AG Mortgage Investment Trust Inc

Previous wording

We make forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in this report that are subject to substantial known and unknown risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, returns, results of operations, plans, yields, objectives, the composition of our portfolio, actions by governmental entities, including the Federal Reserve, and the potential effects of actual and proposed legislation on us, and our views on certain macroeconomic trends. When we use the words "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "may" or similar expressions, we intend to identify forward-looking statements.

Current wording

We make forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in this report that are subject to substantial known and unknown risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, returns, results of operations, plans, yields, objectives, the composition of our portfolio, actions by governmental entities, including the Federal Reserve, and the potential effects of actual and proposed legislation on us, and our views on certain macroeconomic trends. When we use the words "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "could," "will," "may" or similar expressions, we intend to identify forward-looking statements.

Previous wording

•$0.55 of Net Income/(Loss) Available to Common Stockholders per diluted common share and $0.21 of Earnings Available for Distribution ("EAD") per diluted common share;

Current wording

•$(0.02) of Net Income/(Loss) Available to Common Stockholders per diluted common share and $0.21 of Earnings Available for Distribution ("EAD") per diluted common share;

Previous wording

•10.8x GAAP Leverage Ratio and 1.4x Economic Leverage Ratio; and

Current wording

•12.2x GAAP Leverage Ratio and 2.5x Economic Leverage Ratio; and

Previous wording

•$0.18 dividend per common share declared.

Current wording

•$0.19 dividend per common share declared, which represents a 5.6% increase over the prior quarter dividend of $0.18 per common share.

Previous wording

(1)Includes sales of $16.8 million of Non-Agency RMBS sold from the legacy portfolio acquired from Western Asset Mortgage Capital Corporation ("WMC").

Current wording

(1)Includes sales of $8.3 million of Non-Agency RMBS sold from the legacy portfolio acquired from Western Asset Mortgage Capital Corporation ("WMC").

Previous wording

•Executed a rated securitization of Agency-Eligible Loans with a total unpaid principal balance of $377.5 million, converting recourse financing with mark-to-market margin calls to non-recourse financing without mark-to-market margin calls;

Current wording

•Executed a rated securitization of Agency-Eligible Loans with a total unpaid principal balance of $309.8 million, converting recourse financing with mark-to-market margin calls to non-recourse financing without mark-to-market margin calls; and

Previous wording

•Issued $34.5 million principal amount of 9.500% senior notes due 2029 in a public offering generating net proceeds of approximately $32.8 million; and

Current wording

•Issued $65.0 million principal amount of 9.500% senior notes due 2029 in a public offering generating net proceeds of approximately $62.4 million.

Previous wording

(1)These investments are included in the "Securitized residential mortgage loans, at fair value" and "Residential mortgage loans, at fair value" line items on the consolidated balance sheets.

Current wording

(1)These investments are included in the "Securitized residential mortgage loans, at fair value", "Residential mortgage loans, at fair value", and "Residential mortgage loans held for sale, at fair value" line items on the consolidated balance sheets.

Previous wording

Additionally, each outstanding share of WMC’s restricted common stock and each WMC restricted stock unit (each, a “WMC Equity Award”) vested in full immediately prior to the Effective Time and, as of the Effective Time, was considered outstanding for all purposes of the Merger Agreement, including the right to receive the Per Share Merger Consideration, except that WMC Equity Awards granted to certain members of the WMC board of directors at WMC’s 2023 annual stockholders’ meeting (collectively, the “2023 WMC Director Awards”) were treated as follows: (i) for M. Christian Mitchell and Lisa G. Quateman, who were appointed to the our board of directors as of the Effective Time, the 2023 WMC Director Awards were equitably adjusted effective as of the Effective Time into awards relating to shares of our common stock that have the same value, vesting terms and other terms and conditions as applied to the corresponding WMC restricted stock units immediately prior to the Effective Time and (ii) for the other members of the WMC board of directors, the 2023 WMC Director Awards accelerated and vested pro-rata effective as of immediately prior to the Effective Time based on a fraction, the numerator of which was 166 (the number of days between the grant date and the Closing Date) and the denominator of which was 365, and the remaining unvested portion of such 2023 WMC Director Awards was cancelled without any consideration.

