
	March 31, 2023
	Fair Value
	Level I		Level II		Level III		Total
Assets




Agency RMBS Interest-only strips	$	—	$	—	$	56	$	56
Agency RMBS Interest-only strips accounted for as derivatives, included in MBS	—		—		781		781
Subtotal Agency MBS	—		—		837		837

Non-Agency CMBS	—		62,682		—		62,682
Non-Agency RMBS	—		22,861		—		22,861
Non-Agency RMBS Interest-only strips	—		—		1,590		1,590

Subtotal Non-Agency MBS	—		85,543		1,590		87,133

Other securities	—		24,857		—		24,857
Total mortgage-backed securities and other securities	—		110,400		2,427		112,827

Residential Whole Loans	—		—		1,074,417		1,074,417
Residential Bridge Loans	—		—		2,782		2,782
Securitized Commercial Loans	—		—		1,088,224		1,088,224
Commercial Loans	—		—		79,182		79,182
Derivative assets	—		—		—		—
Total Assets	$	—	$	110,400	$	2,247,032	$	2,357,432

Liabilities
Derivative liabilities	$	—	$	121	$	—	$	121
Securitized debt	—		1,705,483		7,972		1,713,455

Total Liabilities	$	—	$	1,705,604	$	7,972	$	1,713,576


	December 31, 2022
	Fair Value
	Level I		Level II		Level III		Total
Assets





Agency RMBS Interest-only strips	$	—	$	—	$	53	$	53
Agency RMBS Interest-only strips accounted for as derivatives, included in MBS	—		—		714		714
Subtotal Agency MBS	—		—		767		767

Non-Agency CMBS	—		85,435		—		85,435
Non-Agency RMBS	—		22,483		—		22,483
Non-Agency RMBS Interest-only strips	—		—		1,204		1,204

Subtotal Non-Agency MBS	—		107,918		1,204		109,122

Other securities	—		27,262		—		27,262
Total mortgage-backed securities and other securities	—		135,180		1,971		137,151

Residential Whole Loans	—		—		1,091,145		1,091,145
Residential Bridge Loans	—		—		2,849		2,849
Securitized Commercial Loan	—		—		1,085,103		1,085,103
Commercial Loans	—		—		90,002		90,002
Derivative assets	—		1		—		1
Total Assets	$	—	$	135,181	$	2,271,070	$	2,406,251

Liabilities
Derivative liabilities	$	—	$	61	$	—	$	61
Securitized debt	—		1,710,938		8,927		1,719,865
Total Liabilities	$	—	$	1,710,999	$	8,927	$	1,719,926

When available, the Company uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Company will use independent pricing services and if the independent pricing service cannot price a particular asset or liability, the Company will obtain third-party broker quotes. The Manager's pricing group, which functions independently from its portfolio management personnel, reviews the third-party broker quotes by comparing the broker quotes for reasonableness to the alternate sources when available. If independent pricing services or third-party broker quotes are not available, the Company determines the fair value of the securities using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates and, when applicable, estimates of prepayments and credit losses.

In instances when the Company is required to consolidate a VIE that is determined to be a qualifying collateralized financing entity ("CFE") under GAAP, and if the Company has elected the fair value option for the securitized debt, the Company will measure both the financial assets and financial liabilities of the VIE using the fair value of either the VIE’s financial assets or financial liabilities, whichever is more observable.

