Q1 2017 Supplemental Materials April 27, 2017 

 Disclaimers  FORWARD-LOOKING INFORMATIONThis presentation contains forward-looking statements and information. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend” and similar expressions. These statements include, among others, statements regarding our expected performance, anticipated returns and our investment, financing, and hedging strategies and means to implement the strategy.The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. You should not place undue reliance on these forward-looking statements. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. Some of these factors are described under the caption ‘‘Risk Factors’’ in this Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward looking statements, whether as a result of new information, future events or otherwise.  2 

 GAAP to Non GAAP Reconciliation  In addition to the results presented in accordance with GAAP, our results of operations discussed below include certain non-GAAP financial information, including “Net Income Excluding Realized and Unrealized Gains and Losses”Net Income Excluding Realized and Unrealized Gains and LossesWe have elected the fair value option for all of our MBS assets and have not elected to designate our derivative holdings for hedge accounting treatment under the Financial Accounting Standards Board (the “FASB”), Accounting Standards Codification (“ASC”), Topic 815, Derivatives and Hedging. Changes in fair value of these instruments are presented in a separate line item in our consolidated statements of operations. Therefore, we mark all of our MBS assets and hedge instruments to market every reporting period. With the volatility that occurs in markets every quarter, the market value of these assets and hedge instruments varies as well. These fluctuations in value are reported in our statement of operations every period. We have presented the results of our operations in the tables below with and without these realized and unrealized gains and losses included in the calculation of net income/(loss). We believe that net income excluding realized and unrealized gains and losses provides meaningful information to consider, in addition to the respective amounts prepared in accordance with GAAP. This non-GAAP measure helps management to evaluate its financial position and performance without the effects of these realized and unrealized gains and losses that are not necessarily indicative of our financial performance. The unrealized gains or losses on derivative instruments and MBS assets presented in our consolidated statements of operations are not necessarily representative of the ultimate gain or loss, if any, that we may realize in the future. This is because as interest rates move up or down in the future, the gains or losses we ultimately realize, and which will affect our net income for the then current period, may differ from the unrealized gains or losses recognized as of the reporting date. With respect to realized gains and losses, the application of the fair value method of accounting may cause users of our financial statements to conclude that the realized gains or losses in a given period are indicative of the gains and losses incurred from the date we purchased the assets or hedge instruments. This is not the case, as the fair value method of accounting requires us to report gains and losses based on the movement in the market value of the instrument in question since the beginning of the period only.Our presentation of net income excluding realized and unrealized gains and losses has important limitations. First, other market participants may use the available for sale method of accounting for their MBS assets. Under the available for sale method of accounting, fluctuation in the value of MBS assets are reflected in other comprehensive income, a component of the shareholders equity section of the balance sheet. Second, while we believe that the calculation of net income excluding realized and unrealized gains and losses described above helps to present our financial position and performance, it may be of limited usefulness as an analytical tool. Therefore, net income excluding realized and unrealized gains and losses should not be viewed in isolation and is not a substitute for net income computed in accordance with GAAP.The table below on page 14 presents a reconciliation of the adjustments to net income calculated in accordance with GAAP for the first quarter of 2017.  3 

 Table of Contents   Topic Point  Financial Highlights for the QuarterMarket DevelopmentsFinancial ResultsMBS Portfolio Characteristics, Credit Counterparties, and Hedge Position   5 6 - 1213 - 1718 - 23  4  Slide(s) 

 Financial Highlights for the Quarter Ended March 31, 2017  Earnings per Share of $0.07Incurred $0.63 loss per Share from net realized and unrealized gain/(losses) on MBS and derivative instrumentsEarnings per Share of $0.70 excluding realized and unrealized gains/(losses) on MBS and derivative instruments (See page 14 for a reconciliation of this non-GAAP measure to Earnings per Share)Book Value per Share of $9.75 at March 31, 2017A decrease of $0.35 (or -3.5%) from $10.10 at December 31, 2016Dividend of $0.42 declared during the quarterEconomic return of $0.07 per share, or 0.7% unannualized / 2.8% annualized  5 

   Market Developments  6 

 10-Year US Treasury Note & US Dollar Swap: Q1 2017  7  10-Year US Treasury Note: Q1 2017  10-Year US Dollar Swap: Q1 2017  Source: Bloomberg Data 

 US Treasury Curve: Q1 2017 Performance  8  Source: Bloomberg Data  Yield (%)  Change (bps)   3Mo 1Yr 2Yr 3Yr 5Yr 7Yr 10Yr 30Yr   Tenor 

 US Dollar Swap Curve: Q1 2017 Performance   9  Yield (%)  Change (bps)  Tenor  3Mo 1Yr 2Yr 3Yr 5Yr 7Yr 10Yr 30Yr  Source: Bloomberg Data 