Current wording

Additionally, each outstanding share of WMC’s restricted common stock and each WMC restricted stock unit (each, a “WMC Equity Award”) vested in full immediately prior to the Effective Time and, as of the Effective Time, was considered outstanding for all purposes of the Merger Agreement, including the right to receive the Per Share Merger Consideration, except that WMC Equity Awards granted to certain members of the WMC board of directors at WMC’s 2023 annual stockholders’ meeting (collectively, the “2023 WMC Director Awards”) were treated as follows: (i) for M. Christian Mitchell and Lisa G. Quateman, who were appointed to our Board of Directors as of the Effective Time, the 2023 WMC Director Awards were equitably adjusted effective as of the Effective Time into awards relating to shares of our common stock that have the same value, vesting terms and other terms and conditions as applied to the corresponding WMC restricted stock units immediately prior to the Effective Time and (ii) for the other members of the WMC board of directors, the 2023 WMC Director Awards accelerated and vested pro-rata effective as of immediately prior to the Effective Time based on a fraction, the numerator of which was 166 (the number of days between the grant date and the Closing Date) and the denominator of which was 365, and the remaining unvested portion of such 2023 WMC Director Awards was cancelled without any consideration.

Previous wording

The first quarter of 2024 experienced a consistent theme of volatility in the financial markets due to the overall market uncertainty related to inflation, the path of monetary policy and interest rates. The Federal Reserve continued to hold the federal funds target rate steady at the March 2024 Federal Open Market Committee meeting after raising the short-term federal funds rate eleven times between March 2022 and July 2023. The March Consumer Price Index indicated inflation was 3.5% year over year which increased from prior monthly readings. In addition, the U.S. Economy continues to show signs of durability with a strong March employment report issued by the U.S. Bureau of Labor Statistics and the unemployment rate remaining low at 3.8%. As a result of the overall strong first quarter inflation and employment reports, the 10-year U.S. treasury yield increased by approximately 33 basis points from 3.88% as of December 2023 to 4.21% as of the end of the first quarter and the 30-year fixed rate mortgage increased by approximately 20 basis points to 6.8% from the start of the year. Furthermore, treasury yields continued to increase during April 2024. Although at the end of 2023 market participants began pricing in rate cuts as soon as March 2024, the recent inflation reading has indicated the timing of any potential rate cuts would likely be pushed towards the back half of 2024 causing market participants to adjust expectations once again. As a result, it remains unclear when the Federal Reserve will initiate rate cuts and it is possible longer-term rates may remain elevated for longer than anticipated. The quarter ended with the spread between the 2-year and 10-year U.S. treasury yields at approximately 43 basis points inverted, a slight increase from 37 basis points to end 2023. While the Federal Reserve’s policy tightening has slowed, the Federal Reserve has indicated that it will continue to seek economic data that will provide greater confidence that inflation is moving sustainably toward the target rate of 2% to support future rate reductions.

