awards were earned or vested during those periods. For the nine months ended September 30, 2022 and 2021, there were 0 and 82,124 ROE Awards, respectively, including dividend equivalents, that were earned and converted into an equal number of shares of restricted stock that will vest on the third anniversary of the original ROE Award grant date.

Employee Restricted Stock Awards

Compensation costs for restricted stock awards subject only to service conditions are measured at the closing stock price on the dates of grant and are recognized as expense on a straight-line basis over the requisite service periods for the awards, as adjusted for changes in estimated, and ultimately actual, forfeitures.

The Company grants restricted common shares to employees that either vest ratably over a three-year period or cliff vest at the end of a three-year period based on continued employment over these specified periods. A summary of these unvested restricted stock awards is presented below:

	Number of Shares			Weighted-average Grant-date Fair Value		Weighted- average Remaining Vested Period
Share Balance as of December 31, 2020		547,688		$	4.89		1.5
Granted		365,592			3.89		—
Conversion of ROE Awards		82,124			5.65		—
Forfeitures		(22,000	)		6.54		—
Vestitures		(214,369	)		5.89		—
Share Balance as of December 31, 2021		759,035			4.16		1.5
Granted		384,291			3.42		—
Forfeitures		(12,167	)		3.57		—
Vestitures		(108,318	)		6.43
Share Balance as of September 30, 2022		1,022,841		$	3.65		1.2

For the nine months ended September 30, 2022 and 2021, the Company recognized $1,470 and $896, respectively, of compensation expense related to restricted stock awards. As of September 30, 2022 and December 31, 2021, the Company had unrecognized compensation expense related to restricted stock awards of $1,646 and $1,847, respectively. The unrecognized compensation expense as of September 30, 2022 is expected to be recognized over a weighted average period of 1.2 years. For the nine months ended September 30, 2022 and 2021, the intrinsic value of restricted stock awards that vested were $328 and $444, respectively.

In addition, as part of the Company’s satisfaction of incentive compensation earned for past service under the Company’s variable compensation programs, employees may receive restricted Class A common stock in lieu of cash payments. These restricted Class A common stock shares are issued to an irrevocable trust and are not returnable to the Company. No such shares were issued during the nine months ended September 30, 2022 and 2021. As of September 30, 2022 and December 31, 2021, the Company had 9,155 vested shares of the undistributed restricted stock issued to the trust.

Employee Restricted Stock Units

In connection with the announcement in June 2019 that the Company’s Executive Chairman would retire on December 31, 2019 from all positions with the Company, including its Board of Directors, the Company and its Executive Chairman entered into a consulting agreement to provide consulting services through January 1, 2022. Pursuant to the consulting agreement, the Company granted the Executive Chairman 87,847 RSUs with a grant date fair value of $6.83 per share. The grant date fair value of the award was based on the closing price of the Class A common stock on the New York Stock Exchange on the date of grant. The RSUs vested equally on each of January 1, 2020, July 1, 2020, January 1, 2021, July 1, 2021 and January 1, 2022, and were subject to the individual’s continued employment through December 31, 2019 and providing consulting services through January 1, 2022. Upon vesting, the RSUs were converted into shares of Class A common stock. The RSUs did not have any voting rights, and no dividends were paid on outstanding RSUs. Instead, dividend equivalents were accrued on outstanding RSUs, deemed invested in shares of Class A common stock and were paid out in shares of Class A common stock on the vesting date.

For the nine months ended September 30, 2022 and 2021, the Company recognized $0 and $66, respectively, of compensation expense related to employee restricted stock units. For the nine months ended September 30, 2022 and 2021, the intrinsic value of RSUs that were converted into shares of Class A common stock were $73 and $74, respectively. As of September 30, 2022 and December 31, 2021, the Company had 0 and 20,455, respectively, of employee restricted stock units outstanding.

Director Restricted Stock Units

Compensation costs for RSU awards subject only to service conditions are measured at the closing stock price on the dates of grant and are recognized as expense on a straight-line basis over the requisite service periods for the awards, as adjusted for changes in estimated, and ultimately actual, forfeitures. Compensation costs for RSUs that do not require future service conditions are expensed immediately.

The Company’s non-employee directors are compensated in both cash and RSUs. RSUs awarded to non-employee directors vest immediately on the award grant date and are convertible into shares of Class A common stock. For RSUs granted under the Company’s 2021 Plan, 2014 Plan, and certain of the Prior Plans, the RSUs are convertible into shares of Class A common stock at the later of the date the non-employee director ceases to be a member of the Company’s Board or the first anniversary of the grant date. For RSUs granted under certain Prior Plans, the RSUs are convertible into shares of Class A common stock one year after the

non-employee director ceases to be a member of the Company’s Board. The non-employee director RSUs do not have any voting rights but are entitled to cash dividend equivalent payments. As of September 30, 2022 and December 31, 2021, the Company had 548,272 and 415,822, respectively, of non-employee director RSUs outstanding. A summary of the non-employee director RSUs grants is presented below for the periods indicated:

	Nine Months Ended September 30,
	2022		2021
RSUs granted		132,450		98,035
Grant date fair value	$	3.02	$	4.08

The grant date fair value is based on the closing price of the Class A common stock on the New York Stock Exchange on the date of grant. For the nine months ended September 30, 2022 and 2021, the Company recognized $300 and $300, respectively, of director fees related to these RSUs. There were no non-employee director RSUs that were converted into shares of Class A common stock for the nine months ended September 30, 2022 and 2021.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2022

Cash Equivalents

Cash Equivalents

Cash equivalents include demand deposits with banks, money market accounts and highly liquid investments with original maturities of three months or less. As of September 30, 2022 and December 31, 2021, approximately 75% and 67%, respectively, of the Company’s cash equivalents were invested in money market funds that invest primarily in U.S. Treasuries and other securities backed by the U.S. government.

Investment Security Purchases and Sales

Investment Security Purchases and Sales

Purchases and sales of investment securities are recorded on the settlement date of the transfer unless the trade qualifies as a “regular-way” trade and the associated commitment qualifies for an exemption from the accounting guidance applicable to derivative instruments. A regular-way trade is an investment security purchase or sale transaction that is expected to settle within the period of time following the trade date that is prevalent or traditional for that specific type of security. Any amounts payable or receivable for unsettled security trades are recorded as “sold securities receivable” or “purchased securities payable” in the consolidated balance sheets.

Interest Income Recognition for Investments in Agency MBS and Mortgage Loans of Consolidated VIEs and Credit Securities of High Credit Quality

Interest Income Recognition for Investments in Agency MBS, Mortgage Loans of Consolidated VIEs and Credit Securities of High Credit Quality

The Company recognizes interest income for its investments in agency MBS, mortgage loans of consolidated variable interest entities (“VIEs”) and credit securities that are considered to be of high credit quality (that is, those with a Standard & Poor's rating of AA or higher or an equivalent rating from another rating agency) by applying the “interest method” permitted by GAAP, whereby purchase premiums and discounts are amortized and accreted, respectively, as an adjustment to contractual interest income accrued at each investment’s stated interest rate. The interest method is applied at the individual instrument level based upon each instrument’s effective interest rate. The Company calculates each instrument’s effective interest rate at the time of purchase or initial recognition by solving for the discount rate that equates the present value of that instrument's remaining contractual cash flows (assuming no principal prepayments) to its purchase cost. Because each instrument’s effective interest rate does not reflect an estimate of future prepayments, the Company refers to this manner of applying the interest method as the “contractual effective interest method.” When applying the contractual effective interest method, as principal prepayments occur, a proportional amount of the unamortized premium or unaccreted discount is recognized in interest income such that the contractual effective interest rate on any remaining security or loan balance is unaffected.

For mortgage loans of consolidated VIEs, the Company ceases the accrual of interest income (i.e., places the loan in non-accrual status) when it believes collectability of principal and interest in full is not reasonably assured, which generally occurs when a loan is three or more monthly payments past due, unless the loan is well secured and in the process of collection based upon an individual loan assessment. Upon placing a loan in non-accrual status, any previously accrued but uncollected interest is derecognized and a corresponding reduction to current period interest income is recorded. While a loan is in non-accrual status, the Company recognizes interest income only when interest payments occur.

Interest Income Recognition for Investments in Credit Securities and MSR Financing Receivables

Interest Income Recognition for Investments in Other Credit Securities and MSR Financing Receivables

The Company recognizes interest income for its investments in credit securities (other than those considered to be of high credit quality) and MSR financing receivables by applying the prospective level-yield methodology required by GAAP for financial assets that are either not of high credit quality at the time of acquisition or can be contractually prepaid or otherwise settled in such a way that the Company would not recover substantially all of its recorded investment. The amount of periodic interest income recognized is determined by applying the investment’s effective interest rate to its amortized cost basis (or “reference amount”). At the time of acquisition, the investment’s effective interest rate is calculated by solving for the single discount rate that equates the present value of the Company’s best estimate of the amount and timing of the cash flows expected to be collected from the investment to its purchase cost. To prepare its best estimate of cash flows expected to be collected, the Company develops a number of assumptions about the future performance of the pool of loans that serve as collateral for its investment, including assumptions about the timing and amount of prepayments and credit losses. For investments in MSR financing receivables, the Company's estimate of cash flows expected to be collected reflects all components of its mortgage servicing counterparty's payment obligation, which is comprised of cash flows referenced to the monthly net cash flows of the underlying reference pool of MSRs net of (i) the counterparty's periodic interest payments and principal repayments related to advances obtained via its third-party secured financing facility collateralized by MSRs to which the Company's MSR financing receivables are referenced and (ii) fees payable to the counterparty. In each subsequent quarterly reporting period, the amount and timing of cash flows expected to be collected from the investment are re-estimated based upon current information and events. The following table provides a description of how periodic changes in the estimate of cash flows expected to be collected affect interest income recognition prospectively for investments in credit securities and MSR financing receivables:

Scenario:	Effect on Interest Income Recognition:
A positive change in cash flows occurs. Actual cash flows exceed prior estimates and/or a positive change occurs in the estimate of expected remaining cash flows.	A revised effective interest rate is calculated and applied prospectively such that the positive change in cash flows is recognized as incremental interest income over the remaining life of the investment.
	The amount of periodic interest income recognized over the remaining life of the investment will be reduced accordingly. Generally, the investment’s effective interest rate is reduced accordingly and applied on a prospective basis. However, if the revised effective interest rate is negative, the investment’s existing effective interest rate is retained while the reference amount to which the existing effective interest rate will be prospectively applied is reduced to the present value of cash flows expected to be collected, discounted at the investment’s existing effective interest rate.
An adverse change in cash flows occurs. Actual cash flows fall short of prior estimates and/or an adverse change occurs in the estimate of expected remaining cash flows.

Other Significant Accounting Policies

Other Significant Accounting Policies

Certain of the Company’s other significant accounting policies are summarized in the following notes:

Investments in agency MBS, subsequent measurement	Note 3
Investments in credit securities, subsequent measurement Loans held for investment, subsequent measurement Investments in MSR financing receivables, subsequent measurement Investments in SFR properties	Note 4 Note 5 Note 6 Note 7
Consolidation of variable interest entities Borrowings	Note 8 Note 9
To-be-announced agency MBS transactions, including “dollar rolls”	Note 10
Derivative instruments	Note 10
Balance sheet offsetting	Note 11
Fair value measurements Income taxes	Note 12 Note 13
Stock-based compensation	Note 16

Refer to the Company’s 2021 Annual Report on Form 10-K for a complete inventory and summary of the Company’s significant accounting policies.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

The following table provides a brief description of recently issued accounting pronouncements and their actual or expected effect on the Company’s consolidated financial statements:

Standard	Description	Date of Adoption	Effect on the Consolidated Financial Statements
Recently Issued Accounting Guidance Not Yet Adopted
ASU Nos. 2020-04 and 2021-01, Reference Rate Reform (Topic 848)	The amendments in these updates provide optional practical expedients and exceptions for applying GAAP to the modification of receivables, debt or lease contracts as well as cash flow and fair value hedge accounting relationships that reference a rate, such as the London Interbank Offered Rate (“LIBOR”), that is expected to be discontinued because of reference rate reform. The practical expedients and exceptions provided by these updates are effective from March 12, 2020 through December 31, 2022.	Not yet adopted.	To date, any modifications due to reference rate reform have not had a material impact to the Company. The Company has not elected to apply hedge accounting for financial reporting purposes. The Company does not currently expect the adoption of ASU Nos. 2020-04 and 2021-01 to have a material effect on its consolidated financial statements.

Consolidation of Variable Interest Entities

The vehicles that issue the Company’s investments in securitized mortgage assets are considered VIEs. The Company is required to consolidate any VIE in which it holds a variable interest if it determines that it holds a controlling financial interest in the VIE and is, therefore, determined to be the primary beneficiary of the VIE. The Company is determined to be the primary beneficiary of a VIE in which it holds a variable interest if it both (i) holds the power to direct the activities that most significantly impact the VIE’s economic performance and (ii) has the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. The economic performance of the trusts that issue the Company’s investments in securitized mortgage assets is most significantly impacted by the performance of the mortgage loans that are held by the trusts. The party that is determined to have the most power to direct the loss mitigation actions that are taken with respect to delinquent or otherwise troubled mortgage loans held by the trust is, therefore, deemed to hold the most power to direct the activities that most significantly impact the trust’s economic performance. As a passive investor, the Company does not have the power to direct the loss mitigation activities of most of the trusts that have issued its securitized mortgage assets.

