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 June 30, 2021

OR

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

For the transition period from              to             

Commission File Number: 001-34374

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
6.625% Senior Notes due 2023	AIW	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 July 30, 2021:

Title	Outstanding
Class A Common Stock	32,331,068 shares

ARLINGTON ASSET INVESTMENT CORP.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2021

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	4
		Notes to Consolidated Financial Statements	5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	49
	Item 4.	Controls and Procedures	54
PART II — OTHER INFORMATION
	Item 1.	Legal Proceedings	55
	Item 1A.	Risk Factors	55
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
	Item 3.	Defaults Upon Senior Securities	55
	Item 4.	Mine Safety Disclosures	55
	Item 5.	Other Information	56
	Item 6.	Exhibits	56
		Signatures	59

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PART I

FINANCIAL INFORMATION

Item 1. Financial Statements

ARLINGTON ASSET INVESTMENT CORP.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)

	June 30, 2021			December 31, 2020
ASSETS
Cash and cash equivalents	$	2,349		$	28,796
Restricted cash of consolidated VIE		4,456			11,169
Interest receivable of consolidated VIE		179			545
Sold securities receivable		34,456			—
Agency mortgage-backed securities, at fair value		725,709			970,880
Mortgage credit securities, at fair value		43,217			26,660
Mortgage loans of consolidated VIE, at fair value		35,778			93,283
Mortgage loans, at fair value		74,685			45,000
MSR financing receivables, at fair value		74,652			9,346
Derivative assets, at fair value		881			258
Deposits		16,554			6,306
Other assets		17,181			20,146
Total assets	$	1,030,097		$	1,212,389
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Repurchase agreements	$	694,586		$	655,212
Secured debt of consolidated VIE, at fair value		28,465			93,627
Interest payable of consolidated VIE		99			321
Derivative liabilities, at fair value		2,327			221
Purchased securities payable		—			139,013
Other liabilities		2,739			4,698
Long-term unsecured debt		73,129			73,027
Total liabilities		801,345			966,119
Commitments and contingencies
Stockholders’ Equity:
Series B Preferred stock, $0.01 par value, 336,273 shares issued    and outstanding (liquidation preference of $8,407)		7,933			7,933
Series C Preferred stock, $0.01 par value, 1,117,034 shares issued    and outstanding (liquidation preference of $27,926)		27,356			27,356
Class A common stock, $0.01 par value, 450,000,000 shares authorized, 32,679,938    and 33,517,018 shares issued and outstanding, respectively		327			335
Additional paid-in capital		2,037,953			2,040,918
Accumulated deficit		(1,844,817	)		(1,830,272	)
Total stockholders’ equity		228,752			246,270
Total liabilities and stockholders’ equity	$	1,030,097		$	1,212,389
	June 30, 2021			December 31, 2020
Assets and liabilities of consolidated VIE
Restricted cash	$	4,456		$	11,169
Interest receivable		179			545
Mortgage loans, at fair value		35,778			93,283
Secured debt, at fair value		(28,465	)		(93,627	)
Interest payable		(99	)		(321	)
Net investment in consolidated VIE	$	11,849		$	11,049

See notes to consolidated financial statements.

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ARLINGTON ASSET INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands, except per share data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Interest income
Agency mortgage-backed securities	$	2,984		$	3,517		$	5,768		$	26,905
Mortgage credit securities		637			1,258			1,203			1,989
Loans		1,133			825			1,836			1,536
Mortgage loans of consolidated VIE		776			—			2,463			—
MSR financing receivables		1,390			—			1,748			—
Interest and other income		125			534			286			677
Total interest income		7,045			6,134			13,304			31,107
Interest expense
Short-term secured debt		403			1,154			891			15,746
Long-term unsecured debt		1,150			1,215			2,301			2,455
Secured debt of consolidated VIE		405			—			1,267			—
Total interest expense		1,958			2,369			4,459			18,201
Net interest income		5,087			3,765			8,845			12,906
Investment (loss) gain, net
Gain (loss) on mortgage investments, net		5,334			7,625			(16,331	)		10,719
Loss from derivative instruments, net		(14,983	)		(397	)		(438	)		(102,997	)
Other, net		617			2,569			974			2,007
Total investment (loss) gain, net		(9,032	)		9,797			(15,795	)		(90,271	)
General and administrative expenses
Compensation and benefits		1,841			1,897			3,236			3,755
Other general and administrative expenses		1,349			1,431			2,591			2,816
Total general and administrative expenses		3,190			3,328			5,827			6,571
(Loss) income before income taxes		(7,135	)		10,234			(12,777	)		(83,936	)
Income tax (benefit) provision		(76	)		—			322			—
Net (loss) income		(7,059	)		10,234			(13,099	)		(83,936	)
Dividend on preferred stock		(723	)		(758	)		(1,446	)		(1,532	)
Net (loss) income (attributable) available to     common stock	$	(7,782	)	$	9,476		$	(14,545	)	$	(85,468	)
Basic (loss) earnings per common share	$	(0.24	)	$	0.26		$	(0.44	)	$	(2.33	)
Diluted (loss) earnings per common share	$	(0.24	)	$	0.26		$	(0.44	)	$	(2.33	)
Weighted-average common shares outstanding   (in thousands)
Basic		33,066			36,618			33,123			36,665
Diluted		33,066			36,666			33,123			36,665

See notes to consolidated financial statements.

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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, 2019		354,039		$	8,270			1,200,000		$	28,944			36,755,387		$	368		$	2,049,292		$	(1,759,626	)	$	327,248
Net loss		—			—			—			—			—			—			—			(94,170	)		(94,170	)
Issuance of Class A common   stock under stock-based   compensation plans		—			—			—			—			60,374			—			62			—			62
Stock-based compensation		—			—			—			—			—			—			393			—			393
Other		—			(6	)		—			(10	)		—			—			(6	)		—			(22	)
Dividends declared		—			—			—			—			—			—			—			(702	)		(702	)
Balances, March 31, 2020		354,039		$	8,264			1,200,000		$	28,934			36,815,761		$	368		$	2,049,741		$	(1,854,498	)	$	232,809
Net income		—			—			—			—			—			—			—			10,234			10,234
Repurchase of Class A common   stock		—			—			—			—			(1,069,340	)		(11	)		(3,036	)		—			(3,047	)
Repurchase of preferred stock		(10,200	)		(173	)		(33,100	)		(627	)		—			—			—			—			(800	)
Stock-based compensation		—			—			—			—			—			—			594			—			594
Other		—			(13	)		—			—			—			—			(13	)		—			(26	)
Dividends declared		—			—			—			—			—			—			—			(779	)		(779	)
Balances, June 30, 2020		343,839		$	8,078			1,166,900		$	28,307			35,746,421		$	357		$	2,047,286		$	(1,845,043	)	$	238,985

	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

See notes to consolidated financial statements.

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ARLINGTON ASSET INVESTMENT CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Six Months Ended June 30,
	2021			2020
Cash flows from operating activities:
Net loss	$	(13,099	)	$	(83,936	)
Adjustments to reconcile net loss to net cash provided by operating activities
Total investment loss, net		15,795			90,271
Net (discount) premium (accretion) amortization		(1,297	)		6,257
Other		1,131			1,180
Changes in operating assets
Interest receivable		312			9,058
Other assets		(537	)		(974	)
Changes in operating liabilities
Interest payable and other liabilities		1,087			(3,721	)
Accrued compensation and benefits		(1,223	)		(2,157	)
Net cash provided by operating activities		2,169			15,978
Cash flows from investing activities:
Purchases of agency mortgage-backed securities		(607,659	)		(360,984	)
Purchases of mortgage credit securities		(28,356	)		(106,622	)
Purchases of loans		(29,967	)		(25,000	)
Purchases of MSR financing receivables		(60,556	)		—
Proceeds from sales of agency mortgage-backed securities		625,812			3,484,757
Proceeds from sales of mortgage credit securities		13,640			49,115
Receipt of principal payments on agency mortgage-backed securities		29,735			181,552
Receipt of principal payments on mortgage credit securities		—			49
Receipt of principal payments on loans		282			—
Receipt of principal payments on mortgage loans of consolidated VIE		58,948			—
Payments for derivatives and deposits, net		(9,349	)		(65,819	)
Other		3,583			(10,067	)
Net cash (used in) provided by investing activities		(3,887	)		3,146,981
Cash flows from financing activities:
Proceeds from (repayments of) repurchase agreements, net		39,374			(3,154,360	)
Repayments of secured debt of consolidated VIE, net		(65,350	)		—
Repurchase of common stock		(4,013	)		(3,047	)
Repurchase of preferred stock		—			(800	)
Repurchase of long-term unsecured debt		(7	)		(388	)
Dividends paid		(1,446	)		(9,856	)
Other		—			(48	)
Net cash used in financing activities		(31,442	)		(3,168,499	)
Net decrease in cash, cash equivalents and restricted cash		(33,160	)		(5,540	)
Cash, cash equivalents and restricted cash, beginning of period		39,965			19,636
Cash, cash equivalents and restricted cash, end of period	$	6,805		$	14,096
Supplemental cash flow information:
Cash payments for interest	$	4,468		$	22,121
Cash payments for taxes	$	—		$	—

See notes to consolidated financial statements.

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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.  The Company may also invest in other asset classes that its management team believes may offer attractive risk adjusted returns, such as real estate assets or investments outside the real estate or mortgage asset classes.  The Company’s investment capital is currently allocated between agency mortgage-backed securities (“MBS”), mortgage credit investments and mortgage servicing right (“MSR”) related assets.

The Company’s agency MBS consist of residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by either 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”), or by a U.S. government agency, such as the Government National Mortgage Association (“Ginnie Mae”).  The Company’s mortgage 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”).  The principal and interest of the Company’s mortgage credit investments are not guaranteed by a GSE or a U.S government agency.  The Company’s MSR related assets represent investments for which the return is based on the economic performance of a pool of specific MSRs.

Arlington Asset 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, 2020.

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 from these estimates materially.

Certain amounts in the consolidated financial statements and notes for prior periods 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 June 30, 2021 and December 31, 2020, approximately 83% and 99%, respectively, of the

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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 and Mortgage Loans of a Consolidated VIE

The Company recognizes interest income for its investments in agency MBS and mortgage loans of a consolidated variable interest entity (“VIE”) 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 to its investments in agency MBS and mortgage loans of a consolidated VIE, 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 a consolidated VIE, 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.  When a loan is placed in non-accrual status, all accrued but uncollected contractual interest as well as any discount accreted during the period of delinquency are reversed.  While a loan is in non-accrual status, the Company recognizes interest income only when interest payments occur.

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

The Company recognizes interest income for its investments in mortgage credit securities 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 mortgage loans that serve as collateral for its investment, including assumptions about the timing and amount of prepayments and credit losses.  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 mortgage credit securities and MSR financing receivables:

Scenario:	Effect on Interest Income Recognition for Investments in Mortgage Credit Securities and MSR Financing Receivables:
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 will be 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.

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

Refer to the Company’s 2020 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, the Company has not made any modifications to contracts due to reference rate reform. 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 an effect on its consolidated financial statements.

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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 June 30, 2021 and December 31, 2020, the fair value of the Company’s investments in agency MBS was $725,709 and $970,880, respectively. As of June 30, 2021, 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 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 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 June 30,					Six Months Ended June 30,
	2021		2020			2021			2020
Net gains (losses) recognized in earnings for:
Agency MBS still held at period end	$	6,840	$	4,930		$	(11,861	)	$	9,971
Agency MBS sold during the period		290		(522	)		(10,224	)		17,955
Total	$	7,130	$	4,408		$	(22,085	)	$	27,926

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 9. Derivative Instruments” for further information about dollar rolls.

Note 4. Investments in Mortgage Credit Securities

The Company has elected to classify its investments in mortgage credit securities as trading securities.  Accordingly, the Company’s investments in mortgage credit securities are reported in the accompanying consolidated balance sheets at fair value.  As of June 30, 2021 and December 31, 2020, the fair value of the Company’s investments in mortgage credit securities was $43,217 and $26,660, respectively.  As of June 30, 2021, the Company’s investments in mortgage credit securities primarily consist of non-agency MBS collateralized by pools of residential mortgage loans, business purpose residential mortgage loans or smaller balance commercial mortgage loans.

All periodic changes in the fair value of mortgage credit securities that are not attributed to interest income are recognized as a component of “investment 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 gain (loss), net” in the Company’s consolidated statements of comprehensive income for the periods indicated with respect to investments in mortgage credit securities:

	Three Months Ended June 30,					Six Months Ended June 30,
	2021			2020		2021			2020
Net gains (losses) recognized in earnings for:
Mortgage credit securities still held at period end	$	(186	)	$	2,118	$	1,210		$	(5,678	)
Mortgage credit securities sold during the period		(75	)		1,138		(80	)		(11,104	)
Total	$	(261	)	$	3,256	$	1,130		$	(16,782	)

Note 5. Loans Held for Investment

As of June 30, 2021 and December 31, 2020, the Company held loans secured by first lien positions in commercial real estate with an aggregate outstanding principal outstanding principal balance of $74,685 and $45,000, respectively.  

As of June 30, 2021 and December 31, 2020, 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 balance of $44,784 and $45,000, respectively.  The loan bears interest at a floating note rate equal to one-month LIBOR plus 4.25% with a LIBOR floor of 2.00%.  The maturity date of the

8

loan is December 31, 2021 with a one-year extension available at the option of the borrower.  The loan has an initial interest-only period of one year followed by principal amortization based upon a 30-year amortization schedule beginning in 2021 with the remaining principal balance due at loan maturity.  Subsequent to June 30, 2021, the Company received full repayment of its loan investment on July 7, 2021.

As of June 30, 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 balance of $29,901 that was purchased by the Company during the three months ended June 30, 2021.  The loan bears interest at a floating note rate equal to one-month LIBOR plus 5.50%.  The maturity date of the loan is March 23, 2022 with a one-year extension available at the option of the borrower.  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 loans held for investment at fair value on a recurring basis with periodic changes in fair value recognized as a component of “investment gain (loss), net” in the accompanying consolidated statements of comprehensive income.  As of June 30, 2021 and December 31, 2020, the Company’s investments were $74,685 and $45,000, respectively, at fair value.  The Company recognizes interest income on its loan investments based upon the contractual note rate of the loans.

As of June 30, 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 one-month LIBOR plus 3.75% with a LIBOR 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 June 30, 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.  Under the arrangement, the Company is obligated to provide funds to the mortgage servicing counterparty to fund its advances of delinquent payments on the serviced pool of mortgage loans with the mortgage servicing counterparty required to return to the Company any subsequent servicing advances collected.  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 GAAP, the Company accounts for transactions executed under its arrangement 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 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 June 30, 2021 and December 31, 2020, the fair value of the Company’s investments in MSR financing receivables was $74,652 and $9,346, respectively. The following table presents activity related to the carrying value of the Company’s investments in MSR financing receivables for the period indicated:

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	Three Months Ended June 30, 2021			Six Months Ended June 30, 2021
Balance at period beginning	$	36,005		$	9,346
Capital investments		39,278			59,622
Accretion of interest income		1,390			1,748
Changes in fair value due to:
Amortization of underlying MSRs		(1,984	)		(3,260	)
Changes in valuation inputs and assumptions		(37	)		7,196
Balance at period end	$	74,652		$	74,652

Note 7. 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.  The carrying values of the assets and liabilities of the consolidated VIE, net of elimination entries, are as follows as of the dates indicated:

	June 30, 2021			December 31, 2020
Restricted cash of consolidated VIE (1)	$	4,456		$	11,169
Mortgage loans of consolidated VIE, at fair value		35,778			93,283
Interest receivable of consolidated VIE		179			545
Secured debt of consolidated VIE, at fair value		(28,465	)		(93,627	)
Interest payable of consolidated VIE		(99	)		(321	)
Investment in consolidated VIE	$	11,849		$	11,049

<sup>(1)</sup> 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 pool of mortgage loans and the third-party held debt obligations of the consolidated VIE had aggregate unpaid principal balances of $37,099 and $28,482, respectively, as of June 30, 2021.  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 June 30, 2021, the weighted average net note rate to which the VIE was entitled and the weighted average coupon rate of the debt obligations of the consolidated VIE were 6.03% and 4.01%, respectively.  The debt of the consolidated VIE has recourse solely to the assets of the VIE; it has no recourse to the general credit of the Company.

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

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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.  Pursuant to the terms of certain of the mortgage loans, the borrower may draw upon a specified amount of additional funds as needed in order to finance construction on, or the repair or rehabilitation of, the mortgaged property (referred to as a “construction draw”).  Pursuant to the terms of the securitization transaction, if the monthly principal repayments collected from the mortgage loan pool are insufficient to fund that month’s construction draws, such shortfall is to be funded by the holders of the first loss position on a pro rata basis.  Any construction draws funded by holders of the first loss position accrue interest at the net note rate of the mortgage loan.  The repayment of any construction draws funded by holders of the first loss position takes priority over the senior debt securities with respect to the cash flows collected from the mortgage loan pool in the following month.  As of June 30, 2021, the aggregate unfunded construction draw balance commitment attributable to the Company’s subordinate debt security investment was $4,386.

The Company has elected to account for the mortgage loans and debt of the consolidated VIE 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 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 the consolidated VIE by applying the “interest method” permitted by GAAP, whereby the discount recognized at the initial recognition of each loan is accreted as an adjustment to contractual interest income accrued at the loan’s stated 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 mortgage loans of the consolidated VIE as of June 30, 2021:

	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Difference
Less than 90 days past due and in accrual status	$	30,483	$	31,608	$	(1,125	)
90 days or more past due and in non-accrual status		5,295		5,491		(196	)
Total mortgage loans of consolidated VIE	$	35,778	$	37,099	$	(1,321	)

Note 8. 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 May 3, 2022 and an interest rate that resets monthly at a rate equal to one-month LIBOR plus 2.50%.   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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As of June 30, 2021 and December 31, 2020, the Company had no amount at risk with a single repurchase agreement counterparty or lender greater than 10% of equity. The following table provides information regarding the Company’s outstanding repurchase agreement borrowings as of the dates indicated:

	June 30, 2021			December 31, 2020
Agency MBS repurchase financing:
Repurchase agreements outstanding	$	673,655		$	623,712
Agency MBS collateral, at fair value (1)		710,630			656,154
Net amount (2)		36,975			32,442
Weighted-average rate		0.09	%		0.21	%
Weighted-average term to maturity	13.6 days			14.0 days
Mortgage loans repurchase financing:
Repurchase agreements outstanding	$	20,931		$	31,500
Mortgage loans collateral, at fair value		29,901			45,000
Net amount (2)		8,970			13,500
Weighted-average rate		2.59	%		3.00	%
Weighted-average term to maturity	307.0 days			315.0 days
Total mortgage investments repurchase financing:
Repurchase agreements outstanding	$	694,586		$	655,212
Mortgage investments collateral, at fair value		740,531			701,154
Net amount (2)		45,945			45,942
Weighted-average rate		0.17	%		0.34	%
Weighted-average term to maturity	22.4 days			28.5 days

<sup>(1)</sup> As of June 30, 2021, includes $34,456 at sale price of unsettled agency MBS sale commitments which are included in the line item “sold securities receivable” in the accompanying consolidated balance sheets.

<sup>(2)</sup> 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 six months ended June 30, 2021 and 2020:

	June 30, 2021			June 30, 2020
Weighted-average outstanding balance during the three months ended	$	652,624		$	559,880
Weighted-average rate during the three months ended		0.24	%		0.82	%
Weighted-average outstanding balance during the six months ended	$	603,233		$	1,861,110
Weighted-average rate during the six months ended		0.29	%		1.68	%

Long-Term Unsecured Debt

As of June 30, 2021 and December 31, 2020, the Company had $73,129 and $73,027, respectively, of outstanding long-term unsecured debentures, net of unamortized debt issuance costs of $623 and $732, respectively. The Company’s long-term debentures consisted of the following as of the dates indicated:

	June 30, 2021									December 31, 2020
	Senior Notes Due 2025			Senior Notes Due 2023			Trust Preferred Debt			Senior Notes Due 2025			Senior Notes Due 2023			Trust Preferred Debt
Outstanding Principal	$	34,931		$	23,821		$	15,000		$	34,931		$	23,828		$	15,000
Annual Interest Rate		6.75	%		6.625	%	LIBOR+ 2.25 - 3.00 %				6.75	%		6.625	%	LIBOR+ 2.25 - 3.00 %
Interest Payment Frequency	Quarterly			Quarterly			Quarterly			Quarterly			Quarterly			Quarterly
Weighted-Average Interest Rate		6.75	%		6.625	%		2.93	%		6.75	%		6.625	%		2.99	%
Maturity	March 15, 2025			May 1, 2023			2033 - 2035			March 15, 2025			May 1, 2023			2033 - 2035

The Senior Notes due 2023 and the Senior Notes due 2025 are publicly traded on the New York Stock Exchange under the ticker symbols “AIW” and “AIC,” respectively. The Senior Notes due 2023, Senior Notes due 2025 and Trust Preferred Debt may be

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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 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.

During the three months ended March 31, 2021, the Company repurchased $7 in principal balance of Senior Notes due 2023 for a purchase price of $7. There were no repurchases of outstanding long-term unsecured debentures during the three months ended June 30, 2021 and the three and six months ended June 30, 2020.

Subsequent to June 30, 2021, the Company completed a public offering on July 15, 2021 of $37,750 of 6.00% Senior Notes due 2026 and received net proceeds of $36,570 after deducting underwriter discounts.  The Senior Notes due 2026 are publicly traded on the New York Stock Exchange under the ticker symbol “AAIN.”  On July 7, 2021, the Company issued a notice of redemption for all $23,821 principal amount of its outstanding Senior Notes due 2023 on August 6, 2021 at a redemption price of 100% of the principal amount plus unpaid interest thereon.

Note 9. 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 “derivative assets” or “derivative liabilities” in the consolidated balance sheets, with all periodic changes in fair value reflected as a component of “investment 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 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

13

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 includes 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 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:

	June 30, 2021					December 31, 2020
	Assets		Liabilities			Assets		Liabilities
Interest rate swaps	$	—	$	(944	)	$	—	$	(147	)
10-year U.S. Treasury note futures		105		—			—		—
TBA commitments		776		(1,383	)		258		(74	)
Total	$	881	$	(2,327	)	$	258	$	(221	)

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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 June 30, 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	$	200,000		0.10	%		0.04	%		(0.06	)%		2.4	$	(25	)
3 to less than 7 years		75,000		0.89	%		0.19	%		(0.70	)%		6.5		(121	)
7 to less than 10 years		250,000		1.12	%		0.17	%		(0.95	)%		9.4		(798	)
Total / weighted-average	$	525,000		0.70	%		0.12	%		(0.58	)%		6.3	$	(944	)

The following table presents information about the Company’s interest rate swap agreements that were in effect as of December 31, 2020:

			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	$	200,000		0.10	%		0.06	%		(0.04	)%		2.9	$	(40	)
3 to less than 10 years		75,000		0.74	%		0.22	%		(0.52	)%		9.5		(107	)
Total / weighted-average	$	275,000		0.28	%		0.10	%		(0.18	)%		4.7	$	(147	)

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 June 30, 2021, the Company held long positions of 10-year U.S. Treasury note futures with an aggregate notional amount of $45,000 with a maturity in September 2021. As of December 31, 2020, the Company had no outstanding positions of U.S. Treasury note futures.

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 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 June 30, 2021 and December 31, 2020, the Company had no outstanding options on U.S. Treasury note futures contracts.

15

TBA Commitments

The following table presents information about the Company’s TBA commitments as of the date indicated:

	June 30, 2021
	Notional Amount: Purchase (Sale) Commitment			Contractual Forward Price			Market Price			Fair Value
1.5% 30-year MBS purchase commitments	$	100,000		$	98,250		$	98,055		$	(195	)
1.5% 30-year MBS sale commitments		(100,000	)		(97,674	)		(98,055	)		(381	)
2.0% 30-year MBS purchase commitments		125,000			125,445			126,221			776
2.0% 30-year MBS sale commitments		(125,000	)		(125,488	)		(126,221	)		(733	)
2.5% 30-year MBS purchase commitments		25,000			25,855			25,854			(1	)
2.5% 30-year MBS sale commitments		(25,000	)		(25,781	)		(25,854	)		(73	)
Total TBA commitments, net	$	—		$	607		$	—		$	(607	)

	December 31, 2020
	Notional Amount: Purchase (Sale) Commitment			Contractual Forward Price			Market Price			Fair Value
1.5% 30-year MBS purchase commitments	$	50,000		$	50,281		$	50,539		$	258
1.5% 30-year MBS sale commitments		(50,000	)		(50,465	)		(50,539	)		(74	)
Total TBA commitments, net	$	—		$	(184	)	$	—		$	184

Derivative Instrument Gains and Losses

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Interest rate derivatives:
Interest rate swaps:
Net interest (expense) income (1)	$	(1,187	)	$	(6	)	$	(1,897	)	$	586
Unrealized (losses) gains, net		(13,517	)		8,367			7,548			14,312
Losses realized upon early termination, net		(1,258	)		(8,969	)		(1,271	)		(118,893	)
Total interest rate swap (losses) gains, net		(15,962	)		(608	)		4,380			(103,995	)
U.S. Treasury note futures, net		91			—			2,710			(3,071	)
Options on U.S. Treasury note futures, net		—			—			(20	)		—
Total interest rate derivative (losses) gains, net		(15,871	)		(608	)		7,070			(107,066	)
TBA commitments:
TBA dollar roll income (2)		1,778			170			2,614			275
Other (losses) gains on TBA commitments, net		(890	)		41			(10,122	)		4,834
Total gains (losses) on TBA commitments, net		888			211			(7,508	)		5,109
Other derivatives		—			—			—			(1,040	)
Total derivative losses, net	$	(14,983	)	$	(397	)	$	(438	)	$	(102,997	)

<sup>(1)</sup> 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.