Current wording

The second quarter of 2024 continued to experience volatility in the financial markets due to the overall market uncertainty related to inflation, the path of monetary policy and interest rates and the recent developments of the upcoming U.S. presidential election. The quarter began with the March Consumer Price Index report indicating inflation was 3.5% year over year, increasing from prior monthly readings. This report, coupled with the unemployment rate remaining low at 3.8%, resulted in the 10-year U.S. treasury yield increasing by approximately 48 basis points during April 2024 to 4.69% and the 30-year fixed rate mortgage increasing by approximately 43 basis points to 7.2%. As the quarter progressed, the May and June Consumer Price Index reports showed signs of inflation softening with the year over year Consumer Price Index declining to 3.3% and 3.0%, respectively, and the unemployment rate increasing to 4.1%. The increase in benchmark and mortgage rates experienced during April then began to reverse its course with the 10-year U.S. treasury yield decreasing 29 basis points to 4.4% and the 30-year fixed rate mortgage ending the quarter only 7 basis points higher than the start of the quarter. The quarter ended with the spread between the 2-year and 10-year U.S. treasury yields at approximately 37 basis points inverted, a slight decrease from 43 basis points inverted in March 2024. After quarter end, the Federal Reserve acknowledged at the July 2024 Federal Open Market Committee meeting that they have seen significant progress in bringing down inflation toward their target rate of 2%. Jerome Powell, the Federal Reserve Chair, noted that a broad set of indicators suggest that conditions in the labor market have returned to approximately where they were pre-pandemic. With the balance of risks moving back into equilibrium, Powell also offered that if the broad set of labor and inflation data continued to cooperate, that a reduction of the policy rate could be considered as soon as the September meeting. This was shortly followed by the July employment report issued by the U.S. Bureau of Labor Statistics noting a moderation in the labor market and the unemployment rate increasing to 4.3%, the highest level since October 2021. As a result, benchmark rates retraced at a significant rate in the first week of August 2024 and, as of August 6, 2024, market participants are pricing in approximately 110 basis points of rate cuts before year end. Overall, the Federal Reserve continues to monitor available economic data to determine if they will initiate rate cuts and to what extent rates will decline; however, the recent economic data has been more supportive of a reduction in the Federal Funds Rate.

Previous wording

Although benchmark rates increased during the first quarter 2024, RMBS spreads tightened sharply during this period amid strong investor appetite for U.S. housing and mortgage credit. Trends in credit spreads on credit risk transfer ("CRT") assets are generally utilized by market participants as a proxy for evaluating credit related assets given the observability of transactions. CRT tranches were tighter by 50 to 200 basis points and the sector’s credit curve significantly flattened. Senior Non-QM spreads were around 40 basis points tighter during the first quarter 2024, and BBB- and BB- rated Non-QM spreads were 70 and 120 basis points tighter, respectively. First quarter 2024 total returns were between 2% and 4% for mezzanine CRT tranches, 4% and 6% for subordinate CRT tranches, and 1% to 2% for legacy RMBS.

Current wording

RMBS spreads mostly tightened during the second quarter as there continues to be a strong investor appetite for U.S. housing and mortgage credit. This theme has been well-supported by stable collateral fundamentals, sound underwriting criteria and rising home values, though pockets of weakness have been slowly emerging from specific cohorts in the Non-QM sector. Trends in credit spreads on credit risk transfer ("CRT") assets are generally utilized by market participants as a proxy for evaluating credit related assets given the observability of transactions. CRT tranches tightened by 10 to 20 basis points during the quarter ended June 30, 2024. Senior Non-QM spreads were a few basis points wider during the quarter ended June 30, 2024 while lower Non-QM tranches such as BBB- and BB-rated bonds were 10 and 45 basis points tighter, respectively.

Previous wording

Our investment portfolio and the related financing arrangements are presented along with a reconciliation to GAAP. This presentation of our investment portfolio is consistent with how our management team evaluates the business, and we believe this presentation, when considered with the GAAP presentation, provides supplemental information useful for investors in evaluating our investment portfolio and financial condition. See Note 10 to the "Notes to Consolidated Financial Statements (unaudited)" for a discussion of investments in debt and equity of affiliates. See below for further terms used when describing our investment portfolio.

Current wording

Our investment portfolio and the related financing arrangements are presented along with a reconciliation to GAAP. This presentation of our investment portfolio is consistent with how our management team evaluates the business, and we believe this presentation, when considered with the GAAP presentation, provides supplemental information useful for investors in evaluating our investment portfolio and financial condition. See Note 10 to the "Notes to Consolidated Financial Statements (unaudited)"

Previous wording

Interest income increased from the three months ended March 31, 2023 to the three months ended March 31, 2024 primarily as a result of an increased investment portfolio resulting from the acquisition of WMC in December 2023 along with purchases of Non-Agency Loans and Agency-Eligible Loans during the period and an increase in the weighted average yield of our investment portfolio. The following table presents a summary of the weighted average amortized cost of and the weighted average yield on our GAAP investment portfolio for the three months ended March 31, 2024 and 2023 ($ in millions).