Repurchase Agreements

The Company finances the purchase of mortgage investments through repurchase agreements, which are accounted for as collateralized borrowing arrangements. In a repurchase transaction, the Company sells a mortgage investment to a counterparty under a master repurchase agreement in exchange for cash and concurrently agrees to repurchase the same asset at a future date in an amount equal to the cash initially exchanged plus an agreed-upon amount of interest. Mortgage investments sold under agreements to repurchase remain on the Company’s consolidated balance sheets because the Company maintains effective control over such assets throughout the duration of the arrangement. Throughout the contractual term of a repurchase agreement, the Company recognizes a “repurchase agreement” liability on its consolidated balance sheets to reflect the obligation to repay to the counterparty the proceeds received upon the initial transfer of the mortgage investment. The difference between the proceeds received by the Company upon the initial transfer of the mortgage investment and the contractually agreed-upon repurchase price is recognized as interest expense ratably over the term of the repurchase arrangement.

Derivative Instruments

In the normal course of its operations, the Company is a party to financial instruments that are accounted for as derivative instruments. Derivative instruments are recorded at fair value as either “other assets” or “other liabilities” in the consolidated balance sheets, with all periodic changes in fair value reflected as a component of “investment and derivative gain (loss), net” in the consolidated statements of comprehensive income. Cash receipts or payments related to derivative instruments are classified as investing activities within the consolidated statements of cash flows.

In addition to interest rate hedging instruments that are used for interest rate risk management, the Company is a party to derivative instruments that economically serve as investments, such as forward commitments to purchase fixed-rate “pass-through” agency MBS on a non-specified pool basis, which are known as to-be-announced (“TBA”) securities. A TBA security is a forward commitment for the purchase or sale of a fixed-rate agency MBS at a predetermined price, face amount, issuer, coupon, and stated maturity for settlement on an agreed upon future date. The specific agency MBS that will be delivered to satisfy the TBA trade is not known at the inception of the trade. The specific agency MBS to be delivered is determined 48 hours prior to the settlement date. The Company accounts for TBA securities as derivative instruments because the Company cannot assert that it is probable at inception and throughout the term of an individual TBA commitment that its settlement will result in physical delivery of the underlying agency MBS, or the individual TBA commitment will not settle in the shortest time period possible.

Derivatives, Offsetting of Financial Assets and Liabilities

The agreements that govern certain of the Company’s derivative instruments and collateralized short-term financing arrangements provide for a right of setoff in the event of default or bankruptcy with respect to either party to such transactions. The Company presents derivative assets and liabilities as well as collateralized short-term financing arrangements on a gross basis.

Receivables recognized for the right to reclaim cash initial margin posted in respect of interest rate derivative instruments are included in the line item “deposits” in the accompanying consolidated balance sheets.

The daily exchange of variation margin associated with a centrally cleared or exchange-traded derivative instrument is legally characterized as the daily settlement of the derivative instrument itself, as opposed to a pledge of collateral. Accordingly, the Company accounts for the daily receipt or payment of variation margin associated with its interest rate swaps and futures as a direct reduction to the carrying value of derivative asset or liability, respectively. The carrying amount of interest rate swaps and futures reflected in the Company’s consolidated balance sheets is equal to the unsettled fair value of such instruments; because variation margin is exchanged on a one-day lag, the unsettled fair value of such instruments generally represents the change in fair value that occurred on the last day of the reporting period.

Fair Value of Financial Instruments

The accounting principles related to fair value measurements define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial Accounting Standards Board Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels, giving the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3) as described below:

Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible by the Company at the measurement date;

Level 2 Inputs - Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly; and

Level 3 Inputs - Unobservable inputs for the asset or liability, including significant judgments made by the Company about the assumptions that a market participant would use.

The Company measures the fair value of the following assets and liabilities:

Variable Interest Entity

Investment Security Purchases and Sales

The Company has elected to account for the mortgage loans and debt of its consolidated VIEs at fair value with changes in fair value that are not attributed to interest income or interest expense, respectively, recognized as a component of “investment and derivative gain (loss), net” in the accompanying consolidated statements of comprehensive income.

Single-Family Residential Properties

Investment Security Purchases and Sales

The Company’s investments in SFR properties are initially recognized on the settlement date of their acquisition at cost. The Company allocates the initial acquisition cost of each property to land and building on the basis of their relative fair values at the time of acquisition. To determine the relative fair value of land and building at the time of acquisition, the Company uses available market data, such as property specific county tax assessment records.

Subsequent to the acquisition of a property, expenditures which improve or extend the life of the property are capitalized as a component of the property’s cost basis. Expenditures for ordinary maintenance and repairs are recognized as an expense as incurred and are reported as a component of “single-family property operating expenses” in the Company’s consolidated statements of comprehensive income.

The Company subsequently recognizes depreciation of each property’s buildings and capitalized improvements over the expected useful lives of those assets. The Company calculates depreciation on a straight-line basis over a useful life of 27.5 years for buildings and useful lives ranging from five to 27.5 years for capitalized improvements. The Company reports depreciation expense as a component of “single-family property operating expenses” in the Company’s consolidated statements of comprehensive income.

Agency MBS

Investment Security Purchases and Sales

The Company has elected to classify its investments in agency MBS as trading securities. Accordingly, the Company’s investments in agency MBS are reported in the accompanying consolidated balance sheets at fair value. As of September 30, 2022 and December 31, 2021, the fair value of the Company’s investments in agency MBS was $445,122 and $483,927, respectively.

Credit Securities

Investment Security Purchases and Sales

The Company has elected to classify its investments in credit securities as trading securities. Accordingly, the Company’s investments in credit securities are reported in the accompanying consolidated balance sheets at fair value. As of September 30, 2022 and December 31, 2021, the fair value of the Company’s investments in credit securities was $115,783 and $26,222, respectively.

Loans Held for Investment

Investment Security Purchases and Sales

The Company has elected to account for its loan held for investment at fair value on a recurring basis with periodic changes in fair value recognized as a component of “investment and derivative gain (loss), net” in the accompanying consolidated statements of comprehensive income.

M S R Financing Receivables

Investment Security Purchases and Sales

The Company accounts for transactions executed under its arrangement with the mortgage servicing counterparty as financing transactions and reflects the associated financing receivables in the line item “MSR financing receivables” on its consolidated balance sheets. The Company has elected to account for its MSR financing receivables at fair value with changes in fair value that are not attributed to interest income recognized as a component of “investment and derivative gain (loss), net” in the accompanying consolidated statements of comprehensive income. As described in further detail in “Note 2. Summary of Significant Accounting Policies,” the Company recognizes interest income for MSR financing receivables by applying the prospective level-yield methodology required by GAAP for financial assets that are either not of high credit quality at the time of acquisition or can be contractually prepaid or otherwise settled in such a way that the Company would not recover substantially all of its recorded investment.

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Investments in Agency MBS (Tables)

9 Months Ended

Sep. 30, 2022

Agency MBS

Additional Information Realized Gain Loss on Investments

The following table provides additional information about the gains and losses recognized as a component of “investment and derivative gain (loss), net” in the Company’s consolidated statements of comprehensive income for the periods indicated with respect to investments in agency MBS:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net gains (losses) recognized in earnings for:
Agency MBS still held at period end	$	(24,430	)	$	(2,904	)	$	(26,911	)	$	(13,323	)
Agency MBS sold during the period		1,702			457			(32,365	)		(11,209	)
Total	$	(22,728	)	$	(2,447	)	$	(59,276	)	$	(24,532	)

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Investments in Credit Securities (Tables)

9 Months Ended

Sep. 30, 2022

Credit Securities

Additional Information Realized Gain Loss on Investments

The following table provides additional information about the gains and losses recognized as a component of “investment and derivative gain (loss), net” in the Company’s consolidated statements of comprehensive income for the periods indicated with respect to investments in credit securities:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net gains (losses) recognized in earnings for:
Credit securities still held at period end	$	(1,552	)	$	(165	)	$	(2,227	)	$	1,017
Credit securities sold during the period		—			90			(970	)		37
Total	$	(1,552	)	$	(75	)	$	(3,197	)	$	1,054

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Investments in MSR Financing Receivables (Tables)

9 Months Ended

Sep. 30, 2022

Receivables [Abstract]

Change in Fair Value of MSR Financing Receivables

The following table presents activity related to the carrying value of the Company’s investments in MSR financing receivables for the periods indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Balance at period beginning	$	120,260		$	74,652		$	125,018		$	9,346
Capital investments		40,474			35,601			61,693			95,223
Capital distributions		(4,049	)		(3,816	)		(68,601	)		(3,816	)
Accretion of interest income		3,608			1,945			10,973			3,693
Changes in valuation inputs and assumptions		4,292			4,452			35,502			8,388
Balance at period end	$	164,585		$	112,834		$	164,585		$	112,834

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Investments in SFR Properties (Tables)

9 Months Ended

Sep. 30, 2022

SEC Schedule, 12-28, Real Estate Companies, Investment in Real Estate and Accumulated Depreciation Disclosure [Abstract]

Summary of Net Carrying Amount of SFR Properties

The following table summarizes the Company’s net carrying amount of its SFR properties by component as of the dates indicated:

	September 30, 2022			December 31, 2021
Investments in single-family residential real estate:
Land	$	13,646		$	10,128
Buildings and improvements		68,573			51,060
Investments in single-family residential real estate, at cost		82,219			61,188
Less: accumulated depreciation		(977	)		(299	)
Investments in single-family residential real estate, net	$	81,242		$	60,889

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Consolidation of Variable Interest Entities (Tables)

9 Months Ended

Sep. 30, 2022

Variable Interest Entity [Line Items]

Schedule of Carrying Values of Assets and Liabilities of Consolidated VIE, Net of Elimination Entries

The carrying values of the assets and liabilities of the consolidated VIEs, net of elimination entries, are as follows as of the dates indicated:

	September 30, 2022
	VIE of Business Purpose Residential Mortgage Loans			VIE of Residential Mortgage Loans			Total
Cash of consolidated VIEs	$	560		$	—		$	560
Restricted cash of consolidated VIEs (1)		29			1,925			1,954
Mortgage loans of consolidated VIEs, at fair value		3,750			199,706			203,456
Other assets of consolidated VIEs		689			724			1,413
Secured debt of consolidated VIEs, at fair value		(251	)		(182,085	)		(182,336	)
Other liabilities of consolidated VIEs		—			(265	)		(265	)
Net investment in consolidated VIEs	$	4,777		$	20,005		$	24,782

(1)Restricted cash represents cash collected by the trust that must be used solely to satisfy the liabilities of the VIE in the month following collection.

	December 31, 2021
	VIE of Business Purpose Residential Mortgage Loans			VIE of Residential Mortgage Loans		Total
Cash of consolidated VIEs	$	2,118		$	—	$	2,118
Restricted cash of consolidated VIEs (1)		111			—		111
Mortgage loans of consolidated VIEs, at fair value		7,442			—		7,442
Other assets of consolidated VIEs		547			—		547
Secured debt of consolidated VIEs, at fair value		(508	)		—		(508	)
Other liabilities of consolidated VIEs		(2	)		—		(2	)
Net investment in consolidated VIEs	$	9,708		$	—	$	9,708

(1)Restricted cash represents cash collected by the trust that must be used solely to satisfy the liabilities of the VIE in the month following collection.

Business Purpose Residential Mortgage Loans

Variable Interest Entity [Line Items]

Schedule of Accrual Status of Residential Mortgage Loans of Consolidated VIE

The following table presents information about the accrual status of the loans of the Company’s consolidated VIE of business purpose residential mortgage loans as of September 30, 2022:

	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Difference
Less than 90 days past due and in accrual status	$	151	$	151	$	—
90 days or more past due and in non-accrual status		3,599		3,757		(158	)
Total mortgage loans of consolidated VIE	$	3,750	$	3,908	$	(158	)

Residential Mortgage Loans

Variable Interest Entity [Line Items]

Schedule of Accrual Status of Residential Mortgage Loans of Consolidated VIE

The following table presents information about the accrual status of the loans of the Company’s consolidated VIE of residential mortgage loans as of September 30, 2022:

	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Difference
Less than 90 days past due and in accrual status	$	198,876	$	232,353	$	(33,477	)
90 days or more past due and in non-accrual status		830		969		(139	)
Total mortgage loans of consolidated VIE	$	199,706	$	233,322	$	(33,616	)

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Borrowings (Tables)

9 Months Ended

Sep. 30, 2022

Debt Disclosure [Abstract]

Schedule of Repurchase Agreements

The following table provides information regarding the Company’s outstanding repurchase agreement borrowings as of the dates indicated:

	September 30, 2022			December 31, 2021
Agency MBS repurchase financing:
Repurchase agreements outstanding	$	319,538		$	425,836
Agency MBS collateral, at fair value (1)		336,277			447,979
Net amount (2)		16,739			22,143
Weighted-average rate		3.02	%		0.14	%
Weighted-average term to maturity	13.0 days			13.0 days
Non-agency MBS repurchase financing:
Repurchase agreements outstanding	$	89,809		$	—
MBS collateral, at fair value		99,821			—
Net amount (2)		10,012			—
Weighted-average rate		3.68	%
Weighted-average term to maturity	26.5 days
Mortgage loans repurchase financing:
Repurchase agreements outstanding	$	20,563		$	20,788
Mortgage loans collateral, at fair value		29,375			29,697
Net amount (2)		8,812			8,909
Weighted-average rate		5.27	%		2.60	%
Weighted-average term to maturity	327.0 days			319.0 days
Total mortgage investments repurchase financing:
Repurchase agreements outstanding	$	429,910		$	446,624
Mortgage investments collateral, at fair value (1)		465,473			477,676
Net amount (2)		35,563			31,052
Weighted-average rate		3.27	%		0.25	%
Weighted-average term to maturity	30.8 days			27.2 days

(1)As of December 31, 2021, includes $28,219 at sale price of unsettled agency MBS sale commitments which is included in the line item “sold securities receivable” in the accompanying consolidated balance sheets.