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

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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 June 30, 2021
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	675,000	$	—	$	—		$	(150,000	)	$	525,000
10-year U.S. Treasury note futures		—		165,000		(120,000	)		—			45,000
Purchased call options on 10-year U.S.   Treasury note futures		65,200		—		(65,200	)		—			—
TBA purchase (sale) commitments, net		100,000		450,000		(550,000	)		—			—

	For the Three Months Ended June 30, 2020
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	600,000	$	50,000	$	—		$	(600,000	)	$	50,000
TBA purchase (sale) commitments, net		—		75,000		(75,000	)		—			—

	For the Six Months Ended June 30, 2021
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	275,000	$	450,000	$	—		$	(200,000	)	$	525,000
2-year U.S. Treasury note futures		—		50,000		(50,000	)		—			—
10-year U.S. Treasury note futures		—		540,100		(320,000	)		(175,100	)		45,000
Purchased call options on 10-year U.S.   Treasury note futures		—		65,200		(65,200	)		—			—
TBA purchase (sale) commitments, net		—		1,365,000		(1,365,000	)		—			—

	For the Six Months Ended June 30, 2020
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	2,985,000	$	50,000	$	(100,000	)	$	(2,885,000	)	$	50,000
2-year U.S. Treasury note futures		—		1,150,000		—			(1,150,000	)		—
10-year U.S. Treasury note futures		—		765,000		—			(765,000	)		—
TBA purchase (sale) commitments, net		—		175,000		(175,000	)		—			—
Put options on S&P 500 ETF		—		1,850		(1,850	)		—			—

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, net” in the accompanying consolidated balance sheets, for the dates indicated:

	June 30, 2021		December 31, 2020
Cash collateral posted for:
Interest rate swaps (cash initial margin)	$	15,293	$	6,306
10-year U.S. Treasury note futures (cash initial margin)		686		—
Unsettled MBS trades and TBA commitments, net		575		—
Total cash collateral posted, net	$	16,554	$	6,306

Note 10. 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.

17

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 June 30, 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:
10-year U.S. Treasury note futures	$	105	$	—	$	105	$	—		$	—		$	105
TBA commitments		776		—		776		(776	)		—			—
Total derivative instruments		881		—		881		(776	)		—			105
Total assets	$	881	$	—	$	881	$	(776	)	$	—		$	105
Liabilities:
Derivative instruments:
Interest rate swaps	$	944	$	—	$	944	$	—		$	(944	)	$	—
TBA commitments		1,383		—		1,383		(776	)		(575	)		32
Total derivative instruments		2,327		—		2,327		(776	)		(1,519	)		32
Repurchase agreements		694,586		—		694,586		(694,586	)		—			—
Total liabilities	$	696,913	$	—	$	696,913	$	(695,362	)	$	(1,519	)	$	32

	As of December 31, 2020
	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	$	258	$	—	$	258	$	(74	)	$	—		$	184
Total derivative instruments		258		—		258		(74	)		—			184
Total assets	$	258	$	—	$	258	$	(74	)	$	—		$	184
Liabilities:
Derivative instruments:
Interest rate swaps	$	147	$	—	$	147	$	—		$	(147	)	$	—
TBA commitments		74		—		74		(74	)		—			—
Total derivative instruments		221		—		221		(74	)		(147	)		—
Repurchase agreements		655,212		—		655,212		(655,212	)		—			—
Total liabilities	$	655,433	$	—	$	655,433	$	(655,286	)	$	(147	)	$	—

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<sup>(1)</sup> 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.

<sup>(2)</sup> Does not include the amount of cash collateral pledged in respect of derivative instruments that exceeds the associated derivative liability presented in the consolidated balance sheets.

Note 11. 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:

Mortgage investments

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.

Mortgage credit securities – The Company’s investments in residential MBS and commercial MBS are classified within Level 2 of the fair value hierarchy. Inputs to fair value measurements of the Company’s investments in residential and commercial MBS 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 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 first loss position in a securitized pool of business-purpose residential mortgage loans is classified within Level 3 of the fair value hierarchy.  To measure the fair value of this investment, 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 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 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 significant unobservable inputs to the fair value measurement of the Company’s non-agency MBS secured by business-purpose residential mortgage loans as of the periods indicated:

19

	June 30, 2021			December 31, 2020
Annualized default rate		15.0	%		12.0	%
Loss-given-default		25.0	%		40.0	%
Discount rate		13.0	%		13.9	%

Loans – The Company’s commercial mortgage loan investments are classified within Level 3 of the fair value hierarchy.  To measure the fair value of its mortgage loan investments, the Company uses an income approach by preparing an estimate of the present value of the expected future cash flows of the loans over their expected remaining lives, discounted at a current market rate.  The significant unobservable inputs to the fair value measurement of the Company’s mortgage loan investments 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 June 30, 2021, the weighted-average estimated probability of default and discount rate for the Company’s mortgage loan investments were 0%, and 6.0%, respectively.  As of December 31, 2020, the estimated probability of default and discount rate for the Company’s mortgage loan investment were 0% and 6.3%, respectively.

Mortgage loans and secured debt of consolidated VIE – 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 VIE.  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.  Pursuant to the practical expedient, the Company measures the fair value of both the mortgage loans and the debt obligations of its consolidated VIE based upon the fair value of the debt obligations of the VIE, as the fair value of the debt securities issued by the VIE is more observable to the Company than the fair value of the underlying mortgage loans.

The senior debt obligations of the consolidated VIE are classified within Level 2 of the fair value hierarchy.  Inputs to fair value measurements of the senior 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 are based upon observable transactions for securities with similar characteristics.

The subordinate debt obligation and the mortgage loans of the consolidated VIE are classified within Level 3 of the fair value hierarchy.  To measure the fair value of the subordinate debt obligation of the consolidated VIE, 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 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 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 significant unobservable inputs to the fair value measurement of the subordinate debt obligation as of the periods indicated:

	June 30, 2021			December 31, 2020
Annualized default rate		15.0	%		20.0	%
Loss-given-default		25.0	%		40.0	%
Discount rate		13.0	%		13.9	%

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 June 30, 2021:

20

	June 30, 2021
Discount rate		9.0	%
Annualized prepayment rate		11.1	%
Annual per-loan cost of servicing (current loans)	$	65.00

Pursuant to the Company’s MSR financing arrangements, upon the consummation of three-year performance periods ending December 31, 2023 and April 1, 2024, the Company’s mortgage servicer 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 based upon the current fair value of the underlying MSRs.  As of June 30, 2021, the present value of the expected incentive fee payment reflected in fair value of the Company’s MSR financing receivables was $1,202.

As of December 31, 2020, the fair value of the Company’s MSR financing receivable was its transacted purchase price, which occurred on the measurement date.

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 June 30, 2021 and December 31, 2020, the carrying value of the Company’s long-term unsecured debt was $73,129 and $73,027, 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 $71,678 and $69,904 as of June 30, 2021 and December 31, 2020, 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.

Investments in equity securities of publicly-traded companies – As of June 30, 2021 and December 31, 2020, the Company had investments in equity securities of publicly-traded companies at fair value of $6,703 and $10,821, 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 June 30, 2021 and December 31, 2020, the Company had investments in equity securities and investment funds measured at fair value of $7,307 and $6,869, respectively, which are included in the line item “other assets” in the accompanying consolidated balance sheets.

21

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 June 30, 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. As of December 31, 2020, 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, 10 percent, and 15 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, 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 June 30, 2021 and December 31, 2020. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	June 30, 2021
	Total		Level 1		Level 2		Level 3
Financial assets:
Agency MBS	$	725,709	$	—	$	725,709	$	—
Mortgage credit securities		43,217		—		28,910		14,307
Mortgage loans of consolidated VIE		35,778		—		—		35,778
Loans		74,685		—		—		74,685
MSR financing receivable		74,652		—		—		74,652
Derivative assets		881		105		776		—
Other assets		14,010		6,703		—		7,307
Financial liabilities:
Secured debt of consolidated VIE		28,465		—		27,825		640
Derivative liabilities		2,327		—		2,327		—

	December 31, 2020
	Total		Level 1		Level 2		Level 3
Financial assets:
Agency MBS	$	970,880	$	—	$	970,880	$	—
Mortgage credit securities		26,660		—		14,730		11,930
Mortgage loans of consolidated VIE		93,283		—		—		93,283
Loans		45,000		—		—		45,000
MSR financing receivable		9,346		—		—		9,346
Derivative assets		258		—		258		—
Other assets		17,690		10,821		—		6,869
Financial liabilities:
Secured debt of consolidated VIE		93,627		—		93,051		576
Derivative liabilities		221		—		221		—

22

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 June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Beginning balance	$	157,714		$	59,592		$	166,428		$	51,398
Net (loss) gain included in "Investment gain (loss), net"		(1,183	)		1,981			5,135			(1,628	)
Purchases		72,669			25,000			93,013			36,995
Sales		(1,662	)		—			(1,662	)		—
Payments, net		(22,764	)		(115	)		(59,540	)		(525	)
Accretion of discount		1,955			243			3,355			461
Ending balance	$	206,729		$	86,701		$	206,729		$	86,701
Net unrealized gains (losses) included in earnings for the    period for Level 3 assets still held at the reporting date	$	(1,108	)	$	1,981		$	5,215		$	(1,628	)

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 June 30,				Six Months Ended June 30,
	2021		2020		2021			2020
Beginning balance	$	611	$	—	$	576		$	—
Net gain (loss) included in "Investment gain (loss), net"		29		—		(10	)		—
Accretion of discount		—		—		74			—
Ending balance	$	640	$	—	$	640		$	—
Net unrealized gains (losses) included in earnings for the    period for Level 3 liabilities still held at the reporting date	$	29	$	—	$	(10	)	$	—

Note 12. Income Taxes

The Company has elected to be taxed as a REIT under the Internal Revenue Code.  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 taxable income within the time limits prescribed by the Internal Revenue Code, which may extend into the subsequent taxable year.  

As of June 30, 2021, the Company had estimated net operating loss (“NOL”) carryforwards of $152,064 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 $137,476 have no expiration period. As of June 30, 2021, the Company had estimated net capital loss (“NCL”) carryforwards of $180,948 that can be used to offset future net capital gains. The scheduled expirations of the Company’s NCL carryforwards are $66,862 in 2021, $3,763 in 2022 and $110,323 in 2023.

The Company and subsidiaries have made joint elections to treat certain 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 and six months ended June 30, 2021, the Company recognized a benefit (provision) for income taxes of $76 and $(322), respectively, on the pre-tax net 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 June 30, 2021 and December 31, 2020, 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.

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Note 13. 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 tables present the computations of basic and diluted earnings (loss) per share for the periods indicated:

	Three Months Ended June 30,					Six Months Ended June 30,
(Shares in thousands)	2021			2020		2021			2020
Basic weighted-average common shares outstanding		33,066			36,618		33,123			36,665
Performance share units, unvested restricted stock units,    and unvested restricted stock		—			48		—			—
Diluted weighted-average common shares outstanding		33,066			36,666		33,123			36,665
Net (loss) income (attributable) available to common stock	$	(7,782	)	$	9,476	$	(14,545	)	$	(85,468	)
Basic (loss) earnings per common share	$	(0.24	)	$	0.26	$	(0.44	)	$	(2.33	)
Diluted (loss) earnings per common share	$	(0.24	)	$	0.26	$	(0.44	)	$	(2.33	)

 The diluted loss per share for the three months and six months ended June 30, 2021 did not include the antidilutive effect of 358,127 and 310,769 shares of unvested shares of restricted stock, restricted stock units, and performance share units, respectively. The diluted loss per share for the six months ended June 30, 2020 did not include the antidilutive effect of 76,836 shares of unvested shares of restricted stock, restricted stock units, and performance share units.

Note 14. 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 June 30, 2021 and December 31, 2020, 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 Stock Dividends

The Board of Directors evaluates common stock dividends on a quarterly basis and, in its sole discretion, approves the payment of dividends. The Company’s common stock dividend payments, if any, may vary significantly from quarter to quarter. For the quarters ended March 31, 2021 and June 30, 2021 and the year ended December 31, 2020, the Board of Directors determined that the Company would not declare a dividend on its common stock.

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 six months ended June 30, 2021 and the year ended December 31, 2020, there were no issuances of common stock under the common equity distribution agreements.

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As of June 30, 2021, 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 October 26, 2015, the Company announced that its Board of Directors authorized a share repurchase program pursuant to which the Company may repurchase up to 2,000,000 shares of Class A common stock (the “Repurchase Program”). On July 31, 2020, the Company announced that its Board of Directors authorized an increase in the Repurchase Program pursuant to which the Company may repurchase up to 18,000,000 shares of Class A common stock, inclusive of 56,090 shares previously available to be repurchased under the prior authorization.  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 six months ended June 30, 2021, the Company repurchased 855,835 and 993,490 shares of Class A common stock for a total purchase price of $3,490 and $4,013, respectively. During the year ended December 31, 2020, the Company repurchased 3,662,566 shares of Class A common stock for a total purchase price of $10,377. As of June 30, 2021, there remain available for repurchase 15,239,159 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 commencing on May 12, 2022 or earlier upon the occurrence of a change in control. 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 2021.

There were no shares of Series B Preferred Stock repurchased by the Company during the three and six months ended June 30, 2021. During the year ended December 31, 2020, the Company repurchased 17,766 shares of Series B Preferred Stock for a total purchase price of $299.

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 2021.

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There were no shares of Series C Preferred Stock repurchased by the Company during the three and six months ended June 30, 2021. During the year ended December 31, 2020, the Company repurchased 82,966 shares of Series C Preferred Stock for a total purchase price of $1,578.

Preferred Equity Distribution Agreements

On March 21, 2019, the Company entered into an amended and restated equity distribution agreement with JonesTrading Institutional Services LLC, B. Riley FBR, Inc., Compass Point Research and Trading, 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 three and six months ended June 30, 2021 and the year ended December 31, 2020, there were no issuances of preferred stock under the Series B preferred equity distribution agreement. As of June 30, 2021, the Company had 1,645,961 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.  

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, and any outstanding rights will expire at the earliest of (i) June 4, 2022, (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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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, 2020.

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, 2020.

Our Company

We are an investment firm that focuses primarily on investing in mortgage related assets.  We may also invest in other asset classes that our management team believes may offer attractive risk adjusted returns, such as real estate assets or investments outside the real estate or mortgage asset classes. Our investment capital is currently allocated between agency MBS, mortgage credit investments and MSR related assets.

Our agency MBS consist of residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by either a GSE, such as the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), or by a U.S. government agency, such as the Government National Mortgage Association (“Ginnie Mae”). Our mortgage 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”).  The principal and interest of our mortgage credit investments are not guaranteed by a GSE or a U.S government agency.  Our MSR related assets represent investments for which the return is based on the economic performance of a pool of specific MSRs.

We believe we leverage prudently our investment portfolio, as we seek to increase potential returns to our shareholders. We fund our investments primarily through short-term financing arrangements, principally though repurchase agreements. We enter into various hedging transactions to mitigate the interest rate sensitivity of our cost of borrowing and the value of our fixed-rate mortgage investment portfolio.

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

During the second quarter of 2021, equity capital markets continued to strengthen with the market’s improved economic outlook due to COVID-19 vaccination efforts, the economic reopening, ongoing accommodative central bank policies and substantial fiscal stimulus polices. The U.S. economy experienced the highest inflation levels in decades during the second quarter due primarily to the pandemic related effects of pent-up demand and supply chain disruptions.  Two of the market’s overriding macroeconomic concerns during the quarter were whether the uptick in inflation is temporary and the timing of when the Federal Reserve will start tightening the money supply.  Despite the higher actual inflation readings, the bond market appears to be pricing in the view that the recent

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spikes in inflation are transitory as evidenced by the bond market rallying during the second quarter as long-term interest rates fell meaningfully.  

The 10-year U.S. Treasury rate decreased 27 basis points during the second quarter to 1.47% as of June 30, 2021.  The U.S. Treasury curve flattened during the second quarter as the spread between the 2-year and 10-year U.S. Treasury rate narrowed 36 basis points resulting in a spread of 122 basis points as of June 30, 2021.  

At its June 16, 2021 meeting, the Federal Open Market Committee (“FOMC”) stated that it expects to continue to maintain an accommodative monetary policy stance and will keep its target range for the federal funds rate at 0% to 0.25%.  In addition, the FOMC reaffirmed that it will continue with its asset purchase program to help foster smooth market functioning and accommodative financial conditions by continuing to increase its holdings of Treasury securities by at least $80 billion per month and agency MBS by at least $40 billion per month.

Prepayment speeds in the conforming fixed-rate residential mortgage market during the second quarter of 2021 were consistent with the prior quarter and remain at elevated levels due to historically low mortgage rates.  Looking forward, market expectations are that historically low interest rates will keep prepayment speeds elevated in the near term. Pay-up premiums on agency MBS, which represent the price premium of agency MBS backed by specified pools over a TBA security, as of June 30, 2021 did not change significantly compared to the prior quarter-end.  

Housing prices have strengthened significantly, as evidenced by the Standard & Poor’s CoreLogic Case-Shiller U.S. National Home Price NSA index reporting an 14.6% annual gain in April 2021, the highest recorded in over 30 years of the index’s data. The strong gains in housing continue to be driven by low mortgage rates and low supply of homes for sale as well as the impact of the COVID-19 pandemic increasing the number of potential home buyers moving from urban apartments to suburban homes.

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

	June 30, 2020			September 30, 2020			December 31, 2020			March 31, 2021			June 30, 2021			Change - Second Quarter 2021
30-Year FNMA Fixed Rate MBS (1)
2.0%	$	102.32		$	103.39		$	103.95		$	99.67		$	100.97		$	1.30
2.5%		104.23			104.89			105.45			102.51			103.41			0.90
3.0%		105.30			104.77			104.80			104.13			104.22			0.09
3.5%		105.17			105.48			105.73			105.61			105.27			(0.34	)
4.0%		105.95			106.64			106.80			107.32			106.54			(0.78	)
4.5%		107.45			108.17			108.39			108.87			107.63			(1.24	)
Investment Spreads
FNMA Current Coupon vs.    10-year Swap Rate	93 bps			69 bps			42 bps			26 bps			39 bps			13 bps
CMBS 2.0/3.0 BBB- vs. Swap Curve	735 bps			500 bps			475 bps			390 bps			345 bps			-45 bps
U.S. Treasury Rates ("UST")
2-year UST		0.15	%		0.13	%		0.12	%		0.16	%		0.25	%	9 bps
5-year UST		0.29	%		0.28	%		0.36	%		0.94	%		0.89	%	-5 bps
10-year UST		0.66	%		0.68	%		0.91	%		1.74	%		1.47	%	-27 bps
2-year UST to 10-year UST spread	51 bps			55 bps			79 bps			158 bps			122 bps			-36 bps
Interest Rate Swap Rates
2-year swap		0.23	%		0.22	%		0.20	%		0.29	%		0.33	%	4 bps
5-year swap		0.33	%		0.35	%		0.43	%		1.06	%		0.96	%	-10 bps
10-year swap		0.64	%		0.71	%		0.93	%		1.78	%		1.44	%	-34 bps
2-year swap to 2-year UST spread	8 bps			9 bps			8 bps			13 bps			8 bps			-5 bps
10-year swap to 10-year UST spread	-2 bps			3 bps			2 bps			4 bps			-3 bps			-7 bps
London Interbank Offered Rates ("LIBOR") and Secured Overnight Financing Rate ("SOFR")
1-month LIBOR		0.16	%		0.15	%		0.14	%		0.11	%		0.10	%	-1 bps
3-month LIBOR		0.30	%		0.23	%		0.24	%		0.19	%		0.15	%	-4 bps
SOFR		0.10	%		0.08	%		0.07	%		0.01	%		0.05	%	4 bps

<sup>(1)</sup> 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.

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Recent Regulatory Activity

LIBOR Transition

The ICE Benchmark Administration Limited (“IBA”) is a benchmark administrator that is authorized and regulated by the U.K. Financial Conduct Authority (“FCA”) to administer the publication of LIBOR.  On July 27, 2017, the FCA announced that it intends to stop persuading or compelling banks to submit LIBOR rates after December 31, 2021, which could either cause LIBOR to stop publication immediately or cause LIBOR’s regulator to determine that its quality had degraded to the degree that it is no longer representative of its underlying market.  On November 30, 2020, the IBA announced that it intends to consult on its intention to cease publication of one-week and two-month LIBOR after December 31, 2021 and cease publication of overnight, one-month, three-month, six-month and twelve-month LIBOR after June 30, 2023. The consultation results have not yet been published, but it is unlikely that any setting of LIBOR will continue beyond June 2023. The U.S. Federal Reserve and the Federal Reserve Bank of New York jointly convened the Alternative Reference Rates Committee (“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 U.S. dollar LIBOR, identify best practices for contract robustness and create an implementation plan. The ARRC identified SOFR, a new index calculated by short-term repurchase agreements backed by U.S. Treasury securities, as the rate that represents the best replacement for U.S. dollar LIBOR in most U.S. dollar derivatives and other financial contracts. In April 2018, the Federal Reserve Bank of New York began publishing SOFR rates. The ARRC also published its transition plan with specific steps and timelines designed to encourage the adoption of SOFR. The likely market transition away from LIBOR and towards SOFR is expected to be gradual and complicated.

On March 5, 2021, the FCA 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 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 borrowings that extend beyond June 30, 2023 will need to be converted to a replacement rate. There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured lending rate, and LIBOR reflects term rates at different maturities while SOFR is an overnight rate. These and other differences create the potential for basis risk between the two rates. The impact of any basis risk between LIBOR and SOFR may negatively affect our operating results. Any of these alternative methods may result in interest rates that are either higher or lower than if LIBOR were available in its current form, which could have a material adverse effect on our 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.  It is not yet possible to predict the magnitude of LIBOR's end on our borrowing costs given the remaining uncertainty about which rates will replace LIBOR.

We are party to various financial instruments which include LIBOR as a reference rate. As of June 30, 2021, these financial instruments include interest rate swap agreements, mortgage loan investments, and preferred stock and unsecured notes issued by the Company.

As of June 30, 2021, we had $325 million notional amount of interest rate swaps outstanding that expire after 2021 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 designed to cover a permanent discontinuation of LIBOR. Under the terms of the current ISDA definitions, if the publication of LIBOR is not available, the current fallback is for the calculation agent to obtain quotations for what LIBOR should be from major banks in the interbank market. If LIBOR is permanently discontinued, it is possible that major banks would be unwilling and/or unable to give such quotations. Even if quotations were available in the near-term after the permanent discontinuation, it is unlikely that they will be available for each future reset date over the remaining tenor of our interest rate swap agreements. ISDA is currently leading an effort to amend its definitions to include fallbacks for an alternative reference rate that would apply upon the permanent discontinuation of LIBOR. It is anticipated that the amended ISDA definitions would include a statement identifying the objective triggers that would activate a fallback alternative interest rate provision and a description of the fallback alternative interest rate, which is expected to be SOFR adjusted for the fact that SOFR is an overnight rate and the various premia included within LIBOR. It is expected that the CME Rulebook would incorporate any amendments to the ISDA definitions. However, under the terms of the CME Rulebook, if a fallback to an alternative interest rate has not been triggered under future amended ISDA definitions, the CME as the calculation agent has the sole discretion to select an alternative interest rate if it determines that LIBOR is no longer representative of its underlying market.

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As of June 30, 2021, we had two mortgage loan investments with an aggregate principal balance outstanding of $74.7 million that bear interest at one-month LIBOR plus a spread, subject to a potential minimum LIBOR floor. Subsequent to June 30, 2021, we received a full repayment of one of our mortgage loan investment totaling $44.8 million resulting in a remaining mortgage loan investment with an unpaid principal balance of $29.9 million.  The remaining mortgage loan investment matures on March 23, 2022 with a one-year extension available at the option of the borrower. Under the terms of the loan agreement, if the administrative agent of the loan determines that LIBOR cannot be determined and LIBOR has been succeeded by an alternative floating rate index (i) that is commonly accepted by market participants as an alternative to LIBOR as determined by the administrative agent, (ii) that is publicly recognized by ISDA as an alternative to LIBOR, and (iii) for which ISDA has approved an amendment to hedge agreements generally providing such floating rate index as a standard alternative to LIBOR, then the administrative agent would use such alternative floating rate index as the fallback rate. If the administrative agent determines that no alternative rate index is available, then the fallback interest rate would be based on the prime rate plus an applicable spread.