Current wording

Interest income increased from the three months ended June 30, 2023 to the three months ended June 30, 2024 primarily as a result of an increased investment portfolio resulting from the WMC acquisition in December 2023 along with purchases of residential mortgage loans and Agency RMBS during the period and an increase in the weighted average yield of our investment portfolio. The following table presents a summary of the weighted average amortized cost of and the weighted average yield on our GAAP investment portfolio for the three months ended June 30, 2024 and 2023 ($ in millions).

Previous wording

Interest expense increased from the three months ended March 31, 2023 to the three months ended March 31, 2024 due to an increase in the GAAP financing balance outstanding resulting from the assumption of financing through the acquisition of WMC in December 2023 along with the issuance of securitized debt during the period and an increase in the weighted average financing rate. The following table presents a summary of the weighted average financing balance and the weighted average financing rate on our GAAP investment portfolio for the three months ended March 31, 2024 and 2023 ($ in millions).

Current wording

Interest expense increased from the three months ended June 30, 2023 to the three months ended June 30, 2024 due to an increase in the GAAP financing balance outstanding resulting from the assumption of financing through the WMC acquisition in December 2023 along with the issuance of securitized debt and Senior Unsecured Notes during the period and an increase in financing arrangements. Additionally, there was an increase in the weighted average financing rate. The following table presents a summary of the weighted average financing balance and the weighted average financing rate on our GAAP investment portfolio for the three months ended June 30, 2024 and 2023 ($ in millions).

Previous wording

We recorded income on the net interest component of interest rate swaps during the three months ended March 31, 2024 and 2023 as a result of our swap portfolio being in a net receive position. Interest income increased from the three months ended March 31, 2023 to the three months ended March 31, 2024 primarily as a result of an increase in the net weighted average receive rate during the three months ended March 31, 2024 compared with the three months ended March 31, 2023. The following table presents a summary of our interest rate swap portfolio as of March 31, 2024 and 2023 ($ in millions).

Current wording

We recorded income on the net interest component of interest rate swaps during the three months ended June 30, 2024 and 2023 as a result of our swap portfolio being in a net receive position. Interest income increased from the three months ended June 30, 2023 to the three months ended June 30, 2024 primarily as a result of an increase in the portfolio coupled with an increase in the net weighted average receive rate during the three months ended June 30, 2024 compared with the three months ended June 30, 2023. The following table presents a summary of our interest rate swap portfolio as of June 30, 2024 and 2023 ($ in millions).

Previous wording

(1)For the three months ended March 31, 2024, the Manager agreed to waive its right to receive expense reimbursements of $0.3 million pursuant to the MITT Management Agreement Amendment executed in connection with the Merger.

Current wording

(1)For the three months ended June 30, 2024, the Manager agreed to waive its right to receive expense reimbursements of $0.3 million pursuant to the MITT Management Agreement Amendment executed in connection with the Merger. Of the $1.3 million expense reimbursement waiver agreed upon in connection with the Merger, $0.5 million remains outstanding as of June 30, 2024.

Previous wording

(1)The acquisition of WMC in December 2023 resulted in an increase in our residential mortgage loan portfolio of $1.1 billion of unpaid principal balance, which contributed to an increase in servicing fees and other residential loan related expenses.

Current wording

(1)The WMC acquisition in December 2023 resulted in an increase in our residential mortgage loan portfolio of $1.1 billion of unpaid principal balance, which contributed to an increase in servicing fees and other residential loan related expenses.

Previous wording

Historically, transaction related expenses have included expenses primarily associated with purchasing and securitizing residential mortgage loans as well as certain other transaction and performance related fees associated with assets we invest in. Transaction related expenses decreased from the three months ended March 31, 2023 to the three months ended March 31, 2024 primarily due to less expenses associated with the securitization executed in the first quarter of 2024 compared to the securitization executed in the first quarter of 2023.

Current wording

Historically, transaction related expenses have included expenses primarily associated with purchasing and securitizing residential mortgage loans as well as certain other transaction and performance related fees associated with assets we invest in. Transaction related expenses increased from the three months ended June 30, 2023 to the three months ended June 30, 2024 primarily due to more upfront expenses associated with securitizations, offset by the release of a previously accrued deal related reserve.