 FNCL 4.0 & FNCL 4.5: Q1 2017   10  Source: Bloomberg Data 

 Wells Fargo Production 85k Max Specified Pool Payups over TBA  11  Source: Wells Fargo Securities 

 Wells Fargo New Production Specified Pool Payup over TBA  12  Source: Wells Fargo Securities 

   Financial Results  13 

 Financial Results for the Three Months Ended March 31, 2017  14                      Net Income Excluding Realized and Unrealized Gains and Losses     Realized and Unrealized Gains/(Losses)     Total  Interest income  $   32,311   $   -   $   32,311   Interest expense      (6,715)      -       (6,715)  Net interest income     25,596      -      25,596   Realized losses on mortgage-backed securities     -      (1,350)     (1,350)  Unrealized (losses) on mortgage-backed securities     -      (14,958)     (14,958)  Losses on interest rate futures     -      (4,422)     (4,422)  Gains on interest rate swaps      -       3       3   Net portfolio income (loss)  $   25,596   $   (20,727)  $   4,869                 Expenses:              Management fees     1,302      -      1,302   Allocated overhead     368      -      368   Accrued incentive compensation     12      -      12   Directors' fees and liability insurance     276      -      276   Audit, legal and other professional fees     170      -      170   Direct REIT operating expenses     231      -      231   Other administrative      61       -       61   Total expenses      2,420       -       2,420                 Net income (loss)  $   23,176   $   (20,727)  $   2,449                 Basic and diluted net income (loss) per share  $  0.701   $  (0.627)  $  0.074                 Weighted average shares outstanding - Basic and diluted     33,069,064       33,069,064       33,069,064                 Dividends declared per common share                  $ 0.42    ($ in thousands, except per share data) 

 MBS Portfolio Roll Forward Dec 31, 2016 to Mar 31, 2017  15  ($ in thousands)                        Portfolio Activity for the Quarter                                 Structured Security Portfolio                     Pass-Through    Interest-Only    Inverse Interest                   Portfolio    Securities    Only Securities    Sub-total    Total    Market value - December 31, 2016    $  2,874,215   $  69,726   $  78,233   $  147,959   $  3,022,174   Securities purchased      1,682,894     43,498     10,848     54,346     1,737,240   Securities sold      (1,369,585)    -    (38,088)    (38,088)    (1,407,673)  Losses on sales      (910)    -    (440)    (440)    (1,350)  Return of investment      n/a    (5,859)    (2,668)    (8,527)    (8,527)  Pay-downs      (64,889)    n/a    n/a    n/a    (64,889)  Premium lost due to pay-downs      (4,653)    n/a    n/a    n/a    (4,653)  Mark to market losses       (9,412)     (151)     (742)     (893)     (10,305)  Market value - March 31, 2017    $  3,107,660   $  107,214   $  47,143   $  154,357   $  3,262,017  

 MBS Portfolio Capital Allocation at Dec 31, 2016 and Mar 31, 2017  16  ($ in thousands)                        Capital Allocation                                 Structured Security Portfolio                     Pass-Through    Interest-Only    Inverse Interest                   Portfolio    Securities    Only Securities    Sub-total    Total    31-Mar-17                                  Market value    $  3,107,660   $  107,214   $  47,143   $  154,357   $  3,262,017   Cash      112,723     -    -    -    112,723   Borrowings(1)       (3,050,608)     -     -     -     (3,050,608)    Total  $  169,775   $  107,214   $  47,143   $  154,357   $  324,132      % of Total     52.40%     33.10%     14.50%     47.60%     100.00%  31-Dec-16                                  Market value    $  2,874,215   $  69,726   $  78,233   $  147,959   $  3,022,174   Cash      94,425     -    -    -    94,425   Borrowings(2)       (2,793,705)     -     -     -     (2,793,705)    Total  $  174,935   $  69,726   $  78,233   $  147,959   $  322,894      % of Total     54.20%     21.60%     24.20%     45.80%     100.00%  At March 31, 2017, there were outstanding repurchase agreement balances of $63.8 million and $33.6 million secured by IO and IIO securities, respectively. We entered into these arrangements to generate additional cash to invest in PT RMBS; therefore, we have not considered these balances to be allocated to the structured securities strategy.At December 31, 2016, there were outstanding repurchase agreement balances of $33.3 million and $45.5 million secured by IO and IIO securities, respectively. We entered into these arrangements to generate additional cash to invest in PT RMBS; therefore, we have not considered these balances to be allocated to the structured securities strategy. 

