UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the quarterly period ended June 30, ~~2021~~2022


☐			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 001-35896

Ellington Residential Mortgage REIT

(Exact Name of Registrant as Specified in Its Charter)


Maryland						46-0687599
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

53 Forest Avenue

Old Greenwich, Connecticut 06870

(Address of Principal Executive Offices) (Zip Code)

(203) 698-1200

(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

Common Shares of Beneficial Interest, $0.01 par value per share

EARN

The New York Stock Exchange

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 (§ 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 the 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

☒

Smaller 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 the Registrant's common shares outstanding as of August ~~6, 2021: 12,918,542~~5, 2022: 13,079,394

ELLINGTON RESIDENTIAL MORTGAGE REIT


PART I. Financial Information
Item 1. Consolidated Financial Statements (unaudited)			3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			3435
Item 3. Quantitative and Qualitative Disclosures about Market Risk			5254
Item 4. Controls and Procedures			5456
PART II. Other Information
Item 1. Legal Proceedings			5557
Item 1A. Risk Factors			5557
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			57
Item 6. Exhibits			5558

PART I—FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (unaudited)

ELLINGTON RESIDENTIAL MORTGAGE REIT

CONSOLIDATED BALANCE SHEET

(UNAUDITED)


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
(In thousands except for share amounts)	(In thousands except for share amounts)					(In thousands except for share amounts)
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	58,683	$	58,166	Cash and cash equivalents	$	37,472	$	69,028
Mortgage-backed securities, at fair value(1)	Mortgage-backed securities, at fair value(1)	1,210,620		1,081,380		Mortgage-backed securities, at fair value(1)	947,647		1,311,361
Other investments, at fair value	Other investments, at fair value	306		292		Other investments, at fair value	7,648		309
Due from brokers	Due from brokers	69,000		47,798		Due from brokers	45,643		88,662
Financial derivatives–assets, at fair value	Financial derivatives–assets, at fair value	3,750		2,791		Financial derivatives–assets, at fair value	34,527		6,638
Reverse repurchase agreements	Reverse repurchase agreements	33,572		0		Reverse repurchase agreements	11,005		117,505
Receivable for securities sold	Receivable for securities sold	778		0		Receivable for securities sold	34,217		—
Interest receivable	Interest receivable	3,786		4,114		Interest receivable	3,009		4,504
Other assets	Other assets	550		270		Other assets	650		459
Total Assets	Total Assets	$	1,381,045	$	1,194,811	Total Assets	$	1,121,818	$	1,598,466
LIABILITIES AND SHAREHOLDERS' EQUITY	LIABILITIES AND SHAREHOLDERS' EQUITY					LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES	LIABILITIES					LIABILITIES
Repurchase agreements	Repurchase agreements	$	1,135,497	$	1,015,245	Repurchase agreements	$	950,339	$	1,064,835
Payable for securities purchased	Payable for securities purchased	51,885		0		Payable for securities purchased	15,579		255,136
Due to brokers	Due to brokers	222		1,064		Due to brokers	19,320		1,959
Financial derivatives–liabilities, at fair value	Financial derivatives–liabilities, at fair value	4,318		6,630		Financial derivatives–liabilities, at fair value	2,938		1,103
U.S. Treasury securities sold short, at fair value	U.S. Treasury securities sold short, at fair value	21,017		—		U.S. Treasury securities sold short, at fair value	10,989		117,195
Dividend payable	Dividend payable	3,876		3,456		Dividend payable	1,046		1,311
Accrued expenses	Accrued expenses	1,332		918		Accrued expenses	1,216		1,236
Management fee payable to affiliate	Management fee payable to affiliate	609		626		Management fee payable to affiliate	447		581
Interest payable	Interest payable	437		470		Interest payable	1,314		885
Total Liabilities	Total Liabilities	1,219,193		1,028,409		Total Liabilities	1,003,188		1,444,241
SHAREHOLDERS' EQUITY	SHAREHOLDERS' EQUITY					SHAREHOLDERS' EQUITY
Preferred shares, par value $0.01 per share, 100,000,000 shares authorized; (0 shares issued and outstanding, respectively)	Preferred shares, par value $0.01 per share, 100,000,000 shares authorized; (0 shares issued and outstanding, respectively)	0		0		Preferred shares, par value $0.01 per share, 100,000,000 shares authorized; (0 shares issued and outstanding, respectively)	—		—
Common shares, par value $0.01 per share, 500,000,000 shares authorized; (12,918,542 and 12,343,542 shares issued and outstanding, respectively)		129		123
Common shares, par value $0.01 per share, 500,000,000 shares authorized; (13,079,394 and 13,109,926 shares issued and outstanding, respectively)						Common shares, par value $0.01 per share, 500,000,000 shares authorized; (13,079,394 and 13,109,926 shares issued and outstanding, respectively)	131		131
Additional paid-in-capital	Additional paid-in-capital	236,800		229,614		Additional paid-in-capital	238,816		238,865
Accumulated deficit	Accumulated deficit	(75,077)		(63,335)		Accumulated deficit	(120,317)		(84,771)
Total Shareholders' Equity	Total Shareholders' Equity	161,852		166,402		Total Shareholders' Equity	118,630		154,225
Total Liabilities and Shareholders' Equity	Total Liabilities and Shareholders' Equity	$	1,381,045	$	1,194,811	Total Liabilities and Shareholders' Equity	$	1,121,818	$	1,598,466

(1)Includes assets pledged as collateral to counterparties. See Note 6 for additional details on the Company's borrowings and related collateral.

See Notes to Consolidated Financial Statements

ELLINGTON RESIDENTIAL MORTGAGE REIT

CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)


		Three-Month Period Ended				Six-Month Period Ended					Three-Month Period Ended				Six-Month Period Ended
		June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020			June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
(In thousands except for per share amounts)	(In thousands except for per share amounts)									(In thousands except for per share amounts)
INTEREST INCOME (EXPENSE)	INTEREST INCOME (EXPENSE)									INTEREST INCOME (EXPENSE)
Interest income	Interest income	$	9,875	$	3,489	$	16,410	$	13,370	Interest income	$	9,087	$	9,875	$	15,622	$	16,410
Interest expense	Interest expense	(661)		(2,330)		(1,442)		(8,430)		Interest expense	(1,972)		(661)		(3,075)		(1,442)
Total net interest income	Total net interest income	9,214		1,159		14,968		4,940		Total net interest income	7,115		9,214		12,547		14,968
EXPENSES	EXPENSES									EXPENSES
Management fees to affiliate	Management fees to affiliate	609		594		1,223		1,119		Management fees to affiliate	447		609		947		1,223
Professional fees	Professional fees	275		598		545		806		Professional fees	211		275		417		545
Compensation expense	Compensation expense	212		142		389		293		Compensation expense	191		212		353		389
Insurance expense	Insurance expense	95		82		181		158		Insurance expense	101		95		200		181
Other operating expenses	Other operating expenses	342		316		659		643		Other operating expenses	356		342		710		659
Total expenses	Total expenses	1,533		1,732		2,997		3,019		Total expenses	1,306		1,533		2,627		2,997
OTHER INCOME (LOSS)	OTHER INCOME (LOSS)									OTHER INCOME (LOSS)
Net realized gains (losses) on securities	Net realized gains (losses) on securities	852		5,175		3,932		6,268		Net realized gains (losses) on securities	(15,464)		852		(29,634)		3,932
Net realized gains (losses) on financial derivatives	Net realized gains (losses) on financial derivatives	2,222		(8,452)		(2,928)		(14,951)		Net realized gains (losses) on financial derivatives	30,477		2,222		45,830		(2,928)
Change in net unrealized gains (losses) on securities	Change in net unrealized gains (losses) on securities	(11,071)		15,690		(21,379)		22,458		Change in net unrealized gains (losses) on securities	(28,134)		(11,071)		(78,649)		(21,379)
Change in net unrealized gains (losses) on financial derivatives	Change in net unrealized gains (losses) on financial derivatives	(4,221)		9,505		3,994		(11,096)		Change in net unrealized gains (losses) on financial derivatives	(3,428)		(4,221)		24,326		3,994
Total other income (loss)	Total other income (loss)	(12,218)		21,918		(16,381)		2,679		Total other income (loss)	(16,549)		(12,218)		(38,127)		(16,381)
NET INCOME (LOSS)	NET INCOME (LOSS)	$	(4,537)	$	21,345	$	(4,410)	$	4,600	NET INCOME (LOSS)	$	(10,740)	$	(4,537)	$	(28,207)	$	(4,410)
NET INCOME (LOSS) PER COMMON SHARE:	NET INCOME (LOSS) PER COMMON SHARE:									NET INCOME (LOSS) PER COMMON SHARE:
Basic and Diluted	Basic and Diluted	$	(0.36)	$	1.73	$	(0.36)	$	0.37	Basic and Diluted	$	(0.82)	$	(0.36)	$	(2.15)	$	(0.36)

See Notes to Consolidated Financial Statements

ELLINGTON RESIDENTIAL MORTGAGE REIT

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

(UNAUDITED)


		Common Shares	Common Shares, par value		Preferred Shares	Preferred Shares, par value		Additional Paid-in-Capital		Accumulated (Deficit) Earnings		Total			Common Shares	Common Shares, par value		Preferred Shares	Preferred Shares, par value		Additional Paid-in-Capital		Accumulated (Deficit) Earnings		Total
(In thousands except for share amounts)	(In thousands except for share amounts)													(In thousands except for share amounts)
BALANCE, December 31, 2021														BALANCE, December 31, 2021	13,109,926	$	131	—	$	—	$	238,865	$	(84,771)	$	154,225
Share based compensation														Share based compensation							76				76
Dividends declared(1)														Dividends declared(1)									(3,933)		(3,933)
Net income (loss)														Net income (loss)									(17,467)		(17,467)
BALANCE, March 31, 2022														BALANCE, March 31, 2022	13,109,926	131		—	—		238,941		(106,171)		132,901
Share based compensation														Share based compensation							75				75
Repurchase of common shares														Repurchase of common shares	(30,532)	—					(200)				(200)
Dividends declared(1)														Dividends declared(1)									(3,406)		(3,406)
Net income (loss)														Net income (loss)									(10,740)		(10,740)
BALANCE, June 30, 2022														BALANCE, June 30, 2022	13,079,394	$	131	—	$	—	$	238,816	$	(120,317)	$	118,630

BALANCE, December 31, 2020	BALANCE, December 31, 2020	12,343,542	$	123	0	$	0	$	229,614	$	(63,335)	$	166,402	BALANCE, December 31, 2020	12,343,542	$	123	—	$	—	$	229,614	$	(63,335)	$	166,402
Share based compensation	Share based compensation							66				66		Share based compensation							66				66
Dividends declared(1)	Dividends declared(1)									(3,456)		(3,456)		Dividends declared(1)									(3,456)		(3,456)
Net income (loss)	Net income (loss)									127		127		Net income (loss)									127		127
BALANCE, March 31, 2021	BALANCE, March 31, 2021	12,343,542	123		0	—		229,680		(66,664)		163,139		BALANCE, March 31, 2021	12,343,542	123		—	—		229,680		(66,664)		163,139
Common shares issued(2)	Common shares issued(2)	575,000	6					7,054				7,060		Common shares issued(2)	575,000	6					7,054				7,060
Share based compensation	Share based compensation							66				66		Share based compensation							66				66
Dividends declared(1)	Dividends declared(1)									(3,876)		(3,876)		Dividends declared(1)									(3,876)		(3,876)
Net income (loss)	Net income (loss)									(4,537)		(4,537)		Net income (loss)									(4,537)		(4,537)
BALANCE, June 30, 2021	BALANCE, June 30, 2021	12,918,542	$	129	0	$	0	$	236,800	$	(75,077)	$	161,852	BALANCE, June 30, 2021	12,918,542	$	129	—	$	—	$	236,800	$	(75,077)	$	161,852

BALANCE, December 31, 2019		12,455,758	$	124	0	$	0	$	230,358	$	(69,638)	$	160,844
Share based compensation								59				59
Repurchase of common shares		(136,142)	(1)					(985)				(986)
Dividends declared(1)										(3,449)		(3,449)
Net income (loss)										(16,745)		(16,745)
BALANCE, March 31, 2020		12,319,616	123		0	0		229,432		(89,832)		139,723
Share based compensation								59				59
Dividends declared(1)										(3,450)		(3,450)
Net income (loss)										21,345		21,345
BALANCE, June 30, 2020		12,319,616	$	123	0	$	0	$	229,491	$	(71,937)	$	157,677

(1)For the three-month periods ended June 30, ~~2021~~2022 and ~~2020,~~2021, dividends totaling ~~$0.30~~$0.26 and ~~$0.28,~~$0.30, respectively, per common share outstanding, were declared. For the six-month periods ended June 30, ~~2021~~2022 and ~~2020,~~2021, dividends totaling ~~$0.58~~$0.56 and ~~$0.56,~~$0.58, respectively, per common share outstanding, were declared.

(2)Net of underwriters' discounts and commissions and offering costs.

See Notes to Consolidated Financial Statements

ELLINGTON RESIDENTIAL MORTGAGE REIT

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)


		Six-Month Period Ended					Six-Month Period Ended
		June 30, 2021		June 30, 2020			June 30, 2022		June 30, 2021
(In thousands)	(In thousands)					(In thousands)
Cash flows provided by (used in) operating activities:	Cash flows provided by (used in) operating activities:					Cash flows provided by (used in) operating activities:
Net income (loss)	Net income (loss)	$	(4,410)	$	4,600	Net income (loss)	$	(28,207)	$	(4,410)
Reconciliation of net income (loss) to net cash provided by (used in) operating activities:	Reconciliation of net income (loss) to net cash provided by (used in) operating activities:					Reconciliation of net income (loss) to net cash provided by (used in) operating activities:
Net realized (gains) losses on securities	Net realized (gains) losses on securities	(3,932)		(6,268)		Net realized (gains) losses on securities	29,634		(3,932)
Change in net unrealized (gains) losses on securities	Change in net unrealized (gains) losses on securities	21,379		(22,458)		Change in net unrealized (gains) losses on securities	78,649		21,379
Net realized (gains) losses on financial derivatives	Net realized (gains) losses on financial derivatives	2,928		14,951		Net realized (gains) losses on financial derivatives	(45,830)		2,928
Change in net unrealized (gains) losses on financial derivatives	Change in net unrealized (gains) losses on financial derivatives	(3,994)		11,096		Change in net unrealized (gains) losses on financial derivatives	(24,326)		(3,994)
Amortization of premiums and accretion of discounts, net	Amortization of premiums and accretion of discounts, net	2,206		9,282		Amortization of premiums and accretion of discounts, net	2,347		2,206
Share based compensation	Share based compensation	132		118		Share based compensation	151		132
(Increase) decrease in assets:	(Increase) decrease in assets:					(Increase) decrease in assets:
Interest receivable	Interest receivable	328		727		Interest receivable	1,495		328
Other assets	Other assets	(179)		65		Other assets	(191)		(179)
Increase (decrease) in liabilities:	Increase (decrease) in liabilities:					Increase (decrease) in liabilities:
Accrued expenses	Accrued expenses	113		249		Accrued expenses	13		113
Interest payable	Interest payable	(33)		(3,237)		Interest payable	429		(33)
Management fees payable to affiliate	Management fees payable to affiliate	(17)		(11)		Management fees payable to affiliate	(134)		(17)
Net cash provided by (used in) operating activities	Net cash provided by (used in) operating activities	14,521		9,114		Net cash provided by (used in) operating activities	14,030		14,521
Cash flows provided by (used in) investing activities:	Cash flows provided by (used in) investing activities:					Cash flows provided by (used in) investing activities:
Purchases of securities	Purchases of securities	(563,225)		(408,505)		Purchases of securities	(1,575,390)		(563,225)
Proceeds from sale of securities	Proceeds from sale of securities	283,668		708,337		Proceeds from sale of securities	1,421,966		283,668
Principal repayments of mortgage-backed securities	Principal repayments of mortgage-backed securities	166,776		120,681		Principal repayments of mortgage-backed securities	120,047		166,776
Proceeds from investments sold short	Proceeds from investments sold short	355,633		222,741		Proceeds from investments sold short	245,786		355,633
Repurchase of investments sold short	Repurchase of investments sold short	(319,635)		(227,522)		Repurchase of investments sold short	(346,644)		(319,635)
Proceeds from disposition of financial derivatives	Proceeds from disposition of financial derivatives	11,942		10,574		Proceeds from disposition of financial derivatives	59,151		11,942
Purchase of financial derivatives	Purchase of financial derivatives	(13,950)		(26,417)		Purchase of financial derivatives	(13,653)		(13,950)
Payments made on reverse repurchase agreements	Payments made on reverse repurchase agreements	(4,457,224)		(3,839,520)		Payments made on reverse repurchase agreements	(6,907,422)		(4,457,224)
Proceeds from reverse repurchase agreements	Proceeds from reverse repurchase agreements	4,423,652		3,841,604		Proceeds from reverse repurchase agreements	7,013,921		4,423,652
Due from brokers, net	Due from brokers, net	(3,655)		(11,551)		Due from brokers, net	4,798		(3,655)
Due to brokers, net	Due to brokers, net	(985)		1,024		Due to brokers, net	16,593		(985)
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	(117,003)		391,446		Net cash provided by (used in) investing activities	39,153		(117,003)

See Notes to Consolidated Financial Statements


ELLINGTON RESIDENTIAL MORTGAGE REIT	ELLINGTON RESIDENTIAL MORTGAGE REIT					ELLINGTON RESIDENTIAL MORTGAGE REIT
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)	CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)					CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
(UNAUDITED)	(UNAUDITED)					(UNAUDITED)

		Six-Month Period Ended					Six-Month Period Ended
		June 30, 2021		June 30, 2020			June 30, 2022		June 30, 2021
Cash flows provided by (used in) financing activities:	Cash flows provided by (used in) financing activities:					Cash flows provided by (used in) financing activities:
Net proceeds from the issuance of common shares(1)	Net proceeds from the issuance of common shares(1)	7,360		0		Net proceeds from the issuance of common shares(1)	$	—	$	7,360
Offering costs paid	Offering costs paid	(101)		0		Offering costs paid	(33)		(101)
Repurchase of common shares	Repurchase of common shares	0		(986)		Repurchase of common shares	(200)		—
Dividends paid	Dividends paid	(6,912)		(6,937)		Dividends paid	(7,604)		(6,912)
Borrowings under repurchase agreements	Borrowings under repurchase agreements	1,405,275		1,274,931		Borrowings under repurchase agreements	2,395,320		1,405,275
Repayments of repurchase agreements	Repayments of repurchase agreements	(1,285,023)		(1,661,382)		Repayments of repurchase agreements	(2,509,816)		(1,285,023)
Due from brokers, net	Due from brokers, net	(17,598)		9,234		Due from brokers, net	37,434		(17,598)
Due to brokers, net	Due to brokers, net	(2)		164		Due to brokers, net	160		(2)
Cash provided by (used in) financing activities	Cash provided by (used in) financing activities	102,999		(384,976)		Cash provided by (used in) financing activities	(84,739)		102,999
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	517		15,584		NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(31,556)		517
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	58,166		35,351		CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	69,028		58,166
CASH AND CASH EQUIVALENTS, END OF PERIOD	CASH AND CASH EQUIVALENTS, END OF PERIOD	$	58,683	$	50,935	CASH AND CASH EQUIVALENTS, END OF PERIOD	$	37,472	$	58,683
Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Interest paid	Interest paid	$	1,475	$	11,668	Interest paid	$	2,647	$	1,475
Dividends payable	Dividends payable	3,876		3,450		Dividends payable	1,046		3,876

(1)Net of underwriters' discount and commissions.

See Notes to Consolidated Financial Statements

ELLINGTON RESIDENTIAL MORTGAGE REIT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, ~~2021~~2022

(UNAUDITED)

1. Organization and Investment Objective

Ellington Residential Mortgage REIT, or "EARN," was formed as a Maryland real estate investment trust, or "REIT," on August 2, 2012, and commenced operations on September 25, 2012. EARN conducts its business through its wholly owned subsidiaries, EARN OP GP LLC, or the "General Partner," and Ellington Residential Mortgage LP, or the "Operating Partnership," which were formed as a Delaware limited liability company and a Delaware limited partnership, respectively, on July 31, 2012 and commenced operations on September 25, 2012. The Operating Partnership conducts its business of acquiring, investing in, and managing residential mortgage- and real estate-related assets through its wholly owned subsidiaries. EARN, the General Partner, the Operating Partnership, and their consolidated subsidiaries are hereafter defined as the "Company."

Ellington Residential Mortgage Management LLC, or the "Manager," serves as the Manager of the Company pursuant to the terms of the Fifth Amended and Restated Management Agreement, or the "Management Agreement." The Manager is an affiliate of Ellington Management Group, L.L.C., or "EMG," an investment management firm that is an SEC-registered investment adviser with a ~~26-year~~27-year history of investing in a broad spectrum of mortgage-backed securities and related derivatives, with an emphasis on the residential mortgage-backed securities, or "RMBS," market. In accordance with the terms of the Management Agreement and the Services Agreement (as described in Note 9), the Manager is responsible for administering the Company's business activities and day-to-day operations, and performs certain services, subject to oversight by the Board of Trustees. See Note 9 for further information on the Management Agreement.

The Company acquires and manages RMBS, for which the principal and interest payments are guaranteed by a U.S. government agency or a U.S. government-sponsored entity, or "Agency RMBS," and RMBS that do not carry such guarantees, or "non-Agency RMBS," such as RMBS backed by prime jumbo, Alternative A-paper, manufactured housing, and subprime residential mortgage loans. Agency RMBS include both Agency pools and Agency collateralized mortgage obligations, or "CMOs," and non-Agency RMBS primarily consist of non-Agency CMOs, both investment grade and non-investment grade. The Company may also acquire and manage CMBS, mortgage servicing rights, credit risk transfer securities, residential mortgage loans, and other mortgage- and real estate-related assets. The Company may also invest in other instruments including, but not limited to, forward-settling To-Be-Announced Agency pass-through certificates, or "TBAs," interest rate swaps and swaptions, U.S. Treasury securities, Eurodollar and U.S. Treasury futures, other financial derivatives, and cash equivalents. The Company's targeted investments may range from unrated first loss securities to AAA senior securities.

The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or "the Code," and conducts its operations to qualify and be taxed as a REIT. As a REIT, the Company is required to distribute annually at least 90% of its taxable income. As long as the Company continues to qualify as a REIT, it will not be subject to U.S. federal corporate taxes on its taxable income to the extent that it distributes all of its annual taxable income to its shareholders within the time limits prescribed by the Code. It is the intention of the Company to distribute at least 100% of its taxable income, after application of available tax attributes, within the time limits prescribed by the Code, which may extend into the subsequent taxable year.

2. Significant Accounting Policies

(A) Basis of Presentation: The Company's unaudited interim consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, or "U.S. GAAP," and Regulation S-X. Entities in which the Company has a controlling financial interest, through ownership of the majority of the entities' voting equity interests, or through other contractual rights that give the Company control, are consolidated by the Company. All inter-company balances and transactions have been eliminated. The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and those differences could be material (particularly in light of the significant volatility, lack of pricing transparency, and market dislocations that have been caused by the novel coronavirus disease, or "COVID-19," pandemic, and associated responses to the pandemic).material. In management's opinion, all material adjustments considered necessary for a fair statement of the Company's interim consolidated financial statements have been included and are only of a normal recurring nature. Interim results are not necessarily indicative of the results that may be expected for the entire fiscal year. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

(B) Valuation: The Company applies ASC 820-10, Fair Value Measurement ("ASC 820-10"), to its holdings of financial instruments. ASC 820-10 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation

hierarchy is based upon the observability of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

•Level 1—inputs to the valuation methodology are observable and reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Currently, the types of financial instruments the Company generally includes in this category are exchange-traded derivatives and equities;

•Level 2—inputs to the valuation methodology other than quoted prices included in Level 1 are observable for the asset or liability, either directly or indirectly. Currently, the types of financial instruments that the Company generally includes in this category are Agency RMBS, U.S. Treasury securities, certain non-Agency RMBS, and actively traded derivatives such as TBAs, interest rate swaps, and swaptions; and

•Level 3—inputs to the valuation methodology are unobservable and significant to the fair value measurement. Currently, this category includes certain RMBS, such as certain non-Agency RMBS and certain Agency interest only securities, or "IOs," where there is less price transparency.

For certain financial instruments, the various inputs that management uses to measure fair value may fall into different levels of the fair value hierarchy. For each such financial instrument, the determination of which category within the fair value hierarchy is appropriate is based on the lowest level of input that is significant to the fair value measurement. ASC 820 prioritizes the various inputs that management uses to measure fair value, with the highest priority given to inputs that are observable and reflect quoted prices (unadjusted) for identical assets or liabilities in active markets (Level 1), and the lowest priority given to inputs that are unobservable and significant to the fair value measurement (Level 3). The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument. The Company may use valuation techniques consistent with the market and income approaches to measure the fair value of its assets and liabilities. The market approach uses third-party valuations and information obtained from market transactions involving identical or similar assets or liabilities. The income approach uses projections of the future economic benefits of an instrument to determine its fair value, such as in the discounted cash flow methodology. The inputs or methodology used for valuing financial instruments are not necessarily an indication of the risk associated with investing in these financial instruments. The leveling of each financial instrument is reassessed at the end of each period. Transfers between levels of the fair value hierarchy are assumed to occur at the end of the reporting period.

Summary Valuation Techniques

For financial instruments that are traded in an "active market," the best measure of fair value is the quoted market price. However, many of the Company's financial instruments are not traded in an active market. Therefore, management generally uses third-party valuations when available. If third-party valuations are not available, management uses other valuation techniques, such as the discounted cash flow methodology. The following are summary descriptions, for the various categories of financial instruments, of the valuation methodologies management uses in determining fair value of the Company's financial instruments in such categories. Management utilizes such methodologies to assign a fair value (the estimated price that, in an orderly transaction at the valuation date, would be received to sell an asset, or paid to transfer a liability, as the case may be) to each such financial instrument.

For the Company's RMBS investments and TBAs, management seeks to obtain at least one third-party valuation, and often obtains multiple valuations when available. Management has been able to obtain third-party valuations on the vast majority of these instruments and expects to continue to solicit third-party valuations in the future. Management generally values each financial instrument at the average of third-party valuations received and not rejected as described below. Third-party valuations are not binding, management may adjust the valuations it receives (e.g., downward adjustments for odd lots), and management may challenge or reject a valuation when, based on its validation criteria, management determines that such valuation is unreasonable or erroneous. Furthermore, based on its validation criteria, management may determine that the average of the third-party valuations received for a given instrument does not result in what management believes to be the fair value of such instrument, and in such circumstances management may override this average with its own good faith valuation. The validation criteria may take into account output from management's own models, recent trading activity in the same or similar instruments, and valuations received from third parties. The use of proprietary models requires the use of a significant amount of judgment and the application of various assumptions including, but not limited to, assumptions concerning future prepayment rates and default rates.

Given their relatively high level of price transparency, Agency RMBS pass-throughs and TBAs are typically designated as Level 2 assets. Non-Agency RMBS and Agency interest only and inverse interest only RMBS are generally classified as either Level 2 or Level 3 based on the analysis of available market data and/or third-party valuations. Furthermore, the methodology

used by the third-party valuation providers is reviewed at least annually by management, so as to ascertain whether such providers are utilizing observable market data to determine the valuations that they provide.

Interest rate swaps and swaptions are typically valued based on internal models that use observable market data, including applicable interest rates in effect as of the measurement date; the model-generated valuations are then typically compared to counterparty valuations for reasonableness. These financial derivatives are generally designated as Level 2 instruments.

In valuing its derivatives, the Company also considers the creditworthiness of both the Company and its counterparties, along with collateral provisions contained in each derivative agreement.

The Company's repurchase and reverse repurchase agreements are carried at cost, which approximates fair value. Repurchase agreements and reverse repurchase agreements are classified as Level 2 assets and liabilities based on the adequacy of the collateral and their short term nature.

The Company's valuation process, including the application of validation criteria, is directed by the Manager's Valuation Committee ("Valuation Committee") and overseen by the Company's audit committee. The Valuation Committee includes senior level executives from various departments within the Manager, and each quarter the Valuation Committee reviews and approves the valuations of the Company's investments. The valuation process also includes a monthly review by the Company's third party administrator. The goal of this review is to replicate various aspects of the Company's valuation process based on the Company's documented procedures.

Because of the inherent uncertainty of valuation, the estimated fair value of the Company's financial instruments may differ significantly from the values that would have been used had a ready market for the financial instruments existed, and the differences could be material to the consolidated financial statements.

(C) Accounting for Securities: Purchases and sales of securities are recorded on trade date and realized and unrealized gains and losses are calculated based on identified cost.

The Company has chosen to make a fair value election pursuant to ASC 825-10, Financial Instruments, for its securities portfolio. Electing the fair value option, or "FVO," allows the Company to record changes in fair value in the Consolidated Statement of Operations, which, in management's view, more appropriately reflects the results of operations for a particular reporting period as all securities activities will be recorded in a similar manner. As such, securities are recorded at fair value on the Consolidated Balance Sheet and the period change in fair value is recorded in current period earnings on the Consolidated Statement of Operations as a component of Change in net unrealized gains (losses) on securities.

The Company applies the principles of ASU 2016-13, Financial Instruments—Credit Losses ("ASU 2016-13") and evaluates the cost basis of its securities on at least a quarterly basis under ASC 326-30, Financial Instruments—Credit Losses: Available-for-Sale Debt Securities ("ASC 326-30"). When the fair value of a security is less than its amortized cost basis as of the balance sheet date, the security's cost basis is considered impaired. The Company must evaluate the decline in the fair value of the impaired security and determine whether such decline resulted from a credit loss or non-credit related factors. In its assessment of whether a credit loss exists, the Company compares the present value of estimated future cash flows of the impaired security with the amortized cost basis of such security. The estimated future cash flows reflect those that a "market participant" would use and typically include assumptions related to fluctuations in interest rates, prepayment speeds, default rates, collateral performance, and the timing and amount of projected credit losses, as well as incorporating observations of current market developments and events. Cash flows are discounted at an interest rate equal to the current yield used to accrete interest income. If the present value of estimated future cash flows is less than the amortized cost basis of the security, an expected credit loss exists and is included in Unrealized gains (losses) on securities and loans, net, on the Consolidated Statement of Operations. If it is determined as of the financial reporting date that all or a portion of a security's cost basis is not collectible, then the Company will recognize a realized loss to the extent of the adjustment to the security's cost basis. This adjustment to the amortized cost basis of the security is reflected in Net realized gains (losses) on securities, on the Consolidated Statement of Operations.

(D) Interest Income: Coupon interest income on investment securities is accrued based on the outstanding principal balance or notional amount and the current coupon rate on each security. The Company amortizes purchase premiums and accretes purchase discounts on its fixed-income securities. For RMBS that are deemed to be of high credit quality at the time of purchase, premiums and discounts are generally amortized/accreted into interest income over the life of such securities using the effective interest method. For such RMBS whose cash flows vary depending on prepayments, an effective yield retroactive to the time of purchase is periodically recomputed based on actual prepayments and changes in projected prepayment activity, and a catch-up adjustment, or "Catch-up Premium Amortization Adjustment," is made to amortization to reflect the cumulative impact of the change in effective yield.

