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) September 30, 2023 December 31, 2022 Assets Securitized residential mortgage loans, at fair value - $ 512,146 and $ 423,967 pledged as collateral, respectively (1) $ 4,343,371 $ 3,707,146 Residential mortgage loans, at fair value - $ 136,543 and $ 353,039 pledged as collateral, respectively 139,283 356,467 Residential mortgage loans held for sale, at fair value - $ 0 and $ 64,984 pledged as collateral, respectively — 64,984 Real estate securities, at fair value - $ 170,213 and $ 41,653 pledged as collateral, respectively 170,213 43,719 Investments in debt and equity of affiliates 60,320 71,064 Cash and cash equivalents 118,735 84,621 Restricted cash 20,527 14,182 Other assets 29,307 27,595 Total Assets $ 4,881,756 $ 4,369,778 Liabilities Securitized debt, at fair value (1) $ 3,831,515 $ 3,262,352 Financing arrangements 565,913 621,187 Dividend payable 3,639 3,846 Other liabilities (2) 30,267 19,593 Total Liabilities 4,431,334 3,906,978 Commitments and Contingencies (Note 12) Stockholders’ Equity Preferred stock - $ 227,991 aggregate liquidation preference 220,472 220,472 Common stock, par value $ 0.01 per share; 450,000 shares of common stock authorized and 20,219 and 21,284 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively 202 212 Additional paid-in capital 772,525 778,606 Retained earnings/(deficit) ( 542,777 ) ( 536,490 ) Total Stockholders’ Equity 450,422 462,800 Total Liabilities & Stockholders’ Equity $ 4,881,756 $ 4,369,778 (1) These balances relate to certain residential mortgage loans which were securitized resulting in the Company consolidating the variable interest entities that were created to facilitate these securitizations as the Company was determined to be the primary beneficiary. See Note 3 for additional details. (2) Refer to Note 7 and Note 10 for additional details on amounts payable to affiliates. The accompanying notes are an integral part of these unaudited consolidated financial statements. 3 AG Mortgage Investment Trust, Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited) (in thousands, except per share data) Three Months Ended Nine Months Ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Net Interest Income Interest income $ 64,211 $ 50,190 $ 182,802 $ 123,017 Interest expense 52,692 34,699 148,309 73,994 Total Net Interest Income 11,519 15,491 34,493 49,023 Other Income/(Loss) Net interest component of interest rate swaps 2,221 ( 996 ) 5,025 ( 5,849 ) Net realized gain/(loss) 7,127 50,981 9,171 60,072 Net unrealized gain/(loss) ( 8,768 ) ( 54,261 ) ( 257 ) ( 123,032 ) Total Other Income/(Loss) 580 ( 4,276 ) 13,939 ( 68,809 ) Expenses Management fee to affiliate (1) 2,054 2,064 6,190 5,984 Non-investment related expenses (1) 2,454 2,501 7,848 7,710 Investment related expenses (1) 2,347 2,568 6,905 6,889 Transaction related expenses (1) 7,597 5,325 9,700 14,939 Total Expenses 14,452 12,458 30,643 35,522 Income/(loss) before equity in earnings/(loss) from affiliates ( 2,353 ) ( 1,243 ) 17,789 ( 55,308 ) Equity in earnings/(loss) from affiliates 188 ( 1,626 ) 642 ( 9,486 ) Net Income/(Loss) ( 2,165 ) ( 2,869 ) 18,431 ( 64,794 ) Dividends on preferred stock ( 4,586 ) ( 4,586 ) ( 13,758 ) ( 13,758 ) Net Income/(Loss) Available to Common Stockholders $ ( 6,751 ) $ ( 7,455 ) $ 4,673 $ ( 78,552 ) Earnings/(Loss) Per Share of Common Stock Basic $ ( 0.33 ) $ ( 0.33 ) $ 0.23 $ ( 3.38 ) Diluted $ ( 0.33 ) $ ( 0.33 ) $ 0.23 $ ( 3.38 ) Weighted Average Number of Shares of Common Stock Outstanding Basic 20,219 22,394 20,508 23,250 Diluted 20,219 22,394 20,508 23,250 (1) Refer to Note 10 for additional details on related party transactions. 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 September 30, 2023 and September 30, 2022 Common Stock Preferred Stock Additional Paid-in Capital Retained Earnings/(Deficit) Shares Amount Total Balance at July 1, 2023 20,205 $ 202 $ 220,472 $ 772,438 $ ( 532,387 ) $ 460,725 Grant of restricted stock 14 — — 87 — 87 Common dividends declared — — — — ( 3,639 ) ( 3,639 ) Preferred dividends declared — — — — ( 4,586 ) ( 4,586 ) Net Income/(Loss) — — — — ( 2,165 ) ( 2,165 ) Balance at September 30, 2023 20,219 $ 202 $ 220,472 $ 772,525 $ ( 542,777 ) $ 450,422 Common Stock Preferred Stock Additional Paid-in Capital Retained Earnings/(Deficit) Shares Amount Total Balance at July 1, 2022 22,490 $ 225 $ 220,472 $ 785,610 $ ( 527,642 ) $ 478,665 Repurchase of common stock ( 385 ) ( 4 ) — ( 2,335 ) — ( 2,339 ) Grant of restricted stock 12 — — 80 — 80 Common dividends declared — — — — ( 4,655 ) ( 4,655 ) Preferred dividends declared — — — — ( 4,586 ) ( 4,586 ) Net Income/(Loss) — — — — ( 2,869 ) ( 2,869 ) Balance at September 30, 2022 22,117 $ 221 $ 220,472 $ 783,355 $ ( 539,752 ) $ 464,296 For the Nine Months Ended September 30, 2023 and September 30, 2022 Common Stock Preferred Stock Additional Paid-in Capital Retained Earnings/(Deficit) Shares Amount Total Balance at January 1, 2023 21,284 $ 212 $ 220,472 $ 778,606 $ ( 536,490 ) $ 462,800 Repurchase of common stock ( 1,110 ) ( 11 ) — ( 6,341 ) — ( 6,352 ) Grant of restricted stock 45 1 — 260 — 261 Common dividends declared — — — — ( 10,960 ) ( 10,960 ) Preferred dividends declared — — — — ( 13,758 ) ( 13,758 ) Net Income/(Loss) — — — — 18,431 18,431 Balance at September 30, 2023 20,219 $ 202 $ 220,472 $ 772,525 $ ( 542,777 ) $ 450,422 Common Stock Preferred Stock Additional Paid-in Capital Retained Earnings/(Deficit) Shares Amount Total Balance at January 1, 2022 23,908 $ 239 $ 220,472 $ 796,469 $ ( 446,800 ) $ 570,380 Repurchase of common stock ( 1,819 ) ( 18 ) — ( 13,354 ) — ( 13,372 ) Grant of restricted stock 28 — — 240 — 240 Common dividends declared — — — — ( 14,400 ) ( 14,400 ) Preferred dividends declared — — — — ( 13,758 ) ( 13,758 ) Net Income/(Loss) — — — — ( 64,794 ) ( 64,794 ) Balance at September 30, 2022 22,117 $ 221 $ 220,472 $ 783,355 $ ( 539,752 ) $ 464,296 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) Nine Months Ended September 30, 2023 September 30, 2022 Cash Flows from Operating Activities Net income/(loss) $ 18,431 $ ( 64,794 ) Adjustments to reconcile net income/(loss) to net cash provided by (used in) operating activities: Net amortization of premium/(discount) 6,684 3,816 Net realized (gain)/loss ( 9,171 ) ( 60,072 ) Net unrealized (gain)/loss 257 123,032 Equity based compensation expense 261 240 Equity in (earnings)/loss from affiliates ( 642 ) 9,486 Distributions of income from investments in debt and equity of affiliates 814 1,271 Change in operating assets/liabilities: Other assets ( 2,724 ) ( 5,740 ) Other liabilities 4,210 9,567 Net cash provided by (used in) operating activities 18,120 16,806 Cash Flows from Investing Activities Purchase of residential mortgage loans ( 951,478 ) ( 2,440,718 ) Purchase of real estate securities ( 289,557 ) ( 108,558 ) Investments in debt and equity of affiliates ( 4,107 ) ( 1,720 ) Proceeds from sales of residential mortgage loans 310,780 — Proceeds from sales of real estate securities 149,556 526,813 Principal repayments on residential mortgage loans 260,367 393,170 Principal repayments on real estate securities 11,163 20,342 Distributions received in excess of income from investments in debt and equity of affiliates 16,466 9,824 Net settlement of interest rate swaps and other instruments 21,346 103,553 Net settlement of TBAs ( 65 ) 2,789 Cash flows provided by (used in) other investing activities 3,939 2,865 Net cash provided by (used in) investing activities ( 471,590 ) ( 1,491,640 ) Cash Flows from Financing Activities Repurchase of common stock ( 6,352 ) ( 13,372 ) Net borrowings under (repayments of) financing arrangements ( 55,274 ) ( 841,978 ) Deferred financing costs paid ( 9 ) ( 310 ) Proceeds from issuance of securitized debt 878,298 2,659,283 Principal repayments on securitized debt ( 288,783 ) ( 320,502 ) Net collateral received from (paid to) derivative counterparty ( 9,026 ) 19,444 Dividends paid on common stock ( 11,167 ) ( 14,766 ) Dividends paid on preferred stock ( 13,758 ) ( 13,758 ) Net cash provided by (used in) financing activities 493,929 1,474,041 Net change in cash and cash equivalents and restricted cash 40,459 ( 793 ) Cash and cash equivalents and restricted cash, Beginning of Period 98,803 100,229 Cash and cash equivalents and restricted cash, End of Period $ 139,262 $ 99,436 6 Nine Months Ended September 30, 2023 September 30, 2022 Supplemental disclosure of cash flow information: Cash paid for interest on financing arrangements and securitized debt $ 133,716 $ 62,645 Cash paid for income taxes $ 225 $ 23 Supplemental disclosure of non-cash financing and investing activities: Common stock dividends declared but not paid $ 3,639 $ 4,655 Purchase price payable on loans $ — $ 794 Transfer from residential mortgage loans to other assets $ 3,108 $ 1,857 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: September 30, 2023 September 30, 2022 Cash and cash equivalents $ 118,735 $ 77,638 Restricted cash 20,527 21,798 Total cash, cash equivalents and restricted cash shown in the consolidated statement of cash flows $ 139,262 $ 99,436 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) September 30, 2023 1. Organization AG Mortgage Investment Trust, Inc. (the "Company") is a residential mortgage REIT with a focus on investing in a diversified risk-adjusted portfolio of residential mortgage-related assets in the U.S. mortgage market. The Company’s investment activities primarily include acquiring and securitizing newly-originated residential mortgage loans within the non-agency segment of the housing market. The Company obtains its assets through Arc Home, LLC ("Arc Home"), a residential mortgage loan originator in which the Company owns an approximate 44.6 % interest, and through other third-party origination partners. The Company’s assets, excluding its ownership in Arc Home, include Residential Investments and Agency RMBS. Currently, its Residential Investments primarily consist of newly originated Non-Agency Loans and Agency-Eligible Loans. The Company may invest in other types of residential mortgage loans and other mortgage related assets. The Company also invests in Residential Investments through its unconsolidated ownership interests in affiliates which are included in the "Investments in debt and equity of affiliates" line item on its consolidated balance sheets. The Company's asset classes are primarily comprised of the following: Asset Class Description Residential Investments Non-Agency Loans (1) • Non-Agency Loans are loans that do not conform to the underwriting guidelines of a government-sponsored enterprise ("GSE"). Non-Agency Loans consist of Qualified mortgage loans ("QM Loans") and Non-Qualified mortgage loans ("Non-QM Loans"). QM Loans are residential mortgage loans that comply with the Ability-To-Repay rules and related guidelines of the Consumer Finance Protection Bureau. Agency-Eligible Loans (1) • Agency-Eligible Loans are loans that are underwritten in accordance with GSE guidelines and are primarily secured by investment properties, but are not guaranteed by a GSE. Although these loans are underwritten in accordance with GSE guidelines and can be delivered to Fannie Mae and Freddie Mac, the Company includes these loans within its Non-Agency securitizations. Re- and Non-Performing Loans (1) • Performing, re-performing, and non-performing loans are residential mortgage loans collateralized by a first lien mortgaged property. Non-Agency Residential Mortgage-Backed Securities ("RMBS") (2) • Non-Agency RMBS represent fixed- and floating-rate RMBS issued by entities other than U.S. GSEs or agencies of the U.S. government. The mortgage loan collateral consists of either Non-Agency Loans or Agency-Eligible Loans. Agency RMBS (2) • Agency RMBS represent interests in pools of residential mortgage loans guaranteed by a GSE such as Fannie Mae or Freddie Mac, or an agency of the U.S. Government such as Ginnie Mae. (1) These investments are included in the "Securitized residential mortgage loans, at fair value," "Residential mortgage loans, at fair value," and "Residential mortgage loans held for sale, at fair value" line items on the consolidated balance sheets. (2) These investments are included in the "Real estate securities, at fair value" line item on the consolidated balance sheets. The Company conducts its business through one reportable segment, Loans and Securities, which reflects how the Company manages its business and analyzes and reports its results of operations. The Company was incorporated in the state of Maryland on March 1, 2011 and commenced operations in July 2011. 