AG MORTGAGE INVESTMENT TRUST, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

The following discussion contains forward-looking statements and should be read
in conjunction with our consolidated financial statements and the accompanying
notes to our consolidated financial statements, which are included in this
report.

Our company

We are a residential mortgage REIT with a focus on investing in a diversified
risk-adjusted portfolio of residential mortgage-related assets in the U.S.
mortgage market. Our objective is to provide attractive risk-adjusted returns to
our stockholders over the long-term, primarily through dividends and capital
appreciation.

Our investment activities primarily include acquiring and securitizing
newly-originated residential mortgage loans within the growing non-agency
segment of the housing market. We obtain our assets through Arc Home, our
residential mortgage loan originator in which we own an approximate 44.6%
interest, and through other third-party origination partners. We finance our
acquired loans through various financing lines on a short-term basis and utilize
Angelo Gordon's proprietary securitization platform to secure long-term,
non-recourse, non-mark-to-market financing as market conditions permit. Through
our ownership in Arc Home, we also have exposure to mortgage banking activities.
Arc Home is a multi-channel licensed mortgage originator and servicer primarily
engaged in the business of originating and selling residential mortgage loans
while retaining the mortgage servicing rights associated with the loans that it
originates.

Our investment portfolio (which excludes our ownership in Arc Home) includes
Residential Investments and Agency RMBS. Currently, our Residential Investments
primarily consist of Non-QM Loans and GSE Non-Owner Occupied Loans. We may also
invest in other types of residential mortgage loans and other mortgage related
assets.

We were incorporated in Maryland on March 1, 2011 and commenced operations in
July 2011. We conduct our operations to qualify and be taxed as a REIT for U.S.
federal income tax purposes. We also operate our business in a manner that
permits us to maintain our exemption from registration under the Investment
Company Act.

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We are externally managed by our Manager, an affiliate of Angelo Gordon,
pursuant to a management agreement. Our Manager has delegated to Angelo Gordon
the overall responsibility of its day-to-day duties and obligations arising
under the management agreement. Angelo Gordon is a leading privately-held
alternative investment firm focusing on credit and real estate strategies.

Executive summary

During the year ended 2021, we focused on executing our mission to become a
pure-play residential mortgage REIT by simplifying our portfolio through exiting
all of our commercial investments, growing our portfolio of newly-originated
non-agency loans, and increasing our pace of securitization activity in order to
obtain long-term, non-recourse financing without mark-to-market margin calls.
During 2021, we significantly increased the size of our investment portfolio and
also completed five Non-QM securitizations through Angelo Gordon's proprietary
securitization platform. Further, we focused on strengthening our capital base
by entering into various financing facilities and raising capital in order to
provide for continued growth and execution of our business strategy. Subsequent
to year end, we continued to grow our portfolio of newly-originated non-agency
loans and completed two additional securitizations. See below for detail on
these activities during 2021 and subsequent to year end.

Investment Activity

•Purchased $2.5 billion of Non-QM Loans and GSE Non-Owner Occupied Loans, $833.4
million of which were purchased from Arc Home;
•Participated in two rated securitizations alongside other Angelo Gordon funds
in which Non-QM Loans with a fair value of $397.3 million were securitized.
Certain senior tranches in the securitization were sold to third parties with us
and private funds under the management of Angelo Gordon retaining the
subordinate tranches;
•$171.4 million were securitized through our unconsolidated ownership interest
in MATT, in which we have an approximate 44.6% interest;
•$225.9 million were securitized alongside one private fund under the management
of Angelo Gordon and we contributed approximately 41% of the underlying loans;
•Sold Non-Agency RMBS for gross proceeds of $44.6 million;
•Exited remaining commercial investments;
•Received gross proceeds of $148.4 million from the full repayment or sales of
our Commercial Loans, inclusive of receiving all accrued or deferred interest
outstanding; and
•Sold our remaining CMBS portfolio for gross proceeds of $67.7 million.

Financing Activity

•Executed three rated securitizations in which Non-QM Loans with a fair value of
$880.9 million were securitized, converting financing from recourse financing
with mark-to-market margin calls to non-recourse financing without
mark-to-market margin calls;
•Entered into certain financing arrangements with a maximum uncommitted
borrowing capacity of $2.3 billion to finance non-agency mortgage loans, of
which approximately $1.0 billion of the maximum uncommitted borrowing capacity
remains available as of December 31, 2021; and
•Repaid $10 million secured note and accrued interest to our Manager upon
maturity on March 31, 2021.

Capital Activity
•Completed a public offering issuing 8.1 million shares of common stock for net
proceeds of approximately $80.0 million after deducting estimated offering
expenses;
•Utilized ATM program to issue 1.0 million shares of common stock, raising net
proceeds of approximately $13.1 million;
•Repurchased 0.3 million shares of common stock for $3.6 million;
•Entered into two privately negotiated exchange offers with existing holders of
our preferred stock, issuing 1.4 million shares of common stock in exchange for
0.7 million shares of preferred stock; and
•Implemented a reverse stock split primarily to decrease volatility in trading
for our common stock. The reverse stock split was effective following the close
of business on July 22, 2021 (the "Effective Time"). At the Effective Time,
every three issued and outstanding shares of our common stock was converted into
one share of common stock. No fractional shares were issued in connection with
the reverse stock split. Instead, each stockholder holding fractional shares was
entitled to receive, in lieu of such fractional shares, cash in an amount
determined based on the closing price of our common stock on the date of the
Effective Time.
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Subsequent Event Activity

•Purchased $519.0 million of non-agency mortgage loans, inclusive Non-QM Loans,
GSE Non-Owner Occupied Loans, and other qualifying mortgage loans. $233.0
million of these non-agency mortgage loans were purchased from Arc Home;
•Participated in our first rated securitization of GSE Non-Owner Occupied Loans,
in which loans with a fair value of $474.9 million were securitized;
•Participated in a rated securitization in which Non-QM Loans with a fair value
of $301.7 million were securitized; and
•Announced that on February 18, 2022 our Board of Directors declared first
quarter 2022 preferred stock dividends on our Series A Preferred Stock, Series B
Preferred Stock, and Series C Preferred Stock in the amount of $0.51563, $0.50
and $0.50 per share, respectively. The dividends will be paid on March 17, 2022
to holders of record on February 28, 2022.

Presentation of investment, financing and hedging activities

In the "Investment activities," "Financing activities," "Hedging activities" and
"Liquidity and capital resources" sections of this Part II, Item 7, we present
information on our investment portfolio and the related financing arrangements
inclusive of unconsolidated ownership interests in affiliates that are accounted
for under GAAP using the equity method. Our investment portfolio excludes our
investment in Arc Home.

Our investment portfolio and the related financing arrangements are presented
along with a reconciliation to GAAP. This presentation of our investment
portfolio is consistent with how our management team evaluates the business, and
we believe this presentation, when considered with the GAAP presentation,
provides supplemental information useful for investors in evaluating our
investment portfolio and financial condition. See Note 2 to the "Notes to
Consolidated Financial Statements" for a discussion of investments in debt and
equity of affiliates. See below for further terms used when describing our
investment portfolio.

•Our "Investment portfolio" includes Agency RMBS and our credit portfolio.
•Our "Credit portfolio" or "credit investments" refer to our residential
investments, inclusive of loans and credit securities.
•"Loans" refer to our Non-QM Loans and Re/Non-Performing Loans, exclusive of
retained tranches from unconsolidated securitizations, GSE Non-Owner Occupied
Loans, and Land Related Financing.
•"Credit securities" refer to the retained tranches from unconsolidated
securitizations of Non-QM Loans and Re/Non-Performing Loans.
•"Real estate securities" refers to our Agency RMBS and our credit securities.
•Our "GAAP Investment portfolio" includes Agency RMBS and our GAAP Credit
portfolio.
•Our "GAAP Credit portfolio" refers to our credit portfolio exclusive of all
investments held within affiliated entities.

For a reconciliation of our Investment portfolio to our GAAP Investment
portfolio, see the GAAP Investment Portfolio Reconciliation Table below.

Special Note Regarding COVID-19 Pandemic

In March 2020, the global pandemic associated with COVID-19 and the related
economic conditions caused financial and mortgage-related asset markets to come
under extreme duress, resulting in credit spread widening, a sharp decrease in
interest rates and unprecedented illiquidity in repurchase agreement financing
and MBS markets. The illiquidity was exacerbated by inadequate demand for MBS
among primary dealers due to balance sheet constraints. Refer to the "Financing
activities-Forbearance and Reinstatement Agreements" section below for further
details related to the impact these economic conditions had on us.

Although market conditions improved during 2021, the COVID-19 pandemic is
ongoing with new variants emerging despite growing vaccination rates. As a
result, the full impact of COVID-19 (including the impact of any significant
variants) on the mortgage REIT industry, credit markets, and, consequently, on
our financial condition and results of operations for future periods remains
uncertain. Future developments with respect to the COVID-19 pandemic, including
among others, the emergence of new variants, the effectiveness and durability of
current vaccines and government stimulus measures, could materially and
adversely affect our business, operations, operating results, financial
condition, liquidity, or capital levels.

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Market Conditions

During 2021, the financial markets generally continued their recovery from the
unprecedented dislocation caused by the COVID-19 pandemic and the resulting
economic shutdown across much of the U.S. economy. In addition, mortgage and
housing fundamentals continued to be favorable throughout the year. Delinquency
and forbearance rates continued to decline and home prices reached another
record high, rising 19.1% year-over-year. Limited availability of homes against
fundamentally strong housing demand has been a driving factor for persistent
home price appreciation. Other fundamentals continued to be favorable due to
strong labor conditions and residual support from federal stimulus and payment
accommodations, whose positive effects should persist into 2022. Some near-term
headwinds could be created by the term-driven expiration of mortgage payment
forbearance, resumption of foreclosure activity and sunset of other relief
programs. However, we believe these risks should be offset by strong demand for
labor, rising collateral prices and persistently tight new mortgage
underwriting, the latter of which remains near 2014 levels, according to the
Mortgage Bankers Association.

Non-Agency Loans and Securitizations: Non-QM securitization issuance topped $10
billion in a record quarter for the sector driven by strong origination volume
as well as older vintages exiting their respective non-call windows Annual
issuance also hit a record at approximately $25 billion, which was in line with
the market's expectations for 2020 prior to the COVID-19 pandemic disruption.
Despite the amount of supply in the market during the fourth quarter, execution
was orderly with spreads slightly widening. The prospect of raising rates did
bring about concerns on extension risk among buyers of the most senior bonds,
causing issuers to transition from pro-rata capital structures to sequential
capital structures. Non-QM loan volumes remained elevated, with some originators
doubling their monthly production over the course of 2021. During the third
quarter, an increased amount of agency-eligible mortgage loans backed by
investment properties and second homes were being issued into the Private Label
Securities ("PLS") market as originators looked for liquidity away from the
GSE's as a result of amendments made to the Preferred Stock Purchase Agreement
between Treasury and the GSEs earlier in the year. However these volumes
declined during the fourth quarter as originators returned to delivering most,
if not all, of their production back to the GSEs due to the September 14, 2020
suspension of certain amendments made to the Preferred Stock Purchase Agreement.