As of June 30, 2021, 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 interest payment period.

As of June 30, 2021, we had 1,117,034 shares of 8.250% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (“Series C Preferred Stock”) outstanding with a liquidation preference of $27.9 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 the Company 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. Notwithstanding the preceding section of this paragraph, 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. If the calculation agent determines that there is not an accepted substitute or successor base rate, then the calculation agent will follow the original fallback language.

At this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or any other reforms to LIBOR that may be implemented in the U.K. or elsewhere. While we expect LIBOR to be available in substantially its current form until the end of 2021, and likely based on IBA's announced consultation through June 2023, if sufficient banks decline to make submissions to IBA, it is possible that LIBOR will become unavailable prior to that point. Uncertainty as to the nature of such potential 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.”

COVID-19 Stimulus

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into legislation that authorizes more than $2 trillion in economic relief to individuals, businesses and government organizations due to the economic and health impacts of the COVID-19 pandemic.  Among its many provisions, the CARES Act instituted a foreclosure moratorium and borrower right to request forbearance on any federally-backed residential mortgage, including mortgage loans in agency MBS.  More specifically, commencing March 18, 2020, foreclosures were not allowed for 60 days.   Subsequently, the FHFA announced that Fannie Mae and Freddie Mac had extended the moratorium on foreclosures until at least December 31, 2020. In addition, under the CARES Act, borrowers of federally-backed residential mortgages may request forbearance if the borrower has experienced financial hardship as a result of the COVID-19 pandemic.  If forbearance is requested by the borrower, the loan servicer is required to grant forbearance for up to 180 days that can be extended for an additional 180 days at the borrower’s request.  During the forbearance period, the servicer cannot charge or collect any fees, penalties, or interest beyond what could be charged if the borrower made all payments timely.  

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On January 20, 2021, President Biden signed an executive order to extend foreclosure moratoriums to at least March 31, 2021 for all federally-backed residential mortgages, and on February 9, 2021, the Federal Housing Finance Agency (“FHFA”) announced that Fannie Mae and Freddie Mac were extending foreclosure moratoriums until March 31, 2021 for mortgages guaranteed by Fannie Mae and Freddie Mac.  On February 16, 2021, President Biden signed another executive order to further extend foreclosure moratoriums through June 30, 2021 for all federally-backed residential mortgages. In addition, the executive order extended the mortgage payment forbearance enrollment window until June 30, 2021 for borrowers of federally-backed residential mortgages who wish to request forbearance and provides up to six months of additional mortgage payment forbearance, in three-month increments, for borrowers who entered forbearance on or before June 30, 2020.  On February 25, 2021, the FHFA announced that Fannie Mae and Freddie Mac also extended their foreclosure and forbearance moratorium periods to align with the federal government’s extended periods.  On June 25, 2021, the Federal Housing Authority (“FHA”) further extended the foreclosure moratorium to July 31, 2021 for all federally-backed residential mortgages.  The FHA also provided an additional three-month forbearance extension for borrowers who previously received forbearance from their servicer between July 1, 2020 and September 30, 2020, and also extended the time period for borrowers to start new six-month forbearance plans to September 30, 2021.   On June 24, 2021, the FHFA further announced that Fannie Mae and Freddie Mac extended their foreclosure moratoriums until July 31, 2021.  

On March 11, 2021, President Biden signed the $1.9 trillion American Rescue Plan Act of 2021 into law. This stimulus program furthered the federal government’s efforts to stabilize the economy and provide assistance to sectors of the population still suffering from the various physical and economic effects of the pandemic.

On September 4, 2020, the Centers for Disease Control and Prevention (“CDC”) issued a federal eviction moratorium that temporarily halted residential evictions of qualifying tenants for nonpayment of rent during the period from September 4, 2020 to December 31, 2020. In December 2020, the Consolidated Appropriations Act, 2021 was signed into law, which is an Omnibus spending bill that included a second COVID-19 stimulus bill (the “Second Stimulus”). In addition to providing stimulus checks for individuals and families, the Second Stimulus provides for, among other things, (i) an extension of federal unemployment insurance benefits, (ii) funding to help individuals connect remotely during the pandemic, (iii) tax credits for companies offering paid sick leave and (iv) funding for vaccine distribution and development. As further described below, the Second Stimulus provided an additional $25 billion in tax-free rental assistance and an executive order by President Biden extended the temporary eviction moratorium promulgated by the CDC through March 31, 2021.  On April 13, 2021, the CDC issued a temporary eviction moratorium that extended eviction moratorium through June 30, 2021.  On June 24, 2021, the CDC issued an additional temporary eviction moratorium that further extended the eviction moratorium through July 31, 2021.

The CDC order will likely prevent some mortgagors from evicting certain tenants who are not current on their monthly payments of rent and who qualify for relief under the CDC order, which may present a greater risk that the mortgagor will stop making monthly mortgage loan payments. The CDC order by its terms does not preempt or preclude state and local jurisdictions from more expansive orders currently in place or from imposing additional or more restrictive requirements than the CDC order to provide greater public health protection and, across the country, similar moratoriums are in place in certain states to stop evictions and foreclosures in an effort to lessen the financial burden created by COVID-19. The CDC’s moratorium and any other similar state moratoriums or bans could adversely impact the cash flow on mortgage loans

We expect vigorous debate and discussion in a number of areas, including residential housing and mortgage reform, fiscal policy, monetary policy and healthcare, to continue over the next few years; however, we cannot be certain if or when any specific proposal or policy might be announced, emerge from committee or be approved by Congress, and if so, what the effects on us may be.

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Portfolio Overview

The following table summarizes our mortgage investment portfolio at fair value as of June 30, 2021 (dollars in thousands):

	June 30, 2021
	Assets		Capital Allocation (1)		Capital Allocation (%)			Leverage (2)
Agency MBS	$	725,709	$	118,409		39	%		5.4
Mortgage credit investments
Commercial mortgage loans		74,685		53,754		18	%		0.4
Residential MBS		24,995		24,995		8	%		—
Business purpose loan residential MBS (3)		22,731		22,731		8	%		—
Small balance commercial MBS		3,915		3,915		1	%		—
Other		3,425		3,425		1	%		—
Total mortgage credit investments		129,751		108,820		36	%		0.2
MSR financing receivables		74,652		74,652		25	%		—
Total mortgage investments	$	930,112	$	301,881		100	%		2.2

<sup>(1)</sup> Our investable capital is calculated as the sum of our shareholders’ equity capital and long-term unsecured debt.

<sup>(2)</sup> Our leverage is measured as the ratio of the sum of our repurchase agreement financing, net payable or receivable for unsettled securities and net contractual forward purchase price of our TBA commitments less our cash and cash equivalents compared to our investable capital.

<sup>(3)</sup> Includes our net investment of $11,849 in a VIE with gross assets and liabilities of $40,413 and $28,564, respectively, that is consolidated for GAAP financial reporting purposes.

Agency MBS Investment Portfolio

Our specified agency MBS consisted of the following as of June 30, 2021 (dollars in thousands):

	Unpaid Principal Balance		Net Unamortized Purchase Premiums		Amortized Cost Basis		Net Unrealized (Loss) Gain			Fair Value		Market Price		Coupon			Weighted Average Expected Remaining Life
30-year fixed rate:
2.0%	$	466,229	$	12,645	$	478,874	$	(6,111	)	$	472,763	$	101.40		2.00	%		7.9
2.5%		242,469		13,282		255,751		(2,818	)		252,933		104.32		2.50	%		6.4
5.5%		11		—		11		2			13		116.51		5.50	%		4.9
Total/weighted-average	$	708,709	$	25,927	$	734,636	$	(8,927	)	$	725,709	$	102.40		2.17	%		7.4

	Unpaid Principal Balance		Net Unamortized Purchase Premiums		Amortized Cost Basis		Net Unrealized (Loss) Gain			Fair Value		Market Price		Coupon			Weighted Average Expected Remaining Life
Fannie Mae	$	520,041	$	18,117	$	538,158	$	(5,702	)	$	532,456	$	102.39		2.17	%		7.5
Freddie Mac		188,668		7,810		196,478		(3,225	)		193,253		102.43		2.18	%		7.0
Total/weighted-average	$	708,709	$	25,927	$	734,636	$	(8,927	)	$	725,709	$	102.40		2.17	%		7.4

The annualized prepayment rate for our agency MBS was 6.34% for the three months ended June 30, 2021. As of June 30, 2021, our agency MBS was comprised of securities specifically selected for their relatively lower propensity for prepayment, which includes approximately 58% in specified pools of low balance loans, approximately 28% in specified pools of loans originated in certain geographical areas and approximately 14% in specified pools of new production serviced by banks. 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 one-half of a percentage point as of June 30, 2021.

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Our agency MBS portfolio also includes 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 accordance with GAAP, we account for our net long TBA positions as derivative instruments. Information about our net long TBA positions as of June 30, 2021 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)
1.5% 30-year MBS purchase commitments	$	100,000		$	98,250		$	98,055		$	(195	)
1.5% 30-year MBS sale commitments		(100,000	)		(97,674	)		(98,055	)		(381	)
2.0% 30-year MBS purchase commitments		125,000			125,445			126,221			776
2.0% 30-year MBS sale commitments		(125,000	)		(125,488	)		(126,221	)		(733	)
2.5% 30-year MBS purchase commitments		25,000			25,855			25,854			(1	)
2.5% 30-year MBS sale commitments		(25,000	)		(25,781	)		(25,854	)		(73	)
Total net long agency TBA dollar roll positions	$	—		$	607		$	—		$	(607	)

<sup>(1)</sup> “Notional amount” represents the unpaid principal balance of the underlying agency MBS.

<sup>(2)</sup> “Implied cost basis” represents the contractual forward price for the underlying agency MBS.

<sup>(3)</sup> “Implied fair value” represents the current fair value of the underlying agency MBS.

<sup>(4)</sup> “Net carrying amount” represents the difference between the implied cost basis and the current fair value of the underlying agency MBS. This amount is reflected on the Company’s consolidated balance sheets as a component of “derivative assets, at fair value” and “derivative liabilities, at fair value.”

Mortgage Credit Investment Portfolio

As of June 30, 2021, our mortgage credit investment portfolio was primarily comprised of a $74.7 million commercial mortgage loans secured by a first lien position in healthcare facilities and $55.1 million in non-agency MBS investments collateralized by pools of residential mortgage loans, business purpose residential mortgage loans and small balance commercial mortgage loans, including an $11.8 million net investment in a consolidated variable interest entity (“VIE”).  The following table presents further information about our mortgage credit investments as of June 30, 2021 (dollars in thousands):

	Unpaid Principal Balance		Net Unamortized Premiums (Discounts)			Amortized Original Cost Basis		Net Unrealized Gain (Loss)			Fair Value (1)		Market Price
Commercial mortgage loans	$	74,685	$	—		$	74,685	$	—		$	74,685	$	100.00
Residential MBS		27,481		(2,534	)		24,947		48			24,995		90.59
Business purpose residential MBS (2)		24,593		1,603			26,196		(3,465	)		22,731		93.70
Commercial MBS		6,000		(787	)		5,213		(1,298	)		3,915		64.73
Other		5,061		(1,635	)		3,426		(1	)		3,425		67.67
Total/weighted-average	$	137,820	$	(3,353	)	$	134,467	$	(4,716	)	$	129,751	$	94.28

<sup>(1)</sup> For investments in mortgage credit securities, includes contractual accrued interest receivable.

<sup>(2)</sup> Includes our net investment of $11,849 in a VIE with gross assets and liabilities of $40,413 and $28,564, respectively, that is consolidated for GAAP financial reporting purposes.

MSR Financing Receivables

As of June 30, 2021, we had $74.7 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 table presents further information about our MSR financing receivable investments as of June 30, 2021 (dollars in thousands):

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Underlying MSR
Holder of Loans	UPB		Weighted-Average Note Rate			Weighted-Average Servicing Fee			Weighted-Average Loan Age	Price			Multiple (1)		Financing Receivable Fair Value
Fannie Mae	$	6,838,328		2.94	%		0.26	%	9 months		1.04	%		4.08	$	74,652

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

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 June 30, 2021, the interest rate hedging instruments primarily used by us were centrally cleared 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 June 30, 2021 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	$	200,000		0.10	%		0.04	%		(0.06	)%		2.4
3 to less than 7 years		75,000		0.89	%		0.19	%		(0.70	)%		6.5
7 to less than 10 years		250,000		1.12	%		0.17	%		(0.95	)%		9.4
Total / weighted-average	$	525,000		0.70	%		0.12	%		(0.58	)%		6.3

In addition to interest rate swap agreements, we may also use exchange-traded U.S. Treasury note futures that are either long or short positions 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 purchasing or delivering the underlying U.S. Treasury note. Information about our outstanding U.S. Treasury note futures contracts as of June 30, 2021 is as follows (dollars in thousands):

	Maturity Date	Notional Amount
Long 10-year U.S. Treasury note futures	September 2021	$	45,000

Single-Family Rental

On August 5, 2021, we entered into an agreement with an experienced real estate investment management institution which will enable us to acquire, lease and operate single-family homes as rental properties.  Pursuant to the agreement, we have committed to invest a minimum of $50 million in capital to a single-family rental investment strategy.  We anticipate having the ability to, and will seek to obtain, leverage on our invested capital.

Results of Operations

Net Interest Income

Net interest income determined in accordance with GAAP primarily represents the interest income recognized from our specified agency MBS, mortgage credit investments and MSR financing receivables (including the amortization of purchase premiums and accretion of purchase discounts), net of the interest expense incurred from repurchase agreement financing arrangements or other short- and long-term borrowing transactions. 

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Net interest income determined in accordance with GAAP does not include TBA agency MBS dollar roll income, which we believe represents the economic equivalent of net interest income generated 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 prepared in accordance with GAAP, TBA agency MBS dollar roll income 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 “gain (loss) from derivative instruments, net” of the “investment gain (loss), net” section.

Investment Gain (Loss), Net

“Investment gain (loss), net” primarily consists of periodic changes in the fair value (whether realized or unrealized) of the Company’s mortgage investments 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 the Company’s 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;

• 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 six months ended June 30, 2021 compared to the three and six months ended June 30, 2020

The following table presents the net income (loss) available (attributable) to common stock reported for the three and six months ended June 30, 2021 and 2020, respectively (dollars in thousands, except per share amounts):

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Interest income	$	7,045		$	6,134		$	13,304		$	31,107
Interest expense		1,958			2,369			4,459			18,201
Net interest income		5,087			3,765			8,845			12,906
Investment (loss) gain, net		(9,032	)		9,797			(15,795	)		(90,271	)
General and administrative expenses		(3,190	)		(3,328	)		(5,827	)		(6,571	)
(Loss) income before income taxes		(7,135	)		10,234			(12,777	)		(83,936	)
Income tax (benefit) provision		(76	)		—			322			—
Net (loss) income		(7,059	)		10,234			(13,099	)		(83,936	)
Dividend on preferred stock		(723	)		(758	)		(1,446	)		(1,532	)
Net (loss) income (attributable) available to common stock	$	(7,782	)	$	9,476		$	(14,545	)	$	(85,468	)
Diluted (loss) earnings per common share	$	(0.24	)	$	0.26		$	(0.44	)	$	(2.33	)
Weighted-average diluted common shares   outstanding		33,066			36,666			33,123			36,665

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GAAP Net Interest Income

Net interest income determined in accordance with GAAP (“GAAP net interest income”) increased $1.3 million, or 34.2%, from $3.8 million for the three months ended June 30, 2020 to $5.1 million for the three months ended June 30, 2021. GAAP net interest income decreased $4.1 million, or 31.8%, from $12.9 million for the six months ended June 30, 2020 to $8.8 million for the six months ended June 30, 2021.

The components of GAAP net interest income from our MBS portfolio are summarized in the following table for the periods indicated (dollars in thousands):

	Three Months Ended June 30,
	2021								2020
	Average		Income			Yield			Average		Income			Yield
	Balance		(Expense)			(Cost)			Balance		(Expense)			(Cost)
Agency MBS	$	735,641	$	2,984			1.62	%	$	667,355	$	3,517			2.11	%
Mortgage credit investments		91,858		1,770			7.71	%		115,818		2,083			7.19	%
Mortgage loans of consolidated VIE		53,534		776			5.80	%		—		—
MSR financing receivable		52,075		1,390			10.68	%		—		—
Other		—		125						—		534
	$	933,108		7,045			3.02	%	$	783,173		6,134			3.13	%
Repurchase agreements	$	652,624		(403	)		(0.24	)%	$	559,880		(1,154	)		(0.82	)%
Long-term unsecured debt		73,054		(1,150	)		(6.30	)%		74,339		(1,215	)		(6.54	)%
Secured debt of consolidated VIE		38,152		(405	)		(4.25	)%		—		—
	$	763,830		(1,958	)		(1.02	)%	$	634,219		(2,369	)		(1.49	)%
Net interest income/spread (1)			$	5,087			2.56	%			$	3,765			2.31	%
Net interest margin (1)							2.67	%							2.54	%

	Six Months Ended June 30,
	2021								2020
	Average		Income			Yield			Average		Income			Yield
	Balance		(Expense)			(Cost)			Balance		(Expense)			(Cost)
Agency MBS	$	726,365	$	5,768			1.59	%	$	1,989,497	$	26,905			2.70	%
Mortgage credit investments		78,199		3,039			7.77	%		101,438		3,525			6.95	%
Mortgage loans of consolidated VIE		68,398		2,463			7.20	%		—		—
MSR financing receivable		33,754		1,748			10.36	%		—		—
Other		—		286						—		677
	$	906,716		13,304			2.93	%	$	2,090,935		31,107			2.98	%
Repurchase agreements	$	603,233		(891	)		(0.29	)%	$	1,861,110		(15,746	)		(1.67	)%
Long-term unsecured debt		73,050		(2,301	)		(6.30	)%		74,532		(2,455	)		(6.59	)%
Secured debt of consolidated VIE		53,939		(1,267	)		(4.70	)%		—		—
	$	730,222		(4,459	)		(1.22	)%	$	1,935,642		(18,201	)		(1.86	)%
Net interest income/spread (1)			$	8,845			2.28	%			$	12,906			1.31	%
Net interest margin (1)							2.46	%							1.47	%

(1) Net interest spread and net interest margin rates exclude interest on long-term unsecured debt.

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The effects of changes in the composition of our investments on our GAAP net interest income from our mortgage investment activities are summarized below (dollars in thousands):

	Three Months Ended June 30, 2021									Six Months Ended June 30, 2021
	vs.									vs.
	Three Months Ended June 30, 2020									Six Months Ended June 30, 2020
	Rate			Volume			Total Change			Rate			Volume			Total Change
Agency MBS	$	(893	)	$	360		$	(533	)	$	(4,056	)	$	(17,081	)	$	(21,137	)
Mortgage credit investments		96			(409	)		(313	)		352			(838	)		(486	)
Mortgage loans of consolidated VIE		—			776			776			—			2,463			2,463
MSR financing receivable		—			1,390			1,390			—			1,748			1,748
Other		—			(409	)		(409	)		—			(391	)		(391	)
Repurchase agreements		939			(188	)		751			4,212			10,643			14,855
Long-term unsecured debt		44			21			65			110			44			154
Secured debt of consolidated VIE		—			(405	)		(405	)		—			(1,267	)		(1,267	)
	$	186		$	1,136		$	1,322		$	618		$	(4,679	)	$	(4,061	)

Economic Net Interest Income

Economic net interest income, a non-GAAP financial measure, represents the interest income earned net of the interest expense incurred from all of our interest bearing financial instruments as well as the agency MBS which underlie, and are implicitly financed through, our TBA dollar roll transactions. Economic net interest income is comprised of the following: (i) net interest income determined in accordance with GAAP, (ii) TBA agency MBS “dollar roll” income and (iii) net interest income earned or expense incurred from interest rate swap agreements. We believe that economic net interest income assists investors in understanding and evaluating the financial performance of the Company’s long-term-focused, net interest spread-based investment strategy, prior to the deduction of general and administrative expenses. For a full description of each of the three aforementioned components of economic net interest income, see “Non-GAAP Core Operating Income” below.

Below is a reconciliation of economic net interest income, a non-GAAP financial measure, to net interest income determined in accordance with GAAP (dollars in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Economic net interest income	$	5,678		$	3,929		$	9,562		$	13,767
TBA dollar roll income		(1,778	)		(170	)		(2,614	)		(275	)
Interest rate swap net interest expense (income)		1,187			6			1,897			(586	)
Net interest income determined in accordance with GAAP	$	5,087		$	3,765		$	8,845		$	12,906

The components of our economic net interest income are summarized in the following table for the periods indicated (dollars in thousands):

	Three Months Ended June 30,
	2021								2020
	Average		Income			Yield			Average		Income			Yield
	Balance		(Expense)			(Cost)			Balance		(Expense)			(Cost)
Agency MBS	$	735,641	$	2,984			1.62	%	$	667,355	$	3,517			2.11	%
Mortgage credit investments		91,858		1,770			7.71	%		115,818		2,083			7.19	%
Mortgage loans of consolidated VIE		53,534		776			5.80	%		—		—
MSR financing receivable		52,075		1,390			10.68	%		—		—
TBA dollar rolls (1)		314,494		1,778			2.26	%		50,249		170			1.35	%
Other		—		125						—		534
Repurchase agreements		652,624		(403	)		(0.24	)%		559,880		(1,154	)		(0.82	)%
Interest rate swaps (2)		658,889		(1,187	)		(0.72	)%		122,222		(6	)		(0.02	)%
Long-term unsecured debt		73,054		(1,150	)		(6.30	)%		74,339		(1,215	)		(6.54	)%
Secured debt of consolidated VIE		38,152		(405	)		(4.25	)%		—		—
Economic net interest income/margin (3)			$	5,678			2.19	%			$	3,929			2.47	%

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	Six Months Ended June 30,
	2021								2020
	Average		Income			Yield			Average		Income			Yield
	Balance		(Expense)			(Cost)			Balance		(Expense)			(Cost)
Agency MBS	$	726,365	$	5,768			1.59	%	$	1,989,497	$	26,905			2.70	%
Mortgage credit investments		78,199		3,039			7.77	%		101,438		3,525			6.95	%
Mortgage loans of consolidated VIE		68,398		2,463			7.20	%		—		—
MSR financing receivable		33,754		1,748			10.36	%		—		—
TBA dollar rolls (1)		218,947		2,614			2.39	%		46,999		275			1.17	%
Other		—		286						—		677
Repurchase agreements		603,233		(891	)		(0.29	)%		1,861,110		(15,746	)		(1.67	)%
Interest rate swaps (2)		582,344		(1,897	)		(0.65	)%		1,270,063		586			0.09	%
Long-term unsecured debt		73,050		(2,301	)		(6.30	)%		74,352		(2,455	)		(6.60	)%
Secured debt of consolidated VIE		53,939		(1,267	)		(4.70	)%		—		—
Economic net interest income/margin (3)			$	9,562			2.11	%			$	13,767			1.52	%

(1) TBA dollar roll average balance (average cost basis) is based upon the contractual price of the initial TBA purchase trade of each individual series of dollar roll transactions.  TBA dollar roll income is net of implied financing costs.

(2) Interest rate swap cost represents the weighted average net receive (pay) rate in effect for the period, adjusted for “price alignment interest” income earned or expense incurred on cumulative variation margin paid or received, respectively.

(3) Net interest spread and net interest margin rates exclude interest on long-term unsecured debt.