(2)Net amount represents the value of collateral in excess of corresponding repurchase obligation. The amount of collateral at-risk is limited to the outstanding repurchase obligation and not the entire collateral balance.

The following table provides information regarding the Company’s outstanding repurchase agreement borrowings during the three and nine months ended September 30, 2022 and 2021:

	September 30, 2022			September 30, 2021
Weighted-average outstanding balance during the three months ended	$	430,792		$	599,224
Weighted-average rate during the three months ended		2.60	%		0.20	%
Weighted-average outstanding balance during the nine months ended	$	351,960		$	601,897
Weighted-average rate during the nine months ended		1.46	%		0.27	%

Schedule of Long-term Unsecured Debt Instruments

As of September 30, 2022 and December 31, 2021, the Company had $86,302 and $85,994, respectively, of outstanding long-term unsecured debentures, net of unamortized debt issuance costs of $1,379 and $1,687, respectively. The Company’s long-term unsecured debentures consisted of the following as of the dates indicated:

	September 30, 2022									December 31, 2021
	Senior Notes Due 2025			Senior Notes Due 2026			Trust Preferred Debt			Senior Notes Due 2025			Senior Notes Due 2026			Trust Preferred Debt
Outstanding   Principal	$	34,931		$	37,750		$	15,000		$	34,931		$	37,750		$	15,000
Annual    Interest Rate		6.75	%		6.000	%	LIBOR+ 2.25 - 3.00 %				6.75	%		6.000	%	LIBOR+ 2.25 - 3.00 %
Interest    Payment    Frequency	Quarterly			Quarterly			Quarterly			Quarterly			Quarterly			Quarterly
Weighted-    Average    Interest Rate		6.75	%		6.000	%		5.26	%		6.75	%		6.000	%		2.87	%
Maturity	March 15, 2025			August 1, 2026			2033 - 2035			March 15, 2025			August 1, 2026			2033 - 2035

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Derivative Instruments (Tables)

9 Months Ended

Sep. 30, 2022

Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]

Schedule of Derivative Instruments

The following table presents the fair value of the Company’s derivative instruments as of the dates indicated:

	September 30, 2022					December 31, 2021
	Assets		Liabilities			Assets		Liabilities
Interest rate swaps	$	260	$	—		$	—	$	(107	)
10-year U.S. Treasury note futures		—		—			16		—
Options on U.S. Treasury note futures		—		—			4		—
TBA commitments		4,162		(139	)		230		(121	)
Total	$	4,422	$	(139	)	$	250	$	(228	)

Schedule of Other Derivatives Not Designated as Hedging Instruments, Statements of Financial Performance and Financial Position, Location

The following tables provide information about the derivative gains and losses recognized within the periods indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Interest rate derivatives:
Interest rate swaps:
Net interest income (expense) (1)	$	258		$	(379	)	$	(315	)	$	(2,276	)
Unrealized (losses) gains, net		(1,420	)		(3,951	)		5,277			3,597
Gains (losses) realized upon early termination, net		5,238			1,149			8,687			(122	)
Total interest rate swap gains (losses), net		4,076			(3,181	)		13,649			1,199
U.S. Treasury note futures, net		—			872			(782	)		3,582
Options on U.S. Treasury note futures, net		—			—			(4	)		(20	)
Total interest rate derivative gains (losses), net		4,076			(2,309	)		12,863			4,761
TBA commitments:
TBA dollar roll (expense) income (2)		(421	)		1,064			682			3,678
Other gains (losses) on TBA commitments, net		2,998			(2,082	)		(1,971	)		(12,204	)
Total gains (losses) on TBA commitments, net		2,577			(1,018	)		(1,289	)		(8,526	)
Total derivative gains (losses), net	$	6,653		$	(3,327	)	$	11,574		$	(3,765	)

(1)Represents the periodic net interest settlement incurred during the period (often referred to as “net interest carry”). Also includes “price alignment interest” income earned or expense incurred on cumulative variation margin paid or received, respectively, associated with centrally cleared interest rate swap agreements.

(2)Represents the price discount of forward-settling TBA purchases (sales) relative to a contemporaneously executed “spot” TBA sale (purchase), which economically equates to net interest income (expense) that is earned (incurred) ratably over the period beginning on the settlement date of the sale (purchase) and ending on the settlement date of the forward-settling purchase (sale).

Derivative Instrument Volume of Activity

The following tables summarize the volume of activity, in terms of notional amount, related to derivative instruments for the periods indicated:

	For the Three Months Ended September 30, 2022
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	230,000	$	90,000	$	—		$	(125,000	)	$	195,000
TBA commitments, net		155,000		535,000		(435,000	)		—			255,000

	For the Three Months Ended September 30, 2021
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	525,000	$	—	$	—		$	(310,000	)	$	215,000
10-year U.S. Treasury note futures		45,000		—		(45,000	)		—			—
TBA commitments, net		—		1,125,000		(1,100,000	)		—			25,000

	For the Nine Months Ended September 30, 2022
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	150,000	$	235,000	$	—		$	(190,000	)	$	195,000
10-year U.S. Treasury note futures		25,000		50,000		(50,000	)		(25,000	)		—
Purchased call options on 10-year U.S.   Treasury note futures		25,000		—		(25,000	)		—			—
TBA commitments, net		—		1,290,000		(1,035,000	)		—			255,000

	For the Nine Months Ended September 30, 2021
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	275,000	$	450,000	$	—		$	(510,000	)	$	215,000
2-year U.S. Treasury note futures		—		50,000		(50,000	)		—			—
10-year U.S. Treasury note futures		—		540,100		(365,000	)		(175,100	)		—
Purchased call options on 10-year U.S.   Treasury note futures		—		65,200		(65,200	)		—			—
TBA commitments, net		—		2,490,000		(2,465,000	)		—			25,000

Derivative Instruments and Other Financial Instrument Cash Collateral

The following table presents information about the cash collateral posted by the Company in respect of its derivative and other financial instruments, which is included in the line item “deposits” in the accompanying consolidated balance sheets, for the dates indicated:

	September 30, 2022		December 31, 2021
Cash collateral posted for:
Interest rate swaps (cash initial margin)	$	3,228	$	4,174
U.S. Treasury note futures (cash initial margin)		—		375
Total cash collateral posted, net	$	3,228	$	4,549

Options on 10-Year U.S. Treasury Note Futures

Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]

Schedule of Derivative Instruments

Information about the Company’s outstanding options on 10-year U.S. Treasury note futures contracts as of December 31, 2021 is as follows:

	Notional Amount Long/(Short)		Weighted-average Strike Price		Implied Strike Rate (1)			Net Fair Value
Purchased call options:
January 2022 expiration	$	25,000		134.5		1.00	%	$	4

(1)The implied strike rate is estimated based upon the weighted average strike price per contract and the price of an equivalent 10-year U.S. Treasury note futures contract.

TBA Commitments

Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]

Schedule of Derivative Instruments

The following tables present information about the Company’s TBA commitments as of the dates indicated:

	September 30, 2022
	Notional Amount: Net Purchase (Sale) Commitment			Contractual Forward Price			Market Price			Fair Value
3.5% 30-year MBS sale commitments	$	(60,000	)	$	(56,803	)	$	(53,897	)	$	2,906
4.0% 30-year MBS sale commitments		(100,000	)		(93,359	)		(92,680	)		679
4.5% 30-year MBS sale commitments		(95,000	)		(90,859	)		(90,421	)		438
Total TBA commitments, net	$	(255,000	)	$	(241,021	)	$	(236,998	)	$	4,023

	December 31, 2021
	Notional Amount: Net Purchase (Sale) Commitment			Contractual Forward Price			Market Price			Fair Value
2.5% 30-year MBS purchase commitments	$	225,000		$	229,043		$	229,148		$	105
2.5% 30-year MBS sale commitments		(225,000	)		(229,152	)		(229,148	)		4
Total TBA commitments, net	$	—		$	(109	)	$	—		$	109

Interest Rate Swap

Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]

Schedule of Derivative Instruments

The following table presents information about the Company’s interest rate swap agreements that were in effect as of September 30, 2022:

			Weighted-average:
	Notional Amount		Fixed Pay Rate			Variable Receive Rate			Net Receive (Pay) Rate			Remaining Life (Years)		Fair Value
Years to maturity:
Less than 3 years	$	125,000		1.82	%		2.78	%		0.96	%		1.6	$	52
3 to less than 10 years		70,000		2.53	%		3.11	%		0.58	%		5.4		208
Total / weighted-average	$	195,000		2.07	%		2.90	%		0.83	%		3.0	$	260

The following table presents information about the Company’s interest rate swap agreements that were in effect as of December 31, 2021:

			Weighted-average:
	Notional Amount		Fixed Pay Rate			Variable Receive Rate			Net Receive (Pay) Rate			Remaining Life (Years)		Fair Value
Years to maturity:
Less than 3 years	$	50,000		0.71	%		0.13	%		(0.58	)%		1.8	$	(5	)
3 to less than 10 years		100,000		0.90	%		0.13	%		(0.77	)%		6.6		(102	)
Total / weighted-average	$	150,000		0.84	%		0.13	%		(0.71	)%		5.0	$	(107	)

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Offsetting of Financial Assets and Liabilities (Tables)

9 Months Ended

Sep. 30, 2022

Offsetting [Abstract]

Offsetting of Financial Assets and Liabilities

The following tables present information, as of the dates indicated, about the Company’s derivative instruments, short-term borrowing arrangements, and associated collateral, including those subject to master netting (or similar) arrangements:

	As of September 30, 2022
	Gross Amount Recognized		Amount Offset in the Consolidated Balance Sheets		Net Amount Presented in the Consolidated Balance Sheets		Gross Amount Not Offset in the Consolidated Balance Sheets					Net Amount
							Financial Instruments (1)			Cash Collateral (2)
Assets:
Derivative instruments:
Interest rate swaps	$	260	$	—	$	260	$	—		$	—	$	260
TBA commitments		4,162		—		4,162		(139	)		—		4,023
Total derivative instruments		4,422		—		4,422		(139	)		—		4,283
Total assets	$	4,422	$	—	$	4,422	$	(139	)	$	—	$	4,283
Liabilities:
Derivative instruments:
TBA commitments	$	139	$	—	$	139	$	(139	)	$	—	$	—
Total derivative instruments		139		—		139		(139	)		—		—
Repurchase agreements		429,910		—		429,910		(429,910	)		—		—
Total liabilities	$	430,049	$	—	$	430,049	$	(430,049	)	$	—	$	—

	As of December 31, 2021
	Gross Amount Recognized		Amount Offset in the Consolidated Balance Sheets		Net Amount Presented in the Consolidated Balance Sheets		Gross Amount Not Offset in the Consolidated Balance Sheets						Net Amount
							Financial Instruments (1)			Cash Collateral (2)
Assets:
Derivative instruments:
TBA commitments	$	230	$	—	$	230	$	(105	)	$	—		$	125
10-year U.S. Treasury note futures		16		—		16		—			—			16
Options on U.S. Treasury note futures		4		—		4		—			—			4
Total derivative instruments		250		—		250		(105	)		—			145
Total assets	$	250	$	—	$	250	$	(105	)	$	—		$	145
Liabilities:
Derivative instruments:
Interest rate swaps	$	107	$	—	$	107	$	—		$	(107	)	$	—
TBA commitments		121		—		121		(105	)		—			16
Total derivative instruments		228		—		228		(105	)		(107	)		16
Repurchase agreements		446,624		—		446,624		(446,624	)		—			—
Total liabilities	$	446,852	$	—	$	446,852	$	(446,729	)	$	(107	)	$	16

(1)Does not include the fair value amount of financial instrument collateral pledged in respect of repurchase agreements that exceeds the associated liability presented in the consolidated balance sheets.

(2)Does not include the amount of cash collateral pledged in respect of derivative instruments and repurchase agreements that exceeds the associated liability presented in the consolidated balance sheets.