For RMBS that are deemed not to be of high credit quality at the time of purchase, interest income is recognized based on the effective interest method. For purposes of estimating future expected cash flows, management uses assumptions including,

but not limited to, assumptions for future prepayment rates, default rates, and loss severities (each of which may in turn incorporate various macro-economic assumptions, such as future housing prices). These assumptions are re-evaluated not less than quarterly. Changes in estimated future cash flows, as applied to the current amortized cost of the security, may result in a prospective change in the yield/interest income recognized on such securities.

Certain of the Company's debt securities, at the date of acquisition, have experienced or are expected to experience more-than-insignificant deterioration in credit quality since origination. ~~For periods subsequent to the Company's application of the principles of ASU 2016-13, if~~If at the date of acquisition for a particular asset the Company projects a significant difference between contractual cash flows and expected cash flows, it establishes an initial estimate for credit losses as an upward adjustment to the acquisition cost of the asset for the purpose of calculating interest income using the effective yield method.

The Company's accretion of discounts and amortization of premiums on securities for U.S. federal and other tax purposes is likely to differ from the accounting treatment under U.S. GAAP of these items as described above.

(E) Cash and Cash Equivalents: Cash and cash equivalents include cash and short term investments with original maturities of three months or less at the date of acquisition. Cash and cash equivalents typically include amounts held in interest bearing overnight accounts and amounts held in money market funds, and these balances generally exceed insured limits. The Company holds its cash at institutions that it believes to be highly creditworthy.

(F) Due from brokers/Due to brokers: Due from brokers and Due to brokers accounts on the Consolidated Balance Sheet include collateral transferred to or received from counterparties, including clearinghouses, along with receivables and payables for open and/or closed derivative positions.

(G) Financial Derivatives: The Company enters into various types of financial derivatives subject to its investment guidelines, which include restrictions associated with maintaining its qualification as a REIT. The Company's financial derivatives are predominantly subject to bilateral ~~collateral arrangements~~master trade agreements or clearing in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Company may be required to deliver or may receive cash or securities as collateral upon entering into derivative transactions. In addition, changes in the relative value of financial derivative transactions may require the Company or the counterparty to post or receive additional collateral. In the case of cleared financial derivatives, the clearinghouse becomes the Company's counterparty and a futures commission merchant acts as intermediary between the Company and the clearinghouse with respect to all facets of the related transaction, including the posting and receipt of required collateral. Collateral received by the Company is reflected on the Consolidated Balance Sheet as "Due to Brokers." Conversely, collateral posted by the Company is reflected as "Due from Brokers" on the Consolidated Balance Sheet. The types of financial derivatives that have been utilized by the Company to date include interest rate swaps, TBAs, swaptions, and futures.

Swaps: The Company enters into interest rate swaps. Interest rate swaps are contractual agreements whereby one party pays a floating interest rate on a notional principal amount and receives a fixed-rate payment on the same notional principal, or vice versa, for a fixed period of time. The Company enters into interest rate swap contracts primarily to mitigate interest rate risk. The Company is subject to interest rate risk exposure in the normal course of pursuing its investment objectives.

Swaps change in value with movements in interest rates or total return of the reference securities. During the term of swap contracts, changes in value are recognized as unrealized gains or losses on the Consolidated Statement of Operations. When a contract is terminated, the Company realizes a gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Company's basis in the contract, if any. Periodic payments or receipts required by swap agreements are recorded as unrealized gains or losses when accrued and realized gains or losses when received or paid. Upfront payments paid and/or received by the Company to open swap contracts are recorded as an asset and/or liability on the Consolidated Balance Sheet and are recorded as a realized gain or loss on the termination date.

TBA Securities: The Company transacts in the forward settling TBA market. A TBA position is a forward contract for the purchase ("long position") or sale ("short position") of Agency RMBS at a predetermined price, face amount, issuer, coupon, and maturity on an agreed-upon future delivery date. For each TBA contract and delivery month, a uniform settlement date for all market participants is determined by the Securities Industry and Financial Markets Association. The specific Agency RMBS to be delivered into the contract at the settlement date are not known at the time of the transaction. The Company typically does not take delivery of TBAs, but rather enters into offsetting transactions and settles the associated receivable and payable balances with its counterparties. The Company uses TBAs to mitigate interest rate risk, usually by taking short positions. The Company also invests in TBAs as a means of acquiring additional exposure to Agency RMBS, or for speculative purposes, including holding long positions.

TBAs are accounted for by the Company as financial derivatives. The difference between the contract price and the fair value of the TBA position as of the reporting date is included in Change in net unrealized gains (losses) on financial derivatives in the Consolidated Statement of Operations. Upon settlement of the TBA contract, the realized gain (loss) on the TBA contract is equal to the net cash amount received (paid).

Options: The Company enters into swaption contracts. It may purchase or write put, call, straddle, or other similar options contracts. The Company enters into options contracts primarily to help mitigate interest rate risk. When the Company purchases an options contract, the option asset is initially recorded at an amount equal to the premium paid, if any, and is subsequently marked-to-market. Premiums paid for purchasing options contracts that expire unexercised are recognized on the expiration date as realized losses. If an options contract is exercised, the premium paid is subtracted from the proceeds of the sale or added to the cost of the purchase to determine whether the Company has realized a gain or loss on the related investment transaction. When the Company writes an options contract, the option liability is initially recorded at an amount equal to the premium received, if any, and is subsequently marked-to-market. Premiums received for writing options contracts that expire unexercised are recognized on the expiration date as realized gains. If an options contract is exercised, the premium received is subtracted from the cost of the purchase or added to the proceeds of the sale to determine whether the Company has realized a gain or loss on the related investment transaction. When the Company enters into a closing transaction, the Company will realize a gain or loss depending upon whether the amount from the closing transaction is greater or less than the premiums paid or received. In general, the Company's options contracts contain forward-settling premiums. In this case, no money is exchanged upfront; instead, the agreed-upon premium is paid by the buyer upon expiration of the options contract, regardless of whether or not the options contract is exercised. Unrealized gains or (losses) resulting from the options contract being marked-to-market are included in Change in net unrealized gains (losses) on financial derivatives in the Consolidated Statement of Operations. Realized gains or (losses) are included in Net realized gains (losses) on financial derivatives on the Consolidated Statement of Operations.

Futures Contracts: The Company enters into Eurodollar futures contracts and U.S. Treasury futures contracts. A futures contract is an exchange-traded agreement to buy or sell an asset for a set price on a future date. Initial margin deposits are made upon entering into futures contracts and can be either in the form of cash or securities. During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by marking-to-market to reflect the current market value of the contract. Unrealized gains or (losses) are included in Change in net unrealized gains (losses) on financial derivatives in the Consolidated Statement of Operations. Variation margin payments are made or received periodically, depending upon whether unrealized losses or gains are incurred. When the contract is closed, the Company records a realized gain or loss equal to the difference between the proceeds of the closing transaction and the Company's basis in the contract. Realized gains or (losses) are included in Net realized gains (losses) on financial derivatives on the Consolidated Statement of Operations.

Financial derivative assets are included in Financial derivatives–assets, at fair value on the Consolidated Balance Sheet while financial derivative liabilities are included in Financial derivatives–liabilities, at fair value on the Consolidated Balance Sheet. The Company has chosen to elect the FVO for its financial derivatives. Electing the FVO allows the Company to record changes in fair value in the Consolidated Statement of Operations, which, in management's view, more appropriately reflects the results of operations for a particular reporting period as all securities activities will be recorded in a similar manner. Changes in unrealized gains and losses on financial derivatives are included in Change in net unrealized gains (losses) on financial derivatives, on the Consolidated Statement of Operations. Realized gains and losses on financial derivatives are included in Net realized gains (losses) on financial derivatives on the Consolidated Statement of Operations.

(H) Repurchase Agreements: The Company enters into repurchase agreements with third-party broker-dealers, whereby it sells securities under agreements to repurchase at an agreed upon price and date. The Company accounts for repurchase agreements as collateralized borrowings, with the initial sale price representing the amount borrowed, and with the future repurchase price consisting of the amount borrowed plus interest, at the implied interest rate of the repurchase agreement, on the amount borrowed over the term of the repurchase agreement. The interest rate on a repurchase agreement is based on competitive market rates (or competitive market spreads, in the case of agreements with floating interest rates) at the time such agreement is entered into. When the Company enters into a repurchase agreement, the lender establishes and maintains an account containing cash and/or securities having a value not less than the repurchase price, including accrued interest, of the repurchase agreement. Repurchase agreements are carried at their contractual amounts, which approximate fair value due to their short-term nature.

(I) Reverse Repurchase Agreements: The Company enters into reverse repurchase agreement transactions with third-party broker-dealers, whereby it purchases securities under agreements to resell at an agreed upon price and date. The interest rate on a reverse repurchase agreement is based on competitive market rates (or competitive market spreads, in the case of agreements

with floating interest rates) at the time such agreement is entered into. Reverse repurchase agreements are carried at their contractual amounts, which approximate fair value due to their short-term nature.

Repurchase and reverse repurchase agreements that are conducted with the same counterparty can be reported on a net basis if they meet the requirements of ASC 210-20, Balance Sheet Offsetting. There are currently no repurchase and reverse repurchase agreements reported on a net basis in the Company's consolidated financial statements.

(J) Securities Sold Short: The Company may purchase or engage in short sales of U.S. Treasury securities to mitigate the potential impact of changes in interest rates on the performance of its portfolio. When the Company sells securities short, it typically satisfies its security delivery settlement obligation by borrowing or purchasing the security sold short from the same or a different counterparty. When borrowing a security sold short from a counterparty, the Company generally is required to deliver cash or securities to such counterparty as collateral for the Company's obligation to return the borrowed security.

The Company has chosen to make the fair value election pursuant to ASC 825-10, Financial Instruments, for its securities sold short. Electing the FVO allows the Company to record changes in fair value in the Consolidated Statement of Operations, which, in management's view, more appropriately reflects the results of operations for a particular reporting period as all securities activities will be recorded in a similar manner. As such, securities sold short are recorded at fair value on the Consolidated Balance Sheet and the period change in fair value is recorded in current period earnings on the Consolidated Statement of Operations as a component of Change in net unrealized gains (losses) on securities. A realized gain or loss will be recognized upon the termination of a short sale if the market price is less or greater than the original sale price. Such realized gain or loss is recorded on the Company's Consolidated Statement of Operations in Net realized gains (losses) on securities.

(K) Offering Costs/Deferred Offering Costs/Underwriters' Discounts: Offering costs, underwriters' discounts and commissions and fees, are charged against shareholders' equity within Additional paid-in-capital. Offering costs typically include legal, accounting, and other fees associated with the cost of raising equity capital.

(L) Share Based Compensation: The Company applies the provisions of ASC 718, Compensation—Stock Compensation ("ASC 718"), with regard to its equity incentive plan. ASC 718 covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. ASC 718 requires that compensation cost relating to share-based payment transactions be recognized in the financial statements. The cost is measured based on the fair value, at the grant date, of the equity or liability instruments issued and is amortized over the vesting period. Restricted shares issued to the Company's independent trustees and partially dedicated personnel are participating securities and receive dividends prior to vesting. Fair value for such awards is based on the closing stock price on the New York Stock Exchange at the grant date. The vesting period for restricted share awards is typically one to two years. Shares issued to the Company's independent trustees and partially dedicated personnel are subject to tax withholding upon vesting. The Company's independent trustees and partially dedicated personnel are permitted to forfeit a portion of their vested shares to pay such withholding tax. Forfeited shares decrease the total number of shares issued and outstanding and are immediately retired upon settlement.

(M) Dividends: Dividends payable are recorded on the declaration date.

(N) Expenses: Expenses are recognized as incurred on the Consolidated Statement of Operations.

(O) Earnings Per Share: In accordance with the provisions of ASC 260, Earnings per Share, the Company calculates basic income (loss) per share by dividing net income (loss) for the period by the weighted average of the Company's common shares outstanding for that period. Diluted income (loss) per share takes into account the effect of dilutive instruments, such as share options and warrants, and uses the average share price for the period in determining the number of incremental shares that are to be added to the weighted average number of shares outstanding.

(P) Share Repurchases: Common shares that are repurchased by the Company subsequent to issuance are immediately retired upon settlement and decrease the total number of shares issued and outstanding. The cost of such share repurchases is charged against Additional paid-in-capital on the Company's Consolidated Balance Sheet.

(Q) Income Taxes: The Company has elected to be taxed as a REIT under Sections 856 through 860 of the Code. As a REIT, the Company is generally not subject to corporate-level federal and state income tax on net income it distributes to its shareholders within the prescribed timeframes. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including distributing at least 90% of its annual taxable income to shareholders. Even if the Company qualifies as a REIT, it may be subject to certain federal, state, local and foreign taxes on its income and property, and to federal income and excise taxes on its undistributed taxable income. If the Company fails to qualify as a REIT, and does not qualify for certain statutory relief provisions, it will be subject to U.S. federal, state, and local income taxes and may be precluded from qualifying as a REIT for the four taxable years following the year in which the Company fails to qualify as a REIT.

The Company follows the authoritative guidance on accounting for and disclosure of uncertainty on tax positions, which requires management to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. For uncertain tax positions, the tax benefit to be recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company did not have any unrecognized tax benefits resulting from tax positions related to the current period or its open tax years. In the normal course of business, the Company may be subject to examination by federal, state, local, and foreign jurisdictions, where applicable, for the current period and its open tax years. The Company may take positions with respect to certain tax issues which depend on legal interpretation of facts or applicable tax regulations. Should the relevant tax regulators successfully challenge any of such positions, the Company might be found to have a tax liability that has not been recorded in the accompanying consolidated financial statements. Also, management's conclusions regarding the authoritative guidance may be subject to review and adjustment at a later date based on changing tax laws, regulations, and interpretations thereof. There were no amounts accrued for penalties or interest as of or during the periods presented in these consolidated financial statements.

(R) Recent Accounting Pronouncements: In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform—Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2020-04"), which provides optional guidance for a limited period meant to ease the potential burden in accounting for, or recognizing the effects of, reform to LIBOR and certain other reference rates. The standard is effective for all entities beginning on March 12, 2020 and may be elected over time. However, ASU 2020-04 is only applicable to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform, and that were entered into or evaluated prior to January 1, 2023. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("ASU 2021-01"), which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications apply to derivatives that are affected by the reform to LIBOR. The amendments in this update were effective immediately for all entities. ASU 2021-01 provides increased clarity as the Company continues to evaluate the transition of reference rates and it is currently evaluating the impact that the adoption of ASU 2020-04 would have on the consolidated financial statements.

3. Mortgage-Backed Securities

The following tables present details of the Company's mortgage-backed securities portfolio at June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. The Company's Agency RMBS include mortgage pass-through certificates and CMOs representing interests in or obligations backed by pools of residential mortgage loans issued or guaranteed by a U.S. government agency or government-sponsored enterprise, or "GSE." The non-Agency RMBS portfolio is not issued or guaranteed by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, or any agency of the U.S. Government and is therefore subject to greater credit risk.

By RMBS Type

June 30, ~~2021:~~2022:

($ in thousands) Gross Unrealized Weighted Average
Current Principal Unamortized Premium (Discount) Amortized Cost Gains Losses Fair Value
Coupon(1)
Yield
Life
(Years)(2)
Agency RMBS:
15-year fixed-rate mortgages $ 140,139 $ 5,665 $ 145,804 $ 2,625 $ (375) $ 148,054 2.83% 1.79% 4.15
20-year fixed-rate mortgages 38,496 1,566 40,062 62 (514) 39,610 2.34% 1.52% 5.57
30-year fixed-rate mortgages 872,706 42,260 914,966 21,221 (2,935) 933,252 3.45% 2.43% 5.83
Adjustable rate mortgages 13,388 639 14,027 71 (56) 14,042 2.92% 2.49% 4.25
Reverse mortgages 49,698 3,258 52,956 1,085 (327) 53,714 3.53% 2.49% 4.16
Interest only securities n/a n/a 15,393 178 (2,927) 12,644 3.56% 5.62% 3.84
Total Agency RMBS 1,114,427 53,388 1,183,208 25,242 (7,134) 1,201,316 3.36% 2.37% 5.34
Non-Agency RMBS 11,069 (3,725) 7,344 1,960 0 9,304 1.45% 8.25% 7.87
Total RMBS $ 1,125,496 $ 49,663 $ 1,190,552 $ 27,202 $ (7,134) $ 1,210,620 3.34% 2.40% 5.36

~~(1)Weighted average coupon represents the weighted average pass-through rates of the securities rather than the weighted average gross mortgage rates of the underlying collateral.~~

~~(2)~~Average lives of RMBS are generally shorter than stated contractual maturities. Average lives are affected by the contractual maturities of the underlying mortgages, scheduled periodic payments of principal, and unscheduled prepayments of principal.

~~December 31, 2020:~~


($ in thousands)	($ in thousands)							Gross Unrealized						Weighted Average			($ in thousands)							Gross Unrealized						Weighted Average
		Current Principal		Unamortized Premium (Discount)		Amortized Cost		Gains		Losses		Fair Value		Coupon(1)	Yield	Life (Years)(2)		Current Principal		Unamortized Premium (Discount)		Amortized Cost		Gains		Losses		Fair Value		Coupon(1)	Yield	Life (Years)(2)
Agency RMBS:	Agency RMBS:																Agency RMBS:
15-year fixed-rate mortgages	15-year fixed-rate mortgages	$	77,578	$	2,566	$	80,144	$	3,063	$	(48)	$	83,159	3.35%	2.24%	3.33	15-year fixed-rate mortgages	$	104,064	$	2,381	$	106,445	$	6	$	(5,938)	$	100,513	2.63%	1.92%	4.16
20-year fixed-rate mortgages	20-year fixed-rate mortgages	42,559		1,688		44,247		516		0		44,763		2.35%	1.34%	4.46	20-year fixed-rate mortgages	33,430		1,410		34,840		—		(4,431)		30,409		2.29%	1.58%	7.05
30-year fixed-rate mortgages	30-year fixed-rate mortgages	763,563		35,797		799,360		35,865		(344)		834,881		3.87%	2.47%	4.18	30-year fixed-rate mortgages	795,468		28,547		824,015		501		(62,212)		762,304		3.30%	2.60%	8.34
Adjustable rate mortgages	Adjustable rate mortgages	19,459		522		19,981		481		(20)		20,442		3.32%	2.34%	3.18	Adjustable rate mortgages	9,266		698		9,964		—		(548)		9,416		3.02%	2.34%	4.58
Reverse mortgages	Reverse mortgages	61,653		3,841		65,494		1,990		(10)		67,474		3.86%	2.40%	4.49	Reverse mortgages	18,781		1,884		20,665		—		(1,284)		19,381		3.65%	2.41%	5.14
Interest only securities	Interest only securities	n/a		n/a		15,434		489		(2,874)		13,049		3.25%	3.74%	3.37	Interest only securities	n/a		n/a		11,096		395		(2,041)		9,450		4.09%	6.62%	6.81
Total Agency RMBS	Total Agency RMBS	964,812		44,414		1,024,660		42,404		(3,296)		1,063,768		3.68%	2.42%	4.02	Total Agency RMBS	961,009		34,920		1,007,025		902		(76,454)		931,473		3.25%	2.53%	7.72
Non-Agency RMBS		23,140		(7,771)		15,369		2,245		(2)		17,612		1.32%	7.41%	6.53
Non-Agency RMBS:																	Non-Agency RMBS:
Principal and interest securities																	Principal and interest securities	10,622		(3,253)		7,369		925		(325)		7,969		2.81%	6.35%	5.44
Interest only securities																	Interest only securities	n/a		n/a		6,570		1,635		—		8,205		0.24%	17.19%	9.47
Total Non-Agency RMBS																	Total Non-Agency RMBS	10,622		(3,253)		13,939		2,560		(325)		16,174		0.28%	11.46%	7.48
Total RMBS	Total RMBS	$	987,952	$	36,643	$	1,040,029	$	44,649	$	(3,298)	$	1,081,380	3.63%	2.49%	4.07	Total RMBS	$	971,631	$	31,667	$	1,020,964	$	3,462	$	(76,779)	$	947,647	2.02%	2.65%	7.72

(1)Weighted average coupon represents the weighted average pass-through rates of the securities rather than the weighted average gross mortgage rates of the underlying collateral.

(2)Average lives of RMBS are generally shorter than stated contractual maturities. Average lives are affected by the contractual maturities of the underlying mortgages, scheduled periodic payments of principal, and unscheduled prepayments of principal.

December 31, 2021:


($ in thousands)							Gross Unrealized						Weighted Average
	Current Principal		Unamortized Premium (Discount)		Amortized Cost		Gains		Losses		Fair Value		Coupon(1)	Yield	Life (Years)(2)
Agency RMBS:
15-year fixed-rate mortgages	$	125,033	$	5,066	$	130,099	$	1,488	$	(877)	$	130,710	2.78%	1.69%	4.18
20-year fixed-rate mortgages	35,732		1,479		37,211		34		(898)		36,347		2.31%	1.50%	5.96
30-year fixed-rate mortgages	1,027,843		38,504		1,066,347		13,672		(7,115)		1,072,904		3.03%	2.37%	4.97
Adjustable rate mortgages	11,491		543		12,034		59		(133)		11,960		2.82%	2.21%	4.23
Reverse mortgages	35,313		2,339		37,652		242		(597)		37,297		3.33%	2.27%	4.24
Interest only securities	n/a		n/a		12,983		95		(2,789)		10,289		3.36%	5.34%	3.87
Total Agency RMBS	1,235,412		47,931		1,296,326		15,590		(12,409)		1,299,507		3.02%	2.31%	4.81
Non-Agency RMBS:
Principal and interest securities	10,672		(3,438)		7,234		1,822		—		9,056		1.47%	6.25%	7.49
Interest only securities	n/a		n/a		2,684		114		—		2,798		0.27%	11.58%	6.79
Total Non-Agency RMBS	10,672		(3,438)		9,918		1,936		—		11,854		0.30%	7.69%	6.82
Total RMBS	$	1,246,084	$	44,493	$	1,306,244	$	17,526	$	(12,409)	$	1,311,361	2.48%	2.33%	5.21

(1)Weighted average coupon represents the weighted average pass-through rates of the securities rather than the weighted average gross mortgage rates of the underlying collateral.

By Estimated Weighted Average Life

As of June 30, ~~2021:~~2022


($ in thousands)	($ in thousands)	Agency RMBS						Agency Interest Only Securities						Non-Agency RMBS						($ in thousands)	Agency RMBS						Agency Interest Only Securities						Non-Agency RMBS
Estimated Weighted Average Life(1)	Estimated Weighted Average Life(1)	Fair Value		Amortized Cost		Weighted Average Coupon(2)		Fair Value		Amortized Cost		Weighted Average Coupon(2)		Fair Value		Amortized Cost		Weighted Average Coupon(2)		Estimated Weighted Average Life(1)	Fair Value		Amortized Cost		Weighted Average Coupon(2)		Fair Value		Amortized Cost		Weighted Average Coupon(2)		Fair Value		Amortized Cost		Weighted Average Coupon(2)
Less than three years	Less than three years	$	47,445	$	46,456	4.05	%	$	1,909	$	2,678	4.73	%	$	584	$	486	6.00	%	Less than three years	$	16,288	$	16,988	3.34	%	$	554	$	709	4.56	%	$	3,091	$	3,328	3.24	%
Greater than three years and less than seven years	Greater than three years and less than seven years	947,430		929,137		3.51	%	10,257		12,228		3.34	%	311		141		2.70	%	Greater than three years and less than seven years	265,855		282,522		3.47	%	2,997		3,749		4.41	%	304		175		2.89	%
Greater than seven years and less than eleven years	Greater than seven years and less than eleven years	193,797		192,222		2.35	%	478		487		2.00	%	8,409		6,717		0.94	%	Greater than seven years and less than eleven years	639,880		696,419		3.08	%	5,899		6,638		3.81	%	12,779		10,436		0.26	%
Total	Total	$	1,188,672	$	1,167,815	3.33	%	$	12,644	$	15,393	3.56	%	$	9,304	$	7,344	1.45	%	Total	$	922,023	$	995,929	3.19	%	$	9,450	$	11,096	4.09	%	$	16,174	$	13,939	0.28	%

(1)Average lives of RMBS are generally shorter than stated contractual maturities.

(2)Weighted average coupon represents the weighted average pass-through rates of the securities rather than the weighted average gross mortgage rates of the underlying collateral.

As of December 31, ~~2020:~~2021:


($ in thousands)	($ in thousands)	Agency RMBS						Agency Interest Only Securities						Non-Agency RMBS						($ in thousands)	Agency RMBS						Agency Interest Only Securities						Non-Agency RMBS
Estimated Weighted Average Life(1)	Estimated Weighted Average Life(1)	Fair Value		Amortized Cost		Weighted Average Coupon(2)		Fair Value		Amortized Cost		Weighted Average Coupon(2)		Fair Value		Amortized Cost		Weighted Average Coupon(2)		Estimated Weighted Average Life(1)	Fair Value		Amortized Cost		Weighted Average Coupon(2)		Fair Value		Amortized Cost		Weighted Average Coupon(2)		Fair Value		Amortized Cost		Weighted Average Coupon(2)
Less than three years	Less than three years	$	165,830	$	162,346	3.80	%	$	3,345	$	4,341	4.72	%	$	1,848	$	1,757	2.08	%	Less than three years	$	28,443	$	28,273	3.75	%	$	1,628	$	2,027	2.10	%	$	561	$	457	6.00	%
Greater than three years and less than seven years	Greater than three years and less than seven years	860,498		824,259		3.74	%	9,612		10,995		2.84	%	8,728		7,215		1.45	%	Greater than three years and less than seven years	724,996		718,318		3.53	%	7,820		10,095		4.38	%	1,773		1,571		0.35	%
Greater than seven years and less than eleven years	Greater than seven years and less than eleven years	7,953		7,399		3.86	%	92		98		0.23	%	7,036		6,397		0.93	%	Greater than seven years and less than eleven years	280,147		281,786		2.50	%	841		861		2.39	%	9,520		7,890		0.25	%
Greater than eleven years	Greater than eleven years	16,438		15,222		3.61	%	0		0		0	%	0		0		0	%	Greater than eleven years	255,632		254,966		2.00	%	—		—		—	%	—		—		—	%
Total	Total	$	1,050,719	$	1,009,226	3.75	%	$	13,049	$	15,434	3.25	%	$	17,612	$	15,369	1.32	%	Total	$	1,289,218	$	1,283,343	2.99	%	$	10,289	$	12,983	3.36	%	$	11,854	$	9,918	0.30	%

(1)Average lives of RMBS are generally shorter than stated contractual maturities.

(2)Weighted average coupon represents the weighted average pass-through rates of the securities rather than the weighted average gross mortgage rates of the underlying collateral.

The following tables reflect the components of interest income on the Company's RMBS for the ~~three-and~~three- and six-month periods ended June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three-Month Period Ended June 30, 2021						Three-Month Period Ended June 30, 2020							Three-Month Period Ended June 30, 2022						Three-Month Period Ended June 30, 2021
($ in thousands)	($ in thousands)	Coupon Interest		Net Amortization		Interest Income		Coupon Interest		Net Amortization		Interest Income		($ in thousands)	Coupon Interest		Net Amortization		Interest Income		Coupon Interest		Net Amortization		Interest Income
Agency RMBS	Agency RMBS	$	10,331	$	(654)	$	9,677	$	10,333	$	(7,332)	$	3,001	Agency RMBS	$	8,990	$	(561)	$	8,429	$	10,331	$	(654)	$	9,677
Non-Agency RMBS	Non-Agency RMBS	43		122		165		161		274		435		Non-Agency RMBS	481		(57)		424		43		122		165
Total	Total	$	10,374	$	(532)	$	9,842	$	10,494	$	(7,058)	$	3,436	Total	$	9,471	$	(618)	$	8,853	$	10,374	$	(532)	$	9,842

Six-Month Period Ended
June 30, 2021 Six-Month Period Ended
June 30, 2020
($ in thousands) Coupon
Interest Net Amortization Interest
Income Coupon
Interest Net Amortization Interest
Income
Agency RMBS $ 20,449 $ (4,482) $ 15,967 $ 24,512 $ (12,175) $ 12,337
Non-Agency RMBS 115 279 394 250 382 632
Total $ 20,564 $ (4,203) $ 16,361 $ 24,762 $ (11,793) $ 12,969


	Six-Month Period Ended June 30, 2022						Six-Month Period Ended June 30, 2021
($ in thousands)	Coupon Interest		Net Amortization		Interest Income		Coupon Interest		Net Amortization		Interest Income
Agency RMBS	$	18,214	$	(3,579)	$	14,635	$	20,449	$	(4,482)	$	15,967
Non-Agency RMBS	903		(189)		714		115		279		394
Total	$	19,117	$	(3,768)	$	15,349	$	20,564	$	(4,203)	$	16,361

For the three-month periods ended June 30, ~~2021~~2022 and ~~2020,~~2021, the Catch-up Premium Amortization Adjustment was ~~$2.6~~$1.6 million and ~~$(3.8)~~$2.6 million, respectively. For the six-month periods ended June 30, ~~2021~~2022 and ~~2020,~~2021, the Catch-up Premium Amortization Adjustment was ~~$2.7~~$1.1 million and ~~$(4.5)~~$2.7 million, respectively.

At June 30, 2022, the Company had gross unrealized losses on RMBS of $(76.8) million, of which $(0.6) million relates primarily to adverse changes in estimated future cash flows on Agency IOs. At December 31, 2021, the Company had gross unrealized losses on RMBS of ~~$(7.1)~~$(12.4) million, of which ~~$(2.6)~~$(2.2) million relates to adverse changes in estimated future cash flows on Agency IOs and non-Agency RMBS, primarily resulting from an increase in expected prepayments. ~~At December 31, 2020, the Company had gross unrealized losses on RMBS of $(3.3) million, of which~~

$(2.6) million relates to adverse changes in estimated future cash flows on Agency IOs and non-Agency RMBS, primarily resulting from an increase in expected prepayments. As of December 31, 2020, certain of the Company's securities, at the date of acquisition, have experienced or are expected to experience more-than-insignificant deterioration in credit quality since origination, and the Company has established an initial estimate for credit losses on such securities for the purpose of calculating interest income. As of December 31, 2020, the estimated credit losses on such securities was $(0.7) million.

~~As of June 30, 2021, the~~The Company determined for certain securities that a portion of such securities' cost basis is not collectible; for the three- and six-month periods ended June 30, 2022, the Company recognized realized losses on such securities of $(0.2) million and $(0.5) million, respectively. For each of the three- and six-month periods ended June 30, 2021, the Company recognized a realized loss of $(0.4) ~~million, which is~~million. Such realized losses are reflected in Net realized gains (losses) on securities, on the Consolidated Statement of Operations.