The effects of changes in the composition of our investments on our economic net interest income from our MBS investment and related funding and hedging activities are summarized below (dollars in thousands):

	Three Months Ended June 30, 2021									Six Months Ended June 30, 2021
	vs.									vs.
	Three Months Ended June 30, 2020									Six Months Ended June 30, 2020
	Rate			Volume			Total Change			Rate			Volume			Total Change
Agency MBS	$	(893	)	$	360		$	(533	)	$	(4,056	)	$	(17,081	)	$	(21,137	)
Mortgage credit investments		96			(409	)		(313	)		352			(838	)		(486	)
Mortgage loans of consolidated VIE		—			776			776			—			2,463			2,463
MSR financing receivable		—			1,390			1,390			—			1,748			1,748
TBA dollar rolls		712			896			1,608			1,333			1,006			2,339
Other		—			(409	)		(409	)		—			(391	)		(391	)
Repurchase agreements		939			(188	)		751			4,212			10,643			14,855
Interest rate swaps		(1,153	)		(28	)		(1,181	)		(2,165	)		(318	)		(2,483	)
Long-term unsecured debt		44			21			65			110			44			154
Secured debt of consolidated VIE		—			(405	)		(405	)		—			(1,267	)		(1,267	)
	$	(255	)	$	2,004		$	1,749		$	(214	)	$	(3,991	)	$	(4,205	)

Investment 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 June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Gain (loss) on agency MBS investments, net	$	7,130		$	4,408		$	(22,085	)	$	27,926
Gain (loss) on mortgage credit investments, net		225			3,217			1,818			(17,207	)
(Loss) gain on MSR financing receivable		(2,021	)		—			3,936			—
TBA commitments, net:
TBA dollar roll income		1,778			170			2,614			275
Other (loss) gain from TBA commitments, net		(890	)		41			(10,122	)		4,834
Total gain (loss) on TBA commitments, net		888			211			(7,508	)		5,109
Interest rate derivatives:
Net interest (expense) income on interest rate swaps		(1,187	)		(6	)		(1,897	)		586
Other (loss) gain from interest rate derivative   instruments, net		(14,684	)		(602	)		8,967			(107,652	)
Total (loss) gain on interest rate derivatives, net		(15,871	)		(608	)		7,070			(107,066	)
Other derivatives, net		—			—			—			(1,040	)
Other investments, net		617			2,569			974			2,007
Investment (loss) gain, net	$	(9,032	)	$	9,797		$	(15,795	)	$	(90,271	)

As of the end of 2020, our agency MBS portfolio’s asset and hedge construct was modestly biased toward lower interest rates.  During the three months ended March 31, 2021, our agency MBS investments and TBA commitments underperformed relative to our interest rate hedging instruments in response to the significant increases in long-term interest rates during that period.  During the three months ended June 30, 2021, agency MBS spreads widened which resulted in the underperformance of our investments in agency MBS and TBA commitments relative to our interest rate hedging instruments during that period.

During the six months ended June 30, 2020, agency MBS spreads widened significantly which resulted in the underperformance of our investments in agency MBS and TBA commitments relative to our interest rate hedging instruments. During the three months ended June 30, 2020, agency MBS spreads narrowed, in part due to the improved liquidity and functioning of the financial markets.

Mortgage credit investments prices declined substantially during the six months ended June 30, 2020 as spreads widened significantly due to severe dislocations in the market for non-agency MBS along with uncertainty surrounding the extent of potential credit losses due to the economic downturn. During the three months ended June 30, 2020, mortgage credit spreads narrowed somewhat on certain classes of instruments leading to the recognition of net gains on such investments.   

General and Administrative Expenses

General and administrative expenses decreased by $0.1 million, or 3.0%, from $3.3 million for the three months ended June 30, 2020 to $3.2 million for the three months ended June 30, 2021. General and administrative expenses decreased by $0.8 million, or 12.1%, from $6.6 million for the six months ended June 30, 2020 to $5.8 million for the six months ended June 30, 2021. The decrease in general and administrative expenses for the six months ended June 30, 2021 is primarily due to a decrease in compensation and benefits expense.

Compensation and benefits expense decreased by $0.1 million, or 5.3%, from $1.9 million for the three months ended June 30, 2020 to $1.8 million for the three months ended June 30, 2021. Compensation and benefits expense decreased by $0.6 million, or 15.8%, from $3.8 million for the six months ended June 30, 2020 to $3.2 million for the six months ended June 30, 2021. The decrease in compensation and benefits for the six months ended June 30, 2021 is primarily due to a decrease in management cash incentive compensation.

Other general and administrative expenses decreased by $0.1 million, or 7.1%, from $1.4 million for the three months ended June 30, 2020 to $1.3 million for the three months ended June 30, 2021. Other general and administrative expenses decreased by $0.2 million, or 7.1%, from $2.8 million for the six months ended June 30, 2020 to $2.6 million for the three months ended June 30, 2021.

Income Tax Provision

Our taxable REIT subsidiaries (“TRSs”) are subject to U.S. federal and state corporate income taxes.  As a result, for the three and six months ended June 30, 2021, we recognized a (benefit) provision for income taxes of $(0.1) and $0.3 million on the pre-tax net income of our TRSs.  As noted in “Non-GAAP Core Operating Income” below, our computation of non-GAAP core operating income includes a provision for income taxes on the core operating income of our TRSs.  TRS core operating income is comprised of net interest income generated by TRSs net of the TRSs’ general and administrative expenses.  In our consolidated financial

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consolidated statements of comprehensive income prepared in accordance with GAAP, the “income tax provision (benefit)” includes (i) the income tax provision for TRS core operating income 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 gain (loss) net.”  Below is a reconciliation of the income tax provision for TRS core operating income, a non-GAAP financial measure, to the income tax provision determined in accordance with GAAP (dollars in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2021			2020		2021		2020
Income tax provision for TRS core operating income	$	61		$	—	$	72	$	—
Income tax (benefit) provision for TRS investment gains, net		(137	)		—		250		—
GAAP income tax (benefit) provision	$	(76	)	$	—	$	322	$	—

Non-GAAP Core Operating Income

In addition to the results of operations determined in accordance with GAAP, we also report “non-GAAP core operating income.” We define core operating income as “economic net interest income” less “core general and administrative expenses,” “income tax provision for TRS core operating income” and preferred stock dividends.

Economic Net Interest Income

Economic net interest income, a non-GAAP financial measure, represents the interest income earned net of the interest expense incurred from all of our interest-bearing financial instruments as well as the agency MBS which underlie, and are implicitly financed through, our TBA dollar roll transactions. Economic net interest income is comprised of the following: (i) net interest income determined in accordance with GAAP, (ii) TBA agency MBS “dollar roll” income, and (iii) net interest income earned or expense incurred from interest rate swap agreements.

We believe that economic net interest income assists investors in understanding and evaluating the financial performance of our long-term-focused, net interest spread-based investment strategy, prior to the deduction of core general and administrative expenses.

• Net interest income determined in accordance with GAAP.  Net interest income determined in accordance with GAAP primarily represents the interest income recognized from our investments in specified agency MBS, mortgage credit investments and MSR financing receivables (including the amortization of purchase premiums and accretion of purchase discounts), net of the interest expense incurred from repurchase agreement financing arrangements or other short- and long-term borrowing transactions income.

• TBA agency MBS dollar roll income.  Dollar roll income represents the economic equivalent of net interest income (implied interest income net of financing costs) generated from our investments 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 is generated as a result of delaying, or “rolling,” the settlement of a forward-settling purchase of a TBA agency MBS by entering into an offsetting “spot” sale with the same counterparty prior to the settlement date, net settling the “paired-off” positions in cash, and contemporaneously entering another forward-settling purchase 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. The price discount of the forward-settling purchase relative to the contemporaneously executed spot sale reflects compensation 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 as the excess of the spot sale price over the forward-settling purchase price, and recognize this amount ratably over the period beginning on the settlement date of the sale and ending on the settlement date of the forward purchase. In our consolidated statements of comprehensive income prepared in accordance with GAAP, TBA agency MBS dollar roll income is reported as a component of the overall periodic change in the fair value of TBA forward commitments within the line item “gain (loss) from derivative instruments, net” of the “investment gain (loss), net” section.

From time to time, we may enter into forward-settling TBA agency MBS sale commitments (known as a “net short” TBA position) as a means of economically hedging a portion of the interest rate sensitivity of our agency MBS investment portfolio.  When we delay (or “roll”) the settlement of a net short TBA position, the price discount of the forward-settling sale relative to the contemporaneously executed spot purchase results in an implied net interest expense (i.e., “dollar roll

40

expense”).  In our presentation of non-GAAP core operating income, we present TBA dollar roll income net of any implied net interest expense that resulted from rolling the settlement of net short TBA positions.

• Net interest income earned or expense incurred from interest rate swap agreements. 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 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 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 “gain (loss) from derivative instruments, net” of the “investment gain (loss), net” section.

Core General and Administrative Expenses

Core general and administrative expenses are non-interest expenses reported within the line item “total general and administrative expenses” of the consolidated statements of comprehensive income less stock-based compensation expense.  

Income Tax Provision for TRS Core Operating Income

Our TRSs are subject to U.S. federal and state corporate income taxes.  Our computation of core operating income includes a provision for income taxes on the core operating income of our TRSs.  The core operating income of our TRSs is comprised of net interest income generated by our TRSs net of our TRSs’ general and administrative expenses.  In our consolidated statements of comprehensive income prepared in accordance with GAAP, the “income tax provision (benefit)” includes (i) the income tax provision for TRS core operating income 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 gain (loss) net.”  

Non-GAAP Core Operating Income

The following table presents our computation of non-GAAP core operating income for the three and six months ended June 30, 2021 and 2020 (amounts in thousands, except per share amounts):

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
GAAP net interest income	$	5,087		$	3,765		$	8,845		$	12,906
TBA dollar roll income		1,778			170			2,614			275
Interest rate swap net interest (expense) income		(1,187	)		(6	)		(1,897	)		586
Economic net interest income		5,678			3,929			9,562			13,767
Core general and administrative expenses		(2,653	)		(2,734	)		(4,787	)		(5,584	)
Preferred stock dividend		(723	)		(758	)		(1,446	)		(1,532	)
Income tax provision for TRS core operating income		(61	)		—			(72	)		—
Non-GAAP core operating income	$	2,241		$	437		$	3,257		$	6,651
Non-GAAP core operating income per diluted    common share	$	0.07		$	0.01		$	0.10		$	0.18
Weighted average diluted common shares    outstanding		33,424			36,666			33,434			36,742

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The following table provides a reconciliation of GAAP net income (loss) to non-GAAP core operating income for the three and six months ended June 30, 2021 and 2020 (amounts in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
GAAP net (loss) income	$	(7,059	)	$	10,234		$	(13,099	)	$	(83,936	)
Add (less):
Total investment loss (gain), net		9,032			(9,797	)		15,795			90,271
Stock-based compensation expense		537			594			1,040			987
Income tax (benefit) provision for TRS investment     gain (loss)		(137	)		—			250			—
Preferred stock dividend		(723	)		(758	)		(1,446	)		(1,532	)
Add back:
TBA dollar roll income		1,778			170			2,614			275
Interest rate swap net interest (expense) income		(1,187	)		(6	)		(1,897	)		586
Non-GAAP core operating income	$	2,241		$	437		$	3,257		$	6,651

Non-GAAP core operating income 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 non-GAAP core operating income 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.

Periodic fair value gains and losses recognized with respect to our mortgage investments and economic hedging instruments, which are reported in line item “total investment gain (loss), net” of our consolidated statements of comprehensive income, are excluded from the computation of non-GAAP core operating income 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 investment portfolio is to generate a net interest 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 investments and economic hedging instruments to largely offset one another over time.

A limitation of utilizing this non-GAAP financial measure is that the effect of accounting for “non-core” 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. For example, the economic cost or benefit of hedging instruments other than interest rate swap agreements, such as U.S. Treasury note futures or options, do not affect the computation of non-GAAP core operating income.  In addition, our calculation of non-GAAP core operating income may not be comparable to other similarly titled measures of other companies.  Therefore, we believe that non-GAAP core operating income 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 non-GAAP core operating income 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, non-GAAP core operating income 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, 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

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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.

As of June 30, 2021, 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, net payable or receivable for unsettled securities, net contractual forward price of our TBA commitments less our cash and cash equivalents compared to our investable capital.  Our investable capital is calculated as the sum of our stockholders’ equity and long-term unsecured debt.  As of June 30, 2021, our “at risk” leverage ratio was 2.2 to 1.  

As of June 30, 2021, the Company’s liquid assets totaled $51.8 million consisting of cash and cash equivalents of $2.3 million and unencumbered agency MBS of $49.5 million at fair value. Cash equivalents consist primarily of money market funds invested in debt obligations of the U.S. government.

Due to the ongoing economic impact of the COVID-19 pandemic on the financial markets, we may experience increased difficulty in our financing operations. During the period immediately after the beginning of the COVID-19 pandemic, mortgage REITs experienced severe disruptions in financing operations (including the cost, attractiveness and availability of financing), in particular the ability to utilize repurchase financing and the margin requirements related to such financing.  While funding conditions have improved significantly since mid-2020, if the ongoing economic impact of COVID-19 were to, again, cause severe disruptions in financing operations, we could experience an unwillingness or inability of our potential lenders to provide us with, or renew, financing, increased margin calls, and/or additional capital requirements. These conditions could force us to sell our assets at inopportune times or otherwise cause us to potentially revise our strategic business initiatives, which could adversely affect our business.

We are continuing to monitor the rapid developments around COVID-19 and the related impacts to our business. In response to the economic uncertainty that has unfolded as a result of COVID-19, we took steps to lower our repurchase agreement leverage and maintain what we believe to be a sufficient liquidity position.

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 June 30, 2021, our cash totaled $6.8 million, which included cash and cash equivalents of $2.3 million and restricted cash of a consolidated VIE of $4.5 million, representing a net decrease of $33.2 million from $40.0 million as of December 31, 2020. Cash provided by operating activities of $2.1 million during the six months ended June 30, 2021 was attributable primarily to net interest income less our general and administrative expenses. Cash used in investing activities of $3.9 million during the six months ended June 30, 2021 was primarily generated by purchases of new agency MBS, mortgage credit securities, a mortgage loan and MSR financing receivables as well as net payments for settlements and deposits for margin on our interest rate derivative instruments, offset by sales of agency MBS and mortgage credit securities, receipt of principal payments from agency MBS and principal receipts on mortgage loans of a consolidated VIE. Cash used in financing activities of $31.4 million during the six months ended June 30, 2021 was primarily from net repayments of secured debt of a consolidated VIE, dividend payments to stockholders and from repurchases of our common stock, partially offset by proceeds from repurchase agreements.

Debt Capital

Long-Term Unsecured Debt

As of June 30, 2021, we had $73.1 million of total long-term unsecured debt, net of unamortized debt issuance costs of $0.6 million. Our 6.625% Senior Notes due 2023 with a principal amount of $23.8 million outstanding as of June 30, 2021 accrue and require payment of interest quarterly at an annual rate of 6.625% and mature on May 1, 2023. Our 6.75% Senior Notes due 2025 with

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a principal amount of $34.9 million outstanding as of June 30, 2021 accrue and require payment of interest quarterly at an annual rate of 6.75% and mature on March 15, 2025. Our trust preferred debt with a principal amount of $15.0 million outstanding as of June 30, 2021 accrue and require the payment of interest quarterly at three-month LIBOR plus 2.25% to 3.00% and mature between 2033 and 2035. Each of our unsecured notes 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.

Subsequent to June 30, 2021, we completed a public offering on July 15, 2021 of $37.8 million of 6.00% Senior Notes due 2026 and received net proceeds of $36.6 million after deducting underwriter discounts.  On July 7, 2021, we issued a notice of redemption for all $23.8 million principal amount of our outstanding Senior Notes due 2023 on August 6, 2021 at a redemption price of 100% of the principal amount plus unpaid interest thereon.

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.

Our repurchase agreement to finance our acquisition of mortgage loans is subject to a master repurchase agreement between a wholly-owned subsidiary of the Company, 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 or prepayments, 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

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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.

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

	June 30, 2021
Agency MBS repurchase financing:
Repurchase agreements outstanding	$	673,655
Agency MBS collateral, at fair value (1)		710,630
Net amount (2)		36,975
Weighted-average rate		0.09	%
Weighted-average term to maturity	13.6 days
Mortgage loans repurchase financing:
Repurchase agreements outstanding	$	20,931
Mortgage loans collateral, at fair value		29,901
Net amount (2)		8,970
Weighted-average rate		2.59	%
Weighted-average term to maturity	307.0 days
Total mortgage investments repurchase financing:
Repurchase agreements outstanding	$	694,586
Mortgage investments collateral, at fair value		740,531
Net amount (2)		45,945
Weighted-average rate		0.17	%
Weighted-average term to maturity	22.4 days
Maximum amount outstanding at any month-end during the period	$	694,586

<sup>(1)</sup> Includes $34,456 at sale price of unsettled agency MBS sale commitments which are included in the line item “sold securities receivable” in the accompanying consolidated balance sheets.

<sup>(2)</sup> 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 and by counterparty region. As of June 30, 2021, we had outstanding repurchase agreement balances with 8 counterparties and have master repurchase agreements in place with a total of 17 counterparties located throughout North America, Europe and Asia. As of June 30, 2021, no more than 3.9% of our stockholders’ equity was at risk with any one counterparty, with the top five counterparties representing approximately 14.6% of our stockholders’ equity. The table below includes a summary of our repurchase agreement funding by number of counterparties and counterparty region as of June 30, 2021:

	Number of		Percentage of Repurchase
	Counterparties		Agreement Funding
North America		5		57.9	%
Europe		1		18.2	%
Asia		2		23.9	%
		8		100.0	%

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

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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 June 30, 2021, we had outstanding interest rate swaps and U.S. Treasury note futures with the following aggregate notional amount and corresponding initial margin held in collateral deposit with the custodian (dollars in thousands):

	June 30, 2021
	Notional		Collateral
	Amount		Deposit
Interest rate swaps	$	525,000	$	15,293
10-year U.S. Treasury note futures		45,000		686

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 four large financial institutions.  To date, among our four 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

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 June 30, 2021, we have fully funded the total minimum commitment. At any time prior to 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.

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At our election, the mortgage servicing counterparty could utilize leverage on the MSRs that are subject to our MSR financing receivables to finance the purchase of additional MSRs to increase potential returns to us.  The lender providing the leverage to our mortgage servicing counterparty would have a secured interest in the MSRs pledged under a credit facility between the lender and our mortgage servicing counterparty.  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 that are referenced to our MSR financing receivable to satisfy the loan obligation and thereby reducing the value of our MSR financing receivable.  As of June 30, 2021, we have not requested the mortgage servicing counterparty to utilize any leverage on the MSRs that are subject to our MSR financing receivable.

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 referenced to our MSR financing receivable.  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 referenced to our MSR financing receivable.  In such case, if the mortgage servicing counterparty to our MSR financing receivable 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.  As of June 30, 2021, there are no borrowings outstanding under our mortgage servicing counterparty’s credit facility.

Under the arrangement, we are obligated to provide funds to the mortgage servicing counterparty to fund its advances of delinquent payments on the serviced pool of mortgage loans within the referenced MSR with the mortgage servicing counterparty required to return to us any subsequent servicing advances collected.  At our option, we could instruct 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.

Investment Commitments

As of June 30, 2021, 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 fund the last $30 million of advances under the revolving credit facility.  As of June 30, 2021, our unfunded commitment was $30 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 time to time, shares of our Class A 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.

During the three and six months ended June 30, 2021, there were no issuances of common stock under the common equity distribution agreements.  As of June 30, 2021, we had 11,302,160 shares of Class A common stock available for sale under the common equity distribution agreements.

Common Share Repurchase Program

On October 26, 2015, we announced that our Board of Directors authorized a share repurchase program pursuant to which we may repurchase up to 2,000,000 shares of Class A common stock (the “Repurchase Program”). On July 31, 2020, we announced that our Board of Directors authorized an increase in the Repurchase Program pursuant to which we may repurchase up to 18,000,000 shares of Class A common stock, inclusive of 56,090 shares previously available to be repurchased under the prior authorization.  

As of June 30, 2021, we had remaining availability of 15,239,159 shares of Class A common stock remain available for repurchase under the Repurchase Program.

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Preferred Stock

As of June 30, 2021, we had Series B Preferred Stock outstanding with a liquidation preference of $8.4 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 commencing on May 12, 2022 or earlier upon the occurrence of a change in control. 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 June 30, 2021, we had Series C Preferred Stock outstanding with a liquidation preference of $27.9 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 will be 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 three and six months ended June 30, 2021, there were no issuances of preferred stock under the Series B preferred equity distribution agreement. As of June 30, 2021, we had 1,645,961 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.

Off-Balance Sheet Arrangements and Other Commitments

As of June 30, 2021 and December 31, 2020, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance, or special purpose 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 June 30, 2021 and December 31, 2020, we had consolidated for financial reporting purposes one securitization trust for which we determined that our investment 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 June 30, 2021 and December 31, 2020, as we did not have the power to direct the activities that most significantly impact the economic performance of such entities.

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As of June 30, 2021, we were party to a participation agreement pursuant to which we had 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 fund the last $30 million of advances under the revolving credit facility.  Any draws under the revolving credit facility bear interest at one-month LIBOR plus 3.75% with a LIBOR 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 June 30, 2021, our unfunded commitment was $30 million.  

As of June 30, 2021 and December 31, 2020, we had not guaranteed any obligations of unconsolidated entities.  As of June 30, 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.  As of December 31, 2020, we had not entered into any commitment or intent to provide funding to unconsolidated entities.

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, 2020 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 portfolio. Our investments in agency MBS are 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. Historically, we have also utilized Eurodollar futures and interest rate swap futures.

Changes in both short- and long-term interest rates affect us in several ways, including our financial position. As interest rates increase, the fair 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. However, an increase in interest rates results in an increase in the fair value of our interest rate hedging instruments. Conversely, if interest rates decline, the fair value of fixed-rate agency MBS is generally expected to increase while the fair value of our interest rate hedging instruments is expected to decline. We also manage our interest rate risk through investment allocation between our agency MBS and MSR related assets.  As interest rates rise, the value of our MSR financing receivables is generally expected to increase due to lower expectations of prepayments in the referenced pools of mortgage loans.  Conversely, as interest rates fall, the value of MSR financing receivables is generally expected to decline due to higher expectations of prepayments in the referenced pools of mortgage loans.  Accordingly, our MSR financing receivables that derive value from the value of a related MSR can be a fair value hedge of our fixed-rate agency MBS.

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 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.

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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 reflects 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 any estimated changes in our income tax provision.

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

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):

	June 30, 2021
				Value			Value
				with 50			with 50
				Basis Point			Basis Point
				Increase in			Decrease in
	Value			Interest Rates			Interest Rates
Agency MBS	$	725,709		$	703,923		$	743,231
TBA commitments		(607	)		(607	)		(607	)
MSR financing receivable		74,652			79,381			65,037
Interest rate swaps		(944	)		14,849			(16,733	)
U.S. Treasury note futures		105			(1,677	)		1,887
Equity available to common stock		192,419			189,371			186,317
Book value per common share	$	5.94		$	5.84		$	5.75
Book value per common share percent change					(1.58	)%		(3.17	)%

	June 30, 2021
				Value			Value
				with 100			with 100
				Basis Point			Basis Point
				Increase in			Decrease in
	Value			Interest Rates			Interest Rates
Agency MBS	$	725,709		$	679,484		$	756,004
TBA commitments		(607	)		(607	)		(607	)
MSR financing receivable		74,652			81,290			45,772
Interest rate swaps		(944	)		30,640			(32,524	)
U.S. Treasury note futures		105			(3,458	)		3,668
Equity available to common stock		192,419			180,851			165,816
Book value per common share	$	5.94		$	5.58		$	5.12
Book value per common share percentage change					(6.01	)%		(13.83	)%

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

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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 6.8 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 June 30, 2021.

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):

	June 30, 2021
				Value with			Value with
				10 Basis Point			10 Basis Point
				Increase in			Decrease In
				Agency MBS			Agency MBS
	Value			Spreads			Spreads
Agency MBS	$	725,709		$	720,792		$	730,626
TBA		(607	)		(607	)		(607	)
Equity available to common stock		192,419			187,502			197,336
Book value per common share	$	5.94		$	5.79		$	6.09
Book value per common share percent change					(2.56	)%		2.56	%

	June 30, 2021
				Value with			Value with
				25 Basis Point			25 Basis Point
				Increase in			Decrease In
				Agency MBS			Agency MBS
	Value			Spreads			Spreads
Agency MBS	$	725,709		$	712,709		$	738,709
TBA commitments		(607	)		(607	)		(607	)
Equity available to common stock		192,419			179,419			205,419
Book value per common share	$	5.94		$	5.54		$	6.34
Book value per common share percent change					(6.76	)%		6.76	%

Credit Risk

Unlike our agency MBS investments, our mortgage credit investments do not carry a credit guarantee from a GSE or government agency.  Accordingly, our mortgage 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.

Some of our mortgage 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 the Company’s security, to the extent of its principal balance, prior to being allocated to the respective securitization’s more senior credit positions.

51

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.

Inflation

Virtually all of our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors influence our performance far more than inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. Our financial statements are prepared in accordance with GAAP and our distributions are determined by our Board of Directors in its sole discretion pursuant to our variable dividend policy; in each case, our activities and balance sheet are measured with reference to fair value without considering inflation.

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) agency MBS or (ii) mortgage credit investments that generally consist of mortgage loans secured by either residential or commercial real property or MBS collateralized by such mortgage loans, and debt securities secured by MSRs;

• 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;

• 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;

• our asset valuation policies;

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

52

• 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 LIBOR and 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;

• 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 or a downgrade in the credit rating of such 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 Annual Report on Form 10-K for the year ended December 31, 2020 under the caption “Item 1A — Risk Factors.”

