UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 


FORM 10-Q
__________________________________________________ 
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20202021
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                         to                         
Commission file number 001-35151
_____________________________________________________________________ 

AG MORTGAGE INVESTMENT TRUST, INC.
_____________________________________________________________________ 
Maryland27-5254382
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
245 Park Avenue, 26th Floor
New York, New York
10167
(Address of Principal Executive Offices)(Zip Code)
(212) 692-2000
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   ý    No   ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 and Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes   ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated filer ¨     Accelerated filer ý Non-Accelerated filer ¨ Smaller reporting company ☒  Emerging growth company  ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   
Yes   ☐     No   ý
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:Trading Symbols:Name of each exchange on which registered:
Common Stock, $0.01 par value per shareMITTNew York Stock Exchange (NYSE)
8.25% Series A Cumulative Redeemable Preferred StockMITT PrANew York Stock Exchange (NYSE)
8.00% Series B Cumulative Redeemable Preferred StockMITT PrBNew York Stock Exchange (NYSE)
8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred StockMITT PrCNew York Stock Exchange (NYSE)

As of August 6, 2020,July 28, 2021, there were 34,234,60116,170,312 outstanding shares of common stock of AG Mortgage Investment Trust, Inc.


AG MORTGAGE INVESTMENT TRUST, INC.
TABLE OF CONTENTS
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PART I
 
ITEM 1. FINANCIAL STATEMENTS
 
AG Mortgage Investment Trust, Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(in thousands, except per share data)
June 30, 2020December 31, 2019
Assets
Real estate securities, at fair value:
Agency - $0 and $2,234,921 pledged as collateral, respectively$—  $2,315,439  
Non-Agency - $36,913 and $682,828 pledged as collateral, respectively (1)45,817  717,470  
CMBS - $73,294 and $413,922 pledged as collateral, respectively86,654  416,923  
Residential mortgage loans, at fair value - $171,316 and $171,224 pledged as collateral, respectively (2)379,822  417,785  
Commercial loans, at fair value - $5,441 and $4,674 pledged as collateral, respectively127,685  158,686  
Investments in debt and equity of affiliates122,929  156,311  
Excess mortgage servicing rights, at fair value12,294  17,775  
Cash and cash equivalents68,150  81,692  
Restricted cash1,084  43,677  
Other assets11,163  21,905  
Assets held for sale - Single-family rental properties, net—  154  
Total Assets$855,598  $4,347,817  
Liabilities
Financing arrangements$251,098  $3,233,468  
Securitized debt, at fair value (1)(2)198,974  224,348  
Dividend payable—  14,734  
Due to affiliates31,396  5,226  
Other liabilities8,446  19,449  
Liabilities held for sale - Single-family rental properties, net306  1,546  
Total Liabilities490,220  3,498,771  
Commitments and Contingencies (Note 13)
Stockholders’ Equity
Preferred stock - $0.01 par value; 50,000 shares authorized:
8.25% Series A Cumulative Redeemable Preferred Stock, 2,070 shares issued and outstanding ($52,817 aggregate liquidation preference)49,921  49,921  
8.00% Series B Cumulative Redeemable Preferred Stock, 4,600 shares issued and outstanding ($117,300 aggregate liquidation preference)111,293  111,293  
8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, 4,600 shares issued and outstanding ($117,300 aggregate liquidation preference)111,243  111,243  
Common stock, par value $0.01 per share; 450,000 shares of common stock authorized and 33,825 and 32,742 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively338  327  
Additional paid-in capital666,127  662,183  
Retained earnings/(deficit)(573,544) (85,921) 
Total Stockholders’ Equity365,378  849,046  
Total Liabilities & Stockholders’ Equity$855,598  $4,347,817  
The accompanying notes are an integral part of these unaudited consolidated financial statements.