4. Valuation

The following tables present the Company's financial instruments measured at fair value on:

June 30, ~~2021:~~2022:


(In thousands)	(In thousands)									(In thousands)
Description	Description	Level 1		Level 2		Level 3		Total		Description	Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Mortgage-backed securities, at fair value:	Mortgage-backed securities, at fair value:									Mortgage-backed securities, at fair value:
Agency RMBS:	Agency RMBS:									Agency RMBS:
15-year fixed-rate mortgages	15-year fixed-rate mortgages	$	0	$	148,054	$	0	$	148,054	15-year fixed-rate mortgages	$	—	$	100,513	$	—	$	100,513
20-year fixed-rate mortgages	20-year fixed-rate mortgages	0		39,610		0		39,610		20-year fixed-rate mortgages	—		30,409		—		30,409
30-year fixed-rate mortgages	30-year fixed-rate mortgages	0		933,252		0		933,252		30-year fixed-rate mortgages	—		762,304		—		762,304
Adjustable rate mortgages	Adjustable rate mortgages	0		14,042		0		14,042		Adjustable rate mortgages	—		9,416		—		9,416
Reverse mortgages	Reverse mortgages	0		53,714		0		53,714		Reverse mortgages	—		19,381		—		19,381
Interest only securities	Interest only securities	0		8,411		4,233		12,644		Interest only securities	—		6,755		2,695		9,450
Non-Agency RMBS	Non-Agency RMBS	0		353		8,951		9,304		Non-Agency RMBS	—		—		16,174		16,174
Mortgage-backed securities, at fair value	Mortgage-backed securities, at fair value	0		1,197,436		13,184		1,210,620		Mortgage-backed securities, at fair value	—		928,778		18,869		947,647
Other investments, at fair value:	Other investments, at fair value:									Other investments, at fair value:
U.S. Treasury securities										U.S. Treasury securities	—		7,431		—		7,431
Preferred equity securities	Preferred equity securities	306		0		0		306		Preferred equity securities	217		—		—		217
Total other investments, at fair value	Total other investments, at fair value	306		0		0		306		Total other investments, at fair value	217		7,431		—		7,648
Financial derivatives–assets, at fair value:	Financial derivatives–assets, at fair value:									Financial derivatives–assets, at fair value:
TBAs	TBAs	0		1,696		0		1,696		TBAs	—		845		—		845
Interest rate swaps	Interest rate swaps	0		1,496		0		1,496		Interest rate swaps	—		33,649		—		33,649
Futures	Futures	558		0		0		558		Futures	33		—		—		33
Total financial derivatives–assets, at fair value	Total financial derivatives–assets, at fair value	558		3,192		0		3,750		Total financial derivatives–assets, at fair value	33		34,494		—		34,527
Total mortgage-backed securities, other investments, and financial derivatives–assets, at fair value	Total mortgage-backed securities, other investments, and financial derivatives–assets, at fair value	$	864	$	1,200,628	$	13,184	$	1,214,676	Total mortgage-backed securities, other investments, and financial derivatives–assets, at fair value	$	250	$	970,703	$	18,869	$	989,822
Liabilities:	Liabilities:									Liabilities:
U.S. Treasury securities sold short, at fair value	U.S. Treasury securities sold short, at fair value	$	0	$	(21,017)	$	0	$	(21,017)	U.S. Treasury securities sold short, at fair value	$	—	$	(10,989)	$	—	$	(10,989)
Financial derivatives–liabilities, at fair value:	Financial derivatives–liabilities, at fair value:									Financial derivatives–liabilities, at fair value:
TBAs	TBAs	0		(74)		0		(74)		TBAs	—		(2,347)		—		(2,347)
Interest rate swaps	Interest rate swaps	0		(3,596)		0		(3,596)		Interest rate swaps	—		(517)		—		(517)
Futures	Futures	(648)		0		0		(648)		Futures	(74)		—		—		(74)
Total financial derivatives–liabilities, at fair value	Total financial derivatives–liabilities, at fair value	(648)		(3,670)		0		(4,318)		Total financial derivatives–liabilities, at fair value	(74)		(2,864)		—		(2,938)
Total U.S. Treasury securities sold short and financial derivatives–liabilities, at fair value	Total U.S. Treasury securities sold short and financial derivatives–liabilities, at fair value	$	(648)	$	(24,687)	$	0	$	(25,335)	Total U.S. Treasury securities sold short and financial derivatives–liabilities, at fair value	$	(74)	$	(13,853)	$	—	$	(13,927)

1718

December 31, ~~2020:~~2021:


(In thousands)	(In thousands)									(In thousands)
Description	Description	Level 1		Level 2		Level 3		Total		Description	Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Mortgage-backed securities, at fair value:	Mortgage-backed securities, at fair value:									Mortgage-backed securities, at fair value:
Agency RMBS:	Agency RMBS:									Agency RMBS:
15-year fixed-rate mortgages	15-year fixed-rate mortgages	$	0	$	83,159	$	0	$	83,159	15-year fixed-rate mortgages	$	—	$	130,710	$	—	$	130,710
20-year fixed-rate mortgages	20-year fixed-rate mortgages	0		44,763		0		44,763		20-year fixed-rate mortgages	—		36,347		—		36,347
30-year fixed-rate mortgages	30-year fixed-rate mortgages	0		834,881		0		834,881		30-year fixed-rate mortgages	—		1,072,904		—		1,072,904
Adjustable rate mortgages	Adjustable rate mortgages	0		20,442		0		20,442		Adjustable rate mortgages	—		11,960		—		11,960
Reverse mortgages	Reverse mortgages	0		67,474		0		67,474		Reverse mortgages	—		37,297		—		37,297
Interest only securities	Interest only securities	0		4,853		8,196		13,049		Interest only securities	—		4,635		5,654		10,289
Non-Agency RMBS	Non-Agency RMBS	0		4,316		13,296		17,612		Non-Agency RMBS	—		4,595		7,259		11,854
Mortgage-backed securities, at fair value	Mortgage-backed securities, at fair value	0		1,059,888		21,492		1,081,380		Mortgage-backed securities, at fair value	—		1,298,448		12,913		1,311,361
Other investments, at fair value:	Other investments, at fair value:									Other investments, at fair value:
Preferred equity securities	Preferred equity securities	292		0		0		292		Preferred equity securities	309		—		—		309
Total other investments, at fair value	Total other investments, at fair value	292		0		0		292		Total other investments, at fair value	309		—		—		309
Financial derivatives–assets, at fair value:	Financial derivatives–assets, at fair value:									Financial derivatives–assets, at fair value:
TBAs	TBAs	0		1,720		0		1,720		TBAs	—		908		—		908
Interest rate swaps	Interest rate swaps	0		1,071		0		1,071		Interest rate swaps	—		5,454		—		5,454
Futures										Futures	276		—		—		276
Total financial derivatives–assets, at fair value	Total financial derivatives–assets, at fair value	0		2,791		0		2,791		Total financial derivatives–assets, at fair value	276		6,362		—		6,638
Total mortgage-backed securities and financial derivatives–assets, at fair value	Total mortgage-backed securities and financial derivatives–assets, at fair value	$	292	$	1,062,679	$	21,492	$	1,084,463	Total mortgage-backed securities and financial derivatives–assets, at fair value	$	585	$	1,304,810	$	12,913	$	1,318,308
Liabilities:	Liabilities:									Liabilities:
U.S. Treasury securities sold short, at fair value										U.S. Treasury securities sold short, at fair value	$	—	$	(117,195)	$	—	$	(117,195)
Financial derivatives–liabilities, at fair value:	Financial derivatives–liabilities, at fair value:									Financial derivatives–liabilities, at fair value:
TBAs	TBAs	$	0	$	(699)	$	0	$	(699)	TBAs	—		(350)		—		(350)
Interest rate swaps	Interest rate swaps	0		(5,585)		0		(5,585)		Interest rate swaps	—		(608)		—		(608)
Futures	Futures	(346)		0		0		(346)		Futures	(145)		—		—		(145)
Total financial derivatives–liabilities, at fair value	Total financial derivatives–liabilities, at fair value	$	(346)	$	(6,284)	$	0	$	(6,630)	Total financial derivatives–liabilities, at fair value	(145)		(958)		—		(1,103)
Total U.S. Treasury securities sold short and financial derivatives–liabilities, at fair value										Total U.S. Treasury securities sold short and financial derivatives–liabilities, at fair value	$	(145)	$	(118,153)	$	—	$	(118,298)

The following tables present additional information about the Company's investments which are measured at fair value for which the Company has utilized Level 3 inputs to determine fair value.

Three-Month Period Ended June 30, ~~2021:~~2022:


(In thousands)	(In thousands)	Non-Agency RMBS		Agency RMBS		(In thousands)	Non-Agency RMBS		Agency RMBS
Beginning balance as of March 31, 2021		$	10,000	$	7,195
Beginning balance as of March 31, 2022						Beginning balance as of March 31, 2022	$	12,148	$	3,142
Purchases	Purchases	0		434		Purchases	1,375		—
Proceeds from sales	Proceeds from sales	(1,125)		(118)		Proceeds from sales	(1,375)		—
Principal repayments	Principal repayments	(300)		0		Principal repayments	(33)		—
(Amortization)/accretion, net	(Amortization)/accretion, net	125		(489)		(Amortization)/accretion, net	—		(146)
Net realized gains (losses)	Net realized gains (losses)	100		(96)		Net realized gains (losses)	25		(240)
Change in net unrealized gains (losses)	Change in net unrealized gains (losses)	151		(1,234)		Change in net unrealized gains (losses)	(688)		163
Transfers:	Transfers:					Transfers:
Transfers into level 3	Transfers into level 3	0		188		Transfers into level 3	4,722		671
Transfers out of level 3	Transfers out of level 3	0		(1,647)		Transfers out of level 3	—		(895)
Ending balance as of June 30, 2021		$	8,951	$	4,233
Ending balance as of June 30, 2022						Ending balance as of June 30, 2022	$	16,174	$	2,695

All amounts of net realized and changes in net unrealized gains (losses) in the table above are reflected in the accompanying Consolidated Statement of Operations. The table above incorporates changes in net unrealized gains (losses) for both Level 3 financial instruments held by the Company at June 30, 2022, as well as Level 3 financial instruments disposed of by the Company during the three-month period ended June 30, 2022. For Level 3 financial instruments held by the Company as of June 30, 2022, change in net unrealized gains (losses) of $(0.1) million and $0.1 million, for the three-month period ended June 30, 2022 relate to non-Agency RMBS and Agency RMBS, respectively.

At June 30, 2022, the Company transferred $0.9 million of RMBS from Level 3 to Level 2 and $5.4 million of RMBS from Level 2 to Level 3. Transfers between hierarchy levels are based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria. The level designation of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third party pricing sources.

Three-Month Period Ended June 30, 2021:


(In thousands)	Non-Agency RMBS		Agency RMBS
Beginning balance as of March 31, 2021	$	10,000	$	7,195
Purchases	—		434
Proceeds from sales	(1,125)		(118)
Principal repayments	(300)		—
(Amortization)/accretion, net	125		(489)
Net realized gains (losses)	100		(96)
Change in net unrealized gains (losses)	151		(1,234)
Transfers:
Transfers into level 3	—		188
Transfers out of level 3	—		(1,647)
Ending balance as of June 30, 2021	$	8,951	$	4,233

by the Company during the three-month period ended June 30, 2021. For Level 3 financial instruments held by the Company as of June 30, 2021, change in net unrealized gains (losses) of $0.2 million and $(0.8) million, for the three-month period ended June 30, 2021 relate to non-Agency RMBS and Agency RMBS, respectively.

At June 30, 2021, the Company transferred $1.6 million of RMBS from Level 3 to Level 2 and $0.2 million of RMBS from Level 2 to Level 3. Transfers between these hierarchy levels are based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria. The level designation of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third party pricing sources.

~~Three-Month~~

The following tables present additional information about the Company's investments which are measured at fair value for which the Company has utilized Level 3 inputs to determine fair value.

Six-Month Period Ended June 30, ~~2020:~~2022:


(In thousands)	(In thousands)	Non-Agency RMBS		Agency RMBS		(In thousands)	Non-Agency RMBS		Agency RMBS
Beginning balance as of March 31, 2020		$	3,001	$	6,966
Beginning balance as of December 31, 2021						Beginning balance as of December 31, 2021	$	7,259	$	5,654
Purchases	Purchases	14,289		0		Purchases	7,849		174
Proceeds from sales	Proceeds from sales	(5,574)		0		Proceeds from sales	(6,502)		—
Principal repayments	Principal repayments	(175)		0		Principal repayments	(74)		—
(Amortization)/accretion, net	(Amortization)/accretion, net	116		(705)		(Amortization)/accretion, net	(49)		(956)
Net realized gains (losses)	Net realized gains (losses)	280		0		Net realized gains (losses)	23		(181)
Change in net unrealized gains (losses)	Change in net unrealized gains (losses)	206		(68)		Change in net unrealized gains (losses)	321		824
Transfers:	Transfers:					Transfers:
Transfers into level 3	Transfers into level 3	0		420		Transfers into level 3	7,347		354
Transfers out of level 3	Transfers out of level 3	0		(4,093)		Transfers out of level 3	—		(3,174)
Ending balance as of June 30, 2020		$	12,143	$	2,520
Ending balance as of June 30, 2022						Ending balance as of June 30, 2022	$	16,174	$	2,695

All amounts of net realized and changes in net unrealized gains (losses) in the table above are reflected in the accompanying Consolidated Statement of Operations. The table above incorporates changes in net unrealized gains (losses) for both Level 3 financial instruments held by the Company at June 30, ~~2020,~~2022, as well as Level 3 financial instruments disposed of by the Company during the ~~three-month~~six-month period ended June 30, ~~2020.~~2022. For Level 3 financial instruments held by the Company as of June 30, ~~2020,~~2022, change in net unrealized gains (losses) of ~~$0.2~~$0.3 million and ~~$(28) thousand,~~$0.3 million, for the ~~three-month~~six-month period ended June 30, ~~2020~~2022 relate to non-Agency RMBS and Agency RMBS, respectively.

At June 30, ~~2020,~~2022, the Company transferred ~~$4.1~~$3.2 million of RMBS from Level 3 to Level 2 and ~~$0.4~~$7.7 million of RMBS from Level 2 to Level 3. Transfers between hierarchy levels are based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria. The level designation of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third party pricing sources.

Six-Month Period Ended June 30, 2021:


(In thousands)	(In thousands)	Non-Agency RMBS		Agency RMBS		(In thousands)	Non-Agency RMBS		Agency RMBS
Beginning balance as of December 31, 2020	Beginning balance as of December 31, 2020	$	13,296	$	8,196	Beginning balance as of December 31, 2020	$	13,296	$	8,196
Purchases	Purchases	0		2,338		Purchases	—		2,338
Proceeds from sales	Proceeds from sales	(4,040)		0		Proceeds from sales	(4,040)		—
Principal repayments	Principal repayments	(751)		0		Principal repayments	(751)		—
(Amortization)/accretion, net	(Amortization)/accretion, net	273		(1,451)		(Amortization)/accretion, net	273		(1,451)
Net realized gains (losses)	Net realized gains (losses)	270		(382)		Net realized gains (losses)	270		(382)
Change in net unrealized gains (losses)	Change in net unrealized gains (losses)	(97)		(105)		Change in net unrealized gains (losses)	(97)		(105)
Transfers:	Transfers:					Transfers:
Transfers into level 3	Transfers into level 3	0		361		Transfers into level 3	—		361
Transfers out of level 3	Transfers out of level 3	0		(4,724)		Transfers out of level 3	—		(4,724)
Ending balance as of June 30, 2021	Ending balance as of June 30, 2021	$	8,951	$	4,233	Ending balance as of June 30, 2021	$	8,951	$	4,233

of June 30, 2021, change in net unrealized gains (losses) of $0.1 million and $(0.1) million, for the six-month period ended June 30, 2021 relate to non-Agency RMBS and Agency RMBS, respectively.

At June 30, 2021, the Company transferred $4.7 million of RMBS from Level 3 to Level 2 and $0.4 million of RMBS from Level 2 to Level 3. Transfers between hierarchy levels are based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria. The level designation of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third party pricing sources.

~~Six-Month Period Ended June 30, 2020:~~

(In thousands) Non-Agency RMBS Agency RMBS
Beginning balance as of December 31, 2019 $ 3,273 $ 7,639
Purchases 14,289 77
Proceeds from sales (5,574) 0
Principal repayments (269) 0
(Amortization)/accretion, net 207 (1,144)
Net realized gains (losses) 280 (1)
Change in net unrealized gains (losses) (63) (542)
Transfers:
Transfers into level 3 0 1,401
Transfers out of level 3 0 (4,910)
Ending balance as of June 30, 2020 $ 12,143 $ 2,520

All amounts of net realized and changes in net unrealized gains (losses) in the table above are reflected in the accompanying Consolidated Statement of Operations. The table above incorporates changes in net unrealized gains (losses) for both Level 3 financial instruments held by the Company as of June 30, 2020, as well as Level 3 financial instruments disposed of by the Company during the six-month period ended June 30, 2020. For Level 3 financial instruments held by the Company as of June 30, 2020, change in net unrealized gains (losses) of $(63) thousand and $(0.6) million, for the six-month period ended June 30, 2020 relate to non-Agency RMBS and Agency RMBS, respectively.

~~At June 30, 2020, the Company transferred $4.9 million of RMBS from Level 3 to Level 2 and $1.4 million of RMBS from Level 2 to Level 3. Transfers between~~ these hierarchy levels are based on the availability of sufficient observable inputs to meet Level 2 versus Level 3 criteria. The level designation of each financial instrument is reassessed at the end of each period, and is based on pricing information received from third party pricing sources.

2021

The following tables identify the significant unobservable inputs that affect the valuation of the Company's Level 3 assets and liabilities as of June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:

June 30, 2022:


					Range
Description	Fair Value		Valuation Technique	Significant Unobservable Input	Min			Max			Weighted Average(1)
	(In thousands)
Non-Agency RMBS	$	11,916	Market quotes	Non-Binding Third-Party Valuation	$	0.47		$	91.00		$	47.21
	4,258		Discounted Cash Flows
	16,174			Yield	5.1		%	22.7		%	9.3		%
				Projected Collateral Prepayments	20.9		%	52.5		%	28.3		%
				Projected Collateral Losses	1.1		%	10.8		%	8.4		%
				Projected Collateral Recoveries	9.3		%	14.7		%	12.7		%
Agency RMBS–Interest Only Securities	474		Market quotes	Non-Binding Third-Party Valuation	$	12.86		$	17.29		$	14.55
	2,221		Option Adjusted Spread ("OAS")	LIBOR OAS (2)	230			5,056			1,076
	2,695			Projected Collateral Prepayments	38.9		%	79.0		%	48.2		%

(1)Averages are weighted based on the fair value of the related instrument.

(2)Shown in basis points.

December 31, 2021:


						Range														Range
Description	Description	Fair Value		Valuation Technique	Significant Unobservable Input	Min			Max			Weighted Average(1)			Description	Fair Value		Valuation Technique	Significant Unobservable Input	Min			Max			Weighted Average(1)
		(In thousands)														(In thousands)
Non-Agency RMBS	Non-Agency RMBS	$	6,682	Market quotes	Non-Binding Third-Party Valuation	$	82.66		$	93.50		$	87.86		Non-Agency RMBS	$	2,643	Market quotes	Non-Binding Third-Party Valuation	$	52.43		$	92.28		$	88.18
		2,269		Discounted Cash Flows												4,616		Discounted Cash Flows
		8,951			Yield	2.8		%	31.7		%	4.4		%		7,259			Yield	2.2		%	31.8		%	6.0		%
					Projected Collateral Prepayments	28.0		%	53.6		%	33.4		%					Projected Collateral Prepayments	35.7		%	79.1		%	49.2		%
					Projected Collateral Losses	1.8		%	9.7		%	8.2		%					Projected Collateral Losses	0.0		%	9.2		%	5.9		%
					Projected Collateral Recoveries	8.6		%	16.0		%	13.9		%					Projected Collateral Recoveries	1.1		%	14.0		%	9.3		%
Agency RMBS–Interest Only Securities	Agency RMBS–Interest Only Securities	764		Market quotes	Non-Binding Third-Party Valuation	$	10.67		$	15.66		$	12.41		Agency RMBS–Interest Only Securities	3,713		Market quotes	Non-Binding Third-Party Valuation	$	6.64		$	15.90		$	13.42
		3,469		Option Adjusted Spread ("OAS")	LIBOR OAS (2)(3)	224			3,458			923				1,941		Option Adjusted Spread ("OAS")	LIBOR OAS (2)(3)	224			5,020			953
		4,233			Projected Collateral Prepayments	21.8		%	84.1		%	71.9		%		5,654			Projected Collateral Prepayments	17.3		%	85.4		%	72.4		%

(1)Averages are weighted based on the fair value of the related instrument.

(2)Shown in basis points.

(3)For the range minimum, the range maximum, and the weighted average of LIBOR OAS, excludes Agency interest only securities with a negative LIBOR OAS, with a total fair value of ~~$45~~$15 thousand. Including these securities, the weighted average was ~~911 basis points.~~

~~December 31, 2020:~~

Range
Description Fair Value Valuation Technique
Significant
Unobservable Input
Min Max
Weighted Average(1)
(In thousands)
Non-Agency RMBS $ 12,009 Market quotes Non-Binding Third-Party Valuation $ 42.57 $ 92.45 $ 80.76
1,287 Discounted Cash Flows
13,296
Yield(2)
2.2 % 28.6 % 4.5 %
Projected Collateral Prepayments 31.7 % 56.2 % 41.8 %
Projected Collateral Losses 2.8 % 14.3 % 8.3 %
Projected Collateral Recoveries 9.4 % 21.5 % 15.2 %
Agency RMBS–Interest Only Securities 8,196 Option Adjusted Spread ("OAS")
LIBOR OAS (3)(4)
0 3,077 543
Projected Collateral Prepayments 25.8 % 100.0 % 82.9 %

~~(1)Averages are weighted based on the fair value of the related instrument.~~

~~(2)~~For the range minimum, the range maximum, and the weighted average yield, excludes non-Agency RMBS with a negative yield, with a total fair value of $0.9 million. Including these securities the weighted average yield was 4.1%

~~(3)Shown in basis points.~~

~~(4)~~For the range minimum, the range maximum, and the weighted average of LIBOR OAS, excludes Agency interest only securities with a negative LIBOR OAS, with a total fair value of $0.5 million. Including these securities the weighted average was 385950 basis points.

Third-party non-binding valuations are validated by comparing such valuations to internally generated prices based on the Company's models and, when available, to recent trading activity in the same or similar instruments. For those instruments valued using discounted cash flows, collateral prepayments, losses, recoveries, and scheduled amortization are projected over the remaining life of the collateral and expressed as a percentage of the collateral's current principal balance. For those assets valued using the LIBOR Option Adjusted Spread, or "OAS," valuation methodology, cash flows are projected using the Company's models over multiple interest rate scenarios, and these projected cash flows are then discounted using the LIBOR rates implied by each interest rate scenario. The LIBOR OAS of an asset is then computed as the unique constant yield spread that, when added to all LIBOR rates in each interest rate scenario generated by the model, will equate (a) the expected present value of the projected asset cash flows over all model scenarios to (b) the actual current market price of the asset. LIBOR OAS

2122

is therefore model-dependent. Generally speaking, LIBOR OAS measures the additional yield spread over LIBOR that an asset provides at its current market price after taking into account any interest rate options embedded in the asset.

Material changes in any of the inputs above in isolation could result in a significant change to reported fair value measurements. Fair value measurements are impacted by the interrelationships of these inputs. For example, a higher expectation of collateral prepayments will generally result in a lower expectation of collateral losses. Conversely, higher losses will generally result in lower prepayments.

The following table summarizes the estimated fair value of all other financial instruments not included in the disclosures above as of June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		June 30, 2021				December 31, 2020					June 30, 2022				December 31, 2021
(In thousands)	(In thousands)	Fair Value		Carrying Value		Fair Value		Carrying Value		(In thousands)	Fair Value		Carrying Value		Fair Value		Carrying Value

Assets:	Assets:									Assets:
Cash and cash equivalents	Cash and cash equivalents	$	58,683	$	58,683	$	58,166	$	58,166	Cash and cash equivalents	$	37,472	$	37,472	$	69,028	$	69,028
Due from brokers	Due from brokers	69,000		69,000		47,798		47,798		Due from brokers	45,643		45,643		88,662		88,662
Reverse repurchase agreements	Reverse repurchase agreements	33,572		33,572		0		0		Reverse repurchase agreements	11,005		11,005		117,505		117,505
Liabilities:	Liabilities:									Liabilities:
Repurchase agreements	Repurchase agreements	1,135,497		1,135,497		1,015,245		1,015,245		Repurchase agreements	950,339		950,339		1,064,835		1,064,835
Due to brokers	Due to brokers	222		222		1,064		1,064		Due to brokers	19,320		19,320		1,959		1,959

Cash and cash equivalents includes cash held in interest bearing overnight accounts, for which fair value equals the carrying value, and cash held in money market accounts, which are liquid in nature and for which fair value equals the carrying value; such assets are considered Level 1 assets. Due from brokers and Due to brokers include collateral transferred to or received from counterparties, along with receivables and payables for open and/or closed derivative positions. These receivables and payables are short term in nature and any collateral transferred consists primarily of cash; fair value of these items approximates carrying value and such items are considered Level 1 assets and liabilities. The Company's repurchase and reverse repurchase agreements are carried at cost, which approximates fair value due to their short term nature. Repurchase agreements and reverse repurchase agreements are classified as Level 2 assets and liabilities based on the adequacy of the collateral and their short term nature.

5. Financial Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. Specifically, the Company's primary source of financing is repurchase agreements and the Company enters into financial derivative and other instruments to manage exposure to variable cash flows on portions of its borrowings under those repurchase agreements. Since the interest rates on repurchase agreements typically change with market interest rates such as LIBOR or the Secured Overnight Financing Rate, or "SOFR," the Company is constantly exposed to ~~constantly~~ changing interest rates, which accordingly affects cash flows associated with the Company's borrowings. To mitigate the effect of changes in these interest rates and their related cash flows, the Company may enter into a variety of derivative contracts, including interest rate swaps, futures, swaptions, and TBAs. Additionally, from time to time, the Company may use short positions in U.S. Treasury securities to mitigate its interest rate risk.

2223

The following table details the fair value of the Company's holdings of financial derivatives as of June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
		(In thousands)					(In thousands)
Financial derivatives–assets, at fair value:	Financial derivatives–assets, at fair value:					Financial derivatives–assets, at fair value:
TBA securities purchase contracts	TBA securities purchase contracts	$	369	$	1,720	TBA securities purchase contracts	$	245	$	158
TBA securities sale contracts	TBA securities sale contracts	1,327		0		TBA securities sale contracts	600		750
Fixed payer interest rate swaps	Fixed payer interest rate swaps	881		457		Fixed payer interest rate swaps	33,391		5,165
Fixed receiver interest rate swaps	Fixed receiver interest rate swaps	615		614		Fixed receiver interest rate swaps	258		289
Futures	Futures	558		0		Futures	33		276
Total financial derivatives–assets, at fair value	Total financial derivatives–assets, at fair value	3,750		2,791		Total financial derivatives–assets, at fair value	34,527		6,638
Financial derivatives–liabilities, at fair value:	Financial derivatives–liabilities, at fair value:					Financial derivatives–liabilities, at fair value:
TBA securities purchase contracts	TBA securities purchase contracts	(59)		0		TBA securities purchase contracts	(177)		(182)
TBA securities sale contracts	TBA securities sale contracts	(15)		(699)		TBA securities sale contracts	(2,170)		(168)
Fixed payer interest rate swaps	Fixed payer interest rate swaps	(3,462)		(5,208)		Fixed payer interest rate swaps	(336)		(465)
Fixed receiver interest rate swaps	Fixed receiver interest rate swaps	(134)		(377)		Fixed receiver interest rate swaps	(181)		(143)
Futures	Futures	(648)		(346)		Futures	(74)		(145)
Total financial derivatives–liabilities, at fair value	Total financial derivatives–liabilities, at fair value	(4,318)		(6,630)		Total financial derivatives–liabilities, at fair value	(2,938)		(1,103)
Total, net	Total, net	$	(568)	$	(3,839)	Total, net	$	31,589	$	5,535

Interest Rate Swaps

The following tables provide information about the Company's fixed payer interest rate swaps as of June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:

June 30, ~~2021:~~2022:


						Weighted Average										Weighted Average
Maturity	Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity	Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
		(In thousands)										(In thousands)
2022	2022	$	5,000	$	6	0.05	%	0.09	%	1.31	2022	$	5,000	$	44	0.05	%	1.58	%	0.31
2023	2023	125,889		(1,371)		0.70		0.14		1.94	2023	13,200		(257)		1.87		1.18		0.82
2024	2024	32,300		103		0.31		0.15		2.64	2024	76,575		879		2.23		1.49		1.83
2025	2025	69,911		522		0.56		0.15		3.96	2025	58,005		3,546		0.78		1.66		2.80
2027	2027	472		(15)		1.61		0.14		6.41	2027	3,795		141		2.48		1.50		4.92
2028	2028	105,038		(876)		1.28		0.15		6.82	2028	38,338		3,753		1.27		1.82		6.10
2029											2029	49,735		1,669		2.17		1.50		6.76
2030											2030	97,200		1,532		2.50		1.50		7.92
2031	2031	57,326		(853)		1.53		0.15		9.75	2031	124,124		9,061		1.94		1.54		8.98
2032											2032	107,174		8,444		1.77		1.50		9.64
2040	2040	500		48		0.90		0.09		19.32	2040	500		136		0.90		1.58		18.32
2042		10,303		(176)		1.81		0.13		21.43
2041											2041	11,227		2,434		1.59		1.33		19.11
2049	2049	3,633		(127)		1.89		0.18		28.34	2049	3,633		725		1.89		1.18		27.34
2050	2050	792		158		0.90		0.19		29.05	2050	792		310		0.90		0.99		28.05
2052											2052	10,000		638		2.28		1.50		29.81
Total	Total	$	411,164	$	(2,581)	0.94	%	0.15	%	5.47	Total	$	599,298	$	33,055	1.88	%	1.53	%	7.45

2324

December 31, ~~2020:~~2021:


						Weighted Average										Weighted Average
Maturity	Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity	Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
		(In thousands)										(In thousands)
2022	2022	$	124,347	$	(1,883)	0.93	%	0.22	%	1.78	2022	$	5,000	$	12	0.05	%	0.08	%	0.08
2023	2023	77,591		(1,711)		0.96		0.23		2.45	2023	129,095		419		0.43		0.16		1.43
2024											2024	14,700		193		0.30		0.16		2.13
2025	2025	25,000		(128)		0.51		0.21		4.87	2025	53,101		1,037		0.57		0.18		3.32
2027	2027	56,692		305		0.50		0.23		6.54	2027	472		(6)		1.61		0.18		5.91
2028											2028	116,894		1,920		1.14		0.17		6.55
2031											2031	61,024		891		1.34		0.17		9.54
2040	2040	500		20		0.90		0.09		19.82	2040	500		45		0.90		0.08		18.82
2042		10,303		(988)		1.81		0.23		21.93
2041											2041	11,227		196		1.59		0.14		19.60
2049	2049	3,633		(463)		1.89		0.21		28.83	2049	3,633		(155)		1.89		0.12		27.83
2050	2050	792		97		0.90		0.22		29.54	2050	792		148		0.90		0.12		28.54
Total	Total	$	298,858	$	(4,751)	0.86	%	0.22	%	4.24	Total	$	396,438	$	4,700	0.84	%	0.17	%	5.30

The following tables provide information about the Company's fixed receiver interest rate swaps as of June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

June 30, ~~2021:~~

Weighted Average
Maturity Notional Amount Fair Value Pay Rate Receive Rate Remaining Years to Maturity
(In thousands)
2022 $ 5,000 $ (2) 0.08 % 0.06 % 1.31
2023 13,200 615 0.18 1.87 1.82
2026 20,000 (83) 0.12 0.85 4.97
2040 500 (49) 0.09 0.84 19.32
Total $ 38,700 $ 481 0.14 % 1.09 % 3.61
2022:


					Weighted Average
Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
	(In thousands)
2022	$	5,000	$	(41)	1.50	%	0.06	%	0.31
2023	13,200		257		1.18		1.87		0.82
2032	250		1		1.50		2.75		9.85
2040	500		(140)		1.50		0.84		18.32
Total	$	18,950	$	77	1.28	%	1.37	%	1.26

December 31, ~~2020:~~2021:


						Weighted Average										Weighted Average
Maturity	Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity	Maturity	Notional Amount		Fair Value		Pay Rate		Receive Rate		Remaining Years to Maturity
		(In thousands)										(In thousands)
2022	2022	$	5,000	$	(1)	0.09	%	0.06	%	1.80	2022	$	5,000	$	(10)	0.05	%	0.06	%	0.80
2023	2023	13,200		614		0.21		1.87		2.31	2023	13,200		283		0.12		1.87		1.31
2030		25,880		(356)		0.23		0.73		9.60
2026											2026	11,500		(77)		0.16		1.14		4.78
2040	2040	500		(20)		0.09		0.84		19.82	2040	500		(50)		0.08		0.84		18.82
Total	Total	$	44,580	$	237	0.21	%	0.99	%	6.68	Total	$	30,200	$	146	0.13	%	1.27	%	2.84

2425

Futures

The following tables provide information about the Company's futures as of June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

June 30, ~~2021:~~2022:


Description	Description	Notional Amount		Fair Value		Remaining Months to Expiration	Description	Notional Amount		Fair Value		Remaining Months to Expiration
($ in thousands)	($ in thousands)						($ in thousands)
Assets:	Assets:						Assets:
Long Contracts:
U.S. Treasury Futures		$	3,300	$	124	2.77
Short Contracts:	Short Contracts:						Short Contracts:
U.S. Treasury Futures	U.S. Treasury Futures	(100,500)		434		3.07	U.S. Treasury Futures	$	(5,400)	$	33	3.07
Liabilities:	Liabilities:						Liabilities:
Short Contracts:
Long Contracts:							Long Contracts:
U.S. Treasury Futures	U.S. Treasury Futures	(153,500)		(648)		2.77	U.S. Treasury Futures	3,300		(74)		2.77
Total, net	Total, net	$	(250,700)	$	(90)	2.89	Total, net	$	(2,100)	$	(41)	2.95

December 31, ~~2020:~~2021:


Description	Description	Notional Amount		Fair Value		Remaining Months to Expiration	Description	Notional Amount		Fair Value		Remaining Months to Expiration
($ in thousands)	($ in thousands)						($ in thousands)
Assets:							Assets:
Short Contracts:							Short Contracts:
U.S. Treasury Futures							U.S. Treasury Futures	$	(100,500)	$	276	3.00
Liabilities:	Liabilities:						Liabilities:
Long Contracts:	Long Contracts:						Long Contracts:
U.S. Treasury Futures	U.S. Treasury Futures	$	3,300	$	(28)	2.70	U.S. Treasury Futures	3,300		(29)		2.70
Short Contracts:	Short Contracts:						Short Contracts:
U.S. Treasury Futures	U.S. Treasury Futures	(147,800)		(318)		2.85	U.S. Treasury Futures	(153,500)		(116)		2.70
Total, net	Total, net	$	(144,500)	$	(346)	2.85	Total, net	$	(250,700)	$	131	2.82

TBAs

The Company transacts in the forward settling TBA market. Pursuant to these TBA transactions, the Company agrees to purchase or sell, for future delivery, Agency RMBS with certain principal and interest terms and certain types of underlying collateral, but the particular Agency RMBS to be delivered is not identified until shortly before the TBA settlement date. TBAs are generally liquid, have quoted market prices, and represent the most actively traded class of MBS. The Company uses TBAs to mitigate interest rate risk, usually by taking short positions. The Company also invests in TBAs as a means of acquiring additional exposure to Agency RMBS, or for speculative purposes, including holding long positions.