 MBS Portfolio Returns by Sector for the Quarter Ended Mar 31, 2017  17  (1)      Calculated by dividing the Total Return by the Beginning Capital Allocation, expressed as a percentage.  (2)      Calculated using two data points, the Beginning and Ending Capital Allocation balances.  (3)      Calculated by dividing the Total Return by the Average Capital Allocation, expressed as a percentage.  ($ in thousands)                        Returns for the Quarter Ended March 31, 2017                                 Structured Security Portfolio                     Pass-Through    Interest-Only    Inverse Interest                   Portfolio    Securities    Only Securities    Sub-total    Total    Income (net of borrowing cost)    $  23,057   $  541   $  1,998   $  2,539   $  25,596   Realized and unrealized losses      (14,975)    (151)    (1,182)    (1,333)    (16,308)  Derivative losses       (4,419)     n/a     n/a     n/a     (4,419)     Total Return  $  3,663   $  390   $  816   $  1,206   $  4,869   Beginning Capital Allocation    $  174,935   $  69,726   $  78,233   $  147,959   $  322,894   Return on Invested Capital for the Quarter(1)       2.10%     0.60%     1.00%     0.80%     1.50%  Average Capital Allocation(2)    $  172,355   $  88,470   $  62,688   $  151,158   $  323,513   Return on Average Invested Capital for the Quarter(3)       2.10%     0.40%     1.30%     0.80%     1.50% 

   Portfolio Characteristics, Credit Counterparties & Hedge Position  18 

 MBS Portfolio Characteristics as of March 31, 2017  19  MBS Valuation Characteristics                  (in thousands of $s)                          Asset Category     Current Face     FairValue  Current Price  Percentage of Portfolio  Weighted Average Coupon  Realized March 2017 CPR (Reported in Apr)  As of March 31, 2017                          Adjustable Rate MBS  $  1,832   $  1,947   106.26   0.06%  3.52%  0.1%  10-1 Hybrid Rate MBS     42,680      43,756   102.52   1.34%  2.55%  0.6%  Total Hybrid Adjustable Rate MBS     42,680      43,756   102.52   1.34%  2.55%  0.6%  15 Year Fixed Rate MBS     80,902     84,266   104.16   2.58%  3.28%  9.2%  20 Year Fixed Rate MBS     237,234     253,347   106.79   7.77%  4.00%  10.4%  30 Year Fixed Rate MBS     2,536,513      2,724,344   107.41   83.52%  4.40%  6.2%  Total Fixed Rate MBS     2,854,649      3,061,957   107.26   93.87%  4.33%  6.6%  Total Mortgage-backed Pass-through MBS     2,899,161      3,107,659   107.19   95.27%  4.31%  6.5%  Interest-Only Securities     815,467     107,214   13.15   3.29%  3.74%  13.3%  Inverse Interest-Only Securities     243,293      47,143   19.38   1.45%  5.26%  13.7%  Structured MBS     1,058,760      154,357   14.58   4.73%  4.20%  13.4%  Total Mortgage Assets  $  3,957,921   $  3,262,017      100.00%  4.30%  8.4%  MBS Assets by Agency          Investment Company Act of 1940 (Whole Pool) Test        (in thousands of $s)             (in thousands of $s)           As of March 31, 2017     FairValue  Percentage of Portfolio    As of March 31, 2017     FairValue  Percentage of Portfolio  Fannie Mae  $   2,491,752   76.4%    Whole Pool Assets  $   2,882,506   88.4%  Freddie Mac      761,590   23.3%    Non Whole Pool Assets      379,510   11.6%  Ginnie Mae      8,675   0.3%              Total Portfolio  $   3,262,017   100%    Total Portfolio  $   3,262,017   100% 

 Credit Counterparties & Trading Activity  ($ in thousands)                                                Weighted        Weighted  As of March 31, 2017     Total           Average        Average        Outstanding     % of     Borrowing     Amount  Maturity  Counterparty     Balances     Total     Rate     at Risk(1)  in Days  Wells Fargo Bank, N.A.  $  423,078     13.8%     0.98%  $  23,102  11  Citigroup Global Markets, Inc.     286,584     9.4%     1.04%     28,586  27  ICBC Financial Services, LLC     240,705     7.9%     1.04%     12,885  43  J.P. Morgan Securities LLC     231,617     7.6%     1.11%     18,241  13  RBC Capital Markets, LLC     229,689     7.5%     0.98%     12,399  12  Cantor Fitzgerald & Co.     228,461     7.5%     0.91%     12,440  18  Mitsubishi UFJ Securities (USA), Inc.     207,082     6.8%     0.86%     11,237  21  South Street Securities, LLC     172,080     5.6%     0.98%     9,130  7  ED&F Man Capital Markets Inc.     153,325     5.0%     0.99%     8,374  59  KGS-Alpha Capital Markets, L.P.     149,426     4.9%     1.06%     14,056  44  Merrill Lynch, Pierce, Fenner & Smith Inc     149,096     4.9%     0.99%     5,067  17  Daiwa Capital Markets America, Inc.     123,675     4.1%     1.01%     6,638  13  Goldman Sachs & Co.     111,342     3.6%     1.12%     9,059  70  Guggenheim Securities, LLC     81,432     2.7%     1.05%     4,609  78  FHLB-Cincinnati     80,435     2.6%     1.04%     2,963  3  Natixis, New York Branch     72,100     2.4%     0.93%     3,910  6  Nomura Securities International, Inc.     65,701     2.2%     1.05%     3,592  38  Mizuho Securities USA, Inc.     44,780     1.5%     1.21%     6,720  17  Total / Weighted Average  $  3,050,608     100.0%     1.01%  $  193,008  25  20  Equal to the sum of the fair value of securities sold, accrued interest receivable and cash posted as collateral (if any), minus the sum of repurchase agreement liabilities, accrued interest payable and the fair value of securities posted by the counterparties (if any). 