In determining the proper fair value hierarchy or level, the Company considers the amount of available observable market data for each security. For Agency IOs, Non-Agency RMBS, CMBS and other securities, to determine whether a security should be a Level II, the securities are grouped by security type and the Manager reviews the internal trade history, for

the quarter, for each security type. If there is sufficient trade data above a predetermined threshold of a security type, the Manager determines it has sufficient observable market data and the security will be categorized as a Level II; otherwise, the

Values for the Company’s securities are based upon prices obtained from independent third party pricing services. The valuation methodology of the third party pricing services incorporates market information and commonly used market pricing methods, which include actual trades and quoted prices for similar or identical instruments, and are designed to produce a pricing process that is responsive to market conditions. Depending on the type of asset and the underlying collateral, the primary inputs to the model include; yields for TBAs, Agency RMBS, the U.S. Treasury market and floating rate indices such as LIBOR and SOFR, the Constant Maturity Treasury rate, and the prime rate as a benchmark yield. In addition, the model may incorporate the current weighted average maturity and additional pool level information such as prepayment speeds, default frequencies and default severities, if applicable. When the third party pricing service cannot adequately price a particular security, the Company utilizes a broker’s quote which is reviewed for reasonableness by the Manager’s pricing group.

Values for the Company's Residential Whole Loans and Residential Bridge Loans are based upon prices obtained from an independent third-party pricing service that specializes in loan valuation, utilizing a discounted cash flow valuation model that is calibrated to recent loan trade execution. Their valuation methodology incorporates commonly used market pricing methods, which include the inputs considered most significant to the determination of fair value of the Company's Residential Whole Loans and Residential Bridge Loans. The key loan inputs include loan balance, interest rate, loan to value, delinquencies and fair value of the collateral for collateral dependent loans. The assumptions made by the independent third-party pricing service includes the market discount rate, default assumptions, and loss severity. Other inputs and assumptions relevant to the pricing of Residential Whole Loans include FICO scores and prepayment speeds.

The independent third-party pricing service used a combination of recent loan trades and recent Residential Whole Loans and Residential Bridge Loans securitization transactions adjusted for deal cost and liquidity premium, to form their opinion on the appropriate discount rate.

The Company reviews the analysis provided by the pricing service, as well as the key assumptions made available to the Company. Due to the inherent uncertainty of such valuation, the fair values established for Residential Whole Loans and Residential Bridge Loans held by the Company may differ from the fair values that would have been established if a readily available market existed for these loans. In addition, the fair values for the Company's Non-QM Residential Whole Loans held in Arroyo Trust 2022-1 and Arroyo Trust 2022-2 are measured using the fair value of the securitized debt based on the CFE valuation methodology. See Note 5, "Residential Whole Loans and Residential Bridge Loans" to the Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q for additional details. Accordingly, the Company classifies its Residential Whole Loans and Residential Bridge Loans as Level III.

Values for the Company's Commercial Loans are based upon prices obtained from an independent third-party pricing service that specializes in loan valuation, utilizing a valuation model that is calibrated to recent loan trade execution. Their valuation methodology incorporates commonly used market pricing methods, which include the inputs considered most significant to the determination of fair value of the Company's Commercial Loans. The assumptions made by the independent third-party pricing vendor include a market discount rate, default assumption, loss severity, cash flows and probability weighted loss scenarios. The Company reviews the analysis provided by the pricing service as well as the key assumptions. Due to the inherent uncertainty of such valuation, the fair values established for Commercial Loans held by the Company may differ from the fair values that would have been established if a readily available market existed for these loans. Accordingly, the Company's Commercial Loans are classified as Level III.

Values for the Company’s Securitized Commercial Loans are based on the collateralized financing entity ("CFE") valuation methodology. Since there is an extremely limited market for the Securitized Commercial Loans, the Company determined the securitized debt is more actively traded and therefore was more observable. Due to the inherent uncertainty of the Securitized Commercial Loans' valuation, the Company classifies its Securitized Commercial Loans as Level III.

Values for the Company's securitized debt that the Company elected the fair value option are based upon prices obtained from independent third party pricing services. The valuation methodology of the third-party pricing services incorporates market information and commonly used market pricing methods, which include actual trades and quoted prices for similar or identical instruments. In determining the proper fair value hierarchy or level, the Company considers the amount of available observable market data for each security. Since the securitized debt represents traded debt securities, the Manager's pricing team reviews the trade activity during the quarter for each security to determine the appropriate level within the fair value hierarchy. If there is sufficient trade data above a predetermined volume threshold, the Manager determines it has sufficient observable market data and the debt security will be categorized as a Level II. If there is not sufficient observable market data the debt security will be categorized as a Level III.