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 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 diversified credit and real estate investing platform within TPG Inc. ("TPG"). TPG (Nasdaq: TPG) is a leading global alternative asset management firm. 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) September 30, 2023 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. Proposed Acquisition of Western Asset Mortgage Capital Corporation On August 8, 2023, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Western Asset Mortgage Capital Corporation, a Delaware corporation ("WMC"), AGMIT Merger Sub, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company ("Merger Sub"), and, solely for the purposes set forth in the Merger Agreement, the Manager. Pursuant to, and subject to the terms and conditions set forth in the Merger Agreement, WMC will merge with and into Merger Sub, with Merger Sub surviving (the "Merger"). On November 7, 2023, the Company's stockholders approved the issuance of the Company's common stock in connection with the Merger with WMC at a special stockholders meeting. No further Company stockholder approval is required for the Merger. On November 7, 2023, WMC announced it adjourned its special stockholders meeting relating to the Merger until December 5, 2023, at 9:00 a.m., Pacific Time, online in a virtual-only meeting format, due to a lack of quorum and to allow further solicitation of proxies from WMC common stockholders for the approval of the Merger at such special stockholders meeting. The Merger is expected to close in the fourth quarter of 2023, subject to the satisfaction of certain customary conditions, including approval of WMC's common stockholders. Under the terms of the Merger Agreement, at the effective time of the Merger (the "Effective Time"), each outstanding share of WMC common stock will be converted into the right to receive the following (the "Per Share Merger Consideration"): (i) 1.498 shares, or approximately 9.2 million shares in aggregate, of the Company's common stock; and (ii) the per share portion of a cash payment from the Manager equal to the lesser of $ 7.0 million or approximately 9.9 % of the aggregate Per Share Merger Consideration. Cash will be paid in lieu of any fractional shares of the Company's common stock that would otherwise have been received as a result of the Merger. In addition, on August 8, 2023, the Company and the Manager entered into an amendment (the “MITT Management Agreement Amendment”) to the existing management agreement, pursuant to which (i) the base management fee will be reduced by $ 0.6 million for the first four quarters (i.e., resulting in an aggregate $ 2.4 million waiver of base management fees) following the Effective Time, beginning with the fiscal quarter in which the Effective Time occurs, and (ii) the Manager will waive its right to seek reimbursement from the Company for any expenses otherwise reimbursable by the Company under the management agreement in an amount equal to the excess, if any, of $ 7.0 million over the aggregate cash portion of the Per Share Merger Consideration paid by the Manager to the holders of WMC common stock in the Merger. The MITT Management Agreement Amendment will become effective automatically upon the closing of the Merger, and will have no force and effect if the Merger does not close. Further, in the Merger Agreement, the Company has agreed to take all necessary corporate action so that upon and after the Effective Time, the size of the Company's Board of Directors will be increased by two members, and M. Christian Mitchell and Lisa G. Quateman (the "WMC Director Designees") will be appointed to the Company's Board of Directors. The Company has further agreed to nominate the WMC Director Designees to the Company's Board of Directors at the next annual meeting following the Effective Time. Concurrently with the execution of the Merger Agreement, WMC terminated its merger agreement (the "TPT Merger Agreement") with Terra Property Trust, Inc. ("TPT"). In connection with such termination, the Company, on behalf of WMC, paid to TPT a termination fee of $ 3.0 million as required by the TPT Merger Agreement (the "TPT Termination Fee"). 9 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 2. Summary of significant accounting policies Consolidation and basis of presentation 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. For the three months ended September 30, 2022, the Company reclassified $ 2.5 million and $ 1.6 million of other operating expenses into the "Non-investment related expenses" and "Investment related expenses" line items on the consolidated statement of operations, respectively. For the nine months ended September 30, 2022, the Company reclassified $ 7.7 million and $ 3.9 million of other operating expenses into the "Non-investment related expenses" and "Investment related expenses" line items on the consolidated statement of operations, respectively. Furthermore, for the three and nine months ended September 30, 2022, the Company reclassified $ 1.0 million and $ 3.0 million of servicing fees into the "Investment related expenses" line item on the consolidated statement of operations, respectively. These expenses were reclassified to conform to the current year presentation of expenses. In the opinion of management, all adjustments considered necessary for a fair statement 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. Significant accounting policies There have been no significant changes to the Company's accounting policies included in Note 2 to the consolidated financial statements of the Company’s Form 10-K for the year ended December 31, 2022 . These unaudited consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes for the year ended December 31, 2022 included in the Company’s Form 10-K. 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. Investment consolidation An entity is a variable interest entity ("VIE") 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 Accounting Standards Codification ("ASC") 810-10, "Consolidation" are required to be consolidated by their primary beneficiary. The primary beneficiary of a VIE is 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 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. 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 10 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 ensuring that investors receive principal and/or interest cash flow on the investment in accordance with the terms of their investment agreement. The Company enters into securitization transactions collateralized by its Non-Agency Loans/Agency-Eligible Loans and re- and non-performing loans (the trusts in which these loans are deposited are referred to as "Non-Agency VIEs" and "RPL/NPL VIEs", respectively), which may result in the Company consolidating the respective VIEs that are created to facilitate these securitizations. Based on the evaluations of each VIE, the Company may conclude that the VIEs should be consolidated and, as a result, transferred assets of these VIEs would be 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 Non-Agency VIEs and RPL/NPL VIEs. 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 ASC 810-10 (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 Non-Agency VIEs and RPL/NPL VIEs 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 Non-Agency VIEs and RPL/NPL VIEs 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 3 for more detail regarding the Non-Agency VIEs and RPL/NPL VIEs and Note 5 for more detail related to the Company's determination of fair value for the assets and liabilities included within these VIEs. 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 and may be elected over time as reference rate reform activities occur. This ASU is effective as of March 12, 2020 and was amended by ASU 2022-06 to sunset on December 31, 2024. The ASU 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, 2024. 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 has transitioned from LIBOR to an alternative benchmark. The adoption of ASU 2020-04 and the LIBOR transition did not have a material impact on the consolidated financial statements. The Company's primary exposure to LIBOR has historically included its financing arrangements and derivative contracts. In addition, the Company's Series C Preferred Stock is set to transition to a floating rate in September of 2024. At the time of transition, the Company no longer had derivative contracts indexed to LIBOR and all LIBOR-based financing arrangements transitioned to alternative benchmark rates. The Company does not currently intend to amend the Series C Preferred Stock to change the existing LIBOR cessation fallback language. 11 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 3. Loans Residential mortgage loans The table below details information regarding the Company’s residential mortgage loan portfolio as of September 30, 2023 and December 31, 2022 ($ in thousands). The gross unrealized gains/(losses) in the table below represent inception to date gains/(losses). Unpaid Principal Balance Gross Unrealized Weighted Average September 30, 2023 Premium (Discount) Amortized Cost Gains Losses Fair Value Coupon Yield Life (Years) (1) Securitized residential mortgage loans, at fair value (2) Non-Agency Loans (3) $ 4,615,412 $ 50,676 $ 4,666,088 $ 4,843 $ ( 509,182 ) $ 4,161,749 5.18 % 5.14 % 9.81 Re- and Non-Performing Loans 223,136 ( 18,787 ) 204,349 144 ( 22,871 ) 181,622 3.81 % 6.34 % 6.08 Total Securitized residential mortgage loans, at fair value $ 4,838,548 $ 31,889 $ 4,870,437 $ 4,987 $ ( 532,053 ) $ 4,343,371 5.12 % 5.19 % 9.64 Residential mortgage loans, at fair value Non-Agency Loans $ 88,800 $ 1,427 $ 90,227 $ 173 $ ( 751 ) $ 89,649 8.22 % 7.44 % 3.82 Agency-Eligible Loans 46,227 758 46,985 — ( 91 ) 46,894 7.75 % 7.10 % 3.42 Re- and Non-Performing Loans 2,837 ( 1,745 ) 1,092 1,648 — 2,740 N/A 105.46 % 1.76 Total Residential mortgage loans, at fair value $ 137,864 $ 440 $ 138,304 $ 1,821 $ ( 842 ) $ 139,283 8.06 % 9.26 % 3.64 Total as of September 30, 2023 $ 4,976,412 $ 32,329 $ 5,008,741 $ 6,808 $ ( 532,895 ) $ 4,482,654 5.20 % 5.32 % 9.47 Unpaid Principal Balance Gross Unrealized Weighted Average December 31, 2022 Premium (Discount) Amortized Cost Gains Losses Fair Value Coupon Yield Life (Years) (1) Securitized residential mortgage loans, at fair value (2) Non-Agency Loans (3) $ 3,841,265 $ 63,576 $ 3,904,841 $ — $ ( 468,640 ) $ 3,436,201 4.82 % 4.65 % 10.20 Re- and Non-Performing Loans 325,120 ( 36,982 ) 288,138 1,972 ( 19,165 ) 270,945 3.68 % 6.66 % 6.33 Total Securitized residential mortgage loans, at fair value $ 4,166,385 $ 26,594 $ 4,192,979 $ 1,972 $ ( 487,805 ) $ 3,707,146 4.73 % 4.80 % 9.90 Residential mortgage loans, at fair value Non-Agency Loans (4) $ 406,294 $ ( 7,902 ) $ 398,392 $ 2,775 $ ( 30,006 ) $ 371,161 5.36 % 5.54 % 6.14 Agency-Eligible Loans (4) 48,657 18 48,675 94 ( 1,907 ) 46,862 6.00 % 5.99 % 4.73 Re- and Non-Performing Loans 3,520 ( 2,000 ) 1,520 1,908 — 3,428 N/A 72.78 % 1.87 Total Residential mortgage loans, at fair value $ 458,471 $ ( 9,884 ) $ 448,587 $ 4,777 $ ( 31,913 ) $ 421,451 5.43 % 6.13 % 5.96 Total as of December 31, 2022 $ 4,624,856 $ 16,710 $ 4,641,566 $ 6,749 $ ( 519,718 ) $ 4,128,597 4.80 % 4.93 % 9.51 (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 mortgage loans, periodic payments of principal, and prepayments of principal. (2) Refer to the "Variable interest entities" section below for additional details related to the assets and liabilities of VIEs consolidated on the Company's consolidated balance sheets. (3) Securitized Non-Agency Loans include loans that were considered to be Agency-Eligible prior to the Company's securitization. (4) Includes fair value of $ 46.8 million and $ 18.2 million of Non-Agency Loans and Agency-Eligible Loans, respectively, classified as held for sale and presented in the "Residential mortgage loans held for sale, at fair value" line item on the consolidated balance sheets as of December 31, 2022. 