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2022

Fair Value Disclosures [Abstract]

Summary of Significant Inputs to Fair Value Measurement

The following table presents the weighted-average of the significant inputs to the fair value measurement of the Company’s non-agency MBS secured by business purpose residential mortgage loans as of dates indicated:

	September 30, 2022			December 31, 2021
Probability of default		18.2	%		77.7	%
Loss-given-default		18.4	%		15.8	%

The following table presents the weighted-average of the significant inputs to the fair value measurement of the business purpose residential mortgage loans of the Company’s consolidated VIE as of the periods indicated:

	September 30, 2022			December 31, 2021
Probability of default		50.3	%		66.2	%
Loss-given-default		9.6	%		8.6	%

The following table presents the weighted-average of the significant inputs to the fair value measurement of the subordinate and excess interest-only debt obligations of its consolidated VIE of residential mortgage loans as of September 30, 2022:

	Subordinate Debt Obligation			Excess Interest-Only Debt Obligations
Annualized voluntary prepayment rate		17.3	%		17.3	%
Annualized default rate		0.5	%		0.5	%
Loss-given-default		17.5	%		17.5	%
Discount rate		7.8	%		17.7	%

Schedule of significant unobservable inputs to the fair value measurement

The following table presents the significant unobservable inputs to the fair value measurement of the MSRs underlying the Company’s MSR financing receivables as of the periods indicated:

	September 30, 2022			December 31, 2021
Discount rate		8.5	%		9.0	%
Annualized prepayment rate		7.0	%		10.1	%
Annual per-loan cost of servicing (current loans)	$	65.00		$	65.00

Financial Instruments Measured at Fair Value on a Recurring Basis

The following tables set forth financial instruments measured at fair value by level within the fair value hierarchy as of September 30, 2022 and December 31, 2021. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	September 30, 2022
	Total		Level 1		Level 2		Level 3
Financial assets:
Agency MBS	$	445,122	$	—	$	445,122	$	—
MSR financing receivables		164,585		—		—		164,585
Loans		29,375		—		—		29,375
Credit securities		115,783		—		108,330		7,453
Mortgage loans of consolidated VIEs		203,456		—		—		203,456
Derivative assets		4,422		—		4,422		—
Other assets		5,600		352		—		5,248
Financial liabilities:
Secured debt of consolidated VIEs		182,336		—		172,012		10,324
Derivative liabilities		139		—		139		—

	December 31, 2021
	Total		Level 1		Level 2		Level 3
Financial assets:
Agency MBS	$	483,927	$	—	$	483,927	$	—
MSR financing receivables		125,018		—		—		125,018
Loans		29,697		—		—		29,697
Credit securities		26,222		—		—		26,222
Mortgage loans of consolidated VIE		7,442		—		—		7,442
Derivative assets		250		20		230		—
Other assets		12,655		5,267		—		7,388
Financial liabilities:
Secured debt of consolidated VIE		508		—		—		508
Derivative liabilities		228		—		228		—

Change in Fair Value of Level 3 Financial Assets and Liabilities that are Measured at Fair Value on Recurring Basis

The table below sets forth an attribution of the change in the fair value of the Company’s Level 3 financial assets that are measured at fair value on a recurring basis for the periods indicated:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Beginning balance	$	393,501		$	206,729		$	195,767		$	166,428
Net (loss) gain included in "Investment and derivative    gain (loss), net"		(13,199	)		4,504			(11,583	)		9,639
Additions from consolidation of VIEs		—			—			276,594			—
Transfers to real estate owned by consolidated VIE		(78	)		—			(277	)		—
Purchases		40,474			35,601			61,693			128,614
Sales		—			—			(12,406	)		(1,662	)
Payments, net		(14,671	)		(68,810	)		(110,052	)		(128,350	)
Accretion (amortization) of discount (premium), net		4,090			2,411			10,381			5,766
Ending balance	$	410,117		$	180,435		$	410,117		$	180,435
Net unrealized (losses) gains included in earnings for the    period for Level 3 assets still held at the reporting date	$	(13,199	)	$	4,504		$	(10,552	)	$	9,719

The table below sets forth an attribution of the change in the fair value of the Company’s Level 3 financial liabilities that are measured at fair value on a recurring basis for the periods indicated:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2022			2021		2022			2021
Beginning balance	$	11,521		$	640	$	508		$	576
Net (gain) loss included in "Investment and derivative   gain (loss), net"		(808	)		9		(2,140	)		(1	)
Additions from consolidation of VIEs		—			—		14,278			—
Payments, net		(374	)		3		(2,170	)		3
(Amortization) accretion of (premium) discount, net		(15	)		—		(152	)		74
Ending balance	$	10,324		$	652	$	10,324		$	652
Net unrealized (gains) losses included in earnings for the    period for Level 3 liabilities still held at the reporting date	$	(808	)	$	9	$	(2,140	)	$	(1	)

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Earnings (Loss) Per Share (Tables)

9 Months Ended

Sep. 30, 2022

Earnings Per Share [Abstract]

Computations of Basic and Diluted Earnings (Loss) Per Share

The following table presents the computations of basic and diluted earnings (loss) per share for the periods indicated:

	Three Months Ended September 30,					Nine Months Ended September 30,
(Shares in thousands)	2022		2021			2022			2021
Basic weighted-average common shares outstanding		28,338		31,927			28,973			32,720
Performance share units, unvested restricted stock units,    and unvested restricted stock		575		—			—			—
Diluted weighted-average common shares outstanding		28,913		31,927			28,973			32,720
Net income (loss) available (attributable) to common stock	$	2,756	$	(981	)	$	(1,087	)	$	(15,526	)
Basic earnings (loss) per common share	$	0.10	$	(0.03	)	$	(0.04	)	$	(0.47	)
Diluted earnings (loss) per common share	$	0.10	$	(0.03	)	$	(0.04	)	$	(0.47	)

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Long-Term Incentive Plan (Tables)

9 Months Ended

Sep. 30, 2022

Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]

Share Based Compensation Performance Shares Grants Activity

The Compensation Committee of the Board of Directors of the Company approved the following Performance-based Stock Award grants for the periods indicated:

	Nine Months Ended September 30,
	2022		2021
Absolute TSR Awards granted		174,581		90,711
Absolute TSR Award grant date fair value per share	$	6.03	$	6.89
Relative TSR Awards granted		87,291		47,710
Relative TSR Award grant date fair value per share	$	5.83	$	6.55
Book Value Awards granted		103,000		—
Book Value Award grant date fair value per share	$	3.37	$	—
Stock Price Awards granted		1,225,490		—
Stock Price Award grant date fair value per share	$	1.72	$	—

Share based compensation award valuation assumptions

The following assumptions, determined as of the date of grant, were used in the Monte Carlo simulation model to measure the grant date fair value per share of the Company’s Absolute TSR Awards, Relative TSR Awards and Stock Price Awards for the periods indicated:

	Absolute TSR Awards						Relative TSR Awards						Stock Price Awards
	Nine Months Ended September 30,						Nine Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021			2022			2021
Closing stock price on date of grant	$	3.58		$	4.08		$	3.58		$	4.08		$	3.06		$	—
Beginning average stock price on   date of grant (1)	$	3.60		$	4.07		$	3.60		$	4.07		N/A			$	—
Expected volatility (2)		69.20	%		69.27	%		69.20	%		69.27	%		51.17	%		—
Dividend yield (3)		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		—
Risk-free rate (4)		1.01	%		0.34	%		1.01	%		0.34	%		2.97	%		—
Discount for illiquidity (5)		0.00	%		0.00	%		0.00	%		0.00	%		8.42	%		—

(1)Based upon the 30 trading days prior to and including the date of grant.

(2)Based upon the most recent three-year volatility as of the date of grant.

(3)Dividend equivalents are accrued during the performance period and deemed reinvested in additional stock units, which are to be paid out at the end of the performance period to the extent the underlying Performance-based Stock Award is earned. Applying dividend yield assumption of 0.00% in the Monte Carlo simulation is mathematically equivalent to reinvesting dividends on a continuous basis and including the value of the dividends in the final payout.

(4)Based upon the yield of a U.S. Treasury bond with a three-year maturity as of the date of grant.

(5)Based on restriction on ability to sell vested awards for one year after vesting.

Schedule of Unvested Restricted Stock Units Roll Forward

The Company grants restricted common shares to employees that either vest ratably over a three-year period or cliff vest at the end of a three-year period based on continued employment over these specified periods. A summary of these unvested restricted stock awards is presented below:

	Number of Shares			Weighted-average Grant-date Fair Value		Weighted- average Remaining Vested Period
Share Balance as of December 31, 2020		547,688		$	4.89		1.5
Granted		365,592			3.89		—
Conversion of ROE Awards		82,124			5.65		—
Forfeitures		(22,000	)		6.54		—
Vestitures		(214,369	)		5.89		—
Share Balance as of December 31, 2021		759,035			4.16		1.5
Granted		384,291			3.42		—
Forfeitures		(12,167	)		3.57		—
Vestitures		(108,318	)		6.43
Share Balance as of September 30, 2022		1,022,841		$	3.65		1.2

Non Employee Director

Deferred Compensation Arrangement with Individual, Excluding Share-Based Payments and Postretirement Benefits [Line Items]

Share Based Compensation Restricted Stock Units Grants Activity

A summary of the non-employee director RSUs grants is presented below for the periods indicated:

	Nine Months Ended September 30,
	2022		2021
RSUs granted		132,450		98,035
Grant date fair value	$	3.02	$	4.08

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Organization and Basis of Presentation - Additional Information (Details)	9 Months Ended
	Sep. 30, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Required annual distribution of taxable income	90.00%
Intended annual distribution of taxable income	100.00%

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Summary of Significant Accounting Policies - Additional Information (Details)	Sep. 30, 2022	Dec. 31, 2021
Summary Of Significant Accounting Policies [Line Items]
Cash Equivalents Percentage Held in Us Government Backed Securities	75.00%	67.00%
ASU No. 2020-04
Summary Of Significant Accounting Policies [Line Items]
Change in Accounting Principle, Accounting Standards Update, Adopted	false
ASU No. 2021-01
Summary Of Significant Accounting Policies [Line Items]
Change in Accounting Principle, Accounting Standards Update, Adopted	false

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Investments in Agency MBS - Additional Information (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Agency MBS
Fair Value of MBS	$ 445,122	$ 483,927

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Investments in Agency MBS - Additional Information About Gains and Losses Recognized with Respect to Investments in Agency MBS (Details) - Agency MBS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Net gains (losses) recognized in earnings for:
MBS still held at period end	$ (24,430)	$ (2,904)	$ (26,911)	$ (13,323)
MBS sold during the period	1,702	457	(32,365)	(11,209)
Total	$ (22,728)	$ (2,447)	$ (59,276)	$ (24,532)

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Investments in Credit Securities - Additional Information (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Credit Securities
Fair Value of MBS	$ 115,783	$ 26,222

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Investments in Credit Securities - Additional Information About Gains and Losses Recognized with Respect to Investments in Credit Securities (Details) - Credit Securities - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Net gains (losses) recognized in earnings for:
Credit securities still held at period end	$ (1,552)	$ (165)	$ (2,227)	$ 1,017
Credit securities sold during the period	0	90	(970)	37
Total	$ (1,552)	$ (75)	$ (3,197)	$ 1,054

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Loans Held For Investment - Additional Information (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Schedule Of Investments [Line Items]
Mortgage loans, at fair value	$ 29,375	$ 29,697
Revolving Credit Facility
Schedule Of Investments [Line Items]
Loan Rate	SOFR plus 3.86
Revolving credit facility, committed fund	$ 30,000	30,000
Revolving credit facility	$ 130,000	$ 130,000
Revolving credit facility maturity date	Jul. 07, 2024
Unused commitment fee percentage	0.50%	0.50%
Revolving credit facility, unfunded commitment	$ 30,000	$ 30,000
Revolving Credit Facility | Minimum
Schedule Of Investments [Line Items]
Loan floor rate	1.00%	1.00%
Healthcare Facilities Mortgage Loan
Schedule Of Investments [Line Items]
Outstanding principal balance	$ 29,375	$ 29,697
Healthcare Facilities Mortgage Loan | Loan Purchase Commitments
Schedule Of Investments [Line Items]
Loan Rate	SOFR plus 5.61%
Loan maturity date	Mar. 23, 2022
New loan maturity date	Mar. 23, 2023

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Investments in MSR Financing Receivables - Additional Information (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended	36 Months Ended	39 Months Ended
	Sep. 30, 2022	Dec. 31, 2021	Dec. 31, 2023	Apr. 01, 2024	Jun. 30, 2022	Sep. 30, 2021	Jun. 30, 2021	Dec. 31, 2020
Accounts Notes And Loans Receivable [Line Items]
MSR servicing fee basis points	0.125%
Servicing advances receivable	$ 2,244	$ 3,731
Counterparty financing secured by financing receivable	27,863	40,398
MSR financing receivables, at fair value	164,585	$ 125,018			$ 120,260	$ 112,834	$ 74,652	$ 9,346
Scenario, Forecast
Accounts Notes And Loans Receivable [Line Items]
Minimum amount of capital commitment for investments to counterparty period of expiration			Dec. 31, 2023	Apr. 01, 2024
Minimum
Accounts Notes And Loans Receivable [Line Items]
Minimum amount of capital commitment for investments to counterparty	$ 50,000
Minimum | Scenario, Forecast
Accounts Notes And Loans Receivable [Line Items]
Minimum amount of capital commitment for investments to counterparty			$ 25,000	$ 25,000