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.

53

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 June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

54

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

For information regarding factors that could affect our results of operations, financial condition and liquidity, see the risk factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020.

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

Purchases of Equity Securities by the Issuer

On October 26, 2015, we announced that our Board of Directors authorized a share repurchase program pursuant to which we may repurchase up to 2,000,000 shares of Class A common stock (the “Repurchase Program”). On July 31, 2020, we announced that our Board of Directors authorized an increase in the Repurchase Program pursuant to which we may repurchase up to 18,000,000 shares of Class A common stock, inclusive of 56,090 shares previously available to be repurchased under the prior authorization.  As of June 30, 2021, we had repurchased 2,760,841 shares of Class A common stock and there remain available for repurchase 15,239,159 shares of Class A common stock under the Repurchase Program.  

The following table presents information with respect to our purchases of our Class A common stock during the three months ended June 30, 2021, by the Company or any “affiliated purchaser” of the Company, 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
April 1, 2021 - April 30, 2021		—	$	—		—		16,094,994
May 1, 2021 - May 31, 2021		62,815		3.94		62,815		16,032,179
June 1, 2021 - June 30, 2021		793,020		4.07		793,020		15,239,159
Total		855,835	$	4.06		855,835		15,239,159

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

55

Item 5. Other Information

None.

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).
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, as amended (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on July 28, 2011).
3.06	Amendment No. 1 to the Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on February 4, 2015).
3.07	Amendment No. 2 to the Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on October 26, 2016).
3.08	Amendment No. 3 to the Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on January 17, 2019).
3.09	Amendment No. 4 to the Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed on December 13, 2019).
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).

56

Exhibit Number	Exhibit Title
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).
10.01	Arlington Asset Investment Corp. 2021 Long-Term Incentive Plan (filed as Annex A to the Company’s Definitive Proxy Statement on Schedule 14A filed on April 29, 2021 and incorporated by reference herein). †
10.02	Form of Restricted Stock Award Agreement under Arlington Asset Investment Corp. 2021 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on June 17, 2021). †
10.03	Form of Deferred Stock Unit Award Agreement under Arlington Asset Investment Corp. 2021 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed with the SEC on June 17, 2021). †
10.04	Form of Performance Restricted Stock Unit Award Agreement under Arlington Asset Investment Corp. 2021 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed with the SEC on June 17, 2021). †
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***

57

Exhibit Number	Exhibit Title
104	The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, 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 June 30, 2021, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at June 30, 2021 and December 31, 2020; (ii) Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2021 and 2020; (iii) Consolidated Statements of Changes in Equity for the Three Months Ended March 31, 2021 and 2020 and for the Three Months Ended June 30, 2021 and 2020; and (iv) Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020.

† Compensatory plan or arrangement.

58

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: August 9, 2021

59

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 June 30, 2021 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: August 9, 2021	/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 June 30, 2021 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: August 9, 2021	/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 June 30, 2021, 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: August 9, 2021	/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 June 30, 2021, 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: August 9, 2021	/s/ RICHARD E. KONZMANN
	Richard E. Konzmann
	Executive Vice President,
	Chief Financial Officer and Treasurer
	(Principal Financial Officer)

XML

Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2021	Jul. 30, 2021
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2021
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2
Entity Registrant Name	ARLINGTON ASSET INVESTMENT CORP.
Entity Central Index Key	0001209028
Current Fiscal Year End Date	--12-31
Entity Filer Category	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		32,331,068
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
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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
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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
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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
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6.625% Senior Notes due 2023
Document Information [Line Items]
Title of 12(b) Security	6.625% Senior Notes due 2023
Security Exchange Name	NYSE
Trading Symbol	AIW

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands		Jun. 30, 2021	Dec. 31, 2020
ASSETS
Cash and cash equivalents		$ 2,349	$ 28,796
Sold securities receivable		34,456
Loans, at fair value		74,685	45,000
MSR financing receivables, at fair value		74,652	9,346
Derivative assets, at fair value		881	258
Deposits		16,554	6,306
Other assets		17,181	20,146
Total assets		1,030,097	1,212,389
Liabilities:
Repurchase agreements		694,586	655,212
Derivative liabilities, at fair value		2,327	221
Purchased securities payable			139,013
Other liabilities		2,739	4,698
Commitments and contingencies
Stockholders’ Equity:
Additional paid-in capital		2,037,953	2,040,918
Accumulated deficit		(1,844,817)	(1,830,272)
Total stockholders’ equity		228,752	246,270
Total liabilities and stockholders’ equity		1,030,097	1,212,389
Long-term unsecured debt		73,129	73,027
Total liabilities		801,345	966,119
Variable Interest Entity, Primary Beneficiary
ASSETS
Restricted cash of consolidated VIE	[1]	4,456	11,169
Interest receivable of consolidated VIE		179	545
Loans, at fair value		35,778	93,283
Liabilities:
Secured debt of consolidated VIE, at fair value		28,465	93,627
Interest payable of consolidated VIE		99	321
Agency MBS
ASSETS
Mortgage-backed securities, at fair value		725,709	970,880
Liabilities:
Repurchase agreements		673,655	623,712
Mortgage Credit Securities
ASSETS
Mortgage-backed securities, at fair value		43,217	26,660
Series B Preferred Stock
Stockholders’ Equity:
Preferred stock		7,933	7,933
Series C Preferred Stock
Stockholders’ Equity:
Preferred stock		27,356	27,356
Common Class A
Stockholders’ Equity:
Common stock		$ 327	$ 335

[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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CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands		Jun. 30, 2021	Dec. 31, 2020
Loans, at fair value		$ 74,685	$ 45,000
Common stock, shares outstanding (in shares)		0	0
Series B Preferred Stock
Preferred stock, par value (in dollars per share)		$ 0.01	$ 0.01
Preferred stock, issued (in shares)		336,273	336,273
Preferred stock, outstanding (in shares)		336,273	336,273
Preferred stock, liquidation preference		$ 8,407	$ 8,407
Series C Preferred Stock
Preferred stock, par value (in dollars per share)		$ 0.01	$ 0.01
Preferred stock, issued (in shares)		1,117,034	1,117,034
Preferred stock, outstanding (in shares)		1,117,034	1,117,034
Preferred stock, liquidation preference		$ 27,926	$ 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)		32,679,938	33,517,018
Common stock, shares outstanding (in shares)		32,679,938	33,517,018
Variable Interest Entity, Primary Beneficiary
Restricted cash of consolidated VIE	[1]	$ 4,456	$ 11,169
Interest receivable of consolidated VIE		179	545
Loans, at fair value		35,778	93,283
Secured debt, at fair value		(28,465)	(93,627)
Interest payable		(99)	(321)
Net investment in consolidated VIE		$ 11,849	$ 11,049

[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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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Interest income
Loans	$ 1,133	$ 825	$ 1,836	$ 1,536
MSR financing receivables	1,390		1,748
Interest and other income	125	534	286	677
Total interest income	7,045	6,134	13,304	31,107
Interest expense
Total interest expense	1,958	2,369	4,459	18,201
Net interest income	5,087	3,765	8,845	12,906
Investment (loss) gain, net
Gain (loss) on mortgage investments, net	5,334	7,625	(16,331)	10,719
Loss from derivative instruments, net	(14,983)	(397)	(438)	(102,997)
Other, net	617	2,569	974	2,007
Total investment (loss) gain, net	(9,032)	9,797	(15,795)	(90,271)
General and administrative expenses
Compensation and benefits	1,841	1,897	3,236	3,755
Other general and administrative expenses	1,349	1,431	2,591	2,816
Total general and administrative expenses	3,190	3,328	5,827	6,571
(Loss) income before income taxes	(7,135)	10,234	(12,777)	(83,936)
Income tax (benefit) provision	(76)		322
Net (loss) income	(7,059)	10,234	(13,099)	(83,936)
Dividend on preferred stock	(723)	(758)	(1,446)	(1,532)
Net (loss) income (attributable) available to common stock	$ (7,782)	$ 9,476	$ (14,545)	$ (85,468)
Basic (loss) earnings per common share	$ (0.24)	$ 0.26	$ (0.44)	$ (2.33)
Diluted (loss) earnings per common share	$ (0.24)	$ 0.26	$ (0.44)	$ (2.33)
Weighted-average common shares outstanding (in thousands)
Basic	33,066	36,618	33,123	36,665
Diluted	33,066	36,666	33,123	36,665
Variable Interest Entity, Primary Beneficiary
Interest income
Loans	$ 776		$ 2,463
Secured Debt
Interest expense
Short-term debt	403	$ 1,154	891	$ 15,746
Secured Debt | Variable Interest Entity, Primary Beneficiary
Interest expense
Secured debt of consolidated VIE	405		1,267
Unsecured Debt
Interest expense
Long-term debt	1,150	1,215	2,301	2,455
Agency MBS
Interest income
Mortgage-backed credit securities	2,984	3,517	5,768	26,905
Mortgage Credit Securities
Interest income
Mortgage-backed credit securities	637	1,258	1,203	1,989
Investment (loss) gain, net
Gain (loss) on mortgage investments, net	$ (261)	$ 3,256	$ 1,130	$ (16,782)

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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, 2019	$ 327,248			$ 8,270	$ 28,944	$ 368	$ 2,049,292	$ (1,759,626)
Balances (in shares) at Dec. 31, 2019				354,039	1,200,000	36,755,387
Net income(loss)	(94,170)							(94,170)
Issuance of Class A common stock under stock-based compensation plans	62						62
Issuance of Class A common stock under stock-based compensation plans (in shares)						60,374
Stock-based compensation	393						393
Other	(22)			$ (6)	$ (10)		(6)
Dividends declared	(702)							(702)
Balances at Mar. 31, 2020	232,809			$ 8,264	$ 28,934	$ 368	2,049,741	(1,854,498)
Balances (in shares) at Mar. 31, 2020				354,039	1,200,000	36,815,761
Balances at Dec. 31, 2019	327,248			$ 8,270	$ 28,944	$ 368	2,049,292	(1,759,626)
Balances (in shares) at Dec. 31, 2019				354,039	1,200,000	36,755,387
Net income(loss)	(83,936)
Balances at Jun. 30, 2020	238,985			$ 8,078	$ 28,307	$ 357	2,047,286	(1,845,043)
Balances (in shares) at Jun. 30, 2020				343,839	1,166,900	35,746,421
Balances at Dec. 31, 2019	327,248			$ 8,270	$ 28,944	$ 368	2,049,292	(1,759,626)
Balances (in shares) at Dec. 31, 2019				354,039	1,200,000	36,755,387
Repurchase of stock		$ (10,377)		$ (299)	$ (1,578)
Repurchase of stock (in shares)				(17,766)	(82,966)	(3,662,566)
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
Balances at Mar. 31, 2020	232,809			$ 8,264	$ 28,934	$ 368	2,049,741	(1,854,498)
Balances (in shares) at Mar. 31, 2020				354,039	1,200,000	36,815,761
Net income(loss)	10,234							10,234
Repurchase of stock		(3,047)	$ (800)	$ (173)	$ (627)	$ (11)	(3,036)
Repurchase of stock (in shares)				(10,200)	(33,100)	(1,069,340)
Stock-based compensation	594						594
Other	(26)			$ (13)			(13)
Dividends declared	(779)							(779)
Balances at Jun. 30, 2020	238,985			$ 8,078	$ 28,307	$ 357	2,047,286	(1,845,043)
Balances (in shares) at Jun. 30, 2020				343,839	1,166,900	35,746,421
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 income(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 stock		(523)				$ (1)	(522)
Repurchase of 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 income(loss)	(13,099)
Repurchase of stock		(4,013)
Repurchase of stock (in shares)				0	0	(993,490)
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
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 income(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 stock		$ (3,490)				$ (9)	(3,481)
Repurchase of stock (in shares)				0	0	(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

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Cash flows from operating activities:
Net loss	$ (13,099)	$ (83,936)
Adjustments to reconcile net loss to net cash provided by operating activities
Total investment loss, net	(15,795)	(90,271)
Net (discount) premium (accretion) amortization	(1,297)	6,257
Other	1,131	1,180
Changes in operating assets
Interest receivable	312	9,058
Other assets	(537)	(974)
Changes in operating liabilities
Interest payable and other liabilities	1,087	(3,721)
Accrued compensation and benefits	(1,223)	(2,157)
Net cash provided by operating activities	2,169	15,978
Cash flows from investing activities:
Purchases of loans	(29,967)	(25,000)
Purchases of MSR financing receivables	(60,556)
Proceeds from sales of agency mortgage-backed securities	625,812	3,484,757
Proceeds from sales of mortgage credit securities	13,640	49,115
Receipt of principal payments on agency mortgage-backed securities	29,735	181,552
Receipt of principal payments on mortgage credit securities		49
Receipt of principal payments on loans	282
Receipt of principal payments on mortgage loans of consolidated VIE	58,948
Payments for derivatives and deposits, net	(9,349)	(65,819)
Other	3,583	(10,067)
Net cash (used in) provided by investing activities	(3,887)	3,146,981
Cash flows from financing activities:
Proceeds from (repayments of) repurchase agreements, net	39,374	(3,154,360)
Repayments of secured debt of consolidated VIE, net	(65,350)
Repurchase of common stock	(4,013)	(3,047)
Repurchase of preferred stock		(800)
Repurchase of long-term unsecured debt	(7)	(388)
Dividends paid	(1,446)	(9,856)
Other		(48)
Net cash used in financing activities	(31,442)	(3,168,499)
Net decrease in cash, cash equivalents and restricted cash	(33,160)	(5,540)
Cash, cash equivalents and restricted cash, beginning of period	39,965	19,636
Cash, cash equivalents and restricted cash, end of period	6,805	14,096
Supplemental cash flow information:
Cash payments for interest	4,468	22,121
Mortgage Credit Securities
Cash flows from investing activities:
Purchases of mortgage-backed securities	(28,356)	(106,622)
Agency MBS
Cash flows from investing activities:
Purchases of mortgage-backed securities	$ (607,659)	$ (360,984)

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Organization and Basis of Presentation

6 Months Ended

Jun. 30, 2021

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.  The Company may also invest in other asset classes that its management team believes may offer attractive risk adjusted returns, such as real estate assets or investments outside the real estate or mortgage asset classes.  The Company’s investment capital is currently allocated between agency mortgage-backed securities (“MBS”), mortgage credit investments and mortgage servicing right (“MSR”) related assets.

The Company’s agency MBS consist of residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by either 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”), or by a U.S. government agency, such as the Government National Mortgage Association (“Ginnie Mae”).  The Company’s mortgage 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”).  The principal and interest of the Company’s mortgage credit investments are not guaranteed by a GSE or a U.S government agency.  The Company’s MSR related assets represent investments for which the return is based on the economic performance of a pool of specific MSRs.

Arlington Asset 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, 2020.

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 from these estimates materially.

Certain amounts in the consolidated financial statements and notes for prior periods 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

6 Months Ended

Jun. 30, 2021

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 June 30, 2021 and December 31, 2020, approximately 83% and 99%, 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 and Mortgage Loans of a Consolidated VIE

The Company recognizes interest income for its investments in agency MBS and mortgage loans of a consolidated variable interest entity (“VIE”) 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 to its investments in agency MBS and mortgage loans of a consolidated VIE, 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 a consolidated VIE, 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.  When a loan is placed in non-accrual status, all accrued but uncollected contractual interest as well as any discount accreted during the period of delinquency are reversed.  While a loan is in non-accrual status, the Company recognizes interest income only when interest payments occur.

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

The Company recognizes interest income for its investments in mortgage credit securities 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 mortgage loans that serve as collateral for its investment, including assumptions about the timing and amount of prepayments and credit losses.  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 mortgage credit securities and MSR financing receivables:

Scenario:	Effect on Interest Income Recognition for Investments in Mortgage Credit Securities and MSR Financing Receivables:
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 will be 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 mortgage credit securities, subsequent measurement Loans held for investment, subsequent measurement Investments in MSR financing receivables, subsequent measurement Consolidation of variable interest entities Borrowings	Note 4 Note 5 Note 6 Note 7 Note 8
To-be-announced agency MBS transactions, including “dollar rolls”	Note 9
Derivative instruments	Note 9
Balance sheet offsetting	Note 10
Fair value measurements Income taxes	Note 11 Note 12

Refer to the Company’s 2020 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, the Company has not made any modifications to contracts due to reference rate reform. 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 an effect on its consolidated financial statements.

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Investments in Agency MBS

6 Months Ended

Jun. 30, 2021

Agency MBS

Investments in MBS

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 June 30, 2021 and December 31, 2020, the fair value of the Company’s investments in agency MBS was $725,709 and $970,880, respectively. As of June 30, 2021, 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 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 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 June 30,					Six Months Ended June 30,
	2021		2020			2021			2020
Net gains (losses) recognized in earnings for:
Agency MBS still held at period end	$	6,840	$	4,930		$	(11,861	)	$	9,971
Agency MBS sold during the period		290		(522	)		(10,224	)		17,955
Total	$	7,130	$	4,408		$	(22,085	)	$	27,926

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 9. Derivative Instruments” for further information about dollar rolls.

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Investments in Mortgage Credit Securities

6 Months Ended

Jun. 30, 2021

Mortgage Credit Securities

Investments in MBS

Note 4. Investments in Mortgage Credit Securities

The Company has elected to classify its investments in mortgage credit securities as trading securities.  Accordingly, the Company’s investments in mortgage credit securities are reported in the accompanying consolidated balance sheets at fair value.  As of June 30, 2021 and December 31, 2020, the fair value of the Company’s investments in mortgage credit securities was $43,217 and $26,660, respectively.  As of June 30, 2021, the Company’s investments in mortgage credit securities primarily consist of non-agency MBS collateralized by pools of residential mortgage loans, business purpose residential mortgage loans or smaller balance commercial mortgage loans.

All periodic changes in the fair value of mortgage credit securities that are not attributed to interest income are recognized as a component of “investment 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 gain (loss), net” in the Company’s consolidated statements of comprehensive income for the periods indicated with respect to investments in mortgage credit securities:

	Three Months Ended June 30,					Six Months Ended June 30,
	2021			2020		2021			2020
Net gains (losses) recognized in earnings for:
Mortgage credit securities still held at period end	$	(186	)	$	2,118	$	1,210		$	(5,678	)
Mortgage credit securities sold during the period		(75	)		1,138		(80	)		(11,104	)
Total	$	(261	)	$	3,256	$	1,130		$	(16,782	)

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Loans Held for Investment

6 Months Ended

Jun. 30, 2021

Investments Debt And Equity Securities [Abstract]

Loans Held for Investment

Note 5. Loans Held for Investment

As of June 30, 2021 and December 31, 2020, the Company held loans secured by first lien positions in commercial real estate with an aggregate outstanding principal outstanding principal balance of $74,685 and $45,000, respectively.  

As of June 30, 2021 and December 31, 2020, 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 balance of $44,784 and $45,000, respectively.  The loan bears interest at a floating note rate equal to one-month LIBOR plus 4.25% with a LIBOR floor of 2.00%.  The maturity date of the

loan is December 31, 2021 with a one-year extension available at the option of the borrower.  The loan has an initial interest-only period of one year followed by principal amortization based upon a 30-year amortization schedule beginning in 2021 with the remaining principal balance due at loan maturity.  Subsequent to June 30, 2021, the Company received full repayment of its loan investment on July 7, 2021.

As of June 30, 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 balance of $29,901 that was purchased by the Company during the three months ended June 30, 2021.  The loan bears interest at a floating note rate equal to one-month LIBOR plus 5.50%.  The maturity date of the loan is March 23, 2022 with a one-year extension available at the option of the borrower.  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 loans held for investment at fair value on a recurring basis with periodic changes in fair value recognized as a component of “investment gain (loss), net” in the accompanying consolidated statements of comprehensive income.  As of June 30, 2021 and December 31, 2020, the Company’s investments were $74,685 and $45,000, respectively, at fair value.  The Company recognizes interest income on its loan investments based upon the contractual note rate of the loans.

As of June 30, 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 one-month LIBOR plus 3.75% with a LIBOR 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 June 30, 2021, the Company’s unfunded commitment was $30,000.

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Investments in MSR Financing Receivables

6 Months Ended

Jun. 30, 2021

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.  Under the arrangement, the Company is obligated to provide funds to the mortgage servicing counterparty to fund its advances of delinquent payments on the serviced pool of mortgage loans with the mortgage servicing counterparty required to return to the Company any subsequent servicing advances collected.  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 GAAP, the Company accounts for transactions executed under its arrangement 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 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 June 30, 2021 and December 31, 2020, the fair value of the Company’s investments in MSR financing receivables was $74,652 and $9,346, respectively. The following table presents activity related to the carrying value of the Company’s investments in MSR financing receivables for the period indicated:

	Three Months Ended June 30, 2021			Six Months Ended June 30, 2021
Balance at period beginning	$	36,005		$	9,346
Capital investments		39,278			59,622
Accretion of interest income		1,390			1,748
Changes in fair value due to:
Amortization of underlying MSRs		(1,984	)		(3,260	)
Changes in valuation inputs and assumptions		(37	)		7,196
Balance at period end	$	74,652		$	74,652

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Consolidation of Variable Interest Entities

6 Months Ended

Jun. 30, 2021

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Consolidation of Variable Interest Entities

Note 7. 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.  The carrying values of the assets and liabilities of the consolidated VIE, net of elimination entries, are as follows as of the dates indicated:

	June 30, 2021			December 31, 2020
Restricted cash of consolidated VIE (1)	$	4,456		$	11,169
Mortgage loans of consolidated VIE, at fair value		35,778			93,283
Interest receivable of consolidated VIE		179			545
Secured debt of consolidated VIE, at fair value		(28,465	)		(93,627	)
Interest payable of consolidated VIE		(99	)		(321	)
Investment in consolidated VIE	$	11,849		$	11,049

<sup>(1)</sup> 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 pool of mortgage loans and the third-party held debt obligations of the consolidated VIE had aggregate unpaid principal balances of $37,099 and $28,482, respectively, as of June 30, 2021.  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 June 30, 2021, the weighted average net note rate to which the VIE was entitled and the weighted average coupon rate of the debt obligations of the consolidated VIE were 6.03% and 4.01%, respectively.  The debt of the consolidated VIE has recourse solely to the assets of the VIE; it has no recourse to the general credit of the Company.

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.  Pursuant to the terms of certain of the mortgage loans, the borrower may draw upon a specified amount of additional funds as needed in order to finance construction on, or the repair or rehabilitation of, the mortgaged property (referred to as a “construction draw”).  Pursuant to the terms of the securitization transaction, if the monthly principal repayments collected from the mortgage loan pool are insufficient to fund that month’s construction draws, such shortfall is to be funded by the holders of the first loss position on a pro rata basis.  Any construction draws funded by holders of the first loss position accrue interest at the net note rate of the mortgage loan.  The repayment of any construction draws funded by holders of the first loss position takes priority over the senior debt securities with respect to the cash flows collected from the mortgage loan pool in the following month.  As of June 30, 2021, the aggregate unfunded construction draw balance commitment attributable to the Company’s subordinate debt security investment was $4,386.

The Company has elected to account for the mortgage loans and debt of the consolidated VIE 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 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 the consolidated VIE by applying the “interest method” permitted by GAAP, whereby the discount recognized at the initial recognition of each loan is accreted as an adjustment to contractual interest income accrued at the loan’s stated 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 mortgage loans of the consolidated VIE as of June 30, 2021:

	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Difference
Less than 90 days past due and in accrual status	$	30,483	$	31,608	$	(1,125	)
90 days or more past due and in non-accrual status		5,295		5,491		(196	)
Total mortgage loans of consolidated VIE	$	35,778	$	37,099	$	(1,321	)

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Borrowings

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Borrowings

Note 8. 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 May 3, 2022 and an interest rate that resets monthly at a rate equal to one-month LIBOR plus 2.50%.   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.

As of June 30, 2021 and December 31, 2020, the Company had no amount at risk with a single repurchase agreement counterparty or lender greater than 10% of equity. The following table provides information regarding the Company’s outstanding repurchase agreement borrowings as of the dates indicated:

	June 30, 2021			December 31, 2020
Agency MBS repurchase financing:
Repurchase agreements outstanding	$	673,655		$	623,712
Agency MBS collateral, at fair value (1)		710,630			656,154
Net amount (2)		36,975			32,442
Weighted-average rate		0.09	%		0.21	%
Weighted-average term to maturity	13.6 days			14.0 days
Mortgage loans repurchase financing:
Repurchase agreements outstanding	$	20,931		$	31,500
Mortgage loans collateral, at fair value		29,901			45,000
Net amount (2)		8,970			13,500
Weighted-average rate		2.59	%		3.00	%
Weighted-average term to maturity	307.0 days			315.0 days
Total mortgage investments repurchase financing:
Repurchase agreements outstanding	$	694,586		$	655,212
Mortgage investments collateral, at fair value		740,531			701,154
Net amount (2)		45,945			45,942
Weighted-average rate		0.17	%		0.34	%
Weighted-average term to maturity	22.4 days			28.5 days

<sup>(1)</sup> As of June 30, 2021, includes $34,456 at sale price of unsettled agency MBS sale commitments which are included in the line item “sold securities receivable” in the accompanying consolidated balance sheets.

