TPG Mortgage Investment Trust, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS AG Mortgage Investment Trust, Inc. and Subsidiaries Consolidated Balance Sheets (Unaudited) (in thousands, except per share data) March 31, 2021 December 31, 2020 Assets Real estate securities, at fair value: Agency - $ 915,423 and $ 460,949 pledged as collateral, respectively $ 915,423 $ 518,352 Non-Agency - $ 14,751 and $ 28,653 pledged as collateral, respectively 16,371 38,406 CMBS - $ 29,439 and $ 42,669 pledged as collateral, respectively 45,838 56,788 Residential mortgage loans, at fair value - $ 257,844 and $ 46,571 pledged as collateral, respectively (1) 642,959 435,441 Commercial loans, at fair value 58,209 111,549 Commercial loans held for sale, at fair value — 13,959 Investments in debt and equity of affiliates 160,323 150,667 Excess mortgage servicing rights, at fair value 3,000 3,158 Cash and cash equivalents 51,637 47,926 Restricted cash 39,918 14,392 Other assets 8,922 9,407 Total Assets $ 1,942,600 $ 1,400,045 Liabilities Financing arrangements $ 1,132,200 $ 564,047 Securitized debt, at fair value (1) 344,429 355,159 Payable on unsettled trades — 51,136 Dividend payable 2,791 1,243 Other liabilities 7,875 18,755 Total Liabilities 1,487,295 990,340 Commitments and Contingencies (Note 12) Stockholders’ Equity Preferred stock - $ 0.01 par value; 50,000 shares authorized: 8.25 % Series A Cumulative Redeemable Preferred Stock; 1,663 and 1,817 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively ($ 41,580 and $ 45,413 aggregate liquidation preference, respectively) 40,110 43,808 8.00 % Series B Cumulative Redeemable Preferred Stock; 3,814 and 4,165 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively ($ 95,353 and $ 104,118 aggregate liquidation preference, respectively) 92,279 100,762 8.000 % Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, 3,883 shares issued and outstanding at March 31, 2021 and December 31, 2020 ($ 97,079 aggregate liquidation preference) 93,908 93,908 Common stock, par value $ 0.01 per share; 450,000 shares of common stock authorized and 46,503 and 41,434 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively 465 414 Additional paid-in capital 710,746 688,871 Retained earnings/(deficit) ( 482,203 ) ( 518,058 ) Total Stockholders’ Equity 455,305 409,705 Total Liabilities & Stockholders’ Equity $ 1,942,600 $ 1,400,045 The accompanying notes are an integral part of these unaudited consolidated financial statements. (1) See Note 4 for details related to variable interest entities. 3 AG Mortgage Investment Trust, Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited) (in thousands, except per share data) Three Months Ended March 31, 2021 March 31, 2020 Net Interest Income Interest income $ 12,119 $ 40,268 Interest expense 4,061 19,971 Total Net Interest Income 8,058 20,297 Other Income/(Loss) Net realized gain/(loss) ( 4,038 ) ( 151,143 ) Net interest component of interest rate swaps ( 741 ) 923 Unrealized gain/(loss) on real estate securities and loans, net ( 6,658 ) ( 313,897 ) Unrealized gain/(loss) on derivative and other instruments, net 26,507 5,686 Foreign currency gain/(loss), net 14 1,649 Other income 23 3 Total Other Income/(Loss) 15,107 ( 456,779 ) Expenses Management fee to affiliate 1,654 2,149 Other operating expenses 3,983 930 Restructuring related expenses — 1,500 Excise tax — ( 815 ) Servicing fees 615 579 Total Expenses 6,252 4,343 Income/(loss) before equity in earnings/(loss) from affiliates 16,913 ( 440,825 ) Equity in earnings/(loss) from affiliates 26,336 ( 44,192 ) Net Income/(Loss) 43,249 ( 485,017 ) Gain on Exchange Offers, net (Note 11) 358 — Dividends on preferred stock ( 4,924 ) ( 5,667 ) Net Income/(Loss) Available to Common Stockholders $ 38,683 $ ( 490,684 ) Earnings/(Loss) Per Share - Basic Total Earnings/(Loss) Per Share of Common Stock $ 0.91 $ ( 14.98 ) Earnings/(Loss) Per Share - Diluted Total Earnings/(Loss) Per Share of Common Stock $ 0.91 $ ( 14.98 ) Weighted Average Number of Shares of Common Stock Outstanding Basic 42,348 32,749 Diluted 42,348 32,749 The accompanying notes are an integral part of these unaudited consolidated financial statements. 4 AG Mortgage Investment Trust, Inc. and Subsidiaries Consolidated Statements of Stockholders’ Equity (Unaudited) (in thousands) For the Three Months Ended March 31, 2021 and March 31, 2020 Common Stock 8.25 % Series A Cumulative Redeemable Preferred Stock 8.00 % Series B Cumulative Redeemable Preferred Stock 8.000 % Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock Additional Paid-in Capital Retained Earnings/(Deficit) Shares Amount Total Balance at January 1, 2021 41,434 $ 414 $ 43,808 $ 100,762 $ 93,908 $ 688,871 $ ( 518,058 ) $ 409,705 Net proceeds from issuance of common stock 2,235 22 — — — 10,011 — 10,033 Grant of restricted stock 22 — — — — 80 — 80 Common dividends declared — — — — — — ( 2,791 ) ( 2,791 ) Preferred Series A dividends declared — — — — — — ( 937 ) ( 937 ) Preferred Series B dividends declared — — — — — — ( 2,082 ) ( 2,082 ) Preferred Series C dividends declared — — — — — — ( 1,942 ) ( 1,942 ) Exchange Offers (Note 11) 2,812 29 ( 3,698 ) ( 8,483 ) — 11,784 358 ( 10 ) Net Income/(Loss) — — — — — — 43,249 43,249 Balance at March 31, 2021 46,503 $ 465 $ 40,110 $ 92,279 $ 93,908 $ 710,746 $ ( 482,203 ) $ 455,305 Common Stock 8.25% Series A Cumulative Redeemable Preferred Stock 8.00% Series B Cumulative Redeemable Preferred Stock 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock Additional Paid-in Capital Retained Earnings/(Deficit) Shares Amount Total Balance at January 1, 2020 32,742 $ 327 $ 49,921 $ 111,293 $ 111,243 $ 662,183 $ ( 85,921 ) $ 849,046 Grant of restricted stock and amortization of equity based compensation 7 — — — — 303 — 303 Preferred Series A dividends declared — — — — — — ( 1,067 ) ( 1,067 ) Preferred Series B dividends declared — — — — — — ( 2,300 ) ( 2,300 ) Preferred Series C dividends declared — — — — — — ( 2,300 ) ( 2,300 ) Net Income/(Loss) — — — — — — ( 485,017 ) ( 485,017 ) Balance at March 31, 2020 32,749 $ 327 $ 49,921 $ 111,293 $ 111,243 $ 662,486 $ ( 576,605 ) $ 358,665 The accompanying notes are an integral part of these unaudited consolidated financial statements. 5 AG Mortgage Investment Trust, Inc. and Subsidiaries Consolidated Statements of Cash Flows (Unaudited) (in thousands) Three Months Ended March 31, 2021 March 31, 2020 Cash Flows from Operating Activities Net income/(loss) $ 43,249 $ ( 485,017 ) Adjustments to reconcile net income/(loss) to net cash provided by (used in) operating activities: Net amortization of premium/(discount) ( 802 ) ( 2,951 ) Net realized (gain)/loss 4,038 151,143 Unrealized (gain)/loss on real estate securities and loans, net 6,658 313,897 Unrealized (gain)/loss on derivative and other instruments, net ( 26,507 ) ( 5,686 ) Foreign currency (gain)/loss, net ( 14 ) ( 1,649 ) Equity based compensation to affiliate — 88 Equity based compensation expense 80 215 (Income)/Loss from investments in debt and equity of affiliates in excess of distributions received ( 20,403 ) 45,459 Change in operating assets/liabilities: Other assets 321 3,489 Other liabilities ( 143 ) ( 10,831 ) Net cash provided by (used in) continuing operating activities 6,477 8,157 Net cash provided by (used in) discontinued operating activities — ( 726 ) Net cash provided by (used in) operating activities 6,477 7,431 Cash Flows from Investing Activities Purchase of real estate securities ( 566,731 ) ( 29,599 ) Purchase of residential mortgage loans ( 208,927 ) ( 481,470 ) Origination of commercial loans ( 1,881 ) ( 4,663 ) Purchase of commercial loans ( 1,788 ) ( 6,778 ) Investments in debt and equity of affiliates ( 1,122 ) ( 28,180 ) Proceeds from sales of real estate securities 111,954 2,449,103 Proceeds from sales of residential mortgage loans — 8,679 Proceeds from sales of commercial loans 74,579 — Principal repayments on real estate securities 14,337 97,694 Principal repayments on excess MSRs 223 1,065 Principal repayments on commercial loans 195 — Principal repayments on residential mortgage loans 12,294 22,674 Distributions received in excess of income from investments in debt and equity of affiliates 12,325 19,509 Net settlement of interest rate swaps and other instruments 27,469 ( 73,338 ) Net settlement of TBAs — 4,218 Cash flows provided by (used in) other investing activities 619 ( 2,638 ) Net cash provided by (used in) investing activities ( 526,454 ) 1,976,276 Cash Flows from Financing Activities Net proceeds from issuance of common stock 10,033 — Borrowings under financing arrangements 2,852,955 11,470,090 Repayments of financing arrangements ( 2,284,802 ) ( 13,391,832 ) Repayments of secured debt ( 10,000 ) — Principal repayments on securitized debt ( 12,777 ) ( 5,707 ) Net collateral received from (paid to) repurchase counterparty — ( 27,444 ) Dividends paid on common stock ( 1,243 ) ( 14,734 ) Dividends paid on preferred stock ( 4,961 ) ( 5,667 ) Net cash provided by continuing financing activities 549,205 ( 1,975,294 ) 6 Three Months Ended March 31, 2021 March 31, 2020 Net change in cash and cash equivalents and restricted cash 29,228 8,413 Cash and cash equivalents and restricted cash, Beginning of Period 62,318 125,369 Effect of exchange rate changes on cash 9 ( 83 ) Cash and cash equivalents and restricted cash, End of Period $ 91,555 $ 133,699 Supplemental disclosure of cash flow information: Cash paid for interest on financing arrangements $ 3,979 $ 27,253 Cash paid for excise and income taxes $ — $ 1,010 Supplemental disclosure of non-cash financing and investing activities: Receivable on unsettled trades $ — $ 12,007 Common stock dividends declared but not paid $ 2,791 $ — Exchange Offer (Note 11) $ 12,181 $ — Transfer of real estate securities in satisfaction of repurchase agreements $ — $ 340,267 Change in repurchase agreements from transfer of real estate securities $ — $ 339,898 Decrease in securitized debt $ — $ 1,193 Transfer from residential mortgage loans to other assets $ 571 $ 206 Transfer from investments in debt and equity of affiliates to CMBS $ — $ 320 The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows: March 31, 2021 March 31, 2020 Cash and cash equivalents $ 51,637 $ 92,299 Restricted cash 39,918 41,400 Total cash and cash equivalents and restricted cash shown in the consolidated statements of cash flows $ 91,555 $ 133,699 The accompanying notes are an integral part of these unaudited consolidated financial statements. 7 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 1. Organization AG Mortgage Investment Trust, Inc. (the "Company") was incorporated in the state of Maryland on March 1, 2011. The Company is a hybrid mortgage REIT that opportunistically invests in a diversified risk adjusted portfolio of credit investments and agency investments, which contains the asset classes further described below. The Company's investment groups are primarily comprised of the following: Investment Groups Description Credit - Residential Residential mortgage loans • Non-QM Loans are residential mortgage loans that are not deemed "qualified mortgage," or "QM," loans under the rules of the Consumer Finance Protection Bureau. • Performing, re-performing, and non-performing loans are residential mortgage loans collateralized by a first lien mortgage on residential mortgaged property. Non-Agency Residential Mortgage-Backed Securities ("RMBS") • Non-Agency RMBS represent fixed- and floating-rate RMBS issued by entities other than U.S. government-sponsored entity ("GSE") or agency of the U.S. government. The mortgage loan collateral for Non-Agency RMBS consists of residential mortgage loans that do not generally conform to underwriting guidelines issued by a GSE or agency of the U.S. government. Credit - Commercial Commercial Mortgage-Backed Securities ("CMBS") • CMBS represent investments of fixed- and floating-rate CMBS secured by, or evidencing an ownership interest in, a single commercial mortgage loan or a pool of commercial mortgage loans. Single-Asset/Single-Borrower securities are CMBS which securitize a single loan that is backed by a single asset (usually a large commercial property) or by a pool of cross collateralized mortgage obligations to a single borrower or related borrowers. Conduit CMBS are CMBS that are collateralized by commercial mortgage loans to multiple borrowers. Commercial Loans • Commercial loans are collateralized by an interest in commercial real estate and represent a contractual right to receive money on demand or on fixed or determinable dates. Agency RMBS • Agency RMBS represent interests in pools of residential mortgage loans guaranteed by a GSE such as Fannie Mae or Freddie Mac, or any agency of the U.S. Government such as Ginnie Mae. Excess MSRs • Excess MSRs represent the excess servicing spread related to mortgage servicing rights, whose underlying collateral is securitized in a trust held by a GSE or agency of the U.S. government ("Agency Excess MSR"). The Company refers to its residential and commercial mortgage loans as "mortgage loans" or "loans." The Company refers to Agency RMBS, Non-Agency RMBS, and CMBS asset types as "real estate securities" or "securities." Credit investments include loans, Non-Agency RMBS, and CMBS and agency investments include Agency RMBS and Agency Excess MSRs. The Company conducts its business through one reportable segment, Securities and Loans, which reflects how the Company manages its business and analyzes and reports its results of operations. On November 15, 2019, the Company sold its portfolio of single-family rental properties ("SFR portfolio") to a third party, which was previously reported as a separate operating segment. The sale of the Company's SFR portfolio met the criteria for discontinued operations. The Company is externally managed by AG REIT Management, LLC, a Delaware limited liability company (the "Manager"), a wholly-owned subsidiary of Angelo, Gordon & Co., L.P. ("Angelo Gordon"), a privately-held, SEC-registered investment adviser, pursuant to a management agreement. The Manager has delegated to Angelo Gordon the overall responsibility of its day-to-day duties and obligations arising under the management agreement. 8 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 The Company conducts its operations to qualify and be taxed as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. COVID-19 Impact The novel coronavirus ("COVID-19") pandemic has caused, and will continue to cause, a significant disruption in the U.S. and world economies. To slow the spread of COVID-19, many countries, including the U.S., have implemented social distancing measures, which have substantially prohibited larger gatherings, including at sporting events, religious services and schools. Further, many regions, including the majority of U.S. states, implemented additional measures, such as shelter-in-place and stay-at-home orders. Many businesses moved to a remote working environment, temporarily suspended operations, laid off a significant percentage of their workforce and/or shut down completely. Moreover, the COVID-19 pandemic and certain of the actions taken to reduce its spread have resulted in lost business revenue, rapid and significant increases in unemployment, changes in consumer behavior and significant reductions in liquidity and the fair value of many assets, including those in which the Company invests. Although many of the government restrictions were relaxed over the summer and early fall of 2020, these conditions, or some level thereof, are expected to continue over the near term and may continue throughout the remainder of 2021, depending on state and local outbreaks and the pace and effectiveness of COVID-19 vaccinations. Beginning in mid-March 2020, the global pandemic associated with COVID-19 and 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 mortgage-backed securities ("MBS") markets. The illiquidity was exacerbated by inadequate demand for MBS among primary dealers due to balance sheet constraints. Refer to Note 2 "Financing arrangements" for further details related to the impact to the Company as a result of these economic conditions. The full impact of COVID-19 on the mortgage REIT industry, the credit markets and consequently on the Company’s financial condition and results of operations for future periods is uncertain and cannot be predicted at the current time as it depends on several factors beyond the control of the Company including, but not limited to (i) the uncertainty around the severity, duration and spread of the outbreak, (ii) the effectiveness of the United States and global public health response, (iii) the pandemic’s impact on the U.S. and global economies, (iv) the timing, scope and effectiveness of additional governmental responses to the pandemic, including the availability of a treatment or the administration of vaccines, (v) the impact of government interventions, and (vi) the negative impact on the Company's borrowers, asset values and cost of capital. 2. Summary of significant accounting policies The accompanying unaudited consolidated financial statements and related notes have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows have been included for the interim period and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. Cash and cash equivalents Cash is comprised of cash on deposit with financial institutions. The Company classifies highly liquid investments with original maturities of three months or less from the date of purchase as cash equivalents. Cash equivalents includes cash invested in money market funds. Cash and cash equivalents are carried at cost, which approximates fair value. The Company places its cash with high credit quality institutions to minimize credit risk exposure. Cash pledged to the Company as collateral is unrestricted in use and, accordingly, is included as a component of "Cash and cash equivalents" on the consolidated balance sheets. Any cash held by the Company as collateral is included in the "Other liabilities" line item on the consolidated balance sheets and in cash flows from financing activities on the consolidated statement of cash flows. Any cash due to the Company in the form of principal payments is included in the "Other assets" line item on the consolidated balance sheets and in cash flows from operating activities on the consolidated statement of cash flows. 