Agency RMBS: Despite the Federal Reserve's commencement of tapering its monthly
bond purchases during the fourth quarter, spreads on Agency RMBS modestly
tightened. Valuations continued to be supported by bank demand, moderating
supply, and strong carry due to persistent specialness of TBA dollar roll
income. Payups on specified pools have also held steady as holders of TBA rotate
into specified pools in anticipation of a shrinking Federal Reserve presence and
subsequent weakening of TBA dollar roll income. Post year-end however, spreads
have begun to widen in response to the Federal Reserve communicating its desire
to begin winding down their balance sheet earlier than the market had
anticipated.

Non-Agency RMBS: Spreads for securitized residential debt sectors were mixed
during the fourth quarter. Most Credit Risk Transfer tranches generally widened
10-20 basis points while other new-issue senior tranches widened 10-15 basis
points. Legacy mortgages were mostly unchanged during the quarter. Many of the
same themes that have supported the sector persisted during the quarter,
including favorable collateral fundamentals, record high home prices, demand for
yield, and continued employment gains. Issuance of new RMBS rose approximately
14% to $55 billion in the fourth quarter, and for the full year 2021, RMBS
issuance totaled $200 billion, surpassing the post-Great Financial Crisis peak
of $137 billion in 2019, though some of this year's issuance was delayed from
2020. The rise was mostly due to issuance of Jumbo 2.0 and Agency-eligible
securities, which collectively comprised over half of the annual growth. Non-QM,
Single-Family Rental, and Non-Performing Loans also saw meaningful annual
increases in 2021.

In light of various market uncertainties, in particular the pervasive
uncertainties of the COVID-19 pandemic for the U.S. and global economy, there
can be no assurance that the trends and conditions described above will not
change in a manner materially adverse to the mortgage REIT industry and/or our
Company.

Results of Operations for the Fiscal Year 2021 and 2020

Our operating results can be affected by a number of factors and primarily
depend on the size and composition of our investment portfolio, the level of our
net interest income, the fair value of our assets and the supply of, and demand
for, our investments in residential mortgages in the marketplace, among other
things, which can be impacted by unanticipated credit events, such as defaults,
liquidations or delinquencies, experienced by borrowers whose mortgage loans are
included in our investment portfolio and other unanticipated events in our
markets. Our primary source of net income or loss available to common
stockholders is our net interest income, less our cost of hedging, which
represents the difference between the interest earned on our investment
portfolio and the costs of financing and economic hedges in place on our
investment portfolio, as well as any income or losses from our equity
investments in affiliates.


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Year Ended December 31, 2021 compared to the Year Ended December 31, 2020

The table below presents certain information from our consolidated statements of
operations for the years ended December 31, 2021 and 2020 (in thousands):

                                                                   Year 

Ended

                                                  December 31, 2021           December 31, 2020           Increase/(Decrease)
Statement of Operations Data:
Net Interest Income
Interest income                                 $           70,662          $           74,525          $             (3,863)
Interest expense                                            27,250                      36,945                        (9,695)
Total Net Interest Income                                   43,412                      37,580                         5,832

Other Income/(Loss)
Net interest component of interest rate swaps               (4,862)                        731                        (5,593)
Net realized gain/(loss)                                     1,698                    (256,522)                      258,220
Net unrealized gain/(loss)                                  62,699                    (169,813)                      232,512
Other income/(loss), net                                        37                       1,534                        (1,497)
Total Other Income/(Loss)                                   59,572                    (424,070)                      483,642

Expenses
Management fee to affiliate                                  6,814                       7,181                          (367)
Other operating expenses                                    13,357                      15,911                        (2,554)
Transaction related expenses                                 7,328                      (1,235)                        8,563
Restructuring related expenses                                   -                      10,200                       (10,200)
Excise tax                                                       -                        (815)                          815
Servicing fees                                               3,188                       2,224                           964
Total Expenses                                              30,687                      33,466                        (2,779)

Income/(loss) before equity in earnings/(loss)
from affiliates                                             72,297                    (419,956)                      492,253

Equity in earnings/(loss) from affiliates                   31,889                      (1,629)                       33,518
Net Income/(Loss) from Continuing Operations               104,186                    (421,585)                      525,771
Net Income/(Loss) from Discontinued Operations                   -                         666                          (666)
Net Income/(Loss)                                          104,186                    (420,919)                      525,105

Gain on Exchange Offers, net                                      472                   10,574                       (10,102)

Dividends on preferred stock                               (18,785)                    (20,549)                        1,764

Net Income/(Loss) Available to Common
Stockholders                                    $           85,873          $         (430,894)         $            516,767



Interest income

Interest income is calculated using the effective interest method for our GAAP
investment portfolio and calculated based on the actual coupon rate.

Interest income decreased from December 31, 2020 to December 31, 2021 primarily
due to the decrease in the weighted average yield of our GAAP investment
portfolio which decreased by 1.00% from 4.61% for the year ended December 31,
2020 to 3.61% for the year ended December 31, 2021. This was offset by a $0.4
billion increase in the weighted average cost of our GAAP investment portfolio
from $1.6 billion for the year ended December 31, 2020 to $2.0 billion for the
year ended December 31, 2021.

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Interest expense

Interest expense is calculated based on the actual financing rate and the
outstanding financing balance of our GAAP investment portfolio.

Interest expense decreased from December 31, 2020 to December 31, 2021 primarily
due to a decrease in the weighted average financing rate on our GAAP investment
portfolio, inclusive of securitized debt, which decreased by 1.20% from 2.79%
for the year ended December 31, 2020 to 1.59% for the year ended December 31,
2021. This was offset by an increase in the weighted average financing balance
on our GAAP investment portfolio, inclusive of securitized debt, during the
period which increased by $0.4 billion from $1.3 billion for the year ended
December 31, 2020 to $1.7 billion for the year ended December 31, 2021.

Net interest component of interest rate swaps

Net interest component of interest rate swaps represents the net interest income
received or expense paid on our interest rate swaps.

We recognized losses on the net interest component of interest rate swaps for
the year ended December 31, 2021 compared with gains for the year ended
December 31, 2020 primarily due to the difference in terms on the outstanding
interest rate swaps during the periods. We also exited our entire interest rate
swap portfolio in the first quarter of 2020 and began growing our interest rate
swap portfolio in the fourth quarter of 2020 and throughout 2021 in connection
with the growth of our GAAP investment portfolio. As of the December 31, 2021,
we held an interest rate swap portfolio with a notional value of $888.5 million,
a weighted average receive-variable rate of 0.15%, and a weighted average
pay-fix rate of 0.85%.

Net realized gain/(loss)

The following table presents a summary of Net realized gain/(loss) for the years
ended December 31, 2021 and 2020 (in thousands):

Year Ended

                                                             December 31, 2021           December 31, 2020

Sales of Residential mortgage loans and loans transferred
to or sold from Other assets

                               $            6,374          $          (56,815)
Sales/Seizures of real estate securities (1)                           (6,088)                   (130,567)

Sales of Commercial loans                                              (2,518)                     (6,470)
Settlement of derivatives and other instruments                         3,930                     (62,670)

Total Net realized gain/(loss)                             $            

1,698 $ (256,522)

(1)Certain realized losses on real estate securities during the year ended
December 31, 2020 were a result of financing counterparty seizures. There were
no financing counterparty seizures during the year ended December 31, 2021.

Net unrealized gain/(loss)

The following table presents a summary of Net unrealized gain/(loss) for the
years ended December 31, 2021 and 2020 (in thousands):

                                                       Year Ended
                                       December 31, 2021       December 31, 2020
Residential mortgage loans            $           25,018      $           (5,851)
Real estate securities                            (2,648)               (136,773)
Commercial loans                                  16,148                 (16,842)
Excess mortgage servicing rights                   1,515                     457
Derivatives                                       19,137                  (9,864)
Securitized debt                                   3,529                    (940)
Total Net unrealized gain/(loss)      $           62,699      $         (169,813)



Management fee to affiliate

Our management fee is based upon a percentage of our Stockholders' Equity. See
the "Contractual obligations" section of this Part II, Item 7 for further detail
on the calculation of our management fee and for the definition of Stockholders'
Equity. Management fees decreased from December 31, 2020 to December 31, 2021
primarily due to a decrease in our Stockholders' Equity as calculated pursuant
to our Management Agreement.
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Other operating expenses

Other operating expenses is primarily comprised of professional fees, directors'
and officers' ("D&O") insurance, directors' fees, and certain non-investment
related and investment related expenses reimbursable to the Manager. We are
required to reimburse our Manager or its affiliates for operating expenses
incurred by our Manager or its affiliates on our behalf, including certain
compensation expenses and other expenses relating to legal, accounting, due
diligence, and other services. Refer to the "Contractual obligations" section
below for more detail on certain expenses reimbursable to the Manager. The
following table presents a summary of Other operating expenses broken out
between non-investment related expenses and investment related expenses for the
years ended December 31, 2021 and 2020 (in thousands):
                                                                            

Year Ended

                                                                  December 31, 2021           December 31, 2020
Non-Investment Related Expenses
Affiliate reimbursement - Operating expenses (1)                $            4,322          $            6,320
Professional Fees                                                            2,409                       2,472
D&O insurance                                                                1,465                       1,063
Directors' compensation                                                        672                         680
Equity based compensation to affiliate                                           -                         163
Other                                                                          877                         711
Total Corporate Expenses                                                     9,745                      11,409

Investment Related Expenses
Affiliate expense reimbursement - Deal related expenses                      1,157                       1,116

Residential mortgage loan related expenses                                   2,218                       3,064

Other                                                                          237                         322
Total Investment Expenses                                                    3,612                       4,502
Total Other operating expenses                                  $           13,357          $           15,911


(1)For the year ended December 31, 2021, the Manager agreed to waive its right
to receive expense reimbursements of $0.8 million.

Transaction related expenses

Transaction related expenses are expenses associated with securitizing
residential mortgage loans as well as certain other transaction and performance
related fees associated with assets we invest in. These fees increased from the
year ended December 31, 2020 to December 31, 2021 primarily as a result of the
various securitizations of Non-QM Loans transacted in 2021. Additionally, in the
period ended March 31, 2020, the Company reversed previously accrued deal
related performance fees due to a decline in the price of the related assets and
the seizure of such assets by financing counterparties.

Restructuring related expenses

Restructuring related expenses relate to legal and consulting fees primarily
incurred in connection with executing the Forbearance Agreement and subsequent
Reinstatement Agreement during 2020. Refer to the "Financing activities" section
below for more information regarding the Forbearance Agreement and the
Reinstatement Agreement.

Excise tax

Excise tax represents a four percent tax on the required amount of any ordinary
income and net capital gains not distributed during the year. The expense is
calculated in accordance with applicable tax regulations.

During the year ended December 31, 2020, we reversed previously accrued excise
taxes primarily as a result of losses associated with COVID-19. We did not
record any excise taxes for the year ended December 31, 2021.