The Company does not generally take delivery of TBAs; rather, it settles the associated receivable and payable with its trading counterparties on a net basis. Transactions with the same counterparty for the same TBA that result in a reduction of the position are treated as extinguished.

2526

As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had outstanding contracts to purchase ("long positions") and sell ("short positions") TBA securities as follows:


		June 30, 2021								December 31, 2020									June 30, 2022								December 31, 2021
TBA Securities	TBA Securities	Notional Amount(1)		Cost Basis(2)		Market Value(3)		Net Carrying Value(4)		Notional Amount (1)		Cost Basis(2)		Market Value(3)		Net Carrying Value(4)		TBA Securities	Notional Amount(1)		Cost Basis(2)		Market Value(3)		Net Carrying Value(4)		Notional Amount (1)		Cost Basis(2)		Market Value(3)		Net Carrying Value(4)
(In thousands)	(In thousands)																	(In thousands)
Purchase contracts:	Purchase contracts:																	Purchase contracts:
Assets	Assets	$	241,611	$	244,443	$	244,812	$	369	$	317,890	$	330,719	$	332,439	$	1,720	Assets	$	12,939	$	12,025	$	12,270	$	245	$	85,766	$	88,324	$	88,482	$	158
Liabilities	Liabilities	48,517		50,131		50,072		(59)		0		0		0		0		Liabilities	40,104		39,835		39,658		(177)		130,641		132,419		132,237		(182)
		290,128		294,574		294,884		310		317,890		330,719		332,439		1,720			53,043		51,860		51,928		68		216,407		220,743		220,719		(24)
Sale contracts:	Sale contracts:																	Sale contracts:
Assets	Assets	(388,903)		(413,588)		(412,261)		1,327		0		0		0		0		Assets	(88,997)		(82,359)		(81,759)		600		(255,987)		(270,334)		(269,584)		750
Liabilities	Liabilities	(5,700)		(5,941)		(5,956)		(15)		(459,613)		(488,066)		(488,765)		(699)		Liabilities	(122,160)		(112,046)		(114,216)		(2,170)		(156,645)		(164,510)		(164,678)		(168)
		(394,603)		(419,529)		(418,217)		1,312		(459,613)		(488,066)		(488,765)		(699)			(211,157)		(194,405)		(195,975)		(1,570)		(412,632)		(434,844)		(434,262)		582
Total TBA securities, net	Total TBA securities, net	$	(104,475)	$	(124,955)	$	(123,333)	$	1,622	$	(141,723)	$	(157,347)	$	(156,326)	$	1,021	Total TBA securities, net	$	(158,114)	$	(142,545)	$	(144,047)	$	(1,502)	$	(196,225)	$	(214,101)	$	(213,543)	$	558

(1)Notional amount represents the principal balance of the underlying Agency RMBS.

(2)Cost basis represents the forward price to be paid (received) for the underlying Agency RMBS.

(3)Market value represents the current market value of the underlying Agency RMBS (on a forward delivery basis) as of period end.

(4)Net carrying value represents the difference between the market value of the TBA contract as of period end and the cost basis and is reported in Financial derivatives-assets at fair value and Financial derivatives-liabilities at fair value on the Consolidated Balance Sheet.

The table below details the average notional values of the Company's financial derivatives, using absolute value of month end notional values, for the six-month period ended June 30, ~~2021~~2022 and year ended December 31, ~~2020:~~2021:


Derivative Type	Derivative Type	Six-Month Period Ended June 30, 2021		Year Ended December 31, 2020		Derivative Type	Six-Month Period Ended June 30, 2022		Year Ended December 31, 2021
		(In thousands)					(In thousands)
Interest rate swaps						Interest rate swaps	$	587,533	$	422,905
TBAs	TBAs	$	766,715	$	642,362	TBAs	408,093		720,268
Interest rate swaps		389,741		402,407
Futures	Futures	211,786		104,454		Futures	188,886		232,792

Gains and losses on the Company's financial derivatives for the three- and six-month periods ended June 30, ~~2021~~2022 and ~~2020~~2021 are summarized in the tables below:

Three-Month Period Ended June 30, 2021
Derivative Type Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps Net Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate Swaps Net Realized Gains (Losses) on Financial Derivatives Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps Change in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps Change in Net Unrealized Gains (Losses) on Financial Derivatives
(In thousands)
Interest rate swaps $ (255) $ 1,833 $ 1,578 $ (246) $ (6,136) $ (6,382)
TBAs 1,082 1,082 5,797 5,797
Futures (438) (438) (3,636) (3,636)
Total $ (255) $ 2,477 $ 2,222 $ (246) $ (3,975) $ (4,221)

Three-Month Period Ended June 30, 2020
Derivative Type Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps Net Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate Swaps Net Realized Gains (Losses) on Financial Derivatives Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps Change in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps Change in Net Unrealized Gains (Losses) on Financial Derivatives
(In thousands)
Interest rate swaps $ (1,223) $ (1,698) $ (2,921) $ 896 $ 1,281 $ 2,177
TBAs (1,886) (1,886) 4,336 4,336
Futures (3,645) (3,645) 2,992 2,992
Total $ (1,223) $ (7,229) $ (8,452) $ 896 $ 8,609 $ 9,505

Six-Month Period Ended June 30, 2021
Derivative Type Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps Net Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate Swaps Net Realized Gains (Losses) on Financial Derivatives Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps Change in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps Change in Net Unrealized Gains (Losses) on Financial Derivatives
(In thousands)
Interest rate swaps $ (641) $ (1,284) $ (1,925) $ (297) $ 3,434 $ 3,137
TBAs (2,449) (2,449) 600 600
Futures 1,446 1,446 257 257
Total $ (641) $ (2,287) $ (2,928) $ (297) $ 4,291 $ 3,994


	Three-Month Period Ended June 30, 2022
Derivative Type	Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives		Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives
(In thousands)
Interest rate swaps	$	(232)	$	9,339	$	9,107	$	(328)	$	7,973	$	7,645
TBAs			9,075		9,075				(3,022)		(3,022)
Futures			12,295		12,295				(8,051)		(8,051)
Total	$	(232)	$	30,709	$	30,477	$	(328)	$	(3,100)	$	(3,428)


		Six-Month Period Ended June 30, 2020													Three-Month Period Ended June 30, 2021
Derivative Type	Derivative Type	Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives		Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives		Derivative Type	Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives		Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives
(In thousands)	(In thousands)													(In thousands)
Interest rate swaps	Interest rate swaps	$	110	$	(6,282)	$	(6,172)	$	(253)	$	(11,846)	$	(12,099)	Interest rate swaps	$	(255)	$	1,833	$	1,578	$	(246)	$	(6,136)	$	(6,382)
TBAs	TBAs			(2,686)		(2,686)				1,718		1,718		TBAs			1,082		1,082				5,797		5,797
Futures	Futures			(6,093)		(6,093)				(715)		(715)		Futures			(438)		(438)				(3,636)		(3,636)
Total	Total	$	110	$	(15,061)	$	(14,951)	$	(253)	$	(10,843)	$	(11,096)	Total	$	(255)	$	2,477	$	2,222	$	(246)	$	(3,975)	$	(4,221)


	Six-Month Period Ended June 30, 2022
Derivative Type	Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives		Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives
(In thousands)
Interest rate swaps	$	(848)	$	8,527	$	7,679	$	(371)	$	26,929	$	26,558
TBAs			16,802		16,802				(2,060)		(2,060)
Futures			21,349		21,349				(172)		(172)
Total	$	(848)	$	46,678	$	45,830	$	(371)	$	24,697	$	24,326


	Six-Month Period Ended June 30, 2021
Derivative Type	Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives		Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives
(In thousands)
Interest rate swaps	$	(641)	$	(1,284)	$	(1,925)	$	(297)	$	3,434	$	3,137
TBAs			(2,449)		(2,449)				600		600
Futures			1,446		1,446				257		257
Total	$	(641)	$	(2,287)	$	(2,928)	$	(297)	$	4,291	$	3,994

From time to time, the Company uses short positions in U.S. Treasury positions as a component of its interest rate hedging portfolio. As of June 30, 2022, the Company held short positions in U.S. Treasury securities, with a principal amount of $11.5 million and a fair value of $11.0 million. As of December 31, 2021, the Company held short positions in U.S. Treasury securities, with a principal amount of ~~$21.0~~$118.8 million and a fair value of ~~$21.0~~$117.2 million.

6. Borrowings under Repurchase Agreements

The Company enters into repurchase agreements. A repurchase agreement involves the sale of an asset to a counterparty together with a simultaneous agreement to repurchase the transferred asset or similar asset from such counterparty at a future date. The Company accounts for its repurchase agreements as collateralized borrowings, with the transferred assets effectively serving as collateral for the related borrowing. The Company's repurchase agreements typically range in term from 30 to ~~180~~364 days. The principal economic terms of each repurchase agreement—such as loan amount, interest rate, and maturity date—are typically negotiated on a transaction-by-transaction basis. Other terms and conditions, such as relating to events of default, are

typically governed under the Company's master repurchase agreements. Absent an event of default, the Company maintains beneficial ownership of the transferred securities during the term of the repurchase agreement and receives the related principal and interest payments. Interest rates on these borrowings are generally fixed based on prevailing rates corresponding to the terms of the borrowings, and interest is paid at the termination of the repurchase agreement at which time the Company may enter into a new repurchase agreement at prevailing market rates with the same counterparty, repay that counterparty and possibly negotiate financing terms with a different counterparty, or choose to no longer finance the related asset. In response to a decline in the fair value of the transferred securities, whether as a result of changes in market conditions, security paydowns, or other factors, repurchase agreement counterparties will typically make a margin call, whereby the Company will be required to post additional securities and/or cash as collateral with the counterparty in order to re-establish the agreed-upon collateralization requirements. In the event of increases in fair value of the transferred securities, the Company generally can require the counterparty to post collateral with it in the form of cash or securities. The Company is generally permitted to sell or re-pledge any securities posted by the counterparty as collateral; however, upon termination of the repurchase agreement, or other circumstance in which the counterparty is no longer required to post such margin, the Company must return to the counterparty the same security that had been posted. The contractual amount (loan amount) of the Company's repurchase agreements approximates fair value, based on the short-term nature of the debt and the adequacy of the collateral.

At any given time, the Company seeks to have its outstanding borrowings under repurchase agreements with several different counterparties in order to reduce the exposure to any single counterparty. As of both June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had outstanding borrowings under repurchase agreements with ~~16 and~~ 15 ~~counterparties, respectively.~~

counterparties.

The following table details the Company's outstanding borrowings under repurchase agreements as of June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		June 30, 2021					December 31, 2020						June 30, 2022					December 31, 2021
				Weighted Average					Weighted Average						Weighted Average					Weighted Average
Remaining Days to Maturity	Remaining Days to Maturity	Borrowings Outstanding		Interest Rate		Remaining Days to Maturity	Borrowings Outstanding		Interest Rate		Remaining Days to Maturity	Remaining Days to Maturity	Borrowings Outstanding		Interest Rate		Remaining Days to Maturity	Borrowings Outstanding		Interest Rate		Remaining Days to Maturity
		(In thousands)					(In thousands)
Agency RMBS:												Agency RMBS:	(In thousands)					(In thousands)
30 days or less	30 days or less	$	234,227	0.15	%	19	$	307,544	0.27	%	15	30 days or less	$	327,276	1.05	%	15	$	162,089	0.18	%	13
31-60 days	31-60 days	323,704		0.16		45	541,104		0.23		44	31-60 days	194,101		0.76		44	235,321		0.21		43
61-90 days	61-90 days	70,788		0.20		76	92,314		0.26		74	61-90 days	163,855		0.87		76	114,931		0.18		72
91-120 days	91-120 days	31,572		0.18		106	0		0		—	91-120 days	73,891		0.87		108	104,361		0.17		106
121-150 days	121-150 days	25,247		0.14		134	2,371		0.27		126	121-150 days	45,516		1.33		135	148,855		0.16		133
151-180 days	151-180 days	0		0		—	53,150		0.32		162	151-180 days	45,403		2.13		166	56,337		0.15		163
181-360 days		449,959		0.19		270	18,762		0.26		257
181-364 days												181-364 days	80,745		1.04		217	242,941		0.19		238
Total Agency RMBS												Total Agency RMBS	930,787		1.01		70	1,064,835		0.18		111
Non-Agency RMBS:												Non-Agency RMBS:
30 days or less												30 days or less	5,409		2.33		6	—		—		—
31-60 days												31-60 days	6,759		2.56		36	—		—		—
Total Non-Agency RMBS												Total Non-Agency RMBS	12,168		2.46		23	—		—		—
U.S. Treasury Securities												U.S. Treasury Securities
30 days or less												30 days or less	7,384		1.55		1	—		—		—
Total U.S. Treasury Securities												Total U.S. Treasury Securities	7,384		1.55		1	—		—		—
Total	Total	$	1,135,497	0.17	%	134	$	1,015,245	0.25	%	48	Total	$	950,339	1.03	%	69	$	1,064,835	0.18	%	111

Repurchase agreements involving underlying investments that the Company sold prior to period end, for settlement following period end, are shown using their contractual maturity dates even though such repurchase agreements may be expected to be terminated early upon settlement of the sale of the underlying investment.

As of both June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the fair value of RMBS transferred as collateral under outstanding borrowings under repurchase agreements was ~~$1.1 billion and~~ $1.0 ~~billion, respectively.~~billion. Collateral transferred under outstanding borrowings under repurchase agreements as of June 30, ~~2021~~2022 includes RMBS in the amount of ~~$0.8~~$21.7 million that were sold prior to period end but for which such sale had not yet settled. In addition as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company was posting to

repurchase agreement counterparties net cash collateral of ~~$52.3~~$40.1 million and ~~$34.7~~$77.7 million, respectively, as a result of margin calls with various repurchase agreement counterparties.

Amount at risk represents the excess, if any, for each counterparty of the fair value of collateral held by such counterparty over the amounts outstanding under repurchase agreements. The following table provides details by counterparty for such counterparties for which the amounts at risk relating to our repurchase agreements was greater than 10% of total equity as of June 30, 2022. There was no counterparty for which the amount at risk was greater than 10% of shareholders' equity as of ~~June 30, 2021 or~~ December 31, ~~2020.~~2021.


Counterparty	Amount at Risk		Weighted Average Remaining Days to Maturity	Percentage of Equity
	(In thousands)
Royal Bank of Canada	$	12,026	58	10.1	%

7. Offsetting of Assets and Liabilities

The Company records certain financial instruments at fair value as described in Note 2. In connection with its financial derivatives, repurchase agreements, and related trading agreements, the Company and its counterparties are required to pledge collateral. Cash or other collateral is exchanged as required with each of the Company's counterparties in connection with open derivative positions and repurchase agreements.

The following tables present information about certain assets and liabilities representing financial instruments as of June 30, ~~2021~~2022 and December 31, ~~2020.~~2021. The Company has not previously entered into master netting agreements with any of its counterparties. Certain of the Company's repurchase and reverse repurchase agreements and financial derivative transactions are governed by underlying agreements that generally provide a right of net settlement, as well as a right of offset in the event of default or in the event of a bankruptcy of either party to the transaction.

June 30, ~~2021:~~2022:


Description	Description	Amount of Assets (Liabilities) Presented in the Consolidated Balance Sheet(1)		Financial Instruments Available for Offset		Financial Instruments Transferred or Pledged as Collateral(2)(3)		Cash Collateral (Received) Pledged(2)(3)		Net Amount		Description	Amount of Assets (Liabilities) Presented in the Consolidated Balance Sheet(1)		Financial Instruments Available for Offset		Financial Instruments Transferred or Pledged as Collateral(2)(3)		Cash Collateral (Received) Pledged(2)(3)		Net Amount
(In thousands)	(In thousands)											(In thousands)
Assets:	Assets:											Assets:
Financial derivatives–assets	Financial derivatives–assets	$	3,750	$	(2,737)	$	0	$	(77)	$	936	Financial derivatives–assets	$	34,527	$	(1,046)	$	—	$	(14,572)	$	18,909
Reverse repurchase agreements	Reverse repurchase agreements	33,572		(33,572)		0		0		0		Reverse repurchase agreements	11,005		(11,005)		—		—		—
Liabilities:	Liabilities:											Liabilities:
Financial derivatives–liabilities	Financial derivatives–liabilities	(4,318)		2,737		0		1,537		(44)		Financial derivatives–liabilities	(2,938)		1,046		—		1,836		(56)
Repurchase agreements	Repurchase agreements	(1,135,497)		33,572		1,054,230		47,695		0		Repurchase agreements	(950,339)		11,005		899,240		40,094		—

(1)In the Company's Consolidated Balance Sheet, all balances associated with repurchase and reverse repurchase agreements and financial derivatives are presented on a gross basis.

(2)For the purpose of this presentation, for each row the total amount of financial instruments transferred or pledged and cash collateral (received) or pledged may not exceed the applicable gross amount of assets or (liabilities) as presented here. Therefore, the Company has reduced the amount of financial instruments transferred or pledged as collateral related to the Company's repurchase agreements and cash collateral pledged on the Company's financial derivative assets and liabilities. Total financial instruments transferred or pledged as collateral on the Company's repurchase agreements as of June 30, ~~2021~~2022 were ~~$1.1 billion.~~$971.1 million. As of June 30, ~~2021~~2022 total cash collateral (received) pledged on financial derivative assets and financial derivative liabilities excludes ~~$4.9~~$0.3 million and ~~$0.3~~$0.7 million, respectively, of net excess cash collateral.

(3)When collateral is pledged to or pledged by a counterparty, it is often pledged or posted with respect to all positions with such counterparty, and in such cases such collateral cannot be specifically identified as relating to a particular asset or liability. As a result, in preparing the above table, the Company has made assumptions in allocating pledged or posted collateral among the various rows.

December 31, ~~2020:~~2021:


Description	Description	Amount of Assets (Liabilities) Presented in the Consolidated Balance Sheet(1)		Financial Instruments Available for Offset		Financial Instruments Transferred or Pledged as Collateral(2)(3)		Cash Collateral (Received) Pledged(2)(3)		Net Amount		Description	Amount of Assets (Liabilities) Presented in the Consolidated Balance Sheet(1)		Financial Instruments Available for Offset		Financial Instruments Transferred or Pledged as Collateral(2)(3)		Cash Collateral (Received) Pledged(2)(3)		Net Amount
(In thousands)	(In thousands)											(In thousands)
Assets:	Assets:											Assets:
Financial derivatives–assets	Financial derivatives–assets	$	2,791	$	(1,774)	$	0	$	(230)	$	787	Financial derivatives–assets	$	6,638	$	(820)	$	—	$	—	$	5,818
Reverse repurchase agreements												Reverse repurchase agreements	117,505		(31,306)		(86,199)		—		—
Liabilities:	Liabilities:											Liabilities:
Financial derivatives–liabilities	Financial derivatives–liabilities	(6,630)		1,774		0		4,530		(326)		Financial derivatives–liabilities	(1,103)		820		—		271		(12)
Repurchase agreements	Repurchase agreements	(1,015,245)		0		980,561		34,684		0		Repurchase agreements	(1,064,835)		31,306		955,842		77,687		—

(1)In the Company's Consolidated Balance Sheet, all balances associated with repurchase and reverse repurchase agreements and financial derivatives are presented on a gross basis.

(2)For the purpose of this presentation, for each row the total amount of financial instruments transferred or pledged and cash collateral (received) or pledged may not exceed the applicable gross amount of assets or (liabilities) as presented here. Therefore, the Company has reduced the amount of financial instruments transferred or pledged as collateral related to the Company's repurchase agreements and cash collateral pledged on the Company's financial derivative assets and liabilities. Total financial instruments transferred or pledged as collateral on the Company's repurchase agreements as of December 31, ~~2020~~2021 were $1.0 billion. As of December 31, ~~2020~~2021 total cash collateral on financial derivative assets ~~and liabilities~~ excludes ~~$3.7~~$9.2 million ~~and $3.9 million, respectively~~ of net excess cash collateral.

8. Earnings Per Share

Basic earnings per share, or "EPS," is calculated by dividing net income (loss) for the period by the weighted average of the Company's common shares outstanding for the period. Diluted EPS takes into account the effect of outstanding dilutive instruments, such as share options and warrants, if any, and uses the average share price for the period in determining the number of incremental shares that are to be added to the weighted average number of shares outstanding. As of June 30, ~~2021~~2022 and ~~December 31, 2020,~~2021, the Company did not have any dilutive instruments outstanding.

The following table presents a reconciliation of the earnings/(losses) and shares used in calculating basic EPS for the three- and six-month periods ended June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three-Month Period Ended				Six-Month Period Ended					Three-Month Period Ended				Six-Month Period Ended
(In thousands except for share amounts)	(In thousands except for share amounts)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020		(In thousands except for share amounts)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Numerator:	Numerator:									Numerator:
Net income (loss)	Net income (loss)	$	(4,537)	$	21,345	$	(4,410)	$	4,600	Net income (loss)	$	(10,740)	$	(4,537)	$	(28,207)	$	(4,410)
Denominator:	Denominator:									Denominator:
Basic and diluted weighted average shares outstanding	Basic and diluted weighted average shares outstanding	12,432,004		12,319,616		12,388,017		12,377,185		Basic and diluted weighted average shares outstanding	13,106,585		12,432,004		13,108,246		12,388,017
Basic and diluted earnings per share	Basic and diluted earnings per share	$	(0.36)	$	1.73	$	(0.36)	$	0.37	Basic and diluted earnings per share	$	(0.82)	$	(0.36)	$	(2.15)	$	(0.36)

9. Related Party Transactions

Management Agreement

The Company is party to the Management Agreement, which has a current term that expires on September 24, ~~2021,~~2022, and has been, and is expected to be, renewed automatically each year thereafter for an additional one-year period, subject to certain termination rights. The Company is externally managed and advised by the Manager. Pursuant to the terms of the Management Agreement, the Manager provides the Company with its management team, including its officers, and appropriate support personnel. The Company does not have any employees. The Manager is responsible for the day-to-day operations of the Company.

The Manager receives an annual management fee in an amount equal to 1.50% per annum of shareholders' equity (as defined in the Management Agreement) as of the end of each fiscal quarter (before deductions for any management fee with respect to such fiscal period). The management fee is payable quarterly in arrears. For ~~each of~~ the three-month periods ended June 30, ~~2021~~2022 and ~~2020,~~2021, the total management fee incurred was $0.4 million and $0.6 ~~million.~~million, respectively. For the six-month periods ended June 30, ~~2021~~2022 and ~~2020,~~2021, the total management fee incurred was $0.9 million and $1.2 million, ~~and $1.1 million,~~ respectively.

Services Agreement

The Manager and EMG are parties to a services agreement, pursuant to which EMG is required to provide to the Manager sufficient personnel, services, and resources to enable the Manager to carry out its obligations and responsibilities under the Management Agreement. The Company is a named third-party beneficiary to the services agreement and, as a result, has, as a non-exclusive remedy, a direct right of action against EMG in the event of any breach by the Manager of any of its duties, obligations, or agreements under the Management Agreement that arise out of or result from any breach by EMG of its obligations under the services agreement. The services agreement will terminate upon the termination of the Management Agreement. Pursuant to the services agreement, the Manager makes certain payments to EMG in connection with the services provided. The Manager and EMG have overlapping ownership and are under common control.

Expense Reimbursement

Under the terms of the Management Agreement, the Company is required to reimburse the Manager for operating expenses related to the Company that are incurred by the Manager, including expenses relating to legal, accounting, due diligence, other services, and all other costs and expenses. The Company's reimbursement obligation is not subject to any dollar limitation. Expenses will be reimbursed in cash within 60 days following delivery of the expense statement by the Manager; provided, however, that such reimbursement may be offset by the Manager against amounts due to the Company from the Manager. The Company will not reimburse the Manager for the salaries and other compensation of the Manager's personnel except that the Company will be responsible for expenses incurred by the Manager in employing certain dedicated or partially dedicated personnel as further described below.

The Company reimburses the Manager for the allocable share of the compensation, including, without limitation, wages, salaries, and employee benefits paid or reimbursed, as approved by the Compensation Committee of the Board of Trustees, to

certain dedicated or partially dedicated personnel who spend all or a portion of their time managing the Company's affairs, based upon the percentage of time devoted by such personnel to the Company's affairs. In their capacities as officers or personnel of the Manager or its affiliates, such personnel will devote such portion of their time to the Company's affairs as is necessary to enable the Company to operate its business.

During each of the six-month periods ended June 30, ~~2021~~2022 and ~~2020,~~2021, the Company reimbursed the Manager $1.4 million ~~and $1.2 million, respectively,~~ for previously incurred operating and compensation expenses. As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the outstanding payable to the Manager for operating and compensation expenses was $0.2 million and ~~$0.3~~$0.4 million, respectively, and is included in Accrued expenses on the Consolidated Balance Sheet.

Termination Fee

The Management Agreement requires the Company to pay a termination fee to the Manager in the event of (1) the Company's termination or non-renewal of the Management Agreement without cause or (2) the Manager's termination of the Management Agreement upon a default by the Company in the performance of any material term of the Management Agreement. Such termination fee will be equal to 5% of Shareholders' Equity, as defined in the Management Agreement as of the month-end preceding the date of the notice of termination or non-renewal of the Management Agreement.

Registration Rights Agreement

The Company is a party to a registration rights agreement, the "Registration Rights Agreement," with an affiliate of EMG and with the Blackstone Tactical Opportunities Funds (the "Blackstone Funds") pursuant to which the Company has granted ~~its initial investors~~such EMG affiliate and the Blackstone Funds and each of their permitted transferees and other holders of the Company's "Registrable Common Stock" (as such term is defined in the registration rights agreement) who become parties to the registration rights agreement with certain demand and/or piggy-back registration and shelf takedown rights. In April ~~2020,~~2021, the Blackstone Funds registered all of their Registrable Common Stock.

10. Capital

The Company has authorized 500,000,000 common shares, $0.01 par value per share, and 100,000,000 preferred shares, $0.01 par value per share. The Board of Trustees may authorize the issuance of additional shares of either class. As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, there were ~~12,918,542~~13,079,394 and ~~12,343,542~~13,109,926 common shares outstanding, respectively. ~~NaN~~No preferred shares have been issued.

On June 17, 2021, the Company completed a public follow-on offering of 3,250,000 common shares, of which 2,675,000 common shares were sold by the Blackstone Funds and 575,000 common shares were sold by the Company. The offering generated net proceeds to the Company of $7.1 million, after underwriters' discounts and commissions and offering costs. The Company did not receive any proceeds from the common shares sold by the Blackstone Funds.