Values for the Company's derivatives are based upon prices from third party pricing services, whose pricing is subject to review by the Manager’s pricing committee. In valuing its over-the-counter interest rate derivatives, such as swaps and swaptions, its currency derivatives, such as swaps, forwards, and credit derivatives such as total return swaps, the Company considers the creditworthiness of both the Company and its counterparties, along with collateral provisions contained in each derivative agreement, from the perspective of both the Company and its counterparties. No credit valuation adjustment was made in determining the fair value of interest rate derivatives and/or futures contracts for the periods ended March 31, 2023 and December 31, 2022. See Note 8, "Derivative Instruments" to the Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.

The Company performs quarterly reviews of the independent third party pricing data. These reviews may include a review of the valuation methodology used by third party valuation specialists and review of the daily change in the prices provided by the independent pricing vendor which exceed established tolerances or comparisons to executed transaction prices, utilizing the Manager’s pricing group. The Manager’s pricing group, which functions independently from its portfolio management personnel, reviews the price differences or changes in price by comparing the vendor price to alternate sources including other independent pricing services or broker quotations. If the price change or difference cannot be corroborated, the Manager’s pricing group consults with the portfolio management team for market color in reviewing such pricing data as warranted. To the extent that the Manager has information, typically in the form of broker quotations that would indicate that a price received from the independent pricing service is outside of a tolerance range, the Manager generally challenges the independent pricing service price.

The following tables present a summary of the available quantitative information about the significant unobservable inputs used in the fair value measurement of financial instruments for which the Company has utilized Level III inputs to determine fair value as of March 31, 2023 and December 31, 2022 (dollars in thousands):


	Fair Value at				Range
	March 31, 2023		Valuation Technique	Unobservable Input	Minimum		Maximum		Weighted Average






Residential Whole Loans	$	1,074,417	Discounted Cash Flow	Market Discount Rate	5.2	%	8.4	%	6.1	%
				Weighted Average Life	0.7		10.3		5.0
Residential Bridge Loans	$	2,782	Discounted Cash Flow	Market Discount Rate	12.4	%	29.4	%	18.3	%
				Weighted Average Life	0.8		4.7		2.9
Securitized Commercial Loan	$	1,088,224	Market Comparables, Vendor Pricing	Weighted Average Life	2.5		2.5		2.5

Commercial Loans	$	79,182	Discounted Cash Flow	Market Discount Rate	8.2	%	11.1	%	9.7	%
				Weighted Average Life	0.1		2.6		2.1


	Fair Value at				Range
	December 31, 2022		Valuation Technique	Unobservable Input	Minimum		Maximum			Weighted Average






Residential Whole Loans	$	1,091,145	Discounted Cash Flow	Market Discount Rate	6.0	%	8.4	%		6.8	%
				Weighted Average Life	1.4		10.4			5.4
Residential Bridge Loans	$	2,849	Discounted Cash Flow	Market Discount Rate	12.9	%	35.7	%	(1)	22.4	%
				Weighted Average Life	0.4		4.1			2.0
Securitized Commercial Loan	$	1,085,103	Market Comparables, Vendor Pricing	Weighted Average Life	2.7		2.7			2.7
Commercial Loans	$	90,002	Discounted Cash Flow	Market Discount Rate	8.4	%	9.6	%		9.2	%
				Weighted Average Life	0.3		2.4			1.2


	Three months ended March 31, 2023
$ in thousands	Agency MBS		Non-Agency MBS		Residential Whole Loans		Residential Bridge Loans		Commercial Loans		Securitized Commercial Loan		Securitized debt
Beginning balance	$	767	$	1,204	$	1,091,145	$	2,849	$	90,002	$	1,085,103	$	8,927
Transfers into Level III from Level II	—		—		—		—		—		—		—
Transfers from Level III into Level II	—		—		—		—		—		—		—