Servicing fees

We incur servicing fee expenses in connection with the servicing of our
Residential mortgage loans. The weighted average cost of our GAAP Residential
mortgage loan portfolio increased by $0.6 billion from $0.6 billion for the year
ended December 31, 2020 to $1.2 billion for the year ended December 31, 2021.
This increase was primarily the result of purchases of Non-QM
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Loans and GSE Non-Owner Occupied Loans in 2021. As a result, servicing fees
increased from the year ended December 31, 2020 to the year ended December 31,
2021
.

Equity in earnings/(loss) from affiliates

Equity in earnings/(loss) from affiliates represents our share of earnings and
profits of investments held within affiliated entities. Substantially all of
these investments are comprised of real estate securities, loans, and our
investment in AG Arc which holds our investment in Arc Home. The below table
reconciles the net income/(loss) to the "Equity in earnings/(loss) from
affiliates" line item on our consolidated statements of operations (in
thousands):
                                                                 Year Ended
                                                 December 31, 2021       December 31, 2020
Non-QM Loans (1)                                $           12,594      $          (26,511)
AG Arc (2)                                                   3,681                  23,260
Land Related Financing                                       2,455                   2,620
Other (3)                                                   13,159                    (998)

Equity in earnings/(loss) from affiliates       $           31,889      $   

(1,629)


(1)The earnings within MATT for the year ended December 31, 2021 were primarily
the result of mark-to-market gains on its Non-QM Loan portfolio and net interest
income, offset by expenses. The losses generated within MATT for the year ended
December 31, 2020 were primarily the result of mark-to-market losses on its
Non-QM Loan portfolio and related financing, offset by net interest income.
(2)The earnings/(loss) at AG Arc during the year ended December 31, 2021 were
primarily the result of $5.4 million of net income related to Arc Home's lending
and servicing operations, offset by $(2.3) million related to changes in the
fair value of the MSR portfolio held by Arc Home. Earnings/(loss) recognized by
AG Arc do not include our portion of gains recorded by Arc Home in connection
with the sale of residential mortgage loans to us. For the year ended
December 31, 2021, we eliminated $5.3 million of intra-entity profits recognized
by Arc Home and also decreased the cost basis of the underlying loans we
purchased by the same amount.
(3)The earnings for the year ended December 31, 2021 were primarily the result
of accelerated accretion as a result of paydowns on certain Re/Non-Performing
Loans held at discounts.

Gain on Exchange Offers, net

We completed two privately negotiated exchange offers during the year ended
December 31, 2021. As a result of the exchange offers, we exchanged 153,325
shares of our 8.25% Series A Cumulative Redeemable Preferred Stock ("Series A
Preferred Stock"), 437,087 shares of our 8.00% Series B Cumulative Redeemable
Preferred Stock ("Series B Preferred Stock"), and 154,383 shares of our 8.000%
Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock ("Series C
Preferred Stock") (collectively, "preferred stock") for a total of 1,367,264
shares of common stock. We recognized a gain of $0.5 million in connection with
the offers.

We completed a public exchange offer and two privately negotiated exchange
offers during the year ended December 31, 2020. As a result of the exchange
offers, we exchanged a total of 253,482 shares of our Series A Preferred Stock,
435,272 shares of our Series B Preferred Stock, and 716,822 shares of our Series
C Preferred Stock for a total of 1,698,645 shares of common stock and cash
consideration of $8.0 million. We recognized a gain of $10.6 million in
connection with the exchange offers.

Book value and Adjusted book value per share

On July 12, 2021, we announced a one-for-three reverse stock split of our
outstanding shares of common stock. The reverse stock split was effected
following the close of business on July 22, 2021. All per share amounts and
common shares outstanding for all periods presented have been adjusted on a
retroactive basis to reflect the one-for-three reverse stock split.

Per share amounts for book value are calculated using all outstanding common
shares in accordance with GAAP, including all vested shares issued to our
Manager and our independent directors under our equity incentive plans as of
quarter-end. As of December 31, 2021, the net proceeds on our preferred stock
were $220.5 million. As of December 31, 2021, the liquidation preference for our
issued and outstanding preferred stock was $228.0 million.

As of December 31, 2021 and 2020, our book value per common share calculated
using stockholders' equity less net proceeds on our preferred stock as the
numerator was $14.64 and $12.40, respectively. As of December 31, 2021 and 2020,
our adjusted book value per common share calculated using stockholders' equity
less the liquidation preference of our preferred stock as the numerator was
$14.32 and $11.81, respectively.
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Net interest margin and leverage ratio

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

GAAP net interest margin and non-GAAP net interest margin, a non-GAAP financial
measure, are calculated by subtracting the weighted average cost of funds from
the weighted average yield for our GAAP investment portfolio and our investment
portfolio, respectively, both of which exclude cash held by us. The weighted
average yield on our investment portfolio represents an effective interest rate,
which utilizes all estimates of future cash flows and adjusts for actual
prepayment and cash flow activity as of quarter-end. The calculation of weighted
average yield is weighted on fair value at quarter-end. The weighted average
cost of funds is the sum of the weighted average funding costs on total
financing arrangements outstanding at quarter-end, including all non-recourse
financing arrangements, and our weighted average hedging cost, which is the
weighted average of the net pay rate on our interest rate swaps. GAAP and
non-GAAP cost of funds are weighted by the outstanding financing arrangements on
our GAAP investment portfolio and our investment portfolio, respectively, and
the fair value of securitized debt at quarter-end.

Our leverage ratio is determined by our portfolio mix as well as many additional
factors, including the liquidity of our portfolio, the availability and price of
our financing, the available capacity to finance our assets, and anticipated
regulatory developments. See the "Financing activities" section below for more
detail on our leverage ratio.

The table below sets forth the net interest margin and leverage ratio on our
investment portfolio as of December 31, 2021 and 2020 and a reconciliation to
the net interest margin and leverage ratio on our GAAP investment portfolio:
December 31, 2021
                                                GAAP Investment                  Investments in Debt and
Weighted Average                                   Portfolio                       Equity of Affiliates              Investment Portfolio
Yield                                                            3.72  %                            9.21  %                           3.84  %
Cost of Funds (a)                                                2.06  %                            3.41  %                           2.08  %
Net Interest Margin                                              1.66  %                            5.80  %                           1.76  %
Leverage Ratio (b)                                                  4.9x                                (c)                              2.4x




December 31, 2020
                                                GAAP Investment                  Investments in Debt and
Weighted Average                                   Portfolio                       Equity of Affiliates              Investment Portfolio
Yield                                                            3.73  %                            7.78  %                           4.36  %
Cost of Funds (a)                                                1.82  %                            4.87  %                           2.09  %
Net Interest Margin                                              1.91  %                            2.91  %                           2.27  %
Leverage Ratio (b)                                                  2.4x                                (c)                              1.5x


(a)Includes cost of non-recourse financing arrangements.
(b)The leverage ratio on our GAAP Investment Portfolio represents GAAP leverage.
The leverage ratio on our investment portfolio represents Economic Leverage as
defined below in the "Financing Activities" section.
(c)Refer to the "Financing activities" section below for an aggregate breakout
of leverage.

Core Earnings

One of our objectives is to generate net income from net interest margin on the
portfolio, and management uses Core Earnings, as one of several metrics, to help
measure our performance against this objective. Management believes that this
non-GAAP measure, when considered with our GAAP financial statements, provides
supplemental information useful for investors to help evaluate our financial
performance. However, management also believes that our definition of Core
Earnings has important limitations as it does not include certain earnings or
losses our management team considers in evaluating our financial performance.
Our presentation of Core Earnings may not be comparable to similarly-titled
measures of other companies, who may use different calculations. This non-GAAP
measure should not be considered a substitute for, or superior to, Net
Income/(loss) available to common stockholders or Net income/(loss) per diluted
common share calculated in accordance with GAAP. Our GAAP financial results and
the reconciliations from these results should be carefully evaluated.

We define Core Earnings, a non-GAAP financial measure, as Net Income/(loss)
available to common stockholders excluding (i) (a) unrealized gains/(losses) on
real estate securities, loans, derivatives and other investments, inclusive of
our investment in
                                       55
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AG Arc, and (b) net realized gains/(losses) on the sale or termination of such
instruments, (ii) any transaction related expenses incurred in connection with
the acquisition or disposition of our investments, (iii) accrued deal-related
performance fees payable to Arc Home and third party operators to the extent the
primary component of the accrual relates to items that are excluded from Core
Earnings, such as unrealized and realized gains/(losses), (iv) realized and
unrealized changes in the fair value of Arc Home's net mortgage servicing rights
and the derivatives intended to offset changes in the fair value of those net
mortgage servicing rights, (v) deferred taxes recognized at our taxable REIT
subsidiaries, if any, (vi) any foreign currency gain/(loss) relating to monetary
assets and liabilities, (vii) income from discontinued operations, and (viii)
any gains/(losses) associated with exchange transactions on our common and
preferred stock. Items (i) through (viii) above include any amount related to
those items held in affiliated entities. Management considers the transaction
related expenses referenced in (ii) above to be similar to realized losses
incurred at the acquisition or disposition of an asset and does not view them as
being part of its core operations. Management views the exclusion described in
(iv) above to be consistent with how it calculates Core Earnings on the
remainder of its portfolio. Management excludes all deferred taxes because it
believes deferred taxes are not representative of current operations. Core
Earnings include the net interest income and other income earned on our
investments on a yield adjusted basis, including TBA dollar roll income/(loss)
or any other investment activity that may earn or pay net interest or its
economic equivalent.

A reconciliation of "Net Income/(loss) available to common stockholders" to Core
Earnings for the years ended December 31, 2021 and 2020 is set forth below (in
thousands, except per share data):
                                                                            

Year Ended

                                                              December 31, 2021           December 31, 2020
Net Income/(loss) available to common stockholders          $           85,873          $         (430,894)
Add (Deduct):
Net realized (gain)/loss                                                (1,698)                    256,522
Net unrealized (gain)/loss                                             (62,699)                    169,813

Transaction related expenses and deal related performance
fees (1)

                                                                 8,558                        (613)
Equity in (earnings)/loss from affiliates                              (31,889)                      1,629

Net interest income and expenses from equity method
investments (2)(3)

                                                      23,807                      38,025
Net (income)/loss from discontinued operations                               -                        (666)
Other (income)/loss, net                                                   (14)                     (1,528)
(Gains) from Exchange Offers, net                                         (472)                    (10,574)
Dollar roll income/(loss)                                               (3,377)                        322
Core Earnings                                               $           18,089          $           22,036

Core Earnings, per Diluted Share (4)                        $             1.11          $             1.88


(1)For the years ended December 31, 2021 and 2020, total transaction related
expenses and deal related performance fees included $7.3 million and $(1.2
million), respectively, recorded within the "Transaction related expenses" line
item and $1.2 million and $0.6 million, respectively, recorded within the
"Interest expense" line item, which relates to the amortization of deferred
financing costs.
(2)For the years ended December 31, 2021 and 2020, $2.5 million or $0.15 per
share and $(3.9 million) or $(0.33) per share, respectively, of realized and
unrealized changes in the fair value of Arc Home's net mortgage servicing rights
and corresponding derivatives were excluded from Core Earnings per diluted
share.
(3)Core income or loss recognized by AG Arc does not include our portion of
gains recorded by Arc Home in connection with the sale of residential mortgage
loans to us. For the year ended December 31, 2021, we eliminated $5.3 million of
intra-entity profits recognized by Arc Home and also decreased the cost basis of
the underlying loans we purchased by the same amount. We did not eliminate any
intra-entity profits for the year ended December 31, 2020. Refer to Note 2 to
the "Notes to Consolidated Financial Statements" for more information on this
accounting policy.
(4)All per share amounts for all periods presented have been adjusted to reflect
the one-for-three reverse stock split.