9 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 Restricted cash Restricted cash includes cash pledged as collateral for clearing and executing trades, derivatives, and financing arrangements, as well as restricted cash deposited into accounts held at certain consolidated trusts. Restricted cash is not available to the Company for general corporate purposes. Restricted cash may be returned to the Company when the related collateral requirements are exceeded or at the maturity of the derivative or financing arrangement. Restricted cash is carried at cost, which approximates fair value. Use of estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates. Earnings/(Loss) per share In accordance with the provisions of Accounting Standards Codification ("ASC") 260, "Earnings per Share," the Company calculates basic income/(loss) per share by dividing net income/(loss) available to common stockholders for the period by weighted average shares of the Company’s common stock outstanding for that period. Diluted income per share takes into account the effect of dilutive instruments, such as stock options, warrants, unvested restricted stock and unvested restricted stock units but uses the average share price for the period in determining the number of incremental shares that are to be added to the weighted average number of shares outstanding. In periods in which the Company records a loss, potentially dilutive securities are excluded from the diluted loss per share calculation, as their effect on loss per share is anti-dilutive. Valuation of financial instruments The fair value of the financial instruments that the Company records at fair value is determined by the Manager, subject to oversight of the Company’s Board of Directors, and in accordance with ASC 820, "Fair Value Measurements and Disclosures." When possible, the Company determines fair value using third-party data sources. ASC 820 establishes a hierarchy that prioritizes the inputs to valuation techniques giving the highest priority to readily available unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements) when market prices are not readily available or reliable. The three levels of the hierarchy under ASC 820 are described below: • Level 1 – Quoted prices in active markets for identical assets or liabilities. • Level 2 – Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others. • Level 3 – Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Company’s assumptions about the factors that market participants would use in pricing an asset or liability, and would be based on the best information available. Transfers between levels are assumed to occur at the beginning of the reporting period. At the beginning of the first quarter of 2020, the Manager completed a data collection and analysis effort, which supported an update to its Leveling policy under ASC 820. Among the data collected and analyzed were: (i) reports from TRACE, FINRA’s Trade Reporting and Compliance Engine, that reports over-the-counter secondary market transactions in eligible fixed income securities, (ii) information from pricing vendors regarding valuation approaches and observability of market color, (iii) data points collected from discussions with industry sources, including peer firms and audit firms, and (iv) its own data from back testing vendor pricing against its own trades. After analyzing this data, the Manager concluded that there was sufficient observability of market inputs used by its third-party pricing services for certain RMBS and CMBS positions previously categorized as Level 3 to meet the criteria for a Level 2 classification. Accounting for loans Investments in loans are recorded in accordance with ASC 310-10, "Receivables." The Company has chosen to make a fair 10 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 value election pursuant to ASC 825 for its loan portfolio. Electing the fair value option allows the Company to record changes in fair value in the consolidated statement of operations, which, in management's view, more appropriately reflects the results of operations for a particular reporting period as all loan activities will be recorded in a similar manner. As such, loans are recorded at fair value on the consolidated balance sheets and any periodic change in fair value is recorded in current period earnings on the consolidated statement of operations as a component of "Unrealized gain/(loss) on real estate securities and loans, net." The Company recognizes certain upfront costs and fees relating to loans for which the fair value option has been elected in current period earnings as incurred and does not defer those costs, which is in accordance with ASC 825-10-25. Purchases and sales of loans are recorded on the settlement date, concurrent with the completion of due diligence and the removal of any contingencies. Prior to the settlement date, the Company will include commitments to purchase loans within the Commitments and Contingencies footnote to the financial statements. The Company amortizes or accretes any premium or discount over the life of the loans utilizing the effective interest method. On at least a quarterly basis, the Company evaluates the collectability of both interest and principal on its loans to determine whether they are impaired. A loan or pool of loans is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. Income recognition is suspended for loans at the earlier of the date at which payments become 90-days past due or when, in the opinion of the Manager, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired loan or pool of loans is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired loan is not in doubt, contractual interest is recorded as interest income when received, under the cash basis method until an accrual is resumed when the loan becomes contractually current and performance is demonstrated to be resumed. A loan is written off when it is no longer realizable and/or legally discharged. Residential Mortgage Loans At purchase, the Company may aggregate its residential mortgage loans into pools based on common risk characteristics. Once a pool of loans is assembled, its composition is maintained. When the Company purchases mortgage loans with evidence of credit deterioration since origination and it determines that it is probable it will not collect all contractual cash flows on those loans, it will apply the guidance found in ASC 310-30. Mortgage loans that are delinquent 60 or more days are considered non-performing. The Company updates its estimate of the cash flows expected to be collected on at least a quarterly basis for loans accounted for under ASC 310-30. In estimating these cash flows, there are a number of assumptions that will be subject to uncertainties and contingencies including both the rate and timing of principal and interest receipts, and assumptions of prepayments, repurchases, defaults and liquidations. If based on the most current information and events it is probable that there is a significant increase in cash flows previously expected to be collected or if actual cash flows are significantly greater than cash flows previously expected, the Company will recognize these changes prospectively through an adjustment of the loan’s yield over its remaining life. The Company will adjust the amount of accretable yield by reclassification from the nonaccretable difference. The adjustment is accounted for as a change in estimate in conformity with ASC 250, "Accounting Changes and Error Corrections" with the amount of periodic accretion adjusted over the remaining life of the loan. Commercial Loans Commercial loans are classified as held for sale upon the Company determining that it intends to sell or liquidate the loan in the short-term and certain criteria have been met. Commercial loans meeting all criteria for reclassification are presented separately on the consolidated balance sheets in the "Commercial Loans Held for Sale" line item. Estimated costs incurred to sell a loan are included within the fair value of the loan. Accounting for real estate securities Investments in real estate securities are recorded in accordance with ASC 320-10, "Investments – Debt and Equity Securities," ASC 325-40, "Beneficial Interests in Securitized Financial Assets," or ASC 310-30, "Loans and Debt Securities Acquired with Deteriorated Credit Quality." The Company has chosen to make a fair value election pursuant to ASC 825, "Financial Instruments" for its real estate securities portfolio. Real estate securities are recorded at fair value on the consolidated balance sheets and the periodic change in fair value is recorded in current period earnings on the consolidated statement of operations as a component of "Unrealized gain/(loss) on real estate securities and loans, net." Purchases and sales of real estate securities are recorded on the trade date. 11 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 These investments meet the requirements to be classified as available for sale under ASC 320-10-25 which requires the securities to be carried at fair value on the consolidated balance sheets with changes in fair value recorded to other comprehensive income, a component of stockholders’ equity. Electing the fair value option allows the Company to record changes in fair value in the consolidated statement of operations, which, in management’s view, more appropriately reflects the results of operations for a particular reporting period as all securities activities will be recorded in a similar manner. When the Company purchases securities with evidence of credit deterioration since origination, it will analyze the securities to determine if the guidance found in ASC 310-30 is applicable. In June 2016, FASB issued ASU 2016-13, "Financial Instruments – Credit Losses" ("ASU 2016-13"). This guidance significantly changed how entities measure credit losses for most financial assets, including loans, that are not measured at fair value with changes in fair value recognized through net income. The Company adopted the guidance as of January 1, 2020. The guidance specifically excludes available-for-sale securities and loans measured at fair value, with changes in fair value recognized through net income. Accordingly, the impact of the guidance on accounting for the Company's debt securities and loans is limited to recognition of effective yield which was historically impacted by other than temporary impairment recorded under previous standards. As the guidance eliminates the accounting for other than temporary impairment, this guidance has impacted the Company's unrealized and realized gain/(loss) amounts. As the Company measures its debt securities and loans at fair value with any changes recognized through net income and updates its estimate of the cash flows expected to be collected on these asset classes on at least a quarterly basis recognizing changes in cash flows in interest income prospectively through an adjustment of an asset’s yield over its remaining life, the adoption of the standard did not have a material impact to the Company’s consolidated financial statements. Realized gains or losses on sales of securities, loans and derivatives are included in the "Net realized gain/(loss)" line item on the consolidated statement of operations. The cost of positions sold is calculated using a first in, first out ("FIFO") basis. Realized gains and losses are recorded in earnings at the time of disposition. Investments in debt and equity of affiliates The Company’s unconsolidated ownership interests in affiliates are accounted for using the equity method. A majority of the Company’s investments held through affiliated entities are comprised of real estate securities, loans and its interest in AG Arc LLC. These types of investments may also be held directly by the Company. Certain entities have chosen to make a fair value election on their financial instruments and certain financing arrangements pursuant to ASC 825; as such, the Company will treat these financial instruments and financing arrangements consistently with this election. Arc Home On December 9, 2015, the Company, alongside private funds managed by Angelo Gordon, through AG Arc LLC, one of the Company’s indirect subsidiaries ("AG Arc"), formed Arc Home LLC ("Arc Home"). Arc Home originates conforming, Government, Jumbo, Non-QM, and other non-conforming residential mortgage loans and retains the mortgage servicing rights associated with the loans it originates. Arc Home is led by an external management team. The Company has chosen to make a fair value election with respect to its investment in AG Arc pursuant to ASC 825. The Company elected to treat its investment in AG Arc as a taxable REIT subsidiary. As a result, income or losses recognized by the Company from its investment in AG Arc are recorded in "Equity in earnings/(loss) from affiliates" line item on the Company's consolidated statement of operations net of income taxes. From time to time, the Company acquires newly originated Non-QM Loans from Arc Home with the intent to securitize the assets and obtain non-recourse financing. In connection with the sale of loans from Arc Home to the Company, gains or losses recorded by Arc Home are consolidated into AG Arc. In accordance with ASC 323-10, for loans acquired from Arc Home that remain on the Company's consolidated balance sheet at period end, the Company eliminates any profits or losses typically recognized through the "Equity in earnings/(loss) from affiliates" line item on the Company's consolidated statement of operations and adjusts the cost basis of the underlying loans accordingly. For the three months ended March 31, 2021, the Company eliminated $ 0.5 million of intra-entity profits recognized by Arc Home and also decreased the cost basis of the underlying loans by the same amount in connection with loan sales to the Company. MATH On August 29, 2017, the Company, alongside private funds managed by Angelo Gordon, formed Mortgage Acquisition Holding I LLC ("MATH") to conduct a residential mortgage investment strategy. MATH in turn sponsored the formation of an 12 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 entity called Mortgage Acquisition Trust I LLC ("MATT") to purchase predominantly Non-QM Loans. Non-QM Loans are not eligible for delivery to Fannie Mae, Freddie Mac, or Ginnie Mae. MATT made an election to be treated as a real estate investment trust beginning with the 2018 tax year. LOTS On May 15, 2019 and November 14, 2019, the Company, alongside private funds managed by Angelo Gordon, formed LOT SP I LLC and LOT SP II LLC, respectively, (collectively, "LOTS"). LOTS were formed to originate first mortgage loans to third-party land developers and home builders for the acquisition and horizontal development of land ("Land Related Financing"). Investments in debt and equity of affiliates The below tables reconcile the fair value of investments to the "Investments in debt and equity of affiliates" line item on the Company's consolidated balance sheets (in thousands). March 31, 2021 December 31, 2020 Assets Liabilities Equity Assets Liabilities Equity Non-QM Loans (1) $ 149,039 $ ( 100,762 ) $ 48,277 $ 153,200 $ ( 111,135 ) $ 42,065 Land Related Financing 22,718 — 22,718 22,824 — 22,824 Other (2) 46,001 ( 13,236 ) 32,765 41,940 ( 5,588 ) 36,352 Real Estate Securities and Loans, at fair value $ 217,758 $ ( 113,998 ) $ 103,760 $ 217,964 $ ( 116,723 ) $ 101,241 AG Arc, at fair value 52,138 — 52,138 45,341 — 45,341 Cash and Other assets/(liabilities) 8,260 ( 3,835 ) 4,425 5,279 ( 1,194 ) 4,085 Investments in debt and equity of affiliates $ 278,156 $ ( 117,833 ) $ 160,323 $ 268,584 $ ( 117,917 ) $ 150,667 (1) As of March 31, 2021 and December 31, 2020, Non-QM Loans excluded loans with an unpaid principal balance of $ 14.2 million and $ 17.3 million, respectively, whereby an affiliate of MATT has the right, but not the obligation, to repurchase loans from a trust that are 90 days or more delinquent at its discretion. These loans, which are eligible to be repurchased, would be recorded on the balance sheet of MATT, an unconsolidated equity method investee of the Company, with a corresponding and offsetting liability. (2) Certain loans held in securitized form are presented net of non-recourse securitized debt. The below table reconciles the net income/(loss) to the "Equity in earnings/(loss) from affiliates" line item on the Company's consolidated statements of operations (in thousands). Three Months Ended March 31, 2021 March 31, 2020 Non-QM Loans $ 14,646 $ ( 26,729 ) AG Arc (1) 6,340 ( 10,026 ) Land Related Financing 710 664 Other 4,640 ( 8,101 ) Equity in earnings/(loss) from affiliates $ 26,336 $ ( 44,192 ) (1) The earnings at AG Arc during the three months ended March 31, 2021 were primarily the result of $ 4.2 million of net income related to Arc Home's lending and servicing operations and $ 1.5 million related to changes in the fair value of the MSR portfolio held by Arc Home. Investment consolidation and transfers of financial assets For each investment made, the Company evaluates the underlying entity that issued the securities acquired or to which the Company makes a loan to determine the appropriate accounting. In performing the analysis, the Company refers to guidance in ASC 810-10, "Consolidation." In situations where the Company is the transferor of financial assets, the Company refers to the guidance in ASC 860-10 "Transfers and Servicing." In variable interest entities ("VIEs"), an entity is subject to consolidation under ASC 810-10 if the equity investors (i) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support, (ii) are unable to direct the entity’s activities or (iii) are not exposed to the entity’s losses or entitled to its residual returns. VIEs within the scope of ASC 810-10 are required to be consolidated by their primary beneficiary. The primary beneficiary of a VIE is 13 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 determined to be the party that has both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. This determination can sometimes involve complex and subjective analyses. Further, ASC 810-10 also requires ongoing assessments of whether an enterprise is the primary beneficiary of a VIE. In accordance with ASC 810-10, all transferees, including variable interest entities, must be evaluated for consolidation. If the Company determines that consolidation is not required, it will then assess whether the transfer of the underlying assets would qualify as a sale, should be accounted for as secured financings under GAAP, or should be accounted for as an equity method investment, depending on the circumstances. See Note 4 for more detail. A Special Purpose Entity ("SPE") is an entity designed to fulfill a specific limited need of the company that organized it. SPEs are often used to facilitate transactions that involve securitizing financial assets or resecuritizing previously securitized financial assets. The objective of such transactions may include obtaining non-recourse financing, obtaining liquidity or refinancing the underlying securitized financial assets on improved terms. Securitization involves transferring assets to an SPE to convert all or a portion of those assets into cash before they would have been realized in the normal course of business through the SPE’s issuance of debt or equity