Detailed below is a roll forward of the Company's common shares outstanding for the three- and six-month periods ended June 30, ~~2021~~2022 and ~~2020:~~2021:

Three-Month Period Ended Six-Month Period Ended
June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020
Common Shares Outstanding (3/31/2021, 3/31/2020, 12/31/2020, and 12/31/2019, respectively)
12,343,542 12,319,616 12,343,542 12,455,758
Share Activity:
Shares issued 575,000 0 575,000 0
Shares repurchased 0 0 0 (136,142)
Common Shares Outstanding (6/30/2021, 6/30/2020, 6/30/2021, and 6/30/2020, respectively)
12,918,542 12,319,616 12,918,542 12,319,616
Unvested restricted shares outstanding (6/30/2021, 6/30/2020, 6/30/2021, and 6/30/2020, respectively)
27,594 25,476 27,594 25,476


	Three-Month Period Ended		Six-Month Period Ended
	June 30, 2022	June 30, 2021	June 30, 2022	June 30, 2021
Common Shares Outstanding (3/31/2022, 3/31/2021, 12/31/2021, and 12/31/2020, respectively)	13,109,926	12,343,542	13,109,926	12,343,542
Share Activity:
Common shares repurchased	(30,532)	—	(30,532)	—
Common shares issued	—	575,000	—	575,000
Restricted common shares issued	—	—	—	—
Common Shares Outstanding (6/30/2022, 6/30/2021, 6/30/2022, and 6/30/2021, respectively)	13,079,394	12,918,542	13,079,394	12,918,542
Unvested restricted shares outstanding (6/30/2022, 6/30/2021, 6/30/2022, and 6/30/2021, respectively)	32,567	27,594	32,567	27,594

The below table provides details on the Company's restricted shares granted pursuant to share award agreements which are unvested at June 30, ~~2021:~~2022:

Grant Recipient

Number of Restricted Shares Granted

Grant Date

Vesting Date(1)

Independent trustees:

~~15,020~~16,816

September ~~10, 2020~~14, 2021

September ~~9, 2021~~13, 2022

Partially dedicated employees:

~~3,668~~

~~December 13, 2019~~

~~December 13, 2021~~

~~4,454~~

~~December 17, 2020~~

~~December 17, 2021~~

4,452

December 17, 2020

December 17, 2022

5,650

December 16, 2021

December 16, 2022

5,649

December 16, 2021

December 16, 2023

(1)Date at which such restricted shares will vest and become non-forfeitable.

As of both June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, there were ~~292,048 and 274,798~~268,831 shares available for future issuance under the Company's 2013 Equity Incentive ~~Plan, respectively.~~Plan.

On June 13, 2018, the Company's Board of Trustees approved the adoption of a share repurchase program under which the Company is authorized to repurchase up to 1.2 million common shares. The program, which is open-ended in duration, allows the Company to make repurchases from time to time on the open market or in negotiated transactions, including through Rule 10b5-1 plans. Repurchases are at the Company's discretion, subject to applicable law, share availability, price and its financial performance, among other considerations. During the ~~six-month period~~three- and six month periods ended June 30, ~~2020,~~2022, the Company repurchased ~~136,142~~30,532 of its common shares at an aggregate cost of ~~$1.0~~$0.2 million, and an average price per share of ~~$7.24; the Company did not repurchase any shares during the six-month period ended June 30, 2021.~~$6.57. From inception of the current share repurchase program adopted on June 13, 2018 through June 30, ~~2021,~~2022, the Company repurchased ~~434,171~~464,703 of its common shares at an aggregate cost of ~~$4.1~~$4.3 million, and an average price per share of ~~$9.45.~~$9.26.

On April 2, 2021, the Company commenced an "at-the-market" offering program, or "ATM program," by entering into equity distribution agreements with third party sales agents under which it was authorized to offer and sell up to $75.0 million of common shares from time to time. From commencement of the ATM program through June 30, 2022, the Company issued 163,269 common shares under the ATM program.

Distribution Policy

The timing and frequency of distributions will be determined by the Board of Trustees based upon a variety of factors deemed relevant by the Company's trustees, including restrictions under applicable law, capital requirements of the Company, and the REIT requirements of the Code. Distributions to shareholders generally will be taxable as ordinary income, although a portion of such distributions may be designated as long-term capital gain or qualified dividend income, or may constitute a return of capital. The Company will furnish annually to each shareholder a statement setting forth distributions paid or deemed paid during the preceding year and their U.S. federal income tax treatment. It is the intention of the Company to distribute at least 100% of its REIT taxable income, after application of available tax attributes, within the time limits prescribed by the Internal Revenue Code, which may extend into the subsequent taxable year.

11. Commitments and Contingencies

From time to time, the Company may become involved in various claims and legal actions arising in the ordinary course of business. The Company provides current trustees and officers with a limited indemnification against liabilities arising in connection with the performance of their duties to the Company.

In the normal course of business the Company may also enter into contracts that contain a variety of representations, warranties, and general indemnifications. The Company's maximum exposure under these arrangements, including future claims that may be made against the Company that have not yet occurred, is unknown. The Company has not incurred any costs to defend lawsuits or settle claims related to these indemnification agreements. The Company has no liabilities recorded for these agreements as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 and management is not aware of any significant contingencies at June 30, ~~2021.~~2022.

12. Subsequent Events

On July 8, 2022, the Board of Trustees approved a monthly dividend in the amount of $0.08 per share payable on August 25, 2022 to shareholders of record as of July 29, 2022.

On August 4, 2022, the Board of Trustees approved a monthly dividend in the amount of $0.08 per share payable on September 26, 2022 to shareholders of record as of August 31, 2022.

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

In this Quarterly Report on Form 10-Q, except where the context suggests otherwise, "EARN," "we," "us," and "our" refer to Ellington Residential Mortgage REIT and its subsidiaries, our "Manager" refers to Ellington Residential Mortgage Management LLC, our external manager, and "Ellington" refers to Ellington Management Group, L.L.C. and its affiliated investment advisory firms.

Special Note Regarding Forward-Looking Statements

When used in this Quarterly Report on Form 10-Q, in future filings with the Securities and Exchange Commission, or 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," "project," "plan," "continue," "intend," "should," "would," "could," "goal," "objective," "will," "may," "seek," or similar expressions, are intended to identify "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, or the "Securities Act," and Section 21E of the Securities Exchange Act of 1934, as amended, or the "Exchange Act," and, as such, may involve known and unknown risks, uncertainties and assumptions.

Forward-looking statements are based on our beliefs, assumptions, and expectations of our future operations, business strategies, performance, financial condition, liquidity and prospects, taking into account all information currently available to us. These beliefs, assumptions, and expectations are subject to risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us. If a change occurs, our business, financial condition, liquidity, results of operations and strategies may vary materially from those expressed or implied in our forward-looking statements. The following factors are examples of those that could cause actual results to vary from our forward-looking statements: changes in interest rates and the market value of our securities; our use of and dependence on leverage; future changes with respect to the Federal National Mortgage Association, or "Fannie Mae," and Federal Home Loan Mortgage Corporation, or "Freddie Mac," and related events, including the lack of certainty as to the future roles of these entities and the U.S. Government in the mortgage market and changes to legislation and regulations affecting these entities; market volatility; changes in the prepayment rates on the mortgage loans underlying the securities we own and intend to acquire; changes in rates of default and/or recovery rates on our non-Agency assets; our ability to borrow to finance our assets; changes in government regulations affecting our business; our ability to maintain our exclusion from registration under the Investment Company Act of 1940, as amended, or the "Investment Company Act"; and risks associated with investing in real estate assets, including changes in business conditions and the general economy, such as those resulting from the economic effects related to the COVID-19 pandemic, and associated responses to the pandemic. These and other risks, uncertainties and factors, including the risk factors described under Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020,~~2021, could cause our actual results to differ materially from those projected or implied 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.

Executive Summary

We are a Maryland real estate investment trust, or "REIT," formed in August 2012 that specializes in acquiring, investing in, and managing residential mortgage- and real estate-related assets. Our primary objective is to generate attractive current yields and risk-adjusted total returns for our shareholders by making investments that we believe compensate us appropriately for the risks associated with them. We seek to attain this objective by constructing and actively managing a portfolio consisting primarily of residential mortgage-backed securities, or "RMBS," for which the principal and interest payments are guaranteed by a U.S. government agency or a U.S. government-sponsored entity, or "Agency RMBS," and, to a lesser extent, RMBS that do not carry such guarantees, or "non-Agency RMBS," such as RMBS backed by prime jumbo, Alternative A-paper, mortgage loans that are not deemed "qualified mortgage," or "QM," loans under the rules of the Consumer Financial Protection Bureau, or "non-QM loans," mortgages on single-family-rental properties, manufactured housing, and subprime residential mortgage loans. We also may opportunistically acquire other types of mortgage- and real estate-related asset classes, such as commercial mortgage-backed securities, or "CMBS," residential mortgage loans, mortgage servicing rights, or "MSRs," and credit risk transfer securities, or "CRTs." We believe that being able to combine Agency RMBS with non-Agency RMBS and other mortgage- and real estate-related asset classes enables us to balance a range of mortgage-related risks.

We were initially formed through ~~an initial~~a strategic venture among affiliates of Ellington Management Group, L.L.C., an investment management firm and registered investment adviser with a ~~26-year~~27-year history of investing in a broad spectrum of residential and commercial mortgage-backed securities, or "MBS," and related derivatives, with an emphasis on the RMBS market, and the Blackstone Tactical Opportunity Funds, or the "Blackstone Funds." We are externally managed and advised by our Manager, an affiliate of Ellington. Since our inception, the Blackstone Funds had held special non-voting membership

3435

interests in the holding company that owns our Manager. In August 2021, an Ellington affiliate purchased these special non-voting membership interests from the Blackstone Funds.

We use leverage in both our Agency and non-Agency RMBS ~~strategy and, while~~strategies, although we ~~have not done so meaningfully to date, we may use~~expect leverage in our non-Agency ~~RMBS~~ strategy ~~as well, although we expect such leverage~~ to be significantly lower. We have financed our ~~purchases of Agency~~ RMBS exclusively through repurchase agreements, which we account for as collateralized borrowings. As of June 30, ~~2021,~~2022, we had outstanding borrowings under repurchase agreements in the amount of ~~$1.1~~$1.0 billion with 1615 counterparties.

We have elected to be taxed as a REIT for U.S. federal income tax purposes. Accordingly, we generally will not be subject to U.S. federal income taxes on our taxable income that we distribute currently to our shareholders as long as we maintain our qualification as a REIT. We intend to conduct our operations so that neither we nor any of our subsidiaries is required to register as an investment company under the Investment Company Act of 1940, as amended, or the "Investment Company Act."

On June 17, 2021, we completed a public follow-on offering of 3,250,000 common shares, of which 2,675,000 shares were sold by the Blackstone Funds and 575,000 shares were sold by us. The offering generated net proceeds to us of $7.1 million, after underwriters' discounts and commissions and offering costs.

As of June 30, ~~2021,~~2022, our book value per share was ~~$12.53,~~$9.07 as compared to ~~$13.22~~$10.14 and ~~$13.48 as of~~$11.76 as of March ~~30, 2021~~31, 2022 and December 31, ~~2020,~~2021, respectively.

Trends and Recent Market Developments

Market Overview

•~~The~~After increasing its target range for the federal funds rate by 0.25%, to 0.25%–0.50%, in March, the U.S. Federal Reserve, or the ~~"Federal~~“Federal Reserve,~~" continued its accommodative~~” accelerated the pace of monetary policy tightening in the second quarter of ~~2021.~~ 2022.

At its ~~April and June meetings,~~May meeting, the Federal Reserve ~~maintained its~~raised the target range ~~of 0.00%–0.25%~~ for the federal funds rate ~~but noted in June~~by 0.50%, to 0.75%–1.00%, citing elevated inflation that ~~“indicators~~had been exacerbated by Russia’s invasion of ~~economic activity~~Ukraine and ~~employment have strengthened. The sectors most adversely affected~~ by ~~the pandemic remain weak but have shown improvement.”~~ongoing supply-chain disruptions. Additionally, ~~at both meetings,~~ the Federal Reserve ~~maintained~~announced plans for reducing the size of its ~~directions to the Open Market Desk to increase its holdings~~balance sheet, whereby it would only reinvest principal payments that exceed monthly caps of ~~U.S.~~$30.0 billion for Treasury securities ~~by $80~~and $17.5 billion ~~per month,~~for agency MBS, beginning in June. Those monthly caps would then increase in September to $60.0 billion and ~~of Agency RMBS by $40~~$35.0 billion, per month, to “help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.” In the press conference following therespectively.

At its June meeting, the Federal Reserve ~~Chairman Jerome Powell~~raised the target range for the federal funds rate by an additional 0.75%, to 1.50%–1.75%, which was its most aggressive interest rate hike since 1994, as inflation remained at historically high levels. The Federal Reserve stated that ~~“we~~it “anticipates that ongoing increases in the target range will ~~taper when we feel that~~be appropriate,” and also reiterated the ~~economy has achieved substantial further progress, and we will communicate very carefully~~balance sheet reduction plan announced in ~~advance of that.”~~May.

Similarly, other central banks globally also tightened their monetary policies during the second quarter.

•~~After rising significantly during the first quarter of 2021, long-term interest~~Interest rates ~~reversed course during~~continued to increase rapidly in the second quarter, ~~of 2021, with~~reaching their highs for the quarter in mid-June before declining moderately going into quarter end. Overall, the 10-year U.S. Treasury yield ~~falling 27~~rose by 67 basis points to ~~1.47%. The~~3.01%, quarter over quarter, while the 2-year U.S. Treasury yield increased 9by 62 basis points ~~during~~to 2.95%. Through the ~~quarter to 0.25%, and~~first half of 2022, the ~~yield spread between the 2-year and~~ 10-year U.S. Treasury ~~decreased to 122~~yield increased a cumulative 150 basis points, ~~at June 30, down from 158~~and the 2-year U.S. Treasury increased a cumulative 222 basis ~~points at March 31, but still meaningfully higher than the 79 basis point spread at year-end 2020. Interest~~points. Meanwhile, interest rate volatility ~~decreased for most of the quarter, although~~continued to surge, with the MOVE ~~index increased modestly during~~Index in mid-June reaching its highest point since the ~~second half~~COVID-related market volatility of ~~June.~~March 2020.

•~~After increasing during the first quarter of 2021, mortgage~~Mortgage rates ~~declined~~also continued to soar in the second quarter of ~~2021 as long-term~~2022, in sympathy with the significant increase in interest ~~rates fell.~~rates. The Freddie Mac survey 30-year mortgage rate ~~decreased to 2.98% as~~reached 5.81% on June 23rd, its highest level since November 2008, and ended the quarter at 5.70%, a quarter-over-quarter increase of ~~June 30, 2021, as compared to 3.17% at~~103 basis points. Through the ~~end~~first half of 2022, the ~~prior quarter. Refinancing applications declined for~~Freddie Mac survey 30-year mortgage rate increased by 259 basis points, which was the ~~second-consecutive quarter, with~~largest 6-month increase since 1981. As a result, the Mortgage Bankers Association's Refinance Index ~~decreasing 9%~~continued to plummet, declining 42.5% between April 21st and July ~~2; in total, the index declined 28.7% year-to-date through July 2, 2021. Overall~~1st, reaching its lowest level since December 2000. Fannie Mae 30-year MBS prepayments ~~declined~~continued their sharp drop as well, declining from a CPR of ~~35.4~~14.2 in March to ~~27.8~~11.4 in April, ~~and 23.4~~9.9 in May, ~~before~~and 9.3 in June, the lowest level since March 2019.

In addition to the sharp rise in mortgage rates, home prices continued to appreciate significantly in the first half of 2022. After increasing ~~moderately to 24.6~~by 18.9% in ~~June.~~2021, the S&P CoreLogic Case-Shiller US National Home Price NSA Index rose an additional 9.8% during the first five months of 2022. As a result of higher mortgage rates and higher home prices, home affordability has declined significantly; the National Association of Realtors Housing Affordability Index declined 27.6% between January 1 and May 1 of 2022.

•LIBOR and SOFR rates also spiked in the second quarter. One-month LIBOR increased by 133 basis points to end the quarter at 1.79%, and three-month LIBOR increased by 132 basis points to 2.29%. In anticipation of additional interest rate increases by the Federal Reserve in the near term, the spread between one- and three-month LIBOR remained

wide, finishing the quarter at 50 basis points, virtually unchanged from the previous quarter but up 39 basis points since year-end. The Secured Overnight Financing Rate, or SOFR, which is a broad measure of the cost of borrowing cash overnight collateralized by U.S. Treasury securities, increased from 0.29% as of March 31st to 1.50% at June 30th. LIBOR and SOFR drive many of our financing ~~costs, remained very low in the second quarter of 2021. One-month LIBOR decreased 1 basis point to end the quarter at 0.10%, and three-month LIBOR fell 5 basis points to 0.15%.~~costs.

•~~Real~~The U.S. likely entered a technical recession, as real GDP ~~grew for the fourth-consecutive quarter, increasing~~contracted at an estimated annualized rate of~~6.5%~~ 0.9% in the second quarter, after shrinking at an estimated annualized rate of ~~2021.~~1.6% in the prior quarter. Meanwhile, the unemployment rate ~~declined slightly to 5.9% as of June 30, from 6.0%~~remained low, at 3.6%, throughout the ~~end of the previous~~second quarter. ~~The increase in COVID cases heading into quarter end challenged the outlook going forward, however.~~

•~~Forbearance rates on residential mortgages~~Inflation continued to ~~decline~~be elevated in the second ~~quarter of 2021.~~quarter. According to the ~~Mortgage Bankers Association,~~Bureau of Labor Statistics, the ~~total forbearance~~Consumer Price Index registered an annualized rate ~~decreased to 3.9% at~~of 8.3% in April, 8.6% in May, and 9.1% in June, ~~27, from 4.9% at March 28.~~which was the highest reading since November 1981.

•For the second quarter, ~~of 2021,~~ the Bloomberg Barclays U.S. MBS Index generated a ~~positive~~negative return of ~~0.33%~~(3.81%), ~~driven by falling long-term~~as interest rates ~~but~~continued to rise and yield spreads widened further, and a negative excess return (on a ~~duration adjusted~~duration-adjusted basis) of ~~(0.60%~~(0.91%) relative to the Bloomberg Barclays U.S. Treasury Index. The Bloomberg Barclays U.S. Corporate Bond Index generated a ~~positive~~negative return of ~~3.38%,~~(6.70%) and ana negative excess return of ~~1.09%~~(2.00%), while the Bloomberg Barclays U.S. Corporate High Yield Bond Index generated a ~~positive~~negative return of ~~2.77%,~~(9.35%) and ana negative excess return of ~~2.05%~~(7.52%).

•~~The strong performance of~~ U.S. ~~equities continued into~~equity markets experienced significant losses in the second quarter ~~of 2021, driven by~~with the ~~ongoing economic recovery and despite concerns about the quickening pace of inflation. The~~ S&P 500 ~~hit new record highs in each month of the quarter, rising 8.2% overall, while~~down 16.4% and the Dow Jones Industrial Average ~~increased 4.6% and~~down 11.3%, each index’s worst quarter since the COVID-related volatility of 2020. The tech-heavy NASDAQ ~~rose 9.5%~~fell 22.4% quarter over ~~quarter. Apart from a spike in mid-May,~~quarter, which was its worst quarter since the 2008-2009 financial crisis. The VIX volatility index ~~remained low throughout the quarter.~~spiked in late April and mid-May, and again in mid-June, before declining into quarter end. Meanwhile, London's FTSE 100 index ~~increased 4.8%~~decreased 4.6%, and the MSCI World global equity index ~~rose 7.3%~~fell 16.6% quarter over quarter.

Portfolio Overview and Outlook

As of June 30, ~~2021,~~2022, our mortgage-backed securities portfolio consisted of ~~$1.121 billion~~$893.2 million of fixed-rate Agency "specified pools," ~~$14.0~~$9.4 million of Agency RMBS backed by adjustable rate mortgages, or "Agency ARMs," ~~$53.7~~$19.4 million of Agency reverse mortgage pools, ~~$12.6~~$9.5 million of Agency interest-only securities, or "Agency IOs," ~~and $9.3~~$8.0 million of non-Agency ~~RMBS.~~RMBS, and $8.2 million of non-Agency interest-only securities, or "non-Agency IOs." Specified pools are fixed-rate Agency pools consisting of mortgages with special characteristics, such as mortgages with low loan balances, mortgages backed by investor properties, mortgages originated through the government-sponsored "Making Homes Affordable" refinancing programs, and mortgages with various other characteristics.

Our Agency RMBS ~~portfolio increased slightly~~holdings decreased by approximately 14% to ~~$1.189 billion~~$922.0 million as of June 30, ~~2021,~~2022, as compared to ~~$1.178~~$1.068 billion as of March 31, ~~2021.~~2022. The decrease was driven by paydowns, net sales, and net losses. Over the same period, our interest-only holdings and non-Agency RMBS holdings ~~decreased by 10% to $9.3 million, from $10.4 million.~~were roughly unchanged.

Our debt-to-equity ratio, adjusted for unsettled purchases and sales, ~~increased moderately~~decreased to ~~7.2:~~7.9:1 as of June 30, ~~2021 from 7.0:~~2022, as compared to 8.3:1 as of March 31, ~~2021.~~2022. The ~~increase~~decrease was primarily due to ~~increased~~a decrease in borrowings on ~~the slightly larger~~our smaller Agency RMBS portfolio, ~~and~~partially offset by lower ~~shareholders'~~shareholders’ equity. Our debt-to-equity ratio may fluctuate period over period based on portfolio management decisions, market conditions, capital markets activities, and the timing of security purchase and sale transactions. As of June 30, ~~2021, substantially all~~2022, the vast majority of our borrowings were secured by specified pools.

As of June 30, ~~2021,~~2022, we had cash and cash equivalents of ~~$58.7 million, along with other unencumbered assets of approximately $31.3~~$37.5 million. This compares to cash and cash equivalents and other liquidity of ~~$52.5~~$29.9 million ~~and unencumbered assets~~as of ~~$48.2 million held by us~~March 31, 2022; other liquidity at March 31, ~~2021.~~2022 represented $13.7 million of unencumbered U.S. Treasury securities.

Agency RMBS continued to face headwinds in the second quarter as the Federal Reserve's aggressive response to persistently high inflation continued to roil markets. During the quarter, the ~~yield curve flattened, with long-term~~Federal Reserve twice increased its target range for the federal funds rate, including a 75 basis-point hike in June that was its largest since 1994, and initiated the runoff of its balance sheet. Geopolitical uncertainty and concerns over economic growth further contributed to market volatility. In mid-June, the MOVE index, which measures interest rate volatility, reached its highest level since the 2020 COVID liquidity crisis, and interest rates ~~decreasing and short-term~~rose significantly.

Agency RMBS durations extended in response to the higher interest rates, ~~increasing moderately. Yield spreads on most~~while the elevated volatility contributed to yield spread widening during the quarter. Agency RMBS ~~widened amidst concerns that~~prices declined sharply, with the ~~Federal Reserve will commence tapering its asset purchases~~largest declines on lower coupon RMBS, and Agency RMBS significantly underperformed U.S. Treasury securities and interest rate swaps. We experienced net losses on our Agency RMBS, concentrated in lower coupons, and these losses exceeded net interest income and net gains on

our interest rate hedges. Our performance was also negatively impacted by costs associated with rebalancing certain of our interest rate hedges in response to the ~~coming months, and with heightened prepayment risk related to lower mortgage rates. Yield spreads widened most significantly on higher-coupon RMBS.~~

Wevolatility. As a result, we had a significant net loss for the ~~quarter, as net realized and unrealized losses on specified pools, interest-only securities,~~quarter.

In the current higher interest rate ~~swaps, U.S. Treasury securities,~~environment, the specified pool market has become less focused on prepayment protection, and ~~futures exceeded net interest income~~more focused on RMBS and net gains on TBA positions. During the quarter, we continued to concentrate long TBA investments in lower coupons and short TBA investments in higher coupons; this positioning benefited results during the quarter.

~~Average pay-ups on~~extension protection. Many of our specified pools ~~decreased~~are considered to 1.55% as of June 30, 2021, as compared to 1.61% as of March 31, 2021, primarily because our new purchases during the quarter mainly consisted of pools with lower pay-ups. Pay-ups are price premiums for specified poolsoffer significant extension protection relative to their TBA counterparts.

~~Non-Agency RMBS yield spreads tightened further~~ Thus despite the surge in mortgage rates, average pay-ups on our specified pool portfolio actually increased quarter over quarter, as the increase in the value of the extension protection provided by this portfolio, relative to TBA counterparts, more than offset the reduction in the value of its prepayment protection. Additionally, we net sold pools during the quarter, ~~generating~~and these net ~~realized and unrealized gains~~sales generally consisted of pools with much lower pay-ups. Pay-ups on our ~~portfolio.~~specified pools increased modestly to 1.09% as of June 30, 2022, as compared to 0.94% as of March 31, 2022.

In our non-Agency RMBS portfolio, wider yield spreads drove negative results for the quarter. We expect ~~to continue~~ to vary our allocation to non-Agency RMBS as market opportunities change over time.

~~With the increase in our overall RMBS portfolio and a smaller net short TBA position, our~~Our net mortgage assets-to-equity ratio—which we define as the net aggregate market value of our mortgage-backed securities (including the underlying market values of our long and short TBA positions) divided by total shareholders' equity—~~increased~~decreased during the quarter. The decrease was due to lower Agency RMBS holdings, partially offset by a smaller net short TBA position and lower shareholders' equity. From time to time, in response to market opportunities and other factors, we increase or decrease our net mortgage assets-to-equity ratio by varying the sizes of our net short TBA position and/or our long RMBS portfolio. The following table summarizes our net mortgage assets-to-equity ratio and provides additional details, for the last five quarters, to illustrate this fluctuation.

Notional Amount of Long TBAs Notional Amount of Short TBAs Fair Value of Mortgage-backed Securities
Net Short TBA Underlying Market Value(1)
Net Mortgage Assets-to-Equity Ratio
($ In thousands)
June 30, 2021 $ 290,128 $ (394,603) $ 1,210,620 $ (123,333) 6.7:1
March 31, 2021 299,350 (459,286) 1,204,629 (186,394) 6.2:1
December 31, 2020 317,890 (459,613) 1,081,380 (156,326) 5.6:1
September 30, 2020 359,430 (551,853) 1,113,620 (208,952) 5.6:1
June 30, 2020 319,280 (529,888) 1,154,047 (229,102) 5.9:1
March 31, 2020 53,800 (303,388) 1,050,521 (266,536) 5.6:1


	Notional Amount of Long TBAs		Notional Amount of Short TBAs		Fair Value of Mortgage-backed Securities		Net Short TBA Underlying Market Value(1)		Net Mortgage Assets-to-Equity Ratio
($ In thousands)
June 30, 2022	$	53,043	$	(211,157)	$	947,647	$	(144,047)	6.8:1
March 31, 2022	65,263		(234,872)		1,094,183		(171,002)		6.9:1
December 31, 2021	216,407		(412,632)		1,311,361		(213,543)		7.1:1
September 30, 2021	237,697		(410,932)		1,218,306		(195,178)		6.4:1
June 30, 2021	290,128		(394,603)		1,210,620		(123,333)		6.7:1

(1)Market value represents the current market value of the underlying Agency RMBS (on a forward delivery basis) as of period end.

We expect to continue to target specified pools that, taking into account their particular composition and based on our prepayment projections, should: (1) generate attractive yields relative to other Agency RMBS and U.S. Treasury securities, (2) have less prepayment sensitivity to government policy shocks, and/or (3) create opportunities for trading gains once the market recognizes their value, which for newer pools may come only after several months, when actual prepayment experience can be observed. We believe that our research team, proprietary prepayment models, and extensive databases remain essential tools in our implementation of this strategy.

The following table summarizes prepayment rates for our portfolio of fixed-rate specified pools (excluding those backed by reverse mortgages) for the three-month periods ended June 30, ~~2021,~~2022, March 31, ~~2021,~~2022, December, 31, ~~2020,~~2021, September 30, ~~2020,~~2021, and June 30, ~~2020.~~2021.


	Three-Month Period Ended
	June 30, 2022	March 31, 2022	December 31, 2021	September 30, 2021	June 30, 2021
Three-Month Constant Prepayment Rates	13.9%	17.0%	20.7%	21.9%	22.8%

Three-Month Period Ended
June 30, 2021 March 31, 2021 December 31, 2020 September 30,
2020 June 30, 2020
Three-Month Constant Prepayment Rates 22.8% 23.6% 21.0% 21.4% 18.0%
(1)Excludes recent purchases of fixed rate Agency specified pools with no prepayment history.

3738

The following table provides details about the composition of our portfolio of fixed-rate specified pools (excluding those backed by reverse mortgages) as of June 30, ~~2021~~2022 and March 31, ~~2021.~~2022.


			June 30, 2021					March 31, 2021							June 30, 2022					March 31, 2022
		Coupon (%)	Current Principal		Fair Value		Weighted Average Loan Age (Months)	Current Principal		Fair Value		Weighted Average Loan Age (Months)		Coupon (%)	Current Principal		Fair Value		Weighted Average Loan Age (Months)	Current Principal		Fair Value		Weighted Average Loan Age (Months)
			(In thousands)					(In thousands)							(In thousands)					(In thousands)
Fixed-rate Agency RMBS:	Fixed-rate Agency RMBS:												Fixed-rate Agency RMBS:
15-year fixed-rate mortgages:	15-year fixed-rate mortgages:												15-year fixed-rate mortgages:
														1.50-1.99	$	3,827	$	3,506	21	$	3,972	$	3,775	18
		2.00–2.49	$	43,572	$	45,285	4	$	19,648	$	20,177	2		2.00–2.49	47,319		44,460		16	36,843		35,901		13
		2.50–2.99	24,048		25,194		30	29,164		30,477		25		2.50–2.99	9,262		8,952		64	9,798		9,710		62
		3.00–3.49	27,859		29,421		41	15,948		16,937		48		3.00–3.49	17,210		16,930		45	18,661		18,844		42
		3.50–3.99	26,488		28,495		46	28,927		31,238		44		3.50–3.99	14,518		14,556		71	19,562		20,053		57
		4.00–4.49	17,754		19,219		39	19,757		21,439		36		4.00–4.49	11,716		11,898		52	13,027		13,544		49
		4.50–4.99	418		440		141	480		506		138		4.50–4.99	212		211		149	256		262		150
Total 15-year fixed-rate mortgages	Total 15-year fixed-rate mortgages		140,139		148,054		29	113,924		120,774		31	Total 15-year fixed-rate mortgages		104,064		100,513		37	102,119		102,089		37
20-year fixed-rate mortgages:	20-year fixed-rate mortgages:												20-year fixed-rate mortgages:
		2.00–2.49	29,635		30,120		10	31,344		31,784		7		2.00–2.49	26,767		23,914		22	27,154		25,382		19
		2.50–2.99	2,710		2,809		11	2,976		3,067		8		2.50–2.99	1,959		1,808		23	2,043		1,969		20
		3.00–3.49	2,065		2,177		16	2,283		2,410		13		3.00–3.49	1,736		1,655		28	1,903		1,884		25
		4.00–4.49	2,045		2,262		11	2,063		2,302		8		4.00–4.49	1,531		1,552		23	1,625		1,693		20
		4.50–4.99	1,005		1,084		33	1,132		1,237		30		4.50–4.99	631		643		45	704		737		42
		5.00–5.49	1,036		1,158		34	1,047		1,181		31		5.00–5.49	806		837		46	815		874		43
Total 20-year fixed-rate mortgages	Total 20-year fixed-rate mortgages		38,496		39,610		12	40,845		41,981		9	Total 20-year fixed-rate mortgages		33,430		30,409		24	34,244		32,539		21
30-year fixed-rate mortgages:	30-year fixed-rate mortgages:												30-year fixed-rate mortgages:
		2.00–2.49	83,498		84,636		3	83,609		83,597		4		2.00–2.49	87,972		76,863		15	113,766		105,991		11
		2.50–2.99	159,188		165,674		5	85,771		88,290		6		2.50–2.99	152,982		138,761		17	223,162		214,385		10
		3.00–3.49	87,146		91,932		29	96,008		101,136		29		3.00–3.49	161,018		151,246		18	138,928		137,105		19
		3.50–3.99	205,791		221,616		57	229,189		246,857		54		3.50–3.99	143,006		140,502		70	149,550		152,567		68
		4.00–4.49	160,970		175,127		62	173,759		190,408		59		4.00–4.49	133,573		134,294		65	141,607		146,921		63
		4.50–4.99	123,855		135,772		55	140,135		155,247		51		4.50–4.99	88,354		90,674		64	91,456		96,348		64
		5.00–5.49	43,930		49,006		59	50,013		56,202		55		5.00–5.49	22,979		23,997		81	25,950		27,795		77
		5.50–5.99	6,496		7,454		58	7,427		8,490		52		5.50–5.99	3,943		4,199		77	4,670		5,090		69
		6.00–6.49	1,832		2,035		32	2,502		2,774		29		6.00–6.49	1,641		1,768		45	1,647		1,805		42
Total 30-year fixed-rate mortgages	Total 30-year fixed-rate mortgages		872,706		933,252		40	868,413		933,001		42	Total 30-year fixed-rate mortgages		795,468		762,304		42	890,736		888,007		38
Total fixed-rate Agency RMBS	Total fixed-rate Agency RMBS		$	1,051,341	$	1,120,916	38	$	1,023,182	$	1,095,756	43	Total fixed-rate Agency RMBS		$	932,962	$	893,226	41	$	1,027,099	$	1,022,635	37

For the three-month period ended June 30, ~~2021,~~2022, we had total net realized and unrealized losses on our Agency ~~RMBS~~securities of ~~$(10.4)~~$(42.2) million, or ~~$(0.83)~~$(3.22) per share. Our Agency ~~RMBS~~ portfolio turnover was approximately ~~13%~~24% for the ~~three-month period~~quarter ended June 30, ~~2021.~~2022, and we recognized net realized losses of $(14.9) million.