Investment activities

We aim to allocate capital to investment opportunities with attractive
risk/return profiles in our target asset classes. Our investment activities
primarily include acquiring and securitizing newly-originated residential
mortgage loans. We finance our acquired loans through various financing lines on
a short-term basis and securitize the loans to obtain long-term, non-recourse,
non-mark-to-market financing as market conditions permit. We are also currently
investing in 30 Year Fixed Rate Agency RMBS to utilize excess liquidity. Our
investment and capital allocation decisions depend on prevailing market
conditions and compliance with Investment Company Act and REIT tests, among
other factors, and may change over time in response to opportunities available
in different economic and capital market environments. As a result, in reacting
to market conditions and
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taking into account a variety of other factors, including liquidity, duration,
and interest rate expectations, the mix of our assets changes over time as we
opportunistically deploy capital. We actively evaluate our investments based on
factors including, among others, the characteristics of the underlying
collateral, geography, expected return, expected future prepayment trends,
supply of and demand for our investments, costs of financing, costs of hedging,
expected future interest rate volatility, and the overall shape of the U.S.
Treasury and interest rate swap yield curves.

We allocate our equity by investment type using the fair value of our investment
portfolio, less any associated leverage, inclusive of any long TBA position (at
cost). We allocate all non-investment portfolio related assets and liabilities
to our investment portfolio based on the characteristics of such assets and
liabilities in order to sum to stockholders' equity per the consolidated balance
sheets. Our equity allocation method is a non-GAAP methodology and may not be
comparable to the similarly titled measure or concepts of other companies, who
may use different calculations and allocation methodologies.

The following table presents a summary of the allocated equity of our investment
portfolio as of December 31, 2021 and 2020 ($ in thousands):

                                                  Allocated Equity                                 Percent of Equity
                                         December 31,          December 31,
                                             2021                  2020              December 31, 2021          December 31, 2020
          Residential Investments       $    459,058          $    229,183                       80.5  %                    56.0  %
           Commercial Investments                  -                99,668                          -  %                    24.3  %
                      Agency RMBS            111,322                80,854                       19.5  %                    19.7  %

                            Total       $    570,380          $    409,705                      100.0  %                   100.0  %


The following table presents a summary of our investment portfolio as of
December 31, 2021 and 2020 and a reconciliation to our GAAP Investment Portfolio
($ in thousands):

                                           Fair Value                                                  Percent of Investment Portfolio Fair Value       

Leverage Ratio (a)

                                              December 31,          December 31,                                                                                                              December 31,           December 31,
                                                  2021                  2020                                                                                                                      2021                   2020              December 31, 2021          December 31, 2020
      Residential Investments                $  2,725,889          $    691,478                                                                                                                      84.6  %                49.5  %                       2.1x                       0.2x
       Commercial Investments                           -               182,296                                                                                                                         -  %                13.1  %                  -                               0.9x
                  Agency RMBS                     495,713               521,843                                                                                                                      15.4  %                37.4  %                       3.7x                       6.1x

  Total: Investment Portfolio                $  3,221,602          $  1,395,617                                                                                                                     100.0  %               100.0  %                       2.4x                       1.5x

Investments in Debt and

     Equity of Affiliates (b)                $     72,026          $    217,964                                                                                                                          N/A                    N/A                        (c)                        (c)

       Total: GAAP Investment
                    Portfolio                $  3,149,576          $  1,177,653                                                                                                                          N/A                    N/A                       4.9x                       2.4x


(a)The leverage ratio on our investment portfolio represents Economic Leverage
as defined below in the "Financing Activities" section and is calculated by
dividing each investment type's total recourse financing arrangements by its
allocated equity (described in the chart below). Cash posted as collateral has
been allocated pro-rata by each respective asset class's Economic Leverage
amount. The Economic Leverage Ratio excludes any fully non-recourse financing
arrangements and includes any net receivables or payables on TBAs. The leverage
ratio on our GAAP Investment Portfolio represents GAAP leverage.
(b)Certain Re/Non-Performing Loans held in securitized form are presented net of
non-recourse securitized debt.
(c)Refer to the "Financing activities" section below for an aggregate breakout
of leverage.


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The following table presents a reconciliation of our Investment Portfolio to our
GAAP Investment Portfolio as of December 31, 2021 and 2020 ($ in thousands):
                                                                                                                                                                                                                                December 31,
                                                                                                                         December 31, 2021                                                                                          2020
                                                                                                Unrealized                                     Weighted Average              Weighted                Weighted Average
             Instrument                      Current Face           Amortized Cost            Mark-to-Market            Fair Value (1)            Coupon (2)               Average Yield             Life  (Years) (3)         Fair Value (1)
Credit Investments:
Residential Investments
Non-QM Loans (4)                            $  1,780,012          $     1,846,162          $          12,636          $     1,858,798                    4.91  %                     3.85  %                        4.78       $          -
GSE Non-Owner Occupied Loans                     429,424                  439,463                      1,374                  440,837                    3.64  %                     3.19  %                        6.84                  -
MATT Non-QM Loans (5)                            488,364                   46,795                       (958)                  45,837                    0.91  %                     4.04  %                        0.77            153,200
Re/Non-Performing Loans                          428,472                  345,650                     14,481                  360,131                    3.55  %                     6.82  %                        6.57            478,565
Land Related Financing                            16,891                   16,891                          -                   16,891                   14.50  %                    14.50  %                        0.46             22,824
Interest Only (6)                                160,154                    3,507                       (112)                   3,395                    0.38  %                    10.12  %                        1.81                320
Non-Agency RMBS                                        -                        -                          -                        -                       -  %                        -  %                   -                     36,569

Total Residential Investments                  3,303,317                2,698,468                     27,421                2,725,889                    4.12  %                     4.21  %                        4.52       

691,478

Total Commercial Investments                           -                        -                          -                        -                       -  %                        -  %                   -                    182,296

Total Credit Investments                       3,303,317                2,698,468                     27,421                2,725,889                    4.12  %                     4.21  %                        4.52            873,774

Agency RMBS:
30 Year Fixed Rate                               490,435                  502,362                     (6,649)                 495,713                    2.18  %                     1.78  %                        7.46            518,352

Excess MSR                                             -                        -                          -                        -                       -                           -  %                   -                      3,491

Total Agency RMBS                                490,435                  502,362                     (6,649)                 495,713                    2.18  %                     1.78  %                        7.46            521,843

Total: Investment Portfolio $ 3,793,752 $ 3,200,830 $ 20,772 $ 3,221,602

     3.85  %                     3.84  %                        4.90      

$ 1,395,617

Investments in Debt and Equity of

                           Affiliates       $    548,580          $        72,720          $            (694)         $        72,026                    1.72  %                     9.21  %                        0.86       $    217,964

     Total: GAAP Investment Portfolio       $  3,245,172          $     3,128,110          $          21,466          $     3,149,576                    4.04  %                     3.72  %                        5.59       $  1,177,653


(1)Refer to Note 10 to the "Notes of the Consolidated Financial Statements" for
more detail on what is included in our "Investments in debt and equity of
affiliates" line item on our consolidated balance sheets. Our assets held
through Investments in debt and equity of affiliates are included in the "MATT
Non-QM Loans," "Re/Non-Performing Loans," "Land Related Financing," and "Excess
MSR" line items above.
(2)Equity residuals with a zero coupon rate are excluded from this calculation.
(3)Weighted average life is based on projected life. Typically, actual
maturities are shorter than stated contractual maturities. Maturities are
affected by the contractual lives of the underlying mortgages, periodic payments
of principal, and prepayments of principal.
(4)Prior to 2021, we acquired Non-QM Loans through our equity method investment
in MATT. This line item represents direct purchases of Non-QM Loans, which began
in Q1 2021, and retained tranches of certain Non-QM securitizations.
(5)As of December 31, 2021, this line item primarily includes retained tranches
from past securitizations.
(6)As of December 31, 2021, this line item includes Non-QM interest-only bonds.

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Credit Investments

The following table presents the fair value of the securities and loans in our
credit portfolio and a reconciliation to our GAAP credit portfolio (in
thousands):
                                                                               Fair Value
                                                              December 31, 2021           December 31, 2020
Residential loans (1)                                       $        2,663,992          $          563,263
Commercial real estate loans                                                 -                     125,508
Total loans                                                          2,663,992                     688,771

Non-Agency RMBS (2)                                                     61,897                        128,215
CMBS (3)                                                                     -                      56,788

Total Credit securities                                                 61,897                     185,003

Total Credit Investments                                    $        2,725,889          $          873,774
Less: Investments in Debt and Equity of Affiliates          $           72,026          $          217,547
Total GAAP Credit Portfolio                                 $        

2,653,863 $ 656,227


(1)Includes Non-QM Loans, GSE Non-Owner Occupied Loans, Re/Non-Performing Loans,
and Land Related Financing not held in securitized form.
(2)Includes Non-QM Loans and Re/Non-Performing Loans held in securitized form,
as well as Prime, Alt-A/Subprime, Credit Risk Transfer, Non-U.S RMBS, and
Interest-Only Securities.
(3)Includes Conduit, Single-Asset/Single-Borrower, Freddie Mac K-Series, and
Interest-Only investments.

Residential loans

The following table presents information regarding credit quality for certain
categories within our Residential loan portfolio ($ in thousands):

                                                                                                                     December 31, 2021                                                                                      December 31,
                                                                                            Weighted Average (1)(2)                                     Aging by Unpaid Principal Balance (1)(2)                                2020
                                      Unpaid Principal                              Original LTV
                                          Balance              Fair Value              Ratio               Current FICO (3)                Current                30-59 Days           60-89 Days          90+ Days          Fair Value
Non-QM Loans                          $   1,765,118          $ 1,844,198                  68.19  %                742               $    1,735,644              $    15,596          $     2,666          $ 11,212          $        -
GSE Non-Owner Occupied Loans                429,424              440,837                  65.44  %                754                      425,594                    3,830                    -                 -                   -
MATT Non-QM Loans                            11,250               11,839                  58.13  %                677                        6,558                      575                    -             4,117             100,264
Re/Non-Performing Loans                     384,659              350,227                  79.20  %                639                      256,096                   35,974               12,324            73,736             440,175
Land Related Financing                       16,891               16,891                       N/A                        N/A                         N/A                  N/A                  N/A               N/A           22,824
Total Residential loans               $   2,607,342          $ 2,663,992                  69.71  %                723               $    2,423,892              $    55,975          $    14,990          $ 89,065          $  563,263
Less: Investments in Debt and
Equity of Affiliates                         28,349               28,886                  58.42  %                677                        6,560                      575                    -             4,322             

127,822

Total GAAP Residential Loans $ 2,578,993 $ 2,635,106

              69.76  %                723               $    2,417,332              $    55,400          $    14,990          $ 84,743          $  435,441


(1)Weighted average and aging data excludes residual positions where we
consolidate a securitization and the positions are recorded on our balance sheet
as Re/Non-Performing Loans. There may be limited data available regarding the
underlying collateral of the residual positions.
(2)Weighted average and aging data excludes Land Related Financing.
(3)Weighted average current FICO excludes borrowers where FICO scores were not
available.