Previous wording

(1)For the three months ended March 31, 2024, the earnings/(loss) generated from our investment in MATT Non-QM Securities consisted of interest income of $0.8 million, net unrealized gains of $1.5 million, and other expenses of $(0.1) million. For the three months ended March 31, 2023, the earnings/(loss) generated from our investment in MATT Non-QM Securities consisted of net interest income of $0.9 million, net unrealized gains of $0.8 million, and other expenses of $(0.1) million.

Current wording

(1)For the three months ended June 30, 2024, the earnings/(loss) generated from our investment in MATT Non-QM Securities consisted of interest income of $0.8 million and net unrealized losses of $(1.6) million. For the three months ended June 30, 2023, the earnings/(loss) generated from our investment in MATT Non-QM Securities consisted of net interest income of $0.9 million, net unrealized losses of $(0.5) million, and other expenses of $(0.1) million.

Previous wording

(1)The earnings/(loss) at AG Arc during the three months ended March 31, 2024 were primarily the result of $(0.2) million of losses related to Arc Home's lending and servicing operations, offset by $0.1 million related to changes in the fair value of the MSR portfolio held by Arc Home. The earnings/(loss) at AG Arc during the three months ended March 31, 2023 were primarily the result of $(1.6) million related to changes in the fair value of the MSR portfolio held by Arc Home, along with $(0.7) million of losses related to Arc Home's lending and servicing operations.

Current wording

(1)The earnings/(loss) at AG Arc during the three months ended June 30, 2024 were primarily the result of $0.6 million related to changes in the fair value of the MSR portfolio held by Arc Home, offset by $(0.3) million of losses related to Arc Home's lending and servicing operations. The earnings/(loss) at AG Arc during the three months ended June 30, 2023 were primarily the result of $0.4 million related to changes in the fair value of the MSR portfolio held by Arc Home, offset by $(0.1) million of losses related to Arc Home's lending and servicing operations.

Previous wording

(2)The earnings recognized by AG Arc do not include our portion of gains recorded by Arc Home in connection with the sale of residential mortgage loans to us. Refer to Note 10 to the "Notes to Consolidated Financial Statements (unaudited)" for more information on this accounting policy.

Current wording

(3)The earnings recognized by AG Arc do not include our portion of gains recorded by Arc Home in connection with the sale of residential mortgage loans to us. Refer to Note 10 to the "Notes to Consolidated Financial Statements (unaudited)" for more information on this accounting policy.

Previous wording

The following table presents a summary of Net realized gain/(loss) for the three months ended March 31, 2024 and 2023 (in thousands). The realized loss during the three months ended March 31, 2024 was primarily driven by unwinding pay-fix, receive-variable interest rate swaps which were held at unrealized losses partially offset by gains on the sale of certain Non-Agency RMBS acquired in the WMC acquisition and gains on the settlement of forward purchase commitments.

Current wording

The following table presents a summary of Net realized gain/(loss) for the six months ended June 30, 2024 and 2023 (in thousands). The realized gain during the six months ended June 30, 2024 was primarily driven by gains on the sale of certain Non-Agency RMBS offset by losses from unwinding pay-fix, receive-variable interest rate swaps which were held at unrealized losses.

Previous wording

The following table presents a summary of Net unrealized gain/(loss) for the three months ended March 31, 2024 and 2023 (in thousands). During the three months ended March 31, 2024, there were unrealized gains on residential mortgage loans and derivatives offset by unrealized losses on securitized debt.

Current wording

The following table presents a summary of Net unrealized gain/(loss) for the six months ended June 30, 2024 and 2023 (in thousands). During the six months ended June 30, 2024, there were unrealized gains on residential mortgage loans and interest rate swaps offset by unrealized losses on our Legacy WMC CMBS portfolio and securitized debt.