During the three-month period ended June 30, ~~2021,~~2022, we continued to hedge interest rate risk through the use of interest rate swaps, and short positions in TBAs, U.S. Treasury securities, and futures. We had total net realized and unrealized ~~losses~~gains of ~~$(6.3)~~$28.2 million, or ~~$(0.51)~~$2.15 per share, on our interest rate hedging ~~portfolio. Decreasing long-term~~portfolio, as interest rates ~~during the quarter generated losses on our interest rate swaps, U.S. Treasury securities, and futures. A portion of these losses were offset by net~~increased significantly. These gains ~~on our TBA short positions, which we continued to concentrate in higher coupons. Yield spreads on higher-coupon RMBS widened significantly during the quarter in the face of heightened prepayment risk.~~

~~The net realized and unrealized losses on our interest rate hedging portfolio~~ were partially offset by net realized and unrealized ~~gains~~losses of ~~$4.2~~$(1.9) million, or ~~$0.34~~$(0.15) per share, on our long TBAs held for investment, which we continued to concentrate in lower coupons. Lower-coupon RMBS outperformed higher-coupon RMBS during the quarter, primarily driven by continued RMBS purchasing activity on the part of the Federal Reserve, which has been concentrated in lower coupons.investment.

~~Similar to recent quarters, we~~

We ended the ~~second~~ quarter with a ~~small~~ net short ~~overall~~ TBA position, both on a notional basis ~~while maintaining a small net long overall TBA position~~and as measured by 10-year equivalents. Ten-year equivalents for a group of positions represent the amount of 10-year U.S. Treasury securities that would be expected to experience a similar change in market value under a standard parallel move in interest rates. The relative makeup of our interest rate hedging portfolio can change materially from period to period.

After giving effect to dividends declared during the three-month period ended June 30, ~~2021~~2022 of ~~$0.30~~$0.26 per share, our book value per share decreased to ~~$12.53~~$9.07 as of June 30, ~~2021,~~2022, from ~~$13.22~~$10.14 as of March 31, ~~2021,~~2022, and we had ana negative economic return of ~~(3.0)%~~(8%) for the ~~three-month period~~quarter ended June 30, ~~2021.~~2022. Economic return for a period is computed by adding back dividends declared during the period to ending book value per share, and comparing that amount to book value per share as of the beginning of the ~~quarter.~~

Our net Agency premium as a percentage of the fair value of our specified pool holdings is one metric that we use to measure the overall prepayment risk of our specified pool portfolio. Net Agency premium represents the total premium (excess of market value over outstanding principal balance) on our specified pool holdings less the total premium on net short TBA positions. The lower our net Agency premium, the less we believe that our specified pool portfolio is exposed to market-wide increases in Agency RMBS prepayments. As of June 30, 2021 and March 31, 2021, our net Agency premium as a percentage of fair value of our specified pool holdings was approximately 4.7% and 4.4%, respectively. Excluding TBA positions, our Agency premium as a percentage of fair value was approximately 6.2% and 6.7% as of June 30, 2021 and March 31, 2021, respectively. Our Agency premium percentage and net Agency premium percentage may fluctuate from period to period based on a variety of factors, including market factors such as interest rates and mortgage rates, and, in the case of our net Agency premium percentage, based on the degree to which we hedge prepayment risk with short TBAs. We believe that our focus on purchasing pools with specific prepayment characteristics provides a measure of protection against prepayments.period.

We believe that our adaptive and active style of portfolio management is well suited to the current MBS market environment, which, especially given the current effects and future uncertainties related to ~~the COVID-19 pandemic,~~quantitative tightening, exhibits high levels of interest rate risk, prepayment risk (including extension risk), financing and liquidity risk, shifting central bank and government policies, regulatory changes, and disruptive technological developments.

Financing

For the three-month period ended June 30, ~~2021,~~2022, our average repo borrowing cost ~~decreased~~increased to ~~0.19%~~0.68%, as compared to ~~0.23%~~0.29% for the three-month period ended March 31, ~~2021. The period-over-period decline~~2022. This increase in average repo borrowing cost was ~~due to narrower financing spreads~~the result of increases in short-term interest rates during the three-month period ended June 30, ~~2021.~~2022. As of June 30, ~~2021,~~2022 and March 31, 2022, the weighted average borrowing rate on our repurchase agreements ~~declined to 0.17% from 0.22% as of March 31, 2021.~~was 1.03% and 0.39%, respectively.

While large banks still dominate the repo market, non-bank firms, not subject to the same regulations as banks, are active in providing repo financing. Most of our outstanding repo financing is still provided by banks and bank affiliates; however, we have also entered into repo agreements with non-bank dealers.

Our debt-to-equity ratio was ~~7.0:~~8.0:1 as of June 30, ~~2021,~~2022, as compared to ~~6.8:~~9.1:1 as of March 31, ~~2021.~~2022. Adjusted for unsettled ~~security~~ purchases and sales, our ~~debt-to-equity~~debt-to equity ratio was ~~7.2:~~7.9:1 as of June 30, ~~2021,~~2022, as compared to ~~7.0:~~8.3:1 as of March 31, ~~2021.~~2022. The decrease was primarily due to a decrease in borrowings on the Company’s smaller Agency RMBS portfolio, partially offset by lower shareholders’ equity. Our debt-to-equity ratio may fluctuate period over period based on portfolio management decisions, market conditions, capital markets activities, and the timing of security purchase and sale transactions.

Critical Accounting Estimates

Our ~~unaudited interim~~ consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America, or "U.S. GAAP," and Regulation S-X. Entities in which we have a controlling financial interest, through ownership of the majority of the entities' voting equity interests, or through other contractual rights that give us control, are consolidated by us. All inter-company balances and transactions have been eliminated.

~~Certain~~The preparation of our ~~critical accounting policies require management~~consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Our critical accounting estimates are those which require assumptions to be made about matters that are highly uncertain. Actual results could differ from those ~~estimates.~~estimates and such differences could have a material impact on our financial condition and/or results of operations. We believe that all of the decisions and assessments upon which our consolidated financial statements are based were reasonable at the time made based upon

information available to us at that time. We rely on the experience of our Manager and ~~Ellington's experience~~Ellington and analysis of historical and current market data in order to arrive at what we believe to be reasonable estimates. See Note 2 of the notes to our consolidated financial statements ~~included in this Quarterly Report on Form 10-Q~~ for a complete discussion of our significant accounting policies. We have identified our most critical accounting ~~policies~~estimates to be the following:

Valuation: ~~For financial instruments that are traded in an "active market,"~~We have elected the ~~best measure of~~ fair value is the quoted market price. However, many of our financial instruments are not traded in an active market. Therefore, management generally uses third-party valuations when available. If third-party valuations are not available, management uses other valuation techniques, such as the discounted cash flow methodology. Summary descriptions,option for the various categories of financial instruments, of the valuation methodologies management uses in determining fair value of our financial instruments are detailed in Note 2 of the notes to our consolidated financial statements. Management utilizes such methodologies to assign a good faith fair value (the estimated price that, in an orderly transaction at the valuation date, would be received to sell an asset, or paid to transfer a liability, as the case may be) to each such financial instrument.

~~See the notes to our consolidated financial statements for more information on valuation techniques used by management in the valuation~~vast majority of our assets and ~~liabilities.~~

~~Accounting~~liabilities for ~~Securities: Investments in mortgage-backed securities are recorded on trade date. We have chosen to make a fair value~~which such election ~~pursuant to~~is permitted, as provided for under ASC ~~825-10,~~825, Financial Instruments~~, for our mortgage-backed securities portfolio.~~ ("ASC 825"). Electing the fair value option allows us to record changes in fair value in our Consolidated Statement of Operations, which, in our view, more appropriately reflects the results of our operations for a particular reporting period as all securities activities will be recorded in a similar manner. As such, the mortgage-backed securities are recorded at fair value on our Consolidated Balance Sheet and the period change in fair value is recorded in current period earnings on our Consolidated Statement of Operations as a component of Change in net unrealized gains (losses) on securities.

Purchase and sales transactions are generally recorded on trade date. Realized and unrealized gains orand losses ~~on sales of mortgage-backed securities~~ are ~~included in Net realized gains (losses) on securities on the Consolidated Statement of Operations, and are recorded at the time of disposition. The cost of positions sold is~~ calculated based on identified cost. ~~Principal write-offs~~

For financial instruments that are traded in an "active market," the best measure of fair value is the quoted market price. However, many of our financial instruments are not traded in an active market. Therefore, management generally uses third-party valuations when available. If third-party valuations are not available, management uses other valuation techniques, such as the discounted cash flow methodology.

Summary descriptions, for the various categories of financial instruments, of the valuation methodologies management uses in determining fair value of our financial instruments are detailed in Note 2 of the notes to our consolidated financial statements. Management utilizes such methodologies to assign a good faith fair value (the estimated price that, in an orderly transaction at the valuation date, would be received to sell an asset, or paid to transfer a liability, as the case may be) to each such financial instrument. See the notes to our consolidated financial statements for more information on valuation techniques used by management in the valuation of our assets and liabilities.

Because of the inherent uncertainty of valuation, the estimated fair value of our financial instruments may differ significantly from the values that would have been used had a ready market for the financial instruments existed, and the differences could be material to our consolidated financial statements.

The determination of estimated fair value of those of our financial instruments that are not traded in an active market requires the use of both macroeconomic and microeconomic assumptions and/or inputs, which are generally ~~treated as realized losses.~~based on current market and economic conditions. Changes in market and/or economic conditions could have a significant adverse effect on the estimated fair value of our financial instruments. Changes to assumptions, including assumed market yields, may significantly impact the estimated fair value of our investments. Our valuations are sensitive to changes in interest rates; see the interest rate sensitivity analysis included in Item 3. Quantitative and Qualitative Disclosures about Market Risk in this Quarterly Report on Form 10-Q for further information.

Interest Income: Coupon interest income on investment securities is accrued based on the outstanding principal balance and the current coupon rate on each security. We generally amortize ~~purchase~~ premiums and accrete ~~purchase~~ discounts on our ~~fixed income~~fixed-income investments using the effective interest method. For certain of our securities, for purposes of estimating future expected cash flows, management uses assumptions including, but not limited to, assumptions for future prepayment rates, default rates, and loss severities (each of which may in turn incorporate various macroeconomic assumptions, such as future housing prices, GDP growth rates, and unemployment rates). These assumptions require the use of a significant amount of judgment. Any resulting changes in effective yield are recognized prospectively based on the current amortized cost of the investment as adjusted for credit impairment, if any.

The effective yield on our debt securities that are deemed to be of high credit quality (including Agency RMBS, exclusive of interest only securities) can be significantly impacted by our estimate of future prepayments. Future prepayment rates are difficult to predict. We estimate prepayment rates over the remaining life of our securities using models that generally incorporate the forward yield curve, current mortgage rates, mortgage rates on the outstanding loans, age and size of the outstanding loans, and other factors. We compare estimated prepayments to actual prepayments on a quarterly basis, and effective yields are recalculated retroactive to the time of purchase. When differences arise between our previously calculated effective yields and our current calculated effective yields, a catch-up adjustment, or "Catch-up Premium Amortization Adjustment," is made to interest income to reflect the cumulative impact of the changes in effective yields. For the three-month periods ended June 30, 2022 and 2021, we recognized a Catch-up Premium Amortization Adjustment of $1.6 million and $2.6 million, respectively. For the six-month periods ended June 30, 2022 and 2021, we recognized a Catch-up Premium Amortization Adjustment of $1.1 million and $2.7 million, respectively. The Catch-up Premium Amortization Adjustment is reflected as an increase (decrease) to interest income on the Consolidated Statement of Operations.

Our accretion of discounts and amortization of premiums on securities for U.S. federal and other tax purposes is likely to differ from the accounting treatment under U.S. GAAP of these items as described above.

See the Note 2 of the notes to our consolidated financial statements for more information on the assumptions and methods that we use to amortize purchase premiums and accrete purchase discounts.

Income Taxes: We made an election to be taxed as a REIT for U.S. federal income tax ~~purposes. As a REIT, we~~purposes and are generally ~~are~~ not subject to corporate-level federal and state income tax on net income we distribute to our shareholders within the prescribed timeframes. To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement to distribute at least 90% of our taxable income to our shareholders. Even if we qualify as a REIT, we may be subject to certain federal, state, local and foreign taxes on our income and property, and to federal income and excise taxes on our undistributed taxable income. If we fail to qualify as a REIT, and do not qualify for certain statutory relief provisions, we will be subject to U.S. federal, state, and local income taxes and may be precluded from qualifying as a REIT for the four taxable years following the year in which we fail to qualify as a REIT.

We follow the authoritative guidance on accounting for and disclosure of uncertainty on tax positions, which requires management to determine whether a tax position is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. For uncertain tax positions, the tax benefit to be recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. We did not have any unrecognized tax benefits resulting from tax positions related to the current period or our open tax years. In the normal course of business, we may be subject to examination by federal, state, local, and foreign jurisdictions, where applicable, for the current period and our open tax years. We may take positions with respect to certain tax issues which depend on legal interpretation of facts or applicable tax regulations. Should the relevant tax regulators successfully challenge any such positions, we might be found to have a tax liability that has not been recorded in the accompanying consolidated financial statements. Also, management's conclusions regarding the authoritative guidance may be subject to review and adjustment at a later date based on changing tax laws, regulations, and interpretations thereof. ~~There were no amounts accrued~~See Note 2 and Note 12 to our consolidated financial statements for ~~penalties or interest as of or during the periods presented in the consolidated~~additional details on income taxes.

4041

~~financial statements included in this Quarterly Report on Form 10-Q.~~

Recent Accounting Pronouncements

Refer to the notes to our consolidated financial statements for a description of relevant recent accounting pronouncements.

Financial Condition

Investment portfolio

The following tables summarize our securities portfolio as of June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


		June 30, 2021										December 31, 2020											June 30, 2022										December 31, 2021
(In thousands)	(In thousands)	Current Principal		Fair Value		Average Price(1)		Cost		Average Cost(1)		Current Principal		Fair Value		Average Price(1)		Cost		Average Cost(1)		(In thousands)	Current Principal		Fair Value		Average Price(1)		Cost		Average Cost(1)		Current Principal		Fair Value		Average Price(1)		Cost		Average Cost(1)
Agency RMBS(2)	Agency RMBS(2)																					Agency RMBS(2)
15-year fixed-rate mortgages	15-year fixed-rate mortgages	$	140,139	$	148,054	$	105.65	$	145,804	$	104.04	$	77,578	$	83,159	$	107.19	$	80,144	$	103.31	15-year fixed-rate mortgages	$	104,064	$	100,513	$	96.59	$	106,445	$	102.29	$	125,033	$	130,710	$	104.54	$	130,099	$	104.05
20-year fixed-rate mortgages	20-year fixed-rate mortgages	38,496		39,610		102.89		40,062		104.07		42,559		44,763		105.18		44,247		103.97		20-year fixed-rate mortgages	33,430		30,409		90.96		34,840		104.22		35,732		36,347		101.72		37,211		104.14
30-year fixed-rate mortgages	30-year fixed-rate mortgages	872,706		933,252		106.94		914,966		104.84		763,563		834,881		109.34		799,360		104.69		30-year fixed-rate mortgages	795,468		762,304		95.83		824,015		103.59		1,027,843		1,072,904		104.38		1,066,347		103.75
ARMs	ARMs	13,388		14,042		104.88		14,027		104.77		19,459		20,442		105.05		19,981		102.68		ARMs	9,266		9,416		101.62		9,964		107.53		11,491		11,960		104.08		12,034		104.73
Reverse mortgages	Reverse mortgages	49,698		53,714		108.08		52,956		106.56		61,653		67,474		109.44		65,494		106.23		Reverse mortgages	18,781		19,381		103.19		20,665		110.03		35,313		37,297		105.62		37,652		106.62
Total Agency RMBS	Total Agency RMBS	1,114,427		1,188,672		106.66		1,167,815		104.79		964,812		1,050,719		108.90		1,009,226		104.60		Total Agency RMBS	961,009		922,023		95.94		995,929		103.63		1,235,412		1,289,218		104.36		1,283,343		103.88
Non-Agency RMBS(2)	Non-Agency RMBS(2)	11,069		9,304		84.05		7,344		66.35		23,140		17,612		76.11		15,369		66.42		Non-Agency RMBS(2)	10,622		7,969		75.02		7,369		69.37		10,672		9,056		84.86		7,234		67.78
Total RMBS(2)	Total RMBS(2)	1,125,496		1,197,976		106.44		1,175,159		104.41		987,952		1,068,331		108.14		1,024,595		103.71		Total RMBS(2)	971,631		929,992		95.71		1,003,298		103.26		1,246,084		1,298,274		104.19		1,290,577		103.57
Agency IOs	Agency IOs	n/a		12,644		n/a		15,393		n/a		n/a		13,049		n/a		15,434		n/a		Agency IOs	n/a		9,450		n/a		11,096		n/a		n/a		10,289		n/a		12,983		n/a
Non-Agency IOs																						Non-Agency IOs	n/a		8,205		n/a		6,570		n/a		n/a		2,798		n/a		2,684		n/a
Total mortgage-backed securities	Total mortgage-backed securities			$	1,210,620			$	1,190,552					$	1,081,380			$	1,040,029			Total mortgage-backed securities			$	947,647			$	1,020,964					$	1,311,361			$	1,306,244

U.S. Treasury securities																						U.S. Treasury securities	7,500		7,431		99.08		7,418		98.91		—		—		—		—		—
U.S. Treasury securities sold short	U.S. Treasury securities sold short	(20,730)		(21,017)		101.38		(20,906)		100.85		—		—		—		—		—		U.S. Treasury securities sold short	(11,500)		(10,989)		95.56		(11,295)		98.22		(118,750)		(117,195)		98.69		(117,322)		98.80
Reverse repurchase agreements	Reverse repurchase agreements	33,572		33,572		100.00		33,572		100.00		—		—		—		—		—		Reverse repurchase agreements	11,005		11,005		100.00		11,005		100.00		117,505		117,505		100.00		117,505		100.00
Total	Total			$	1,223,175			$	1,203,218					$	1,081,380			$	1,040,029			Total			$	955,094			$	1,028,092					$	1,311,671			$	1,306,427

(1)Represents the dollar amount (not shown in thousands) per $100 of current principal of the price or cost for the security.

(2)Excludes ~~Agency~~ IOs.

The majority of our capital is allocated to our Agency RMBS strategy, which includes investments in Agency pools and Agency collateralized mortgage obligations, or "CMOs." As of both June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, investments in non-Agency RMBS constituted a relatively small portion of our total investments.

Our most prevalent method of financing RMBS is through short-term repos, which generally have maturities of ~~180~~364 days or less. The weighted average lives of the RMBS that we own are generally much longer. Consequently, the weighted average term of our repurchase agreement financings will almost always be substantially shorter than the expected average maturity of our RMBS. This mismatch in maturities, together with the uncertainty of RMBS prepayments, and other potential changes in timing and/or amount of cash flows on our RMBS assets, creates the risk that changes in interest rates will cause our financing costs with respect to our RMBS to increase relative to the income on our RMBS over the term of our investments.

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Financial Derivatives

The following table summarizes our portfolio of financial derivative holdings as of June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


(In thousands)	(In thousands)	June 30, 2021		December 31, 2020		(In thousands)	June 30, 2022		December 31, 2021
Financial derivatives–assets, at fair value:	Financial derivatives–assets, at fair value:					Financial derivatives–assets, at fair value:
TBA securities purchase contracts	TBA securities purchase contracts	$	369	$	1,720	TBA securities purchase contracts	$	245	$	158
TBA securities sale contracts	TBA securities sale contracts	1,327		—		TBA securities sale contracts	600		750
Fixed payer interest rate swaps	Fixed payer interest rate swaps	881		457		Fixed payer interest rate swaps	33,391		5,165
Fixed receiver interest rate swaps	Fixed receiver interest rate swaps	615		614		Fixed receiver interest rate swaps	258		289

Futures	Futures	558		—		Futures	33		276
Total financial derivatives–assets, at fair value	Total financial derivatives–assets, at fair value	3,750		2,791		Total financial derivatives–assets, at fair value	34,527		6,638
Financial derivatives–liabilities, at fair value:	Financial derivatives–liabilities, at fair value:					Financial derivatives–liabilities, at fair value:
TBA securities purchase contracts	TBA securities purchase contracts	(59)		—		TBA securities purchase contracts	(177)		(182)
TBA securities sale contracts	TBA securities sale contracts	(15)		(699)		TBA securities sale contracts	(2,170)		(168)
Fixed payer interest rate swaps	Fixed payer interest rate swaps	(3,462)		(5,208)		Fixed payer interest rate swaps	(336)		(465)
Fixed receiver interest rate swaps	Fixed receiver interest rate swaps	(134)		(377)		Fixed receiver interest rate swaps	(181)		(143)

Futures	Futures	(648)		(346)		Futures	(74)		(145)
Total financial derivatives–liabilities, at fair value	Total financial derivatives–liabilities, at fair value	(4,318)		(6,630)		Total financial derivatives–liabilities, at fair value	(2,938)		(1,103)
Total	Total	$	(568)	$	(3,839)	Total	$	31,589	$	5,535

Pursuant to our hedging program, we engage in a variety of interest rate hedging activities that are designed to reduce the interest rate risk with respect to the liabilities incurred to acquire or hold RMBS. These interest rate hedges generally seek to reduce the interest rate sensitivity of our liabilities or, in other words, reduce the volatility of our financing cost over time attributable to interest rate changes. Our interest rate hedging transactions may include:

•Interest rate swaps (a contract exchanging a variable rate for a fixed rate, or vice versa);

•Interest rate swaptions (options to enter into interest rate swaps at a future date);

•TBA forward contracts on Agency pass-through certificates;

•Short sales of U.S. Treasury securities;

•Eurodollar and U.S. Treasury futures; and

•Other derivatives.

We generally enter into these transactions to offset the potential adverse effects of rising interest rates on short-term repurchase agreements. Our repurchase agreements generally have maturities of up to ~~180~~364 days and carry interest rates that are determined by reference to a benchmark rate such as LIBOR or ~~correlated benchmark rates~~SOFR for those same periods. As each then-existing fixed-rate repo borrowing matures, it will generally be replaced with a new fixed-rate repo borrowing based on market interest rates established at that future date.

In the case of interest rate swaps, most of our ~~agreements~~contracts are structured such that we receive payments based on a variable interest rate and make payments based on a fixed interest rate. The variable interest rate on which payments are received is generally calculated based on various reset mechanisms for ~~LIBOR.~~a benchmark rate such as LIBOR or SOFR. To the extent that the benchmark rates used to calculate the payments we receive on our ~~future repo borrowing costs~~interest rate swaps continue to be highly correlated with ~~LIBOR,~~ our ~~LIBOR-based~~repo borrowing costs, our interest rate swap ~~agreements~~contracts should help to reduce the variability of our overall repo borrowing costs, thus reducing risk to the extent we hold fixed-rate assets that are financed with repo borrowings. ~~While for the time being we are continuing to enter into LIBOR-based interest rate swap agreements, we are currently considering entering into SOFR-based interest rate swap agreements as well.~~

In the case of TBAs, many of our positions are short TBA positions with negative duration, meaning that should interest rates rise, the value of the short position would be expected to increase. This expected increase in value would then serve to offset corollary expected increases in our current and/or future borrowing costs under our repurchase agreements, and so in this manner our short TBA positions serve as a hedge against potential increases in interest rates. While we use TBAs to hedge interest rate risk and certain other risks, we also hold net long positions in certain TBA securities as a means of acquiring exposure to Agency RMBS.

4243

The composition and relative mix of our hedging instruments may vary from period to period given the amount of our liabilities outstanding or anticipated to be entered into, the overall market environment and our view as to which instruments best enable us to execute our hedging goals.

Leverage

The following table summarizes our outstanding liabilities under repurchase agreements as of June 30, ~~2021~~2022 and December 31, ~~2020.~~2021. We had no other borrowings outstanding.


		June 30, 2021					December 31, 2020						June 30, 2022					December 31, 2021
				Weighted Average					Weighted Average						Weighted Average					Weighted Average
Remaining Days to Maturity	Remaining Days to Maturity	Borrowings Outstanding		Interest Rate		Remaining Days to Maturity	Borrowings Outstanding		Interest Rate		Remaining Days to Maturity	Remaining Days to Maturity	Borrowings Outstanding		Interest Rate		Remaining Days to Maturity	Borrowings Outstanding		Interest Rate		Remaining Days to Maturity
		(In thousands)											(In thousands)
30 days or less	30 days or less	$	234,227	0.15	%	19	$	307,544	0.27	%	15	30 days or less	$	340,069	1.08	%	14	$	162,089	0.18	%	13
31-60 days	31-60 days	323,704		0.16		45	541,104		0.23		44	31-60 days	200,860		0.82		44	235,321		0.21		43
61-90 days	61-90 days	70,788		0.20		76	92,314		0.26		74	61-90 days	163,855		0.87		76	114,931		0.18		72
91-120 days	91-120 days	31,572		0.18		106	—		—		—	91-120 days	73,891		0.87		108	104,361		0.17		106
121-150 days	121-150 days	25,247		0.14		134	2,371		0.27		126	121-150 days	45,516		1.33		135	148,855		0.16		133
151-180 days	151-180 days	—		—		—	53,150		0.32		162	151-180 days	45,403		2.13		166	56,337		0.15		163
181-360 days		449,959		0.19		270	18,762		0.26		257
181-364 days												181-364 days	80,745		1.04		217	242,941		0.19		238
Total	Total	$	1,135,497	0.17	%	134	$	1,015,245	0.25	%	48	Total	$	950,339	1.03	%	69	$	1,064,835	0.18	%	111

We finance our assets with what we believe to be a prudent amount of leverage, which will vary from time to time based upon the particular characteristics of our portfolio, availability of financing, and market conditions. As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, our total debt-to-equity ratio was ~~7.0:~~8.0:1 and ~~6.1:~~6.9:1, respectively. Collateral transferred with respect to our outstanding repo borrowings, including net cash collateral posted, as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 had an aggregate fair value of ~~$1.2~~$1.0 billion and $1.1 ~~billion, respectively. Adjusted for unsettled security purchases and sales, our debt-to-equity ratio was 7.2:1 and 6.1:1 as of June 30, 2021 and December 31, 2020, respectively.~~billion. Our debt-to-equity ratio may fluctuate period over period based on portfolio management decisions, market conditions, capital markets conditions, and the timing of security purchase and sale transactions.

~~As of June 30, 2021, we had cash and cash equivalents of $58.7 million, along with other unencumbered assets of approximately $31.3 million.~~

Shareholders' Equity

As of June 30, ~~2021,~~2022, our shareholders' equity decreased to ~~$161.9~~$118.6 million from ~~$166.4~~$154.2 million as of December 31, ~~2020.~~2021. This decrease principally consisted of ~~dividends declared of $7.3 million and~~ a net loss of ~~$(4.4)~~$(28.2) million ~~partially offset by net proceeds from the issuance~~and dividends declared of ~~common shares of $7.1~~$7.3 million. As of June 30, ~~2021,~~2022, our book value per share was ~~$12.53,~~$9.07, as compared to ~~$13.48~~$11.76 as of December 31, ~~2020.~~2021.

