On December 14, 2023 (the "Arlington Merger Consummation Date"), Arlington Asset Investment Corp., a Virginia corporation (“Arlington”), merged with and into EF Merger Sub Inc., a direct wholly owned subsidiary of the Company, pursuant to the agreement and plan of merger (the “Arlington Merger Agreement”) which was entered into on May 29, 2023 (the “Arlington Merger”).

In accordance with the terms of the Arlington Merger Agreement, each outstanding share of Arlington's Class A common stock, par value $0.01 per share (other than shares held by the Company, EF Merger Sub Inc. or any wholly-owned subsidiary of the Company, EF Merger Sub Inc. or Arlington) was automatically converted into the right to receive: (i) from the Company, 0.3619 newly issued shares of common stock and (ii) from the Manager, a cash amount equal to $0.09 per share. In connection with the transactions completed pursuant to the Arlington Merger Agreement, 11,040,704 shares of the Company’s common stock were issued. The 11,040,704 shares of the Company's common stock issued included 1,039,418 shares issued related to certain equity-based awards previously issued under Arlington's equity-incentive plans, including restricted shares of common stock, performance restricted stock units, stock price performance restricted stock units and deferred stock units (collectively the “Arlington Equity-Based Awards”), which under the terms of the Arlington Merger Agreement vested prior to the consummation of the Arlington Merger and were treated as shares of Arlington's Class A common stock for all purposes of the Arlington Merger Agreement.

In addition, in accordance with the terms of the Arlington Merger Agreement (i) each of the 379,668 outstanding shares of Arlington’s 7.00% Series B Cumulative Perpetual Redeemable Preferred Stock, $0.01 par value per share, was automatically converted into the right to receive one newly issued share of the Company’s Series D Preferred Stock; and (ii) each of the 957,133 outstanding shares of Arlington’s 8.250% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, $0.01 par value per share, was automatically converted into the right to receive one newly issued share of the Company’s Series E Preferred Stock.

At the consummation of the Arlington Merger, all assets, and all debts, obligations and liabilities of Arlington became the assets, debts, obligations and liabilities of the Company (including Arlington’s outstanding Trust Preferred Debt, 6.75% Senior Notes and 6.00% Senior Notes).

The Arlington Merger was accounted for using the acquisition method of accounting, in accordance with the provisions of ASC 805. The total consideration paid by the Company in the Arlington Merger was $177.3 million, which includes the fair value as of the Arlington Merger Consummation Date of 10,745,327 shares of common stock, 379,668 shares of Series D Preferred Stock, 957,133 shares of Series E Preferred Stock issued by the Company on December 14, 2023, and $5.6 million of

cash consideration associated with the issuance of certain Arlington Equity Based-Awards upon consummation of the Arlington Merger ("Total Arlington Consideration"). Total Arlington Consideration does not include (i) 295,377 shares of common stock, totaling $3.9 million, issued by the Company to Arlington employees related to the accelerated vesting of the Arlington Equity-Based Awards; such amounts were recognized by the Company as an expense at the Arlington Merger Consummation Date; or (ii) approximately $2.7 million in cash paid to the holders of Arlington's Class A common stock by the Manager.

The Company performed a preliminary allocation of the Total Arlington Consideration and recorded the underlying assets acquired and liabilities assumed based on their estimated fair values using the information available as of the Arlington Merger Consummation Date using valuation methodologies consistent with the methodologies outlined in Note 2—Valuation. This allocation is preliminary and subject to change until the end of the measurement period; the purchase price allocation must be finalized within one year of the Arlington Merger Consummation Date.

In conjunction with the preliminary purchase price allocation, the Company recognized a bargain purchase gain of $28.2 million, which is calculated as the recognized amount of the identifiable net assets acquired less the fair value of the consideration transferred. The Company recognized a bargain purchase gain at the Arlington Merger Consummation Date, as the fair value of net assets acquired was greater than the Total Arlington Consideration; such bargain purchase gain is included in Bargain purchase gain, on the Consolidated Statement of Operations.


(In thousands)	December 14, 2023
Purchase price(1)
Common stock(2)	$	140,119
Preferred equity(3)	31,631
Cash	5,552
Total consideration	$	177,302
Allocated to:
Assets:
Securities, at fair value	$	645,708
Forward MSR-related investments, at fair value	177,421
Other assets	71,157
Total assets acquired	894,286
Liabilities:
Repurchase agreements	590,928
Unsecured borrowings, at fair value	81,077
Other liabilities	16,804
Total liabilities assumed	688,809
Total net assets acquired	205,477
Bargain purchase gain	$	28,175

(1)Similar to the Company, Arlington elected to be taxed as a real estate investment trust under the Code. As of December 14, 2023, Arlington had an estimated federal net operating loss carryforward and also had an estimated federal net capital loss carryforward. The Company evaluated the attributes of these loss carryforwards and the extent to which, and likelihood, that the Company would utilize them in part or in whole, taking into account the corporate structure of the Company subsequent to the consummation of the Arlington Merger, the uncertainty of projecting operating gains and/or capital gains in its domestic corporate blockers, and limitations on the utilization of such carryforwards imposed by U.S. Code section 382. Based on this evaluation, the Company does not expect to recognize any deferred tax assets with respect to these net operating and capital loss carryforwards, and has not recognized any such deferred tax assets in this preliminary purchase price allocation. If the Company subsequently determines that it is likely to utilize these loss carryforwards, in part or in whole, this could have a material effect on the purchase price allocation once finalized.

(3)Fair value of the EFC Series D Preferred Stock and the EFC Series E Preferred Stock are based on the closing price, as reported by the NYSE, on the day prior to the Closing Date, for the Arlington Series B Preferred Stock of $21.17 and Arlington Series C Preferred Stock of $24.65, respectively.