instruments. Investors in an SPE usually have recourse only to the assets in the SPE and depending on the overall structure of the transaction, may benefit from various forms of credit enhancement, such as over-collateralization in the form of excess assets in the SPE, priority with respect to receipt of cash flows relative to holders of other debt or equity instruments issued by the SPE, or a line of credit or other form of liquidity agreement that is designed with the objective of ensuring that investors receive principal and/or interest cash flow on the investment in accordance with the terms of their investment agreement. The Company entered into securitization transactions of certain of its re-performing and non-performing residential mortgage loans, which resulted in the Company consolidating the respective VIEs that were created to facilitate these transactions and to which the underlying assets in connection with these securitizations were transferred (the "August 2019 VIE" and the "September 2020 VIE"). Based on the evaluations of each VIE, the Company concluded that the VIEs should be consolidated and, as a result, transferred assets of these VIEs were determined to be secured borrowings. Upon consolidation, the Company elected the fair value option pursuant to ASC 825 for the assets and liabilities of the August 2019 VIE and September 2020 VIE. Electing the fair value option allows the Company to record changes in fair value in the consolidated statement of operations, which, in management's view, more appropriately reflects the results of operations for a particular reporting period as all activities will be recorded in a similar manner. The Company applied the guidance under ASU 2014-13, "Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity," whereby the Company determines whether the fair value of the assets or liabilities of the August 2019 VIE and September 2020 VIE are more observable as a basis for measuring the less observable financial instruments. The Company has determined that the fair value of the liabilities of the August 2019 VIE and September 2020 VIE are more observable since the prices for these liabilities are more easily determined as similar instruments trade more frequently on a relative basis than the individual assets of the VIEs. See Note 4 for more detail regarding these VIEs. Refer to Note 5 related to the Company's determination of fair value for the assets and liabilities included within these VIEs. From time to time the Company purchases residual positions where it consolidates the securitization and the positions are recorded on the Company's books as residential mortgage loans. There may be limited data available regarding the underlying collateral of such securitizations. The Company may periodically enter into transactions in which it transfers assets to a third party. Upon a transfer of financial assets, the Company will sometimes retain or acquire senior or subordinated interests in the related assets. Pursuant to ASC 860-10, a determination must be made as to whether a transferor has surrendered control over transferred financial assets. That determination must consider the transferor’s continuing involvement in the transferred financial asset, including all arrangements or agreements made contemporaneously with, or in contemplation of, the transfer, even if they were not entered into at the time of the transfer. The financial components approach under ASC 860-10 limits the circumstances in which a financial asset, or portion of a financial asset, should be derecognized when the transferor has not transferred the entire original financial asset to an entity that is not consolidated with the transferor in the financial statements being presented and/or when the transferor has continuing involvement with the transferred financial asset. It defines the term "participating interest" to establish specific conditions for reporting a transfer of a portion of a financial asset as a sale. Under ASC 860-10, after a transfer of financial assets that meets the criteria for treatment as a sale—legal isolation, ability of transferee to pledge or exchange the transferred assets without constraint and transferred control—an entity recognizes the financial and servicing assets it acquired or retained and the liabilities it has incurred, derecognizes financial assets it has sold and derecognizes liabilities when extinguished. The transferor would then determine the gain or loss on sale of financial assets by allocating the carrying value of the underlying mortgage between securities or loans sold and the interests retained based on 14 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 their fair value. The gain or loss on sale is the difference between the cash proceeds from the sale and the amount allocated to the securities or loans sold. When a transfer of financial assets does not qualify for sale accounting, ASC 860-10 requires the transfer to be accounted for as a secured borrowing with a pledge of collateral. From time to time, the Company may securitize mortgage loans it holds if such financing is available. These transactions will be recorded in accordance with ASC 860-10 and will be accounted for as either a "sale" and the loans will be removed from the consolidated balance sheets or as a "financing" and will be classified as "residential mortgage loans" on the consolidated balance sheets, depending upon the structure of the securitization transaction. ASC 860-10 is a standard that may require the Company to exercise significant judgment in determining whether a transaction should be recorded as a "sale" or a "financing." Interest income recognition Interest income on the Company’s real estate securities portfolio and loan portfolio is accrued based on the actual coupon rate and the outstanding principal balance of such securities or loans. The Company has elected to record interest in accordance with ASC 835-30-35-2, "Imputation of Interest," using the effective interest method for all securities and loans accounted for under the fair value option in accordance with ASC 825, "Financial Instruments". As such, premiums and discounts are amortized or accreted into interest income over the lives of the securities or loans in accordance with ASC 310-20, "Nonrefundable Fees and Other Costs," ASC 320-10 or ASC 325-40, as applicable. Total interest income is recorded in the "Interest income" line item on the consolidated statement of operations. For Agency RMBS, exclusive of interest-only securities, prepayments of the underlying collateral are estimated on a quarterly basis, which directly affect the speed at which the Company amortizes premiums on its securities. If actual and anticipated cash flows differ from previous estimates, the Company records an adjustment in the current period to the amortization of premiums for the impact of the cumulative change in the effective yield retrospectively through the reporting date. Similarly, the Company also reassesses the cash flows on at least a quarterly basis for securities and loans, including Non-Agency RMBS, CMBS, interest-only securities, Non-QM Loans, and Excess MSRs. In estimating these cash flows, there are a number of assumptions made that are uncertain and subject to judgments and assumptions based on subjective and objective factors and contingencies. These include the rate and timing of principal and interest receipts (including assumptions of prepayments, repurchases, defaults and liquidations), the pass-through or coupon rate and interest rate fluctuations. In addition, interest payment shortfalls due to delinquencies on the underlying mortgage loans have to be estimated. Differences between previously estimated cash flows and current actual and anticipated cash flows are recognized prospectively through an adjustment of the yield over the remaining life of the security based on the current amortized cost of the investment. For security and loan investments purchased with evidence of deterioration of credit quality for which it is probable, at acquisition, that the Company will be unable to collect all contractually required payments receivable, the Company will apply the provisions of ASC 310-30. For purposes of income recognition, the Company aggregates loans that have common risk characteristics into pools and uses a composite interest rate and expectation of cash flows expected to be collected for the pool. ASC 310-30 addresses accounting for differences between contractual cash flows and cash flows expected to be collected from an investor’s initial investment in loans or debt securities (loans) acquired in a transfer if those differences are attributable, at least in part, to credit quality. ASC 310-30 limits the yield that may be accreted (accretable yield) to the excess of the investor’s estimate of undiscounted expected principal, interest and other cash flows (cash flows expected at acquisition to be collected) over the investor’s initial investment in the loan. ASC 310-30 requires that the excess of contractual cash flows over cash flows expected to be collected (nonaccretable difference) not be recognized as an adjustment of yield, loss accrual or valuation allowance. Subsequent changes in cash flows expected to be collected generally should be recognized prospectively through an adjustment of the loan’s yield over its remaining life. Financing arrangements The Company finances the acquisition of certain assets within its portfolio through the use of financing arrangements. Financing arrangements include repurchase agreements and revolving facilities. Repurchase agreements and revolving facilities are treated as collateralized financing transactions and carried at their contractual amounts, including accrued interest, as specified in the respective agreements. The carrying amount of the Company’s repurchase agreements and revolving facilities approximates fair value. The Company pledges certain securities, loans or properties as collateral under financing arrangements with financial institutions, the terms and conditions of which are negotiated on a transaction-by-transaction basis. The amounts available to be 15 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 borrowed under repurchase agreements and revolving facilities are dependent upon the fair value of the securities or loans pledged as collateral, which can fluctuate with changes in interest rates, type of security and liquidity conditions within the banking, mortgage finance and real estate industries. If the fair value of pledged assets declines due to changes in market conditions, lenders typically would require the Company to post additional securities as collateral, pay down borrowings or establish cash margin accounts with the counterparties in order to re-establish the agreed-upon collateral requirements, referred to as margin calls. The fair value of financial instruments pledged as collateral on the Company’s financing arrangements represents the Company’s fair value of such instruments which may differ from the fair value assigned to the collateral by its counterparties. The Company maintains a level of liquidity in order to meet these obligations. If the fair value of pledged assets increases due to changes in market conditions, counterparties may be required to return collateral to us in the form of securities or cash or post additional collateral to us. Financings pursuant to repurchase agreements and revolving facilities are generally recourse to the Company. As of March 31, 2021 and December 31, 2020, the Company had met all margin call requirements. Forbearance and Reinstatement Agreements On March 20, 2020, the Company notified its financing counterparties that it did not expect to be in a position to fund the anticipated volume of future margin calls under its financing arrangements in the near term as a result of market disruptions created by the COVID-19 pandemic. Subsequent to March 23, 2020, the Company received notifications of alleged events of default and deficiency notices from several of its financing counterparties. Subject to the terms of the applicable financing arrangement, if the Company had failed to deliver additional collateral or otherwise meet margin calls when due, the financing counterparties may have been able to demand immediate payment by the Company of the aggregate outstanding financing obligations owed to such counterparties, and if such financing obligations were not paid, may have been permitted to sell the financed assets and apply the proceeds to the Company's financing obligations and/or take ownership of the assets securing the Company's financing obligations. During this period of market upheaval, the Company engaged in discussions with its financing counterparties with regard to entering into forbearance agreements pursuant to which each counterparty would agree to forbear from exercising its rights and remedies with respect to an event of default under the applicable financing arrangement for an agreed-upon period. On April 10, 2020, the Company entered into a forbearance agreement for an initial 15 day period, on April 27, 2020, a second forbearance agreement for an extended period ending on June 1, 2020, and a third forbearance agreement on June 1, 2020 for an additional period ending June 15, 2020 (collectively, the "Forbearance Agreement") with certain of its financing counterparties (the "Participating Counterparties"). Pursuant to the terms of the Forbearance Agreement, the Participating Counterparties agreed to forbear from exercising any of their rights and remedies in respect of events of default and any and all other defaults under the applicable financing arrangement with the Company for the duration of the forbearance period specified in the Forbearance Agreement (the "Forbearance Period"). On June 10, 2020, the Company and the Participating Counterparties entered into a Reinstatement Agreement, pursuant to which the parties agreed to terminate the Forbearance Agreement and each Participating Counterparty agreed to permanently waive all existing and prior events of default under its financing agreements with the Company (each, a “Bilateral Agreement”) and to reinstate each Bilateral Agreement, as it may be amended by agreement between the Participating Counterparty and the Company. As a result of the termination of the Forbearance Agreement and entry into the Reinstatement Agreement, default interest on the Company’s outstanding borrowings under each Bilateral Agreements has ceased to accrue as of June 10, 2020 and the interest rate was the non-default rate of interest or pricing rate, as set forth in the applicable Bilateral Agreements, all cash margin has been applied to outstanding balances owed by the Company, and the DTC repo tracker coding for each Bilateral Agreement has been reinstated, thereby allowing principal and interest payments on the underlying collateral to flow to and be used by the Company, just as it was before the prior forbearance agreements were put in place. In addition, pursuant to the terms of the Reinstatement Agreement, the security interests granted to Participating Counterparties as additional collateral under the various forbearance agreements have been terminated and released. The Company 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. Additionally, the Reinstatement Agreement provided a set of financial covenants that override and replace the financial covenants in each Bilateral Agreement and sets forth various reporting requirements from the Company to the Participating Counterparties, releases, certain netting obligations and cross-default provisions. In connection with the negotiation and execution of the Reinstatement Agreement, the Company entered into certain amendments to the Bilateral Agreements with certain of the Participating Counterparties to reflect current market terms. In general, the amendments reflect increased haircuts and higher coupons. On June 10, 2020, the Company also entered a separate reinstatement agreement with JPMorgan Chase Bank (the "JPM Reinstatement Agreement") on substantially the same terms as those set forth in the Reinstatement Agreement. The Reinstatement Agreement and the JPM Reinstatement Agreement collectively cover all of the Company’s existing financing arrangements as of the date of this report. 