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Investments in MSR Financing Receivables - Schedule of Investment in MSR Finance Receivables (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Receivables [Abstract]
Balance at period beginning	$ 120,260	$ 74,652	$ 125,018	$ 9,346
Capital investments	40,474	35,601	61,693	95,223
Capital distributions	(4,049)	3,816	68,601	3,816
Accretion of interest income	3,608	1,945	10,973	3,693
Changes in valuation inputs and assumptions	4,292	4,452	35,502	8,388
Balance at period end	$ 164,585	$ 112,834	$ 164,585	$ 112,834

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Investments in SFR Properties - Additional Information (Details) $ in Thousands			3 Months Ended		9 Months Ended		12 Months Ended
	Aug. 19, 2022 USD ($) Property	May 01, 2022 Property	Sep. 30, 2022 USD ($)	Sep. 30, 2021 USD ($)	Sep. 30, 2022 USD ($) Property	Sep. 30, 2021 USD ($)	Dec. 31, 2021 USD ($) Property	Nov. 11, 2022 USD ($)
Real Estate And Accumulated Depreciation [Line Items]
Investments in single-family residential real estate, at cost			$ 82,219		$ 82,219		$ 61,188
Gain (Loss) on sale of properties	$ 14,407
Single-Family Residential Properties
Real Estate And Accumulated Depreciation [Line Items]
Maximum commitment fund amount of acquisition of properties			55,000		$ 55,000
Number of properties | Property					246		214
Investments in single-family residential real estate, at cost			82,219		$ 82,219		$ 61,188
Depreciation expense			632	$ 12	$ 1,951	$ 12
Number of properties committed to acquire | Property					5
Commitments to purchase investments in single-family residential real estate, at cost			$ 1,523		$ 1,523
Number of properties committed to sell | Property	371	371
Related to property sold amount	$ 130,026
Commitment to sell real estate assets and associated debt liabilities								$ 87,330
Single-Family Residential Properties | Building [Member]
Real Estate And Accumulated Depreciation [Line Items]
Useful life of building and improvements					27 years 6 months
Single-Family Residential Properties | Building Improvements [Member] | Minimum
Real Estate And Accumulated Depreciation [Line Items]
Useful life of building and improvements					5 years
Single-Family Residential Properties | Building Improvements [Member] | Maximum
Real Estate And Accumulated Depreciation [Line Items]
Useful life of building and improvements					27 years 6 months

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Investments in SFR Properties - Summary of Net Carrying Amount of SFR Properties (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Investments in single-family residential real estate:
Land	$ 13,646	$ 10,128
Buildings and improvements	68,573	51,060
Investments in single-family residential real estate, at cost	82,219	61,188
Less: accumulated depreciation	(977)	(299)
Investments in single-family residential real estate, net	81,242	60,889
Single Family properties
Investments in single-family residential real estate:
Investments in single-family residential real estate, at cost	82,219	61,188
Single-family Residential Real Estate
Investments in single-family residential real estate:
Less: accumulated depreciation	$ (977)	$ (299)

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Consolidation of Variable Interest Entities - Additional Information (Details) - Variable Interest Entity, Primary Beneficiary - USD ($) $ in Thousands			9 Months Ended
	Feb. 03, 2022	Sep. 30, 2020	Sep. 30, 2022
Variable Interest Entity [Line Items]
Purchases of agency mortgage-backed securities	$ 20,585	$ 10,693
Business Purpose Residential Mortgage Loans
Variable Interest Entity [Line Items]
Pool of mortgage loans, unpaid principal balance			$ 3,908
Outstanding Principal			$ 261
Mortgage loan, weighted average net note rate			6.00%
Residential Mortgage Loans
Variable Interest Entity [Line Items]
Pool of mortgage loans, unpaid principal balance			$ 233,322
Outstanding Principal			$ 232,760
Mortgage loan, weighted average net note rate			4.78%
Debt obligations, weighted average coupon rate			1.37%

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Consolidation of Variable Interest Entities - Schedule of Carrying Values of Assets and Liabilities of Consolidated VIE, Net of Elimination Entries (Details) - USD ($) $ in Thousands		Sep. 30, 2022		Dec. 31, 2021
Variable Interest Entity [Line Items]
Restricted cash of consolidated VIE		$ 590		$ 1,132
Loans Receivable, Fair Value Disclosure		29,375		29,697
Other Assets		15,003		15,287
Other liabilities of consolidated VIEs		(11,501)		(6,605)
Variable Interest Entity, Primary Beneficiary
Variable Interest Entity [Line Items]
Cash of consolidated VIEs		560		2,118
Restricted cash of consolidated VIE		1,954	[1]	111	[2]
Loans Receivable, Fair Value Disclosure		203,456		7,442
Other Assets		1,413		547
Secured debt of consolidated VIEs, at fair value		(182,336)		(508)
Other liabilities of consolidated VIEs		(265)		(2)
Net investment in consolidated VIEs		24,782		9,708
Variable Interest Entity, Primary Beneficiary | Business Purpose Residential Mortgage Loans
Variable Interest Entity [Line Items]
Cash of consolidated VIEs		560		2,118
Restricted cash of consolidated VIE		29	[1]	111	[2]
Loans Receivable, Fair Value Disclosure		3,750		7,442
Other Assets		689		547
Secured debt of consolidated VIEs, at fair value		(251)		(508)
Other liabilities of consolidated VIEs		0		(2)
Net investment in consolidated VIEs		4,777		$ 9,708
Variable Interest Entity, Primary Beneficiary | Residential Mortgage Loans
Variable Interest Entity [Line Items]
Restricted cash of consolidated VIE	[1]	1,925
Loans Receivable, Fair Value Disclosure		199,706
Other Assets		724
Secured debt of consolidated VIEs, at fair value		(182,085)
Other liabilities of consolidated VIEs		(265)
Net investment in consolidated VIEs		$ 20,005

[1] Restricted cash represents cash collected by the trust that must be used solely to satisfy the liabilities of the VIE in the month following collection.

[2] Restricted cash represents cash collected by the trust that must be used solely to satisfy the liabilities of the VIE in the month following collection.

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Consolidation of Variable Interest Entities - Schedule of Accrual Status of Residential Mortgage Loans of Consolidated VIE (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Variable Interest Entity [Line Items]
Loans Receivable, Fair Value Disclosure	$ 29,375	$ 29,697
Variable Interest Entity, Primary Beneficiary
Variable Interest Entity [Line Items]
Loans Receivable, Fair Value Disclosure	203,456	7,442
Variable Interest Entity, Primary Beneficiary | Business Purpose Residential Mortgage Loans
Variable Interest Entity [Line Items]
Loans Receivable, Fair Value Disclosure	3,750	$ 7,442
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate	3,908
Difference	(158)
Variable Interest Entity, Primary Beneficiary | Residential Mortgage Loans
Variable Interest Entity [Line Items]
Loans Receivable, Fair Value Disclosure	199,706
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate	233,322
Difference	(33,616)
Less than 90 Days Past Due | Accrual Status | Variable Interest Entity, Primary Beneficiary | Business Purpose Residential Mortgage Loans
Variable Interest Entity [Line Items]
Loans Receivable, Fair Value Disclosure	151
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate	151
Less than 90 Days Past Due | Accrual Status | Variable Interest Entity, Primary Beneficiary | Residential Mortgage Loans
Variable Interest Entity [Line Items]
Loans Receivable, Fair Value Disclosure	198,876
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate	232,353
Difference	(33,477)
90 Days or More Past Due | Non-accrual Status | Variable Interest Entity, Primary Beneficiary | Business Purpose Residential Mortgage Loans
Variable Interest Entity [Line Items]
Loans Receivable, Fair Value Disclosure	3,599
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate	3,757
Difference	(158)
90 Days or More Past Due | Non-accrual Status | Variable Interest Entity, Primary Beneficiary | Residential Mortgage Loans
Variable Interest Entity [Line Items]
Loans Receivable, Fair Value Disclosure	830
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate	969
Difference	$ (139)

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Borrowings - Additional Information (Details) - USD ($) $ in Thousands				9 Months Ended	12 Months Ended
	Sep. 28, 2021	Aug. 06, 2021	Jul. 15, 2021	Sep. 30, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Long-term unsecured debt				$ 86,302	$ 85,994
Unamortized debt issuance costs				$ 1,379	$ 1,687
Weighted-average term to maturity (in days)				30 days 19 hours	27 days 4 hours
Weighted-average rate				3.27%	0.25%
6.000% Senior Notes due 2026
Debt Instrument [Line Items]
Debt instrument, issued			$ 37,750
Net proceeds from after deducting underwriter discounts			$ 36,570
Senior Notes Due 2023
Debt Instrument [Line Items]
Debt instrument redemption amount		$ 23,821
Debt instrument redemption price percentage		100.00%
Secured Debt | McLean SFR Investment, LLC
Debt Instrument [Line Items]
Unamortized debt issuance costs				$ 223	$ 264
Maturity	Oct. 09, 2026
Annual Interest Rate	2.76%
Outstanding balance				$ 56,801	$ 39,178
Debt Instrument, collateral description				The loan is secured by a first priority interest in all the assets of McLean SFR and a first priority pledge of the equity interest of McLean SFR. If the outstanding principal balance of the loan is greater than 74% of the fair value of the eligible collateral, McLean SFR is required to either pledge additional collateral or prepay the loan in an amount so that the outstanding principal balance does not exceed 74% of the fair value of the eligible collateral.
Agency MBS
Debt Instrument [Line Items]
Mortgage Loan Rate				SOFR plus 2.61%
Mortgage loan maturity date				Aug. 23, 2023
Weighted-average term to maturity (in days)				13 days	13 days
Weighted-average rate				3.02%	0.14%
Agency MBS | SOFR
Debt Instrument [Line Items]
Mortgage loan floor rate				2.61%
Minimum | Agency MBS
Debt Instrument [Line Items]
MBS repurchase agreement contract duration				30 days
Maximum | Secured Debt | McLean SFR Investment, LLC
Debt Instrument [Line Items]
Debt instrument, issued	$ 150,000
Percentage of fair value of eligible properties of loan amount	74.00%
Maximum | Agency MBS
Debt Instrument [Line Items]
MBS repurchase agreement contract duration				60 days
Mortgage loan maturity date extension option				364 days

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Borrowings - Outstanding Repurchase Agreement Borrowings (Details) - USD ($) $ in Thousands		9 Months Ended	12 Months Ended
		Sep. 30, 2022	Dec. 31, 2021
Repurchase Agreement Counterparty [Line Items]
Repurchase agreements outstanding		$ 429,910	$ 446,624
Agency MBS collateral, at fair value	[1]	465,473	477,676
Net amount	[2]	$ 35,563	$ 31,052
Weighted-average rate		3.27%	0.25%
Weighted-average term to maturity (in days)		30 days 19 hours	27 days 4 hours
Agency MBS repurchase financing
Repurchase Agreement Counterparty [Line Items]
Repurchase agreements outstanding		$ 319,538	$ 425,836
Agency MBS collateral, at fair value	[1]	336,277	447,979
Net amount	[2]	$ 16,739	$ 22,143
Weighted-average rate		3.02%	0.14%
Weighted-average term to maturity (in days)		13 days	13 days
Non-Agency MBS
Repurchase Agreement Counterparty [Line Items]
Repurchase agreements outstanding		$ 89,809
Agency MBS collateral, at fair value		99,821
Net amount	[2]	$ 10,012
Weighted-average rate		3.68%
Weighted-average term to maturity (in days)		26 days 12 hours
Mortgage loans repurchase financing
Repurchase Agreement Counterparty [Line Items]
Repurchase agreements outstanding		$ 20,563	$ 20,788
Agency MBS collateral, at fair value		29,375	29,697
Net amount	[2]	$ 8,812	$ 8,909
Weighted-average rate		5.27%	2.60%
Weighted-average term to maturity (in days)		327 days	319 days

[1] As of December 31, 2021, includes $28,219 at sale price of unsettled agency MBS sale commitments which is included in the line item “sold securities receivable” in the accompanying consolidated balance sheets.

[2] Net amount represents the value of collateral in excess of corresponding repurchase obligation. The amount of collateral at-risk is limited to the outstanding repurchase obligation and not the entire collateral balance.