Previous wording

We define EAD, a non-GAAP financial measure, as Net Income/(loss) available to common stockholders excluding (i) (a) unrealized gains/(losses) on loans, real estate securities, derivatives and other investments, inclusive of our investment in AG Arc, and (b) net realized gains/(losses) on the sale or termination of such instruments, (ii) any transaction related expenses incurred in connection with the acquisition, disposition, or securitization of our investments as well as transaction related expenses incurred in connection with the WMC acquisition, (iii) accrued deal-related performance fees payable to third party operators to the extent the primary component of the accrual relates to items that are excluded from EAD, such as unrealized and realized gains/(losses), (iv) realized and unrealized changes in the fair value of Arc Home's net mortgage servicing rights and the derivatives intended to offset changes in the fair value of those net mortgage servicing rights, (v) deferred taxes recognized at our taxable REIT subsidiaries, if any, and (vi) any bargain purchase gains recognized. Items (i) through (vi) above include any amount related to those items held in affiliated entities. Management considers the transaction related expenses referenced in (ii) above to be similar to realized losses incurred at the acquisition, disposition, or securitization of an asset and does not view them as being part of its core operations. Management views the exclusion described in (iv) above to be consistent with how it calculates EAD on the remainder of its portfolio. Management excludes all deferred taxes because it believes deferred taxes are not representative of current operations. EAD includes the net interest income and other income earned on our investments on a yield adjusted basis, including TBA dollar roll income/(loss) or any other investment activity that may earn or pay net interest or its economic equivalent.

Current wording

We define EAD, a non-GAAP financial measure, as Net Income/(loss) available to common stockholders excluding (i) (a) unrealized gains/(losses) on loans, real estate securities, derivatives and other investments, inclusive of our investment in AG Arc, and (b) net realized gains/(losses) on the sale or termination of such instruments, (ii) any transaction related expenses incurred in connection with the acquisition, disposition, or securitization of our investments as well as transaction related expenses incurred in connection with the WMC acquisition, (iii) accrued deal-related performance fees payable to third party operators to the extent the primary component of the accrual relates to items that are excluded from EAD, such as unrealized and realized gains/(losses), (iv) realized and unrealized changes in the fair value of Arc Home's net mortgage servicing rights and the derivatives intended to offset changes in the fair value of those net mortgage servicing rights, (v) deferred taxes recognized at our taxable REIT subsidiaries, if any, (vi) any bargain purchase gains recognized, and (vii) certain other nonrecurring gains or losses.

Previous wording

A reconciliation of "Net Income/(loss) available to common stockholders" to EAD for the three months ended March 31, 2024 and 2023 is set forth below (in thousands, except per share data).

Current wording

A reconciliation of "Net Income/(loss) available to common stockholders" to EAD for the three and six months ended June 30, 2024 and 2023 is set forth below (in thousands, except per share data).

Previous wording

(1)For the three months ended March 31, 2024 and 2023, total transaction related expenses and deal related performance fees included $1.0 million and $1.7 million, respectively, recorded within the "Transaction related expenses" line item and $24 thousand and $0.1 million, respectively, recorded within the "Interest expense" line item, which relates to the amortization of deferred financing costs.

Current wording

(1)For the three months ended June 30, 2024 and 2023, total transaction related expenses and deal related performance fees included $0.5 million and $0.4 million, respectively, recorded within the "Transaction related expenses" line item and $22 thousand and $0.1 million, respectively, recorded within the "Interest expense" line item, which relates to the amortization of deferred financing costs. For the six months ended June 30, 2024 and 2023, total transaction related expenses and deal related performance fees included $1.5 million and $2.1 million, respectively, recorded within the "Transaction related expenses" line item and $46 thousand and $0.2 million, respectively, recorded within the "Interest expense" line item, which relates to the amortization of deferred financing costs.

Previous wording

(2)For the three months ended March 31, 2024 and 2023, $0.9 million or $0.03 per share and $(0.6) million or $(0.03) per share, respectively, of realized and unrealized changes in the fair value of Arc Home's net mortgage servicing rights and corresponding derivatives were excluded from EAD, net of deferred tax expense or benefit. Additionally, for the three months ended March 31, 2024 and 2023, $44 thousand or $0.00 per share and $0.2 million or $0.01 per share, respectively, of unrealized changes in the fair value of our investment in Arc Home were excluded from EAD.