16 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 Dividends on Preferred Stock Holders of the Company’s Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock are entitled to receive cumulative cash dividends at a rate of 8.25 %, 8.00 % and 8.000 % per annum, respectively, of the $ 25.00 per share liquidation preference for each series. On and after September 17, 2024, dividends on the Series C Preferred Stock will accumulate at a percentage of the $ 25.00 liquidation preference equal to an annual floating rate of the then three-month LIBOR plus a spread of 6.476 % per annum. If the Company’s Board of Directors does not declare a dividend in a given period, an accrual is not recorded on the balance sheet. However, undeclared preferred stock dividends are reflected in earnings per share as discussed in ASC 260-10-45-11. Preferred stock dividends that are not declared accumulate and are added to the liquidation preference as of the scheduled payment date for the respective series of the preferred stock. The undeclared and unpaid dividends on the Company’s preferred stock accrue without interest, and if dividends on the Company's preferred stock are in arrears, the Company cannot pay cash dividends with respect to its common stock. See Note 11 for further detail on the Company’s Preferred Stock. Accounting for derivative financial instruments Derivative contracts The Company enters into derivative contracts as a means of mitigating interest rate risk or foreign currency risk rather than to enhance returns. The Company accounts for derivative financial instruments in accordance with ASC 815-10, "Derivatives and Hedging." ASC 815-10 requires an entity to recognize all derivatives as either assets or liabilities on the balance sheet and to measure those instruments at fair value. Additionally, if or when hedge accounting is elected, the fair value adjustments will affect either other comprehensive income in stockholders’ equity until the hedged item is recognized in earnings or net income depending on whether the derivative instrument is designated and qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity. As of March 31, 2021 and December 31, 2020, the Company did not have any interest rate derivatives designated as hedges. All derivatives have been recorded at fair value in accordance with ASC 820-10, with corresponding changes in value recognized in the consolidated statement of operations. The Company records derivative asset and liability positions on a gross basis with respect to its counterparties. During the period in which the Company unwinds a derivative, it records a realized gain/(loss) in the "Net realized gain/(loss)" line item in the consolidated statement of operations. To-be-announced securities A to-be-announced security ("TBA") is a forward contract for the purchase or sale of Agency RMBS at a predetermined price, face amount, issuer, coupon and stated maturity on an agreed-upon future date. The specific Agency RMBS delivered into or received from the contract upon the settlement date, published each month by the Securities Industry and Financial Markets Association, are not known at the time of the transaction. The Company may also choose, prior to settlement, to move the settlement of these securities out to a later date by entering into an offsetting short or long position (referred to as a pair off), net settling the paired off positions for cash, simultaneously purchasing or selling a similar TBA contract for a later settlement date. This transaction is commonly referred to as a dollar roll. The Agency RMBS purchased or sold for a forward settlement date are typically priced at a discount to Agency RMBS for settlement in the current month. This difference, or discount, is referred to as the price drop. The price drop is the economic equivalent of net interest carry income on the underlying Agency RMBS over the roll period (interest income less implied financing cost) and is commonly referred to as dollar roll income/(loss). Consequently, forward purchases of Agency RMBS and dollar roll transactions represent a form of off-balance sheet financing. Dollar roll income is recognized in the consolidated statement of operations in the line item "Unrealized gain/(loss) on derivative and other instruments, net." Variation margin The Company may exchange cash "variation margin" with the counterparties to its derivative instruments on a daily basis based upon changes in the fair value of such derivative instruments as measured by the Chicago Mercantile Exchange ("CME") and the London Clearing House ("LCH"), the central clearinghouses ("CCPs") through which those derivatives are cleared. In addition, the CCPs require market participants to deposit and maintain an "initial margin" amount which is determined by the CCPs and is generally intended to be set at a level sufficient to protect the CCPs from the maximum estimated single-day price movement in that market participant’s contracts. Receivables recognized for the right to reclaim cash initial margin posted in respect of derivative instruments are included in the "Restricted cash" line item in the consolidated balance sheets. The daily exchange of variation margin associated with a CCP instrument is legally characterized as the daily settlement of the derivative instrument itself, as opposed to a pledge of collateral. 17 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 Accordingly, the Company accounts for the daily receipt or payment of variation margin associated with its centrally cleared derivative instruments as a direct reduction to the carrying value of the derivative asset or liability, respectively. The carrying amount of centrally cleared derivative instruments reflected in the Company’s consolidated balance sheets approximates the unsettled fair value of such instruments. As variation margin is exchanged on a one-day lag, the unsettled fair value of such instruments represents the change in fair value that occurred on the last day of the reporting period. Manager compensation The management agreement provides for payment to the Manager of a management fee as well as a reimbursement of certain expenses incurred by the Manager or its affiliates on behalf of the Company. The management fee and reimbursement are accrued and expensed during the period for which they are earned or for which the expenses are incurred, respectively. The management fee and reimbursement are included in the "Management fee" and "Other operating expenses" line items, respectively, on the consolidated statement of operations. For a more detailed discussion on the fees payable under the management agreement, see Note 10. Income taxes The Company conducts its operations to qualify and be taxed as a REIT. Accordingly, the Company will generally not be subject to federal or state corporate income tax to the extent that the Company makes qualifying distributions to its stockholders, and provided that it satisfies on a continuing basis, through actual investment and operating results, the REIT requirements including certain asset, income, distribution and stock ownership tests. If the Company fails to qualify as a REIT, and does not qualify for certain statutory relief provisions, it will be subject to U.S. federal, state and local income taxes and may be precluded from qualifying as a REIT for the four taxable years following the year in which the Company fails to qualify as a REIT. The dividends paid deduction of a REIT for qualifying dividends to its stockholders is computed using the Company’s taxable income/(loss) as opposed to net income/(loss) reported on the Company’s GAAP financial statements. Taxable income/(loss), generally, will differ from net income/(loss) reported on the financial statements because the determination of taxable income/(loss) is based on tax principles and not financial accounting principles. Cash distributions declared by the Company that do not exceed its current or accumulated earnings and profits will be considered ordinary income to stockholders for income tax purposes unless all or a portion of a distribution is designated by the Company as a capital gain dividend. Distributions in excess of the Company’s current and accumulated earnings and profits will be characterized as return of capital or capital gains. The Company elected to treat certain domestic subsidiaries as taxable REIT subsidiaries ("TRSs") and may elect to treat other subsidiaries as TRSs. In general, a TRS may hold assets and engage in activities that the Company cannot hold or engage in directly and generally may engage in any real estate or non-real estate-related business. A domestic TRS may declare dividends to the Company which will be included in the Company’s taxable income/(loss) which may necessitate a distribution to stockholders. Conversely, if the Company retains earnings at the domestic TRS level, no distribution is required and the Company can increase book equity of the consolidated entity. A domestic TRS is subject to U.S. federal, state and local corporate income taxes. The Company elected to treat one of its foreign subsidiaries as a TRS and, accordingly, taxable income generated by this foreign TRS may not be subject to local income taxation, but generally will be included in the Company’s taxable income on a current basis as Subpart F income, whether or not distributed. The Company’s financial results are generally not expected to reflect provisions for current or deferred income taxes, except for any activities conducted through one or more TRSs that are subject to corporate income taxation. The Company believes that it will operate in a manner that will allow it to qualify for taxation as a REIT. As a result of the Company’s expected REIT qualification, it does not generally expect to pay federal or state corporate income tax. Many of the REIT requirements, however, are highly technical and complex. As a REIT, if the Company fails to distribute in any calendar year (subject to specific timing rules for certain dividends paid in January) at least the sum of (i) 85% of its ordinary income for such year, (ii) 95% of its capital gain net income for such year, and (iii) any undistributed taxable income from the prior year, the Company would be subject to a non-deductible 4% excise tax 18 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 on the excess of such required distribution over the sum of (i) the amounts actually distributed and (ii) the amounts of income retained and on which the Company has paid corporate income tax. The Company evaluates uncertain income tax positions, if any, in accordance with ASC 740, "Income Taxes." The Company classifies interest and penalties, if any, related to unrecognized tax benefits as a component of provision for income taxes. See Note 9 for further details. Deal related performance fees The Company may incur deal related performance fees, payable to Arc Home and third-party operators, on certain of its CMBS, Excess MSRs, and Land Related Financing. The deal related performance fees are based on these investments meeting certain performance hurdles. The fees are accrued and expensed during the period for which they are incurred and are included in the "Other operating expenses" and "Equity in earnings/(loss) from affiliates" line items on the consolidated statement of operations. Offering costs The Company has incurred offering costs in connection with common stock offerings, registration statements, preferred stock offerings and exchanges. Where applicable, the offering costs were paid out of the proceeds of the respective offerings. Offering costs in connection with common stock offerings and costs in connection with registration statements have been accounted for as a reduction of additional paid-in capital. Offering costs in connection with preferred stock offerings have been accounted for as a reduction of their respective gross proceeds. Exchange costs in connection with the Company's preferred stock exchanges have been accounted for as a reduction to the Company's retained earnings. Recent accounting pronouncements In March 2020, FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." This ASU provides temporary optional guidance intended to ease the burden of reference rate reform on financial reporting. This ASU was effective upon its issuance on March 12, 2020 and applies to all entities that have contracts, hedging relationships and other transactions that reference LIBOR and certain other reference rates that are expected to be discontinued. However, it cannot be applied to contract modifications that occur after December 31, 2022. With certain exceptions, this ASU also cannot be applied to hedging relationships entered into or evaluated after that date. The guidance provides optional expedients and exceptions for applying existing guidance to contract modifications, hedging relationships and other transactions that are expected to be affected by reference rate reform and meet certain scope guidance. The Company is currently evaluating the effect this guidance will have on its consolidated financial statements. 19 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 3. Real Estate Securities The following tables detail the Company’s real estate securities portfolio as of March 31, 2021 and December 31, 2020 ($ in thousands). The gross unrealized gains/(losses) stated in the tables below represent inception to date unrealized gains/(losses). March 31, 2021 Gross Unrealized Weighted Average Current Face Premium / (Discount) Amortized Cost Gains Losses Fair Value Coupon (1) Yield Agency RMBS: 30 Year Fixed Rate $ 906,892 $ 37,735 $ 944,627 $ — $ ( 29,204 ) $ 915,423 2.15 % 1.62 % Credit Investments: Residential Investments Prime 6,816 ( 4,629 ) 2,187 390 — 2,577 3.50 % 14.20 % Alt-A/Subprime 16,282 ( 9,379 ) 6,903 4,542 — 11,445 4.25 % 14.16 % Credit Risk Transfer 420 — 420 7 — 427 5.61 % 5.61 % Non-Agency RMBS Interest Only (2) 142,388 ( 142,306 ) 82 242 ( 43 ) 281 0.51 % NM Re/Non-Performing Securities 1,608 ( 167 ) 1,441 200 — 1,641 5.25 % 20.92 % Total Residential Investments: 167,514 ( 156,481 ) 11,033 5,381 ( 43 ) 16,371 1.36 % 14.38 % Commercial Investments Single-Asset/Single-Borrower 35,500 ( 81 ) 35,419 — ( 5,981 ) 29,438 4.07 % 4.45 % Freddie Mac K-Series CMBS 22,327 ( 11,709 ) 10,618 1,662 ( 53 ) 12,227 3.83 % 9.23 % CMBS Interest Only (3) 685,961 ( 681,952 ) 4,009 270 ( 106 ) 4,173 0.10 % 7.02 % Total Commercial Investments: 743,788 ( 693,742 ) 50,046 1,932 ( 6,140 ) 45,838 0.33 % 5.96 % Total Credit Investments: 911,302 ( 850,223 ) 61,079 7,313 ( 6,183 ) 62,209 0.44 % 8.17 % Total $ 1,818,194 $ ( 812,488 ) $ 1,005,706 $ 7,313 $ ( 35,387 ) $ 977,632 1.34 % 2.04 % December 31, 2020 Gross Unrealized Weighted Average Current Face Premium / (Discount) Amortized Cost Gains Losses Fair Value Coupon (1) Yield Agency RMBS: 30 Year Fixed Rate $ 494,307 $ 22,368 $ 516,675 $ 1,794 $ ( 117 ) $ 518,352 2.10 % 1.17 % Credit Investments: Residential Investments Prime 15,093 ( 7,081 ) 8,012 663 ( 10 ) 8,665 3.68 % 8.97 % Alt-A/Subprime 16,287 ( 9,377 ) 6,910 4,586 — 11,496 4.25 % 12.52 % Credit Risk Transfer 13,880 — 13,880 15 ( 587 ) 13,308 4.71 % 4.70 % Non-U.S. RMBS 2,435 706 3,141 51 ( 92 ) 3,100 6.45 % 6.41 % Non-Agency RMBS Interest Only (2) 157,590 ( 157,513 ) 77 207 ( 48 ) 236 0.53 % NM Re/Non-Performing Securities 1,690 ( 238 ) 1,452 149 — 1,601 5.25 % 14.05 % Total Residential Investments: 206,975 ( 173,503 ) 33,472 5,671 ( 737 ) 38,406 2.01 % 8.50 % Commercial Investments Conduit 4,925 ( 1,024 ) 3,901 — ( 606 ) 3,295 4.62 % 11.89 % Single-Asset/Single-Borrower 50,480 ( 1,494 ) 48,986 668 ( 9,464 ) 40,190 4.15 % 4.81 % Freddie Mac K-Series CMBS 22,572 ( 12,062 ) 10,510 47 ( 1,557 ) 9,000 3.83 % 9.00 % CMBS Interest Only (3) 687,077 ( 682,961 ) 4,116 256 ( 69 ) 4,303 0.10 % 6.93 % Total Commercial Investments: 765,054 ( 697,541 ) 67,513 971 ( 11,696 ) 56,788 0.44 % 6.04 % Total Credit Investments: 972,029 ( 871,044 ) 100,985 6,642 ( 12,433 ) 95,194 0.65 % 7.04 % Total $ 1,466,336 $ ( 848,676 ) $ 617,660 $ 8,436 $ ( 12,550 ) $ 613,546 1.18 % 2.08 % (1) Equity residual investments and principal only securities with a zero coupon rate are excluded from this calculation. (2) Non-Agency RMBS Interest Only includes only two investments as of March 31, 2021 and December 31, 2020. The overall impact of the investments' yields on the Company's portfolio is not meaningful. (3) Comprised of Freddie Mac K-Series interest-only bonds. 20 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 The following tables detail the weighted average life of our real estate securities as of March 31, 2021 and December 31, 2020 ($ in thousands): March 31, 2021 Agency RMBS Credit Investments Weighted Average Life (1) Fair Value Amortized Cost Weighted Average Coupon Fair Value Amortized Cost Weighted Average Coupon (2) Less than or equal to 1 year $ — $ — — % $ 30,891 $ 36,803 4.11 % Greater than one year and less than or equal to five years — — — 2,890 2,543 0.16 % Greater than five years and less than or equal to ten years 734,069 755,645 2.18 % 12,178 11,303 0.25 % Greater than ten years 181,354 188,982 2.00 % 16,250 10,430 4.25 % Total $ 915,423 $ 944,627 2.15 % $ 62,209 $ 61,079 0.44 % December 31, 2020 Agency RMBS Credit Investments Weighted Average Life (1) Fair Value Amortized Cost Weighted Average Coupon Fair Value Amortized Cost Weighted Average Coupon (2) Less than or equal to 1 year $ — $ — — % $ 31,166 $ 39,588 1.81 % Greater than one year and less than or equal to five years 181,947 181,209 2.29 % 20,131 21,634 0.33 % Greater than five years and less than or equal to ten years 336,405 335,466 2.00 % 20,310 20,808 0.36 % Greater than ten years — — — 23,587 18,955 4.18 % Total $ 518,352 $ 516,675 2.10 % $ 95,194 $ 100,985 0.65 % (1) This 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. (2) Equity residual investments and principal only securities with a zero coupon rate are excluded from this calculation. For the three months ended March 31, 2021, the Company sold 27 real estate securities for total proceeds of $ 111.8 million, recording realized gains of $ 2.5 million and realized losses of $ 3.0 million. For the three months ended March 31, 2020, the Company sold, directly or as a result of financing counterparty seizures, 229 real estate securities for total proceeds of $ 2.4 billion, with an additional $ 12.0 million of proceeds on six unsettled security sales, recording realized gains of $ 44.7 million and realized losses of $ 131.0 million. 4. Loans Residential mortgage loans For the three months ended March 31, 2021, the Company purchased Non-QM Loans with a gross aggregate unpaid principal balance and a gross acquisition fair value of $ 198.4 million and $ 208.5 million, respectively. A portion of these loans was purchased from Arc Home. See Note 10 for more detail. For the three months ended March 31, 2021, the Company did not sell any residential mortgage loans. For the three months ended March 31, 2020, the Company sold one residential mortgage loan for total proceeds of $ 8.7 million, recording realized losses of $ 3.1 million. 