June 30, 2021December 31, 2020
Assets
Residential mortgage loans, at fair value - $502,956 and $46,571 pledged as collateral, respectively (1)$1,029,244 $435,441 
Real estate securities, at fair value:
Agency - $689,871 and $460,949 pledged as collateral, respectively696,704 518,352 
Non-Agency - $3,454 and $28,653 pledged as collateral, respectively3,878 38,406 
CMBS - $31,614 and $42,669 pledged as collateral, respectively31,614 56,788 
Commercial loans, at fair value62,279 111,549 
Commercial loans held for sale, at fair value0 13,959 
Investments in debt and equity of affiliates135,868 150,667 
Excess mortgage servicing rights, at fair value2,608 3,158 
Cash and cash equivalents64,007 47,926 
Restricted cash23,708 14,392 
Receivable on unsettled trades - $104,772 and $0 pledged as collateral, respectively106,247 0 
Other assets12,133 9,407 
Total Assets$2,168,290 $1,400,045 
Liabilities
Financing arrangements$1,207,468 $564,047 
Securitized debt, at fair value (1)482,533 355,159 
Payable on unsettled trades0 51,136 
Dividend payable3,394 1,243 
Other liabilities9,018 18,755 
Total Liabilities1,702,413 990,340 
Commitments and Contingencies (Note 12)00
Stockholders’ Equity
Preferred stock - $227,991 and $246,610 aggregate liquidation preference as of June 30, 2021 and December 31, 2020, respectively220,472 238,478 
Common stock, par value $0.01 per share; 450,000 shares of common stock authorized and 16,164 and 13,811 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively (2)162 138 
Additional paid-in capital (2)719,940 689,147 
Retained earnings/(deficit)(474,697)(518,058)
Total Stockholders’ Equity465,877 409,705 
Total Liabilities & Stockholders’ Equity$2,168,290 $1,400,045 
(1)See Note 3 for details related to variable interest entities.
(2)Amounts have been adjusted to reflect the one-for-three reverse stock split effected July 22, 2021. See Note 42 and Note 11 for details related to variable interest entities.additional details.