12 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 The following tables present information regarding credit quality of the Company's residential mortgage loans ($ in thousands). Unpaid Principal Balance Weighted Average (1)(2) Aging by Unpaid Principal Balance (1)(3) September 30, 2023 Loan Count (1) Original LTV Ratio Current FICO (4) Current 30-59 Days 60-89 Days 90+ Days Securitized residential mortgage loans Non-Agency Loans $ 4,615,412 10,869 69.18 % 748 $ 4,519,171 $ 39,219 $ 21,336 $ 35,686 Re- and Non-Performing Loans 223,136 1,532 79.73 % 656 153,564 19,517 6,942 43,113 Total Securitized residential mortgage loans $ 4,838,548 12,401 69.67 % 743 $ 4,672,735 $ 58,736 $ 28,278 $ 78,799 Residential mortgage loans Non-Agency Loans $ 88,800 153 75.09 % 745 $ 83,668 $ 1,582 $ 1,583 $ 1,967 Agency-Eligible Loans 46,227 110 72.76 % 773 46,227 — — — Re- and Non-Performing Loans (1) 2,837 N/A N/A N/A N/A N/A N/A N/A Total Residential mortgage loans $ 137,864 263 74.29 % 754 $ 129,895 $ 1,582 $ 1,583 $ 1,967 Total as of September 30, 2023 $ 4,976,412 12,664 69.80 % 744 $ 4,802,630 $ 60,318 $ 29,861 $ 80,766 Unpaid Principal Balance Weighted Average (1)(2) Aging by Unpaid Principal Balance (1)(3) December 31, 2022 Loan Count (1) Original LTV Ratio Current FICO (4) Current 30-59 Days 60-89 Days 90+ Days Securitized residential mortgage loans Non-Agency Loans $ 3,841,265 9,008 68.20 % 739 $ 3,789,748 $ 31,272 $ 8,661 $ 11,584 Re- and Non-Performing Loans 325,120 2,226 79.61 % 643 220,124 34,865 10,937 59,194 Total Securitized residential mortgage loans $ 4,166,385 11,234 69.09 % 731 $ 4,009,872 $ 66,137 $ 19,598 $ 70,778 Residential mortgage loans Non-Agency Loans $ 406,294 655 71.22 % 734 $ 399,036 $ 4,967 $ 1,404 $ 887 Agency-Eligible Loans 48,657 138 70.94 % 749 47,918 739 — — Re- and Non-Performing Loans (1) 3,520 N/A N/A N/A N/A N/A N/A N/A Total Residential mortgage loans $ 458,471 793 71.19 % 735 $ 446,954 $ 5,706 $ 1,404 $ 887 Total as of December 31, 2022 $ 4,624,856 12,027 69.29 % 731 $ 4,456,826 $ 71,843 $ 21,002 $ 71,665 (1) Loan count, weighted average, and aging data excludes the Re- and Non-Performing Loans subcategory of Residential mortgage loans above as there may be limited data available regarding the underlying collateral of these residual positions. (2) Amounts are weighted based on unpaid principal balance. (3) As of September 30, 2023, the Company had securitized residential mortgage loans and residential mortgage loans that were 90+ days delinquent with a fair value of $ 28.3 million and loans in the process of foreclosure with a fair value of $ 43.3 million. As of December 31, 2022, the Company had securitized residential mortgage loans and residential mortgage loans that were 90+ days delinquent with a fair value of $ 31.4 million and loans in the process of foreclosure with a fair value of $ 33.7 million. (4) Weighted average current FICO excludes borrowers where FICO scores were not available. Data is as of August 31, 2023 and November 30, 2022, respectively. During the three and nine months ended September 30, 2023, the Company purchased residential mortgage loans, as detailed below (in thousands). Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023 Unpaid Principal Balance Fair Value Unpaid Principal Balance Fair Value Non-Agency Loans $ 286,453 $ 291,196 $ 468,909 $ 476,674 Agency-Eligible Loans 418,248 414,560 473,749 471,223 Total $ 704,701 $ 705,756 $ 942,658 $ 947,897 13 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 The Company did no t sell any residential mortgage loans during the three and nine months ended September 30, 2022. During the three and nine months ended September 30, 2023, the Company sold residential mortgage loans as detailed below ($ in thousands). Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023 Number of Loans Proceeds Realized Gains Realized Losses Number of Loans Proceeds Realized Gains Realized Losses Non-Agency Loans 132 $ 73,778 $ 302 $ ( 739 ) 413 $ 220,558 $ 1,353 $ ( 11,884 ) Agency-Eligible Loans — — — — 47 18,474 69 ( 85 ) Re- and Non- Performing Loans 560 68,693 3,729 ( 4,068 ) 560 68,693 3,729 ( 4,068 ) The Company’s residential mortgage loan portfolio consists of mortgage loans on residential real estate located throughout the United States. The following is a summary of the geographic concentration of credit risk as of September 30, 2023 and December 31, 2022 and includes states where the exposure is greater than 5% of the fair value the Company's residential mortgage loan portfolio. Geographic Concentration of Credit Risk (1) September 30, 2023 December 31, 2022 California 32 % 33 % New York 14 % 16 % Florida 11 % 11 % Texas 6 % 5 % New Jersey 5 % 6 % (1) Excludes the Re- and Non-Performing Loans subcategory of Residential mortgage loans above as there may be limited data available regarding the underlying collateral of these residual positions. The following is a summary of the changes in the accretable portion of the discount for the Company’s securitized re- and non-performing loan portfolio for the three and nine months ended September 30, 2023 and 2022, which is determined by the Company’s estimate of undiscounted principal expected to be collected in excess of the amortized cost of the mortgage loans (in thousands). Three Months Ended Nine Months Ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Beginning Balance $ 38,477 $ 43,901 $ 42,237 $ 46,521 Accretion ( 1,127 ) ( 1,587 ) ( 3,698 ) ( 5,012 ) Reclassifications from/(to) non-accretable difference ( 115 ) 1,579 ( 1,088 ) 2,384 Disposals ( 13,655 ) ( 141 ) ( 13,871 ) ( 141 ) Ending Balance $ 23,580 $ 43,752 $ 23,580 $ 43,752 14 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 Variable interest entities The following table details certain information related to the assets and liabilities of the Non-Agency VIEs as of September 30, 2023 and December 31, 2022 ($ in thousands). September 30, 2023 December 31, 2022 Carrying Value Weighted Average Carrying Value Weighted Average Yield Life (Years) (1) Yield Life (Years) (1) Assets Securitized residential mortgage loans, at fair value (2) $ 4,161,749 5.14 % 9.81 $ 3,436,201 4.65 % 10.20 Other assets 23,100 15,350 Total Assets $ 4,184,849 $ 3,451,551 Liabilities Securitized debt, at fair value (2) (3) $ 3,718,992 4.69 % 6.87 $ 3,078,593 4.18 % 7.49 Other liabilities 14,692 10,956 Total Liabilities $ 3,733,684 $ 3,089,549 Total Equity (4) $ 451,165 $ 362,002 (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) Securitized residential mortgage loans in Non-Agency VIEs include loans that were considered to be Agency-Eligible prior to the Company's securitization. (3) 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 Non-Agency VIEs. (4) As of September 30, 2023 and December 31, 2022, the Company had outstanding financing arrangements of $ 242.9 million and $ 197.9 million, respectively, collateralized by $ 444.2 million and $ 357.6 million of the Company's retained interests in the Non-Agency VIEs, respectively. See Note 6 for more detail regarding the Company's financing arrangements. The following table details certain information related to the assets and liabilities of the RPL/NPL VIEs as of September 30, 2023 and December 31, 2022 ($ in thousands). September 30, 2023 December 31, 2022 Carrying Value Weighted Average Carrying Value Weighted Average Yield Life (Years) (1) Yield Life (Years) (1) Assets Securitized residential mortgage loans, at fair value $ 181,622 6.34 % 6.08 $ 270,945 6.66 % 6.33 Restricted cash 9 1,194 Other assets 1,694 3,714 Total Assets $ 183,325 $ 275,853 Liabilities Securitized debt, at fair value (2) $ 112,523 3.20 % 3.87 $ 183,759 3.10 % 3.13 Other liabilities 335 386 Total Liabilities $ 112,858 $ 184,145 Total Equity (3) $ 70,467 $ 91,708 (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) 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 RPL/NPL VIEs. (3) As of September 30, 2023 and December 31, 2022, the Company had outstanding financing arrangements of $ 46.6 million and $ 34.2 million, respectively, collateralized by $ 68.0 million and $ 66.4 million of the Company's retained interests in the RPL/NPL VIEs, respectively. See Note 6 for more detail regarding the Company's financing arrangements. 15 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 4. Real Estate Securities The following tables detail the Company’s real estate securities portfolio as of September 30, 2023 and December 31, 2022 ($ in thousands). The gross unrealized gains/(losses) in the tables below represent inception to date unrealized gains/(losses). Current Face Premium / (Discount) Amortized Cost Gross Unrealized Weighted Average September 30, 2023 Gains Losses Fair Value Coupon (1) Yield Non-Agency RMBS GCAT Non-Agency RMBS (2) (3) GCAT Non-Agency Securities $ 14,894 $ ( 174 ) $ 14,720 $ — $ ( 4,603 ) $ 10,117 4.35 % 4.66 % GCAT Non-Agency RMBS Interest Only (4) N/A N/A 2,534 1,845 — 4,379 0.52 % 34.81 % Total GCAT Non-Agency RMBS 14,894 ( 174 ) 17,254 1,845 ( 4,603 ) 14,496 1.40 % 13.77 % Non-Agency Securities (3) 30,313 ( 9,278 ) 21,035 281 ( 601 ) 20,715 3.78 % 7.93 % Total Non-Agency RMBS $ 45,207 $ ( 9,452 ) $ 38,289 $ 2,126 $ ( 5,204 ) $ 35,211 2.17 % 10.34 % Agency RMBS 30 Year Fixed Rate $ 120,102 $ 1,466 $ 121,568 $ — $ ( 2,632 ) $ 118,936 6.00 % 5.79 % Interest Only (4) N/A N/A 16,365 301 ( 600 ) 16,066 3.93 % 10.13 % Total Agency RMBS $ 120,102 $ 1,466 $ 137,933 $ 301 $ ( 3,232 ) $ 135,002 5.17 % 6.31 % Total as of September 30, 2023 $ 165,309 $ ( 7,986 ) $ 176,222 $ 2,427 $ ( 8,436 ) $ 170,213 4.21 % 7.14 % Current Face Premium / (Discount) Amortized Cost Gross Unrealized Weighted Average December 31, 2022 Gains Losses Fair Value Coupon (1) Yield Non-Agency RMBS GCAT Non-Agency RMBS (2) (3) GCAT Non-Agency Securities $ 14,894 $ ( 201 ) $ 14,693 $ — $ ( 4,834 ) $ 9,859 4.34 % 4.60 % GCAT Non-Agency RMBS Interest Only (4) N/A N/A 2,838 2,220 — 5,058 0.38 % 34.42 % Total GCAT Non-Agency RMBS 14,894 ( 201 ) 17,531 2,220 ( 4,834 ) 14,917 1.23 % 14.71 % Non-Agency Securities (3) 16,819 ( 6,674 ) 10,145 28 ( 495 ) 9,678 3.22 % 8.47 % Total Non-Agency RMBS $ 31,713 $ ( 6,875 ) $ 27,676 $ 2,248 $ ( 5,329 ) $ 24,595 1.62 % 12.26 % Agency RMBS Interest Only (4) N/A N/A $ 19,771 $ 28 $ ( 675 ) $ 19,124 2.87 % 7.54 % Total as of December 31, 2022 $ 31,713 $ ( 6,875 ) $ 47,447 $ 2,276 $ ( 6,004 ) $ 43,719 2.37 % 10.20 % (1) Equity residual investments with a zero coupon rate are excluded from this calculation. (2) GCAT Non-Agency RMBS are securities issued under Gold Creek Asset Trust ("GCAT"), which is the Angelo Gordon securitization shelf under which the Company or private funds under the management of Angelo Gordon securitize loans. Refer to the "Unconsolidated variable interest entities" section below for additional details on these securities. (3) Includes Non-Agency Securities and Non-Agency RMBS Interest Only securities collateralized by non-QM loans and agency-eligible loans. (4) Interest Only have no principal balances and bear interest based on a notional balance. The notional balance is used solely to determine interest distributions on the interest only classes of securities. As of September 30, 2023, the notional balances for the GCAT Non-Agency RMBS Interest Only and Agency RMBS Interest Only line items were $ 98.9 million and $ 79.9 million, respectively. As of December 31, 2022, the notional balances for the GCAT Non-Agency RMBS Interest Only and Agency RMBS Interest Only line items were $ 108.5 million and $ 127.4 million, respectively. 