21 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 The table below details information regarding the Company’s residential mortgage loan portfolio as of March 31, 2021 and December 31, 2020 ($ in thousands): Gross Unrealized Weighted Average As of Unpaid Principal Balance Premium (Discount) Amortized Cost Gains Losses Fair Value Coupon Yield Life (Years) (1) Re- and Non-Performing Loans $ 487,455 $ ( 66,657 ) $ 420,798 $ 19,284 $ ( 6,430 ) $ 433,652 3.37 % 5.89 % 7.09 Non-QM Loans 198,371 9,493 207,864 1,446 ( 3 ) 209,307 5.36 % 4.00 % 4.66 Total at March 31, 2021 (2) $ 685,826 $ ( 57,164 ) $ 628,662 $ 20,730 $ ( 6,433 ) $ 642,959 3.96 % 5.27 % 6.39 December 31, 2020 (3) $ 500,980 $ ( 69,007 ) $ 431,973 $ 13,640 $ ( 10,172 ) $ 435,441 3.58 % 5.69 % 6.67 (1) This is based on projected life. Typically, actual maturities are shorter than stated contractual maturities. Maturities are affected by the lives of the underlying mortgages, periodic payments of principal, and prepayments of principal. (2) As of March 31, 2021, the Company’s residential mortgage loan portfolio was comprised of 3,560 loans with original loan balances between $ 5.6 thousand and $ 3.4 million. Additionally, the Company had residential mortgage loans that were in the process of foreclosure with a fair value of $ 33.7 million. (3) As of December 31, 2020, the Company’s residential mortgage loan portfolio was comprised of 3,273 conventional loans with original loan balances between $ 5.6 thousand and $ 3.4 million. Additionally, the Company had residential mortgage loans that were in the process of foreclosure with a fair value of $ 37.1 million. The table below details information regarding the Company’s residential mortgage loans as of March 31, 2021 and December 31, 2020 (in thousands): March 31, 2021 December 31, 2020 Fair Value Unpaid Principal Balance Fair Value Unpaid Principal Balance Non-QM Loans $ 209,307 $ 198,371 $ — $ — Re-Performing 311,074 338,880 312,733 347,359 Non-Performing 114,224 130,067 113,976 134,129 Other (1) 8,354 18,508 8,732 19,492 $ 642,959 $ 685,826 $ 435,441 $ 500,980 (1) Represents residual positions where the Company consolidates a securitization and the positions are recorded in the Company's consolidated balance sheets as residential mortgage loans. There may be limited data available regarding the underlying collateral of such securitizations. The Company’s residential mortgage loan portfolio consisted of mortgage loans on residential real estate located throughout the United States. The following is a summary of the geographic concentration of credit risk within the Company’s residential mortgage loan portfolio as of March 31, 2021 and December 31, 2020, excluding any loans classified as Other above: Geographic Concentration of Credit Risk March 31, 2021 December 31, 2020 Percentage of fair value of mortgage loans secured by properties in the following states representing 5% or more of fair value: California 28 % 17 % Florida 13 % 11 % New York 10 % 10 % New Jersey 5 % 6 % 22 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 The following is a summary of the changes in the accretable portion of discounts for the Company’s re-performing and non-performing loan portfolios for the three months ended March 31, 2021 and March 31, 2020, which is determined by the excess of the Company’s estimate of undiscounted principal, interest, and other cash flows expected to be collected over its initial investment in the mortgage loan (in thousands): Three Months Ended March 31, 2021 March 31, 2020 Beginning Balance $ 170,291 $ 168,877 Additions — 129,017 Accretion ( 6,122 ) ( 8,428 ) Reclassifications from/(to) non-accretable difference 9,881 ( 26,012 ) Disposals 153 ( 343 ) Ending Balance $ 174,203 $ 263,111 Variable interest entities The following table details certain information related to the assets and liabilities of the August 2019 VIE and September 2020 VIE as of March 31, 2021 and December 31, 2020 (in thousands): March 31, 2021 December 31, 2020 Assets Residential mortgage loans, at fair value $ 425,158 $ 426,604 Restricted cash 2,106 2,110 Other assets 2,730 3,705 Total assets $ 429,994 $ 432,419 Liabilities Financing arrangements $ 28,004 $ 25,590 Securitized debt, at fair value 344,429 355,159 Other liabilities 510 519 Total liabilities $ 372,943 $ 381,268 The following table details additional information regarding residential mortgage loans and securitized debt related to the August 2019 VIE and September 2020 VIE as of March 31, 2021 and December 31, 2020 ($ in thousands): Weighted Average As of: Current Unpaid Principal Balance Fair Value Coupon Yield Life (Years) (1) March 31, 2021 August 2019 VIE Residential mortgage loans $ 232,384 $ 219,806 3.56 % 5.49 % 7.33 Securitized debt 191,790 191,946 2.98 % 3.02 % 5.13 September 2020 VIE Residential mortgage loans $ 236,422 $ 205,352 4.18 % 4.93 % 5.99 Securitized debt 152,063 152,483 2.98 % 2.98 % 1.33 December 31, 2020 August 2019 VIE Residential mortgage loans $ 238,487 $ 222,282 3.79 % 5.44 % 6.86 Securitized debt 197,955 196,338 2.97 % 3.01 % 5.20 September 2020 VIE Residential mortgage loans $ 242,859 $ 204,322 3.37 % 5.80 % 6.70 Securitized debt 158,676 158,821 2.98 % 2.98 % 2.17 (1) This 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. 23 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 The holders of the securitized debt have no recourse to the general credit of the Company. The Company has no obligation to provide any other explicit or implicit support to the August 2019 VIE and September 2020 VIE. Commercial loans For the three months ended March 31, 2021, the Company sold two commercial loans for total proceeds of $ 74.3 million, recording realized losses of $ 2.9 million. For the three months ended March 31, 2020, the Company did not sell any commercial loans. During the fourth quarter of 2020, the Company and the borrower of Loan L entered into a modification agreement which, among other things, required the borrower to pay previously deferred interest in full, deferred interest for the 12-month period following the modification, and required funding of capital reserves by the borrower. The loan was placed on non-accrual status upon modification and was on non-accrual status as of March 31, 2021 and December 31, 2020. As a result of the modification, the loan is classified as a troubled debt restructuring under GAAP. The following tables present detail on the Company’s commercial loan portfolio as of March 31, 2021 and December 31, 2020 ($ in thousands). The gross unrealized gains/(losses) columns in the tables below represent inception to date unrealized gains/(losses). March 31, 2021 Weighted Average Loan (1)(2) Current Face Premium (Discount) Amortized Cost Gross Unrealized Losses Fair Value (3) Coupon (4) Yield (5) Life (Years) (6) Extended Maturity Date (7) Location Collateral Type Loan K (8) $ 17,220 $ — $ 17,220 $ ( 500 ) $ 16,720 10.00 % 10.79 % 1.02 February 22, 2024 NY Hotel, Retail Loan L (8) 51,000 ( 337 ) 50,663 ( 9,174 ) 41,489 N/A N/A 3.36 July 22, 2024 IL Hotel, Retail $ 68,220 $ ( 337 ) $ 67,883 $ ( 9,674 ) $ 58,209 2.52 % 3.10 % 2.77 (1) The Company has the contractual right to receive a balloon payment for each loan. (2) Refer to Note 12 "Commitments and Contingencies" for details on the Company's commitments on its Commercial Loans as of March 31, 2021. (3) Fair value includes the value of unfunded commitments. (4) Each commercial loan investment has a variable coupon rate. (5) Yield includes any exit fees. (6) Actual maturities may be shorter or longer than stated contractual maturities. Maturities are affected by prepayments of principal. (7) Represents the maturity date of the last possible extension option. (8) Loan K and Loan L are comprised of first mortgage and mezzanine loans. December 31, 2020 Weighted Average Loan (1) Current Face Premium (Discount) Amortized Cost Gross Unrealized Losses Fair Value (2) Coupon (3) Yield (4) Life (Years) (5) Extended Maturity Date (6) Location Collateral Type Commercial Loans, at fair value Loan G (7) $ 59,451 $ — $ 59,451 $ ( 3,940 ) $ 55,511 5.27 % 5.27 % 1.54 July 9, 2022 CA Condo, Retail, Hotel Loan K (8) 15,787 — 15,787 ( 1,100 ) 14,687 10.00 % 10.83 % 1.27 February 22, 2024 NY Hotel, Retail Loan L (8) 51,000 ( 337 ) 50,663 ( 9,312 ) 41,351 N/A N/A 3.61 July 22, 2024 IL Hotel, Retail 126,238 ( 337 ) 125,901 ( 14,352 ) 111,549 3.73 % 4.05 % 2.34 Commercial Loans Held for Sale, at fair value Loan I (9) 15,929 ( 175 ) 15,754 ( 1,795 ) 13,959 11.50 % 12.23 % 2.22 February 9, 2023 MN Office, Retail Total $ 142,167 $ ( 512 ) $ 141,655 $ ( 16,147 ) $ 125,508 4.60 % 4.96 % 2.33 (1) The Company has the contractual right to receive a balloon payment for each loan. (2) Fair value includes the value of unfunded commitments. (3) Each commercial loan investment has a variable coupon rate. (4) Yield includes any exit fees. (5) Actual maturities may be shorter or longer than stated contractual maturities. Maturities are affected by prepayments of principal. (6) Represents the maturity date of the last possible extension option. (7) Loan G is a first mortgage loan. (8) Loan K and Loan L are comprised of first mortgage and mezzanine loans. (9) Loan I is a mezzanine loan. 24 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 5. Fair value measurements As described in Note 2, the fair value of financial instruments determined by the Manager, subject to oversight of the Company’s Board of Directors, and in accordance with ASC 820, "Fair Value Measurements and Disclosures." When possible, management determines fair value using third-party data sources. ASC 820 establishes a hierarchy that prioritizes the inputs to valuation techniques giving the highest priority to readily available unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements) when market prices are not readily available or reliable. Values for the Company’s securities, Excess MSRs, and derivatives are based upon prices obtained from third-party pricing services, which are indicative of market activity. The evaluation methodology of the Company’s third-party pricing services incorporates commonly used market pricing methods, including a spread measurement to various indices such as the one-year constant maturity treasury and LIBOR, which are observable inputs. The evaluation also considers the underlying characteristics of each investment, which are also observable inputs, including: coupon; maturity date; loan age; reset date; collateral type; periodic and life cap; geography; and prepayment speeds. The Company collects and considers current market intelligence on all major markets, including benchmark security evaluations and bid-lists from various sources, when available. As part of the Company’s risk management process, the Company reviews and analyzes all prices obtained by comparing prices to recently completed transactions involving the same or similar investments on or near the reporting date. If, in the opinion of the Manager, one or more prices reported to the Company are not reliable or unavailable, the Manager reviews the fair value based on characteristics of the investment it receives from the issuer and available market information. In determining the fair value of the Company's mortgage loans and securitized debt relating to the August 2019 VIE and the September 2020 VIE, the Company considers data such as loan origination information, additional updated borrower information, loan servicing data, as available, forward interest rates, general economic conditions, home price index forecasts, and valuations of the underlying properties. The variables considered most significant to the determination of the fair value of the Company's mortgage loans include market-implied discount rates, projections of default rates, delinquency rates, prepayment rates, loss severity, loan-to-value ratios, and recovery rates. Projections of default and prepayment rates are impacted by other variables such as reperformance rates and timeline to liquidation. The Company uses loan level data and macro-economic inputs to generate loss adjusted cash flows and other information in determining the fair value of its mortgage loans. Because of the inherent uncertainty of such valuation, the fair value established for mortgage loans held by the Company may differ from the fair value that would have been established if a ready market existed for these mortgage loans. Management may also base its valuation on prices obtained from a third-party pricing service provider to assess and corroborate the valuation of a selection of investments in the Company’s loan portfolio and the Company's investment in Arc Home on a periodic basis. These third-party pricing service providers conduct independent valuation analyses based on a review of source documents, available market data, and comparable investments. The analyses provided by valuation service providers are reviewed and considered by the Manager. 25 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 The following table presents the Company’s financial instruments measured at fair value on a recurring basis as of March 31, 2021 (in thousands): Fair Value at March 31, 2021 Level 1 Level 2 Level 3 Total Assets: Agency RMBS: 30 Year Fixed Rate $ — $ 915,423 $ — $ 915,423 Credit Investments: Non-Agency RMBS (1) — 14,449 1,641 16,090 Non-Agency RMBS Interest Only — 281 — 281 CMBS (2) — 41,665 — 41,665 CMBS Interest Only — 4,173 — 4,173 Residential mortgage loans — 2,220 640,739 642,959 Commercial loans — — 58,209 58,209 Excess mortgage servicing rights — — 3,000 3,000 Derivative assets (3) — 28,722 — 28,722 AG Arc (4) — — 52,138 52,138 Total Assets Measured at Fair Value $ — $ 1,006,933 $ 755,727 $ 1,762,660 Liabilities: Securitized debt $ — $ — $ ( 344,429 ) $ ( 344,429 ) Derivative liabilities (3) — ( 22 ) — ( 22 ) Total Liabilities Measured at Fair Value $ — $ ( 22 ) $ ( 344,429 ) $ ( 344,451 ) (1) Non-Agency RMBS is comprised of Prime, Alt-A/Subprime, Credit Risk Transfer, and Re/Non-Performing Securities. (2) CMBS is comprised of Single-Asset/Single-Borrower and Freddie Mac K-Series CMBS. (3) As of March 31, 2021, the Company applied a reduction in fair value of $ 28.7 million and $ 21.7 thousand to its interest rate swap assets and liabilities, respectively, related to variation margin with a corresponding increase or decrease in restricted cash, respectively. Refer to Note 2 and Note 7 for more information on the Company's accounting policies with regard to derivatives. (4) Refer to Note 2 for more information on the Company's accounting policies with regard to cash equivalents, if applicable, and AG Arc. The table above includes the Company's investment in AG Arc, which is included in its "Investments in debt and equity of affiliates" line item on the consolidated balance sheets, as the Company has chosen to elect the fair value option with respect to its investment pursuant to ASC 825. 26 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 The following table presents the Company’s financial instruments measured at fair value on a recurring basis as of December 31, 2020 (in thousands): Fair value at December 31, 2020 Level 1 Level 2 Level 3 Total Assets: Agency RMBS: 30 Year Fixed Rate $ — $ 518,352 $ — $ 518,352 Credit Investments: Non-Agency RMBS (1) — 35,070 3,100 38,170 Non-Agency RMBS Interest Only — 236 — 236 CMBS (2) — 52,485 — 52,485 CMBS Interest Only — 4,303 — 4,303 Residential mortgage loans — 2,134 433,307 435,441 Commercial loans — — 125,508 125,508 Excess mortgage servicing rights — — 3,158 3,158 Derivative assets (3) — 1,356 — 1,356 AG Arc (4) — — 45,341 45,341 Total Assets Measured at Fair Value $ — $ 613,936 $ 610,414 $ 1,224,350 Liabilities: Securitized debt $ — $ — $ ( 355,159 ) $ ( 355,159 ) Derivative liabilities (3) — ( 294 ) — ( 294 ) Total Liabilities Measured at Fair Value $ — $ ( 294 ) $ ( 355,159 ) $ ( 355,453 ) (1) Non-Agency RMBS is comprised of Prime, Alt-A/Subprime, Credit Risk Transfer, Non-US RMBS, and Re/Non-Performing Securities. (2) CMBS is comprised of Conduit, Single-Asset/Single-Borrower, and Freddie Mac K-Series CMBS. (3) As of December 31, 2020, the Company applied a reduction in fair value of $ 1.4 million and $ 0.2 million to its interest rate swap assets and liabilities, respectively, related to variation margin with a corresponding increase or decrease in restricted cash, respectively. Refer to Note 2 and Note 7 for more information on the Company's accounting policies with regard to derivatives. (4) Refer to Note 2 for more information on the Company's accounting policies with regard to cash equivalents, if applicable, and AG Arc. The table above includes the Company's investment in AG Arc, which is included in its "Investments in debt and equity of affiliates" line item on the consolidated balance sheets, as the Company has chosen to elect the fair value option with respect to its investment pursuant to ASC 825. The Company did not have any transfers of assets or liabilities between Levels 1 and 2 of the fair value hierarchy during the three months ended March 31, 2021 and March 31, 2020. Refer to the tables below for details on transfers between the Level 3 and Level 2 categories under ASC 820. Transfers into the Level 3 category of the fair value hierarchy occur due to instruments exhibiting indications of reduced levels of market transparency. Transfers out of the Level 3 category of the fair value hierarchy occur due to instruments exhibiting indications of increased levels of market transparency and updates to the Company's leveling policy, which are detailed in Note 2. Indications of increases or decreases in levels of market transparency include a change in observable transactions or executable quotes involving these instruments or similar instruments. Changes in these indications could impact price transparency, and thereby cause a change in level designations in future periods. 27 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 The following tables present additional information about the Company’s assets and liabilities which are measured at fair value on a recurring basis for which the Company has utilized Level 3 inputs to determine fair value: Three Months Ended March 31, 2021 (in thousands) Non-Agency RMBS Residential Mortgage Loans Commercial Loans Excess Mortgage Servicing Rights AG Arc Securitized debt Beginning balance $ 3,100 $ 433,307 $ 125,508 $ 3,158 $ 45,341 $ ( 355,159 ) Transfers (1): Transfers out of level 3 ( 1,499 ) — — — — — Purchases/Transfers — 208,060 3,669 — — — Proceeds from sales of assets — — ( 74,342 ) — — — Proceeds from settlement ( 32 ) ( 12,294 ) ( 195 ) — — 12,777 Total net gains/(losses) (2) Included in net income 72 11,666 3,569 ( 158 ) 6,797 ( 2,047 ) Ending Balance $ 1,641 $ 640,739 $ 58,209 $ 3,000 $ 52,138 $ ( 344,429 ) Change in unrealized appreciation/(depreciation) for level 3 assets/liabilities still held as of March 31, 2021 (3) $ 72 $ 11,761 $ 738 $ ( 158 ) $ 6,797 $ ( 2,047 ) (1) Transfers are assumed to occur at the beginning of the period. During the three months ended March 31, 2021, the Company transferred one Non-Agency RMBS into the Level 2 category from the Level 3 category under the fair value hierarchy of ASC 820. (2) Gains/(losses) are recorded in the following line items in the consolidated statement of operations: Unrealized gain/(loss) on real estate securities and loans, net $ 18,306 Unrealized gain/(loss) on derivative and other instruments, net ( 2,205 ) Net realized gain/(loss) ( 2,999 ) Equity in earnings/(loss) from affiliates 6,797 Total $ 19,899 (3) Unrealized gains/(losses) are recorded in the following line items in the consolidated statement of operations: Unrealized gain/(loss) on real estate securities and loans, net $ 12,571 Unrealized gain/(loss) on derivative and other instruments, net ( 2,205 ) Equity in earnings/(loss) from affiliates 6,797 Total $ 17,163 Three Months Ended March 31, 2020 (in thousands) Non-Agency RMBS Non-Agency RMBS Interest Only CMBS CMBS Interest Only Residential Mortgage Loans Commercial Loans Excess Mortgage Servicing Rights AG Arc Securitized debt Beginning balance $ 630,115 $ 1,074 $ 366,566 $ 47,992 $ 417,785 $ 158,686 $ 17,775 $ 28,546 $ ( 72,415 ) Transfers (1): Transfers into level 3 — — — — — — — — ( 151,933 ) Transfers out of level 3 ( 210,709 ) ( 1,074 ) ( 170,816 ) ( 22,054 ) — — — — 7,230 Purchases/Transfers 1,559 — 3,540 — 479,195 11,441 — — — Proceeds from sales of assets and seizures of assets ( 362,131 ) — ( 148,111 ) ( 21,996 ) ( 8,679 ) — — — — Proceeds from settlement ( 9,710 ) — ( 9,367 ) — ( 22,674 ) — — — 5,706 Total net gains/(losses) (2) Included in net income ( 43,591 ) — ( 41,812 ) ( 3,942 ) ( 98,667 ) ( 12,076 ) ( 3,709 ) ( 10,027 ) 20,066 Ending Balance $ 5,533 $ — $ — $ — $ 766,960 $ 158,051 $ 14,066 $ 18,519 $ ( 191,346 ) Change in unrealized appreciation/(depreciation) for level 3 assets/liabilities still held as of March 31, 2020 (3) $ ( 554 ) $ — $ — $ — $ ( 95,655 ) $ ( 12,076 ) $ ( 3,701 ) $ ( 10,027 ) $ 20,066 (1) Transfers are assumed to occur at the beginning of the period. During the three months ended March 31, 2020, the Company transferred 50 Non-Agency RMBS, two Non-Agency RMBS Interest Only securities, 32 CMBS, 15 CMBS Interest Only securities, and one securitized debt security into the Level 2 category from the Level 3 category under the fair value hierarchy of ASC 820. During the three months ended March 31, 2020, the Company transferred one securitized debt security into the Level 3 category from the Level 2 category under the fair value hierarchy of ASC 820. Refer to Note 2 for more information on changes regarding the Company's leveling policy. 