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 EndedSix Months Ended
June 30, 2021June 30, 2020June 30, 2021June 30, 2020
Net Interest Income
Interest income$14,228 $13,369 $26,347 $53,637 
Interest expense5,294 8,613 9,355 28,584 
Total Net Interest Income8,934 4,756 16,992 25,053 
Other Income/(Loss)
Net realized gain/(loss)4,374 (91,609)336 (242,752)
Net interest component of interest rate swaps(1,573)0 (2,314)923 
Unrealized gain/(loss), net9,685 100,179 29,534 (208,032)
Other income/(loss), net0 (155)37 1,497 
Total Other Income/(Loss)12,486 8,415 27,593 (448,364)
Expenses
Management fee to affiliate1,667 1,678 3,321 3,827 
Other operating expenses4,866 4,557 8,849 5,487 
Restructuring related expenses0 7,104 0 8,604 
Excise tax0 0 0 (815)
Servicing fees672 566 1,287 1,145 
Total Expenses7,205 13,905 13,457 18,248 
Income/(loss) before equity in earnings/(loss) from affiliates14,215 (734)31,128 (441,559)
Equity in earnings/(loss) from affiliates1,278 3,434 27,614 (40,758)
Net Income/(Loss) from Continuing Operations15,493 2,700 58,742 (482,317)
Net Income/(Loss) from Discontinued Operations0 361 0 361 
Net Income/(Loss)15,493 3,061 58,742 (481,956)
Gain on Exchange Offers, net (Note 11)114 0 472 0 
Dividends on preferred stock (1)(4,689)(5,667)(9,613)(11,334)
Net Income/(Loss) Available to Common Stockholders$10,918 $(2,606)$49,601 $(493,290)
Earnings/(Loss) Per Share - Basic (2)
Continuing Operations$0.70 $(0.27)$3.34 $(45.14)
Discontinued Operations0 0.03 0 0.03 
Total Earnings/(Loss) Per Share of Common Stock (2)$0.70 $(0.24)$3.34 $(45.11)
Earnings/(Loss) Per Share - Diluted (2)
Continuing Operations$0.70 $(0.27)$3.34 $(45.14)
Discontinued Operations0 0.03 0 0.03 
Total Earnings/(Loss) Per Share of Common Stock (2)$0.70 $(0.24)$3.34 $(45.11)
Weighted Average Number of Shares of Common Stock Outstanding (2)
Basic15,595 10,953 14,860 10,935 
Diluted15,595 10,953 14,860 10,935 
Three Months EndedSix Months Ended
June 30, 2020June 30, 2019June 30, 2020June 30, 2019
Net Interest Income
Interest income$13,369  $40,901  $53,637  $82,391  
Interest expense8,613  23,030  28,584  45,124  
Total Net Interest Income4,756  17,871  25,053  37,267  
Other Income/(Loss)
Net realized gain/(loss)(91,609) (27,510) (242,752) (48,093) 
Net interest component of interest rate swaps—  1,800  923  3,581  
Unrealized gain/(loss) on real estate securities and loans, net109,632  43,165  (204,265) 89,918  
Unrealized gain/(loss) on derivative and other instruments, net(9,453) (10,839) (3,767) (20,925) 
Foreign currency gain/(loss), net(156) —  1,493  —  
Other income1  216  4  630  
Total Other Income/(Loss)8,415  6,832  (448,364) 25,111  
Expenses
Management fee to affiliate1,678  2,400  3,827  4,745  
Other operating expenses4,482  3,807  5,324  7,588  
Restructuring related expenses7,104  —  8,604  —  
Equity based compensation to affiliate75  73  163  199  
Excise tax—  186  (815) 278  
Servicing fees566  416  1,145  787  
Total Expenses13,905  6,882  18,248  13,597  
Income/(loss) before equity in earnings/(loss) from affiliates(734) 17,821  (441,559) 48,781  
Equity in earnings/(loss) from affiliates3,434  2,050  (40,758) 1,279  
Net Income/(Loss) from Continuing Operations2,700  19,871  (482,317) 50,060  
Net Income/(Loss) from Discontinued Operations361  (1,193) 361  (2,227) 
Net Income/(Loss)3,061  18,678  (481,956) 47,833  
Dividends on preferred stock (1)5,667  3,367  11,334  6,734  
Net Income/(Loss) Available to Common Stockholders$(2,606) $15,311  $(493,290) $41,099  
Earnings/(Loss) Per Share - Basic
Continuing Operations$(0.09) $0.50  $(15.05) $1.37  
Discontinued Operations0.01  (0.03) 0.01  (0.07) 
Total Earnings/(Loss) Per Share of Common Stock$(0.08) $0.47  $(15.04) $1.30  
Earnings/(Loss) Per Share - Diluted
Continuing Operations$(0.09) $0.50  $(15.05) $1.37  
Discontinued Operations0.01  (0.03) 0.01  (0.07) 
Total Earnings/(Loss) Per Share of Common Stock$(0.08) $0.47  $(15.04) $1.30  
Weighted Average Number of Shares of Common Stock Outstanding
Basic32,859  32,709  32,804  31,636  
Diluted32,859  32,737  32,804  31,664  
(1)The three and six months ended June 30, 2020 include cumulative and undeclared dividends of $5,667$5.7 million on the Company's Preferred Stock as of June 30, 2020.
(2)Amounts have been adjusted to reflect the one-for-three reverse stock split effected July 22, 2021. See Note 2 and Note 11 for additional details.

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 June 30, 2020 and June 30, 2019
Common Stock8.25% Series A
Cumulative
Redeemable
Preferred Stock		8.00% Series B
Cumulative
Redeemable
Preferred Stock		8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred StockAdditional
Paid-in Capital		Retained
Earnings/(Deficit)
SharesAmountTotal
Balance at April 1, 202032,749  $327  $49,921  $111,293  $111,243  $662,486  $(576,605) $358,665  
Net proceeds from issuance of common stock1,002  10  —  —  —  3,489  —  3,499  
Grant of restricted stock and amortization of equity based compensation74  1  —  —  —  152  —  153  
Net Income/(Loss)—  —  —  —  —  —  3,061  3,061  
Balance at June 30, 202033,825  $338  $49,921  $111,293  $111,243  $666,127  $(573,544) $365,378  