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Borrowings - Outstanding Repurchase Agreement Borrowings (Parenthetical) (Details) $ in Thousands	Dec. 31, 2021 USD ($)
Repurchase Agreement Counterparty [Line Items]
Sold securities receivable	$ 28,219
Pledged as Collateral for Repurchase Agreements
Repurchase Agreement Counterparty [Line Items]
Sold securities receivable	$ 28,219

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Borrowings - Information Regarding Outstanding Repurchase Agreement Borrowings During the Period (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Debt Disclosure [Abstract]
Weighted-average outstanding balance	$ 430,792	$ 599,224	$ 351,960	$ 601,897
Weighted-average rate	2.60%	0.20%	1.46%	0.27%

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Borrowings - Long-term Unsecured Debt Instruments (Details) - USD ($) $ in Thousands	6 Months Ended	9 Months Ended	12 Months Ended
	Jun. 30, 2022	Sep. 30, 2022	Dec. 31, 2021
Senior Notes Due 2025
Debt Instrument [Line Items]
Outstanding Principal		$ 34,931	$ 34,931
Annual Interest Rate		6.75%	6.75%
Interest Payment Frequency		Quarterly	Quarterly
Weighted-Average Interest Rate		6.75%	6.75%
Maturity		Mar. 15, 2025	Mar. 15, 2025
Senior Notes Due 2026
Debt Instrument [Line Items]
Outstanding Principal		$ 37,750	$ 37,750
Annual Interest Rate		6.00%	6.00%
Interest Payment Frequency		Quarterly	Quarterly
Weighted-Average Interest Rate		6.00%	6.00%
Maturity		Aug. 01, 2026	Aug. 01, 2026
Trust Preferred Debt
Debt Instrument [Line Items]
Outstanding Principal		$ 15,000	$ 15,000
Interest Payment Frequency		Quarterly	Quarterly
Weighted-Average Interest Rate		5.26%	2.87%
Trust Preferred Debt | Minimum
Debt Instrument [Line Items]
Annual Interest Rate		2.25%	2.25%
Maturity	2033	2033	2033
Trust Preferred Debt | Maximum
Debt Instrument [Line Items]
Annual Interest Rate		3.00%	3.00%
Maturity		2035	2035

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Derivative Instruments - Fair Value of Derivative Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Derivative Assets	$ 4,422	$ 250
Derivative Liabilities, Net Amount	(139)	(228)
Interest Rate Swap
Derivative Assets	260	0
Derivative Liabilities, Net Amount	0	(107)
10-year U.S. Treasury Note Futures
Derivative Assets	0	16
Derivative Liabilities, Net Amount	0	0
Options on U.S. Treasury Note Futures
Derivative Assets	0	4
Derivative Liabilities, Net Amount	0	0
TBA Commitments
Derivative Assets	4,162	230
Derivative Liabilities, Net Amount	$ (139)	$ (121)

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Derivative Instruments - Interest Rate Swap Agreements (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2022	Dec. 31, 2021	Jun. 30, 2022	Sep. 30, 2021	Jun. 30, 2021	Dec. 31, 2020
Notional Amount	$ 255,000	$ 0	$ 155,000	$ 25,000	$ 0
Interest Rate Swap
Notional Amount	$ 195,000	$ 150,000	$ 230,000	$ 215,000	$ 525,000	$ 275,000
Weighted-average: Fixed Pay Rate	2.07%	0.84%
Weighted-average: Variable Receive Rate	2.90%	0.13%
Weighted-average: Net Receive (Pay) Rate	0.83%	(0.71%)
Weighted-average: Remaining Life (in years)	3 years	5 years
Fair Value, Asset and (Liability)	$ 260	$ (107)
Interest Rate Swap | Less Than Three Years Maturity
Notional Amount	$ 125,000	$ 50,000
Weighted-average: Fixed Pay Rate	1.82%	0.71%
Weighted-average: Variable Receive Rate	2.78%	0.13%
Weighted-average: Net Receive (Pay) Rate	0.96%	(0.58%)
Weighted-average: Remaining Life (in years)	1 year 7 months 6 days	1 year 9 months 18 days
Fair Value, Asset and (Liability)	$ 52	$ (5)
Interest Rate Swap | Three To Less Than Ten Years Maturity
Notional Amount	$ 70,000	$ 100,000
Weighted-average: Fixed Pay Rate	2.53%	0.90%
Weighted-average: Variable Receive Rate	3.11%	0.13%
Weighted-average: Net Receive (Pay) Rate	0.58%	(0.77%)
Weighted-average: Remaining Life (in years)	5 years 4 months 24 days	6 years 7 months 6 days
Fair Value, Asset and (Liability)	$ 208	$ (102)

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Derivative Instruments - Additional Information (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Jun. 30, 2022	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Dec. 31, 2020
Derivative [Line Items]
Notional Amount	$ 255,000	$ 155,000	$ 0	$ 25,000	$ 0
10-year U.S. Treasury Note Futures
Derivative [Line Items]
Notional Amount	0		$ 25,000	$ 0	$ 45,000	$ 0
Options on U.S. Treasury Note Futures
Derivative [Line Items]
Derivative outstanding options	$ 0

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Derivative Instruments - Outstanding Options on Ten-Year U.S. Treasury Note Futures Contracts (Details) $ in Thousands		12 Months Ended
		Dec. 31, 2021 USD ($) ₺ / mm	Sep. 30, 2022 USD ($)	Jun. 30, 2022 USD ($)	Sep. 30, 2021 USD ($)	Jun. 30, 2021 USD ($)
Notional Amount		$ 0	$ 255,000	$ 155,000	$ 25,000	$ 0
Options on 10-Year U.S. Treasury Note Futures
Derivative maturity		2022-01
Notional Amount		$ 25,000
Weighted-average Strike Price | ₺ / mm		134.5
Implied Strike Rate	[1]	1.00%
Net Fair Value		$ 4

[1] The implied strike rate is estimated based upon the weighted average strike price per contract and the price of an equivalent 10-year U.S. Treasury note futures contract.

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Derivative Instruments - TBA Commitments (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Jun. 30, 2022	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021
Notional Amount: Net Purchase Commitment	$ 255,000	$ 155,000	$ 0	$ 25,000	$ 0
Fair Value, Asset	4,422		250
Fair Value, Liability	(139)		(228)
TBA Commitments
Notional Amount: Net Purchase Commitment	255,000		0
Contractual Forward Price	(241,021)		(109)
Market Price	(236,998)		0
Fair Value, Asset	4,162		230
Fair Value, Liability	(139)		(121)
Net Fair Value	4,023		109
TBA Commitments | Two Point Five Percent Thirty Year Mortgage Backed Securities Purchase Sale Commitments Purchase
Notional Amount: Net Purchase Commitment			225,000
Contractual Forward Price			229,043
Market Price			229,148
Fair Value, Asset			105
TBA Commitments | Two Point Five Percent Thirty Year Mortgage Backed Securities Purchase Sale Commitments Sale
Notional Amount: Net Purchase Commitment			225,000
Contractual Forward Price			(229,152)
Market Price			(229,148)
Fair Value, Asset			$ 4
TBA Commitments | Three Point Five Percent Thirty Year Mortgage Backed Securities Purchase Sale Commitments Sale
Notional Amount: Net Purchase Commitment	60,000
Contractual Forward Price	(56,803)
Market Price	(53,897)
Fair Value, Asset	2,906
TBA Commitments | Four Point Zero Percent Thirty-year MBS Sale Commitments
Notional Amount: Net Purchase Commitment	100,000
Contractual Forward Price	(93,359)
Market Price	(92,680)
Fair Value, Asset	679
TBA Commitments | Four Point Five Percent Thirty Year Mortgage Backed Securities Purchase Sale Commitments Sale
Notional Amount: Net Purchase Commitment	95,000
Contractual Forward Price	(90,859)
Market Price	(90,421)
Fair Value, Asset	$ 438

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Derivative Instruments - Derivative Gains and Losses Recognized Within the Periods (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
		Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Interest rate derivative gains, net		$ 4,076	$ (2,309)	$ 12,863	$ 4,761
Losses on commitments		2,577	(1,018)	(1,289)	(8,526)
Total derivative gains, net		6,653	(3,327)	11,574	(3,765)
Interest Rate Swap
Interest rate derivative gains, net		4,076	(3,181)	13,649	1,199
Interest Rate Swaps Net Interest Expense
Interest rate derivative gains, net	[1]	258	(379)	(315)	(2,276)
Unrealized Gains, Net
Interest rate derivative gains, net		(1,420)	(3,951)	5,277	3,597
Interest Rate Swaps (Gains) Losses Realized Upon Early Termination, Net
Interest rate derivative gains, net		5,238	1,149	8,687	(122)
Options on U.S. Treasury Note Futures, Net
Interest rate derivative gains, net		0	0	(4)	(20)
TBA Dollar Roll Income
Losses on commitments	[2]	(421)	1,064	682	3,678
Other Losses on TBA Commitments, Net
Losses on commitments		2,998	(2,082)	(1,971)	(12,204)
U.S. Treasury Note Futures, Net
Interest rate derivative gains, net		$ 0	$ 872	$ (782)	$ 3,582

[1] Represents the periodic net interest settlement incurred during the period (often referred to as “net interest carry”). Also includes “price alignment interest” income earned or expense incurred on cumulative variation margin paid or received, respectively, associated with centrally cleared interest rate swap agreements.

[2] Represents the price discount of forward-settling TBA purchases (sales) relative to a contemporaneously executed “spot” TBA sale (purchase), which economically equates to net interest income (expense) that is earned (incurred) ratably over the period beginning on the settlement date of the sale (purchase) and ending on the settlement date of the forward-settling purchase (sale).

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Derivative Instruments - Volume of Activity, in terms of Notional Amount, Related to Derivative Instruments (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Derivative [Line Items]
Beginning of Period	$ 155,000	$ 0	$ 0
Additions	535,000	1,125,000	1,290,000	$ 2,490,000
Scheduled Settlements	435,000	1,100,000	1,035,000	2,465,000
Early Terminations	0	0	0	0
End of Period	255,000	25,000	255,000	25,000
Interest Rate Swap
Derivative [Line Items]
Beginning of Period	230,000	525,000	150,000	275,000
Additions	90,000	0	235,000	450,000
Scheduled Settlements	0	0	0	0
Early Terminations	(125,000)	(310,000)	(190,000)	(510,000)
End of Period	195,000	215,000	195,000	215,000
2-year U.S. Treasury Note Futures
Derivative [Line Items]
Beginning of Period				0
Additions				50,000
Scheduled Settlements				(50,000)
Early Terminations				0
End of Period		0		0
10-year U.S. Treasury Note Futures
Derivative [Line Items]
Beginning of Period		45,000	25,000	0
Additions		0	50,000	540,100
Scheduled Settlements		(45,000)	(50,000)	(365,000)
Early Terminations		0	(25,000)	(175,100)
End of Period	0	0	0	0
Purchased Call Options on Ten Year U.S. Treasury Note Futures
Derivative [Line Items]
Beginning of Period			25,000	0
Additions			0	65,200
Scheduled Settlements			(25,000)	(65,200)
Early Terminations			0	0
End of Period	$ 0	$ 0	$ 0	$ 0

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Derivative Instruments - Cash Collateral Posted in Respect of Derivative and Other Financial Instruments (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Cash collateral posted, net	$ 3,228	$ 4,549
Interest Rate Swap
Cash collateral posted, net	3,228	4,174
U.S. Treasury Note Futures
Cash collateral posted, net	$ 0	$ 375