<sup>(2)</sup> 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 six months ended June 30, 2021 and 2020:

	June 30, 2021			June 30, 2020
Weighted-average outstanding balance during the three months ended	$	652,624		$	559,880
Weighted-average rate during the three months ended		0.24	%		0.82	%
Weighted-average outstanding balance during the six months ended	$	603,233		$	1,861,110
Weighted-average rate during the six months ended		0.29	%		1.68	%

Long-Term Unsecured Debt

As of June 30, 2021 and December 31, 2020, the Company had $73,129 and $73,027, respectively, of outstanding long-term unsecured debentures, net of unamortized debt issuance costs of $623 and $732, respectively. The Company’s long-term debentures consisted of the following as of the dates indicated:

	June 30, 2021									December 31, 2020
	Senior Notes Due 2025			Senior Notes Due 2023			Trust Preferred Debt			Senior Notes Due 2025			Senior Notes Due 2023			Trust Preferred Debt
Outstanding Principal	$	34,931		$	23,821		$	15,000		$	34,931		$	23,828		$	15,000
Annual Interest Rate		6.75	%		6.625	%	LIBOR+ 2.25 - 3.00 %				6.75	%		6.625	%	LIBOR+ 2.25 - 3.00 %
Interest Payment Frequency	Quarterly			Quarterly			Quarterly			Quarterly			Quarterly			Quarterly
Weighted-Average Interest Rate		6.75	%		6.625	%		2.93	%		6.75	%		6.625	%		2.99	%
Maturity	March 15, 2025			May 1, 2023			2033 - 2035			March 15, 2025			May 1, 2023			2033 - 2035

The Senior Notes due 2023 and the Senior Notes due 2025 are publicly traded on the New York Stock Exchange under the ticker symbols “AIW” and “AIC,” respectively. The Senior Notes due 2023, 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 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.

During the three months ended March 31, 2021, the Company repurchased $7 in principal balance of Senior Notes due 2023 for a purchase price of $7. There were no repurchases of outstanding long-term unsecured debentures during the three months ended June 30, 2021 and the three and six months ended June 30, 2020.

Subsequent to June 30, 2021, the Company completed a public offering on July 15, 2021 of $37,750 of 6.00% Senior Notes due 2026 and received net proceeds of $36,570 after deducting underwriter discounts.  The Senior Notes due 2026 are publicly traded on the New York Stock Exchange under the ticker symbol “AAIN.”  On July 7, 2021, the Company issued a notice of redemption for all $23,821 principal amount of its outstanding Senior Notes due 2023 on August 6, 2021 at a redemption price of 100% of the principal amount plus unpaid interest thereon.

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Derivative Instruments

6 Months Ended

Jun. 30, 2021

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Instruments

Note 9. 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 “derivative assets” or “derivative liabilities” in the consolidated balance sheets, with all periodic changes in fair value reflected as a component of “investment 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 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 includes 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 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:

	June 30, 2021					December 31, 2020
	Assets		Liabilities			Assets		Liabilities
Interest rate swaps	$	—	$	(944	)	$	—	$	(147	)
10-year U.S. Treasury note futures		105		—			—		—
TBA commitments		776		(1,383	)		258		(74	)
Total	$	881	$	(2,327	)	$	258	$	(221	)

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 June 30, 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	$	200,000		0.10	%		0.04	%		(0.06	)%		2.4	$	(25	)
3 to less than 7 years		75,000		0.89	%		0.19	%		(0.70	)%		6.5		(121	)
7 to less than 10 years		250,000		1.12	%		0.17	%		(0.95	)%		9.4		(798	)
Total / weighted-average	$	525,000		0.70	%		0.12	%		(0.58	)%		6.3	$	(944	)

The following table presents information about the Company’s interest rate swap agreements that were in effect as of December 31, 2020:

			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	$	200,000		0.10	%		0.06	%		(0.04	)%		2.9	$	(40	)
3 to less than 10 years		75,000		0.74	%		0.22	%		(0.52	)%		9.5		(107	)
Total / weighted-average	$	275,000		0.28	%		0.10	%		(0.18	)%		4.7	$	(147	)

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 June 30, 2021, the Company held long positions of 10-year U.S. Treasury note futures with an aggregate notional amount of $45,000 with a maturity in September 2021. As of December 31, 2020, the Company had no outstanding positions of U.S. Treasury note futures.

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 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 June 30, 2021 and December 31, 2020, the Company had no outstanding options on U.S. Treasury note futures contracts.

TBA Commitments

The following table presents information about the Company’s TBA commitments as of the date indicated:

	June 30, 2021
	Notional Amount: Purchase (Sale) Commitment			Contractual Forward Price			Market Price			Fair Value
1.5% 30-year MBS purchase commitments	$	100,000		$	98,250		$	98,055		$	(195	)
1.5% 30-year MBS sale commitments		(100,000	)		(97,674	)		(98,055	)		(381	)
2.0% 30-year MBS purchase commitments		125,000			125,445			126,221			776
2.0% 30-year MBS sale commitments		(125,000	)		(125,488	)		(126,221	)		(733	)
2.5% 30-year MBS purchase commitments		25,000			25,855			25,854			(1	)
2.5% 30-year MBS sale commitments		(25,000	)		(25,781	)		(25,854	)		(73	)
Total TBA commitments, net	$	—		$	607		$	—		$	(607	)

	December 31, 2020
	Notional Amount: Purchase (Sale) Commitment			Contractual Forward Price			Market Price			Fair Value
1.5% 30-year MBS purchase commitments	$	50,000		$	50,281		$	50,539		$	258
1.5% 30-year MBS sale commitments		(50,000	)		(50,465	)		(50,539	)		(74	)
Total TBA commitments, net	$	—		$	(184	)	$	—		$	184

Derivative Instrument Gains and Losses

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Interest rate derivatives:
Interest rate swaps:
Net interest (expense) income (1)	$	(1,187	)	$	(6	)	$	(1,897	)	$	586
Unrealized (losses) gains, net		(13,517	)		8,367			7,548			14,312
Losses realized upon early termination, net		(1,258	)		(8,969	)		(1,271	)		(118,893	)
Total interest rate swap (losses) gains, net		(15,962	)		(608	)		4,380			(103,995	)
U.S. Treasury note futures, net		91			—			2,710			(3,071	)
Options on U.S. Treasury note futures, net		—			—			(20	)		—
Total interest rate derivative (losses) gains, net		(15,871	)		(608	)		7,070			(107,066	)
TBA commitments:
TBA dollar roll income (2)		1,778			170			2,614			275
Other (losses) gains on TBA commitments, net		(890	)		41			(10,122	)		4,834
Total gains (losses) on TBA commitments, net		888			211			(7,508	)		5,109
Other derivatives		—			—			—			(1,040	)
Total derivative losses, net	$	(14,983	)	$	(397	)	$	(438	)	$	(102,997	)

<sup>(1)</sup> 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.

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

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 June 30, 2021
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	675,000	$	—	$	—		$	(150,000	)	$	525,000
10-year U.S. Treasury note futures		—		165,000		(120,000	)		—			45,000
Purchased call options on 10-year U.S.   Treasury note futures		65,200		—		(65,200	)		—			—
TBA purchase (sale) commitments, net		100,000		450,000		(550,000	)		—			—

	For the Three Months Ended June 30, 2020
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	600,000	$	50,000	$	—		$	(600,000	)	$	50,000
TBA purchase (sale) commitments, net		—		75,000		(75,000	)		—			—

	For the Six Months Ended June 30, 2021
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	275,000	$	450,000	$	—		$	(200,000	)	$	525,000
2-year U.S. Treasury note futures		—		50,000		(50,000	)		—			—
10-year U.S. Treasury note futures		—		540,100		(320,000	)		(175,100	)		45,000
Purchased call options on 10-year U.S.   Treasury note futures		—		65,200		(65,200	)		—			—
TBA purchase (sale) commitments, net		—		1,365,000		(1,365,000	)		—			—

	For the Six Months Ended June 30, 2020
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	2,985,000	$	50,000	$	(100,000	)	$	(2,885,000	)	$	50,000
2-year U.S. Treasury note futures		—		1,150,000		—			(1,150,000	)		—
10-year U.S. Treasury note futures		—		765,000		—			(765,000	)		—
TBA purchase (sale) commitments, net		—		175,000		(175,000	)		—			—
Put options on S&P 500 ETF		—		1,850		(1,850	)		—			—

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, net” in the accompanying consolidated balance sheets, for the dates indicated:

	June 30, 2021		December 31, 2020
Cash collateral posted for:
Interest rate swaps (cash initial margin)	$	15,293	$	6,306
10-year U.S. Treasury note futures (cash initial margin)		686		—
Unsettled MBS trades and TBA commitments, net		575		—
Total cash collateral posted, net	$	16,554	$	6,306

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Offsetting of Financial Assets and Liabilities

6 Months Ended

Jun. 30, 2021

Offsetting [Abstract]

Offsetting of Financial Assets and Liabilities

Note 10. 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 June 30, 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:
10-year U.S. Treasury note futures	$	105	$	—	$	105	$	—		$	—		$	105
TBA commitments		776		—		776		(776	)		—			—
Total derivative instruments		881		—		881		(776	)		—			105
Total assets	$	881	$	—	$	881	$	(776	)	$	—		$	105
Liabilities:
Derivative instruments:
Interest rate swaps	$	944	$	—	$	944	$	—		$	(944	)	$	—
TBA commitments		1,383		—		1,383		(776	)		(575	)		32
Total derivative instruments		2,327		—		2,327		(776	)		(1,519	)		32
Repurchase agreements		694,586		—		694,586		(694,586	)		—			—
Total liabilities	$	696,913	$	—	$	696,913	$	(695,362	)	$	(1,519	)	$	32

	As of December 31, 2020
	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	$	258	$	—	$	258	$	(74	)	$	—		$	184
Total derivative instruments		258		—		258		(74	)		—			184
Total assets	$	258	$	—	$	258	$	(74	)	$	—		$	184
Liabilities:
Derivative instruments:
Interest rate swaps	$	147	$	—	$	147	$	—		$	(147	)	$	—
TBA commitments		74		—		74		(74	)		—			—
Total derivative instruments		221		—		221		(74	)		(147	)		—
Repurchase agreements		655,212		—		655,212		(655,212	)		—			—
Total liabilities	$	655,433	$	—	$	655,433	$	(655,286	)	$	(147	)	$	—

<sup>(1)</sup> 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.

<sup>(2)</sup> Does not include the amount of cash collateral pledged in respect of derivative instruments that exceeds the associated derivative liability presented in the consolidated balance sheets.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2021

Fair Value Disclosures [Abstract]

Fair Value Measurements

Note 11. 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:

Mortgage investments

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.

Mortgage credit securities – The Company’s investments in residential MBS and commercial MBS are classified within Level 2 of the fair value hierarchy. Inputs to fair value measurements of the Company’s investments in residential and commercial MBS 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 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 first loss position in a securitized pool of business-purpose residential mortgage loans is classified within Level 3 of the fair value hierarchy.  To measure the fair value of this investment, 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 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 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 significant unobservable inputs to the fair value measurement of the Company’s non-agency MBS secured by business-purpose residential mortgage loans as of the periods indicated:

	June 30, 2021			December 31, 2020
Annualized default rate		15.0	%		12.0	%
Loss-given-default		25.0	%		40.0	%
Discount rate		13.0	%		13.9	%

Loans – The Company’s commercial mortgage loan investments are classified within Level 3 of the fair value hierarchy.  To measure the fair value of its mortgage loan investments, the Company uses an income approach by preparing an estimate of the present value of the expected future cash flows of the loans over their expected remaining lives, discounted at a current market rate.  The significant unobservable inputs to the fair value measurement of the Company’s mortgage loan investments 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 June 30, 2021, the weighted-average estimated probability of default and discount rate for the Company’s mortgage loan investments were 0%, and 6.0%, respectively.  As of December 31, 2020, the estimated probability of default and discount rate for the Company’s mortgage loan investment were 0% and 6.3%, respectively.

Mortgage loans and secured debt of consolidated VIE – 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 VIE.  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.  Pursuant to the practical expedient, the Company measures the fair value of both the mortgage loans and the debt obligations of its consolidated VIE based upon the fair value of the debt obligations of the VIE, as the fair value of the debt securities issued by the VIE is more observable to the Company than the fair value of the underlying mortgage loans.

The senior debt obligations of the consolidated VIE are classified within Level 2 of the fair value hierarchy.  Inputs to fair value measurements of the senior 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 are based upon observable transactions for securities with similar characteristics.

The subordinate debt obligation and the mortgage loans of the consolidated VIE are classified within Level 3 of the fair value hierarchy.  To measure the fair value of the subordinate debt obligation of the consolidated VIE, 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 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 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 significant unobservable inputs to the fair value measurement of the subordinate debt obligation as of the periods indicated:

	June 30, 2021			December 31, 2020
Annualized default rate		15.0	%		20.0	%
Loss-given-default		25.0	%		40.0	%
Discount rate		13.0	%		13.9	%

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 June 30, 2021:

	June 30, 2021
Discount rate		9.0	%
Annualized prepayment rate		11.1	%
Annual per-loan cost of servicing (current loans)	$	65.00

Pursuant to the Company’s MSR financing arrangements, upon the consummation of three-year performance periods ending December 31, 2023 and April 1, 2024, the Company’s mortgage servicer 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 based upon the current fair value of the underlying MSRs.  As of June 30, 2021, the present value of the expected incentive fee payment reflected in fair value of the Company’s MSR financing receivables was $1,202.

As of December 31, 2020, the fair value of the Company’s MSR financing receivable was its transacted purchase price, which occurred on the measurement date.

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 June 30, 2021 and December 31, 2020, the carrying value of the Company’s long-term unsecured debt was $73,129 and $73,027, 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 $71,678 and $69,904 as of June 30, 2021 and December 31, 2020, 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.

Investments in equity securities of publicly-traded companies – As of June 30, 2021 and December 31, 2020, the Company had investments in equity securities of publicly-traded companies at fair value of $6,703 and $10,821, 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 June 30, 2021 and December 31, 2020, the Company had investments in equity securities and investment funds measured at fair value of $7,307 and $6,869, 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 June 30, 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. As of December 31, 2020, 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, 10 percent, and 15 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, 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 June 30, 2021 and December 31, 2020. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	June 30, 2021
	Total		Level 1		Level 2		Level 3
Financial assets:
Agency MBS	$	725,709	$	—	$	725,709	$	—
Mortgage credit securities		43,217		—		28,910		14,307
Mortgage loans of consolidated VIE		35,778		—		—		35,778
Loans		74,685		—		—		74,685
MSR financing receivable		74,652		—		—		74,652
Derivative assets		881		105		776		—
Other assets		14,010		6,703		—		7,307
Financial liabilities:
Secured debt of consolidated VIE		28,465		—		27,825		640
Derivative liabilities		2,327		—		2,327		—

	December 31, 2020
	Total		Level 1		Level 2		Level 3
Financial assets:
Agency MBS	$	970,880	$	—	$	970,880	$	—
Mortgage credit securities		26,660		—		14,730		11,930
Mortgage loans of consolidated VIE		93,283		—		—		93,283
Loans		45,000		—		—		45,000
MSR financing receivable		9,346		—		—		9,346
Derivative assets		258		—		258		—
Other assets		17,690		10,821		—		6,869
Financial liabilities:
Secured debt of consolidated VIE		93,627		—		93,051		576
Derivative liabilities		221		—		221		—

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 June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Beginning balance	$	157,714		$	59,592		$	166,428		$	51,398
Net (loss) gain included in "Investment gain (loss), net"		(1,183	)		1,981			5,135			(1,628	)
Purchases		72,669			25,000			93,013			36,995
Sales		(1,662	)		—			(1,662	)		—
Payments, net		(22,764	)		(115	)		(59,540	)		(525	)
Accretion of discount		1,955			243			3,355			461
Ending balance	$	206,729		$	86,701		$	206,729		$	86,701
Net unrealized gains (losses) included in earnings for the    period for Level 3 assets still held at the reporting date	$	(1,108	)	$	1,981		$	5,215		$	(1,628	)

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 June 30,				Six Months Ended June 30,
	2021		2020		2021			2020
Beginning balance	$	611	$	—	$	576		$	—
Net gain (loss) included in "Investment gain (loss), net"		29		—		(10	)		—
Accretion of discount		—		—		74			—
Ending balance	$	640	$	—	$	640		$	—
Net unrealized gains (losses) included in earnings for the    period for Level 3 liabilities still held at the reporting date	$	29	$	—	$	(10	)	$	—

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Income Taxes

6 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 12. Income Taxes

The Company has elected to be taxed as a REIT under the Internal Revenue Code.  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 taxable income within the time limits prescribed by the Internal Revenue Code, which may extend into the subsequent taxable year.  

As of June 30, 2021, the Company had estimated net operating loss (“NOL”) carryforwards of $152,064 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 $137,476 have no expiration period. As of June 30, 2021, the Company had estimated net capital loss (“NCL”) carryforwards of $180,948 that can be used to offset future net capital gains. The scheduled expirations of the Company’s NCL carryforwards are $66,862 in 2021, $3,763 in 2022 and $110,323 in 2023.

The Company and subsidiaries have made joint elections to treat certain 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 and six months ended June 30, 2021, the Company recognized a benefit (provision) for income taxes of $76 and $(322), respectively, on the pre-tax net 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 June 30, 2021 and December 31, 2020, 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.

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Earnings (Loss) Per Share

6 Months Ended

Jun. 30, 2021

Earnings Per Share [Abstract]

Earnings (Loss) Per Share

Note 13. 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 tables present the computations of basic and diluted earnings (loss) per share for the periods indicated:

	Three Months Ended June 30,					Six Months Ended June 30,
(Shares in thousands)	2021			2020		2021			2020
Basic weighted-average common shares outstanding		33,066			36,618		33,123			36,665
Performance share units, unvested restricted stock units,    and unvested restricted stock		—			48		—			—
Diluted weighted-average common shares outstanding		33,066			36,666		33,123			36,665
Net (loss) income (attributable) available to common stock	$	(7,782	)	$	9,476	$	(14,545	)	$	(85,468	)
Basic (loss) earnings per common share	$	(0.24	)	$	0.26	$	(0.44	)	$	(2.33	)
Diluted (loss) earnings per common share	$	(0.24	)	$	0.26	$	(0.44	)	$	(2.33	)

 The diluted loss per share for the three months and six months ended June 30, 2021 did not include the antidilutive effect of 358,127 and 310,769 shares of unvested shares of restricted stock, restricted stock units, and performance share units, respectively. The diluted loss per share for the six months ended June 30, 2020 did not include the antidilutive effect of 76,836 shares of unvested shares of restricted stock, restricted stock units, and performance share units.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2021

Equity [Abstract]

Stockholders' Equity

Note 14. 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 June 30, 2021 and December 31, 2020, 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 Stock Dividends

The Board of Directors evaluates common stock dividends on a quarterly basis and, in its sole discretion, approves the payment of dividends. The Company’s common stock dividend payments, if any, may vary significantly from quarter to quarter. For the quarters ended March 31, 2021 and June 30, 2021 and the year ended December 31, 2020, the Board of Directors determined that the Company would not declare a dividend on its common stock.

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 six months ended June 30, 2021 and the year ended December 31, 2020, there were no issuances of common stock under the common equity distribution agreements.

As of June 30, 2021, 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 October 26, 2015, the Company announced that its Board of Directors authorized a share repurchase program pursuant to which the Company may repurchase up to 2,000,000 shares of Class A common stock (the “Repurchase Program”). On July 31, 2020, the Company announced that its Board of Directors authorized an increase in the Repurchase Program pursuant to which the Company may repurchase up to 18,000,000 shares of Class A common stock, inclusive of 56,090 shares previously available to be repurchased under the prior authorization.  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 six months ended June 30, 2021, the Company repurchased 855,835 and 993,490 shares of Class A common stock for a total purchase price of $3,490 and $4,013, respectively. During the year ended December 31, 2020, the Company repurchased 3,662,566 shares of Class A common stock for a total purchase price of $10,377. As of June 30, 2021, there remain available for repurchase 15,239,159 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 commencing on May 12, 2022 or earlier upon the occurrence of a change in control. 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 2021.

There were no shares of Series B Preferred Stock repurchased by the Company during the three and six months ended June 30, 2021. During the year ended December 31, 2020, the Company repurchased 17,766 shares of Series B Preferred Stock for a total purchase price of $299.

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 2021.

There were no shares of Series C Preferred Stock repurchased by the Company during the three and six months ended June 30, 2021. During the year ended December 31, 2020, the Company repurchased 82,966 shares of Series C Preferred Stock for a total purchase price of $1,578.

Preferred Equity Distribution Agreements

On March 21, 2019, the Company entered into an amended and restated equity distribution agreement with JonesTrading Institutional Services LLC, B. Riley FBR, Inc., Compass Point Research and Trading, 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 three and six months ended June 30, 2021 and the year ended December 31, 2020, there were no issuances of preferred stock under the Series B preferred equity distribution agreement. As of June 30, 2021, the Company had 1,645,961 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.  

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, and any outstanding rights will expire at the earliest of (i) June 4, 2022, (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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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2021

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 June 30, 2021 and December 31, 2020, approximately 83% and 99%, 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.

The Company has elected to account for the mortgage loans and debt of the consolidated VIE 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 gain (loss), net” in the accompanying consolidated statements of comprehensive income.

Interest Income Recognition for Investments in Agency MBS and Mortgage Loans of a Consolidated VIE

Interest Income Recognition for Investments in Agency MBS and Mortgage Loans of a Consolidated VIE

The Company recognizes interest income for its investments in agency MBS and mortgage loans of a consolidated variable interest entity (“VIE”) 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 to its investments in agency MBS and mortgage loans of a consolidated VIE, 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 a consolidated VIE, 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.  When a loan is placed in non-accrual status, all accrued but uncollected contractual interest as well as any discount accreted during the period of delinquency are reversed.  While a loan is in non-accrual status, the Company recognizes interest income only when interest payments occur.

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

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

The Company recognizes interest income for its investments in mortgage credit securities 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 mortgage loans that serve as collateral for its investment, including assumptions about the timing and amount of prepayments and credit losses.  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 mortgage credit securities and MSR financing receivables:

Scenario:	Effect on Interest Income Recognition for Investments in Mortgage Credit Securities and MSR Financing Receivables:
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 will be 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 mortgage credit securities, subsequent measurement Loans held for investment, subsequent measurement Investments in MSR financing receivables, subsequent measurement Consolidation of variable interest entities Borrowings	Note 4 Note 5 Note 6 Note 7 Note 8
To-be-announced agency MBS transactions, including “dollar rolls”	Note 9
Derivative instruments	Note 9
Balance sheet offsetting	Note 10
Fair value measurements Income taxes	Note 11 Note 12

Refer to the Company’s 2020 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, the Company has not made any modifications to contracts due to reference rate reform. 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 an 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 “derivative assets” or “derivative liabilities” in the consolidated balance sheets, with all periodic changes in fair value reflected as a component of “investment 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:

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 June 30, 2021 and December 31, 2020, the fair value of the Company’s investments in agency MBS was $725,709 and $970,880, respectively.

Mortgage Credit Securities

Investment Security Purchases and Sales

The Company has elected to classify its investments in mortgage credit securities as trading securities.  Accordingly, the Company’s investments in mortgage credit securities are reported in the accompanying consolidated balance sheets at fair value.  As of June 30, 2021 and December 31, 2020, the fair value of the Company’s investments in mortgage credit securities was $43,217 and $26,660, respectively.

Loans Held for Investment

Investment Security Purchases and Sales

The Company has elected to account for its loans held for investment at fair value on a recurring basis with periodic changes in fair value recognized as a component of “investment gain (loss), net” in the accompanying consolidated statements of comprehensive income.