16 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 The following tables summarize the Company's real estate securities according to their projected weighted average life classifications as of September 30, 2023 and December 31, 2022 ($ in thousands). Non-Agency RMBS Agency RMBS September 30, 2023 Weighted Average Life (1) Fair Value Amortized Cost Weighted Average Coupon (2) Fair Value Amortized Cost Weighted Average Coupon Greater than one year and less than or equal to five years $ 4,933 $ 3,093 0.61 % $ — $ — — % Greater than five years and less than or equal to ten years 3,838 3,956 4.68 % 135,002 137,933 5.17 % Greater than ten years 26,440 31,240 3.82 % — — — % Total as of September 30, 2023 $ 35,211 $ 38,289 2.17 % $ 135,002 $ 137,933 5.17 % Non-Agency RMBS Agency RMBS December 31, 2022 Weighted Average Life (1) Fair Value Amortized Cost Weighted Average Coupon (2) Fair Value Amortized Cost Weighted Average Coupon Greater than one year and less than or equal to five years $ 5,058 $ 2,838 0.38 % $ — $ — — % Greater than five years and less than or equal to ten years — — — % 19,124 19,771 2.87 % Greater than ten years 19,537 24,838 3.75 % — — — % Total as of December 31, 2022 $ 24,595 $ 27,676 1.62 % $ 19,124 $ 19,771 2.87 % (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 securities with a zero coupon rate are excluded from this calculation. The Company sold real estate securities during the three and nine months ended September 30, 2023 and 2022, as detailed below ($ in thousands). Three Months Ended Nine Months Ended Number of Securities Proceeds Realized Gains Realized Losses Number of Securities Proceeds Realized Gains Realized Losses September 30, 2023 3 $ 149,143 $ 391 $ ( 429 ) 3 $ 149,143 $ 391 $ ( 429 ) September 30, 2022 2 13,017 168 — 18 526,258 736 ( 35,240 ) Unconsolidated variable interest entities The Company's Non-Agency RMBS includes certain securities retained from a rated Non-QM Loan securitization the Company participated in alongside a private fund under the management of Angelo Gordon and issued under the GCAT shelf. Upon evaluating its investment in the VIE, the Company determined it was not the primary beneficiary and, as a result, did not consolidate the securitization trust. The Company has a 40.9 % interest in the retained subordinate tranches which represents its continuing involvement in the securitization trust. The following table summarizes the Company’s investment in unconsolidated VIEs as of September 30, 2023 and December 31, 2022 (in thousands). September 30, 2023 December 31, 2022 Current Face Fair Value Current Face Fair Value Retained interest in unconsolidated VIEs GCAT Non-Agency Securities $ 14,894 $ 10,117 $ 14,894 $ 9,859 GCAT Non-Agency RMBS Interest Only (1) N/A 4,379 N/A 5,058 Total retained interest in unconsolidated VIEs (2) (3) $ 14,894 $ 14,496 $ 14,894 $ 14,917 (1) Interest Only have no principal balances and bear interest based on a notional balance. The notional balance is used solely to determine interest distributions on the interest only classes of securities. As of September 30, 2023 and December 31, 2022, the notional balances for the GCAT Non-Agency RMBS Interest Only line item were $ 98.9 million and $ 108.5 million, respectively. (2) Maximum loss exposure from the Company’s involvement with unconsolidated VIEs pertains to the fair value of the securities retained from these VIEs. The Company has no obligation to provide any other explicit or implicit support to the securitization trust. (3) As of September 30, 2023 and December 31, 2022, the Company held securities exposed to the first loss of the securitization with a fair value of $ 3.6 million and $ 4.1 million, respectively. 17 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 The following table summarizes information regarding the residential mortgage loans transferred to the Company’s unconsolidated VIEs as of September 30, 2023 and December 31, 2022 ($ in thousands). Assets transferred to unconsolidated VIEs: September 30, 2023 December 31, 2022 Total unpaid principal balance of loans outstanding (1) $ 120,858 $ 132,509 Weighted average coupon on loans outstanding 5.55 % 5.62 % Percent of unpaid principal balance greater than 90 days delinquent (2) 3.12 % 1.32 % (1) The Company contributed approximately 40.9 % of the unpaid principal balance into the securitization trust. (2) As of September 30, 2023, 1.67 % of loans were 90+ days delinquent and 1.45 % of loans were in process of foreclosure. As of December 31, 2022, 1.32 % of loans were 90+ days delinquent and no loans were in process of foreclosure. 5. Fair value measurements The fair value of the Company's financial instruments is determined in accordance with the provisions of 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. Level 1 inputs are observable inputs that reflect quoted prices for identical assets or liabilities in active markets. Level 2 inputs are observable inputs other than quoted prices and may include quoted prices for similar assets and liabilities in active markets. Level 3 inputs are 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 and 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. In certain cases, inputs used to measure fair value fall into different levels of the fair value hierarchy. In such cases, the level at which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. 18 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 The following tables present the Company’s financial instruments measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022 (in thousands). Fair Value at September 30, 2023 Level 1 Level 2 Level 3 Total Assets: Securitized residential mortgage loans $ — $ — $ 4,343,371 $ 4,343,371 Residential mortgage loans — 785 138,498 139,283 Non-Agency RMBS — 20,715 14,496 35,211 Agency RMBS — 135,002 — 135,002 Derivative assets (1) — 10,892 640 11,532 Cash equivalents (2) 442 — — 442 AG Arc (3) — — 35,203 35,203 Total Assets Measured at Fair Value $ 442 $ 167,394 $ 4,532,208 $ 4,700,044 Liabilities: Securitized debt $ — $ — $ ( 3,831,515 ) $ ( 3,831,515 ) Derivative liabilities — — ( 1,658 ) ( 1,658 ) Total Liabilities Measured at Fair Value $ — $ — $ ( 3,833,173 ) $ ( 3,833,173 ) Fair value at December 31, 2022 Level 1 Level 2 Level 3 Total Assets: Securitized residential mortgage loans $ — $ — $ 3,707,146 $ 3,707,146 Residential mortgage loans (4) — 754 420,697 421,451 Non-Agency RMBS — 9,678 14,917 24,595 Agency Interest Only — 19,124 — 19,124 Derivative assets (1) — 18,401 98 18,499 Cash equivalents (2) 442 — — 442 AG Arc (3) — — 39,680 39,680 Total Assets Measured at Fair Value $ 442 $ 47,957 $ 4,182,538 $ 4,230,937 Liabilities: Securitized debt $ — $ — $ ( 3,262,352 ) $ ( 3,262,352 ) Derivative liabilities — — ( 9 ) ( 9 ) Total Liabilities Measured at Fair Value $ — $ — $ ( 3,262,361 ) $ ( 3,262,361 ) (1) As of September 30, 2023, the Company applied a reduction in fair value of $ 10.7 million to its interest rate swap assets related to variation margin with a corresponding increase in restricted cash. As of December 31, 2022, the Company applied a reduction in fair value of $ 17.3 million to its interest rate swap assets related to variation margin with a corresponding increase in restricted cash, net of collateral posted by the Company's derivative counterparties. Derivative assets and liabilities are included in the "Other assets" and "Other liabilities" line items on the consolidated balance sheets, respectively. Refer to Note 7 for more information on the Company's derivatives. (2) The Company classifies highly liquid investments with original maturities of three months or less from the date of purchase as cash equivalents. Cash equivalents may include cash invested in money market funds and are carried at cost, which approximates fair value. (3) 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. (4) Includes Residential mortgage loans held for sale as of December 31, 2022. 19 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 The valuation of the Company’s residential mortgage loans, securitized debt relating to the Non-Agency VIEs and RPL/NPL VIEs, certain securities, and forward purchase commitments is determined by the Manager using third-party pricing services where available, valuation analyses from third-party pricing service providers, or model-based pricing. 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. 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 Company also considers 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 residential mortgage loans, securitized debt, and forward purchase commitments include market-implied discount rates, projections of default rates, delinquency rates, prepayment rates, loss severity, recovery rates, reperformance rates, timeline to liquidation, and, for forward purchase commitments, pull-through rates. The Company and third-party pricing service providers use loan level data and macro-economic inputs to generate loss adjusted cash flows and other information in determining the fair value. Because of the inherent uncertainty of such valuation, the fair value established for mortgage loans, securitized debt, and forward purchase commitments held by the Company may differ from the fair value that would have been established if a ready market existed for these mortgage loans. Fair values for the Company’s securities and derivatives may be based upon prices obtained from third-party pricing services or broker quotations. The valuation methodology of the Company’s third-party pricing services incorporates commonly used market pricing methods, including a spread measurement to various indices, 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. The Company's investment in Arc Home is evaluated on a periodic basis using a market approach. In applying the market approach, fair value is determined by multiplying Arc Home's book value by a relevant valuation multiple observed based on a range of comparable public entities or transactions, adjusted by management as appropriate for differences between the investment and the referenced comparables. The evaluation also considers the underlying financial performance of Arc Home, general economic conditions, and relevant trends within the mortgage banking industry. Changes in the market environment and other events that may occur over the life of these investments may cause the gains or losses ultimately realized to be different than the valuations currently estimated. The significant unobservable inputs used in the fair value measurement of the Company’s loans and 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. The significant unobservable input used in the fair value measurement of the Company’s investment in Arc Home is the book value multiple. Significant increases (decreases) in the multiple applied would result in a significantly higher (lower) fair value measurement. The Company did not have any transfers of assets or liabilities between Levels 1 and 2 of the fair value hierarchy during the three and nine months ended September 30, 2023 and 2022. The Company did not have any transfers between the Levels 2 and 3 of the fair value hierarchy during the three and nine months ended September 30, 2023 and 2022. 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. 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. 