For the Three Months Ended June 30, 2021 and June 30, 2020
Common Stock (1)Preferred StockAdditional
Paid-in Capital (1)		Retained
Earnings/(Deficit)
SharesAmountTotal
Balance at April 1, 202115,500 $156 $226,297 $711,055 $(482,203)$455,305 
Net proceeds from issuance of common stock227 2 — 3,098 — 3,100 
Grant of restricted stock6 — — 80 — 80 
Common dividends declared— — — — (3,394)(3,394)
Preferred dividends declared— — — — (4,707)(4,707)
Exchange Offers (Note 11)431 4 (5,825)5,707 114 0 
Net Income/(Loss)— — — — 15,493 15,493 
Balance at June 30, 202116,164 $162 $220,472 $719,940 $(474,697)$465,877 

Common Stock8.25% Series A
Cumulative
Redeemable
Preferred Stock		8.00% Series B
Cumulative
Redeemable
Preferred Stock		Additional
Paid-in Capital		Retained
Earnings/(Deficit)
SharesAmountTotal
Balance at April 1, 201932,703  $327  $49,921  $111,293  $661,561  $(91,466) $731,636  
Net proceeds from issuance of common stock—  —  —  —  99  —  99  
Grant of restricted stock and amortization of equity based compensation6  —  —  —  173  —  173  
Common dividends declared—  —  —  —  —  (16,355) (16,355) 
Preferred Series A dividends declared—  —  —  —  —  (1,067) (1,067) 
Preferred Series B dividends declared—  —  —  —  —  (2,300) (2,300) 
Net Income/(Loss)—  —  —  —  —  18,678  18,678  
Balance at June 30, 201932,709  $327  $49,921  $111,293  $661,833  $(92,510) $730,864  
For the Six Months Ended June 30, 2020 and June 30, 2019
Common Stock8.25% Series A
Cumulative
Redeemable
Preferred Stock		8.00% Series B
Cumulative
Redeemable
Preferred Stock		8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred StockAdditional
Paid-in Capital		Retained
Earnings/(Deficit)
SharesAmountTotal
Balance at January 1, 202032,742  $327  $49,921  $111,293  $111,243  $662,183  $(85,921) $849,046  
Net proceeds from issuance of common stock1,002  10  —  —  —  3,489  —  3,499  
Grant of restricted stock and amortization of equity based compensation81  1  —  —  —  455  —  456  
Preferred Series A dividends declared—  —  —  —  —  —  (1,067) (1,067) 
Preferred Series B dividends declared—  —  —  —  —  —  (2,300) (2,300) 
Preferred Series C dividends declared—  —  —  —  —  —  (2,300) (2,300) 
Net Income/(Loss)—  —  —  —  —  —  (481,956) (481,956) 
Balance at June 30, 202033,825  $338  $49,921  $111,293  $111,243  $666,127  $(573,544) $365,378  
Common Stock (1)Preferred StockAdditional
Paid-in Capital (1)		Retained
Earnings/(Deficit)
SharesAmountTotal
Balance at April 1, 202010,915 $109 $272,457 $662,704 $(576,605)$358,665 
Net proceeds from issuance of common stock334 4 — 3,495 — 3,499 
Grant of restricted stock and amortization of equity based compensation25 — — 153 — 153 
Net Income/(Loss)— — — — 3,061 3,061 
Balance at June 30, 202011,274 $113 $272,457 $666,352 $(573,544)$365,378 