28 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 (2) Gains/(losses) are recorded in the following line items in the consolidated statement of operations: Unrealized gain/(loss) on real estate securities and loans, net $ ( 145,817 ) Unrealized gain/(loss) on derivative and other instruments, net 16,357 Net realized gain/(loss) ( 54,271 ) Equity in earnings/(loss) from affiliates ( 10,027 ) Total $ ( 193,758 ) (3) Unrealized gains/(losses) are recorded in the following line items in the consolidated statement of operations: Unrealized gain/(loss) on real estate securities and loans, net $ ( 108,285 ) Unrealized gain/(loss) on derivative and other instruments, net 16,365 Equity in earnings/(loss) from affiliates ( 10,027 ) Total $ ( 101,947 ) The following tables present a summary of quantitative information about the significant unobservable inputs used in the fair value measurement of investments for which the Company has utilized Level 3 inputs to determine fair value. Asset Class Fair Value at March 31, 2021 (in thousands) Valuation Technique Unobservable Input Range (Weighted Average) (1) Yield 8.56 % - 8.56 % ( 8.56 %) Non-Agency RMBS $ 1,641 Discounted Cash Flow Projected Collateral Prepayments 5.28 % - 5.28 % ( 5.28 %) Projected Collateral Losses 4.13 % - 4.13 % ( 4.13 %) Projected Collateral Severities -25.91% - -25.91% (-25.91%) Yield 3.66 % - 10.00 % ( 5.36 %) Residential Mortgage Loans $ 480,759 Discounted Cash Flow Projected Collateral Prepayments 4.34 % - 16.78 % ( 8.12 %) Projected Collateral Losses 0.10 % - 4.90 % ( 2.02 %) Projected Collateral Severities -12.85% - 25.21 % ( 12.95 %) $ 6,133 Consensus Pricing Offered Quotes 83.57 - 109.77 ( 101.08 ) $ 153,847 Recent Transaction Cost N/A Yield 11.22 % - 42.08 % ( 13.80 %) Commercial Loans $ 58,209 Discounted Cash Flow Credit Spread 1,009 bps - 3,470 bps ( 1,234 bps) Recovery Percentage (2) 100.00 % - 100.00 % ( 100.00 %) Loan-to-Value 46.10 % - 91.60 % ( 72.31 %) Excess Mortgage Servicing Rights Discounted Cash Flow Yield 9.00 % - 9.69 % ( 9.08 %) $ 2,931 Projected Collateral Prepayments 9.46 % - 13.32 % ( 10.33 %) $ 69 Consensus Pricing Offered Quotes 0.22 - 0.22 ( 0.22 ) AG Arc $ 52,138 Comparable Multiple Book Value Multiple 1.06 x - 1.06 x ( 1.06 x) Liability Class Fair Value at March 31, 2021 (in thousands) Valuation Technique Unobservable Input Range (Weighted Average) Yield 2.00 % - 5.00 % ( 2.74 %) Securitized debt $ ( 344,429 ) Discounted Cash Flow Projected Collateral Prepayments 5.48 % - 7.91 % ( 6.83 %) Projected Collateral Losses 1.67 % - 3.36 % ( 2.42 %) Projected Collateral Severities 8.90 % - 16.31 % ( 13.03 %) (1) Amounts are weighted based on fair value. (2) Represents the proportion of the principal expected to be collected relative to the loan balances as of March 31, 2021. 29 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 Asset Class Fair Value at December 31, 2020 (in thousands) Valuation Technique Unobservable Input Range (Weighted Average) (1) Yield 8.05 % - 8.05 % ( 8.05 %) Non-Agency RMBS $ 1,601 Discounted Cash Flow Projected Collateral Prepayments 5.46 % - 5.46 % ( 5.46 %) Projected Collateral Losses 5.37 % - 5.37 % ( 5.37 %) Projected Collateral Severities -20.89% - -20.89% (-20.89%) $ 1,499 Consensus Pricing Offered Quotes 91.59 - 91.59 ( 91.59 ) Yield 4.50 % - 10.00 % ( 5.01 %) Residential Mortgage Loans $ 426,709 Discounted Cash Flow Projected Collateral Prepayments 4.30 % - 9.31 % ( 7.28 %) Projected Collateral Losses 1.66 % - 5.75 % ( 2.58 %) Projected Collateral Severities -9.29% - 49.43% (15.68%) $ 6,598 Consensus Pricing Offered Quotes 82.03 - 106.29 ( 99.96 ) Yield 10.95 % - 39.54 % ( 14.09 %) Commercial Loans $ 125,508 Discounted Cash Flow Credit Spread 1,001 bps - 3,304 bps ( 1,279 bps) Recovery Percentage (2) 100.00 % - 100.00 % ( 100.00 %) Loan-to-Value 43.60 % - 97.50 % ( 62.04 %) Excess Mortgage Servicing Rights Yield 9.00 % - 9.70 % ( 9.08 %) $ 3,073 Discounted Cash Flow Projected Collateral Prepayments 11.11 % - 15.51 % ( 12.49 %) $ 85 Consensus Pricing Offered Quotes 0.25 - 0.25 ( 0.25 ) AG Arc $ 45,341 Comparable Multiple Book Value Multiple 1.05 x - 1.05 x ( 1.05 x) Liability Class Fair Value at December 31, 2020 (in thousands) Valuation Technique Unobservable Input Range (Weighted Average) Yield 2.45 % - 5.50 % ( 2.98 %) Securitized debt $ ( 355,159 ) Discounted Cash Flow Projected Collateral Prepayments 5.90 % - 8.20 % ( 7.17 %) Projected Collateral Losses 1.94 % - 3.46 % ( 2.62 %) Projected Collateral Severities 12.70 % - 20.03 % ( 16.75 %) (1) Amounts are weighted based on fair value. (2) Represents the proportion of the principal expected to be collected relative to the loan balances as of December 31, 2020. As further described above, fair value for the Company’s securities portfolio are based upon prices obtained from third-party pricing services. Broker quotations may also be used. The significant unobservable inputs used in the fair value measurement of the Company’s securities are yields, prepayment rates, probability of default, and loss severity in the event of default. Significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for prepayment rates. Also, as described above, valuation of the Company’s loan portfolio is determined by the Manager using third-party pricing services where available, valuation analyses from third-party pricing service providers, or model-based pricing. The evaluation considers the underlying characteristics of each loan, which are observable inputs, including: coupon, maturity date, loan age, reset date, collateral type, periodic and life cap, geography, and prepayment speeds. The valuations of commercial loans also require significant judgments, which include assumptions regarding capitalization rates, re-performance rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders, and other factors deemed necessary by management. Changes in the market environment and other events that may occur over the life of our investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently estimated. If applicable, analyses provided by valuation service providers are reviewed and considered by the Manager. 30 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 6. Financing arrangements The following table presents a summary of the Company's financing arrangements as of March 31, 2021 and December 31, 2020 (in thousands). March 31, 2021 December 31, 2020 Weighted Average Collateral (1)(2)(3) Carrying Value Stated Maturity Funding Cost Life (Years) Amortized Cost Basis Fair Value Carrying Value Repurchase Agreements Agency RMBS $ 874,612 Apr 2021 0.14 % 0.04 $ 944,627 $ 915,423 $ 435,893 Non-Agency RMBS 8,231 Apr 2021 1.84 % 0.03 10,100 14,751 14,550 CMBS 18,081 Apr 2021 2.29 % 0.02 35,419 29,439 24,881 Residential Mortgage Loans (4)(5) 205,326 Jun 2021 - Jan 2022 2.65 % 0.74 253,098 257,844 25,590 Total Repurchase Agreements $ 1,106,250 0.65 % 0.17 $ 1,243,244 $ 1,217,457 $ 500,914 Revolving Facilities Commercial Loans (6)(7)(8) $ 25,950 Aug 2023 3.23 % 2.36 $ 50,663 $ 41,489 $ 63,133 Total Financing Arrangements $ 1,132,200 0.71 % 0.22 $ 1,293,907 $ 1,258,946 $ 564,047 (1) The Company also had $ 6.1 million of cash pledged under repurchase agreements as of March 31, 2021. (2) Under the terms of the Company’s financing agreements, the Company's financing counterparties may, in certain cases, sell or re-hypothecate the pledged collateral. (3) Amounts pledged as collateral under Residential Mortgage Loans include certain of the Company's retained interests in securitizations. Refer to Note 4 for more information on the August 2019 VIE and September 2020 VIE. (4) The Company's Residential Mortgage Loan financing arrangements include a maximum uncommitted borrowing capacity of $ 250 million on a facility used to finance Non-QM Loans. Subsequent to quarter end, the Company amended this financing arrangement to increase the maximum uncommitted borrowing capacity to $ 400 million. (5) The funding cost includes deferred financing costs. The stated rate on the Residential Mortgage Loans repurchase agreements was 2.58 % as of March 31, 2021. (6) The revolving facilities is interest only until maturity. (7) The funding cost includes deferred financing costs. The stated rate on the Commercial Loans revolving facility was 2.19 % as of March 31, 2021. (8) The maximum uncommitted borrowing capacity on the commercial loan revolving facility is $ 100 million. The following table presents contractual maturity information about the Company's borrowings under repurchase agreements and revolving facilities at March 31, 2021 (in thousands). Within 30 Days Over 30 Days to 3 Months Over 3 Months to 12 Months Over 12 Months Total Repurchase Agreements Agency RMBS $ 874,612 $ — $ — $ — $ 874,612 Non-Agency RMBS 8,231 — — — 8,231 CMBS 18,081 — — — 18,081 Residential Mortgage Loans — 28,004 177,322 — 205,326 Total Repurchase Agreements $ 900,924 $ 28,004 $ 177,322 $ — $ 1,106,250 Revolving Facilities Commercial Loans $ — $ — $ — $ 25,950 $ 25,950 Total Financing Arrangements $ 900,924 $ 28,004 $ 177,322 $ 25,950 $ 1,132,200 Counterparties The Company had exposure to five counterparties as of March 31, 2021 and December 31, 2020. 31 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 The following tables present information as of March 31, 2021 and December 31, 2020 with respect to each counterparty that provides the Company with financing for which the Company had greater than 5% of its stockholders’ equity at risk, excluding stockholders’ equity at risk under financing through affiliated entities ($ in thousands). March 31, 2021 Counterparty Stockholders’ Equity at Risk Weighted Average Maturity (days) Percentage of Stockholders’ Equity Barclays Capital Inc. $ 65,949 88 14.5 % Credit Suisse AG, Cayman Islands Branch 29,000 54 6.4 % BofA Securities, Inc. 24,308 14 5.3 % December 31, 2020 Counterparty Stockholders’ Equity at Risk Weighted Average Maturity (days) Percentage of Stockholders’ Equity BofA Securities, Inc. $ 28,091 19 6.9 % Credit Suisse AG, Cayman Islands Branch 26,305 35 6.4 % Barclays Capital Inc. 24,890 15 6.1 % Financial Covenants The Company’s 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 the Company fails 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. Financings pursuant to repurchase agreements and revolving facilities are generally recourse to the Company. As of March 31, 2021, the Company is in compliance with all of its financial covenants. 7. Other assets and liabilities The following table details certain information related to the Company's "Other assets" and "Other liabilities" line items on its consolidated balance sheet as of March 31, 2021 and December 31, 2020 (in thousands): March 31, 2021 December 31, 2020 Other assets Interest receivable $ 4,206 $ 2,962 Other assets 4,321 5,538 Due from broker 395 907 Total Other assets $ 8,922 $ 9,407 Other liabilities Interest payable $ 776 $ 853 Derivative liabilities, at fair value — 68 Due to affiliates (1) 3,346 14,041 Accrued expenses 2,692 2,521 Due to broker 1,061 1,272 Total Other liabilities $ 7,875 $ 18,755 (1) Refer to Note 10 for more information. 32 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 Derivatives The following table presents the fair value of the Company's derivatives and other instruments and their balance sheet location at March 31, 2021 and December 31, 2020 (in thousands). Derivatives and Other Instruments (1) Designation Balance Sheet Location March 31, 2021 December 31, 2020 Pay Fix/Receive Float Interest Rate Swap Agreements (1) Non-Hedge Other liabilities $ — $ ( 68 ) (1) As of March 31, 2021, the Company applied a reduction in fair value of $ 28.7 million and $ 21.7 thousand to its interest rate swap assets and liabilities, respectively, related to variation margin with a corresponding increase or decrease in restricted cash, respectively. As of December 31, 2020, the Company applied a reduction in fair value of $ 1.4 million and $ 0.2 million to its interest rate swap assets and liabilities, respectively, related to variation margin with a corresponding increase or decrease in restricted cash, respectively. The following table summarizes information related to derivatives and other instruments (in thousands): Notional amount of non-hedge derivatives and other instruments: Notional Currency March 31, 2021 December 31, 2020 Pay Fix/Receive Float Interest Rate Swap Agreements USD $ 1,108,000 $ 417,000 Short positions on British Pound Futures (1) GBP — 3,313 (1) Each British Pound Future contract embodies £ 62,500 of notional value. The following table summarizes gains/(losses) related to derivatives and other instruments (in thousands): Three Months Ended March 31, 2021 March 31, 2020 Included within Unrealized gain/(loss) on derivative and other instruments, net Interest Rate Swaps $ 28,420 $ ( 11,588 ) Swaptions — ( 692 ) British Pound Futures 64 ( 53 ) Euro Futures — 48 TBAs — 392 28,484 ( 11,893 ) Included within Net realized gain/(loss) Interest Rate Swaps — ( 65,368 ) Swaptions — ( 1,386 ) British Pound Futures ( 165 ) 664 Euro Futures — 2 TBAs — 4,218 ( 165 ) ( 61,870 ) Total income/(loss) $ 28,319 $ ( 73,763 ) Derivative and other instruments eligible for offset are presented gross on the consolidated balance sheets as of March 31, 2021 and December 31, 2020, if applicable. The Company has not offset or netted any derivatives or other instruments with any financial instruments or cash collateral posted or received. The Company must post cash or securities as collateral on its 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 term of the derivatives involved. The posting of collateral is generally bilateral, meaning that if the fair value of the Company’s derivatives increases, its counterparty will post collateral to it. As of March 31, 2021, the Company's restricted cash balance included $ 31.7 million of collateral related to certain derivatives, of which $ 3.0 million represents cash collateral posted by the Company and $ 28.7 million represents amounts related to variation margin. As of December 31, 2020, the Company's restricted 33 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 cash balance included $ 10.8 million of collateral related to certain derivatives, of which $ 9.7 million represents cash collateral posted by the Company and $ 1.1 million represents amounts related to variation margin. Interest rate swaps To help mitigate exposure to increases in interest rates, the Company may use currently-paying and forward-starting, one- or three-month LIBOR-indexed, pay-fixed, receive-variable, interest rate swap agreements. This arrangement hedges the Company's exposure to higher interest rates because the variable-rate payments received on the swap agreements largely offset additional interest accruing on the related borrowings due to the higher interest rate, leaving the fixed-rate payments to be paid on the swap agreements as the Company’s effective borrowing rate, subject to certain adjustments including changes in spreads between variable rates on the swap agreements and actual borrowing rates. As of March 31, 2021, the Company’s interest rate swap positions consisted of pay-fixed interest rate swaps. The following table presents information about the Company’s interest rate swaps as of March 31, 2021 ($ in thousands): Maturity Notional Amount Weighted Average Pay-Fixed Rate Weighted Average Receive-Variable Rate Weighted Average Years to Maturity 2025 $ 296,000 0.39 % 0.22 % 4.51 2026 379,000 0.73 % 0.20 % 4.89 2028 160,000 1.09 % 0.19 % 6.88 2030 86,000 0.76 % 0.22 % 9.52 2031 187,000 1.38 % 0.20 % 9.88 Total/Wtd Avg $ 1,108,000 0.80 % 0.20 % 6.28 As of December 31, 2020, the Company’s interest rate swap positions consisted of pay-fixed interest rate swaps. The following table presents information about the Company’s interest rate swaps as of December 31, 2020 ($ in thousands): Maturity Notional Amount Weighted Average Pay-Fixed Rate Weighted Average Receive-Variable Rate Weighted Average Years to Maturity 2025 $ 296,000 0.39 % 0.23 % 4.76 2026 20,000 0.45 % 0.24 % 5.01 2030 86,000 0.76 % 0.23 % 9.77 2031 15,000 0.95 % 0.24 % 10.01 Total/Wtd Avg $ 417,000 0.49 % 0.23 % 5.99 TBAs The Company did not hold any TBA positions for the three months ended March 31, 2021. The following tables present information about the Company’s TBAs for the three months ended March 31, 2020 (in thousands): For the Three Months Ended: Beginning Notional Amount Buys or Covers Sales or Shorts Ending Net Notional Amount Net Fair Value as of Period End Net Receivable/(Payable) from/to Broker Derivative Asset Derivative Liability March 31, 2020 TBAs - Long $ — $ 728,000 $ ( 728,000 ) $ — $ — $ 392 $ 2,740 $ ( 2,348 ) 8. Earnings per share Basic earnings per share ("EPS") is calculated by dividing net income/(loss) available to common stockholders for the period by the weighted average shares of the Company’s common stock outstanding for that period that participate in the Company’s common dividends. Diluted EPS takes into account the effect of dilutive instruments, such as stock options, warrants, unvested restricted stock and unvested restricted stock units but uses the average share price for the period in determining the number of incremental shares that are to be added to the weighted-average number of shares outstanding. 