 Hedge Position as of March 31, 2017  21  ($ in thousands)                                     As of 3/31/2017                Expiration Year       Average Contract National Amount     Weighted Average Entry Rate     Weighted Average Effective Rate        Open Equity(1)  Eurodollar Futures Contracts (Short Positions)                               2017                        June  $  600,000    1.43%    1.29%    $  (207)    September    1,000,000    1.50%    1.43%      (183)    December    1,000,000    1.62%    1.55%      (165)  2018                        March  $  1,000,000    1.71%    1.66%    $  (131)    June    1,000,000    1.81%    1.78%      (70)    September    1,000,000    1.90%    1.89%      (25)    December    1,000,000    1.96%    2.01%      135   2019                        March  $  1,000,000    2.02%    2.08%    $  159     June    1,000,000    2.04%    2.16%      297     September    1,000,000    2.11%    2.23%      293     December    1,000,000    2.19%    2.32%      302   2020                        March  $  1,000,000    2.54%    2.36%    $  (441)    June    1,000,000    2.59%    2.41%      (455)    September    1,000,000    2.65%    2.46%      (477)    December    700,000    2.74%    2.52%      (394)                                                                  Total / Weighted Average    $  953,333     2.06%     2.02%     $  (1,364)                        Treasury Note Futures Contracts (Short Position)(2)                               March 2017 10 year T-Note futures                                  (Mar 2017 - Mar 2027 Hedge Period)  $  465,000     2.27%     2.24%     $  (3,134)  Open equity represents the cumulative gains (losses) recorded on open futures positions from inception.T-Note futures contracts were valued at a price of $124.56 at March 31, 2017 and $124.28 at December 31, 2016. The nominal values of the short positions was $579.2 million and $577.9 million at March 31, 2017 and December 31, 2016, respectively 

 Hedge Position as of March 31, 2017  22  (1)      Notional amount represents the par value (or principal balance) of the underlying Agency RMBS.  (2)      Cost basis represents the forward price to be paid (received) for the underlying Agency RMBS.  (3)      Market value represents the current market value of the TBA securities (or of the underlying Agency RMBS) as of period-end.  (4)      Net carrying value represents the difference between the market value and the cost basis of the TBA securities as of period-end and is reported in derivative assets (liabilities), at fair value in our consolidated balance sheets.  Swap Agreements ($ in thousands)                                 Notional Amount  Average Fixed Pay Rate     Average Receive Rate     Net Estimated Fair Value     Average Maturity (Years)  As of March 31, 2017                    Expiration > 1 to ≤ 3 years  $  600,000   1.05%    1.04%  $  12,430     2.9  Expiration > 3 to ≤ 5 years    200,000   2.14%     1.15%     (1,397)     4.9     $  800,000   1.32%     1.07%  $  11,033      3.4  As of December 31, 2016                            Expiration > 3 to ≤ 5 years  $  700,000   1.20%     0.91%  $  9,500      3.4  TBA Positions ($ in thousands)                                    Notional Amount Long (Short)(1)     Cost Basis(2)     Market Value(3)     Net Carrying Value(4)  As of March 31, 2017                            30-Year TBA securities:                      3.00%  $  (150,000)  $  (147,406)  $  (148,267)  $  (861)     4.50%     (297,000)     (317,199)     (318,574)     (1,375)       $  (447,000)  $  (464,605)  $  (466,841)  $  (2,236)  As of December 31, 2016                            30-Year TBA securities:                      3.00%  $  (100,000)  $  (99,406)  $  (99,344)  $  62      4.00%     (100,000)     (103,898)     (105,078)     (1,180)       $  (200,000)  $  (203,304)  $  (204,422)  $  (1,118) 

 Hedge Position by Tenor (Years)  23  Source: Bloomberg Data