See Note 3 to the “Notes to Consolidated Financial Statements” for a breakout of
geographic concentration of credit risk within loans we include in the
“Residential mortgage loans, at fair value” and “Securitized residential
mortgage loans, at fair value” line items on our consolidated balance sheets.

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Credit securities

The following table presents the fair value of our credit securities portfolio
by credit rating as of December 31, 2021 and 2020 (in thousands):
Credit Rating – Credit Securities (1)(2)

                 December 31, 2021            December 31, 2020
AAA                                                    $                 -          $              630

BB                                                                       -                       9,037
B                                                                   10,528                      25,318
Below B                                                                  -                      17,046
Not Rated                                                           51,369                     132,972
                        Total: Credit Securities       $            61,897          $          185,003
         Less: Investments in Debt and Equity of
                                      Affiliates       $            43,140          $           89,725
                               Total: GAAP Basis       $            18,757          $           95,278


(1)Represents the minimum rating for rated assets of S&P, Moody and Fitch credit
ratings, stated in terms of the S&P equivalent.
(2)Certain Re/Non-Performing Loans held in securitized form are presented net of
non-recourse securitized debt.

The following table presents the geographic concentration of the underlying
collateral for our Non-Agency RMBS portfolio ($ in thousands):

December 31, 2021                                                           December 31, 2020
Non-Agency RMBS                                                             Non-Agency RMBS
State                         Fair Value              Percentage            State                                 Fair Value (1)              Percentage (1)
California                  $    31,480                       50.9  %       California                          $        40,593                           32.5  %
New York                            11,092                    17.9  %       New York                                     17,742                           14.2  %
Florida                              3,661                     5.9  %       Florida                                      10,982                            8.8  %
New Jersey                           1,684                     2.7  %       Texas                                         4,216                            3.4  %
Texas                                1,511                     2.4  %       New Jersey                                    4,028                            3.2  %
Other                               12,469                    20.2  %       Other                                        50,654                           37.9  %
                Total       $    61,897                      100.0  %                               Total       $       128,215                          100.0  %


(1)As of December 31, 2020 Non-Agency RMBS fair value includes $3.2 million of
investments where there was no data regarding the underlying collateral. These
positions were excluded from the percent calculation.

Agency RMBS

The following table presents the fair value ($ in thousands) and the Constant
Prepayment Rate ("CPR") experienced on our GAAP Agency RMBS portfolio for the
periods presented:

                                                    Fair Value                                                  CPR (1)(2)
       Agency RMBS                 December 31, 2021           December 31, 2020          December 31, 2021               December 31, 2020
30 Year Fixed Rate               $          495,713          $          518,352                        6.1  %                               2.7  %


(1)Represents the weighted average monthly CPRs published during the period for
our in-place portfolio.

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Investments in debt and equity of affiliates

The below table details our investments in debt and equity of affiliates as of
December 31, 2021 and December 31, 2020 (in thousands):

                                                                            December 31, 2021                                                                      December 31, 2020
                                                Assets            Liabilities           Equity            Net Income/(Loss)            Assets           Liabilities            Equity            Net Income/(Loss)
MATT Non-QM Loans (1)                        $  45,837          $    (30,471)         $ 15,366          $           12,594          $ 153,200    

$ (111,135) $ 42,065 $ (26,511)
Re/Non-Performing Loans (2)

                      9,298                (5,538)            3,760                      13,191             41,523               (5,588)            35,935                       2,483
Land Related Financing (3)                      16,891                     -            16,891                       2,455             22,824                    -             22,824                       2,620
Residential Investments - Fair Value /
Net income/(loss)                               72,026               (36,009)           36,017                      28,240            217,547             (116,723)           100,824                     (21,408)

Other                                                -                     -                 -                         (32)               417                    -                417                      (3,481)

Total Investments excluding AG Arc -
Fair value / Net income/(Loss)                  72,026               (36,009)           36,017                      28,208            217,964             (116,723)           101,241                     (24,889)

AG Arc - Fair value / Net
income/(loss)                                   53,435                     -            53,435                       3,681             45,341                    -             45,341                      23,260

Cash and Other assets/(liabilities)              3,698                (1,127)            2,571                           -              5,279               (1,194)             4,085                           -

Investments in debt and equity of
affiliates / Equity in earnings/(loss)
from affiliates                              $ 129,159          $    (37,136)         $ 92,023          $           31,889          $ 268,584          $  (117,917)         $ 150,667          $           (1,629)


(1)As of December 31, 2021, MATT primarily holds retained tranches from past
securitizations which continue to reduce in size due to ongoing principal
repayments and we do not expect to acquire additional investments within this
equity method investment.
(2)Certain Re/Non-Performing Loans held in securitized form are presented net of
non-recourse securitized debt.
(3)Land Related Financing continues to reduce in size due to ongoing principal
repayments and we do not expect to originate new loans within this equity method
investment.

Financing activities

We use leverage to finance the purchase of our investment portfolio. Our
leverage has primarily been in the form of repurchase agreements, revolving
facilities, and securitized debt. Repurchase agreements involve the sale and a
simultaneous agreement to repurchase the transferred assets or similar assets at
a future date and typically have a term 30 to 90 days. The amount borrowed
generally is equal to the fair value of the assets pledged less an agreed-upon
discount, referred to as a "haircut." The size of the haircut reflects the
perceived risk associated with the pledged asset. Haircuts may change as our
financing arrangements mature or roll and are sensitive to governmental
regulations. Interest rates on borrowings are fixed based on prevailing rates
corresponding to the terms of the borrowings, and interest is paid at the
termination of the borrowing at which time we may enter into a new borrowing
arrangement at prevailing market rates with the same counterparty or repay that
counterparty and negotiate financing with a different counterparty. We have also
used revolving facilities, which are typically longer term in nature than
repurchase agreements, to finance loans. Interest rates on these facilities are
based on prevailing rates corresponding to the terms of the borrowings, and
interest is paid on a monthly basis. Repurchase agreements and revolving
facilities, which we refer to as our financing arrangements, are generally
mark-to-market with respect to margin calls and recourse to us. We had
outstanding financing arrangements with five counterparties as of December 31,
2021 and December 31, 2020.

Our financing arrangements generally include customary representations,
warranties, and covenants, but may also contain more restrictive supplemental
terms and conditions. Although specific to each financing arrangement, typical
supplemental terms include requirements of minimum equity and liquidity,
leverage ratios, and performance triggers. In addition, some of the financing
arrangements contain cross default features, whereby default under an agreement
with one lender simultaneously causes default under agreements with other
lenders. To the extent that we fail to comply with the covenants contained in
these financing arrangements or is otherwise found to be in default under the
terms of such agreements, the counterparty has the right to accelerate amounts
due under the associated agreement. As of December 31, 2021, we are in
compliance with all of our financial covenants.

We also use securitized debt to finance our loan portfolio. Securitized debt is
generally non-mark-to-market with respect to margins calls and non-recourse to
us.

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Forbearance and Reinstatement Agreements

In connection with the market disruption created by the COVID-19 pandemic, in
March 2020, we received notifications of alleged events of default and
deficiency notices from several of our financing counterparties. We engaged in
discussions with our financing counterparties and, as a result, entered into a
series of forbearance agreements (collectively, the "Forbearance Agreement")
with certain of our financing counterparties (the "Participating
Counterparties") pursuant to which each Participating Counterparty agreed to
forbear from exercising its rights and remedies with respect to events of
default and any and all other defaults under the applicable financing
arrangement (each, a "Bilateral Agreement") for the period ending June 15, 2020.

On June 10, 2020, we and the Participating Counterparties entered into a
reinstatement agreement (the "Reinstatement Agreement"), pursuant to which the
Forbearance Agreement was terminated and each Participating Counterparty
permanently waived all existing and prior events of default under the applicable
Bilateral Agreements. Pursuant to the Reinstatement Agreement, the Bilateral
Agreements were reinstated with certain amendments to reflect current market
terms (i.e., increased haircuts and higher coupons), updated financial
covenants, and various reporting requirements from us to the Participating
Counterparties, releases, certain netting obligations and cross-default
provisions. As a result of the Reinstatement Agreement, default interest on our
outstanding borrowings under the Bilateral Agreements ceased to accrue as of
June 10, 2020, all cash margin was applied to outstanding balances owed by us,
and principal and interest payments on the underlying collateral were permitted
to flow to and be used by us, just as it was prior to the Forbearance
Agreements. In addition, pursuant to the terms of the Reinstatement Agreement,
the security interests granted to Participating Counterparties as additional
collateral under the Forbearance Agreement have been terminated and released. We
also agreed to pay the reasonable fees and out-of-pocket expenses of counsel and
other professional advisors for the Participating Counterparties and the
collateral agent.

Concurrently, on June 10, 2020, we entered a separate reinstatement agreement
with one of our financing counterparties on substantially the same terms as
those set forth in the Reinstatement Agreement.

Refer to Note 12 in the “Notes to Consolidated Financial Statements” for more
information on deficiencies that are now settled.

Recourse and non-recourse financing

The below table provides detail on the breakout between recourse and
non-recourse financing as of December 31, 2021 and 2020 (in thousands):

                                                                  December 31, 2021           December 31, 2020
Recourse financing - Financing arrangements                     $        1,791,596          $          569,644
Recourse financing - Secured debt (1)                                            -                      10,393
Non-recourse financing - Securitized debt, at fair value                   999,215                     355,159

Non-recourse financing – Financing arrangements included
in Investments in Debt and Equity of Affiliates (2)

22,156                     111,135
Total Financing                                                          2,812,967                   1,046,331

Less:

Recourse financing – Financing arrangements included in
Investments in Debt and Equity of Affiliates

                                13,853                       5,597

Non-recourse financing – Financing arrangements included
in Investments in Debt and Equity of Affiliates (2)

                         22,156                     111,135
Total Financing in Investments in Debt and Equity of
Affiliates                                                                  36,009                     116,732

Total GAAP Financing                                            $        2,776,958          $          929,599


(1)See the "Contractual obligations-Secured debt" section below for more detail
on Secured debt from our Manager.
(2)On January 29, 2021, we and private funds under the management of Angelo
Gordon entered into an amendment with respect to our Restructured Financing
Arrangement in MATT. The amendment converted the existing financing to a
mark-to-market facility with respect to margin calls that is recourse to us and
the private funds managed by Angelo Gordon that invest in MATT up to our and
each funds' allocation of the $50.0 million commitment to MATH, which is further
described in the "Contractual Obligations-MATT Financing Arrangement
Restructuring" section below and Note 12 to the "Notes of the Consolidated
Financial Statements."