20 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 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 September 30, 2023 (in thousands) Residential Mortgage Loans (1) Non-Agency RMBS Derivative Assets (2) AG Arc Securitized Debt Derivative Liabilities (2) Beginning balance $ 4,103,610 $ 14,667 $ 926 $ 37,447 $ ( 3,402,060 ) $ ( 1,235 ) Purchases 704,680 — — — — — Issuances of Securitized Debt — — — — ( 639,653 ) — Capital distributions — — — ( 224 ) — — Proceeds from sales or settlements ( 142,471 ) — ( 1,675 ) — — 1,871 Principal repayments ( 89,023 ) — — — 127,404 — Included in net income: Net premium and discount amortization (3) 511 ( 101 ) — — ( 2,999 ) — Net realized gain/(loss) ( 895 ) — 1,675 — — ( 1,871 ) Net unrealized gain/(loss) ( 92,367 ) ( 70 ) ( 286 ) — 85,793 ( 423 ) Equity in earnings/(loss) from affiliates — — — ( 2,020 ) — — Other (4) ( 2,176 ) — — — — — Ending Balance $ 4,481,869 $ 14,496 $ 640 $ 35,203 $ ( 3,831,515 ) $ ( 1,658 ) Change in unrealized appreciation/(depreciation) for level 3 assets/liabilities still held as of September 30, 2023: Net premium and discount amortization (3) 368 ( 101 ) — — ( 2,999 ) — Net unrealized gain/(loss) ( 93,712 ) ( 70 ) 640 — 85,794 ( 1,658 ) Equity in earnings/(loss) from affiliates — — — ( 2,020 ) — — Three Months Ended September 30, 2022 (in thousands) Residential Mortgage Loans (1) Non-Agency RMBS Derivative Assets (2) AG Arc Securitized Debt Derivative Liabilities (2) Beginning balance $ 3,569,557 $ 15,579 $ 2,211 $ 50,170 $ ( 2,467,766 ) $ ( 7,058 ) Purchases 883,256 — — — — — Issuances of Securitized Debt — — — — ( 763,294 ) — Capital distributions — — — ( 1,070 ) — — Proceeds from sales or settlements — — ( 1,792 ) — — 6,709 Principal repayments ( 95,895 ) ( 43 ) — — 82,826 — Included in net income: Net premium and discount amortization (3) 831 ( 212 ) — — ( 1,500 ) — Net realized gain/(loss) 126 — 1,792 — — ( 6,709 ) Net unrealized gain/(loss) ( 154,371 ) ( 205 ) ( 1,871 ) — 124,606 5,515 Equity in earnings/(loss) from affiliates — — — ( 2,512 ) — — Other (4) ( 1,139 ) — — — — — Ending Balance $ 4,202,365 $ 15,119 $ 340 $ 46,588 $ ( 3,025,128 ) $ ( 1,543 ) Change in unrealized appreciation/(depreciation) for level 3 assets/liabilities still held as of September 30, 2022: Net premium and discount amortization (3) 882 ( 183 ) — — ( 1,500 ) — Net unrealized gain/(loss) ( 154,569 ) ( 229 ) 340 — 124,606 ( 1,543 ) Equity in earnings/(loss) from affiliates — — — ( 2,512 ) — — (1) Includes Securitized residential mortgage loans, Securitized residential mortgage loans held for sale, and Residential mortgage loans held for sale. (2) Derivative assets and derivative liabilities are included in the "Other assets" and "Other liabilities" lines, respectively, on the consolidated balance sheets. (3) Included in the "Interest Income" and "Interest Expense" line items on the consolidated statement of operations for assets and liabilities, respectively. (4) Includes transfers of residential mortgage loans to real estate owned as well as activity related to advances. 21 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 Nine months ended September 30, 2023 (in thousands) Residential Mortgage Loans (1) Non-Agency RMBS Derivative Assets (2) AG Arc Securitized Debt Derivative Liabilities (2) Beginning balance $ 4,127,843 $ 14,917 $ 98 $ 39,680 $ ( 3,262,352 ) $ ( 9 ) Purchases 948,164 — — — — — Issuances of Securitized Debt — — — — ( 874,407 ) — Capital distributions — — — ( 626 ) — — Proceeds from sales or settlements ( 307,725 ) — ( 4,232 ) — — 2,505 Principal repayments ( 260,367 ) — — — 288,760 — Included in net income: Net premium and discount amortization (3) 2,014 ( 274 ) — — ( 8,862 ) — Net realized gain/(loss) ( 11,109 ) — 4,232 — — ( 2,505 ) Net unrealized gain/(loss) ( 13,286 ) ( 147 ) 542 — 25,346 ( 1,649 ) Equity in earnings/(loss) from affiliates — — — ( 3,851 ) — — Other (4) ( 3,665 ) — — — — — Ending Balance $ 4,481,869 $ 14,496 $ 640 $ 35,203 $ ( 3,831,515 ) $ ( 1,658 ) Change in unrealized appreciation/(depreciation) for level 3 assets/liabilities still held as of September 30, 2023: Net premium and discount amortization (3) 1,166 ( 274 ) — — ( 8,862 ) — Net unrealized gain/(loss) ( 23,891 ) ( 147 ) 640 — 27,137 ( 1,658 ) Equity in earnings/(loss) from affiliates — — — ( 3,851 ) — — Nine months ended September 30, 2022 (in thousands) Residential Mortgage Loans (1) Non-Agency RMBS Derivative Assets (2) AG Arc Securitized Debt Derivative Liabilities (2) Beginning balance $ 2,634,191 $ 18,757 $ — $ 53,435 $ ( 999,215 ) $ ( 79 ) Purchases 2,416,221 — — — — — Issuances of Securitized Debt — — — — ( 2,650,616 ) — Capital distributions — — — ( 1,070 ) — — Proceeds from sales or settlements — — ( 2,208 ) — — 14,514 Principal repayments ( 393,170 ) ( 664 ) — — 320,502 — Included in net income: Net premium and discount amortization (3) ( 1,528 ) ( 582 ) — — ( 2,101 ) — Net realized gain/(loss) 69 — 2,208 — — ( 14,514 ) Net unrealized gain/(loss) ( 451,532 ) ( 2,392 ) 340 — 306,302 ( 1,464 ) Equity in earnings/(loss) from affiliates — — — ( 5,777 ) — — Other (4) ( 1,886 ) — — — — — Ending Balance $ 4,202,365 $ 15,119 $ 340 $ 46,588 $ ( 3,025,128 ) $ ( 1,543 ) Change in unrealized appreciation/(depreciation) for level 3 assets/liabilities still held as of September 30, 2022: Net premium and discount amortization (3) ( 3,695 ) ( 571 ) — — ( 2,101 ) — Net unrealized gain/(loss) ( 451,598 ) ( 2,304 ) 340 — 306,302 ( 1,543 ) Equity in earnings/(loss) from affiliates — — — ( 5,777 ) — — (1) Includes Securitized residential mortgage loans, Securitized residential mortgage loans held for sale, and Residential mortgage loans held for sale. (2) Derivative assets and derivative liabilities are included in the "Other assets" and "Other liabilities" lines, respectively, on the consolidated balance sheets. (3) Included in the "Interest Income" and "Interest Expense" line items on the consolidated statement of operations for assets and liabilities, respectively. (4) Includes transfers of residential mortgage loans to real estate owned as well as activity related to advances. 22 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 The following table presents 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 as of September 30, 2023 and December 31, 2022 ($ in thousands). September 30, 2023 December 31, 2022 Valuation Technique Unobservable Input Fair Value Range (Weighted Average) (1) Fair Value Range (Weighted Average) (1) Securitized Residential Mortgage Loans Yield 4.75 % - 7.32 % ( 6.69 %) 4.75 % - 7.32 % ( 6.40 %) Discounted Cash Flow Projected Collateral Prepayments $ 4,343,371 3.53 % - 10.44 % ( 5.80 %) $ 3,707,146 4.81 % - 10.19 % ( 6.44 %) Projected Collateral Losses 0.04 % - 1.85 % ( 0.20 %) 0.05 % - 1.40 % ( 0.22 %) Projected Collateral Severities - 10.40 % - 26.00 % ( 17.70 %) - 4.16 % - 20.00 % ( 15.40 %) Residential Mortgage Loans (2) Yield 6.92 % - 13.75 % ( 7.70 %) 6.29 % - 9.82 % ( 7.16 %) Discounted Cash Flow Projected Collateral Prepayments $ 138,498 3.33 % - 39.00 % ( 22.88 %) $ 418,023 1.38 % - 31.28 % ( 16.37 %) Projected Collateral Losses 0.00 % - 13.42 % ( 0.38 %) 0.00 % - 14.44 % ( 0.48 %) Projected Collateral Severities - 22.75 % - 44.02 % ( 10.15 %) - 2.64 % - 10.19 % ( 9.99 %) Consensus Pricing Offered Quotes $ — N/A - N/A (N/A) $ 2,674 93.46 - 107.05 ( 101.11 ) Non-Agency RMBS Yield 6.85 % - 14.00 % ( 10.55 %) 7.18 % - 14.00 % ( 10.59 %) Discounted Cash Flow Projected Collateral Prepayments $ 14,496 5.49 % - 5.49 % ( 5.49 %) $ 14,917 8.14 % - 8.14 % ( 8.14 %) Projected Collateral Losses 0.33 % - 0.33 % ( 0.33 %) 0.18 % - 0.18 % ( 0.18 %) Projected Collateral Severities 10.00 % - 10.00 % ( 10.00 %) 10.00 % - 10.00 % ( 10.00 %) Derivative Assets (3) Yield 7.11 % - 9.04 % ( 7.67 %) 6.69 % - 7.68 % ( 7.54 %) Discounted Cash Flow Projected Collateral Prepayments $ 640 11.62 % - 31.91 % ( 22.29 %) $ 98 12.63 % - 34.19 % ( 26.71 %) Projected Collateral Losses 0.00 % - 1.68 % ( 0.36 %) 0.01 % - 0.96 % ( 0.39 %) Projected Collateral Severities 10.00 % - 10.00 % ( 10.00 %) 10.00 % - 10.00 % ( 10.00 %) Pull Through Percentages 60.00 % - 100.00 % ( 84.80 %) 55.00 % - 100.00 % ( 72.78 %) AG Arc Comparable Multiple Book Value Multiple $ 35,203 0.89 x - 0.89 x ( 0.89 x) $ 39,680 0.94 x - 0.94 x ( 0.94 x) Securitized Debt Yield 5.57 % - 15.00 % ( 6.36 %) 5.25 % - 15.00 % ( 6.07 %) Discounted Cash Flow Projected Collateral Prepayments $ ( 3,831,515 ) 3.53 % - 10.44 % ( 5.75 %) $ ( 3,262,352 ) 4.81 % - 10.19 % ( 6.36 %) Projected Collateral Losses 0.04 % - 0.42 % ( 0.18 %) 0.05 % - 1.40 % ( 0.19 %) Projected Collateral Severities 7.75 % - 26.00 % ( 18.10 %) - 4.16 % - 20.00 % ( 15.81 %) Derivative Liabilities (3) Yield 7.15 % - 8.18 % ( 7.58 %) 7.29 % - 7.61 % ( 7.36 %) Discounted Cash Flow Projected Collateral Prepayments $ ( 1,658 ) 10.75 % - 34.37 % ( 26.15 %) $ ( 9 ) 21.51 % - 31.31 % ( 27.92 %) Projected Collateral Losses 0.00 % - 0.62 % ( 0.05 %) 0.01 % - 0.46 % ( 0.16 %) Projected Collateral Severities 10.00 % - 10.00 % ( 10.00 %) 10.00 % - 10.00 % ( 10.00 %) Pull Through Percentages 60.00 % - 100.00 % ( 88.75 %) 100.00 % - 100.00 % ( 100.00 %) (1) Amounts are weighted based on fair value. (2) Includes Residential mortgage loans held for sale as of December 31, 2022. (3) Derivative assets and derivative liabilities are included in the "Other assets" and "Other liabilities" line items, respectively, on the consolidated balance sheets. 23 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 6. Financing The following table presents a summary of the Company's financing as of September 30, 2023 and December 31, 2022 ($ in thousands). September 30, 2023 December 31, 2022 Financing Weighted Average Collateral Fair Value (1)(2) Financing Current Face Carrying Value Stated Maturity Funding Cost Life (Years) Carrying Value Financing Arrangements by Asset Type Securitized Residential Mortgage Loans (3) Non-Agency Loans $ 242,865 $ 242,865 Oct 2023 - May 2024 7.19 % 0.20 $ 444,180 $ 197,937 Re- and Non-Performing Loans 46,568 46,568 Oct 2023 7.26 % 0.04 67,966 34,151 Residential Mortgage Loans (4) Non-Agency Loans 78,300 78,300 Jan 2024 - Aug 2024 7.51 % 0.74 89,649 277,797 Agency-Eligible Loans 43,907 43,907 Sept 2024 7.17 % 1.00 46,894 27,199 Residential Mortgage Loans Held for Sale — — N/A N/A N/A — 55,245 Non-Agency RMBS 21,969 21,969 Oct 2023 - May 2024 6.72 % 0.14 35,211 14,695 Agency RMBS 132,304 132,304 Oct 2023 - Mar 2024 5.61 % 0.15 135,002 14,163 Total Financing Arrangements $ 565,913 $ 565,913 6.85 % 0.31 $ 818,902 $ 621,187 Securitized debt, at fair value (5) Non-Agency Loans (6) (7) $ 4,208,500 $ 3,718,992 N/A 4.69 % 6.87 N/A $ 3,078,593 Re- and Non-Performing Loans (8) 127,935 112,523 N/A 3.20 % 3.87 N/A 183,759 Total Securitized Debt $ 4,336,435 $ 3,831,515 4.65 % 6.79 N/A $ 3,262,352 Total Financing $ 4,902,348 $ 4,397,428 4.93 % 6.06 $ 818,902 $ 3,883,539 (1) The Company also had $ 9.5 million and $ 3.4 million of cash pledged under repurchase agreements as of September 30, 2023 and December 31, 2022, respectively. (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 Securitized residential mortgage loans include certain of the Company's retained interests in securitizations. Refer to Note 3 for more information on the Non-Agency VIEs and RPL/NPL VIEs. (4) The Company's Residential mortgage loan financing arrangements include a maximum uncommitted borrowing capacity of $ 2.1 billion on facilities used to finance Non-Agency and Agency-Eligible Loans. (5) 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 Non-Agency VIEs and RPL/NPL VIEs. (6) As of September 30, 2023, the amortized cost of Securitized debt in the Company's Non-Agency VIEs was $ 4.1 billion. (7) The current face on the Company's Securitized debt in the Company's Non-Agency VIEs excludes Interest Only classes which have no principal balances and bear interest based on a notional balance. The notional balance is used solely to determine interest distributions on the interest only classes of securities. As of September 30, 2023, the notional balance on interest only classes of Securitized debt was $ 135.7 million. (8) As of September 30, 2023, the amortized cost of Securitized debt in the Company's RPL/NPL VIEs was $ 126.1 million. 24 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 The following table presents contractual maturity information about the Company's borrowings under financing arrangements as of September 30, 2023 (in thousands). Securitized debt is excluded from the below table as it does not have a contractual maturity. Financing Arrangements by Asset Type Within 30 Days Over 30 Days to 3 Months Over 3 Months to 12 Months Total Securitized Residential Mortgage Loans Non-Agency Loans $ 114,843 $ 69,268 $ 58,754 $ 242,865 Re- and Non-Performing Loans 46,568 — — 46,568 Residential Mortgage Loans Non-Agency Loans — — 78,300 78,300 Agency-Eligible Loans — — 43,907 43,907 Non-Agency RMBS 11,587 7,639 2,743 21,969 Agency RMBS 980 120,778 10,546 132,304 Total Financing Arrangements $ 173,978 $ 197,685 $ 194,250 $ 565,913 Counterparties The Company had outstanding financing arrangements with six counterparties as of September 30, 2023 and December 31, 2022. The following table presents information as of September 30, 2023 and December 31, 2022 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). September 30, 2023 December 31, 2022 Counterparty Stockholders' Equity at Risk Weighted Average Maturity (days) Percentage of Stockholders' Equity Stockholders' Equity at Risk Weighted Average Maturity (days) Percentage of Stockholders' Equity BofA Securities, Inc. $ 103,920 119 23.1 % $ 36,193 93 7.8 % Barclays Capital Inc. 77,700 49 17.3 % 81,445 113 17.6 % Goldman Sachs Bank USA 49,029 119 10.9 % (2) (2) (2) JP Morgan Securities, LLC 37,542 146 8.3 % (2) (2) (2) Credit Suisse AG, Cayman Islands Branch (1) (1) (1) 130,587 71 28.2 % (1) As of September 30, 2023, the Company did no t have any equity at risk under financing arrangements with Credit Suisse AG, Cayman Islands Branch. (2) As of December 31, 2022, the Company had less than 5 % of its equity at risk under financing arrangements with Goldman Sachs Bank USA and JP Morgan Securities, LLC. 