34 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 The following table presents a reconciliation of the earnings and shares used in calculating basic and diluted EPS for the three months ended March 31, 2021 and March 31, 2020 (in thousands, except per share data): Three Months Ended March 31, 2021 March 31, 2020 Numerator: Net Income/(Loss) from Continuing Operations $ 43,249 $ ( 485,017 ) Gain on Exchange Offers, net (Note 11) 358 — Dividends on preferred stock ( 4,924 ) ( 5,667 ) Net income/(loss) available to common stockholders $ 38,683 $ ( 490,684 ) Denominator: Basic weighted average common shares outstanding 42,348 32,749 Diluted weighted average common shares outstanding (1) 42,348 32,749 Earnings/(Loss) Per Share - Basic Total Earnings/(Loss) Per Share of Common Stock $ 0.91 $ ( 14.98 ) Earnings/(Loss) Per Share - Diluted Total Earnings/(Loss) Per Share of Common Stock $ 0.91 $ ( 14.98 ) (1) Manager restricted stock units of 17.6 thousand were excluded from the computation of diluted earnings per share because its effect would be anti-dilutive for the three months ended March 31, 2020. Restricted stock units issued to the Manager do not entitle the participant the rights of a shareholder of the Company’s common stock, such as dividend and voting rights, until shares are issued in settlement of the vested units. The restricted stock units are not considered to be participating shares. The dilutive effects of the restricted stock units are only included in diluted weighted average common shares outstanding. The Company had no unvested restricted stock units as of March 31, 2021 and December 31, 2020, respectively. The following table details the Company's common stock dividends declared during the three months ended March 31, 2021: 2021 Declaration Date Record Date Payment Date Cash Dividend Per Share 3/22/2021 4/1/2021 4/30/2021 $ 0.06 The Company did no t declare any common stock dividends during the three months ended March 31, 2020. The following tables detail the Company's preferred stock dividends declared and paid during the three months ended March 31, 2021 and March 31, 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 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 35 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 9. Income taxes As a REIT, the Company is not subject to federal income tax to the extent that it makes qualifying distributions to its stockholders, and provided it satisfies on a continuing basis, through actual investment and operating results, the REIT requirements including certain asset, income, distribution and stock ownership tests. Most states follow U.S. federal income tax treatment of REITs. Excise tax represents a four percent tax on the required amount of the Company’s ordinary income and net capital gains not distributed during the year. The expense is calculated in accordance with applicable tax regulations. For the three months ended March 31, 2021, the Company did no t record any excise tax expense. For the three months ended March 31, 2020, the Company recorded excise tax expense of $( 0.8 ) million. The reversal of the previously accrued excise tax expense during the three months ended March 31, 2020 was a result of losses resulting from market conditions associated with the COVID-19 pandemic. The Company files tax returns in several U.S jurisdictions. There are no ongoing U.S. federal, state or local tax examinations related to the Company. Based on its analysis of any potential uncertain income tax positions, the Company concluded it did not have any uncertain tax positions that meet the recognition or measurement criteria of ASC 740 as of March 31, 2021. The Company’s federal income tax returns for the last three tax years are open to examination by the Internal Revenue Service. In the event that the Company incurs income tax related interest and penalties, its policy is to classify them as a component of provision for income taxes. 10. Related party transactions Manager The Company has entered into a management agreement with the Manager, which provided for an initial term and will be deemed renewed automatically each year for an additional one-year period, subject to certain termination rights. The Company is externally managed and advised by the Manager. Pursuant to the terms of the management agreement, which became effective July 6, 2011 (upon the consummation of the Company’s initial public offering (the "IPO")), the Manager provides the Company with its management team, including its officers, along with appropriate support personnel. Each of the Company’s officers is an employee of Angelo Gordon. The Company does not have any employees. The Manager, pursuant to a delegation agreement dated as of June 29, 2011, has delegated to Angelo Gordon the overall responsibility of its day-to-day duties and obligations arising under the Company’s management agreement. Below is a description of the fees and reimbursements provided in the management agreements. Management fee The Manager is entitled to a management fee equal to 1.50 % per annum, calculated and paid quarterly, of the Company’s Stockholders’ Equity. 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 the Company’s 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 the Company pays for repurchases of its common stock, excluding any unrealized gains, losses or other non-cash items that have impacted stockholders’ equity as reported in the Company’s 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 the Company’s independent directors and after approval by a majority of the Company’s independent directors. Stockholders’ Equity, for purposes of calculating the management fee, could be greater or less than the amount of stockholders’ equity shown on the Company’s financial statements. For the three months ended March 31, 2021 and 2020, the Company incurred management fees of approximately $ 1.7 million and $ 2.1 million, respectively. As of March 31, 2021 and December 31, 2020, the Company recorded management fees payable of $ 1.7 million. On April 6, 2020, the Company and the Manager executed an amendment to the management agreement pursuant to which the 36 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 Manager agreed to defer the Company's payment of the management fee effective the first quarter of 2020 through September 30, 2020. On September 24, 2020, the Company and the Manager executed another 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) 1,215,370 shares of common stock in full satisfaction of the deferred base management fee of $ 3.8 million payable by the Company in respect to the first and second quarters of 2020 and (ii) 154,500 shares of common stock in satisfaction of $ 0.5 million of the base management fee payable by the Company in respect to the third quarter of 2020. The shares of common stock issued to the Manager were valued at $ 3.15 per share based on the midpoint of the estimated range of the Company’s book value per share as of August 31, 2020. The remaining third quarter 2020 management fee was paid in the normal course of business. Termination fee Upon the occurrence of (i) the Company’s termination of the management agreement without cause or (ii) the Manager’s termination of the management agreement upon a breach by the Company of any material term of the management agreement, the Manager will be entitled to a termination fee equal to three times the average annual management fee during the 24-month period prior to such termination, calculated as of the end of the most recently completed fiscal quarter. As of March 31, 2021 and December 31, 2020, no event of termination of the management agreement had occurred. Expense reimbursement The Company is required to reimburse the Manager or its affiliates for operating expenses which are incurred by the Manager or its affiliates on behalf of the Company, including expenses relating to legal, accounting, due diligence and other services. The Company’s 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 the Company’s Board of Directors. The Company reimburses the Manager or its affiliates for the Company’s allocable share of the compensation, including, without limitation, annual base salary, bonus, any related withholding taxes and employee benefits paid to (i) the Company’s chief financial officer based on the percentage of time spent on Company affairs, (ii) the Company’s general counsel based on the percentage of time spent on the Company’s affairs, and (iii) other corporate finance, tax, accounting, internal audit, legal, risk management, operations, compliance and other non-investment personnel of the Manager and its affiliates who spend all or a portion of their time managing the Company’s affairs based upon the percentage of time devoted by such personnel to the Company’s affairs. In their capacities as officers or personnel of the Manager or its affiliates, they devote such portion of their time to the Company’s affairs as is necessary to enable the Company to operate its business. Of the $ 4.0 million and $ 0.9 million of Other operating expenses for the three months ended March 31, 2021 and 2020, respectively, the Company has incurred $ 1.5 million and $ 2.0 million, respectively, representing a reimbursement of expenses. As of March 31, 2021 and December 31, 2020, the Company recorded a reimbursement payable to the Manager of $ 1.5 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, the Company executed an amendment to the management agreement pursuant to which the Manager agreed to defer the reimbursement of expenses, effective the first quarter of 2020 through September 30, 2020. All deferred expense reimbursements were paid as of September 30, 2020. Secured debt On April 10, 2020, in connection with the first Forbearance Agreement, the Company issued a secured promissory note (the "Note") to the Manager evidencing a $ 10 million loan made by the Manager to the Company. Additionally, on April 27, 2020, in connection with the second Forbearance Agreement, the Company and the Manager entered into an amendment to the Note to reflect an additional $ 10 million loan by the Manager to the Company. 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 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 37 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 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. See Note 7 for a breakout of the "Other liabilities" line item. Restricted stock grants Effective on April 15, 2020 upon the approval of the Company's stockholders at its 2020 annual meeting of stockholders, the 2020 Equity Incentive Plan provides for 2,000,000 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 March 31, 2021, 1,857,350 shares of common stock were available to be awarded under the Equity Incentive Plan. Since its IPO, the Company has granted an aggregate of 105,794 and 142,650 shares of restricted common stock to its independent directors under its equity incentive plans, dated July 6, 2011 (the "2011 Equity Incentive Plans") and its 2020 Equity Incentive Plan, respectively. As of March 31, 2021, all shares of restricted common stock granted to its independent directors have vested. Further, since its IPO, the Company has issued 40,250 shares of restricted common stock and 120,000 restricted stock units to its Manager under the 2011 Equity Incentive Plans. As of July 1, 2020, all shares of restricted common stock and restricted stock units granted to its Manager have fully vested. Director compensation Beginning January 1, 2021, the annual base director's fee for each independent director decreased from $ 160,000 to $ 150,000 , $ 70,000 of which is payable on a quarterly basis in cash and $ 80,000 of which is payable on a quarterly basis in shares of restricted common stock. The number of shares of restricted common stock to be issued each quarter to each independent director is determined based on the average of the high and low prices of the Company’s common stock on the New York Stock Exchange on the last trading day of each fiscal quarter. To the extent that any fractional shares would otherwise be issuable and payable to each independent director, a cash payment is made to each independent director in lieu of any fractional shares. All directors’ fees are paid pro rata (and restricted stock grants determined) on a quarterly basis in arrears, and shares issued are fully vested and non-forfeitable. These shares may not be sold or transferred by such director during the time of his service as an independent member of the Company’s board. As of March 31, 2021, the Company's Board of Directors consisted of four independent directors. Pursuant to the Forbearance Agreement previously discussed, the Company, among other things, agreed to compensate its independent directors solely with common stock for the quarter ended March 31, 2020. Investments in debt and equity of affiliates The Company invests in credit sensitive residential assets through affiliated entities which hold an ownership interest in the assets. The Company is one investor, amongst other investors managed by affiliates of Angelo Gordon, in such entities and has applied the equity method of accounting for such investments. See Note 2 for the gross fair value of the Company's share of these investments as of March 31, 2021 and December 31, 2020 and the net income/(loss) generated by these investments for the three months ended March 31, 2021 and 2020. The Company’s investment in AG Arc is reflected within the "Investments in debt and equity of affiliates" line item on its consolidated balance sheets. The Company has an approximate 44.6 % interest in AG Arc. See Note 2 for the fair value of AG Arc as of March 31, 2021 and December 31, 2020. Arc Home may sell loans to the Company, to third parties, or to affiliates of the Manager. Arc Home may also enter into agreements with us, third parties, or affiliates of the Manager to sell rights to receive the excess servicing spread related to MSRs that it either purchases from third parties or originates. The Company, directly or through its subsidiaries, has entered into agreements with Arc Home to purchase rights to receive the excess servicing spread related to certain of Arc Home's MSRs. As of March 31, 2021 and December 31, 2020, these Excess MSRs had a fair value of approximately $ 3.3 million and $ 3.5 million, respectively. See below "Transactions with affiliates" for details regarding the sale of a portion of the Company's Excess MSRs during the third quarter of 2020. 38 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 During 2020, Arc Home began selling Non-QM Loans to a private fund under the management of Angelo Gordon. Arc Home sold Non-QM Loans with an unpaid principal balance of $ 76.8 million to this affiliate of the Manager during the three months ended March 31, 2021. For the three months ended March 31, 2021, Arc Home sold Non-QM Loans with an unpaid principal balance of $ 57.7 million to the Company. See "Transactions with affiliates" below for details regarding sales of Non-QM Loans from Arc Home to the Company during the first quarter of 2021. On April 3, 2020, the Company, alongside private funds under the management of Angelo Gordon, restructured its financing arrangements in MATT ("Restructured Financing Arrangement"). The Restructured Financing Arrangement requires all principal and interest on the underlying assets in MATT be used to pay down principal and interest on the outstanding financing arrangement. As of April 3, 2020, the Restructured Financing Arrangement was no longer a mark-to-market facility with respect to margin calls and was non-recourse to the Company. The Restructured Financing Arrangement provided for a termination date of October 1, 2021. At the earlier of the termination date or the securitization or sale by the Company of the remaining assets subject to the Restructured Financing Arrangement, the financing counterparty (which is a non-affiliate) was entitled to 35 % of the remaining equity in the assets. The Company evaluated this restructuring and concluded it was an extinguishment of debt. MATT chose to make a fair value election on this financing arrangement and the Company treated this arrangement consistently with this election. On January 29, 2021, the Company, alongside private funds under the management of Angelo Gordon, entered into an amendment with respect to its Restructured Financing Arrangement in MATT. The amendment serves to convert the existing financing to a mark-to-market facility that is recourse to the Company and the private funds managed by Angelo Gordon that invest in MATT up to the below mentioned commitment from MATH to MATT. Upon amending the agreement, the Company settled the premium recapture fee with the financing counterparty. On January 29, 2021, the Company alongside private funds under the management of Angelo Gordon, entered into an amendment to the MATH LLC Agreement, which requires MATH to fund a capital commitment of $ 50.0 million to MATT. The Company, through its investment in MATH, is responsible for its pro-rata share of the capital commitment. Refer to Note 12 for additional information. The Company's investment in LOTS require it to fund various commitments in connection with the origination of Land Related Financing. Refer to Note 12 for additional information. The Company has an approximate 47.5 % and 50 % interest in LOTS I and LOTS II, respectively. Transactions with affiliates In connection with the Company’s investments in residential mortgage loans, residential mortgage loans in securitized form which are issued by an entity in which the Company holds an equity interest in and which are held alongside other private funds under the management of Angelo Gordon (the "Re/Non-Performing Loans") and Non-QM Loans, the Company engages asset managers to provide advisory, consultation, asset management and other services. Beginning in November 2015, the Company also engaged Red Creek Asset Management LLC ("Asset Manager"), a related party of the Manager and direct subsidiary of Angelo Gordon, as the asset manager for certain of its Re/Non-Performing Loans. Beginning in September 2019, the Company engaged the Asset Manager as the asset manager for its Non-QM Loans. The Company pays the Asset Manager separate arm’s-length asset management fees as assessed and confirmed periodically by a third-party valuation firm for its Re/Non-Performing Loans and Non-QM Loans. In the third quarter of 2019, the third-party assessment of asset management fees resulted in the Company updating the fee amount for its Re/Non-Performing Loans. The Company also utilized the third-party valuation firm to establish the fee level for Non-QM Loans in the third quarter of 2019. The fees paid by the Company to the Asset Manager totaled $ 0.6 million and $ 0.3 million for the three months ended March 31, 2021 and 2020, respectively. For the three months ended March 31, 2020, the Company deferred $ 0.1 million of fees owed to the Asset Manager, which were subsequently paid on September 30, 2020. These fees include amounts paid directly by the Company and amounts paid by trustees in securitizations that the Company owns residual interests. In connection with the Company’s investments in Excess MSRs purchased through Arc Home, the Company pays an administrative fee to Arc Home. The administrative fees paid by the Company to Arc Home totaled $ 11.1 thousand and $ 0.1 million for the three months ended March 31, 2021 and 2020, respectively. In February 2020, the Company, alongside private funds under the management of Angelo Gordon, participated through its unconsolidated ownership interest in MATT in a rated Non-QM Loan securitization, in which Non-QM Loans with a fair value 39 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 of $ 348.2 million were securitized. Certain senior tranches in the securitization were sold to third parties with the Company and private funds under the management of Angelo Gordon retaining the