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See Note 6 to the "Notes to Consolidated Financial Statements" for a breakout of
the "Financing arrangements" line item on our consolidated balance sheets. See
Note 2 and Note 3 to the "Notes to Consolidated Financial Statements" for more
detail on securitized debt and our consolidated variable interest entities.

Leverage

We define GAAP leverage as the sum of (1) our GAAP financing arrangements, net
of any restricted cash posted on such financing arrangements, (2) the amount
payable on purchases that have not yet settled less the financing remaining on
sales that have not yet settled, and (3) securitized debt, at fair value. We
define Economic Leverage, a non-GAAP metric, as the sum of: (i) our GAAP
leverage, exclusive of any fully non-recourse financing arrangements, (ii)
financing arrangements held through affiliated entities, net of any restricted
cash posted on such financing arrangements, exclusive of any financing utilized
through AG Arc, any adjustment related to unsettled trades as described in (2)
in the previous sentence, and any non-recourse financing arrangements and (iii)
our net TBA position (at cost), if any.

The calculations in the tables below divide GAAP leverage and Economic Leverage
by our GAAP stockholders' equity to derive our leverage ratios. The following
tables present a reconciliation of our Economic Leverage ratio to GAAP Leverage
($ in thousands):

December 31, 2021                                      Leverage             Stockholders' Equity              Leverage Ratio
GAAP Leverage                                      $   2,772,094          $             570,380                              4.9x
Financing arrangements through affiliated
entities                                                  35,744
Non-recourse financing arrangements (1)               (1,021,371)
Net TBA receivable/(payable) adjustment                 (394,212)
Economic Leverage                                  $   1,392,255          $             570,380                              2.4x


(1) Non-recourse financing arrangements include securitized debt and other
non-recourse financing held within MATT.
December 31, 2020

                                Leverage             Stockholders' Equity              Leverage Ratio
GAAP Leverage                                $     979,303          $             409,705                              2.4x
Financing arrangements through
affiliated entities                                116,688
Non-recourse financing arrangements
(1)                                               (466,294)

Economic Leverage                            $     629,697          $             409,705                              1.5x

(1) Non-recourse financing arrangements include securitized debt and other
non-recourse financing held within MATT.

Hedging activities

Subject to maintaining our qualification as a REIT and our Investment Company
Act exemption, to the extent leverage is deployed, we may utilize derivative
instruments in an effort to hedge the interest rate risk associated with the
financing of our portfolio. Specifically, we may seek to hedge our exposure to
potential interest rate mismatches between the interest we earn on our
investments and our borrowing costs caused by fluctuations in short-term
interest rates. We may utilize interest rate swaps, swaption agreements, and
other financial instruments such as short positions in to-be-announced
securities. In utilizing leverage and interest rate derivatives, our objectives
are to improve risk-adjusted returns and, where possible, to lock in, on a
long-term basis, a spread between the yield on our assets and the costs of our
financing and hedging. Derivatives have not been designated as hedging
instruments for GAAP. See Note 7 in the "Notes to Consolidated Financial
Statements" for more information.

Dividends

Federal income tax law generally requires that a REIT distribute annually at
least 90% of its REIT ordinary taxable income, without regard to the deduction
for dividends paid and excluding net capital gains and that it pay tax at
regular corporate rates to the extent that it annually distributes less than
100% of its net taxable income. Before we pay any dividend, whether for U.S.
federal income tax purposes or otherwise, we must first meet both our operating
requirements and debt service on our financing arrangements and other debt
payable. If our cash available for distribution is less than our net taxable
income, we could be required to sell assets or borrow funds to make required
cash distributions or we may make a portion of the required distribution in the
form of a taxable stock distribution or distribution of debt securities.

As described above, our distribution requirements are based on taxable income
rather than GAAP net income. Differences between taxable income and GAAP net
income include (i) unrealized gains and losses associated with investment and
derivative portfolios which are marked-to-market in current income for GAAP
purposes, but excluded from taxable income
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until realized or settled, (ii) temporary differences related to amortization of
premiums and discounts paid on investments, (iii) the timing and amount of
deductions related to stock-based compensation, (iv) temporary differences
related to the recognition of realized gains and losses on sold investments and
certain terminated derivatives, (v) taxes, (vi) methods of depreciation and
(vii) differences between GAAP income or losses in our TRSs' and taxable income
resulting from dividend distributions to the REIT from our TRSs. Undistributed
taxable income is based on current estimates and is not finalized until we file
our annual tax return for that tax year, typically in October of the following
year. We did not have any undistributed taxable income as of December 31, 2021.

On March 27, 2020, we announced that our Board of Directors approved a
suspension of our quarterly dividends on our Series A Preferred Stock, Series B
Preferred Stock, and Series C Preferred Stock, beginning with the preferred
dividend that would have been declared in May 2020, as well as a suspension of
the quarterly dividend on the common stock, beginning with the dividend that
normally would have been declared in March 2020, in order to conserve capital
and improve our liquidity position during the market volatility due to the
COVID-19 pandemic. Under the terms of the Articles Supplementary governing our
series of preferred stock, we cannot pay cash dividends with respect to our
common stock if dividends on our preferred stock are in arrears.

On December 17, 2020, we paid our Series A Preferred Stock, Series B Preferred
Stock, and Series C Preferred Stock dividends that were in arrears as well as
the full dividends payable on the preferred stock for the fourth quarter of 2020
in the amount of $1.54689, $1.50 and $1.50 per share, respectively. On December
22, 2020, our Board of Directors declared a dividend of $0.09 per common share
for the fourth quarter 2020 which was paid on January 29, 2021 to shareholders
of record at the close of business on December 31, 2020. During 2021, we
declared our preferred and common dividends in the ordinary course of business.

On July 12, 2021, we announced a one-for-three reverse stock split of our
outstanding shares of common stock. The reverse stock split was effected
following the close of business on July 22, 2021. All per share amounts and
common shares outstanding for all periods presented have been adjusted on a
retroactive basis to reflect the one-for-three reverse stock split.

The following tables detail our common stock dividends declared during the years
ended December 31, 2021 and 2020:
2021
 Declaration Date      Record Date      Payment Date      Dividend Per Share
         3/22/2021         4/1/2021         4/30/2021    $             0.18
         6/15/2021        6/30/2021         7/30/2021                  0.21
         9/15/2021        9/30/2021        10/29/2021                  0.21
        12/15/2021       12/31/2021         1/31/2022                  0.21
             Total                                       $             0.81


2020
 Declaration Date      Record Date      Payment Date      Dividend Per Share

        12/22/2020       12/31/2020         1/29/2021    $             0.09


The following tables detail our preferred stock dividends declared during the
years ended December 31, 2021 and 2020:

      2021                                                                                                Cash Dividend Per Share
       Declaration Date             Record Date              Payment Date            8.25% Series A           8.00% Series B           8.000% Series C
                2/16/2021                 2/26/2021                3/17/2021       $       0.51563          $          0.50          $           0.50
                5/17/2021                 5/28/2021                6/17/2021               0.51563                     0.50                      0.50
                7/30/2021                 8/31/2021                9/17/2021               0.51563                     0.50                      0.50
                11/5/2021                11/30/2021               12/17/2021               0.51563                     0.50                      0.50
                    Total                                                          $       2.06252          $          2.00          $           2.00

      2020                                                                                                Cash Dividend Per Share
       Declaration Date             Record Date              Payment Date            8.25% Series A           8.00% Series B           8.000% Series C
                2/14/2020                 2/28/2020                3/17/2020       $       0.51563          $          0.50          $           0.50
                11/6/2020                11/30/2020               12/17/2020               1.54689                     1.50                      1.50
                    Total                                                          $       2.06252          $          2.00          $           2.00


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Liquidity and capital resources

Our liquidity determines our ability to meet our cash obligations, including
distributions to our stockholders, payment of our expenses, financing our
investments and satisfying other general business needs.

Our principal sources of cash as of December 31, 2021 consisted of borrowings
under financing arrangements, principal and interest payments we receive on our
investment portfolio, cash generated from our operating results, and proceeds
from capital market transactions. We typically use cash to repay principal and
interest on our financing arrangements, to purchase loans, real estate
securities, and other real estate related assets, to make dividend payments on
our capital stock, and to fund our operations. At December 31, 2021, we had
$137.3 million of liquidity, which consisted of $68.1 million of cash and $69.2
million of unencumbered assets available to support our liquidity needs. At
January 31, 2022, we had $134.3 million of liquidity, which consisted of $67.8
million of cash and $66.5 million of unencumbered assets available to support
our liquidity needs. Refer to the "Contractual obligations" section of this Part
II, Item 7 for additional obligations that could impact our liquidity.

Margin requirements

The fair value of our loans and real estate securities fluctuate according to
market conditions. When the fair value of the assets pledged as collateral to
secure a financing arrangement decreases to the point where the difference
between the collateral fair value and the financing arrangement amount is less
than the haircut, our lenders may issue a "margin call," which requires us to
post additional collateral to the lender in the form of additional assets or
cash. Under our repurchase facilities, our lenders have full discretion to
determine the fair value of the securities we pledge to them. Our lenders
typically value assets based on recent transactions in the market. Lenders also
issue margin calls as the published current principal balance factors change on
the pool of mortgages underlying the securities pledged as collateral when
scheduled and unscheduled paydowns are announced monthly. We experience margin
calls in the ordinary course of our business. In seeking to manage effectively
the margin requirements established by our lenders, we maintain a position of
cash and, when owned, unpledged Agency RMBS. We refer to this position as our
"liquidity." The level of liquidity we have available to meet margin calls is
directly affected by our leverage levels, our haircuts and the price changes on
our assets. Typically, if interest rates increase or if credit spreads widen,
then the prices of our collateral (and our unpledged assets that constitute our
liquidity) will decline, we will experience margin calls, and we will need to
use our liquidity to meet the margin calls. There can be no assurance that we
will maintain sufficient levels of liquidity to meet any margin calls. If our
haircuts increase, our liquidity will proportionately decrease. In addition, if
we increase our borrowings, our liquidity will decrease by the amount of
additional haircut on the increased level of indebtedness. We intend to maintain
a level of liquidity in relation to our assets that enables us to meet
reasonably anticipated margin calls but that also allows us to be substantially
invested in the residential mortgage market. We may misjudge the appropriate
amount of our liquidity by maintaining excessive liquidity, which would lower
our investment returns, or by maintaining insufficient liquidity, which may
force us to liquidate assets into potentially unfavorable market conditions and
harm our results of operations and financial condition. Further, an unexpected
rise in interest rates and a corresponding fall in the fair value of our
securities may also force us to liquidate assets under difficult market
conditions, thereby harming our results of operations and financial condition,
in an effort to maintain sufficient liquidity to meet increased margin calls.

Similar to the margin calls that we receive on our borrowing agreements, we may
also receive margin calls on our derivative instruments when their fair value
declines. This typically occurs when prevailing market rates change adversely,
with the severity of the change also dependent on the terms of the derivatives
involved. We may also receive margin calls on our derivatives based on the
implied volatility of interest rates. Our posting of collateral with our
counterparties can be done in cash or securities, and is generally bilateral,
which means that if the fair value of our interest rate hedges increases, our
counterparty will be required to post collateral with us. Refer to the
"Liquidity risk - derivatives" section of Item 7A below for a further discussion
on margin.

