Investor Presentation Second Quarter 2019 Information Related to - PowerPoint PPT Presentation

Investor Presentation Second Quarter 2019

Information Related to Forward-Looking Statements Statements concerning interest rates, portfolio allocation, financing costs, portfolio hedging, prepayments, dividends, book value, utilization of loss carryforwards, any change in long-term tax structures (including any REIT election) and any other guidance on present or future periods constitute forward-looking statements that are subject to a number of factors, risks and uncertainties that might cause actual results to differ materially from stated expectations or current circumstances. These factors include, but are not limited to, changes in interest rates, increased costs of borrowing, decreased interest spreads, changes in political and monetary policies, changes in default rates, changes in prepayment rates and other assumptions underlying our estimates related to our projections of future core earnings, changes in the Company’s returns, changes in the use of the Company’s tax benefits, changes in the agency MBS asset yield, changes in the Company’s monetization of net operating loss carryforwards, changes in the Company’s ability to generate cash earnings and dividends, preservation and utilization of the Company’s net operating loss and net capital loss carryforwards, impacts of changes to and changes by Fannie Mae and Freddie Mac, actions taken by the U.S. Federal Reserve, the Federal Housing Finance Agency and the U.S. Treasury, availability of opportunities that meet or exceed the Company’s risk adjusted return expectations, ability and willingness to make future dividends, ability to generate sufficient cash through retained earnings to satisfy capital needs, and general economic, political, regulatory and market conditions. These and other material risks are described in the Company's most recent Annual Report on Form 10-K and any other documents filed by the Company with the SEC from time to time, which are available from the Company and from the SEC, and you should read and understand these risks when evaluating any forward-looking statement. All forward-looking statements speak only as of the date on which they are made. New risks and uncertainties arise over time, and it is not possible to predict those events or how they may affect the Company. Except as required by law, the Company is not obligated to, and does not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 1

Contents Second Quarter of 2019 Financial Results and Portfolio Update………………...Slide 3 I. Appendix – Additional Financial Data…………………………………………………Slide 18 II. 2

Second Quarter of 2019 Financial Results and Portfolio Update

Publicly Traded Capital Class A Common Stock Ticker: AI Exchange: NYSE Market Capitalization: $241 million (1) Annual Dividend Yield: 13.7% (1) Series B Cumulative Perpetual Redeemable Senior Notes Due 2023 Preferred Stock Ticker: AIW Ticker: AI PrB Exchange: NYSE Exchange: NYSE Per Annum Interest Rate: 6.625% Per Annum Dividend Rate: Current Strip Yield per Annum: 7.33% (1)(2) 7.00% Payable Quarterly Maturity Date: May 1, 2023 Current Strip Yield per Annum: 8.16% (1)(2) Series C Fixed-to-Floating Rate Senior Notes Due 2025 Cumulative Redeemable Preferred Stock Ticker: AIC Ticker: AI PrC Exchange: NYSE Exchange: NYSE Per Annum Interest Rate: 6.75% Per Annum Dividend Rate: Current Strip Yield per Annum: 7.22% (1)(2) 8.25% Payable Quarterly Maturity Date: March 15, 2025 Current Strip Yield per Annum: 9.00% (1)(2) (1) As of July 31, 2019. 4 (2) Source: Bloomberg

Company Snapshot NYSE Ticker AI Share Price (7/31/19) $6.58 Book Value Per Common Share (6/30/19) $7.80 Estimated BV Per Common Share (7/31/19) $8.10 GAAP Net Loss per Diluted Share (Q2 ‘19) $0.67 Non-GAAP Core Operating Income per $0.23 Diluted Share (Q2 ‘19) (1) Dividend per Common Share (Q2 ‘19) $0.225 Dividend Yield (7/31/19) 13.7% Common Equity Market Cap (7/31/19) $241 million Total Investment Portfolio (6/30/19) $4.0 billion  Real estate investment trust (“REIT”) focused on securitized residential mortgage assets  Currently invest primarily in agency MBS issued by Fannie Mae and Freddie Mac - May invest opportunistically in other asset classes  High quality liquid assets with substantial interest rate hedges to protect long-term capital that produce predictable cash flows to support consistent dividends to shareholders  Internally-managed (1) A reconciliation of non-GAAP core operating income to GAAP pre-tax income is provided on slide 22 . 5