Common Stock8.25% Series A
Cumulative
Redeemable
Preferred Stock		8.00% Series B
Cumulative
Redeemable
Preferred Stock		Additional
Paid-in Capital		Retained
Earnings/(Deficit)
SharesAmountTotal
Balance at January 1, 201928,744  $287  $49,921  $111,293  $595,412  $(100,902) $656,011  
Net proceeds from issuance of common stock3,953  40  —  —  66,023  —  66,063  
Grant of restricted stock and amortization of equity based compensation12  —  —  —  398  —  398  
Common dividends declared—  —  —  —  —  (32,707) (32,707) 
Preferred Series A dividends declared—  —  —  —  —  (2,134) (2,134) 
Preferred Series B dividends declared—  —  —  —  —  (4,600) (4,600) 
Net Income/(Loss)—  —  —  —  —  47,833  47,833  
Balance at June 30, 201932,709  $327  $49,921  $111,293  $661,833  $(92,510) $730,864  
For the Six Months Ended June 30, 2021 and June 30, 2020
Common Stock (1)Preferred StockAdditional
Paid-in Capital (1)		Retained
Earnings/(Deficit)
SharesAmountTotal
Balance at January 1, 202113,811 $138 $238,478 $689,147 $(518,058)$409,705 
Net proceeds from issuance of common stock972 10 — 13,123 — 13,133 
Grant of restricted stock13 — — 160 — 160 
Common dividends declared— — — — (6,185)(6,185)
Preferred dividends declared— — — — (9,668)(9,668)
Exchange Offers (Note 11)1,368 14 (18,006)17,510 472 (10)
Net Income/(Loss)— — — — 58,742 58,742 
Balance at June 30, 202116,164 $162 $220,472 $719,940 $(474,697)$465,877 

Common Stock (1)Preferred StockAdditional
Paid-in Capital (1)		Retained
Earnings/(Deficit)
SharesAmountTotal
Balance at January 1, 202010,913 $109 $272,457 $662,401 $(85,921)$849,046 
Net proceeds from issuance of common stock334 4 — 3,495 — 3,499 
Grant of restricted stock and amortization of equity based compensation27 — — 456 — 456 
Preferred dividends declared— — — — (5,667)(5,667)
Net Income/(Loss)— — — — (481,956)(481,956)
Balance at June 30, 202011,274 $113 $272,457 $666,352 $(573,544)$365,378 

(1)Amounts have been adjusted to reflect the one-for-three reverse stock split effected July 22, 2021. See Note 2 and Note 11 for additional details.