Refer to the “Financing activities-Forbearance and Reinstatement Agreements”
section above for information on the impact of COVID-19 on margin calls in 2020.

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Cash Flows

The below details changes to our cash, cash equivalents, and restricted cash for
the years ended December 31, 2021 and 2020 (in thousands):

                                                                    Years 

Ended

                                                   December 31, 2021           December 31, 2020               Change
Cash, cash equivalents, and restricted
cash, Beginning of Period                        $           62,318          $           125,369          $     (63,051)

Net cash provided by (used in) operating
activities (1)                                               26,298                        4,156                 22,142
Net cash provided by (used in) investing
activities (2)                                           (1,899,691)                   2,193,455             (4,093,146)
Net cash provided by (used in) financing
activities (3)                                            1,911,294                   (2,260,500)             4,171,794

Net change in cash, cash equivalents and
restricted cash                                              37,901                      (62,889)               100,790
Effect of exchange rate changes on cash                          10                         (162)                   172
Cash, cash equivalents, and restricted
cash, End of Period                              $          100,229          $            62,318          $      37,911


(1)Cash provided by operating activities is primarily attributable to net
interest income less operating expenses for the years ended December 31, 2021
and 2020, respectively. Our investment portfolio grew in 2021 following a
significant reduction in our investment portfolio size in 2020 as a result of
the COVID-19 pandemic. In addition, distributions received from our equity
method investments increased period over period.
(2)Cash used in investing activities for the year ended December 31, 2021 was
primarily attributable to purchases of investments less sales of investments and
principal repayments of investments. Cash used by investing activities for the
year ended December 31, 2020 was primarily attributable to sales of investments
and principal repayments of investments less purchases of investments. The
difference period over period is primarily due to the increased level of
investment activity during 2021 as we focused on growing our investment
portfolio as compared to significant sales in 2020 as a result of the COVID-19
pandemic.
(3)Cash provided by financing activities for the year ended December 31, 2021
was primarily attributable to borrowing of financing arrangements, proceeds from
the issuance of securitized debt, and net proceeds from the issuance of common
stock offset by offset by repayment of borrowings under financing arrangements,
principal repayments of securitized debt, and dividend payments. Cash used in
financing activities for the year ended December 31, 2020 was primarily
attributable to repayments of financing arrangements and dividend payments
offset by borrowings under financing arrangements. The difference period over
period is primarily due to financing added to support the increased level of
investment and securitization activity during 2021 as compared to a reduction in
financing arrangements as a result of significant sales in 2020 due to the
COVID-19 pandemic.

Stock repurchase programs

On November 3, 2015, our Board of Directors authorized a stock repurchase
program ("Repurchase Program") to repurchase up to $25.0 million of our
outstanding common stock. Such authorization does not have an expiration date.
As part of the Repurchase Program, shares may be purchased in open market
transactions, including through block purchases, through privately negotiated
transactions, or pursuant to any trading plan that may be adopted in accordance
with Rule 10b5-1 of the Exchange Act. Open market repurchases will be made in
accordance with Exchange Act Rule 10b-18, which sets certain restrictions on the
method, timing, price and volume of open market stock repurchases. Subject to
applicable securities laws, the timing, manner, price and amount of any
repurchases of common stock under the Repurchase Program may be determined by
our discretion, using available cash resources. Shares of common stock
repurchased by us under the Repurchase Program, if any, will be cancelled and,
until reissued, will be deemed to be authorized but unissued shares of common
stock as required by Maryland law. The Repurchase Program may be suspended or
discontinued by us at any time and without prior notice and the authorization
does not obligate us to acquire any particular amount of common stock. The cost
of the acquisition of shares of our own stock in excess of the aggregate par
value of the shares first reduces additional paid-in capital, to the extent
available, with any residual cost applied against retained earnings. We
repurchased 0.3 million shares under the Repurchase Program during the year
ended December 31, 2021. We did not repurchase shares under the Repurchase
Program during the year ended December 31, 2020. Approximately $11.0 million of
common stock remained authorized for future share repurchases under the
Repurchase Program as of December 31, 2021.

Equity distribution agreements

On May 5, 2017, we entered into an equity distribution agreement with each of
Credit Suisse Securities (USA) LLC and JMP Securities LLC (collectively, the
"Sales Agents"), which we refer to as the "Equity Distribution Agreements,"
pursuant to which we may sell up to $100.0 million aggregate offering price of
shares of our common stock from time to time through the Sales
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Agents, under the Securities Act of 1933. For the year ended December 31, 2021,
we sold 1.0 million shares of common stock under the Equity Distribution
Agreements for net proceeds of approximately $13.1 million. For the year ended
December 31, 2020, we sold 0.7 million shares of common stock under the Equity
Distribution Agreements for net proceeds of approximately $7.1 million. Since
inception of the program, the Company has sold approximately 2.2 million shares
of common stock under the Equity Distribution Agreements for gross proceeds of
$48.3 million.

Common stock offering

On November 22, 2021, we completed a public offering of 7.0 million shares of
our common stock and subsequently issued an additional 1.1 million shares
pursuant to the underwriters' exercise of their over-allotment option at a price
of $9.98 per share. Net proceeds to us from the offering were approximately
$80.0 million, after deducting estimated offering expenses.

Exchange Offers

The below details the privately negotiated exchange agreements with existing
holders of our preferred shares exchanged for common shares during the year
ended December 31, 2021. Subsequent to each transaction closed, the Preferred
Stock exchanged pursuant to the exchange agreement was reclassified as
authorized but unissued shares of preferred stock without designation as to
class or series ($ in thousands).
                                                      Preferred Shares Exchanged
                            Shares of Series A             Shares of Series B            Shares of Series C         Total Preferred
Date                          Preferred Stock                Preferred Stock               Preferred Stock          Stock Par Value          Common Shares Exchanged
March 17, 2021                      153,325                        350,609                            -            $       12,598                     937,462
June 14, 2021                             -                         86,478                      154,383                     6,022                     429,802


As of December 31, 2021, we had outstanding 1.7 million shares of Series A
Preferred Stock, 3.7 million shares of Series B Preferred Stock, and 3.7 million
shares of Series C Preferred Stock.

Common Stock Issuance to the Manager

Refer to “Contractual obligations-Management agreement” below for more detail
related to the Second Management Agreement Amendment.

Forward-looking statements regarding liquidity

Based upon our current portfolio, leverage and available borrowing arrangements,
we believe the net proceeds of our common equity offerings, preferred equity
offerings, and private placements, combined with cash flow from operations and
our available borrowing capacity will be sufficient to enable us to meet our
anticipated liquidity requirements, including funding our investment activities,
paying fees under our management agreement, funding our distributions to
stockholders and paying general corporate expenses.

Contractual obligations

Management agreement

On June 29, 2011, we entered into a management agreement with our Manager,
pursuant to which our Manager is entitled to receive a management fee and the
reimbursement of certain expenses. The management fee is calculated and payable
quarterly in arrears in an amount equal to 1.50% of our Stockholders' Equity,
per annum.

For purposes of calculating the management fee, "Stockholders' Equity" means the
sum of the net proceeds from any issuances of equity securities (including
preferred securities) since inception (allocated on a pro rata daily basis for
such issuances during the fiscal quarter of any such issuance, and excluding any
future equity issuance to the Manager), plus our retained earnings at the end of
such quarter (without taking into account any non-cash equity compensation
expense or other non-cash items described below incurred in current or prior
periods), less any amount that we pay for repurchases of our common stock,
excluding any unrealized gains, losses or other non-cash items that have
impacted stockholders' equity as reported in our financial statements prepared
in accordance with GAAP, regardless of whether such items are included in other
comprehensive income or loss, or in net income, and excluding one-time events
pursuant to changes in GAAP, and certain other non-cash charges after
discussions between the Manager and our independent directors and after approval
by a majority of our independent directors. Stockholders' Equity, for purposes
of calculating the management fee, could be greater or less than the
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amount of stockholders' equity shown on our financial statements. For the years
ended December 31, 2021 and 2020, we have incurred management fees of $6.8
million and $7.2 million, respectively. As of December 31, 2021 and 2020, we
have recorded management fees payable of $1.8 million and $1.7 million,
respectively.

Our Manager uses the proceeds from its management fee in part to pay
compensation to its officers and personnel, who, notwithstanding that certain of
them also are our officers, receive no compensation directly from us. We are
required to reimburse our Manager or its affiliates for operating expenses
incurred by our Manager or its affiliates on our behalf, including certain
salary expenses and other expenses relating to legal, accounting, due diligence
and other services. Our reimbursement obligation is not subject to any dollar
limitation; however, the reimbursement is subject to an annual budget process
which combines guidelines from the Management Agreement with oversight by our
Board of Directors and discussions with our Manager. For the years ended
December 31, 2021 and 2020, we have accrued $6.3 million and $7.4 million,
respectively, representing a reimbursement of expenses which are recorded within
the "Other operating expenses" and "Transaction related expenses" line items on
the consolidated statements of operations.

As of December 31, 2021 and 2020, we recorded a reimbursement payable to the
Manager of $2.1 million and $1.8 million, respectively. For the year ended
December 31, 2021, the Manager agreed to waive its right to receive expense
reimbursements of $0.8 million.

On April 6, 2020, we executed an amendment to the management agreement, pursuant
to which the Manager agreed to defer our payment of the management fee and
reimbursement of expenses, effective the first quarter of 2020 through September
30, 2020. All deferred expense reimbursements were paid as of September 30,
2020.

On September 24, 2020, we executed an amendment (the "Second Management
Agreement Amendment") to the management agreement, pursuant to which the Manager
agreed to receive a portion of the deferred base management fee in shares of
common stock. Pursuant to the Second Management Agreement Amendment, the Manager
agreed to purchase (i) 405,123 shares of common stock in full satisfaction of
the deferred base management fee of $3.8 million payable by us in respect to the
first and second quarters of 2020 and (ii) 51,500 shares of common stock in
satisfaction of $0.5 million of the base management fee payable by us in respect
to the third quarter of 2020. The shares of common stock issued to the Manager
were valued at $9.45 per share based on the midpoint of the estimated range of
our book value per share as of August 31, 2020. The remaining third quarter 2020
management fee was paid in the normal course of business.

Incentive fee

In connection with our common stock offering in November 2021, including the
Manager's purchase of 700,000 shares in the offering, on November 22, 2021, we
and the Manager executed an amendment (the "Third Amendment") to the management
agreement, pursuant to which we will pay the Manager an annual incentive fee in
addition to the base management fee. Pursuant to the Third Amendment, the
Manager waived the annual incentive fee with respect to the fiscal years ending
December 31, 2021 and December 31, 2022, and the annual incentive fee will first
be payable with respect to the fiscal year ending December 31, 2023.

The annual incentive fee with respect to each applicable fiscal year will be
equal to 15% of the amount by which our cumulative adjusted net income from the
date of the Third Amendment exceeds the cumulative hurdle amount, which
represents an 8% return (cumulative, but not compounding) on an equity hurdle
base consisting of the sum of (i) our adjusted book value (calculated in the
manner described in our public filings) as of October 31, 2021, (ii)
$80.0 million, and (iii) the gross proceeds of any subsequent public or private
common stock offerings by us. The annual incentive fee will be payable in cash,
or, at the option of our Board of Directors, shares of our common stock or a
combination of cash and shares.