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Offsetting of Financial Assets and Liabilities - Derivative Instruments and Short-term Borrowing Arrangements, including those Subject to Master Netting or Similar Arrangements (Details) - USD ($) $ in Thousands		Sep. 30, 2022	Dec. 31, 2021
Derivative instruments:
Derivative Asset, Gross Amount Recognized		$ 4,422	$ 250
Derivative Asset, Amount Offset		0	0
Derivative Asset		4,422	250
Derivative Asset, Financial Instruments	[1]	(139)	(105)
Derivative Asset, Cash Collateral	[2]	0	0
Derivative Asset, Net amount Total		4,283	145
Derivative instruments:
Derivative Liabilities, Gross Amount Recognized		139	228
Derivative Liabilities, Amount Offset		0	0
Derivative Liability		139	228
Derivative Liabilities, Financial Instruments	[1]	(139)	(105)
Derivative Liabilities, Cash Collateral	[2]	0	(107)
Derivative Liabilities, Net amount Total		0	16
Derivative Financial Instruments, Liabilities
Derivative instruments:
Derivative Liabilities, Gross Amount Recognized		430,049	446,852
Derivative Liabilities, Amount Offset		0	0
Derivative Liability		430,049	446,852
Derivative Liabilities, Financial Instruments	[1]	(430,049)	(446,729)
Derivative Liabilities, Cash Collateral	[2]	0	(107)
Derivative Liabilities, Net amount Total		0	16
Derivative Financial Instruments, Assets
Derivative instruments:
Derivative Asset, Gross Amount Recognized		4,422	250
Derivative Asset, Amount Offset		0	0
Derivative Asset		4,422	250
Derivative Asset, Financial Instruments	[1]	(139)	(105)
Derivative Asset, Cash Collateral	[2]		0
Derivative Asset, Net amount Total		4,283	145
Repurchase Agreements
Derivative instruments:
Derivative Liabilities, Gross Amount Recognized		429,910	446,624
Derivative Liabilities, Amount Offset		0	0
Derivative Liability		429,910	446,624
Derivative Liabilities, Financial Instruments	[1]	(429,910)	(446,624)
Derivative Liabilities, Cash Collateral	[2]	0
Derivative Liabilities, Net amount Total		0
TBA Commitments
Derivative instruments:
Derivative Asset, Gross Amount Recognized		4,162	230
Derivative Asset, Amount Offset		0
Derivative Asset		4,162	230
Derivative Asset, Financial Instruments	[1]	(139)	(105)
Derivative Asset, Cash Collateral	[2]	0	0
Derivative Asset, Net amount Total		4,023	125
Derivative instruments:
Derivative Liabilities, Gross Amount Recognized		139	121
Derivative Liabilities, Amount Offset		0	0
Derivative Liability		139	121
Derivative Liabilities, Financial Instruments	[1]	(139)	(105)
Derivative Liabilities, Cash Collateral	[2]	0
Derivative Liabilities, Net amount Total		0	16
10-year U.S. Treasury Note Futures
Derivative instruments:
Derivative Asset, Gross Amount Recognized			16
Derivative Asset, Amount Offset			0
Derivative Asset		0	16
Derivative Asset, Financial Instruments	[1]		0
Derivative Asset, Cash Collateral	[2]		0
Derivative Asset, Net amount Total			16
Derivative instruments:
Derivative Liability		0	0
Options on U.S. Treasury Note Futures
Derivative instruments:
Derivative Asset, Gross Amount Recognized			4
Derivative Asset, Amount Offset			0
Derivative Asset		0	4
Derivative Asset, Financial Instruments	[1]		0
Derivative Asset, Cash Collateral	[2]		0
Derivative Asset, Net amount Total			4
Derivative instruments:
Derivative Liability		0	0
Interest Rate Swap
Derivative instruments:
Derivative Asset, Gross Amount Recognized		260
Derivative Asset, Amount Offset		0
Derivative Asset		260	0
Derivative Asset, Financial Instruments	[1]	0
Derivative Asset, Cash Collateral	[2]	0
Derivative Asset, Net amount Total		260
Derivative instruments:
Derivative Liabilities, Gross Amount Recognized			107
Derivative Liabilities, Amount Offset			0
Derivative Liability		$ 0	107
Derivative Liabilities, Financial Instruments	[1]		0
Derivative Liabilities, Cash Collateral	[2]		(107)
Derivative Liabilities, Net amount Total			$ 0

[1] Does not include the fair value amount of financial instrument collateral pledged in respect of repurchase agreements that exceeds the associated liability presented in the consolidated balance sheets.

[2] Does not include the amount of cash collateral pledged in respect of derivative instruments and repurchase agreements that exceeds the associated liability presented in the consolidated balance sheets

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Fair Value Measurements - Summary of Significant Inputs to Fair Value Measurement (Details) - Fair Value, Inputs, Level 3	Sep. 30, 2022 LoanCost	Dec. 31, 2021 LoanCost
Annualized Voluntary Prepayment Rate | Subordinate Debt Obligations
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Alternative Investment, Measurement Input	0.173
Annualized Voluntary Prepayment Rate | Excess Interest-Only Debt Obligations
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Alternative Investment, Measurement Input	0.173
Annualized Default Rate | Subordinate Debt Obligations
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Alternative Investment, Measurement Input	0.005
Annualized Default Rate | Excess Interest-Only Debt Obligations
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Alternative Investment, Measurement Input	0.005
Loss-Given-Default | Subordinate Debt Obligations
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Alternative Investment, Measurement Input	0.175
Loss-Given-Default | Excess Interest-Only Debt Obligations
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Alternative Investment, Measurement Input	0.175
Discount Rate | Subordinate Debt Obligations
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Alternative Investment, Measurement Input	0.078
Discount Rate | Excess Interest-Only Debt Obligations
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Alternative Investment, Measurement Input	0.177
Non-Agency MBS | Loss-Given-Default
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Alternative Investment, Measurement Input	0.184	0.158
Non-Agency MBS | Probability of Default
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Alternative Investment, Measurement Input	0.182	0.777
Mortgage Loans of Consolidated VIE | Loss-Given-Default
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Alternative Investment, Measurement Input	0.096	0.086
Mortgage Loans of Consolidated VIE | Probability of Default
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Alternative Investment, Measurement Input	0.503	0.662
MSR financing receivables | Annualized Voluntary Prepayment Rate
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Alternative Investment, Measurement Input	0.070	0.101
MSR financing receivables | Discount Rate
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Alternative Investment, Measurement Input	0.085	0.090
MSR financing receivables | Annual per-loan Cost of Servicing(Current Loans)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Alternative Investment, Measurement Input	65.00	65.00

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Fair Value Measurements - Additional Information (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2022	Dec. 31, 2021
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Long-term unsecured debt, carrying value	$ 86,302	$ 85,994
Long-term debt, Fair Value	79,670	84,821
Long-term secured debt, carrying value	56,801	39,178
Equity Securities of Publicly Traded Companies
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Investments in equity securities and investment funds measured at fair value	352	5,267
Private Equity Funds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Investments in equity securities and investment funds measured at fair value	5,248	7,388
MSR financing receivables
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Present value of expected incentive fee	$ 13,057	$ 3,820
Fair Value, Inputs, Level 3 | Private Equity Funds | Stock Price to Net Asset Multiple
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Fair value discount rate	0.97	0.95
Fair Value, Inputs, Level 3 | Private Equity Funds | Discount Factor for Lack of Marketability and Control
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Fair value discount rate	0.15	0.15
Fair Value, Inputs, Level 3 | Private Equity Funds | Cost of Equity Discount Rate
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Fair value discount rate	0.16	0.16
Fair Value, Inputs, Level 3 | Commercial Mortgage Loan Investment
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Estimated weighted average rate of default	0.00%	0.00%
Fair value discount rate	0.064	0.056
Fair Value, Inputs, Level 3 | Single-Family Residential Properties
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Long-term debt, Fair Value	$ 49,438	$ 38,562
Long-term secured debt, carrying value	$ 56,801	$ 39,178
Fair Value, Inputs, Level 3 | Non-Agency MBS | Maximum
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Percentage of investment represented original collateral pool	5.00%	10.00%
Fair Value, Inputs, Level 3 | Mortgage Loans of Consolidated VIE | Maximum
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Percentage of loans represented original collateral pool	5.00%	10.00%

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Fair Value Measurements - Financial Instruments Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Sep. 30, 2022	Dec. 31, 2021
Financial assets:
Loans, at fair value	$ 29,375	$ 29,697
Derivative Asset, Subject to Master Netting Arrangement, before Offset	4,422	250
Financial liabilities:
Derivative Liability	139	228
Fair Value, Measurements, Recurring
Financial assets:
MSR financing receivables	164,585	125,018
Loans, at fair value	29,375	29,697
Derivative Asset, Subject to Master Netting Arrangement, before Offset	4,422	250
Other assets	5,600	12,655
Financial liabilities:
Derivative Liability	139	228
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 1
Financial assets:
MSR financing receivables	0	0
Loans, at fair value	0	0
Derivative Asset, Subject to Master Netting Arrangement, before Offset	0	20
Other assets	352	5,267
Financial liabilities:
Derivative Liability	0	0
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2
Financial assets:
MSR financing receivables	0	0
Loans, at fair value	0	0
Derivative Asset, Subject to Master Netting Arrangement, before Offset	4,422	230
Other assets	0	0
Financial liabilities:
Derivative Liability	139	228
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 3
Financial assets:
MSR financing receivables	164,585	125,018
Loans, at fair value	29,375	29,697
Derivative Asset, Subject to Master Netting Arrangement, before Offset	0	0
Other assets	5,248	7,388
Financial liabilities:
Derivative Liability	0	0
Fair Value, Measurements, Recurring | Agency MBS
Financial assets:
Trading securities	445,122	483,927
Fair Value, Measurements, Recurring | Agency MBS | Fair Value, Inputs, Level 1
Financial assets:
Trading securities	0	0
Fair Value, Measurements, Recurring | Agency MBS | Fair Value, Inputs, Level 2
Financial assets:
Trading securities	445,122	483,927
Fair Value, Measurements, Recurring | Agency MBS | Fair Value, Inputs, Level 3
Financial assets:
Trading securities	0	0
Fair Value, Measurements, Recurring | Variable Interest Entity, Primary Beneficiary
Financial assets:
Loans, at fair value	203,456	7,442
Financial liabilities:
Secured debt of consolidated VIEs, at fair value	182,336	508
Fair Value, Measurements, Recurring | Variable Interest Entity, Primary Beneficiary | Fair Value, Inputs, Level 1
Financial assets:
Loans, at fair value	0	0
Financial liabilities:
Secured debt of consolidated VIEs, at fair value	0	0
Fair Value, Measurements, Recurring | Variable Interest Entity, Primary Beneficiary | Fair Value, Inputs, Level 2
Financial assets:
Loans, at fair value	0	0
Financial liabilities:
Secured debt of consolidated VIEs, at fair value	172,012	0
Fair Value, Measurements, Recurring | Variable Interest Entity, Primary Beneficiary | Fair Value, Inputs, Level 3
Financial assets:
Loans, at fair value	203,456	7,442
Financial liabilities:
Secured debt of consolidated VIEs, at fair value	10,324	508
Fair Value, Measurements, Recurring | Credit Securities
Financial assets:
Trading securities	115,783	26,222
Fair Value, Measurements, Recurring | Credit Securities | Fair Value, Inputs, Level 1
Financial assets:
Trading securities	0	0
Fair Value, Measurements, Recurring | Credit Securities | Fair Value, Inputs, Level 2
Financial assets:
Trading securities	108,330	0
Fair Value, Measurements, Recurring | Credit Securities | Fair Value, Inputs, Level 3
Financial assets:
Trading securities	$ 7,453	$ 26,222

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Fair Value Measurements - Change in Fair Value of Level 3 Financial Assets and Liabilities that are Measured at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Fair Value Disclosures [Abstract]
Beginning balance	$ 393,501	$ 206,729	$ 195,767	$ 166,428
Net gain included in "Investment and derivative gain (loss), net"	(13,199)	4,504	(11,583)	9,639
Additions from consolidation of VIEs	0	0	276,594	0
Transfers to real estate owned by consolidated VIE	(78)	0	(277)	0
Purchases	40,474	35,601	61,693	128,614
Sales	0	0	(12,406)	(1,662)
Payments, net	(14,671)	(68,810)	(110,052)	(128,350)
Accretion (amortization) of discount (premium), net	4,090	2,411	10,381	5,766
Ending balance	410,117	180,435	410,117	180,435
Net unrealized gains (losses) included in earnings for the period for Level 3 assets still held at the reporting date	(13,199)	4,504	(10,552)	9,719
Beginning balance	11,521	640	508	576
Net gain included in "Investment and derivative gain (loss), net"	(808)	9	(2,140)	(1)
Additions from consolidation of VIEs	0	0	14,278	0
Payments, net	(374)	3	(2,170)	3
(Amortization) accretion of (premium) discount, net	(15)	0	(152)	74
Ending balance	10,324	652	10,324	652
Net unrealized losses (gains) included in earnings for the period for Level 3 liabilities still held at the reporting date	$ (808)	$ 9	$ (2,140)	$ (1)

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Income Taxes - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Income Tax Disclosure [Line Items]
Intended annual distribution of taxable income			100.00%
Required annual distribution of taxable income			90.00%
Estimated net operating loss carryforwards	$ 162,828		$ 162,828
Net operating loss carryforward subject to expiration year	14,588		14,588
Net operating loss carryforward not subject to expiration year	148,240		$ 148,240
Percentage of maximum utilization net operating loss carry forward			80.00%
Forwards			2028
Capital loss carryforwards expiration remainder of fiscal year	3,763		$ 3,763
Capital loss carryforwards expiration in year 2023	110,323		110,323
Capital loss carryforwards expiration in year 2026	14,187		14,187
Capital loss carryforwards expiration in year 2027	28,545		28,545
Provision for income taxes	1,074	$ 436	4,163	$ 758
Capital Loss Carryforward
Income Tax Disclosure [Line Items]
Tax Credit Carryforward, Amount	$ 156,818		$ 156,818

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Earnings (Loss) Per Share - Computations of Basic and Diluted Earnings (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Earnings Per Share [Abstract]
Basic weighted-average common shares outstanding	28,338	31,927	28,973	32,720
Performance share units, unvested restricted stock units, and unvested restricted stock	575	0	0	0
Diluted weighted-average common shares outstanding	28,913	31,927	28,973	32,720
Net loss attributable to common stock	$ 2,756	$ (981)	$ (1,087)	$ (15,526)
Basic earnings (loss) per common share	$ 0.10	$ (0.03)	$ (0.04)	$ (0.47)
Diluted earnings (loss) per common share	$ 0.10	$ (0.03)	$ (0.04)	$ (0.47)

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Earnings (Loss) Per Share - Additional Information (Details) - shares	3 Months Ended	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2022	Sep. 30, 2021
Restricted Stock, Restricted Stock Units and Performance Shares
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	315,576	530,673	312,371