M S R Financing Receivables

Investment Security Purchases and Sales

Under GAAP, the Company accounts for transactions executed under its arrangement 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 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)

6 Months Ended

Jun. 30, 2021

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 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 June 30,					Six Months Ended June 30,
	2021		2020			2021			2020
Net gains (losses) recognized in earnings for:
Agency MBS still held at period end	$	6,840	$	4,930		$	(11,861	)	$	9,971
Agency MBS sold during the period		290		(522	)		(10,224	)		17,955
Total	$	7,130	$	4,408		$	(22,085	)	$	27,926

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Investments in Mortgage Credit Securities (Tables)

6 Months Ended

Jun. 30, 2021

Mortgage 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 gain (loss), net” in the Company’s consolidated statements of comprehensive income for the periods indicated with respect to investments in mortgage credit securities:

	Three Months Ended June 30,					Six Months Ended June 30,
	2021			2020		2021			2020
Net gains (losses) recognized in earnings for:
Mortgage credit securities still held at period end	$	(186	)	$	2,118	$	1,210		$	(5,678	)
Mortgage credit securities sold during the period		(75	)		1,138		(80	)		(11,104	)
Total	$	(261	)	$	3,256	$	1,130		$	(16,782	)

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Investments in MSR Financing Receivables (Tables)

6 Months Ended

Jun. 30, 2021

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 period indicated:

	Three Months Ended June 30, 2021			Six Months Ended June 30, 2021
Balance at period beginning	$	36,005		$	9,346
Capital investments		39,278			59,622
Accretion of interest income		1,390			1,748
Changes in fair value due to:
Amortization of underlying MSRs		(1,984	)		(3,260	)
Changes in valuation inputs and assumptions		(37	)		7,196
Balance at period end	$	74,652		$	74,652

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Consolidation of Variable Interest Entities (Tables)

6 Months Ended

Jun. 30, 2021

Organization Consolidation And Presentation Of Financial Statements [Abstract]

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 VIE, net of elimination entries, are as follows as of the dates indicated:

	June 30, 2021			December 31, 2020
Restricted cash of consolidated VIE (1)	$	4,456		$	11,169
Mortgage loans of consolidated VIE, at fair value		35,778			93,283
Interest receivable of consolidated VIE		179			545
Secured debt of consolidated VIE, at fair value		(28,465	)		(93,627	)
Interest payable of consolidated VIE		(99	)		(321	)
Investment in consolidated VIE	$	11,849		$	11,049

<sup>(1)</sup> 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.

Schedule of Accrual Status of Mortgage Loans of Consolidated VIE

The following table presents information about the accrual status of the mortgage loans of the consolidated VIE as of June 30, 2021:

	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Difference
Less than 90 days past due and in accrual status	$	30,483	$	31,608	$	(1,125	)
90 days or more past due and in non-accrual status		5,295		5,491		(196	)
Total mortgage loans of consolidated VIE	$	35,778	$	37,099	$	(1,321	)

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Borrowings (Tables)

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Schedule of Repurchase Agreements

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 May 3, 2022 and an interest rate that resets monthly at a rate equal to one-month LIBOR plus 2.50%.   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.

As of June 30, 2021 and December 31, 2020, the Company had no amount at risk with a single repurchase agreement counterparty or lender greater than 10% of equity. The following table provides information regarding the Company’s outstanding repurchase agreement borrowings as of the dates indicated:

	June 30, 2021			December 31, 2020
Agency MBS repurchase financing:
Repurchase agreements outstanding	$	673,655		$	623,712
Agency MBS collateral, at fair value (1)		710,630			656,154
Net amount (2)		36,975			32,442
Weighted-average rate		0.09	%		0.21	%
Weighted-average term to maturity	13.6 days			14.0 days
Mortgage loans repurchase financing:
Repurchase agreements outstanding	$	20,931		$	31,500
Mortgage loans collateral, at fair value		29,901			45,000
Net amount (2)		8,970			13,500
Weighted-average rate		2.59	%		3.00	%
Weighted-average term to maturity	307.0 days			315.0 days
Total mortgage investments repurchase financing:
Repurchase agreements outstanding	$	694,586		$	655,212
Mortgage investments collateral, at fair value		740,531			701,154
Net amount (2)		45,945			45,942
Weighted-average rate		0.17	%		0.34	%
Weighted-average term to maturity	22.4 days			28.5 days

<sup>(1)</sup> As of June 30, 2021, includes $34,456 at sale price of unsettled agency MBS sale commitments which are included in the line item “sold securities receivable” in the accompanying consolidated balance sheets.

<sup>(2)</sup> 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 six months ended June 30, 2021 and 2020:

	June 30, 2021			June 30, 2020
Weighted-average outstanding balance during the three months ended	$	652,624		$	559,880
Weighted-average rate during the three months ended		0.24	%		0.82	%
Weighted-average outstanding balance during the six months ended	$	603,233		$	1,861,110
Weighted-average rate during the six months ended		0.29	%		1.68	%

Schedule of Long-term Unsecured Debt Instruments

As of June 30, 2021 and December 31, 2020, the Company had $73,129 and $73,027, respectively, of outstanding long-term unsecured debentures, net of unamortized debt issuance costs of $623 and $732, respectively. The Company’s long-term debentures consisted of the following as of the dates indicated:

	June 30, 2021									December 31, 2020
	Senior Notes Due 2025			Senior Notes Due 2023			Trust Preferred Debt			Senior Notes Due 2025			Senior Notes Due 2023			Trust Preferred Debt
Outstanding Principal	$	34,931		$	23,821		$	15,000		$	34,931		$	23,828		$	15,000
Annual Interest Rate		6.75	%		6.625	%	LIBOR+ 2.25 - 3.00 %				6.75	%		6.625	%	LIBOR+ 2.25 - 3.00 %
Interest Payment Frequency	Quarterly			Quarterly			Quarterly			Quarterly			Quarterly			Quarterly
Weighted-Average Interest Rate		6.75	%		6.625	%		2.93	%		6.75	%		6.625	%		2.99	%
Maturity	March 15, 2025			May 1, 2023			2033 - 2035			March 15, 2025			May 1, 2023			2033 - 2035

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Derivative Instruments (Tables)

6 Months Ended

Jun. 30, 2021

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:

	June 30, 2021					December 31, 2020
	Assets		Liabilities			Assets		Liabilities
Interest rate swaps	$	—	$	(944	)	$	—	$	(147	)
10-year U.S. Treasury note futures		105		—			—		—
TBA commitments		776		(1,383	)		258		(74	)
Total	$	881	$	(2,327	)	$	258	$	(221	)

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 June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Interest rate derivatives:
Interest rate swaps:
Net interest (expense) income (1)	$	(1,187	)	$	(6	)	$	(1,897	)	$	586
Unrealized (losses) gains, net		(13,517	)		8,367			7,548			14,312
Losses realized upon early termination, net		(1,258	)		(8,969	)		(1,271	)		(118,893	)
Total interest rate swap (losses) gains, net		(15,962	)		(608	)		4,380			(103,995	)
U.S. Treasury note futures, net		91			—			2,710			(3,071	)
Options on U.S. Treasury note futures, net		—			—			(20	)		—
Total interest rate derivative (losses) gains, net		(15,871	)		(608	)		7,070			(107,066	)
TBA commitments:
TBA dollar roll income (2)		1,778			170			2,614			275
Other (losses) gains on TBA commitments, net		(890	)		41			(10,122	)		4,834
Total gains (losses) on TBA commitments, net		888			211			(7,508	)		5,109
Other derivatives		—			—			—			(1,040	)
Total derivative losses, net	$	(14,983	)	$	(397	)	$	(438	)	$	(102,997	)

<sup>(1)</sup> 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.

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

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 June 30, 2021
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	675,000	$	—	$	—		$	(150,000	)	$	525,000
10-year U.S. Treasury note futures		—		165,000		(120,000	)		—			45,000
Purchased call options on 10-year U.S.   Treasury note futures		65,200		—		(65,200	)		—			—
TBA purchase (sale) commitments, net		100,000		450,000		(550,000	)		—			—

	For the Three Months Ended June 30, 2020
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	600,000	$	50,000	$	—		$	(600,000	)	$	50,000
TBA purchase (sale) commitments, net		—		75,000		(75,000	)		—			—

	For the Six Months Ended June 30, 2021
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	275,000	$	450,000	$	—		$	(200,000	)	$	525,000
2-year U.S. Treasury note futures		—		50,000		(50,000	)		—			—
10-year U.S. Treasury note futures		—		540,100		(320,000	)		(175,100	)		45,000
Purchased call options on 10-year U.S.   Treasury note futures		—		65,200		(65,200	)		—			—
TBA purchase (sale) commitments, net		—		1,365,000		(1,365,000	)		—			—

	For the Six Months Ended June 30, 2020
	Beginning of Period		Additions		Scheduled Settlements			Early Terminations			End of Period
Interest rate swaps	$	2,985,000	$	50,000	$	(100,000	)	$	(2,885,000	)	$	50,000
2-year U.S. Treasury note futures		—		1,150,000		—			(1,150,000	)		—
10-year U.S. Treasury note futures		—		765,000		—			(765,000	)		—
TBA purchase (sale) commitments, net		—		175,000		(175,000	)		—			—
Put options on S&P 500 ETF		—		1,850		(1,850	)		—			—

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, net” in the accompanying consolidated balance sheets, for the dates indicated:

	June 30, 2021		December 31, 2020
Cash collateral posted for:
Interest rate swaps (cash initial margin)	$	15,293	$	6,306
10-year U.S. Treasury note futures (cash initial margin)		686		—
Unsettled MBS trades and TBA commitments, net		575		—
Total cash collateral posted, net	$	16,554	$	6,306

TBA Commitments

Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]

Schedule of Derivative Instruments

The following table presents information about the Company’s TBA commitments as of the date indicated:

	June 30, 2021
	Notional Amount: Purchase (Sale) Commitment			Contractual Forward Price			Market Price			Fair Value
1.5% 30-year MBS purchase commitments	$	100,000		$	98,250		$	98,055		$	(195	)
1.5% 30-year MBS sale commitments		(100,000	)		(97,674	)		(98,055	)		(381	)
2.0% 30-year MBS purchase commitments		125,000			125,445			126,221			776
2.0% 30-year MBS sale commitments		(125,000	)		(125,488	)		(126,221	)		(733	)
2.5% 30-year MBS purchase commitments		25,000			25,855			25,854			(1	)
2.5% 30-year MBS sale commitments		(25,000	)		(25,781	)		(25,854	)		(73	)
Total TBA commitments, net	$	—		$	607		$	—		$	(607	)

	December 31, 2020
	Notional Amount: Purchase (Sale) Commitment			Contractual Forward Price			Market Price			Fair Value
1.5% 30-year MBS purchase commitments	$	50,000		$	50,281		$	50,539		$	258
1.5% 30-year MBS sale commitments		(50,000	)		(50,465	)		(50,539	)		(74	)
Total TBA commitments, net	$	—		$	(184	)	$	—		$	184

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 June 30, 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	$	200,000		0.10	%		0.04	%		(0.06	)%		2.4	$	(25	)
3 to less than 7 years		75,000		0.89	%		0.19	%		(0.70	)%		6.5		(121	)
7 to less than 10 years		250,000		1.12	%		0.17	%		(0.95	)%		9.4		(798	)
Total / weighted-average	$	525,000		0.70	%		0.12	%		(0.58	)%		6.3	$	(944	)

The following table presents information about the Company’s interest rate swap agreements that were in effect as of December 31, 2020:

			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	$	200,000		0.10	%		0.06	%		(0.04	)%		2.9	$	(40	)
3 to less than 10 years		75,000		0.74	%		0.22	%		(0.52	)%		9.5		(107	)
Total / weighted-average	$	275,000		0.28	%		0.10	%		(0.18	)%		4.7	$	(147	)

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Offsetting of Financial Assets and Liabilities (Tables)

6 Months Ended

Jun. 30, 2021

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 June 30, 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:
10-year U.S. Treasury note futures	$	105	$	—	$	105	$	—		$	—		$	105
TBA commitments		776		—		776		(776	)		—			—
Total derivative instruments		881		—		881		(776	)		—			105
Total assets	$	881	$	—	$	881	$	(776	)	$	—		$	105
Liabilities:
Derivative instruments:
Interest rate swaps	$	944	$	—	$	944	$	—		$	(944	)	$	—
TBA commitments		1,383		—		1,383		(776	)		(575	)		32
Total derivative instruments		2,327		—		2,327		(776	)		(1,519	)		32
Repurchase agreements		694,586		—		694,586		(694,586	)		—			—
Total liabilities	$	696,913	$	—	$	696,913	$	(695,362	)	$	(1,519	)	$	32

	As of December 31, 2020
	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	$	258	$	—	$	258	$	(74	)	$	—		$	184
Total derivative instruments		258		—		258		(74	)		—			184
Total assets	$	258	$	—	$	258	$	(74	)	$	—		$	184
Liabilities:
Derivative instruments:
Interest rate swaps	$	147	$	—	$	147	$	—		$	(147	)	$	—
TBA commitments		74		—		74		(74	)		—			—
Total derivative instruments		221		—		221		(74	)		(147	)		—
Repurchase agreements		655,212		—		655,212		(655,212	)		—			—
Total liabilities	$	655,433	$	—	$	655,433	$	(655,286	)	$	(147	)	$	—

<sup>(1)</sup> 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.

<sup>(2)</sup> Does not include the amount of cash collateral pledged in respect of derivative instruments that exceeds the associated derivative liability presented in the consolidated balance sheets.

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2021

Fair Value Disclosures [Abstract]

Summary of Significant Inputs to Fair Value Measurement

The following table presents the significant unobservable inputs to the fair value measurement of the Company’s non-agency MBS secured by business-purpose residential mortgage loans as of the periods indicated:

	June 30, 2021			December 31, 2020
Annualized default rate		15.0	%		12.0	%
Loss-given-default		25.0	%		40.0	%
Discount rate		13.0	%		13.9	%

The following table presents the significant unobservable inputs to the fair value measurement of the subordinate debt obligation as of the periods indicated:

	June 30, 2021			December 31, 2020
Annualized default rate		15.0	%		20.0	%
Loss-given-default		25.0	%		40.0	%
Discount rate		13.0	%		13.9	%

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 June 30, 2021:

	June 30, 2021
Discount rate		9.0	%
Annualized prepayment rate		11.1	%
Annual per-loan cost of servicing (current loans)	$	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 June 30, 2021 and December 31, 2020. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	June 30, 2021
	Total		Level 1		Level 2		Level 3
Financial assets:
Agency MBS	$	725,709	$	—	$	725,709	$	—
Mortgage credit securities		43,217		—		28,910		14,307
Mortgage loans of consolidated VIE		35,778		—		—		35,778
Loans		74,685		—		—		74,685
MSR financing receivable		74,652		—		—		74,652
Derivative assets		881		105		776		—
Other assets		14,010		6,703		—		7,307
Financial liabilities:
Secured debt of consolidated VIE		28,465		—		27,825		640
Derivative liabilities		2,327		—		2,327		—

	December 31, 2020
	Total		Level 1		Level 2		Level 3
Financial assets:
Agency MBS	$	970,880	$	—	$	970,880	$	—
Mortgage credit securities		26,660		—		14,730		11,930
Mortgage loans of consolidated VIE		93,283		—		—		93,283
Loans		45,000		—		—		45,000
MSR financing receivable		9,346		—		—		9,346
Derivative assets		258		—		258		—
Other assets		17,690		10,821		—		6,869
Financial liabilities:
Secured debt of consolidated VIE		93,627		—		93,051		576
Derivative liabilities		221		—		221		—

Change in Fair Value of Level 3 Financial Assets and Liabilities that are Measured at Fair Value on Recurring Basis

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 June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Beginning balance	$	157,714		$	59,592		$	166,428		$	51,398
Net (loss) gain included in "Investment gain (loss), net"		(1,183	)		1,981			5,135			(1,628	)
Purchases		72,669			25,000			93,013			36,995
Sales		(1,662	)		—			(1,662	)		—
Payments, net		(22,764	)		(115	)		(59,540	)		(525	)
Accretion of discount		1,955			243			3,355			461
Ending balance	$	206,729		$	86,701		$	206,729		$	86,701
Net unrealized gains (losses) included in earnings for the    period for Level 3 assets still held at the reporting date	$	(1,108	)	$	1,981		$	5,215		$	(1,628	)

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 June 30,				Six Months Ended June 30,
	2021		2020		2021			2020
Beginning balance	$	611	$	—	$	576		$	—
Net gain (loss) included in "Investment gain (loss), net"		29		—		(10	)		—
Accretion of discount		—		—		74			—
Ending balance	$	640	$	—	$	640		$	—
Net unrealized gains (losses) included in earnings for the    period for Level 3 liabilities still held at the reporting date	$	29	$	—	$	(10	)	$	—

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Earnings (Loss) Per Share (Tables)

6 Months Ended

Jun. 30, 2021

Earnings Per Share [Abstract]

Computations of Basic and Diluted Earnings (Loss) Per Share

The following tables present the computations of basic and diluted earnings (loss) per share for the periods indicated:

	Three Months Ended June 30,					Six Months Ended June 30,
(Shares in thousands)	2021			2020		2021			2020
Basic weighted-average common shares outstanding		33,066			36,618		33,123			36,665
Performance share units, unvested restricted stock units,    and unvested restricted stock		—			48		—			—
Diluted weighted-average common shares outstanding		33,066			36,666		33,123			36,665
Net (loss) income (attributable) available to common stock	$	(7,782	)	$	9,476	$	(14,545	)	$	(85,468	)
Basic (loss) earnings per common share	$	(0.24	)	$	0.26	$	(0.44	)	$	(2.33	)
Diluted (loss) earnings per common share	$	(0.24	)	$	0.26	$	(0.44	)	$	(2.33	)

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Organization and Basis of Presentation - Additional Information (Details)	6 Months Ended
	Jun. 30, 2021
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)	Jun. 30, 2021	Dec. 31, 2020
Summary Of Significant Accounting Policies [Line Items]
Cash Equivalents Percentage Held in Us Government Backed Securities	83.00%	99.00%
ASU No. 2020-04
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	Jun. 30, 2021	Dec. 31, 2020
Agency MBS
Fair Value of MBS	$ 725,709	$ 970,880

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Investments in Agency MBS - Additional Information About Gains and Losses Recognized with Respect to Investments in Agency MBS (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Net gains (losses) recognized in earnings for:
Total	$ 5,334	$ 7,625	$ (16,331)	$ 10,719
Agency MBS
Net gains (losses) recognized in earnings for:
MBS still held at period end	6,840	4,930	(11,861)	9,971
MBS sold during the period	290	(522)	(10,224)	17,955
Total	$ 7,130	$ 4,408	$ (22,085)	$ 27,926

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Investments in Mortgage Credit Securities - Additional Information (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Mortgage Credit Securities
Fair Value of MBS	$ 43,217	$ 26,660

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Investments in Mortgage Credit Securities - Additional Information About Gains and Losses Recognized with Respect to Investments in Mortgage Credit Securities (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Net gains (losses) recognized in earnings for:
Total	$ 5,334	$ 7,625	$ (16,331)	$ 10,719
Mortgage Credit Securities
Net gains (losses) recognized in earnings for:
Mortgage credit securities still held at period end	(186)	2,118	1,210	(5,678)
Mortgage credit securities sold during the period	(75)	1,138	(80)	(11,104)
Total	$ (261)	$ 3,256	$ 1,130	$ (16,782)

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Loans Held For Investment - Additional Information (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
Schedule Of Investments [Line Items]
Loan Rate	LIBOR plus 4.25
Loan maturity date	Dec. 31, 2021
Available period for extension	1 year
Fair value of loans held for investment	$ 74,685	$ 45,000
Revolving Credit Facility
Schedule Of Investments [Line Items]
Loan Rate	LIBOR plus 3.75
Revolving credit facility, committed fund	$ 30,000
Revolving credit facility	$ 130,000
Revolving credit facility maturity date	Jul. 07, 2024
Unused commitment fee percentage	0.50%
Revolving credit facility, unfunded commitment	$ 30,000
Minimum
Schedule Of Investments [Line Items]
Loan LIBOR floor rate	2.00%
Minimum | Revolving Credit Facility
Schedule Of Investments [Line Items]
Loan LIBOR floor rate	1.00%
Commercial Real Estate Mortgage Loan
Schedule Of Investments [Line Items]
Outstanding principal balance	$ 74,685	45,000
Healthcare Facilities Mortgage Loan
Schedule Of Investments [Line Items]
Outstanding principal balance	44,784	$ 45,000
Healthcare Facilities Mortgage Loan | Loan Purchase
Schedule Of Investments [Line Items]
Outstanding principal balance	$ 29,901
Loan Rate	LIBOR plus 5.50
Loan maturity date	Mar. 23, 2022
Available period for extension	1 year

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Investments in MSR Financing Receivables - Additional Information (Details) - USD ($) $ in Thousands	6 Months Ended	36 Months Ended	39 Months Ended
	Jun. 30, 2021	Dec. 31, 2023	Apr. 01, 2024	Mar. 31, 2021	Dec. 31, 2020
Accounts Notes And Loans Receivable [Line Items]
MSR servicing fee basis points	0.125%
MSR financing receivables, at fair value	$ 74,652			$ 36,005	$ 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	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2021
Receivables [Abstract]
Balance at period beginning	$ 36,005	$ 9,346
Capital investments	39,278	59,622
Accretion of interest income	1,390	1,748
Amortization of underlying MSRs	(1,984)	(3,260)
Changes in valuation inputs and assumptions	(37)	7,196
Balance at period end	$ 74,652	$ 74,652

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Consolidation of Variable Interest Entities - Additional Information (Details) - Variable Interest Entity, Primary Beneficiary - USD ($) $ in Thousands		6 Months Ended
	Sep. 30, 2020	Jun. 30, 2021
Variable Interest Entity [Line Items]
Payments to acquire investments	$ 10,693
Pool of mortgage loans, unpaid principal balance		$ 37,099
Outstanding Principal		$ 28,482
Mortgage loan, weighted average net note rate		6.03%
Debt obligations, weighted average coupon rate		4.01%
Unfunded Construction Draw Balance Commitment
Variable Interest Entity [Line Items]
Subordinated debt security investment		$ 4,386

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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		Jun. 30, 2021	Dec. 31, 2020
Variable Interest Entity [Line Items]
Mortgage loans of consolidated VIE, at fair value		$ 74,685	$ 45,000
Variable Interest Entity, Primary Beneficiary
Variable Interest Entity [Line Items]
Restricted cash of consolidated VIE	[1]	4,456	11,169
Mortgage loans of consolidated VIE, at fair value		35,778	93,283
Interest receivable of consolidated VIE		179	545
Secured debt of consolidated VIE, at fair value		(28,465)	(93,627)
Interest payable of consolidated VIE		(99)	(321)
Investment in consolidated VIE		$ 11,849	$ 11,049

[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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Consolidation of Variable Interest Entities - Schedule of Accrual Status of Mortgage Loans of Consolidated VIE (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Variable Interest Entity [Line Items]
Mortgage loans of consolidated VIE	$ 74,685	$ 45,000
Variable Interest Entity, Primary Beneficiary
Variable Interest Entity [Line Items]
Mortgage loans of consolidated VIE	35,778	$ 93,283
Pool of mortgage loans, unpaid principal balance	37,099
Difference	(1,321)
Less than 90 Days Past Due | Accrual Status | Variable Interest Entity, Primary Beneficiary
Variable Interest Entity [Line Items]
Mortgage loans of consolidated VIE	30,483
Pool of mortgage loans, unpaid principal balance	31,608
Difference	(1,125)
90 Days or More Past Due | Non-accrual Status | Variable Interest Entity, Primary Beneficiary
Variable Interest Entity [Line Items]
Mortgage loans of consolidated VIE	5,295
Pool of mortgage loans, unpaid principal balance	5,491
Difference	$ (196)

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Borrowings - Additional Information (Details) - USD ($)			3 Months Ended			6 Months Ended
	Aug. 06, 2021	Jul. 15, 2021	Jun. 30, 2021	Mar. 31, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Jul. 07, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Mortgage Loan Rate						LIBOR plus 4.25
Mortgage loan maturity date			Dec. 31, 2021			Dec. 31, 2021
Long-term unsecured debt			$ 73,129,000			$ 73,129,000			$ 73,027,000
Unamortized debt issuance costs			623,000			$ 623,000			$ 732,000
Senior Notes Due 2023
Debt Instrument [Line Items]
Principal balance of Senior Notes repurchased				$ 7,000
Principal balance of Senior Notes repurchased purchase price				$ 7,000
Senior Notes Due 2023 | Subsequent Event
Debt Instrument [Line Items]
Debt instrument redemption amount								$ 23,821,000
Debt instrument redemption price percentage	100.00%
Unsecured Debentures
Debt Instrument [Line Items]
Principal balance of Senior Notes repurchased purchase price			$ 0		$ 0		$ 0
6.000% Senior Notes due 2026 | Subsequent Event
Debt Instrument [Line Items]
Debt instrument, issued		$ 37,750,000
Net proceeds from after deducting underwriter discounts		$ 36,570,000
Agency MBS
Debt Instrument [Line Items]
Mortgage Loan Rate						LIBOR plus 2.50%
Mortgage loan maturity date			May 03, 2022			May 03, 2022
Agency MBS | One-Month LIBOR
Debt Instrument [Line Items]
Mortgage loan floor rate			2.50%			2.50%
Minimum
Debt Instrument [Line Items]
Mortgage loan floor rate			2.00%			2.00%
Minimum | Agency MBS
Debt Instrument [Line Items]
MBS repurchase agreement contract duration						30 days
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		6 Months Ended	12 Months Ended
		Jun. 30, 2021	Dec. 31, 2020
Repurchase Agreement Counterparty [Line Items]
Repurchase agreements outstanding		$ 694,586	$ 655,212
Mortgage investments collateral, at fair value		740,531	701,154
Net amount	[1]	$ 45,945	$ 45,942
Weighted-average rate		0.17%	0.34%
Weighted-average term to maturity (in days)		22 days 9 hours	28 days 12 hours
Agency MBS repurchase financing
Repurchase Agreement Counterparty [Line Items]
Repurchase agreements outstanding		$ 673,655	$ 623,712
Mortgage investments collateral, at fair value	[2]	710,630	656,154
Net amount	[1]	$ 36,975	$ 32,442
Weighted-average rate		0.09%	0.21%
Weighted-average term to maturity (in days)		13 days 14 hours	14 days
Mortgage loans repurchase financing
Repurchase Agreement Counterparty [Line Items]
Repurchase agreements outstanding		$ 20,931	$ 31,500
Mortgage investments collateral, at fair value		29,901	45,000
Net amount	[1]	$ 8,970	$ 13,500
Weighted-average rate		2.59%	3.00%
Weighted-average term to maturity (in days)		307 days	315 days

[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.