In addition, pursuant to the Third Amendment, the term of the management
agreement was extended until June 30, 2023, unless earlier terminated in
accordance with its terms. Thereafter, the management agreement will continue to
renew automatically each year for an additional one-year period, unless the
Company or the Manager exercise its respective termination rights. All other
terms and conditions of the management agreement continued without change.

Secured debt

On April 10, 2020, in connection with the first Forbearance Agreement, we issued
a secured promissory note (the "Note") to the Manager evidencing a $10 million
loan made by the Manager to us. Additionally, on April 27, 2020, in connection
with the second Forbearance Agreement, we entered into an amendment to the Note
to reflect an additional $10 million loan by the Manager to us. The $10 million
loan made by the Manager on April 10, 2020 was repaid in full with interest when
it matured on March 31, 2021, and the $10 million loan made on April 27, 2020
was repaid in full with interest when it matured on July
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27, 2020. The unpaid balance of the Note accrued interest at a rate of 6.0% per
annum. Interest on the Note was payable monthly in kind through the addition of
such accrued monthly interest to the outstanding principal balance of the Note.
The Note and accrued interest on the Note, when outstanding, were included
within the due to affiliates amount, which is included within the "Other
Liabilities" line item in the consolidated balance sheets.

Share-based compensation

Effective on April 15, 2020 upon the approval of our stockholders at our Annual
Meeting, the 2020 Equity Incentive Plan provides for 666,666 shares of common
stock to be issued. The maximum number of shares of common stock granted during
a single fiscal year to any non-employee director, taken together with any cash
fees paid to such non-employee director during any fiscal year, shall not exceed
$300,000 in total value (calculating the value of any such awards based on the
grant date fair value). As of December 31, 2021, 599,312 shares of common stock
were available to be awarded under the Equity Incentive Plan.

Since our IPO, we have granted an aggregate of 35,264 and 67,354 shares of
restricted common stock to our independent directors under our equity incentive
plans, dated July 6, 2011 (the "2011 Equity Incentive Plans") and our 2020
Equity Incentive Plan, respectively. As of December 31, 2021, all the shares of
restricted common stock granted to our independent directors have vested.

Following approval of our stockholders at our 2021 annual meeting of
stockholders, the AG Mortgage Investment Trust, Inc. 2021 Manager Equity
Incentive Plan (the "2021 Manager Plan") became effective on April 7, 2021 and
provides for a maximum of 573,425 shares of common stock that may be subject to
awards thereunder to our Manager. As of December 31, 2021, there were no shares
or awards issued under the 2021 Manager Plan.

Further, since our IPO, we have issued 13,416 shares of restricted common stock
and 40,000 restricted stock units to our Manager under our 2011 Equity Incentive
Plans. As of July 1, 2020, all shares of restricted common stock and restricted
stock units granted to our Manager have fully vested.

Unfunded commitments

See Note 12 of the “Notes to Consolidated Financial Statements” for details on
our commitments as of December 31, 2021.

MATT Financing Arrangement Restructuring

See Note 10 and Note 12 of the "Notes to Consolidated Financial Statements" for
detail on the MATT Restructured Financing Arrangement and our commitments as of
December 31, 2021.

Off-balance sheet arrangements

Our investments in debt and equity of affiliates primarily consist of real
estate securities, loans, and our interest in AG Arc. Investments in debt and
equity of affiliates are accounted for using the equity method of accounting.
Certain of our investments in debt and equity of affiliates securitize
residential mortgage loans and retain interests in the subordinated tranches of
the transferred assets. These retained interests are included in the MATT Non-QM
Loans and Re/Non-Performing Loans line items of our investment portfolio. See
Note 2 to the "Notes to Consolidated Financial Statements" for a discussion of
investments in debt and equity of affiliates.

We have entered into TBA positions in connection with purchases of GSE Non-Owner
Occupied Loans. We record TBA purchases and sales on the trade date and present
the purchase or receipt net of the corresponding payable or receivable until the
settlement date of the transaction. As of December 31, 2021, we had a net short
TBA position with a net receivable amount and fair market value of
$394.2 million and recorded $13 thousand in the "Other liabilities" line item on
our consolidated balance sheets.

In addition to our investments in debt and equity of affiliates and TBA
positions described above, we also have commitments outstanding on certain
loans. For additional information on our commitments as of December 31, 2021,
refer to Note 12 of the "Notes to Consolidated Financial Statements." Exclusive
of our investments in debt and equity of affiliates described above, we do not
expect these commitments, taken as a whole, to be significant to, or to have a
material impact on, our overall liquidity or capital resources or our
operations.

                                       69
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Critical accounting policies

We prepare our consolidated financial statements in conformity with GAAP, which
requires the use of estimates and assumptions that affect reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. These estimates are based, in part, on our
judgment and assumptions regarding various economic conditions that we believe
are reasonable based on facts and circumstances existing at the time of
reporting. We believe that the estimates, judgments and assumptions utilized in
the preparation of our consolidated financial statements are prudent and
reasonable. Although our estimates contemplate conditions as of December 31,
2021 and how we expect them to change in the future, it is reasonably possible
that actual conditions could be different than anticipated in arriving at those
estimates, which could materially affect reported amounts of assets, liabilities
and accumulated other comprehensive income at the date of the consolidated
financial statements and the reported amounts of income, expenses and other
comprehensive income during the periods presented. Moreover, the uncertainty
over the ultimate impact that that the COVID-19 pandemic will have on the global
economy generally, and on our business in particular, makes any estimate and
assumption inherently less certain than would be the case absent the current and
potential impacts of the COVID-19 pandemic.

Our most critical accounting policies are believed to include (i) Valuation of
financial instruments, (ii) Accounting for loans, (iii) Accounting for real
estate securities, (iv) Interest income recognition, (v) Financing arrangements,
and (vi) Investment consolidation.

These policies involve decisions and assessments that could affect our reported
assets and liabilities, as well as our reported revenues and expenses. We
believe that all of the decisions and assessments upon which our consolidated
financial statements are based are reasonable at the time made and based upon
information available to us at that time. We rely upon third-party pricing of
our assets at each-quarter end to arrive at what we believe to be reasonable
estimates of fair value, whenever available. For more information on our fair
value measurements, see Note 5 to the "Notes to Consolidated Financial
Statements." For a review of our significant accounting policies and the recent
accounting pronouncements that may impact our results of operations, see Note 2
to the "Notes to Consolidated Financial Statements."

REIT Qualification

We have elected to be taxed as a REIT for U.S. federal income tax purposes.
Provided that we maintain our qualification as a REIT, we generally will not be
subject to U.S. federal income tax on our REIT taxable income that we distribute
currently to our stockholders. Our qualification as a REIT depends upon our
ability to meet, on a continuing basis, various complex requirements under the
Code, relating to, among other things, the sources of our gross income and the
composition and values of our assets (which, based on the types of assets we
own, can fluctuate rapidly, significantly and unpredictably), our distribution
levels and the diversity of ownership of our shares. We cannot assure you that
we will be able to comply with such requirements. Failure to qualify as a REIT
in any taxable year would cause us to be subject to U.S. federal income tax on
our taxable income at regular corporate rates (and any applicable state and
local taxes). Even if we qualify for taxation as a REIT, we may be subject to
certain U.S. federal, state, local, and non-U.S. taxes on our income. For
example, any income generated by our domestic TRSs will be subject to U.S.
federal, state, and local income tax. Any taxes paid by a TRS will reduce the
cash available for distribution to our stockholders.

                                       70
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Exclusion From Regulation Under the Investment Company Act

We conduct our business so as to maintain our exempt status under, and not to
become regulated as an investment company for purposes, of the Investment
Company Act. Under Section 3(a)(1)(A) of the Investment Company Act, a company
is an investment company if it is, or holds itself out as being, engaged
primarily, or proposes to engage primarily, in the business of investing,
reinvesting or trading in securities. Under Section 3(a)(1)(C) of the Investment
Company Act, a company is deemed to be an investment company if it is engaged,
or proposes to engage, in the business of investing, reinvesting, owning,
holding or trading in securities and owns or proposes to acquire "investment
securities" having a value exceeding 40% of the value of its total assets
(exclusive of U.S. government securities and cash items) on an unconsolidated
basis (the "40% Test"). "Investment securities" do not include, among other
things, U.S. government securities, and securities issued by majority-owned
subsidiaries that (i) are not investment companies and (ii) are not relying on
the exceptions from the definition of investment company provided by Section
3(c)(1) or 3(c)(7) of the Investment Company Act (the so called "private
investment company" exemptions).

We conduct our operations such that we will not be considered an investment
company under Section 3(a)(1) of the Investment Company Act by complying with
the 40% Test and not engaging primarily (or holding ourselves out as being
engaged primarily) in the business of investing, reinvesting, or trading in
securities. Rather, through wholly-owned or majority-owned subsidiaries, we are
primarily engaged in the non-investment company businesses of these
subsidiaries, namely the real estate finance business of purchasing or otherwise
acquiring mortgage loans and other interests in real estate.

We currently have several subsidiaries that rely on the exclusion provided by
Section 3(c)(7) of the Investment Company Act, each a "3(c)(7) subsidiary." In
addition, we currently have several subsidiaries that rely on the exclusion
provided by Section 3(c)(5)(C) of the Investment Company Act, each a "3(c)(5)(C)
subsidiary."

While investments in 3(c)(7) subsidiaries are considered investment securities
for the purposes of the 40% Test, investments in 3(c)(5)(C) subsidiaries are not
considered investment securities for the purposes of the 40% Test, nor are
investments in subsidiaries that rely on the exclusion provided by Section
3(a)(1)(C). Therefore, our investments in 3(c)(7) subsidiaries and other
investment securities cannot exceed 40% of the value of our total assets
(excluding U.S. government securities and cash) on an unconsolidated basis.

Section 3(c)(5)(C) of the Investment Company Act exempts from the definition of
"investment company" entities primarily engaged in the business of purchasing or
otherwise acquiring mortgages and other liens on and interests in real estate.
The SEC staff generally requires an entity relying on Section 3(c)(5)(C) to
invest at least 55% of its portfolio in "qualifying assets" and at least another
25% in additional qualifying assets or in "real estate-related" assets (with no
more than 20% comprised of miscellaneous assets). Both the 40% Test and the
requirements of the Section 3(c)(5)(C) exclusion limit the types of businesses
in which we may engage and the types of assets we may hold, as well as the
timing of sales and purchases of assets.

The determination that we qualify for this exemption from being regulated as an
investment company depends on various factual matters and circumstances. We
closely monitor our holdings to ensure continuing and ongoing compliance with
these tests. If we failed to comply with the 40% Test or another exemption under
the Investment Company Act and became regulated as an investment company, our
ability to, among other things, use leverage would be substantially reduced and,
as a result, we would be unable to conduct our business as described in this
report.

© Edgar Online, source Glimpses

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