Sales and settlements	—		—		—		—		(8,776)		—		—



Loan modifications / capitalized interest	—		—		7		—		—		—		—
Principal repayments	—		—		(30,514)		(75)		(930)		—		—
Total net gains / losses included in net income
Realized gains/(losses), net on assets	—		—		—		—		(81,223)		—		—


Unrealized gains/(losses), net on assets(1)	66		490		14,488		8		80,055		(4,036)		—
Unrealized (gains)/losses, net on liabilities(2)	—		—		—		—		—		—		(97)
Premium and discount amortization, net	4		(104)		(709)		—		54		7,157		(858)
Ending balance	$	837	$	1,590	$	1,074,417	$	2,782	$	79,182	$	1,088,224	$	7,972

Unrealized gains/(losses), net on assets held at the end of the period(1)	$	66	$	490	$	13,183	$	—	$	(1,168)	$	(4,036)	$	—
Unrealized gains/(losses), net on liabilities held at the end of the period(2)	$	—	$	—	$	—	$	—	$	—	$	—	$	97


	Three months ended March 31, 2022
$ in thousands	Agency MBS		Non-Agency MBS		Residential Whole Loans		Residential Bridge Loans		Commercial Loans		Securitized commercial loan		Securitized debt
Beginning balance	$	1,172	$	7,845	$	1,023,502	$	5,428	$	130,572	$	1,355,808	$	14,919
Transfers into Level III from Level II	—		—		—		—		—		—		—
Transfers from Level III into Level II	—		—		—		—		—		—		—
Purchases	—		—		118,738		—		—		—		—




Loan modifications / capitalized interest	—		—		64		—		—		—		—
Principal repayments	—		—		(95,224)		(105)		(4)		—		—
Total net gains / losses included in net income
Realized gains/(losses), net on assets	—		—		—		—		—		—		—


Unrealized gains/(losses), net on assets(1)	(157)		(1,104)		(42,327)		27		(2,073)		(73,564)		—
Unrealized (gains)/losses, net on liabilities(2)	—		—		—		—		—		—		811
Premium and discount amortization, net	(75)		(82)		(2,043)		—		—		6,699		(811)
Ending balance	$	940	$	6,659	$	1,002,710	$	5,350	$	128,495	$	1,288,943	$	14,919

Unrealized gains/(losses), net on assets held at the end of the period(1)	$	(157)	$	(1,104)	$	(40,637)	$	25	$	(2,073)	$	(73,564)
Unrealized gains/(losses), net on liabilities held at the end of the period(2)	$	—	$	—	$	—	$	—	$	—	$	—	$	(811)

Transfers into the Level III category of the fair value hierarchy occur due to the above segmented classes of investments exhibiting indications of reduced levels of market transparency, including changes in observable transactions or executable quotes involving these investments or similar classes of investments. Changes in these indications could impact price transparency, and thereby cause a change in level designations. The Company did not have transfers between either Level I and Level II or Level I and Level III for the three months ended March 31, 2023 and March 31, 2022.

The fair values of the Company's repurchase agreements approximates the carrying value due to the floating interest rates that are based on an index plus a spread, which is typically consistent with those demanded in the market and the short-term maturities of generally one year or less. The Company's repurchase agreements are classified as Level II.

The following table presents the carrying value and estimated fair value of the Company’s convertible senior unsecured notes and securitized debt that are not carried at fair value as of March 31, 2023 and December 31, 2022 in the consolidated financial statements (dollars in thousands):


	March 31, 2023				December 31, 2022
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value





Convertible senior unsecured notes	$	83,932	$	75,513	$	83,522	$	74,712
Securitized debt(1)	329,701		302,817		342,965		309,474
Total	$	413,633	$	378,330	$	426,487	$	384,186