Current wording

(2)For the three months ended June 30, 2024 and 2023, $0.7 million or $0.02 per share and $1.4 million or $0.07 per share, respectively; and for the six months ended June 30, 2024 and 2023, $1.6 million or $0.05 per share and $0.8 million or $0.04 per share, respectively, of realized and unrealized changes in the fair value of Arc Home's net mortgage servicing rights and corresponding derivatives, and other asset impairments were excluded from EAD, net of deferred tax expense or benefit. Additionally, for the three months ended June 30, 2024 and 2023, $1.7 million or $0.06 per share and $0.0 million or $0.00 per share, respectively; and for the six months ended June 30, 2024 and 2023, $1.7 million or $0.06 per share and $0.2 million or $0.01 per share, respectively, of unrealized changes in the fair value of our investment in Arc Home were excluded from EAD.

Previous wording

(3)EAD recognized by AG Arc does not include our portion of gains recorded by Arc Home in connection with the sale of residential mortgage loans to us. For the three months ended March 31, 2024, we eliminated $0.2 million or $0.01 per share of intra-entity profits recognized by Arc Home, and also decreased the cost basis of the underlying loans we purchased by the same amount. For the three months ended March 31, 2023 we did not eliminate any intra-entity profits recognized by Arc Home as we did not purchase any loans from Arc during the quarter. Refer to Note 10 to the "Notes to Consolidated Financial Statements (unaudited)" for more information on this accounting policy.

Current wording

(3)EAD recognized by AG Arc does not include our portion of gains recorded by Arc Home in connection with the sale of residential mortgage loans to us. For the three months ended June 30, 2024 and 2023, we eliminated $0.4 million or $0.01 per share and $0.3 million or $0.02 per share, respectively, of intra-entity profits recognized by Arc Home, and also decreased the cost basis of the underlying loans we purchased by the same amount. For the six months ended June 30, 2024 and 2023, we eliminated $0.6 million or $0.02 per share and $0.3 million or $0.02 per share, respectively, of intra-entity profits recognized by Arc Home, and also decreased the cost basis of the underlying loans we purchased by the same amount. Refer to Note 10 to the "Notes to Consolidated Financial Statements (unaudited)" for more information on this accounting policy.

Previous wording

Net interest margin and leverage ratio are metrics that management believes should be considered when evaluating the performance of our investment portfolio.

Current wording

Net interest margin and leverage ratio are metrics that management believes should be considered when evaluating the performance of our investment portfolio. Net interest margin provides investors visibility into our profitability of interest income versus interest expense including the net effect of our interest rate swaps for insight into earnings available for distribution.

Previous wording

(b)Includes the cost (interest expense) or benefit (interest income) from our interest rate swap hedges. The benefit of hedging as of March 31, 2024 was 0.12%.

Current wording

(b)Includes the cost (interest expense) or benefit (interest income) from our interest rate swap hedges. The benefit of hedging as of June 30, 2024 was 0.17%.

Previous wording

(f)Cash and cash equivalents may include a portion of cash invested in money market funds. The yield represents the interest earned on money market funds as of period end.

Current wording

(g)Cash and cash equivalents may include a portion of cash invested in money market funds. The yield represents the interest earned on money market funds as of period end.

Previous wording

(g)Interest rate swaps represents the sum of the net fair value of interest rate swaps and the margin posted on interest rate swaps as of period end. Yield on interest rate swaps represents the weighted average net receive/(pay) rate as of period end. The impact of the net interest component of interest rate swaps on the cost of funds is included within the respective investment portfolio asset line items.

Current wording

(h)Interest rate swaps represents the sum of the net fair value of interest rate swaps and the margin posted on interest rate swaps as of period end. Yield on interest rate swaps represents the weighted average net receive/(pay) rate as of period end. The impact of the net interest component of interest rate swaps on the cost of funds is included within the respective investment portfolio asset line items.