subordinate tranches, which had a fair value of $ 26.6 million as of March 31, 2020. The Company has a 44.6 % interest in the retained subordinate tranches. In July 2020, in accordance with the Company’s Affiliated Transactions Policy, the Company sold certain real estate securities to an affiliate of the Manager (the "July 2020 Acquiring Affiliate"). As of the date of the transaction, the real estate securities sold to the July 2020 Acquiring Affiliate had a total fair value of $ 1.9 million. The July 2020 Acquiring Affiliate purchased the real estate securities by submitting an offer to purchase the securities from the Company in a competitive bidding process. This allowed the Company to confirm third-party market pricing and best execution. In August 2020, the Company, alongside private funds under the management of Angelo Gordon, participated through its unconsolidated ownership interest in MATT in a rated Non-QM Loan securitization, in which Non-QM Loans with a fair value of $ 226.0 million were securitized. Certain senior tranches in the securitization were sold to third parties with the Company and private funds under the management of Angelo Gordon retaining the subordinate tranches, which had a fair value of $ 24.3 million as of September 30, 2020. The Company has a 44.6 % interest in the retained subordinate tranches. In August 2020, the Company, alongside private funds under the management of Angelo Gordon, sold its Ginnie Mae Excess MSR portfolio to Arc Home for total proceeds of $ 18.9 million. The portfolio had a total unpaid principal balance of $ 3.5 billion. The Company's share of the total proceeds approximated $ 8.5 million, representing its approximate 45 % ownership interest. Arc Home subsequently sold its Ginnie Mae MSR portfolio to a third party. In October 2020, in accordance with the Company’s Affiliated Transactions Policy, the Company acquired certain real estate securities and Excess MSRs from an affiliate of the Manager (the "October 2020 Selling Affiliate"). As of the date of the transaction, the real estate securities and Excess MSRs acquired from the October 2020 Selling Affiliate had a total fair value of $ 0.5 million and $ 20.0 thousand, respectively. As procuring market bids for the real estate securities was determined to be impracticable in the Manager’s reasonable judgment, appropriate pricing was based on a valuation prepared by third-party pricing vendors. The third-party pricing vendors allowed the Company to confirm third-party market pricing and best execution. During the first quarter of 2021, the Company purchased Non-QM Loans from Arc Home with an underlying unpaid principal balance and fair value of $ 57.7 million and $ 59.2 million, respectively. In March 2021, in accordance with the Company’s Affiliated Transactions Policy, the Company sold certain real estate securities to an affiliate of the Manager (the "March 2021 Acquiring Affiliate"). As of the date of the transaction, the real estate securities sold to the March 2021 Acquiring Affiliate had a total fair value of $ 6.9 million. The March 2021 Acquiring Affiliate purchased the real estate securities by submitting an offer to purchase the securities from the Company in a competitive bidding process. This allowed the Company to confirm third-party market pricing and best execution. 11. Equity Stock repurchase programs On November 3, 2015, the Company’s Board of Directors authorized a stock repurchase program ("Repurchase Program") to repurchase up to $ 25.0 million of the Company's 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 the Company in its discretion, using available cash resources. Shares of common stock repurchased by the Company under the Repurchase Program, if any, will be cancelled and, until reissued by the Company, will be deemed to be authorized but unissued shares of its common stock as required by Maryland law. The Repurchase Program may be suspended or discontinued by the Company at any time and without prior notice and the authorization does not obligate the Company to acquire any particular amount of common stock. The cost of the acquisition by the Company of shares of its 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. No shares were repurchased under the Repurchase Program during the three months 40 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 ended March 31, 2021 and 2020 and approximately $ 14.6 million of common stock remained authorized for future share repurchases under the Repurchase Program. On February 22, 2021, the Company's Board of Directors authorized a stock repurchase program (the "Preferred Repurchase Program") pursuant to which the Company's Board of Directors granted a repurchase authorization to acquire shares of its 8.25 % Series A Cumulative Redeemable Preferred Stock, its 8.00 % Series B Cumulative Redeemable Preferred Stock, and its 8.000 % Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock having an aggregate value of up to $ 20 million. No shares were repurchased under the Repurchase Program during the three months ended March 31, 2021. Equity distribution agreements On May 5, 2017, the Company entered into an equity distribution agreement with each of Credit Suisse Securities (USA) LLC and JMP Securities LLC (collectively, the "Sales Agents"), which the Company refers to as the "Equity Distribution Agreements," pursuant to which the Company may sell up to $ 100.0 million aggregate offering price of shares of its common stock from time to time through the Sales Agents under the Securities Act of 1933. The Equity Distribution Agreements were amended on May 22, 2018 in conjunction with the filing of the Company’s 2018 Registration Statement, described below. For the three months ended March 31, 2021, the Company issued 2.2 million shares of common stock under the Equity Distribution Agreements for net proceeds of approximately $ 10.0 million. For the three months ended March 31, 2020, the Company did no t issue any shares of common stock under the Equity Distribution Agreements. Since inception of the program, the Company has issued approximately 5.8 million shares of common stock under the Equity Distribution Agreements for gross proceeds of $ 45.0 million. Shelf registration statement On May 2, 2018, the Company filed a shelf registration statement, registering up to $ 750.0 million of its securities, including capital stock (the "2018 Registration Statement"). The 2018 Registration Statement became effective on May 18, 2018 and will expire on May 18, 2021. Preferred stock The Company’s Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock have no stated maturity and are not subject to any sinking fund or mandatory redemption. Under certain circumstances upon a change of control, the Company’s Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock are convertible to shares of the Company’s common stock. Holders of the Company’s Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock have no voting rights, except under limited conditions, and holders are entitled to receive cumulative cash dividends at the respective stated rate per annum before holders of the common stock are entitled to receive any cash dividends. The dividend rate of the Series A Preferred Stock and Series B Preferred Stock is 8.25 % and 8.00 % per annum, respectively, of the $ 25.00 per share liquidation preference. The initial dividend rate for the Series C Preferred Stock, from and including the date of original issue to, but not including, September 17, 2024, is 8.000 % per annum of the $ 25.00 per share liquidation preference. On and after September 17, 2024, dividends on the Series C Preferred Stock will accumulate at a percentage of the $ 25.00 liquidation preference equal to an annual floating rate of the then three-month LIBOR plus a spread of 6.476 % per annum. Shares of the Company’s Series A Preferred Stock and Series B Preferred Stock are currently redeemable at $ 25.00 per share plus accumulated and unpaid dividends (whether or not declared) exclusively at the Company’s option. Shares of the Company's Series C Preferred Stock are redeemable at $ 25.00 per share plus accumulated and unpaid dividends (whether or not declared) exclusively at the Company’s option commencing on September 17, 2024, or earlier under certain circumstances intended to preserve its qualification as a REIT for Federal income tax purposes. Dividends are payable quarterly in arrears on the 17th day of each March, June, September and December. The Company's Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock generally do not have any voting rights, subject to an exception in the event the Company fails to pay dividends on such stock for six or more quarterly periods (whether or not consecutive). Under such circumstances, holders of the Company's Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock voting together as a single class with the holders of all other classes or series of its preferred stock upon which like voting rights have been conferred and are exercisable and which are entitled to vote as a class with the Company's Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock will be entitled to vote to elect two additional directors to the Company’s Board of Directors until all unpaid dividends have been paid or declared and set apart for payment. In addition, certain material and adverse changes to the terms of any series of the Company's Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock cannot be made without the affirmative vote of holders of at least two-thirds of the outstanding shares of the series of the Company's Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock whose terms are being changed. 41 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 Dividends On March 27, 2020, the Company announced that its Board of Directors approved a suspension of the Company's quarterly dividends on its 8.25 % Series A Cumulative Redeemable Preferred Stock, 8.00 % Series B Cumulative Redeemable Preferred Stock, and 8.000 % Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, beginning with the preferred dividend that would have been declared in May 2020, in order to conserve capital and improve its liquidity position during the market volatility due to the COVID-19 pandemic 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. Under the terms of the Company's charter governing its series of preferred stock, the Company cannot pay cash dividends with respect to its common stock if dividends on its preferred stock are in arrears. On December 17, 2020, the Company paid its 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, the Company's Board of Directors declared a dividend of $ 0.03 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 the first quarter of 2021, the Company declared its preferred and common dividends in ordinary course. Refer to Note 8 for more information on dividends declared during the period. Exchange offers On August 14, 2020, the Company announced the commencement of an offer to exchange newly issued shares of common stock for up to 250,470 shares of its Series A Preferred Stock, up to 556,600 shares of its Series B Preferred Stock, and up to 556,600 shares of its Series C Preferred Stock. This offer had an expiration date of September 11, 2020. Based on the final count provided by the Exchange Agent, American Stock Transfer & Trust Company, LLC, a total of 42,820 shares of Series A Preferred Stock, 31,085 Series B Preferred Stock and 29,355 Series C Preferred Stock were validly tendered and not properly withdrawn prior to the expiration of the offer. The Company accepted all such 103,260 validly tendered shares of preferred stock, and issued in exchange a total of 516,300 shares of common stock in reliance upon the exemption from registration provided under Section 3(a)(9) of the Securities Act of 1933, as amended. On September 30, 2020, the Company agreed to issue an aggregate of 3,679,634 shares of its common stock and agreed to pay aggregate cash consideration of $ 6.3 million in exchange for 210,662 shares of Series A Preferred Stock, 404,187 shares of Series B Preferred Stock, and 427,467 shares of Series C Preferred Stock, pursuant to a privately negotiated exchange agreement with existing holders of the preferred stock. After the transaction closed, the Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock exchanged pursuant to the exchange agreement were reclassified as authorized but unissued shares of preferred stock without designation as to class or series. On October 2, 2020, the Company agreed to issue an aggregate of 900,000 shares of its common stock and agreed to pay aggregate cash consideration of $ 1.7 million in exchange for 260,000 shares of Series C Preferred Stock, pursuant to a privately negotiated exchange agreement with existing holders of the Series C Preferred Stock. After the transaction closed, the Series C Preferred Stock exchanged pursuant to the exchange agreement were reclassified as authorized but unissued shares of preferred stock without designation as to class or series. On March 17, 2021, the Company agreed to issue an aggregate of 2,812,388 shares of its common stock in exchange for 153,325 shares of Series A Preferred Stock and 350,609 shares of Series B Preferred Stock, pursuant to a privately negotiated exchange agreement with existing holders of the preferred stock. After the transaction closed, the Series A Preferred Stock and Series B Preferred Stock exchanged pursuant to the exchange agreement were reclassified as authorized but unissued shares of preferred stock without designation as to class or series. As of March 31, 2021, the Company had outstanding 1,663,193 shares of Series A Preferred Stock, 3,814,119 shares of Series B Preferred Stock, and 3,883,178 shares of Series C Preferred Stock. Common stock issuance to the Manager On September 24, 2020, the Company issued (i) 1,215,370 shares of common stock to the Manager in full satisfaction of the deferred base management fee of $ 3.8 million payable by the Company in respect to the first and second quarters of 2020 and (ii) 154,500 shares of common stock in satisfaction of $ 0.5 million of the base management fee payable by the Company in respect to the third quarter of 2020. The shares of Common Stock issued to the Manager were valued at $ 3.15 per share based 42 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) March 31, 2021 on the midpoint of the estimated range of the Company’s book value per share as of August 31, 2020. The remaining third quarter management fee was paid in the normal course of business. Refer to Note 10 for more information on this transaction. 12. Commitments and Contingencies From time to time, the Company may become involved in various claims and legal actions arising in the ordinary course of business. As of March 31, 2021, other than as set forth below, the Company was not involved in any material legal proceedings. On March 25, 2020, certain of the Company's subsidiaries filed a suit in federal district court in New York seeking to enjoin Royal Bank of Canada and one of its affiliates ("RBC") from selling certain assets that the Company had on repo with RBC and seeking damages ( AG MIT CMO et al. v. RBC (Barbados) Trading Corp. et al . , 20-cv-2547, U.S. District Court, Southern District of New York) . On March 31, 2020, the Company withdrew, as moot, its request for injunctive relief in the complaint based on the court's ruling on March 25, 2020 relating to the sale at issue. As previously disclosed in a Form 8-K filed with the SEC on June 2, 2020, the Company entered into a settlement agreement with RBC on May 28, 2020, pursuant to which the Company and RBC mutually released each other from further claims related to the repurchase agreements at issue. As part of the settlement, and to resolve all claims by either party under the repurchase agreements, the Company paid RBC $ 5.0 million in cash and issued to RBC a secured promissory note in the principal amount of $ 2.0 million. On June 11, 2020, the Company repaid the secured promissory note due to RBC in full. The Company recognized this settlement in the "Net realized gain/(loss)" line item on the consolidated statement of operations in the second quarter of 2020. As a result, the Company has satisfied all of its payment obligations to RBC under the settlement agreement and promissory note, and, as previously reported, the federal lawsuit has been voluntarily dismissed with prejudice. For the year ended December 31, 2020, the Company recorded a loss of $ 11.6 million related to deficiencies asserted by other counterparties. The Company recognized these losses in the "Net realized gain/(loss)" line item on the consolidated statement of operations. As of August 2020, MITT resolved and settled all deficiency claims with lenders. The below table details the Company's outstanding commitments as of March 31, 2021 (in thousands): Commitment type Date of Commitment Total Commitment Funded Commitment Remaining Commitment Commercial loan K (a) February 22, 2019 $ 20,000 $ 17,220 $ 2,780 LOTS (b) Various 32,345 20,604 11,741 MATH (b) January 29, 2021 22,295 — 22,295 Total $ 74,640 $ 37,824 $ 36,816 (a) The Company entered into commitments on commercial loans relating to construction projects. See Note 4 for further details. (b) Refer to Note 10 "Investments in debt and equity of affiliates" for more information regarding LOTS and MATH. 13. Subsequent Events Subsequent to quarter end, the Company purchased $ 154.2 million of Non-QM Loans, inclusive of $ 47.3 million which were purchased from Arc Home. The Company also amended or entered into financing arrangements to increase the maximum uncommitted borrowing capacity to finance Non-QM Loans to $ 800 million. On April 20, 2021, in accordance with the Company’s Affiliated Transactions Policy, the Company sold certain CMBS to an affiliate of the Manager. As of the date of the transaction, the real estate securities sold to the affiliate had a total fair value of $ 16.8 million. On May 5, 2021, the Company, alongside private funds under the management of Angelo Gordon, participated through its unconsolidated ownership interest in MATT in a rated Non-QM Loan securitization, in which Non-QM Loans with a fair value of $ 171.4 million were securitized. Certain senior tranches in the securitization were sold to third parties with the Company and private funds under the management of Angelo Gordon retaining the subordinate tranches. Subsequent to this transaction, MATT had securitized all Non-QM Loans previously acquired and its remaining portfolio consisted of the subordinate tranches retained from this securitization and past securitizations. During the current year, the Company has begun acquiring Non-QM Loans directly which are recorded in the "Residential mortgage loans, at fair value" line item on the consolidated balance sheets. 43