[2] As of June 30, 2021, includes $34,456 at sale price of unsettled agency MBS sale commitments which are included in the line item “sold securities receivable” in the accompanying consolidated balance sheets.

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Borrowings - Outstanding Repurchase Agreement Borrowings (Parenthetical) (Details) $ in Thousands	Jun. 30, 2021 USD ($)
Repurchase Agreement Counterparty [Line Items]
Sold securities receivable	$ 34,456
Pledged as Collateral for Repurchase Agreements
Repurchase Agreement Counterparty [Line Items]
Sold securities receivable	$ 34,456

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Borrowings - Information Regarding Outstanding Repurchase Agreement Borrowings During the Period (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Debt Disclosure [Abstract]
Weighted-average outstanding balance	$ 652,624	$ 559,880	$ 603,233	$ 1,861,110
Weighted-average rate	0.24%	0.82%	0.29%	1.68%

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Borrowings - Long-term Unsecured Debt Instruments (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
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 2023
Debt Instrument [Line Items]
Outstanding Principal	$ 23,821	$ 23,828
Annual Interest Rate	6.625%	6.625%
Interest Payment Frequency	Quarterly	Quarterly
Weighted-Average Interest Rate	6.625%	6.625%
Maturity	May 01, 2023	May 01, 2023
Trust Preferred Debt
Debt Instrument [Line Items]
Outstanding Principal	$ 15,000	$ 15,000
Interest Payment Frequency	Quarterly	Quarterly
Weighted-Average Interest Rate	2.93%	2.99%
Annual Interest Rate	LIBOR+ 2.25 - 3.00 %	LIBOR+ 2.25 - 3.00 %
Trust Preferred Debt | Minimum
Debt Instrument [Line Items]
Maturity	2033	2033
Trust Preferred Debt | Maximum
Debt Instrument [Line Items]
Maturity	2035	2035

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Derivative Instruments - Fair Value of Derivative Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Derivative Assets	$ 881	$ 258
Derivative Liabilities	(2,327)	(221)
Interest Rate Swap
Derivative Assets	0	0
Derivative Liabilities	(944)	(147)
10-year U.S. Treasury Note Futures
Derivative Assets	105	0
Derivative Liabilities	0	0
TBA Commitments
Derivative Assets	776	258
Derivative Liabilities	$ (1,383)	$ (74)

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Derivative Instruments - Interest Rate Swap Agreements (Details) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2021	Dec. 31, 2020	Mar. 31, 2021	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019
Notional Amount	$ 0	$ 0	$ 100,000,000	$ 0	$ 0	$ 0
Interest Rate Swap
Notional Amount	$ 525,000,000	$ 275,000,000	$ 675,000,000	$ 50,000,000	$ 600,000,000	$ 2,985,000,000
Weighted-average: Fixed Pay Rate	0.70%	0.28%
Weighted-average: Variable Receive Rate	0.12%	0.10%
Weighted-average: Net Receive (Pay) Rate	(0.58%)	(0.18%)
Weighted-average: Remaining Life (in years)	6 years 3 months 18 days	4 years 8 months 12 days
Fair Value, Asset and (Liability)	$ (944,000)	$ (147,000)
Interest Rate Swap | Less Than Three Years Maturity
Notional Amount	$ 200,000,000	$ 200,000,000
Weighted-average: Fixed Pay Rate	0.10%	0.10%
Weighted-average: Variable Receive Rate	0.04%	0.06%
Weighted-average: Net Receive (Pay) Rate	(0.06%)	(0.04%)
Weighted-average: Remaining Life (in years)	2 years 4 months 24 days	2 years 10 months 24 days
Fair Value, Asset and (Liability)	$ (25,000)	$ (40,000)
Interest Rate Swap | Three to Less Than Seven Years Maturity
Notional Amount	$ 75,000,000
Weighted-average: Fixed Pay Rate	0.89%
Weighted-average: Variable Receive Rate	0.19%
Weighted-average: Net Receive (Pay) Rate	(0.70%)
Weighted-average: Remaining Life (in years)	6 years 6 months
Fair Value, Asset and (Liability)	$ (121,000)
Interest Rate Swap | Seven to Less Than Ten Years Maturity
Notional Amount	$ 250,000,000
Weighted-average: Fixed Pay Rate	1.12%
Weighted-average: Variable Receive Rate	0.17%
Weighted-average: Net Receive (Pay) Rate	(0.95%)
Weighted-average: Remaining Life (in years)	9 years 4 months 24 days
Fair Value, Asset and (Liability)	$ (798,000)
Interest Rate Swap | Three To Less Than Ten Years Maturity
Notional Amount		$ 75,000,000
Weighted-average: Fixed Pay Rate		0.74%
Weighted-average: Variable Receive Rate		0.22%
Weighted-average: Net Receive (Pay) Rate		(0.52%)
Weighted-average: Remaining Life (in years)		9 years 6 months
Fair Value, Asset and (Liability)		$ (107,000)

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Derivative Instruments - Additional Information (Details) - USD ($)	6 Months Ended
	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019
Derivative [Line Items]
Notional Amount	$ 0	$ 100,000,000	$ 0	$ 0	$ 0	$ 0
10-year U.S. Treasury Note Futures
Derivative [Line Items]
Notional Amount	$ 45,000,000	$ 0	0	$ 0		$ 0
Derivative maturity	2021-09
U.S. Treasury Note Futures
Derivative [Line Items]
Notional Amount			0
Options on U.S. Treasury Note Futures
Derivative [Line Items]
Derivative outstanding options	$ 0		$ 0

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Derivative Instruments - TBA Commitments (Details) - USD ($)	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2019
Notional Amount: Net Purchase Commitment	$ 0	$ 100,000,000	$ 0	$ 0	$ 0	$ 0
Fair Value, Asset	881,000		258,000
Fair Value, Liability	(2,327,000)		(221,000)
TBA Commitments
Notional Amount: Net Purchase Commitment	0		0
Contractual Forward Price	607,000		(184,000)
Market Price	0		0
Fair Value, Asset	776,000		258,000
Fair Value, Liability	(1,383,000)		(74,000)
Fair Value	(607,000)		184,000
TBA Commitments | One Point Five Percent Thirty Year Mortgage Backed Securities Purchase Sale Commitments Purchase
Notional Amount: Net Purchase Commitment	100,000,000		50,000,000
Contractual Forward Price	98,250,000		50,281,000
Market Price	98,055,000		50,539,000
Fair Value, Asset			258,000
Fair Value, Liability	(195,000)
TBA Commitments | One Point Five Percent Thirty Year Mortgage Backed Securities Purchase Sale Commitments Sale
Notional Amount: Net Purchase Commitment	100,000,000		50,000,000
Contractual Forward Price	(97,674,000)		(50,465,000)
Market Price	(98,055,000)		(50,539,000)
Fair Value, Liability	(381,000)		$ (74,000)
TBA Commitments | Two Percent Thirty Year Mortgage Backed Securities Purchase Sale Commitments, Purchase
Notional Amount: Net Purchase Commitment	125,000,000
Contractual Forward Price	125,445,000
Market Price	126,221,000
Fair Value, Asset	776,000
TBA Commitments | Two Percent Thirty Year Mortgage Backed Securities Purchase Sale Commitments Sale
Notional Amount: Net Purchase Commitment	125,000,000
Contractual Forward Price	(125,488,000)
Market Price	(126,221,000)
Fair Value, Liability	(733,000)
TBA Commitments | Two Point Five Percent Thirty Year Mortgage Backed Securities Purchase Sale Commitments, Purchase
Notional Amount: Net Purchase Commitment	25,000,000
Contractual Forward Price	25,855,000
Market Price	25,854,000
Fair Value, Liability	(1,000)
TBA Commitments | Two Point Five Percent Thirty Year Mortgage Backed Securities Purchase Sale Commitments Sale
Notional Amount: Net Purchase Commitment	25,000,000
Contractual Forward Price	(25,781,000)
Market Price	(25,854,000)
Fair Value, Liability	$ (73,000)

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Derivative Instruments - Derivative Gains and Losses Recognized Within the Periods (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Interest rate derivative gains (losses), net		$ (15,871)	$ (608)	$ 7,070	$ (107,066)
Gains (losses) on commitments		888	211	(7,508)	5,109
Other derivatives		0	0	0	(1,040)
Total derivative losses, net		(14,983)	(397)	(438)	(102,997)
Interest Rate Swap
Interest rate derivative gains (losses), net		(15,962)	(608)	4,380	(103,995)
Interest Rate Swaps Net Interest (Expense) Income
Interest rate derivative gains (losses), net	[1]	(1,187)	(6)	(1,897)	586
Unrealized (Losses) Gains, Net
Interest rate derivative gains (losses), net		(13,517)	8,367	7,548	14,312
Interest Rate Swaps Losses Realized Upon Early Termination, Net
Interest rate derivative gains (losses), net		(1,258)	(8,969)	(1,271)	(118,893)
Options on U.S. Treasury Note Futures, Net
Interest rate derivative gains (losses), net		0	0	(20)	0
TBA Dollar Roll Income
Gains (losses) on commitments	[2]	1,778	170	2,614	275
Other (Losses) Gains on TBA Commitments, Net
Gains (losses) on commitments		(890)	41	(10,122)	4,834
U.S. Treasury Note Futures, Net
Interest rate derivative gains (losses), net		$ 91	$ 0	$ 2,710	$ (3,071)

[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 relative to a contemporaneously executed “spot” TBA sale, which economically equates to net interest income that is earned ratably over the period beginning on the settlement date of the sale and ending on the settlement date of the forward-settling purchase

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Derivative Instruments - Volume of Activity, in terms of Notional Amount, Related to Derivative Instruments (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Derivative [Line Items]
Beginning of Period	$ 100,000,000	$ 0	$ 0	$ 0
Additions	450,000,000	75,000,000	1,365,000,000	175,000,000
Scheduled Settlements	(550,000,000)	(75,000,000)	(1,365,000,000)	(175,000,000)
Early Terminations	0	0	0	0
End of Period	0	0	0	0
Interest Rate Swap
Derivative [Line Items]
Beginning of Period	675,000,000	600,000,000	275,000,000	2,985,000,000
Additions	0	50,000,000	450,000,000	50,000,000
Scheduled Settlements	0	0	0	(100,000,000)
Early Terminations	(150,000,000)	(600,000,000)	(200,000,000)	(2,885,000,000)
End of Period	525,000,000	50,000,000	525,000,000	50,000,000
2-year U.S. Treasury Note Futures
Derivative [Line Items]
Beginning of Period			0	0
Additions			50,000,000	1,150,000,000
Scheduled Settlements			(50,000,000)	0
Early Terminations			0	(1,150,000,000)
End of Period	0	0	0	0
10-year U.S. Treasury Note Futures
Derivative [Line Items]
Beginning of Period	0		0	0
Additions	165,000,000		540,100,000	765,000,000
Scheduled Settlements	(120,000,000)		(320,000,000)	0
Early Terminations	0		(175,100,000)	(765,000,000)
End of Period	45,000,000	0	45,000,000	0
Purchased Call Options on Ten Year U.S. Treasury Note Futures
Derivative [Line Items]
Beginning of Period	65,200,000		0
Additions	0		65,200,000
Scheduled Settlements	(65,200,000)		(65,200,000)
Early Terminations	0		0
End of Period	$ 0		$ 0
Put Options on S&P 500 ETF
Derivative [Line Items]
Beginning of Period				0
Additions				1,850,000
Scheduled Settlements				(1,850,000)
Early Terminations				0
End of Period		$ 0		$ 0

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Derivative Instruments - Cash Collateral Posted in Respect of Derivative and Other Financial Instruments (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Cash collateral posted, net	$ 16,554	$ 6,306
Interest Rate Swap
Cash collateral posted, net	15,293	6,306
10-year U.S. Treasury Note Futures
Cash collateral posted, net	686	0
Unsettled MBS Trades and TBA Commitments, Net
Cash collateral posted, net	$ 575	$ 0

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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		Jun. 30, 2021	Dec. 31, 2020
Derivative instruments:
Derivative Asset, Gross Amount Recognized		$ 881	$ 258
Derivative Asset, Amount Offset		0	0
Derivative Asset, Net Amount		881	258
Derivative Asset, Financial Instruments	[1]	(776)	(74)
Derivative Asset, Cash Collateral	[2]	0	0
Derivative Asset, Net amount Total		105	184
Derivative instruments:
Derivative Liabilities, Gross Amount Recognized		2,327	221
Derivative Liabilities, Amount Offset		0	0
Derivative Liabilities, Net Amount		2,327	221
Derivative Liabilities, Financial Instruments	[1]	(776)	(74)
Derivative Liabilities, Cash Collateral	[2]	(1,519)	(147)
Derivative Liabilities, Net amount Total		32	0
Derivative Financial Instruments, Liabilities
Derivative instruments:
Derivative Liabilities, Gross Amount Recognized		696,913	655,433
Derivative Liabilities, Amount Offset		0	0
Derivative Liabilities, Net Amount		696,913	655,433
Derivative Liabilities, Financial Instruments	[1]	(695,362)	(655,286)
Derivative Liabilities, Cash Collateral	[2]	(1,519)	(147)
Derivative Liabilities, Net amount Total		32	0
Derivative Financial Instruments, Assets
Derivative instruments:
Derivative Asset, Gross Amount Recognized		881	258
Derivative Asset, Amount Offset		0	0
Derivative Asset, Net Amount		881	258
Derivative Asset, Financial Instruments	[1]	(776)	(74)
Derivative Asset, Cash Collateral	[2]	0	0
Derivative Asset, Net amount Total		105	184
Repurchase Agreements
Derivative instruments:
Derivative Liabilities, Gross Amount Recognized		694,586	655,212
Derivative Liabilities, Amount Offset		0	0
Derivative Liabilities, Net Amount		694,586	655,212
Derivative Liabilities, Financial Instruments	[1]	(694,586)	(655,212)
Derivative Liabilities, Cash Collateral	[2]	0	0
Derivative Liabilities, Net amount Total		0	0
10-Year U.S. Treasury Note Futures
Derivative instruments:
Derivative Asset, Gross Amount Recognized		105
Derivative Asset, Amount Offset		0
Derivative Asset, Net Amount		105	0
Derivative Asset, Financial Instruments	[1]	0
Derivative Asset, Cash Collateral	[2]	0
Derivative Asset, Net amount Total		105
Derivative instruments:
Derivative Liabilities, Net Amount		0	0
Interest Rate Swap
Derivative instruments:
Derivative Asset, Net Amount		0	0
Derivative instruments:
Derivative Liabilities, Gross Amount Recognized		944	147
Derivative Liabilities, Amount Offset		0	0
Derivative Liabilities, Net Amount		944	147
Derivative Liabilities, Financial Instruments	[1]	0	0
Derivative Liabilities, Cash Collateral	[2]	(944)	(147)
Derivative Liabilities, Net amount Total		0	0
TBA Commitments
Derivative instruments:
Derivative Asset, Gross Amount Recognized		776	258
Derivative Asset, Amount Offset		0	0
Derivative Asset, Net Amount		776	258
Derivative Asset, Financial Instruments	[1]	(776)	(74)
Derivative Asset, Cash Collateral	[2]	0	0
Derivative Asset, Net amount Total		0	184
Derivative instruments:
Derivative Liabilities, Gross Amount Recognized		1,383	74
Derivative Liabilities, Amount Offset		0	0
Derivative Liabilities, Net Amount		1,383	74
Derivative Liabilities, Financial Instruments	[1]	(776)	(74)
Derivative Liabilities, Cash Collateral	[2]	(575)	0
Derivative Liabilities, Net amount Total		$ 32	$ 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 that exceeds the associated derivative 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	Jun. 30, 2021 LoanCost	Dec. 31, 2020
Annualized Default Rate | Subordinate Debt Obligations
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Significant inputs to fair value measurement	0.150	0.200
Loss-Given-Default | Subordinate Debt Obligations
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Significant inputs to fair value measurement	0.250	0.400
Discount Rate | Subordinate Debt Obligations
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Significant inputs to fair value measurement	0.130	0.139
Mortgage Credit Securities | Annualized Default Rate
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Significant inputs to fair value measurement	0.150	0.120
Mortgage Credit Securities | Loss-Given-Default
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Significant inputs to fair value measurement	0.250	0.400
Mortgage Credit Securities | Discount Rate
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Significant inputs to fair value measurement	0.130	0.139
MSR financing receivables [Member] | Discount Rate
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Significant inputs to fair value measurement	0.090
MSR financing receivables [Member] | Annualized Prepayment Rate
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Significant inputs to fair value measurement	0.111
MSR financing receivables [Member] | Annual per-loan Cost of Servicing(Current Loans)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Significant inputs to fair value measurement	65.00

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Fair Value Measurements - Additional Information (Details) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2021 USD ($)	Dec. 31, 2020 USD ($)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Long-term unsecured debt, carrying value	$ 73,129	$ 73,027
Long-term unsecured debt, Fair Value	71,678	69,904
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	6,703	10,821
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	7,307	$ 6,869
MSR financing receivables [Member]
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]
Present value of expected incentive fee payment reflected in fair value of MSR financing receivables	$ 1,202
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	0.95	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	0.10
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	0.15
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	0.060	0.063

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Fair Value Measurements - Financial Instruments Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2021	Dec. 31, 2020
Financial assets:
Loans, at fair value	$ 74,685	$ 45,000
Derivative assets, at fair value	881	258
Financial liabilities:
Derivative liabilities, at fair value	2,327	221
Fair Value, Measurements, Recurring
Financial assets:
Loans, at fair value	74,685	45,000
MSR financing receivable	74,652	9,346
Derivative assets, at fair value	881	258
Other assets	14,010	17,690
Financial liabilities:
Derivative liabilities, at fair value	2,327	221
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 1
Financial assets:
Loans, at fair value	0	0
MSR financing receivable	0	0
Derivative assets, at fair value	105	0
Other assets	6,703	10,821
Financial liabilities:
Derivative liabilities, at fair value	0	0
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 2
Financial assets:
Loans, at fair value	0	0
MSR financing receivable	0	0
Derivative assets, at fair value	776	258
Other assets	0	0
Financial liabilities:
Derivative liabilities, at fair value	2,327	221
Fair Value, Measurements, Recurring | Fair Value, Inputs, Level 3
Financial assets:
Loans, at fair value	74,685	45,000
MSR financing receivable	74,652	9,346
Derivative assets, at fair value	0	0
Other assets	7,307	6,869
Financial liabilities:
Derivative liabilities, at fair value	0	0
Fair Value, Measurements, Recurring | Mortgage Credit Securities
Financial assets:
Trading securities	43,217	26,660
Fair Value, Measurements, Recurring | Mortgage Credit Securities | Fair Value, Inputs, Level 1
Financial assets:
Trading securities	0	0
Fair Value, Measurements, Recurring | Mortgage Credit Securities | Fair Value, Inputs, Level 2
Financial assets:
Trading securities	28,910	14,730
Fair Value, Measurements, Recurring | Mortgage Credit Securities | Fair Value, Inputs, Level 3
Financial assets:
Trading securities	14,307	11,930
Fair Value, Measurements, Recurring | Agency MBS
Financial assets:
Trading securities	725,709	970,880
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	725,709	970,880
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	35,778	93,283
Financial liabilities:
Secured debt of consolidated VIE, at fair value	28,465	93,627
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 VIE, 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 VIE, at fair value	27,825	93,051
Fair Value, Measurements, Recurring | Variable Interest Entity, Primary Beneficiary | Fair Value, Inputs, Level 3
Financial assets:
Loans, at fair value	35,778	93,283
Financial liabilities:
Secured debt of consolidated VIE, at fair value	$ 640	$ 576

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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		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Fair Value Disclosures [Abstract]
Beginning balance	$ 157,714	$ 59,592	$ 166,428	$ 51,398
Net (loss) gain included in "Investment gain (loss), net"	(1,183)	1,981	5,135	(1,628)
Purchases	72,669	25,000	93,013	36,995
Sales	(1,662)		(1,662)
Payments, net	(22,764)	(115)	(59,540)	(525)
Accretion of discount	1,955	243	3,355	461
Ending balance	206,729	86,701	206,729	86,701
Net unrealized gains (losses) included in earnings for the period for Level 3 assets still held at the reporting date	(1,108)	$ 1,981	5,215	$ (1,628)
Beginning balance	611		576
Net gain (loss) included in "Investment gain (loss), net"	29		(10)
Accretion of discount			74
Ending balance	640		640
Net unrealized gains (losses) included in earnings for the period for Level 3 liabilities still held at the reporting date	$ 29		$ (10)

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Income Taxes - Additional Information (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2021 USD ($)	Jun. 30, 2021 USD ($)
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	$ 152,064	$ 152,064
Net operating loss carryforward subject to expiration year	14,588	14,588
Net operating loss carryforward not subject to expiration year	137,476	$ 137,476
Net operating loss carryforwards, expiration year		2028
Capital loss carryforwards expiration remainder of fiscal year	66,862	$ 66,862
Capital loss carryforwards expiration in year 2022	3,763	3,763
Capital loss carryforwards expiration in year 2023	110,323	110,323
Benefit (provision) for income taxes	76	(322)
Capital Loss Carryforward
Income Tax Disclosure [Line Items]
Tax Credit Carryforward, Amount	$ 180,948	$ 180,948

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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		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Earnings Per Share [Abstract]
Basic weighted-average common shares outstanding	33,066	36,618	33,123	36,665
Performance share units, unvested restricted stock units, and unvested restricted stock		48
Diluted weighted-average common shares outstanding	33,066	36,666	33,123	36,665
Net (loss) income (attributable) available to common stock	$ (7,782)	$ 9,476	$ (14,545)	$ (85,468)
Basic (loss) earnings per common share	$ (0.24)	$ 0.26	$ (0.44)	$ (2.33)
Diluted (loss) earnings per common share	$ (0.24)	$ 0.26	$ (0.44)	$ (2.33)

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Earnings (Loss) Per Share - Additional Information (Details) - shares	3 Months Ended	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2021	Jun. 30, 2020
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	358,127	310,769	76,836

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Stockholders' Equity - Additional Information (Details) $ / shares in Units, $ in Thousands		3 Months Ended			6 Months Ended	12 Months Ended
	Jun. 01, 2009	Jun. 30, 2021 USD ($) $ / shares shares	Mar. 31, 2021 USD ($) shares	Jun. 30, 2020 USD ($) shares	Jun. 30, 2021 USD ($) $ / shares shares	Dec. 31, 2020 USD ($) $ / shares shares	Jul. 31, 2020 shares	Mar. 21, 2019 shares	Aug. 10, 2018 shares	Oct. 26, 2015 shares
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Common stock, shares outstanding (in shares)		0			0	0
Stock repurchase program shares previously available to be repurchased							56,090
Shareholder Rights Plan
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Rights plan, amended term of agreement	3 years
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
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)		32,679,938			32,679,938	33,517,018
Stock repurchase program shares previously available to be repurchased		15,239,159			15,239,159
Repurchase of stock | $		$ 3,490	$ 523	$ 3,047	$ 4,013	$ 10,377
Common Class A | Common Stock
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Repurchase of stock (in shares)		855,835	137,655	1,069,340	993,490	3,662,566
Repurchase of stock | $		$ 9	$ 1	$ 11
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
Share based Compensation Arrangement by Share based Payment Award [Line Items]
Stock repurchase program, number of shares authorized to be repurchased										2,000,000
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)		0		33,100	0	82,966
Repurchase of stock | $				$ 627		$ 1,578
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, redemption date					May 12, 2022
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]
Repurchase of stock (in shares)		0		10,200	0	17,766
Repurchase of stock | $				$ 173		$ 299
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)		0			0	0
Number of Shares Offer and Sell		1,645,961			1,645,961
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