4344

Results of Operations for the Three- and Six-Month Periods Ended June 30, ~~2021~~2022 and ~~2020~~2021

The following table summarizes our results of operations for the three- and six-month periods ended June 30, ~~2021~~2022 and ~~2020:~~2021:


		Three-Month Period Ended				Six-Month Period Ended					Three-Month Period Ended				Six-Month Period Ended
(In thousands except for per share amounts)	(In thousands except for per share amounts)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020		(In thousands except for per share amounts)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Interest Income (Expense)	Interest Income (Expense)									Interest Income (Expense)
Interest income	Interest income	$	9,875	$	3,489	$	16,410	$	13,370	Interest income	$	9,087	$	9,875	$	15,622	$	16,410
Interest expense	Interest expense	(661)		(2,330)		(1,442)		(8,430)		Interest expense	(1,972)		(661)		(3,075)		(1,442)
Net interest income	Net interest income	9,214		1,159		14,968		4,940		Net interest income	7,115		9,214		12,547		14,968
Expenses	Expenses									Expenses
Management fees to affiliate	Management fees to affiliate	609		594		1,223		1,119		Management fees to affiliate	447		609		947		1,223
Other operating expenses	Other operating expenses	924		1,138		1,774		1,900		Other operating expenses	859		924		1,680		1,774
Total expenses	Total expenses	1,533		1,732		2,997		3,019		Total expenses	1,306		1,533		2,627		2,997
Other Income (Loss)	Other Income (Loss)									Other Income (Loss)
Net realized and change in net unrealized gains (losses) on securities	Net realized and change in net unrealized gains (losses) on securities	(10,219)		20,865		(17,447)		28,726		Net realized and change in net unrealized gains (losses) on securities	(43,598)		(10,219)		(108,283)		(17,447)
Net realized and change in net unrealized gains (losses) on financial derivatives	Net realized and change in net unrealized gains (losses) on financial derivatives	(1,999)		1,053		1,066		(26,047)		Net realized and change in net unrealized gains (losses) on financial derivatives	27,049		(1,999)		70,156		1,066
Total Other Income (Loss)	Total Other Income (Loss)	(12,218)		21,918		(16,381)		2,679		Total Other Income (Loss)	(16,549)		(12,218)		(38,127)		(16,381)
Net Income (Loss)	Net Income (Loss)	$	(4,537)	$	21,345	$	(4,410)	$	4,600	Net Income (Loss)	$	(10,740)	$	(4,537)	$	(28,207)	$	(4,410)
Net Income (Loss) Per Common Share	Net Income (Loss) Per Common Share	$	(0.36)	$	1.73	$	(0.36)	$	0.37	Net Income (Loss) Per Common Share	$	(0.82)	$	(0.36)	$	(2.15)	$	(0.36)

~~Core~~Adjusted Distributable Earnings

Beginning with the financial results for the quarter ended June 30, 2022, the supplemental non-GAAP financial measure that we previously referred to as "Core Earnings," we now refer to as "Adjusted Distributable Earnings." We calculate Adjusted Distributable Earnings (formerly referred to as Core ~~Earnings consists of~~Earnings) as net income (loss), excluding realized and change in net unrealized gains and (losses) on securities and financial derivatives, and excluding, if applicable, any non-recurring items of income or loss. ~~Core~~Adjusted Distributable Earnings also excludes the effect of the Catch-up Premium Amortization Adjustment on interest income. The Catch-up Premium Amortization Adjustment is a quarterly adjustment to premium amortization triggered by changes in actual and projected prepayments on our Agency RMBS (accompanied by a corresponding offsetting adjustment to realized and unrealized gains and losses). The adjustment is calculated as of the beginning of each quarter based on our then-current assumptions about cashflows and prepayments, and can vary significantly from ~~period~~quarter to ~~period. Core~~quarter. Adjusted Distributable Earnings includes net realized and change in net unrealized gains (losses) associated with periodic settlements on interest rate swaps.

~~Core~~Adjusted Distributable Earnings is a supplemental non-GAAP financial measure. We believe that ~~Core~~the presentation of Adjusted Distributable Earnings provides information useful to investors, ~~because~~because: (i) we believe that it is a ~~metric~~useful indicator of both current and projected long-term financial performance, in that it excludes the impact of certain current period earnings components that we ~~use to assess our~~believe are less useful in forecasting long-term performance and dividend-paying ability; (ii) we use it to evaluate the effective net yield provided by our portfolio, after the ~~portfolio. Moreover, one~~effects of ~~our objectives is to generate income from the net interest margin on the portfolio,~~financial leverage; and ~~Core Earnings is used to help measure the extent to which this objective is being achieved. In addition,~~(iii) we believe that presenting ~~Core~~Adjusted Distributable Earnings ~~enables~~assists our investors ~~to measure, evaluate~~in measuring and ~~compare~~evaluating our operating performance, and comparing our operating performance to that of our ~~peer companies. However,~~residential mortgage REIT peers. Please note, however, that: (I) our calculation of Adjusted Distributable Earnings may differ from the calculation of similarly titled non-GAAP financial measures by our peers, with the result that these non-GAAP financial measures might not be directly comparable; and (II) Adjusted Distributable Earnings excludes certain items, such as most realized and unrealized gains and losses, that may impact the amount of cash that is actually available for distribution.

In addition, because ~~Core~~Adjusted Distributable Earnings is an incomplete measure of our financial results and differs from net income (loss) computed in accordance with U.S. GAAP, it should be considered as supplementary to, and not as a substitute for, net income (loss) computed in accordance with U.S. GAAP.

Furthermore, Adjusted Distributable Earnings is different from REIT taxable income. As a result, the determination of whether we have met the requirement to distribute at least 90% of our annual REIT taxable income (subject to certain adjustments) to its shareholders, in order to maintain qualification as a REIT, is not based on whether we have distributed 90% of our Adjusted Distributable Earnings.

4445

In setting our dividend, our Board of Trustees considers our earnings, liquidity, financial condition, REIT distribution requirements, and financial covenants, along with other factors that the Board of Trustees may deem relevant from time to time.

The following table reconciles, for the ~~three- and six-month~~three-month periods ended June 30, 2022 and 2021, ~~and 2020, Core~~Adjusted Distributable Earnings to the line on the Consolidated Statement of Operations entitled Net Income (Loss), which we believe is the most directly comparable GAAP measure:


		Three-Month Period Ended				Six-Month Period Ended					Three-Month Period Ended				Six-Month Period Ended
(In thousands except for share amounts)	(In thousands except for share amounts)	June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020		(In thousands except for share amounts)	June 30, 2022		June 30, 2021		June 30, 2022		June 30, 2021
Net Income (Loss)	Net Income (Loss)	$	(4,537)	$	21,345	$	(4,410)	$	4,600	Net Income (Loss)	$	(10,740)	$	(4,537)	$	(28,207)	$	(4,410)
Adjustments:	Adjustments:									Adjustments:
Net realized (gains) losses on securities	Net realized (gains) losses on securities	(852)		(5,175)		(3,932)		(6,268)		Net realized (gains) losses on securities	15,464		(852)		29,634		(3,932)
Change in net unrealized (gains) losses on securities	Change in net unrealized (gains) losses on securities	11,071		(15,690)		21,379		(22,458)		Change in net unrealized (gains) losses on securities	28,134		11,071		78,649		21,379
Net realized (gains) losses on financial derivatives	Net realized (gains) losses on financial derivatives	(2,222)		8,452		2,928		14,951		Net realized (gains) losses on financial derivatives	(30,477)		(2,222)		(45,830)		2,928
Change in net unrealized (gains) losses on financial derivatives	Change in net unrealized (gains) losses on financial derivatives	4,221		(9,505)		(3,994)		11,096		Change in net unrealized (gains) losses on financial derivatives	3,428		4,221		(24,326)		(3,994)
Net realized gains (losses) on periodic settlements of interest rate swaps	Net realized gains (losses) on periodic settlements of interest rate swaps	(255)		(1,223)		(641)		110		Net realized gains (losses) on periodic settlements of interest rate swaps	(232)		(255)		(848)		(641)
Change in net unrealized gains (losses) on accrued periodic settlements of interest rate swaps	Change in net unrealized gains (losses) on accrued periodic settlements of interest rate swaps	(246)		896		(297)		(253)		Change in net unrealized gains (losses) on accrued periodic settlements of interest rate swaps	(328)		(246)		(371)		(297)
Non-recurring expenses	Non-recurring expenses	58		313		58		313		Non-recurring expenses	—		58		—		58
Negative (positive) component of interest income represented by Catch-up Premium Amortization Adjustment	Negative (positive) component of interest income represented by Catch-up Premium Amortization Adjustment	(2,636)		3,782		(2,707)		4,463		Negative (positive) component of interest income represented by Catch-up Premium Amortization Adjustment	(1,595)		(2,636)		(1,106)		(2,707)
Subtotal	Subtotal	9,139		(18,150)		12,794		1,954		Subtotal	14,394		9,139		35,802		12,794
Core Earnings		$	4,602	$	3,195	$	8,384	$	6,554
Adjusted Distributable Earnings										Adjusted Distributable Earnings	$	3,654	$	4,602	$	7,595	$	8,384
Weighted Average Shares Outstanding	Weighted Average Shares Outstanding	12,432,004		12,319,616		12,388,017		12,377,185		Weighted Average Shares Outstanding	13,106,585		12,432,004		13,108,246		12,388,017
Core Earnings Per Share		$	0.37	$	0.26	$	0.68	$	0.53
Adjusted Distributable Earnings Per Share										Adjusted Distributable Earnings Per Share	$	0.28	$	0.37	$	0.58	$	0.68

Results of Operations for the Three-Month Periods Ended June 30, ~~2021~~2022 and ~~2020~~2021

Net Income (Loss)

Net income (loss) for the three-month period ended June 30, ~~2021~~2022 was ~~$(4.5)~~$(10.7) million, as compared to ~~$21.3~~$(4.5) million for the three-month period ended June 30, ~~2020.~~2021. The ~~reversal~~period-over-period decline in our results of operations ~~period over period~~ was primarily due to an increase in total other loss as well as a decrease in net realized and change in unrealized losses on securities and financial derivatives for the three-month period ended June 30, 2021, as compared to net realized and change in unrealized gains on securities and financial derivatives for the three-month period ended June 30, 2020.interest income.

Interest Income

Our portfolio as of both June 30, ~~2021~~2022 and ~~2020~~2021 consisted primarily of Agency RMBS, and to a lesser extent, non-Agency RMBS. Before interest expense, we earned approximately ~~$9.8~~$8.9 million and ~~$3.4~~$9.8 million in interest income on these securities for the three-month periods ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The period-over-period ~~increase~~decrease in interest income primarily resulted from lower average holdings and lower weighted average yields in our Agency RMBS portfolio, partially offset by higher average holdings and higher weighted average yields inon our ~~Agency~~non-Agency RMBS portfolio. The Catch-up Premium Amortization Adjustment causes variability in our interest income and portfolio yields. For the three-month ~~period~~periods ended June 30, 2022 and 2021, we had a positive Catch-up Premium Amortization Adjustment of approximately $1.6 million and $2.6 million, respectively, which increased ~~interest income. For the three-month period ended June 30, 2020, we had a negative Catch-up Premium Amortization Adjustment of approximately $(3.8) million, which decreased~~ interest income. Excluding the Catch-up Premium Amortization Adjustments, the weighted average yield of our overall portfolio was ~~2.44%~~2.57% and ~~2.99%~~2.44% for the three-month periods ended June 30, 2022 and 2021, ~~and 2020,~~ respectively.

The following table details our interest income, average holdings of yield-bearing assets, and weighted average yield based on amortized cost for the three-month periods ended June 30, ~~2021~~2022 and ~~2020:~~2021:

Agency(1)
Non-Agency(1)
Total(1)
(In thousands) Interest Income Average Holdings Yield Interest Income Average Holdings Yield Interest Income Average Holdings Yield
Three-month period ended June 30, 2021 $ 9,677 $ 1,175,360 3.29 % $ 165 $ 7,707 8.55 % $ 9,842 $ 1,183,067 3.33 %
Three-month period ended June 30, 2020 $ 3,001 $ 941,506 1.28 % $ 435 $ 23,768 7.33 % $ 3,436 $ 965,274 1.42 %


	Agency(1)						Non-Agency(1)						Total(1)
(In thousands)	Interest Income		Average Holdings		Yield		Interest Income		Average Holdings		Yield		Interest Income		Average Holdings		Yield
Three-month period ended June 30, 2022	$	8,429	$	1,117,820	3.02	%	$	424	$	13,999	12.12	%	$	8,853	$	1,131,819	3.13	%
Three-month period ended June 30, 2021	$	9,677	$	1,175,360	3.29	%	$	165	$	7,707	8.55	%	$	9,842	$	1,183,067	3.33	%

(1)Amounts exclude interest income on cash and cash equivalents (including when posted as margin) and long U.S. Treasury securities.

Interest Expense

For the three-month periods ended June 30, ~~2021~~2022 and ~~2020,~~2021, the majority of interest expense that we incurred was related to our repo borrowings, which we use to finance our assets. We also incur interest expense in connection with our short positions in U.S. Treasury securities as well as on our counterparties' cash collateral held by us. Our total interest expense for the three-month period ended June 30, ~~2021~~2022 was ~~$0.7~~$2.0 million, which primarily consisted of ~~$0.6~~$1.8 million of interest expense on our repo borrowings, and $0.1 million of interest expense related to our short positions in U.S. Treasury securities. Our total interest expense for the three-month period ended June 30, ~~2020~~2021 was ~~$2.3~~$0.7 million, which primarily consisted of ~~which $2.3~~$0.6 million ~~represented~~of interest expense on our repo borrowings, and ~~$35 thousand represented~~$0.1 million of interest expense related ~~primarily~~ to our short positions in U.S. Treasury securities. The period-over-period ~~decrease~~increase in our total interest expense resulted mainly from ~~significantly lower~~higher rates on our repo borrowings stemming from the ~~decrease~~increase in short-term interest ~~rates, as well as a significant decline in financing spreads as measured against LIBOR.~~rates.

The following table shows information related to our average cost of funds(1) on repurchase agreements for the three-month periods ended June 30, ~~2021~~2022 and ~~2020:~~2021:

Repurchase
Agreements
Interest Rate
Swaps(2)
Short U.S. Treasury Securities(2)(3)
Total(2)
Average Borrowed Funds Interest Expense Average
Cost of
Funds Net periodic expense paid or payable Adjustment to Average
Cost of
Funds Interest expense Adjustment to Average
Cost of
Funds Interest and net periodic expense paid or payable Adjusted Average
Cost of
Funds
(In thousands)
Three-month period ended June 30, 2021 $ 1,166,954 $ 555 0.19 % $ 500 0.17 % $ 98 0.04 % $ 1,153 0.40 %
Three-month period ended June 30, 2020 $ 941,242 $ 2,294 0.98 % $ 322 0.14 % $ 35 0.01 % $ 2,651 1.13 %


	Three-Month Period Ended June 30, 2022						Three-Month Period Ended June 30, 2021
	Average Borrowed Funds		Interest Expense		Average Cost of Funds		Average Borrowed Funds		Interest Expense		Average Cost of Funds
(In thousands)
Agency RMBS	$	1,044,220	$	1,742	0.67	%	$	1,161,015	$	555	0.19	%
Non-Agency RMBS	11,690		56		1.92	%	—		—		—
U.S. Treasury Securities	14,319		22		0.60	%	5,939		—		—
Total	$	1,070,229	$	1,820	0.68	%	$	1,166,954	$	555	0.19	%

(1)This metric does not take into account other instruments that we use to hedge interest rate risk, such as TBAs, swaptions, and futures.

Among other instruments, we use interest rate swaps and short U.S. Treasury securities to hedge against the risk of rising interest rates. The following table shows information related to the components of our average cost of funds(1) including the amortization of upfront payments and the actual and accrued periodic payments on our interest rate swaps and interest expense on short U.S. Treasury securities for the three-month periods ended June 30, 2022 and 2021:


	Repurchase Agreements						Interest Rate Swaps(2)				Short U.S. Treasury Securities(2)(3)				Total(2)
	Average Borrowed Funds		Interest Expense		Average Cost of Funds		Net periodic expense paid or payable		Adjustment to Average Cost of Funds		Interest expense		Adjustment to Average Cost of Funds		Interest and net periodic expense paid or payable		Adjusted Average Cost of Funds
(In thousands)
Three-month period ended June 30, 2022	$	1,070,229	$	1,820	0.68	%	$	502	0.19	%	$	100	0.04	%	$	2,422	0.91	%
Three-month period ended June 30, 2021	$	1,166,954	$	555	0.19	%	$	500	0.17	%	$	98	0.04	%	$	1,153	0.40	%

(1)This metric does not take into account other instruments that we use to hedge interest rate risk, such as TBAs, swaptions, and futures.

(2)As an alternative cost of funds measure, we add to our repo borrowing cost the net periodic amounts paid or payable by us on our interest rate swaps and the interest expense we incur on our short positions in U.S. Treasury securities, and express the total as a percentage of our average outstanding repurchase agreement borrowings.

(3)Includes interest expense on reverse repurchase agreements with negative interest rates, which can occur when we borrow certain bonds that we have sold short.

For the three-month ~~periods~~period ended June 30, ~~2021~~2022, the weighted average yield of our portfolio of Agency and ~~2020,~~non-Agency RMBS excluding the impact of the Catch-up Premium Amortization Adjustment was 2.57%, while our total adjusted average ~~one-month LIBOR~~cost of funds, including interest rate swaps and short U.S. Treasury securities, was ~~0.10% and 0.36%~~0.91%, ~~respectively. For the three-month periods ended June 30, 2021 and 2020, average six-month LIBOR was 0.19% and 0.71%, respectively. For~~resulting in a net interest margin of 1.66%. By comparison, for the three-month period ended June 30, 2021, the weighted average yield of our portfolio of Agency and non-Agency RMBS excluding the impact of the Catch-up Premium Amortization Adjustment was 2.44%, while our total adjusted average cost of funds, including interest rate swaps and short U.S. Treasury securities, was 0.40%, resulting in a net interest margin of 2.04%. By comparison, for the three-month period ended June 30, 2020, the weighted average yield of our Agency and non-Agency RMBS excluding the impact of the Catch-up Premium Amortization Adjustment was 2.99%, while our total adjusted average cost of funds, including interest rate swaps and short U.S. Treasury securities, was 1.13%, resulting in a net interest margin of 1.86%.

Management Fees

For ~~each of~~ the three-month periods ended June 30, ~~2021~~2022 and ~~2020,~~2021, our management fee expense was approximately $0.4 million and $0.6 ~~million.~~million, respectively. Management fees are calculated based on our shareholders' equity at the end of each quarter. The decrease in management fee expense period over period was due to a smaller capital base as of June 30, 2022.

Other Operating Expenses

Other operating expenses, as presented above, include professional fees, compensation expense, insurance expense, and various other expenses incurred in connection with the operation of our business. For each of the three-month periods ended June 30, ~~2021~~2022 and ~~2020,~~2021, our other operating expenses were approximately $0.9 ~~million and $1.1 million, respectively. The decrease in other operating expenses for the three-month period ended June 30, 2021 was primarily due to a decrease in professional fees.~~million.

Other Income (Loss)

Other income (loss) consists of net realized and net change in unrealized gains (losses) on securities and financial derivatives. For the three-month period ended June 30, 2022, Other income (loss) was $(16.5) million, consisting primarily of net realized and unrealized losses of $(43.6) million on our securities, which were partially offset by net realized and unrealized gains of $27.0 million on our financial derivatives. Net realized and unrealized losses of $(43.6) million on our securities, consists primarily of losses on our Agency RMBS which were caused by significantly lower asset prices, as interest rates rose and Agency yield spreads widened. The net realized and unrealized gains on our financial derivatives of $27.0 million consisted of net realized and unrealized gains of $16.8 million on our interest rate swaps, $6.1 million on our TBAs, and $4.2 million on our U.S. Treasury futures, and were primarily the result of the significant increase in interest rates.

For the three-month period ended June 30, 2021, Other income (loss) was $(12.2) million, consisting primarily of

net realized and ~~change in net~~ unrealized losses of $(10.4) million on our Agency RMBS, and $(8.9) million on our interest rate swaps and futures, partially offset by net realized and ~~change in net~~ unrealized gains of $6.9 million on our TBAs. Yield spreads on Agency RMBS widened, most significantly on higher coupons, amidst concerns that the Federal Reserve will commence tapering its asset purchases and with heightened prepayment risk related to lower mortgage rates. With the decrease in long-term interest rates, our interest-only securities, interest rate swaps, U.S. Treasury securities, and futures all had net losses. Our concentration of long TBA investments in lower coupons, and short TBA investments in higher coupons, benefited our results, resulting in net realized and ~~change in net~~ unrealized gains on TBAs of $6.9 million.

Other income (loss) for the three-month period ended June 30, 2020 was $21.9 million, consisting primarily of net realized and change in net unrealized gains of $18.3 million on our Agency RMBS, $2.4 million on our non-Agency RMBS, and $1.1 million on our financial derivatives. Our specified pools increased in price primarily as a result of the increased demand for prepayment protection that specified pools provide, relative to generic pools, amidst record-low mortgage rates and increasing actual and projected prepayment rates during the period ended June 30, 2020. Our reverse mortgage pools also increased in price, driven by strong investor demand and a recovery in yield spreads after the distress in March 2020. As the three-month period ended June 30, 2020 progressed, we added significantly to our non-Agency RMBS portfolio, which performed extremely well, as prices increased throughout the quarter.

Results of Operations for the Six-Month Periods Ended June 30, ~~2021~~2022 and ~~2020~~2021

Net Income (Loss)

Net income (loss) for the six-month period ended June 30, ~~2021~~2022 was ~~$(4.4)~~$(28.2) million, as compared to ~~$4.6~~$(4.4) million for the six-month period ended June 30, ~~2020.~~2021. The ~~reversal~~period-over-period decline in our results of operations ~~period over period~~ was primarily due to an increase in total other ~~losses for the six-month period ended June 30, 2021 as compared to total other gains for the six-month period ended June 30, 2020.~~loss and a decrease in net interest income.

Interest Income

Our portfolio as of both June 30, ~~2021~~2022 and ~~2020~~2021 consisted primarily of Agency RMBS, and to a lesser extent, non-Agency RMBS. Before interest expense, we earned approximately ~~$16.4~~$15.3 million and ~~$13.0~~$16.4 million in interest income on these securities for the six-month periods ended June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The period-over-period ~~increase~~decrease in interest income was primarily ~~resulted from higher~~the result of lower average asset yields on our Agency ~~RMBS~~portfolio, partially offset by higher average holdings and higher asset yields in our non-Agency portfolio. The Catch-up Premium Amortization Adjustment causes variability in our interest income and portfolio yields. For the six-month ~~period~~periods ended June 30, 2022 and 2021, we had a positive Catch-up Premium Amortization Adjustment of approximately $1.1 million and $2.7 million, respectively, which increased ~~interest income. For the six-month period ended June 30, 2020, we had a negative Catch-up Premium Amortization Adjustment of approximately $(4.5) million, which decreased~~ interest income. Excluding the Catch-up Premium Amortization Adjustments, the weighted average yield of our overall portfolio was ~~2.42%~~2.47% and ~~3.03%~~2.42% for the six-month periods ended June 30, 2022 and 2021, ~~and 2020,~~ respectively.

The following table details our interest income, average holdings of yield-bearing assets (on a settle date basis), and weighted average yield based on amortized cost for the six-month periods ended June 30, ~~2021~~2022 and ~~2020:~~2021:


		Agency(1)						Non-Agency(1)						Total(1)							Agency(1)						Non-Agency(1)						Total(1)
(In thousands)	(In thousands)	Interest Income		Average Holdings		Yield		Interest Income		Average Holdings		Yield		Interest Income		Average Holdings		Yield		(In thousands)	Interest Income		Average Holdings		Yield		Interest Income		Average Holdings		Yield		Interest Income		Average Holdings		Yield
Six-month period ended June 30, 2022																				Six-month period ended June 30, 2022	$	14,635	$	1,138,739	2.57	%	$	714	$	13,686	10.44	%	$	15,349	$	1,152,425	2.66	%
Six-month period ended June 30, 2021	Six-month period ended June 30, 2021	$	15,967	$	1,117,267	2.86	%	$	394	$	9,458	8.35	%	$	16,361	$	1,126,725	2.90	%	Six-month period ended June 30, 2021	$	15,967	$	1,117,267	2.86	%	$	394	$	9,458	8.35	%	$	16,361	$	1,126,725	2.90	%
Six-month period ended June 30, 2020		$	12,337	$	1,136,839	2.17	%	$	632	$	15,257	8.29	%	$	12,969	$	1,152,096	2.25	%

(1)Amounts exclude interest income on cash and cash equivalents (including when posted as margin) and long U.S. Treasury securities.

Interest Expense

For the six-month periods ended June 30, ~~2021~~2022 and ~~2020,~~2021, the majority of interest expense that we incurred was related to our repo borrowings, which we use to finance our assets. We also incur interest expense in connection with our short positions in U.S. Treasury securities as well as on our counterparties' cash collateral held by us. Our total interest expense for the six-month period ended June 30, ~~2021~~2022 was ~~$1.4~~$3.1 million, which primarily consisted of ~~$1.2~~$2.6 million of interest expense on our repo borrowings, and ~~$0.3~~$0.4 million of interest expense related to our short positions in U.S. Treasury securities. Our total interest expense for the six-month period ended June 30, ~~2020~~2021 was ~~$8.4~~$1.4 million, consisting primarily of ~~which $8.2~~$1.2 million ~~represented~~of interest expense on our repo borrowings, and ~~$0.2~~$0.3 million ~~represented~~of interest expense related primarily to our short positions in U.S. Treasury securities. The period-over-period ~~decrease~~increase in our total interest expense resulted mainly from ~~significantly lower~~higher rates on our repo borrowings stemming from ~~the decrease~~an increase in short-term interest ~~rates, as well as a significant decline in financing spreads as measured against LIBOR, and to a lesser extent lower average outstanding borrowings.~~rates.

The following table shows information related to our average cost of funds(1) on repurchase agreements for the six-month periods ended June 30, ~~2021~~2022 and ~~2020:~~2021:

Repurchase
Agreements
Interest Rate
Swaps(2)
Short U.S. Treasury Securities(2)(3)
Total(2)
Average Borrowed Funds Interest Expense Average
Cost of
Funds Net periodic expense paid or payable Adjustment to Average
Cost of
Funds Interest expense Adjustment to Average
Cost of
Funds Interest and net periodic expense paid or payable Adjusted Average
Cost of
Funds
(In thousands)
Six-month period ended June 30, 2021 $ 1,104,087 $ 1,156 0.21 % $ 923 0.17 % $ 279 0.05 % $ 2,358 0.43 %
Six-month period ended June 30, 2020 $ 1,111,374 $ 8,212 1.49 % $ 123 0.02 % $ 197 0.03 % $ 8,532 1.54 %


	Six Month Period Ended June 30, 2022						Six Month Period Ended June 30, 2021
	Average Borrowed Funds		Interest Expense		Average Cost of Funds		Average Borrowed Funds		Interest Expense		Average Cost of Funds
(In thousands)
Agency RMBS	$	1,084,745	$	2,527	0.47	%	$	1,101,101	$	1,155	0.21	%
Non-Agency RMBS	7,532		68		1.82	%	—		—		—
U.S. Treasury Securities	9,532		24		0.51	%	2,986		—		—
Total	$	1,101,809	$	2,619	0.48	%	$	1,104,087	$	1,156	0.21	%

(1)This metric does not take into account other instruments that we use to hedge interest rate risk, such as TBAs, swaptions, and futures.


	Repurchase Agreements						Interest Rate Swaps(2)				Short U.S. Treasury Securities(2)(3)				Total(2)
	Average Borrowed Funds		Interest Expense		Average Cost of Funds		Net periodic expense paid or payable		Adjustment to Average Cost of Funds		Interest expense		Adjustment to Average Cost of Funds		Interest and net periodic expense paid or payable		Adjusted Average Cost of Funds
(In thousands)
Six-month period ended June 30, 2022	$	1,101,809	$	2,619	0.48	%	$	1,131	0.21	%	$	402	0.07	%	$	4,152	0.76	%
Six-month period ended June 30, 2021	$	1,104,087	$	1,156	0.21	%	$	923	0.17	%	$	279	0.05	%	$	2,358	0.43	%

(1)This metric does not take into account other instruments that we use to hedge interest rate risk, such as TBAs, swaptions, and futures.

(3)Includes interest expense on reverse repurchase agreements with negative interest rates, which can occur when we borrow certain bonds that we have sold short.

For the six-month ~~periods~~period ended June 30, ~~2021~~2022, the weighted average yield of our portfolio of Agency and ~~2020,~~non-Agency RMBS excluding the impact of the Catch-up Premium Amortization Adjustment was 2.47%, while our total adjusted average ~~one-month LIBOR~~cost of funds, including interest rate swaps and short U.S. Treasury securities, was ~~0.11% and 0.90%~~0.76%, ~~respectively. For the six-month periods ended June 30, 2021 and 2020, average six-month LIBOR was 0.20% and 1.11%, respectively. For~~resulting in a net interest margin of 1.71%. By comparison, for the six-month period ended June 30, 2021, the weighted average yield of our ~~portfolio of~~ Agency and non-Agency RMBS excluding the impact of the Catch-up Premium Amortization Adjustment was 2.42%, while our total adjusted average cost of funds, including interest rate swaps and short U.S. Treasury securities, was 0.43%, resulting in a net interest margin of 1.99%. By comparison, for the six-month period ended June 30, 2020, the weighted average yield of our Agency and non-Agency RMBS excluding the impact of the Catch-up Premium Amortization Adjustment was 3.03%, while our total adjusted average cost of funds, including interest rate swaps and short U.S. Treasury securities, was 1.54%, resulting in a net interest margin of 1.49%.

Management Fees

For the six-month periods ended June 30, ~~2021~~2022 and ~~2020,~~2021, our management fee expense was approximately ~~$1.2~~$0.9 million and ~~$1.1~~$1.2 million, respectively. Management fees are calculated based on our shareholders' equity at the end of each quarter. The ~~increase~~decrease in management fee expense period over period was due to a ~~larger~~smaller capital base at each quarter end in ~~2021,~~2022, as compared to the respective quarter ends in ~~2020.~~2021.

Other Operating Expenses

Other operating expenses, as presented above, include professional fees, compensation expense, insurance expense, and various other expenses incurred in connection with the operation of our business. For the six-month periods ended June 30, ~~2021~~2022 and ~~2020,~~2021, our other operating expenses were approximately ~~$1.8~~$1.7 million and ~~$1.9~~$1.8 million, respectively. The decrease in other operating expenses for the six-month period ended June 30, ~~2021~~2022 was primarily due to a decrease in professional fees.

Other Income (Loss)

Other income (loss) consists of net realized and net change in unrealized gains (losses) on securities and financial derivatives. For the six-month period ended June 30, 2022, Other income (loss) was $(38.1) million, consisting primarily of net realized and unrealized losses of $(112.3) million on our Agency RMBS, which were partially offset by net realized and unrealized gains of $3.7 million on our short U.S. Treasury securities, and net realized and unrealized gains of $70.2 million on our financial derivatives. The losses on our Agency RMBS were caused by significantly lower asset prices, as interest rates rose and Agency yield spreads widened. For the six-month period ended June 30, 2022, the net realized and unrealized gains of $3.7 million on our short U.S. Treasury securities and net realized and unrealized gains of $70.2 on our financial derivatives were primarily the result of the significant increase in interest rates. The net realized and unrealized gains on our financial derivatives of $70.2 million consisted of net realized and unrealized gains of $34.2 million on our interest rate swaps, $21.2 million on our U.S. Treasury futures, and $14.7 million on our TBAs.

For the six-month period ended June 30, 2021, Other income (loss) was $(16.4) million, consisting primarily of net

realized and ~~change in net~~ unrealized losses of $(20.4) million on our Agency RMBS, which were partially offset by net realized gains of $2.7 million on our short U.S. Treasury securities and net realized and ~~change in net~~ unrealized gains of $1.1 million on our financial derivatives. During the period, actual and implied interest rate volatility rose and long-term interest rates increased significantly. Yield spreads on our Agency RMBS holdings widened and prices declined, leading to net realized and unrealized losses. For the six month period ended June 30, 2021, net realized gains of $2.7 million on our short U.S. Treasury securities and net realized and ~~change in net~~ unrealized gains of $1.1 million on our financial derivatives were primarily the result of the increase in long-term interest rates. The net realized and ~~change in net~~ unrealized gains on our financial derivatives of $1.1 million consisted of net realized and ~~change in net~~ unrealized gains of $1.2 million on our interest rate swaps and $1.7 million on our U.S. Treasury futures, partially offset by losses on our TBAs of $(1.8) million, where losses on our long lower-coupon holdings were partially offset by net gains on our short higher-coupon holdings.