On June 30, 2023, we, Great Ajax Corp. (“Great Ajax”), and EF Acquisition I LLC, our wholly-owned subsidiary (“Great Ajax merger sub”), entered into an Agreement and Plan of Merger (the “Great Ajax merger agreement”), pursuant to which it was agreed that, subject to the terms and conditions therein, Great Ajax would be merged with and into Great Ajax merger sub, with Great Ajax merger sub remaining as our wholly-owned subsidiary (the “Great Ajax merger”). On October 20, 2023, we and Great Ajax executed an agreement to terminate the Great Ajax merger agreement and the transactions contemplated thereby (the "Ajax Merger Termination Agreement"). Under the terms of the Ajax Merger Termination Agreement, the Company paid Great Ajax a termination fee of $5.0 million, which is included in Other expenses on the Consolidated Statement of Operations. The Company also purchased 1,666,666 newly issued shares of Great Ajax common stock, at a per share price of $6.60, for a total purchase price of $11.0 million. As of December 31, 2023, the Company's equity interest in Great Ajax had a fair value of $8.8 million.

As of September 30, 2022, the Company held a 49.6% ownership interest (the "Existing Equity Interest") in Longbridge Financial, LLC of $38.9 million. On October 3, 2022 (the "Longbridge Transaction Consummation Date"), the Company acquired an additional 49.6% ownership interest (the "Additional Equity Interest") in the Longbridge Transaction. In combination, the Existing Equity Interest and the Additional Equity Interest constitute a controlling interest in Longbridge. The Longbridge Transaction was accounted for using the acquisition method of accounting, in accordance with the provisions of ASC 805. The total consideration for the Longbridge Transaction was $77.8 million, which is equal to the cash paid to acquire the Additional Equity Interest and the estimated fair value of the Existing Equity Interest (the “Total Longbridge Consideration”).

The Company performed an allocation of the Total Longbridge Consideration and recorded the underlying assets acquired (including certain identified intangible assets) and liabilities assumed based on their estimated fair values using the information available as of the acquisition date using valuation methodologies consistent with the methodologies outlined in Note 2—Significant Accounting Policies—Valuation.

In conjunction with the purchase price allocation, the Company recognized a bargain purchase gain of $7.9 million, which is calculated as the recognized amount of the identifiable net assets acquired less: (i) the fair value of the consideration transferred, (ii) the fair value of the previously held 49.6% equity interest in Longbridge, (iii) the fair value of the non-controlling interest, and (iv) the deferred tax liability associated with the bargain purchase gain. The Company recognized a bargain purchase gain at the date of acquisition, as the fair value of net assets acquired was greater than the total net consideration; such bargain purchase gain is included in Bargain purchase gain, on the Consolidated Statement of Operations.


	October 3, 2022
Purchase Price:	(In thousands)
Cash	$	38,886
Investment in unconsolidated entity, at fair value	38,886
Total Consideration	77,772
Allocated to:
Cash and cash equivalents	20,368
Restricted cash	2,250
Loans, at fair value	7,698,426
Loan commitments, at fair value	3,090
Forward MSR-related investments, at fair value	8,174
Real estate owned	8,511
Financial derivatives—assets, at fair value	7,121
Due from brokers	7,534
Other assets	51,475
Intangible assets, net(2)	3,500
Total assets acquired	7,810,449
HMBS related obligations, at fair value	7,448,524
Other secured borrowings	218,261
Interest payable	1,273
Accrued expenses and other liabilities	51,592
Total liabilities assumed	7,719,650
Total identifiable net assets	90,799
Non-controlling interests(1)	2,237
Total net assets acquired	88,562
Deferred tax liability related to bargain purchase gain	2,858
Total net assets acquired less deferred tax liability	85,704
Bargain purchase gain	$	7,932

The following selected unaudited proforma information is intended to reflect the impact of the acquisition of Arlington and the consolidation of Longbridge by the Company, and has been presented as if the Arlington Merger had occurred on January 1, 2022, and as if the Longbridge Transaction had occurred on January 1, 2021, including associated transaction costs and various other adjustments. This unaudited pro forma information is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had these acquisitions been completed as of the dates indicated.


	Year Ended December 31,
(In thousands)	2023		2022		2021
Interest income	$	421,607	$	325,338	$	179,432
Total other income (loss)(1)	150,279		(43,348)		123,508
Earnings (losses) from investments in unconsolidated entities(2)	(855)		(63,615)		44,217
Net Income (Loss)(3)(4)	43,863		(79,685)		168,280

(1)Includes $28.2 million bargain purchase gain related to the Arlington Merger for the year ended December 31, 2022 and excludes such bargain purchase gain for the year ended December 31, 2023. Includes $7.9 million bargain purchase gain related to the Longbridge Transaction for the year ended December 31, 2021, and excludes such bargain purchase gain for the year ended December 31, 2022.

(2)For the years ended December 31, 2022, and 2021, includes an adjustment to reverse $(37.1) million and $13.9 million of net unrealized and realized gains (losses) recognized by the Company related to its existing non-controlling equity interest in Longbridge, for which the Company had elected the fair value option as provided for under ASC 825, Financial Instruments.

(3)Reflects adjustment for the amortization expense related to intangible assets acquired as a result of the Longbridge Transaction of $0.4 million and $1.0 million, for the years ended December 31, 2022 and 2021, respectively. See Note 11 for additional details on the Company's intangible assets.

(4)Includes an adjustment to recognize a $2.9 million income tax benefit related to the bargain purchase gain related to the Longbridge Transaction for the year ended December 31, 2021 and an adjustment to reverse such amount for the year ended December 31, 2022.