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 financing arrangements are generally recourse to the Company. As of September 30, 2023, the Company is in compliance with all of its financial covenants. 25 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 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 September 30, 2023 and December 31, 2022 (in thousands). September 30, 2023 December 31, 2022 Other assets Interest receivable $ 24,504 $ 20,593 Derivative assets, at fair value 885 1,218 Other assets 3,658 4,983 Due from broker 260 801 Total Other assets $ 29,307 $ 27,595 Other liabilities Due to affiliates (1) $ 4,562 $ 3,652 Interest payable 20,023 14,114 Derivative liabilities, at fair value 1,658 9 Accrued expenses 3,943 1,811 Due to broker 81 7 Total Other liabilities $ 30,267 $ 19,593 (1) Refer to Note 10 for more information. Derivatives The following table presents the fair value of the Company's derivatives and other instruments and their balance sheet location as of September 30, 2023 and December 31, 2022 (in thousands). Derivatives and Other Instruments (1) Balance Sheet Location September 30, 2023 December 31, 2022 Pay Fix/Receive Float Interest Rate Swap Agreements (2) Other assets $ 245 $ 470 Short TBAs Other assets — 650 Forward Purchase Commitments Other assets 640 98 Forward Purchase Commitments Other liabilities ( 1,658 ) ( 9 ) (1) As of September 30, 2023 and December 31, 2022, no derivatives held by the Company were designated as hedges for accounting purposes. (2) As of September 30, 2023, the Company applied a reduction in fair value of $ 10.7 million to its interest rate swap assets related to variation margin with a corresponding increase in restricted cash. As of December 31, 2022, the Company applied a reduction in fair value of $ 17.3 million to its interest rate swap assets related to variation margin with a corresponding increase in restricted cash, net of collateral posted by the Company's derivative counterparties. The following table summarizes information related to derivatives and other instruments as of September 30, 2023 and December 31, 2022 (in thousands). Notional amount of non-hedge derivatives and other instruments: Notional Currency September 30, 2023 December 31, 2022 Pay Fix/Receive Float Interest Rate Swap Agreements (1) USD $ 405,000 $ 335,000 Short TBAs USD — 40,000 Forward Purchase Commitments USD 242,775 8,006 (1) As of September 30, 2023, the Company's pay fix/receive float interest rate swaps had a weighted average pay-fixed rate of 3.99 %, a weighted average receive-variable rate of 5.31 %, and a weighted average years to maturity of 4.55 years. As of December 31, 2022, the Company's pay fix/receive float interest rate swaps had a weighted average pay-fixed rate of 2.77 %, a weighted average receive-variable rate of 4.30 %, and a weighted average years to maturity of 4.77 years. 26 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 Derivative and other instruments eligible for offset are presented gross on the consolidated balance sheets as of September 30, 2023 and December 31, 2022, 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 must post collateral. As of September 30, 2023, the Company's restricted cash balance included $ 11.1 million of collateral related to certain derivatives, of which $ 0.4 million represents cash collateral posted by the Company and $ 10.7 million represents amounts related to variation margin. As of December 31, 2022, the Company's restricted cash balance included $ 9.6 million of collateral related to certain derivatives, of which $ 1.3 million represents cash collateral posted by the Company and $ 8.3 million represents amounts related to variation margin. The following table summarizes gains/(losses) related to derivatives and other instruments for the three and nine months ended September 30, 2023 and 2022 (in thousands). Three Months Ended Nine Months Ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Included within Net unrealized gain/(loss) Interest Rate Swaps $ 1,054 $ ( 28,344 ) $ ( 8,347 ) $ 19,780 Long TBAs — 2,959 — — Short TBAs — — ( 650 ) 13 Forward Purchase Commitments ( 709 ) 3,644 ( 1,107 ) ( 1,124 ) 345 ( 21,741 ) ( 10,104 ) 18,669 Included within Net realized gain/(loss) Interest Rate Swaps 8,422 58,165 18,956 103,381 Long TBAs — ( 3,154 ) 5 ( 10,789 ) Short TBAs — — ( 70 ) 13,578 Forward Purchase Commitments ( 196 ) ( 4,917 ) 1,727 ( 12,306 ) 8,226 50,094 20,618 93,864 Total income/(loss) $ 8,571 $ 28,353 $ 10,514 $ 112,533 27 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 TBAs The Company did no t have any to-be-announced securities during the three months ended September 30, 2023. The following table presents information about the Company’s to-be-announced securities ("TBAs") for the three and nine months ended September 30, 2023 and 2022 (in thousands). Three Months Ended Beginning Notional Amount Buys or Covers Sales or Shorts Ending Notional Amount Fair Value as of Period End Receivable/(Payable) from/to Broker Derivative Asset Derivative Liability September 30, 2022 Long TBAs $ 400,000 $ — $ ( 400,000 ) $ — $ — $ — $ — $ — Nine Months Ended Beginning Notional Amount Buys or Covers Sales or Shorts Ending Notional Amount Fair Value as of Period End Receivable/(Payable) from/to Broker Derivative Asset Derivative Liability September 30, 2023 Long TBAs $ — $ 10,000 $ ( 10,000 ) $ — $ — $ — $ — $ — September 30, 2023 Short TBAs ( 40,000 ) 100,000 ( 60,000 ) — — — — — September 30, 2022 Long TBAs — 1,650,000 ( 1,650,000 ) — — — — — September 30, 2022 Short TBAs ( 385,963 ) 1,320,852 ( 934,889 ) — — — — — 8. Earnings per share The following table presents a reconciliation of the earnings and shares used in calculating basic and diluted earnings per share for the three and nine months ended September 30, 2023 and 2022 (in thousands, except per share data). Three Months Ended Nine Months Ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Numerator: Net Income/(Loss) $ ( 2,165 ) $ ( 2,869 ) $ 18,431 $ ( 64,794 ) Dividends on preferred stock ( 4,586 ) ( 4,586 ) ( 13,758 ) ( 13,758 ) Net income/(loss) available to common stockholders $ ( 6,751 ) $ ( 7,455 ) $ 4,673 $ ( 78,552 ) Denominator: Basic weighted average common shares outstanding 20,219 22,394 20,508 23,250 Diluted weighted average common shares outstanding 20,219 22,394 20,508 23,250 Earnings/(Loss) Per Share Basic $ ( 0.33 ) $ ( 0.33 ) $ 0.23 $ ( 3.38 ) Diluted $ ( 0.33 ) $ ( 0.33 ) $ 0.23 $ ( 3.38 ) 28 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 Dividends The following table details the Company's common stock dividends declared during the nine months ended September 30, 2023 and 2022. Nine Months Ended September 30, 2023 Nine Months Ended September 30, 2022 Declaration Date Record Date Payment Date Cash Dividend Per Share Declaration Date Record Date Payment Date Cash Dividend Per Share 3/15/2023 3/31/2023 4/28/2023 $ 0.18 3/18/2022 3/31/2022 4/29/2022 $ 0.21 6/15/2023 6/30/2023 7/31/2023 0.18 6/15/2022 6/30/2022 7/29/2022 0.21 9/15/2023 9/29/2023 10/31/2023 0.18 9/15/2022 9/30/2022 10/31/2022 0.21 Total $ 0.54 Total $ 0.63 The Company announced that on October 24, 2023, its Board of Directors declared an interim fourth quarter 2023 common stock dividend on the Company's common stock of $ 0.08 per share, made pursuant to the terms of the Merger Agreement in connection with the Merger with WMC. The dividend was paid on November 8, 2023 to stockholders of record as of November 3, 2023. The following tables detail the Company's preferred stock dividends declared and paid during the nine months ended September 30, 2023 and 2022. 2023 Cash Dividend Per Share Declaration Date Record Date Payment Date 8.25 % Series A 8.00 % Series B 8.000 % Series C 2/16/2023 2/28/2023 3/17/2023 $ 0.51563 $ 0.50 $ 0.50 5/4/2023 5/31/2023 6/20/2023 0.51563 0.50 0.50 7/31/2023 8/31/2023 9/18/2023 0.51563 0.50 0.50 Total $ 1.54689 $ 1.50 $ 1.50 2022 Cash Dividend Per Share Declaration Date Record Date Payment Date 8.25 % Series A 8.00 % Series B 8.000 % Series C 2/18/2022 2/28/2022 3/17/2022 $ 0.51563 $ 0.50 $ 0.50 5/2/2022 5/31/2022 6/17/2022 0.51563 0.50 0.50 8/3/2022 8/31/2022 9/19/2022 0.51563 0.50 0.50 Total $ 1.54689 $ 1.50 $ 1.50 The Company announced that on November 3, 2023, its Board of Directors declared fourth quarter 2023 preferred stock dividends on its Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock in the amount of $ 0.51563 , $ 0.50 and $ 0.50 per share, respectively. The dividends will be paid on December 18, 2023 to holders of record on November 30, 2023. 9. Income taxes The Company conducts its operations to qualify and be taxed as a REIT. 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. The state and local tax jurisdictions for which the Company is subject to tax-filing obligations recognize the Company’s status as a REIT, and therefore, the Company generally does not pay income tax in such jurisdictions. The Company may, however, be subject to certain minimum state and local tax filing fees as well as certain excise, franchise, or business taxes. 29 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 Excise tax represents a non-deductible 4% 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 and nine months ended September 30, 2023 and 2022, the Company did no t record any excise tax. Taxable REIT Subsidiaries The Company elected to treat certain domestic subsidiaries as taxable REIT subsidiaries ("TRSs"). 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. Currently, the Company has wholly owned domestic TRSs that are taxable as corporations and subject to U.S. federal, state, and local income tax on net income at the applicable corporate rates. The federal statutory rate for the three and nine months ended September 30, 2023 and 2022 was 21%. The Company’s effective tax rate differs from its combined U.S. federal, state, and local corporate statutory tax rate primarily due to income earned at the REIT, which is not subject to tax, due to the deduction for qualifying distributions made by the Company, and any change in the valuation allowance as disclosed in further detail below. The tax expense attributable to its TRS is recorded in the "Non-investment related expenses" line item on the consolidated statement of operations. The below table details the tax expense attributable to the TRS for the three and nine months ended September 30, 2023 and 2022 (in thousands). Three Months Ended Nine Months Ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Income tax expense $ 14 $ 164 $ 239 $ 179 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting and tax reporting purposes at the TRS level. As of September 30, 2023 and December 31, 2022, the Company recorded a deferred tax asset of approximately $ 30.4 million and $ 30.2 million, respectively, relating to net operating loss carryforwards, capital loss carryforwards, and basis differences of certain investments held within TRSs. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which temporary differences become deductible. The Company concluded it is more likely than not the deferred tax asset will not be realized and established a full valuation allowance as of September 30, 2023 and December 31, 2022. Uncertain Income Tax Positions 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 September 30, 2023 and December 31, 2022. The Company’s federal income tax returns for the last three tax years are open to examination by the Internal Revenue Service. There are no ongoing U.S. federal, state or local tax examinations related to the Company. 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 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 agreement. On November 1, 2023, TPG completed the previously announced acquisition of Angelo Gordon (the "TPG Transaction"), pursuant to which Angelo Gordon, including the Manager, became indirect subsidiaries of TPG. Pursuant to the management 30 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 agreement with the Manager, the closing of the TPG Transaction resulted in an assignment of the management agreement. The independent directors of the Company's board of directors unanimously consented to such assignment on July 31, 2023 in advance of the TPG Transaction closing. There were no changes to the management agreement in connection with the TPG Transaction and the assignment of the management agreement became effective upon the closing of the TPG Transaction. In connection with the proposed Merger with WMC and contemporaneously with the execution of the Merger Agreement, on August 8, 2023, the Company and the Manager entered into the MITT Management Agreement Amendment, pursuant to which (i) the Manager’s base management fee will be reduced by $ 0.6 million for the first four quarters (i.e., resulting in an aggregate $ 2.4 million waiver of base management fees) following the Effective Time, beginning with the fiscal quarter in which the Effective Time occurs, and (ii) the Manager will waive its right to seek reimbursement from the Company for any expenses otherwise reimbursable by the Company under the management agreement in an amount equal to the excess, if any, of $ 7.0 million over the aggregate cash portion of the Per Share Merger Consideration paid by the Manager to the holders of WMC common stock in the Merger. The MITT Management Agreement Amendment will become effective automatically upon the closing of the Merger, and will have no force and effect if the Merger does not close. 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. The below table details the management fees incurred during the three and nine months ended September 30, 2023 and 2022 (in thousands). Three Months Ended Nine Months Ended Consolidated statements of operations line item: September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Management fee to affiliate $ 2,054 $ 2,064 $ 6,190 $ 5,984 As of September 30, 2023 and December 31, 2022, the Company recorded management fees payable of $ 2.1 million and $ 2.1 million, respectively. The management fee payable is included within the "Due to affiliates" item within the "Other liabilities" line item on the consolidated balance sheets. Incentive fee The Manager is entitled to an annual incentive fee with respect to each applicable fiscal year, which will be equal to 15 % of the amount by which the Company's cumulative adjusted net income from November 22, 2021 exceeds the cumulative hurdle amount, which represents an 8 % return (cumulative, but not compounding) on an equity hurdle base consisting of the sum of (i) $ 341.5 million and (ii) the gross proceeds of any subsequent public or private common stock offerings by the Company. The annual incentive fee will be payable in cash, or, at the option of the Company's Board of Directors, shares of common stock or a combination of cash and shares. The Manager waived the annual incentive fee with respect to the fiscal years ending December 31, 2021 and December 31, 2022, and the annual incentive fee will first be payable with respect to the fiscal year ending December 31, 2023. During the three and nine months ended September 30, 2023, the Company did not incur any incentive fee expense. 31 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 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 September 30, 2023 and December 31, 2022, 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. The below table details the expense reimbursement incurred during the three and nine months ended September 30, 2023 and 2022 (in thousands). Three Months Ended Nine Months Ended Consolidated statements of operations line item: September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Non-investment related expenses $ 1,400 $ 1,405 $ 4,200 $ 4,215 Investment related expenses 148 261 360 637 Transaction related expenses 326 738 707 2,484 Expense reimbursements to Manager or its affiliates $ 1,874 $ 2,404 $ 5,267 $ 7,336 As of September 30, 2023 and December 31, 2022, the Company recorded a reimbursement payable to the Manager or its affiliates of $ 2.3 million and $ 1.3 million, respectively. The reimbursement payable to the Manager or its affiliates is included within the "Due to affiliates" item within the "Other liabilities" line item on the consolidated balance sheets. Restricted stock grants Equity Incentive Plans 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 a maximum of 666,666 shares of common stock to be issued. The maximum number of shares of common stock granted during a single fiscal year to any non-employee director, taken together with any cash fees paid to such non-employee director during any fiscal year, shall not exceed $ 300,000 in total value (calculating the value of any such awards based on the grant date fair value). As of September 30, 2023, 505,933 shares of common stock were available to be awarded under the 2020 Equity Incentive Plan. Since inception of the 2020 Equity Incentive Plan and through September 30, 2023, the Company has granted an aggregate of 160,733 shares of restricted common stock to its independent directors under its 2020 Equity Incentive Plan, all of which have vested. 32 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 Manager Equity Incentive Plans Following approval of the Company's stockholders at its 2021 annual meeting of stockholders, the AG Mortgage Investment Trust, Inc. 2021 Manager Equity Incentive Plan (the "2021 Manager Plan") became effective on April 7, 2021 and provides for a maximum of 573,425 shares of common stock that may be subject to awards thereunder to the Manager. As of September 30, 2023, there were no shares or awards issued under the 2021 Manager Plan. Director compensation As of September 30, 2023, the Company's Board of Directors consisted of four independent directors. The annual base director's fee for each independent director is $ 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 common 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 their service as an independent member of the Company’s Board of Directors. In addition to the annual base director's fee, the non-executive chair of the Board receives an annual fee of $ 60,000 , of which $ 30,000 is payable in cash and $ 30,000 is payable in shares of restricted common stock, the chair of the Audit Committee receives an annual fee of $ 25,000 , and the chairs of the Compensation and Nominating and Corporate Governance Committees each receive an annual fee of $ 10,000 . 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. 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 affiliates ("AG Arc"), formed Arc Home. The Company has an approximate 44.6 % interest in AG Arc. Arc Home originates residential mortgage loans and retains the mortgage servicing rights associated with certain 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. 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. The Company has an approximate 44.6 % interest in MATH. MATH in turn sponsored the formation of an entity called Mortgage Acquisition Trust I LLC ("MATT") to purchase predominantly Non-QM Loans. 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"). The Company has an approximate 47.5 % and 50.0 % interest in LOT SP I LLC and LOT SP II LLC, respectively. 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"). In October 2023, the Land Related Financing assets held within LOTS paid off in full. 33 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 Summary of investments in debt and equity of affiliates and related earnings The below table summarizes the components of the "Investments in debt and equity of affiliates" line item on the Company's consolidated balance sheets as of September 30, 2023 and December 31, 2022 (in thousands). September 30, 2023 December 31, 2022 Assets Liabilities Equity Assets Liabilities Equity Non-QM Securities (1) $ 32,377 $ ( 12,940 ) $ 19,437 $ 31,067 $ ( 16,409 ) $ 14,658 Land Related Financing (2) 493 — 493 10,688 — 10,688 Re/Non-Performing Securities 7,301 ( 3,634 ) 3,667 7,854 ( 4,406 ) 3,448 Total Residential Investments 40,171 ( 16,574 ) 23,597 49,609 ( 20,815 ) 28,794 AG Arc, at fair value 35,203 — 35,203 39,680 — 39,680 Cash and Other assets/(liabilities) 1,566 ( 46 ) 1,520 3,290 ( 700 ) 2,590 Investments in debt and equity of affiliates $ 76,940 $ ( 16,620 ) $ 60,320 $ 92,579 $ ( 21,515 ) $ 71,064 (1) As of September 30, 2023 and December 31, 2022, MATT only holds retained tranches from past securitizations which continue to pay down and the Company does not expect to acquire additional investments within this equity method investment. (2) In October 2023, the Land Related Financing assets held within LOTS paid off in full and the Company does not expect to originate new loans within this equity method investment. 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 for the three and nine months ended September 30, 2023 and 2022 (in thousands). Three Months Ended Nine Months Ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Non-QM Securities $ 2,606 $ 1,413 $ 4,580 $ 154 Land Related Financing 64 300 805 1,248 Re/Non-Performing Securities 338 927 249 758 AG Arc (1) ( 2,820 ) ( 4,266 ) ( 4,992 ) ( 11,646 ) Equity in earnings/(loss) from affiliates $ 188 $ ( 1,626 ) $ 642 $ ( 9,486 ) (1) Earnings/(loss) recognized by AG Arc do not include the Company's portion of gains or losses recorded by Arc Home in connection with the sale of residential mortgage loans to the Company. Refer to "Transactions with Arc Home" below for more information on this accounting policy. Transactions with affiliates Transactions with Red Creek Asset Management LLC In connection with the Company’s investments in residential mortgage loans, the Company engages asset managers to provide advisory, consultation, asset management, and other services. The Company engaged Red Creek Asset Management LLC (the "Asset Manager"), a related party of the Manager and direct subsidiary of Angelo Gordon, as the asset manager for certain of its residential mortgage loans. The Company pays the Asset Manager asset management fees which are assessed periodically and 34 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 determined to be commercially reasonable by a third-party valuation firm. The below details the fees paid by the Company to the Asset Manager during the three and nine months ended September 30, 2023 and 2022 (in thousands). Three Months Ended Nine Months Ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Fees paid to Asset Manager $ 752 $ 825 $ 2,115 $ 2,007 As of September 30, 2023 and December 31, 2022, the Company recorded asset management fees payable of $ 0.2 million and $ 0.2 million, respectively. Asset management fees payable are included within the "Due to affiliates" item within the "Other liabilities" line item on the consolidated balance sheets. Transactions with Arc Home Arc Home may sell loans to the Company, third-parties, or affiliates of the Manager. The below table details the unpaid principal balance of Non-Agency Loans and Agency-Eligible Loans sold to the Company and private funds under the management of Angelo Gordon during the three and nine months ended September 30, 2023 and 2022 (in thousands). Three Months Ended Nine Months Ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Residential mortgage loans sold by Arc Home to the Company $ 249,488 $ 350,257 $ 442,695 $ 1,028,339 