Other income (loss) for the six-month period ended June 30, 2020 was $2.7 million, consisting primarily of net realized and change in net unrealized gains of $30.0 million on our Agency RMBS and $1.4 million on our non-Agency RMBS, which were partially offset by net realized and change in net unrealized losses of $(2.8) million on our short U.S. Treasury securities and $(26.0) million on our financial derivatives. The increase in prices on our Agency RMBS holdings, mainly relating to our specified pools, was a result of the decrease in interest rates coupled with increased demand for the prepayment protection that specified pools provide, relative to generic pools, amidst record-low mortgage rates and increasing actual and projected prepayment rates during the six-month period ended June 30, 2020. During the first quarter of 2020, interest rates declined sharply and were highly volatile, generating significant net realized and unrealized losses on our interest rate hedges, only a small portion of which were offset by net unrealized gains on our interest rate hedges in the second quarter. Net realized and change in net unrealized losses on our financial derivatives of $(26.0) million, consisted of net realized and change in net unrealized losses of $(18.3) million on our interest rate swaps, $(6.8) million on our futures, and $(1.0) million on our TBAs. As measured by sales and excluding paydowns, we turned over approximately 29% of our Agency RMBS portfolio during the six-month period ended June 30, 2020, and, as a result of this turnover, we generated net realized gains of $8.7 million on our Agency RMBS portfolio.

Liquidity and Capital Resources

Liquidity refers to our ability to generate and obtain adequate amounts of cash to meet our ~~cash needs,~~requirements, including repaying our borrowings, funding and maintaining RMBS and other assets, paying dividends, and other general business needs. Our short-term ~~(one year or less)~~(the 12 months following period end) and long-term (beyond 12 months from period end) liquidity requirements include acquisition costs for assets we acquire, payment of our management fee, compliance with margin requirements under our repurchase agreements, TBA and other financial derivative contracts, repayment of repurchase agreement borrowings to the extent we are unable or unwilling to extend our repurchase agreements, the payment of dividends, and payment of our general operating expenses. Our capital resources primarily include cash on hand, cash flow from our investments (including monthly principal and interest payments received on our RMBS and proceeds from the sale of RMBS), borrowings under repurchase agreements, and proceeds from equity offerings. We expect that these sources of funds will be sufficient to meet our short-term

and long-term liquidity needs.

We borrow funds in the form of repurchase agreements. The terms of our repo borrowings are predominantly governed by Master Repurchase Agreements, or "MRAs," which generally conform to the terms in the standard master repurchase agreement as published by the Securities Industry and Financial Markets Association as to repayment and margin requirements. In addition, each lender may require that we include supplemental terms and conditions to the standard master repurchase agreement. Typical supplemental terms and conditions include the addition of or changes to provisions relating to margin calls, net asset value requirements, cross default provisions, certain key person events, changes in corporate structure, and requirements that all controversies related to the repurchase agreement be litigated in a particular jurisdiction. These provisions may differ for each of our lenders.

As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had ~~$1.1~~$1.0 billion and ~~$1.0~~$1.1 billion outstanding under our repurchase agreements, respectively. As of June 30, ~~2021,~~2022, our outstanding repurchase agreements were with 1615 counterparties.

The amounts borrowed under our repurchase agreements are generally subject to the application of "haircuts." A haircut is the percentage discount that a repo lender applies to the market value of an asset serving as collateral for a repo borrowing, for the purpose of determining whether such repo borrowing is adequately collateralized. As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the weighted average contractual haircut applicable to the assets that serve as collateral for our outstanding repo borrowings was ~~5.1%~~5.4% and ~~5.3%~~5.2%, respectively.

The following table details total outstanding borrowings, average outstanding borrowings, and the maximum outstanding borrowings at any month end for each quarter under repurchase agreements for the past twelve quarters.


Quarter Ended	Quarter Ended	Borrowings Outstanding at Quarter End		Average Borrowings Outstanding		Maximum Borrowings Outstanding at Any Month End		Quarter Ended	Borrowings Outstanding at Quarter End		Average Borrowings Outstanding		Maximum Borrowings Outstanding at Any Month End
		(In thousands)							(In thousands)
June 30, 2022								June 30, 2022	$	950,339	$	1,070,229	$	1,087,826
March 31, 2022								March 31, 2022	1,211,163		1,133,738		1,211,163
December 31, 2021								December 31, 2021	1,064,835		1,068,384		1,088,712
September 30, 2021								September 30, 2021	1,062,197		1,114,820		1,140,182
June 30, 2021	June 30, 2021	$	1,135,497	$	1,166,954	$	1,196,779	June 30, 2021	1,135,497		1,166,954		1,196,779
March 31, 2021	March 31, 2021	1,106,724		1,040,521		1,106,724		March 31, 2021	1,106,724		1,040,521		1,106,724
December 31, 2020	December 31, 2020	1,015,245		1,033,128		1,050,840		December 31, 2020	1,015,245		1,033,128		1,050,840
September 30, 2020	September 30, 2020	1,061,640		1,030,402		1,096,065		September 30, 2020	1,061,640		1,030,402		1,096,065
June 30, 2020	June 30, 2020	909,821		941,242		920,712		June 30, 2020	909,821		941,242		920,712
March 31, 2020(1)	March 31, 2020(1)	1,109,342		1,281,507		1,308,377		March 31, 2020(1)	1,109,342		1,281,507		1,308,377
December 31, 2019	December 31, 2019	1,296,272		1,301,270		1,319,839		December 31, 2019	1,296,272		1,301,270		1,319,839
September 30, 2019	September 30, 2019	1,337,984		1,369,722		1,374,080		September 30, 2019	1,337,984		1,369,722		1,374,080
June 30, 2019		1,442,043		1,412,434		1,442,043
March 31, 2019		1,427,147		1,422,333		1,427,147
December 31, 2018		1,481,561		1,456,905		1,481,561
September 30, 2018		1,500,632		1,506,855		1,515,617

(1)For the quarter ended March 31, 2020 in response to significant volatility and heightened risks in the financial markets as a result of the spread of COVID-19, we significantly reduced our outstanding borrowings to lower leverage and increase our liquidity.

As of June 30, 2022, we had an aggregate amount at risk under our repurchase agreements with 15 counterparties of $60.8 million. As of December 31, 2021, we had an aggregate amount at risk under our repurchase agreements with 15 counterparties of ~~$57.7 million. As of December 31, 2020, we had an aggregate amount at risk under our repurchase agreements with 15 counterparties of $53.7~~$52.7 million. Amounts at risk represent the excess, if any, for each counterparty of the fair value of collateral held by such counterparty over the amounts outstanding under repurchase agreements. If the amounts outstanding under repurchase agreements with a particular counterparty are greater than the collateral held by the counterparty, there is no amount at risk for the particular counterparty. Amounts at risk under our repurchase agreements as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 does not include ~~$3.2~~$1.9 million and ~~$2.9~~$2.6 million, respectively, of net accrued interest receivable, which is defined as accrued interest on securities held as collateral less interest payable on cash borrowed.

Our derivatives are predominantly subject to bilateral ~~collateral arrangements~~master trade agreements or clearing in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the "Dodd-Frank Act." We may be required to deliver or receive cash or securities as collateral upon entering into derivative transactions. Changes in the relative value of derivative transactions may require us or the counterparty to post or receive additional collateral. Entering into derivative contracts involves market risk in excess of amounts recorded on our balance sheet. In the case of cleared derivatives, the clearinghouse becomes our

counterparty and the future commission merchant acts as an intermediary between us and the clearinghouse with respect to all facets of the related transaction, including the posting and receipt of required collateral.

As of June 30, ~~2021,~~2022, we had an aggregate amount at risk under our derivative contracts, excluding TBAs, with ~~two~~three counterparties of approximately ~~$11.7~~$16.4 million. As of December 31, ~~2020,~~2021, we had an aggregate amount at risk under our derivatives contracts, excluding TBAs, with two counterparties of approximately ~~$5.1~~$11.3 million. ~~We also had $3.9 million of initial margin for cleared OTC derivatives posted to central clearinghouses as of that date.~~ Amounts at risk under our derivatives contracts represent the excess, if any, for each counterparty of the fair value of our derivative contracts plus our collateral held directly by the counterparty less the counterparty's collateral held by us. If a particular counterparty's collateral held by us is greater than the aggregate fair value of the financial derivatives plus our collateral held directly by the counterparty, there is no amount at risk for the particular counterparty.

We purchase and sell TBAs and Agency pass-through certificates on a when-issued or delayed delivery basis. The delayed delivery for these securities means that these transactions are more prone to market fluctuations between the trade date and the ultimate settlement date, and therefore are more vulnerable, especially in the absence of margining arrangements with respect to these transactions, to increasing amounts at risk with the applicable counterparties. As of June 30, ~~2021,~~2022, in connection with our forward settling TBA and Agency pass-through certificates, we had an aggregate amount at risk with ~~eleven~~seven counterparties of approximately ~~$4.6~~$1.1 million. As of December 31, ~~2020,~~2021, in connection with our forward settling TBA and Agency pass-through certificates, we had an aggregate amount at risk with four counterparties of approximately ~~$3.5~~$4.1 million. Amounts at risk in connection with our forward settling TBA and Agency pass-through certificates represent the excess, if any, for each counterparty of the net fair value of the forward settling securities plus our collateral held directly by the

counterparty less the counterparty's collateral held by us. If a particular counterparty's collateral held by us is greater than the aggregate fair value of the forward settling securities plus our collateral held directly by the counterparty, there is no amount at risk for the particular counterparty.

~~We held~~As of June 30, 2022, we had cash and cash equivalents of ~~approximately $58.7 million~~$37.5 million.

The timing and ~~$58.2 million as~~frequency of ~~June 30, 2021~~distributions will be determined by our Board of Trustees based upon a variety of factors deemed relevant by our trustees, including restrictions under applicable law, our capital requirements, and ~~December 31, 2020, respectively.~~

~~We may declare dividends based on, among other things, our earnings, our financial condition,~~ the REIT ~~qualification~~ requirements of the ~~Internal Revenue Code of 1986, as amended, our working capital needs and new opportunities.~~Code. The declaration of dividends to our shareholders and the amount of such dividends are at the discretion of our Board of Trustees. The following table sets forth the dividend distributions authorized by the Board of Trustees for the periods indicated below:

Six-Month Period Ended June 30, ~~2021~~2022:

Dividend
Per Share Dividend Amount Declaration Date Record Date Payment Date
(In thousands)
Second Quarter $ 0.30 $ 3,876 June 9, 2021 June 30, 2021 July 26, 2021
First Quarter 0.28 3,456 March 3, 2021 March 31, 2021 April 26, 2021

Dividend
Per Share

Dividend
Amount

Declaration Date

Record Date

Payment Date

(In thousands)

0.08

1,046

June 7, 2022

June 30, 2022

July 25, 2022

0.08

1,049

May 2, 2022

May 31, 2022

June 27, 2022

0.10

1,311

April 7, 2022

April 29, 2022

May 25, 2022

0.10

1,311

March 7, 2022

March 31, 2022

April 25, 2022

0.10

1,311

February 7, 2022

February 28, 2022

March 25, 2022

0.10

1,311

January 7, 2022

January 31, 2022

February 25, 2022

Six-Month Period Ended June 30, ~~2020~~2021:

Dividend
Per Share Dividend Amount Declaration Date Record Date Payment Date
(In thousands)
Second Quarter $ 0.28 $ 3,450 June 10, 2020 June 30, 2020 July 27, 2020
First Quarter 0.28 3,449 March 4, 2020 March 31, 2020 April 27, 2020

Dividend
Per Share

Dividend
Amount

Declaration Date

Record Date

Payment Date

(In thousands)

0.30

3,876

June 9, 2021

June 30, 2021

July 26, 2021

0.28

3,456

March 3, 2021

March 31, 2021

April 26, 2021

On July 8, 2022, the Board of Trustees approved a monthly dividend in the amount of $0.08 per share payable on August 25, 2022 to shareholders of record as of July 29, 2022.

On August 4, 2022, the Board of Trustees approved a monthly dividend in the amount of $0.08 per share payable on September 26, 2022 to shareholders of record as of August 31, 2022.

For the six-month period ended June 30, 2022, our operating activities provided net cash of $14.0 million and our investing activities provided net cash of $39.2 million. Our repo activity used to finance our purchase of securities (including repayments, in conjunction with the sales of securities, of amounts borrowed under our repurchase agreements as well as collateral posted in connection with our repo activity) used net cash of $76.9 million. Thus our operating and investing activities, when combined with our net repo financing activities, used net cash of $23.7 million. We also used $7.6 million to pay dividends, and $0.2 million to repurchase common shares. As a result of these activities, there was a decrease in our cash holdings of $31.6 million, from $69.0 million as of December 31, 2021 to $37.5 million as of June 30, 2022.

For the six-month period ended June 30, 2021, our operating activities provided net cash of $14.5 million and our investing activities used net cash of $117.0 million. Our repo activity used to finance our purchase of securities (including repayments, in conjunction with the sales of securities, of amounts borrowed under our repurchase agreements as well as collateral posted in connection with our repo activity) provided net cash of $102.7 million. Thus our operating and investing activities, when combined with our net repo financing activities, provided net cash of $0.2 million. We also received net proceeds from the issuance of common shares of $7.4 million. We used $6.9 million to pay dividends and $0.1 million to pay various offering expenses. As a result of these activities, there was an increase in our cash holdings of $0.5 million, from $58.2 million as of December 31, 2020 to $58.7 million as of June 30, 2021.

~~For~~On April 2, 2021, we commenced an "at-the-market" offering program, or "ATM program," by entering into equity distribution agreements with third party sales agents under which we are authorized to offer and sell up to $75.0 million of common shares from time to time. From commencement of the ATM program through August 5, 2022, we issued 163,269 common shares under the ATM program which provided $1.9 million of net proceeds after $29 thousand of agent commissions and offering costs. As of June 30, 2022, we had $73.0 million of common shares available to be issued remaining under the ATM program. We did not issue any shares under the ATM program during the three- or six-month ~~period~~periods ended June 30, 2020, our operating activities provided net cash of $9.1 million and our investing activities provided net cash of $391.4 million. Our repo activity used to finance our purchase of securities (including repayments, in conjunction with the sales of securities, of amounts borrowed under our repurchase agreements as well as collateral posted in connection with our repo activity) used net cash of $377.1 million. Thus our operating and investing activities, when combined with our net repo financing activities, provided net cash of $23.5 million. We used $6.9 million to pay dividends and $1.0 million to repurchase common shares. As a result of these activities, there was an increase in our cash holdings of $15.6 million, from $35.4 million as of December 31, 2019 to $50.9 million as of June 30, 2020.

On June 17, 2021, the Company sold 575,000 of its common shares as part of a follow-on offering, which generated net proceeds, after underwriters' discounts and commissions and offering costs, of $7.1 million.2022.

On June 13, 2018, our Board of Trustees approved the adoption of a share repurchase program under which we are authorized to repurchase up to 1.2 million common shares. The program, which is open-ended in duration, allows us to make repurchases from time to time on the open market or in negotiated transactions, including through Rule 10b5-1 plans. Repurchases are at our discretion, subject to applicable law, share availability, price and our financial performance, among other considerations. During the six-month period ended June 30, 2022, the Company repurchased 30,532 of its common shares at an aggregate cost of $0.2 million, and an average price per share of $6.57. Under the current repurchase program adopted on June 13, 2018, we have repurchased ~~434,171~~464,703 common shares through August ~~6, 2021~~5, 2022 at an average price per share of ~~$9.45~~$9.26 and an aggregate cost of ~~$4.1~~$4.3 million, and have authorization to repurchase an additional ~~765,829~~735,297 common shares. ~~We did not purchase any shares during the three- or six-month periods ended June 30, 2021.~~

Based on our current portfolio, amount of free cash on hand, debt-to-equity ratio and current and anticipated availability of credit, we believe that our capital resources will be sufficient to enable us to meet anticipated short-term and long-term liquidity requirements.

We are not required by our investment guidelines to maintain any specific debt-to-equity ratio, and we believe that the appropriate leverage for the particular assets we hold depends on the credit quality and risk of those assets, as well as the general availability and terms of stable and reliable financing for those assets.

Contractual Obligations and Commitments

We are a party to a management agreement with our Manager. Pursuant to that agreement, our Manager is entitled to receive a management fee based on shareholders' equity, reimbursement of certain expenses and, in certain circumstances, a termination fee. Such fees and expenses do not have fixed and determinable payments. For a description of the management agreement provisions, see Note 9 to our consolidated financial statements.

We enter into repurchase agreements with third-party broker-dealers whereby we sell securities to such broker-dealers at agreed-upon purchase prices at the initiation of the repurchase agreements and agree to repurchase such securities at predetermined repurchase prices and termination dates, thus providing the broker-dealers with an implied interest rate on the funds initially transferred to us by the broker-dealers. We may enter into reverse repurchase agreements with third-party broker-dealers whereby we purchase securities under agreements to resell at an agreed-upon price and date. In general, we most often will enter into reverse repurchase agreement transactions in order to effectively borrow securities that we can then deliver to counterparties to whom we have made short sales of the same securities. The implied interest rates on the repurchase agreements and reverse repurchase agreements we enter into are based upon competitive market rates at the time of initiation. Repurchase agreements and reverse repurchase agreements that are conducted with the same counterparty may be reported on a net basis if they meet the requirements of ASC 210-20, Balance Sheet, Offsetting. As of both June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, there were no repurchase agreements and reverse repurchase agreements reported on a net basis on the Consolidated

Balance Sheet.

As of June 30, ~~2021,~~2022, we had ~~$1.1~~$1.0 billion of outstanding borrowings with 1615 counterparties.

Off-Balance Sheet Arrangements

As of June 30, ~~2021,~~2022, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide funding to any such entities. As such, we are not materially exposed to any market, credit, liquidity, or financing risk that could arise if we had engaged in such relationships.

Inflation

Virtually all of our assets and liabilities are interest rate-sensitive in nature. As a result, interest rates and other factors generally influence our performance ~~far~~ more so than does inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates. Our activities and balance sheet are measured with reference to historical cost and/or fair market value without considering inflation.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The primary components of our market risk are related to interest rate risk, prepayment risk, and credit risk. We seek to actively manage these and other risks and to acquire and hold assets that we believe justify bearing those risks, and to maintain capital levels consistent with those risks.

Interest Rate Risk

Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control. We are subject to interest rate risk in connection with most of our assets and liabilities. For some securities in our portfolio, the coupon interest rates on, and therefore also the values of, such securities are highly sensitive to interest rate movements, such as inverse floating rate RMBS, which benefit from falling interest rates. Our repurchase agreements generally have maturities of up to ~~180~~364 days and carry interest rates that are determined by reference to a benchmark rate such as LIBOR or ~~similar short-term benchmark rates~~SOFR for those same periods. Whenever one of our fixed-rate repo borrowings matures, it will generally be replaced with a new fixed-rate repo borrowing based on market interest rates prevailing at such time. Subject to maintaining our qualification as a REIT and our exclusion from registration under the Investment Company Act, we opportunistically hedge our interest rate risk by entering into interest rate swaps, TBAs, U.S. Treasury securities, Eurodollar and U.S. Treasury futures, and other instruments. In general, such hedging instruments are used to mitigate the interest rate risk arising from the mismatch between the duration of our financed

Agency RMBS and the duration of the liabilities used to finance such assets.

In addition to measuring and mitigating the risk related to changes in interest rates with respect to the generally shorter-term liabilities we incur to acquire and hold generally longer-lived RMBS, we also monitor the effect of changes in interest rates on the discounted present value of our portfolio of assets and liabilities. The following sensitivity analysis table shows the estimated impact on the fair value of our portfolio segregated by certain identified categories as of June 30, ~~2021,~~2022, assuming a static portfolio and immediate and parallel shifts in interest rates from current levels as indicated below.


(In thousands)	(In thousands)	Estimated Change for a Decrease in Interest Rates by								Estimated Change for an Increase in Interest Rates by								(In thousands)	Estimated Change for a Decrease in Interest Rates by								Estimated Change for an Increase in Interest Rates by
		50 Basis Points				100 Basis Points				50 Basis Points				100 Basis Points					50 Basis Points				100 Basis Points				50 Basis Points				100 Basis Points
Category of Instruments	Category of Instruments	Market Value		% of Total Equity		Market Value		% of Total Equity		Market Value		% of Total Equity		Market Value		% of Total Equity		Category of Instruments	Market Value		% of Total Equity		Market Value		% of Total Equity		Market Value		% of Total Equity		Market Value		% of Total Equity
Agency RMBS, excluding TBAs	Agency RMBS, excluding TBAs	$	13,031	8.05	%	$	19,963	12.33	%	$	(19,130)	(11.82)	%	$	(44,359)	(27.41)	%	Agency RMBS, excluding TBAs	$	23,675	19.96	%	$	45,913	38.70	%	$	(25,110)	(21.17)	%	$	(51,655)	(43.55)	%
TBAs		3,122		1.93	%	4,985		3.08	%	(4,381)		(2.71)	%	(10,021)		(6.19)	%
Long TBAs																		Long TBAs	1,189		1.00	%	2,279		1.92	%	(1,287)		(1.08)	%	(2,672)		(2.25)	%
Short TBAs																		Short TBAs	(5,178)		(4.36)	%	(10,151)		(8.56)	%	5,382		4.53	%	10,970		9.25	%
Non-Agency RMBS	Non-Agency RMBS	187		0.11	%	407		0.25	%	(154)		(0.10)	%	(276)		(0.17)	%	Non-Agency RMBS	(405)		(0.34)	%	(976)		(0.82)	%	238		0.20	%	308		0.26	%
U.S. Treasury Securities, Interest Rate Swaps, and Futures	U.S. Treasury Securities, Interest Rate Swaps, and Futures	(19,356)		(11.96)	%	(39,447)		(24.37)	%	18,621		11.51	%	36,508		22.56	%	U.S. Treasury Securities, Interest Rate Swaps, and Futures	(18,869)		(15.91)	%	(38,609)		(32.54)	%	17,999		15.17	%	35,127		29.61	%

Repurchase and Reverse Repurchase Agreements	Repurchase and Reverse Repurchase Agreements	(750)		(0.46)	%	(751)		(0.46)	%	2,073		1.28	%	4,147		2.56	%	Repurchase and Reverse Repurchase Agreements	(868)		(0.73)	%	(1,585)		(1.34)	%	992		0.84	%	1,984		1.67	%
Total	Total	$	(3,766)	(2.33)	%	$	(14,843)	(9.17)	%	$	(2,971)	(1.84)	%	$	(14,001)	(8.65)	%	Total	$	(456)	(0.38)	%	$	(3,129)	(2.64)	%	$	(1,786)	(1.51)	%	$	(5,938)	(5.01)	%

Our analysis of interest rate risk is derived from Ellington's proprietary models as well as third-party information and analytics. Many assumptions have been made in connection with the calculations set forth in the table above and, as such, there can be no assurance that assumed events will occur or that other events will not occur that would affect the outcomes. For example, for each hypothetical immediate shift in interest rates, assumptions have been made as to the response of mortgage prepayment rates, the shape of the yield curve, and market volatilities of interest rates; each of the foregoing factors can significantly and adversely affect the fair value of our interest rate sensitive instruments.

The above analysis utilizes assumptions and estimates based on management's judgment and experience, and relies on financial models, which are inherently imperfect; in fact, different models can produce different results for the same securities. While the table above reflects the estimated impacts of immediate parallel interest rate increases and decreases on specific categories of instruments in our portfolio, we intend to actively trade many of the instruments in our portfolio and intend to diversify our portfolio to reflect a portfolio comprised primarily of Agency RMBS, and, to a lesser extent, non-Agency RMBS and mortgage-related assets. Therefore, our current or future portfolios may have risks that differ significantly from those of our June 30, ~~2021~~2022 portfolio estimated above. Moreover, the impact of changing interest rates on fair value can change significantly when interest rates change by a greater amount than the hypothetical shifts assumed above. Furthermore, our portfolio is subject to many risks other than interest rate risks, and these additional risks may or may not be correlated with changes in interest rates. For all of the foregoing reasons and others, the table above is for illustrative purposes only and actual changes in interest rates would likely cause changes in the actual fair value of our portfolio that would differ from those presented above, and such differences might be significant and adverse. See ~~"Special~~"Business—Special Note Regarding Forward-Looking Statements."

Prepayment Risk

Prepayment risk is the risk of change, whether an increase or a decrease, in the rate at which principal is returned in respect to mortgage loans underlying RMBS, including both through voluntary prepayments and through liquidations due to defaults and foreclosures. Most significantly, our portfolio is exposed to the risk of changes in prepayment rates of the mortgage loans underlying our RMBS. This rate of prepayment is affected by a variety of factors, including the prevailing level of interest rates as well as economic, demographic, tax, social, legal, and other factors. Mortgage prepayment rates can be highly sensitive to changes in interest rates, but they are also affected by housing turnover, which can be driven by factors other than interest rates, including worker mobility and home price appreciation. Changes in prepayment rates will have varying effects on the different types of securities in our portfolio, and we attempt to take these effects into account in making asset management decisions. ~~Additionally, increases~~Increases in prepayment rates may cause us to experience both realized and unrealized losses on our ~~investment in~~ interest-only securities, or "IOs," and inverse interest only securities, or "IIOs," as these securities are extremely sensitive to prepayment rates. ~~Finally,~~Conversely, decreases in prepayment rates on our securities with below-market interest rates may cause the duration of such securities to extend, which may cause us to experience unrealized losses on such securities. Prepayment rates, besides being subject to interest rates and borrower behavior, are also substantially affected by government policy and

regulation. For example, prepayment rates are generally lower in states with substantially higher mortgage recording taxes.

Credit Risk

We are subject to credit risk in connection with certain of our assets, especially our non-Agency RMBS. Credit losses on

real estate loans underlying our non-Agency RMBS can occur for many reasons, including, but not limited to, poor origination practices, fraud, faulty appraisals, documentation errors, poor underwriting, legal errors, poor servicing practices, weak economic conditions, decline in the value of homes, special hazards, earthquakes and other natural events, over-leveraging of the borrower on the property, reduction in market rents and occupancy rates and poor property management services in the case of rented homes, changes in legal protections for lenders, reduction in personal income, job loss, and personal events such as divorce or health problems. Property values are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional, and local economic conditions (which may be adversely affected by industry slowdowns and other factors), local real estate conditions (such as an oversupply of housing), changes or continued weakness in specific industry segments, construction quality, age and design, demographic factors, and retroactive changes to building or similar codes. For mortgage-related instruments, the two primary components of credit risk are default risk and severity risk.

Default Risk

Default risk is the risk that borrowers will fail to make principal and interest payments on their mortgage loans. Subject to maintaining our qualification as a REIT and our exclusion from registration under the Investment Company Act, we may selectively attempt to mitigate our default risk by, among other things, opportunistically entering into credit default swaps and total return swaps. These instruments can reference various RMBS indices, corporate bond indices, or corporate entities, such as publicly traded REITs. We also rely on third-party mortgage servicers to mitigate our default risk, but such third-party mortgage servicers may have little or no economic incentive to mitigate loan default rates.

Severity Risk

Severity risk is the risk of loss upon a borrower default on a mortgage loan underlying our RMBS. Severity risk includes the risk of loss of value of the property underlying the mortgage loan as well as the risk of loss associated with taking over the property, including foreclosure costs. We rely on third-party mortgage servicers to mitigate our severity risk, but such third-party mortgage servicers may have little or no economic incentive to mitigate loan loss severities. Such mitigation efforts may include loan modification programs and prompt foreclosure and property liquidation following a default.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management as appropriate to allow timely decisions regarding required disclosures. An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of June 30, ~~2021.~~2022. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, ~~2021.~~2022.

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~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

5456

PART ~~II—OTHER INFORMATION~~II

Item 1. Legal Proceedings

Neither we nor Ellington nor its affiliates (including our Manager) are currently subject to any legal proceedings that we or our Manager consider material. Nevertheless, we and Ellington and its affiliates operate in highly regulated markets that currently are under regulatory scrutiny, and over the years, Ellington and its affiliates have received, and we expect in the future that we and they may receive, inquiries and requests for documents and information from various federal, state and foreign regulators.

We and Ellington cannot provide any assurance that, whether the result of regulatory inquiries or otherwise, neither we nor Ellington nor its affiliates will become subject to investigations, enforcement actions, fines, penalties or the assertion of private litigation claims or that, if any such events were to occur, they would not materially adversely affect us. For a discussion of these and other related risks, see "Risk Factors—General Risk Factors—We, Ellington, or its affiliates may be subject to regulatory inquiries and proceedings, or other legal proceedings" included in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021.

Item 1A. Risk Factors

For information regarding factors that could affect our results of operations, financial condition, and liquidity, see the risk factors discussed under "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. There have been no material changes from these previously disclosed risk factors. See also "Special Note Regarding Forward-Looking Statements," included in Part I, Item 2 of this Quarterly Report on Form 10-Q.

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

Issuer Purchases of Equity Securities


	Total Number of Shares Purchased	Average Price Paid		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Number of Shares that May Yet be Purchased Under the Plans or Programs
April 1, 2022 – April 30, 2022	—	$	—	—	765,829
May 1, 2022 – May 31, 2022	—	—		—	765,829
June 1, 2022 – June 30, 2022	30,532	6.57		30,532	735,297
Total	30,532	$	6.57	30,532	735,297

Item 6. Exhibits and Financial Statement Schedules


Exhibit						Description
31.1						Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002

31.2						Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes – Oxley Act of 2002

32.1*						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

32.2*						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

101.SCH						Inline XBRL Taxonomy Extension Schema

101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB						Inline XBRL Taxonomy Extension Label Linkbase

101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase

104						Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Furnished herewith. These certifications are not deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

5558

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.

ELLINGTON RESIDENTIAL MORTGAGE REIT

Date:

August ~~11, 2021~~12, 2022

By:

/s/ LAURENCE PENN

Laurence Penn
Chief Executive Officer
(Principal Executive Officer)

ELLINGTON RESIDENTIAL MORTGAGE REIT

Date:

August ~~11, 2021~~12, 2022

By:

/s/ CHRISTOPHER SMERNOFF

Christopher Smernoff
Chief Financial Officer
(Principal Financial and Accounting Officer)

5659


	Six-Month Period Ended June 30, 2021						Six-Month Period Ended June 30, 2020
($ in thousands)	Coupon Interest		Net Amortization		Interest Income		Coupon Interest		Net Amortization		Interest Income
Agency RMBS	$	20,449	$	(4,482)	$	15,967	$	24,512	$	(12,175)	$	12,337
Non-Agency RMBS	115		279		394		250		382		632
Total	$	20,564	$	(4,203)	$	16,361	$	24,762	$	(11,793)	$	12,969


	Three-Month Period Ended June 30, 2020
Derivative Type	Net Realized Gains (Losses) on Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives Other Than Periodic Settlements of Interest Rate Swaps		Net Realized Gains (Losses) on Financial Derivatives		Change in Net Unrealized Gains (Losses) on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives Other Than on Accrued Periodic Settlements of Interest Rate Swaps		Change in Net Unrealized Gains (Losses) on Financial Derivatives
(In thousands)
Interest rate swaps	$	(1,223)	$	(1,698)	$	(2,921)	$	896	$	1,281	$	2,177
TBAs			(1,886)		(1,886)				4,336		4,336
Futures			(3,645)		(3,645)				2,992		2,992
Total	$	(1,223)	$	(7,229)	$	(8,452)	$	896	$	8,609	$	9,505