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Stockholders' Equity - Additional Information (Details) $ / shares in Units, $ in Thousands			3 Months Ended						9 Months Ended	12 Months Ended
	Apr. 11, 2022 $ / shares	Jun. 01, 2009	Sep. 30, 2022 USD ($) $ / shares shares	Jun. 30, 2022 USD ($) shares	Mar. 31, 2022 USD ($) $ / shares shares	Sep. 30, 2021 USD ($) shares	Jun. 30, 2021 USD ($) shares	Mar. 31, 2021 USD ($) shares	Sep. 30, 2022 USD ($) $ / shares shares	Dec. 31, 2021 USD ($) $ / shares shares	Jul. 31, 2020 shares	Aug. 10, 2018 shares
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Common stock, shares outstanding (in shares)			0						0	0
Repurchase of stock | $						$ 4,095
Shareholder Rights Plan
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Rights plan, amended term of agreement		3 years
Stock repurchase program expiration date	Jun. 04, 2025
Preferred Stock
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Repurchase of stock | $			$ 1,640	$ 1,749
Common Equity Distribution Agreements | Common Stock
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Issuance of stock (in shares)			0						0	0
Maximum
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Stock repurchase program, number of shares authorized to be repurchased											18,000,000
Maximum | Shareholder Rights Plan
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Rights plan price per share | $ / shares					$ 70.00
Minimum | Shareholder Rights Plan
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Rights plan price per share | $ / shares	$ 21.30
Common Class A
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Common stock, shares authorized (in shares)			450,000,000						450,000,000	450,000,000
Common stock, par value (in dollars per share) | $ / shares			$ 0.01						$ 0.01	$ 0.01
Common Stock Voting Rights Per Share Owned			1						1
Common stock, shares outstanding (in shares)			28,628,959						28,628,959	30,676,931
Stock repurchase program shares previously available to be repurchased			10,560,785						10,560,785
Repurchase of stock | $			$ 1,493	$ 3,242	$ 3,497		$ 3,490	$ 523	$ 8,232	$ 12,475
Common Class A | Common Stock
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Repurchase of stock (in shares)			472,357	947,570	1,009,566	1,059,980	855,835	137,655	2,429,493	3,242,371
Repurchase of stock | $			$ 5	$ 10	$ 10	$ 11	$ 9	$ 1
Common Class A | Amended New Equity Distribution Agreements | Common Stock
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Number of shares offer and sell			11,302,160						11,302,160
Common Class A | Maximum | Amended New Equity Distribution Agreements | Common Stock
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Number of shares offer and sell												12,597,423
Common Class A | Minimum | Shareholder Rights Plan
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Percentage of beneficial ownership of common stock		4.90%
Common Class B
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Common stock, shares authorized (in shares)			100,000,000						100,000,000
Common stock, par value (in dollars per share) | $ / shares			$ 0.01						$ 0.01
Common Stock Voting Rights Per Share Owned			3						3
7.00% Series B Cumulative Perpetual Redeemable Preferred Stock
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Preferred stock, shares authorized (in shares)			2,000,000						2,000,000
Preferred stock, par value (in dollars per share) | $ / shares			$ 0.01						$ 0.01
Series C Preferred Stock
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Preferred stock, shares authorized (in shares)			2,500,000						2,500,000
Preferred stock, par value (in dollars per share) | $ / shares			$ 0.01						$ 0.01	$ 0.01
Preferred stock, dividend rate percentage									8.25%
Preferred stock voting rights per share owned			0						0
Preferred stock, liquidation preference per share | $ / shares			$ 25.00						$ 25.00
Preferred stock, redeemable price per share | $ / shares			25.00						$ 25.00
Preferred stock, dividend payment terms									Dividends are payable quarterly in arrears on the 30th day of March, June, September and December of each year, when and as declared.
Preferred stock, annual dividend rate per share | $ / shares			$ 2.0625						$ 2.0625
Preferred stock, rate conversion date									Mar. 30, 2024
Series C Preferred Stock | LIBOR
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Preferred stock, variable dividend spread rate									5.664%
Series C Preferred Stock | Preferred Stock
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Repurchase of stock (in shares)			79,848	72,363					152,211	0
Repurchase of stock | $			$ 1,640	$ 1,749					$ 3,389
Undesignated Preferred Stock
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Preferred stock, shares authorized (in shares)			20,400,000						20,400,000
Series A Preferred Stock
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Preferred stock, shares authorized (in shares)			100,000						100,000
Preferred stock shares unissued			100,000						100,000
Series B Preferred Stock
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Preferred stock, par value (in dollars per share) | $ / shares			$ 0.01						$ 0.01	$ 0.01
Preferred stock, dividend rate percentage									7.00%
Preferred stock voting rights per share owned			0						0
Preferred stock, liquidation preference per share | $ / shares			$ 25.00						$ 25.00
Preferred stock, redeemable price per share | $ / shares			25.00						$ 25.00
Preferred stock, dividend payment terms									Dividends are payable quarterly in arrears on the 30th day of March, June, September and December of each year, when and as declared.
Preferred stock, annual dividend rate per share | $ / shares			$ 1.75						$ 1.75
Series B Preferred Stock | Preferred Stock
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Issuance of stock (in shares)					6,058	22,719
Series B Preferred Stock | Series B Preferred Equity Distribution Agreement | Preferred Stock
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Issuance of stock (in shares)									6,058	37,337
Number of Shares Offer and Sell			1,602,566						1,602,566
Weighted average public offering price | $ / shares									$ 24.87	$ 24.99
Proceeds net of selling commissions and expenses | $									$ 149	$ 919
Series B Preferred Stock | Maximum | Series B Preferred Equity Distribution Agreement | Preferred Stock
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Number of Shares Offer and Sell			1,647,370						1,647,370

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Long-Term Incentive Plan (Additional Information) (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended	9 Months Ended		12 Months Ended
	Jun. 30, 2019	Sep. 30, 2022	Sep. 30, 2021	Dec. 31, 2021	Dec. 31, 2020
Long Term Incentive Plan 2021 | Common Class A
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized				5,256,076
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant		4,361,753
Long Term Incentive Plan2021 And Prior Plans
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant		2,517,656
Share-based Compensation Arrangement by Share-based Payment Award, Shares Issued in Period		1,844,097
Stock Options And SARs | Long Term Incentive Plan 2021
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value		$ 160
Absolute TSR Relative TSR And Book Value Performance Shares | Common Class A
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Vesting period		3 years	3 years
Absolute TSR Relative TSR And Book Value Performance Shares | Maximum
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Threshold percentage of performance goals		250.00%
Absolute TSR Relative TSR And Book Value Performance Shares | Maximum | Common Class A
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Vesting percentage		250.00%
Absolute TSR Relative TSR And Book Value Performance Shares | Minimum
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Threshold percentage of performance goals		50.00%
Absolute TSR Relative TSR And Book Value Performance Shares | Minimum | Common Class A
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Vesting percentage		0.00%
Book Value Awards
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Shares granted (in shares)		103,000
Grant date fair value per share		$ 3.37
Book Value Awards | Common Class A
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Vesting period		1 year
Book Value Awards | Maximum | Common Class A
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Vesting percentage		100.00%
Book Value Awards | Minimum | Common Class A
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Vesting percentage		0.00%
Stock Price awards
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Vesting period		3 years
Shares granted (in shares)		1,225,490
Grant date fair value per share		$ 1.72
Stock Price awards | Common Class A
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Vesting period		45 days
Stock Price awards | Maximum
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Vesting percentage		300.00%
Stock Price awards | Minimum
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Vesting percentage		75.00%
Performance Shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Allocated Share Based Compensation Expense Income		$ 902	$ 298
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount		$ 3,650		$ 878
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term		3 years 4 months 24 days
Share-Based Payment Award, Options, Outstanding		1,844,097
Return On Equity Performance Shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, equity instruments other than options conversion in period		0	82,124
Restricted Stocks
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share-Based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount		$ 1,646		$ 1,847
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term		1 year 2 months 12 days
Share-based compensation arrangement by share-based payment award, equity instruments other than options conversion in period				82,124
Allocated Share-based Compensation Expense		$ 1,470	$ 896
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number, Beginning Balance		1,022,841		759,035	547,688
Shares granted (in shares)		384,291		365,592
Grant date fair value per share		$ 3.42		$ 3.89
Intrinsic value		$ 328	444
Restricted Stock Units (RSUs)
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Allocated Share-based Compensation Expense		300	300
Restricted Stock Units (RSUs) | Common Class A
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Intrinsic value		73	74
Restricted Stock Units (RSUs) | Board Of Directors Chairman
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Shares granted (in shares)	87,847
Grant date fair value per share	$ 6.83
Restricted Stock Units (RSUs) | Employee
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Allocated Share-based Compensation Expense		$ 0	$ 66
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number, Beginning Balance		0		20,455
Restricted Stock Units (RSUs) | Non Employee Director
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Shares granted (in shares)		132,450	98,035
Grant date fair value per share		$ 3.02	$ 4.08
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance		548,272		415,822
Undistributed Restricted Stock Issued To Trust
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number, Beginning Balance		9,155		9,155

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Long-Term Incentive Plan - Share Based Compensation Performance-based Stock Award Grants Activity (Details) - $ / shares	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Absolute TSR Awards
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Shares granted (in shares)	174,581	90,711
Grant date fair value per share	$ 6.03	$ 6.89
Relative TSR Awards
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Shares granted (in shares)	87,291	47,710
Grant date fair value per share	$ 5.83	$ 6.55
Book Value Awards
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Shares granted (in shares)	103,000
Grant date fair value per share	$ 3.37
Stock Price awards
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Shares granted (in shares)	1,225,490
Grant date fair value per share	$ 1.72

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Long-Term Incentive Plan - Share Based Compensation Award Valuation Assumptions (Details) - $ / shares		9 Months Ended
		Sep. 30, 2022	Sep. 30, 2021
Absolute TSR Awards
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Closing stock price on date of grant		$ 3.58	$ 4.08
Beginning average stock price on date of grant	[1]	$ 3.60	$ 4.07
Expected volatility	[2]	69.20%	69.27%
Dividend yield	[3]	0.00%	0.00%
Risk-free rate	[4]	1.01%	0.34%
Discount for illiquidity	[5]	0.00%	0.00%
Relative TSR Awards
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Closing stock price on date of grant		$ 3.58	$ 4.08
Beginning average stock price on date of grant	[1]	$ 3.60	$ 4.07
Expected volatility	[2]	69.20%	69.27%
Dividend yield	[3]	0.00%	0.00%
Risk-free rate	[4]	1.01%	0.34%
Discount for illiquidity	[5]	0.00%	0.00%
Stock Price awards
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Closing stock price on date of grant		$ 3.06
Expected volatility	[2]	51.17%
Dividend yield	[3]	0.00%
Risk-free rate	[4]	2.97%
Discount for illiquidity	[5]	8.42%

[1] Based upon the 30 trading days prior to and including the date of grant.

[2] Based upon the most recent three-year volatility as of the date of grant.

[3] Dividend equivalents are accrued during the performance period and deemed reinvested in additional stock units, which are to be paid out at the end of the performance period to the extent the underlying Performance-based Stock Award is earned. Applying dividend yield assumption of 0.00% in the Monte Carlo simulation is mathematically equivalent to reinvesting dividends on a continuous basis and including the value of the dividends in the final payout.

[4] Based upon the yield of a U.S. Treasury bond with a three-year maturity as of the date of grant.

[5] Based on restriction on ability to sell vested awards for one year after vesting.

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Long-Term Incentive Plan - Share Based Compensation Award Valuation Assumptions (Parenthetical) (Details)	9 Months Ended
	Sep. 30, 2022
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Trading Period	30 days
Ability to sell Vested awards, after vesting, (In years)	1 year
Absolute TSR And Relative TSR Performance Shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Dividend yield	0.00%
Absolute TSR And Relative TSR Performance Shares | US Treasury Securities
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions, Expected Term	3 years

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Long-Term Incentive Plan - Schedule of Unvested Restricted Stock Units Roll Forward (Details) - Restricted Stocks - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2022	Dec. 31, 2021	Dec. 31, 2020
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Share Balance (in shares)	759,035	547,688
Shares granted (in shares)	384,291	365,592
Conversion of ROE Awards (in shares)		82,124
Forfeitures (in shares)	(12,167)	(22,000)
Vestitures (in shares)	(108,318)	(214,369)
Share Balance (in shares)	1,022,841	759,035	547,688
Balance (in dollars per share)	$ 4.16	$ 4.89
Grant date fair value per share	3.42	3.89
Conversion of ROE Awards (in dollars per share)		5.65
Forfeitures (in dollars per share)	3.57	6.54
Vestitures (in dollars per share)	6.43	5.89
Balance (in dollars per share)	$ 3.65	$ 4.16	$ 4.89
Weighted-average remaining vested period (in years)	1 year 2 months 12 days	1 year 6 months	1 year 6 months

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Long-Term Incentive Plan - Share Based Compensation Restricted Stock Units Grants Activity (Details) - Restricted Stock Units (RSUs) - Non Employee Director - $ / shares	9 Months Ended
	Sep. 30, 2022	Sep. 30, 2021
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
RSUs granted	132,450	98,035
Grant date fair value per share	$ 3.02	$ 4.08