Residential mortgage loans sold by Arc Home to private funds under the management of Angelo Gordon 93,789 38,792 215,436 170,583 In connection with the sale of loans from Arc Home to the Company, the Company eliminates any intra-entity 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 resulting in unrealized gains or losses on the underlying loans. The table below summarizes intra-entity profits eliminated during the three and nine months ended September 30, 2023 and 2022 (in thousands). Three Months Ended Nine Months Ended September 30, 2023 September 30, 2022 September 30, 2023 September 30, 2022 Intra-Entity Profits Eliminated $ 800 $ 1,755 $ 1,141 $ 5,869 As of December 31, 2022, the Company recorded a $ 0.5 million receivable from Arc Home related to certain loans purchased from Arc Home which was recorded within the "Other assets" line item on the consolidated balance sheets. The Company received payment for the full amount from Arc Home during the current year. The Company enters into forward purchase commitments with Arc Home whereby the Company commits to purchase residential mortgage loans from Arc Home at a particular price on a best-efforts basis. Actual loan purchases are contingent upon successful loan closings. These commitments to purchase mortgage loans are classified as derivatives. From time to time, the Company may determine that certain loans it has previously committed to purchase will be sold to third parties and, as a result, the derivative will be settled on a net basis with Arc Home. See Note 7 and Note 12 for more detail. During the year ended December 31, 2022, the Company determined that certain loans that it had previously committed to purchase from Arc Home would be sold to third parties. The Company net settled its commitment to purchase these loans with Arc Home for $ 0.8 million, which represented the difference between the Company's committed price and the ultimate sale price, inclusive of costs to sell the loans. The settlement of these derivatives was recorded within the "Net realized gain/(loss)" and "Transaction related expenses" line items on the consolidated statement of operations. 35 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 Transactions under the Company's Affiliated Transaction Policy The below table details transactions where the Company purchased or sold assets from or to an affiliate of the Manager ($ in millions). The transactions were executed in accordance with the Company's Affiliated Transaction Policy. Refer to the "Transactions with Arc Home" section above for additional information related to transactions with Arc Home, which are excluded from the table below. Date Transaction Fair Value (1) Pricing Methodology June 2023 Purchase of Real Estate Securities $ 0.3 Competitive bidding process (2) (1) As of the transaction date. (2) The Company submitted an offer to purchase the securities from an affiliate in a competitive bidding process, which 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 (the "2015 Repurchase Program") to repurchase up to $ 25.0 million of the Company's outstanding common stock. As of June 30, 2022 the $ 25.0 million maximum repurchase amount authorized under the 2015 Repurchase Program was fully utilized. The table below details the Company's share repurchases under the 2015 Repurchase Program during the nine months ended September 30, 2022: Three Months Ended (1) Total Number of Shares Purchased Weighted Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Approximate Dollar Value that May Yet Be Purchased Under the Program (2) March 31, 2022 — $ — — $ 11,043,506 June 30, 2022 1,433,851 7.70 1,433,851 — Total 1,433,851 $ 7.70 1,433,851 $ — (1) Based on trade date. (2) Includes brokerage commissions and clearing fees. On August 3, 2022, the Company's Board of Directors authorized a stock repurchase program (the "2022 Repurchase Program") to repurchase up to $ 15.0 million of the Company’s outstanding common stock on substantially the same terms as the 2015 Repurchase Program. The 2022 Repurchase Program does not have an expiration date and permits the Company to repurchase its shares through various methods, including open market repurchases, privately negotiated block transactions and Rule 10b5-1 plans. The Company may repurchase shares of its common stock from time to time in compliance with SEC regulations and other legal requirements. The extent to which the Company repurchases its shares, and the timing, manner, price, and amount of any such repurchases, will depend upon a variety of factors including market conditions and other corporate considerations as determined by the Company’s management, as well as the limits of the 2022 Repurchase Program and the Company's liquidity and business strategy. The 2022 Repurchase Program does not obligate the Company to acquire any particular amount of shares and may be modified or discontinued at any time. As of September 30, 2023, approximately $ 1.5 million of common stock remained authorized for future share repurchases under the 2022 Repurchase Program. The table 36 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 below details the Company's share repurchases under the 2022 Repurchase Program during the nine months ended September 30, 2023 and 2022: Three Months Ended (1) Total Number of Shares Purchased Weighted Average Price Paid per Share (2) Total Number of Shares Purchased as Part of Publicly Announced Program Maximum Approximate Dollar Value that May Yet Be Purchased Under the Program (2) 2023 March 31, 2023 923,261 $ 5.68 923,261 $ 2,569,940 June 30, 2023 187,020 5.93 187,020 1,461,810 September 30, 2023 — — — 1,461,810 Total 1,110,281 $ 5.72 1,110,281 $ 1,461,810 2022 September 30, 2022 384,587 $ 6.08 385,587 $ 12,660,645 (1) Based on trade date. (2) Includes brokerage commissions and clearing fees. On May 4, 2023, the Company's Board of Directors authorized a stock repurchase program (the "2023 Repurchase Program") to repurchase up to $ 15.0 million of the Company’s outstanding common stock on substantially the same terms as the 2022 Repurchase Program. As of September 30, 2023, the full $ 15.0 million authorized amount remains available for repurchase under the 2023 Repurchase Program. This authorization is in addition to the amount remaining under the 2022 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 the Company's 8.25 % Series A Cumulative Redeemable Preferred Stock ("Series A Preferred Stock"), 8.00 % Series B Cumulative Redeemable Preferred Stock ("Series B Preferred Stock"), and 8.000 % Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock ("Series C Preferred Stock") having an aggregate value of up to $ 20.0 million. No share repurchases under the Preferred Repurchase Program have been made since its authorization. Shares of stock repurchased by the Company under any repurchase program, if any, will be cancelled and, until reissued by the Company, will be deemed to be authorized but unissued shares of its stock as required by Maryland law. 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. Equity distribution agreements The Company has 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 Company did no t issue any shares of common stock under the Equity Distribution Agreements during the three and nine months ended September 30, 2023 and 2022. Since inception of the program, the Company has issued approximately 2.2 million shares of common stock under the Equity Distribution Agreements for gross proceeds of $ 48.3 million. Shelf registration statement On May 7, 2021, the Company filed a new shelf registration statement, registering up to $ 1.0 billion of its securities, including capital stock (the "2021 Registration Statement"). The 2021 Registration Statement became effective on May 26, 2021 and will expire on May 28, 2024. Upon effectiveness of the 2021 Registration Statement, the Company's previous registration statement filed in 2018 was terminated. 37 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 Preferred stock The Company is authorized to designate and issue up to 50.0 million shares of preferred stock, par value $ 0.01 per share, in one or more classes or series. As of September 30, 2023 and December 31, 2022, there were 1.7 million, 3.7 million, and 3.7 million of Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock, respectively, issued and outstanding. The following table includes a summary of preferred stock issued and outstanding as of September 30, 2023 ($ and shares in thousands). Preferred Stock Series Issuance Date Shares Outstanding Carrying Value Aggregate Liquidation Preference (1) Optional Redemption Date (2) Rate (3)(4) Series A Preferred Stock August 3, 2012 1,663 $ 40,110 $ 41,580 August 3, 2017 8.25 % Series B Preferred Stock September 27, 2012 3,728 90,187 93,191 September 17, 2017 8.00 % Series C Preferred Stock September 17, 2019 3,729 90,175 93,220 September 17, 2024 8.000 % Total 9,120 $ 220,472 $ 227,991 (1) The Company's Preferred Stock has a liquidation preference of $ 25.00 per share. (2) Shares have no stated maturity and are not subject to any sinking fund or mandatory redemption. Shares of the Company’s Preferred Stock are 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 may be redeemable earlier than the optional redemption date under certain circumstances intended to preserve its qualification as a REIT for federal income tax purposes. (3) 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 (or as replaced by the existing LIBOR cessation fallback language) plus a spread of 6.476 % per annum. (4) Dividends are payable quarterly in arrears on the 17th day of each March, June, September, and December and holders are entitled to receive cumulative cash dividends at the respective stated rate per annum before holders of common stock are entitled to receive any cash dividends. 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. 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 September 30, 2023, the Company was not involved in any material legal proceedings. The below table details the Company's outstanding commitments as of September 30, 2023 (in thousands). Commitment type Date of Commitment Total Commitment Funded Commitment Remaining Commitment Non-Agency and Agency-Eligible Loans (1) Various $ 248,250 $ — $ 248,250 (1) The Company entered into forward purchase commitments to acquire certain Non-Agency and Agency-Eligible Loans from Arc Home which have not yet settled as of September 30, 2023. Refer to Note 10 "Transactions with affiliates" for more information. 38 AG Mortgage Investment Trust Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) September 30, 2023 13. Subsequent Events The Company announced that on October 24, 2023, its Board of Directors declared an interim fourth quarter 2023 common stock dividend on the Company's common stock of $ 0.08 per share, made pursuant to the terms of the Merger Agreement in connection with the Merger with WMC. The dividend was paid on November 8, 2023 to stockholders of record as of November 3, 2023. The Company announced that on November 3, 2023, its Board of Directors declared fourth quarter 2023 preferred stock dividends on its Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock in the amount of $ 0.51563 , $ 0.50 and $ 0.50 per share, respectively. The dividends will be paid on December 18, 2023 to holders of record on November 30, 2023. On November 7, 2023, the Company's stockholders approved the issuance of the Company's common stock in connection with the Merger with WMC at a special stockholders meeting. No further Company stockholder approval is required for the Merger. On November 7, 2023, WMC announced it adjourned its special stockholders meeting relating to the Merger until December 5, 2023, at 9:00 a.m., Pacific Time, online in a virtual-only meeting format, due to a lack of quorum and to allow further solicitation of proxies from WMC common stockholders for the approval of the Merger at such special stockholders meeting. The Merger is expected to close in the fourth quarter of 2023, subject to the satisfaction of certain customary conditions, including approval of WMC's common stockholders. 39