Previous wording

(h)Refer to the "Financing activities" section below for an aggregate breakout of leverage.

Current wording

(i)Refer to the "Financing activities" section below for an aggregate breakout of leverage.

Previous wording

(6)Interest Only have no principal balances and bear interest based on a notional value. The notional value is used solely to determine interest distributions on the interest only classes of securities. The GCAT Non-Agency RMBS Interest Only, MATT Non-QM Securities, Re/Non-Performing Securities, Non-Agency RMBS Interest Only, and Agency RMBS Interest Only line items include interest only classes with notional values of $93.9 million, $302.5 million, $23.2 million, $30.6 million, and $114.8 million, respectively.

Current wording

(6)Interest Only have no principal balances and bear interest based on a notional value. The notional value is used solely to determine interest distributions on the interest only classes of securities. The GCAT Non-Agency RMBS Interest Only, MATT Non-QM Securities, Re/Non-Performing Securities, Non-Agency RMBS Interest Only, and Agency RMBS Interest Only line items include interest only classes with notional values of $89.2 million, $287.7 million, $22.4 million, $56.5 million, and $112.3 million, respectively.

Previous wording

(8)Other securities include residual interests in asset-backed securities which have no principal balance.

Current wording

(9)Other securities include residual interests in asset-backed securities which have no principal balance.

Previous wording

(1)Interest Only have no principal balances and bear interest based on a notional value. The notional value is used solely to determine interest distributions on the interest only classes of securities. As of March 31, 2024, the Securitized debt in Non-Agency VIEs line item includes interest only classes with notional values of $131.3 million. As of March 31, 2024, the notional values of Interest Only / Excess Servicing Bonds was $11.8 billion.

Current wording

(1)Interest Only have no principal balances and bear interest based on a notional value. The notional value is used solely to determine interest distributions on the interest only classes of securities. As of June 30, 2024, the Securitized debt in Non-Agency VIEs line item includes interest only classes with notional values of $621.6 million. As of June 30, 2024, the notional values of Interest Only / Excess Servicing Bonds was $11.7 billion.

Previous wording

(2)Represents the fair value of real estate owned within Non-Agency VIEs. We record real estate owned at the lower of cost or fair value less estimated costs to sell. As of March 31, 2024, we recorded real estate owned within our Non-Agency VIEs at $0.9 million.

Current wording

(2)Represents the fair value of real estate owned within Non-Agency VIEs. We record real estate owned at the lower of cost or fair value less estimated costs to sell. As of June 30, 2024, we recorded real estate owned within our Non-Agency VIEs at $2.4 million.

Previous wording

(4)As of March 31, 2024, our equity at risk included bonds with a fair value of $405.0 million held in order to comply with Risk Retention Rules. We are generally required to hold the Required Credit Risk until the later of (i) the fifth anniversary of the securitization closing date and (ii) the date on which the aggregate unpaid principal balance of the mortgage loans has been reduced to 25% of the aggregate unpaid principal balance of the mortgage loans as of the securitization closing date, but no longer than the seventh anniversary of the closing date.

Current wording

(4)As of June 30, 2024, our equity at risk included bonds with a fair value of $404.3 million held in order to comply with Risk Retention Rules. We are generally required to hold the Required Credit Risk until the later of (i) the fifth anniversary of the securitization closing date and (ii) the date on which the aggregate unpaid principal balance of the mortgage loans has been reduced to 25% of the aggregate unpaid principal balance of the mortgage loans as of the securitization closing date, but no longer than the seventh anniversary of the closing date.

Previous wording

(5)As of March 31, 2024, a portion of our equity at risk included bonds exposed to the first loss of the securitization with a fair value of $119.7 million.

Current wording

(5)As of June 30, 2024, a portion of our equity at risk included bonds exposed to the first loss of the securitization with a fair value of $117.6 million.

Previous wording

(6)Excludes net other asset/(liabilities) held within the VIEs of $7.2 million as of March 31, 2024.

Current wording

(6)Excludes net other asset/(liabilities) held within the VIEs of $7.3 million as of June 30, 2024.