Second Quarter of 2019 Financial Highlights  $0.67 GAAP net loss per diluted common share  $0.23 non-GAAP core operating income (1) per diluted common share - 11.19% annualized core operating income return on average common equity (2)  $7.80 book value per common share as of June 30, 2019  $ 8.10 estimated book value per common share as of July 31, 2019  $0.225 per common share dividend - Economic return of -7.8% measured as the change in book value per common share plus dividends declared during the quarter  Economic net interest income of $12.3 million compared to $14.1 million in the first quarter of 2019 - Comprised of $6.6 million of GAAP net interest income, $2.0 million of net TBA dollar roll income, and $3.8 million of interest rate swap net interest income - Quarter-over-quarter reduction driven primarily by:  a reduction in agency MBS asset yields (3.21% versus 3.36%) due primarily to an increase in prepayment rates (10.16% vs. 7.55%, annualized)  a reduction in TBA dollar roll implied net interest spreads  an increase in economic funding costs due to a 10 bps decline in weighted average interest rate swap receive rates (based on three-month LIBOR) which outpaced a 4 bps decline in weighted average repo funding costs (generally one-month rates) (1) A reconciliation of non-GAAP core operating income to GAAP pre-tax income is provided on slide 22 . 6 (2) See slide 15 for further information.

Agency MBS Investment Portfolio Allocation By Fixed Coupon Rate (1) As of March 31, 2019 As of June 30, 2019 $5.12 Billion Fair Value $3.97 Billion Fair Value Specified Pool vs. TBA Allocation (1) As of March 31, 2019 As of June 30, 2019 Includes the fair value of the agency MBS underlying forward-settling “to -be-announced (“TBA”) purchase or sale commitments that are accounted for as derivative instruments in (1) accordance with GAAP. The difference between the contractual forward price of the Company’s TBA commitments and the fair value of the underlying MBS is reflected on the Company’s 7 consolidated balance sheets as a component of “derivative assets, at fair value” or “derivative liabilities, at fair value. ”

Specified Agency MBS Q2 2019 GAAP Prepayments and Asset Yield Performance (dollars in thousands): WEIGHTED-AVERAGE: Amort. Cost Amortized Cost Coupon Rate CPR Asset Yield Interest Income / UPB (1) Basis 4.0% (20-Year) $ 112,473 102.62 12.76% 3.29% 926 3.5% (30-Year) 214,197 102.33 9.46% 2.94% 1,573 4.0% (30-Year) 2,429,713 104.29 9.80% 3.13% 18,991 4.5% (30-Year) 1,268,619 104.93 10.77% 3.40% 10,785 5.5% (30-Year) 12 100.00 11.52% 5.50% - TOTAL $ 4,025,014 $ 104.34 10.16% 3.21% $ 32,275 Historical Quarterly Prepayments (2) and GAAP Asset Yield Performance: 1) Unpaid principal balance. 8 2) CPR of equivalent TBA eligible calculated as the average of the outstanding population of all Fannie Mae TBA eligible MBS weighted based on the contractual maturity and coupon composition of AI’s monthly investment portfolio.

To-be- Announced (“TBA”) Agency MBS Q2 2019 Dollar Roll (1) Income (dollars in thousands): WEIGHTED-AVERAGE IMPLIED: Net Interest Dollar Roll Cost Basis (2) Coupon Rate Spread Income 2.5% (30-Year) $ 18,650 1.37% $ 64 3.0% (30-Year) 176,813 0.96% 425 3.5% (30-Year) 130,528 0.60% 196 4.0% (30-Year) 626,472 0.82% 1,281 4.5% (30-Year) (4,498) 2.58% 29 TOTAL $ 947,965 0.84% $ 1,995 Recent Relative TBA Dollar Roll Performance and Historical Monthly Price Drop: Example Dollar Roll vs. On Balance Sheet Funding 3.5% Coupon Agency MBS As of July 15, 2019 % 1/32s Annualized Monthly On Balance Sheet Asset Yield (3) 2.87% 7.7 One-month Repo -2.55% (6.8) Net interest spread 0.32% 0.9 Dollar Roll One-month Drop (4) 0.42% 1.1 Dollar Roll Specialness 0.10% 0.3 TBA dollar roll transactions involve delaying, or “rolling,” the settlement of a forward-settling purchase of a TBA agency MBS by entering into an offsetting “spot” sale prior to the settlement date, net (1) settling the “paired - off” positions in cash, and contemporaneously entering another forward-settling purchase of a TBA agency MBS of the same essential characteristics for a later settlement date at a price discount relative to the “spot” sale. Cost basis is based upon the contractual price of the initial TBA purchase trade of each individual series of dollar roll transactions. (2) Asset yield calculated based upon future cash flow estimates obtain from Citi’s the Yield Book, a third-party model, for an illustrative 3.5% coupon specified pool purchased on July 15, 2019. For (3) comparative purposes, assumes agency MBS is 100% financed with a one-month repurchase agreement. 9 TBA dollar roll net interest spread based upon the “price drop” between the August and September settlement of a 3.5% coupon TBA as of July 15, 2019. (4) Source: Bloomberg (5)