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)
Six Months Ended
June 30, 2020June 30, 2019
Cash Flows from Operating Activities
Net income/(loss)$(481,956) $47,833  
Net (income)/loss from discontinued operations(361) (2,227) 
Net income/(loss) from continuing operations(482,317) 50,060  
Adjustments to reconcile net income/(loss) to net cash provided by (used in) operating activities:
Net amortization of premium/(discount)(3,926) (1,393) 
Net realized (gain)/loss242,752  48,093  
Unrealized (gain)/loss on real estate securities and loans, net204,265  (89,918) 
Unrealized (gain)/loss on derivative and other instruments, net3,767  20,925  
Foreign currency (gain)/loss, net(1,493) —  
Equity based compensation to affiliate163  199  
Equity based compensation expense293  199  
(Income)/Loss from investments in debt and equity of affiliates in excess of distributions received42,037  5,640  
Change in operating assets/liabilities:
Other assets6,442  (5,229) 
Other liabilities(10,416) (6,208) 
Net cash provided by (used in) continuing operating activities1,567  22,368  
Net cash provided by (used in) discontinued operating activities(726) (1,285) 
Net cash provided by (used in) operating activities841  21,083  
Cash Flows from Investing Activities
Purchase of real estate securities(29,599) (707,330) 
Purchase of residential mortgage loans(481,470) (25,996) 
Origination of commercial loans(6,729) (13,473) 
Purchase of commercial loans(12,471) (16,175) 
Purchase of U.S. Treasury securities—  (60,615) 
Investments in debt and equity of affiliates(43,208) (32,880) 
Proceeds from sales of real estate securities2,683,595  446,089  
Proceeds from sales of residential mortgage loans387,408  12,780  
Proceeds from sales of commercial loans34,200  —  
Proceeds from sales of U.S. Treasury securities—  60,498  
Principal repayments on real estate securities102,895  151,918  
Principal repayments on excess MSRs1,942  1,983  
Principal repayments on commercial loans—  10,471  
Principal repayments on residential mortgage loans37,390  7,743  
Distributions received in excess of income from investments in debt and equity of affiliates24,212  12,179  
Net proceeds from (payments made on) reverse repurchase agreements—  11,499  
Net proceeds from (payments made on) sales of securities borrowed under reverse repurchase agreements—  (11,478) 
Net settlement of interest rate swaps and other instruments(73,295) (58,594) 
Net settlement of TBAs4,610  1,600  
Cash flows provided by (used in) other investing activities(1,056) (710) 
Net cash provided by (used in) continuing investing activities2,628,424  (210,491) 
Net cash provided by (used in) discontinued investing activities—  245  
Net cash provided by (used in) investing activities2,628,424  (210,246) 
Cash Flows from Financing Activities
Net proceeds from issuance of common stock3,499  66,063  
Borrowings under financing arrangements12,701,999  20,785,055  
Repayments of financing arrangements(15,339,611) (20,614,328) 
Borrowings under secured debt20,000  —  
Six Months Ended
June 30, 2021June 30, 2020
Cash Flows from Operating Activities
Net income/(loss)$58,742 $(481,956)
Net (income)/loss from discontinued operations0 (361)
Net income/(loss) from continuing operations58,742 (482,317)
Adjustments to reconcile net income/(loss) to net cash provided by (used in) operating activities:
Net amortization of premium/(discount)363 (3,926)
Net realized (gain)/loss(336)242,752 
Unrealized (gain)/loss, net(29,534)208,032 
Foreign currency (gain)/loss, net(14)(1,493)
Equity based compensation to affiliate0 163 
Equity based compensation expense160 293 
(Income)/Loss from investments in debt and equity of affiliates in excess of distributions received(18,089)42,037 
Change in operating assets/liabilities:
Other assets(1,741)6,442 
Other liabilities325 (10,416)
Net cash provided by (used in) continuing operating activities9,876 1,567 
Net cash provided by (used in) discontinued operating activities0 (726)
Net cash provided by (used in) operating activities9,876 841 
Cash Flows from Investing Activities
Purchase of real estate securities(768,794)(29,599)
Purchase of residential mortgage loans(655,627)(481,470)
Origination of commercial loans(1,881)(6,729)
Purchase of commercial loans(3,377)(12,471)
Investments in debt and equity of affiliates(3,029)(43,208)
Proceeds from sales of real estate securities453,863 2,683,595 
Proceeds from sales of residential mortgage loans45,615 387,408 
Proceeds from sales of commercial loans74,579 34,200 
Principal repayments on real estate securities30,165 102,895 
Principal repayments on excess MSRs438 1,942 
Principal repayments on commercial loans195 0 
Principal repayments on residential mortgage loans33,651 37,390 
Distributions received in excess of income from investments in debt and equity of affiliates37,804 24,212 
Net settlement of interest rate swaps and other instruments11,518 (73,295)
Net settlement of TBAs0 4,610 
Cash flows provided by (used in) other investing activities2,244 (1,056)
Net cash provided by (used in) investing activities(742,636)2,628,424 
Cash Flows from Financing Activities
Net proceeds from issuance of common stock13,133 3,499 
Borrowings under financing arrangements7,875,275 12,701,999 
Repayments of financing arrangements(7,231,853)(15,339,611)
Deferred financing costs paid(200)0 
Borrowing under secured debt0 20,000 
Repayments of secured debt(10,000)0 
Proceeds from issuance of securitized debt203,625 3,000 
Principal repayments on securitized debt(78,931)(9,223)
Net collateral received from (paid to) repurchase counterparty800 (44,413)
Dividends paid on common stock(4,034)(14,734)
Dividends paid on preferred stock(9,668)(5,667)
Net cash provided by continuing financing activities758,147 (2,685,150)
6


Six Months Ended
June 30, 2020June 30, 2019
Proceeds from issuance of securitized debt3,000  —  
Principal repayments on securitized debt(9,223) —  
Net collateral received from (paid to) derivative counterparty—  (1,465) 
Net collateral received from (paid to) repurchase counterparty(44,413) (113) 
Dividends paid on common stock(14,734) (30,723) 
Dividends paid on preferred stock(5,667) (6,734) 
Net cash provided by continuing financing activities(2,685,150) 197,755  
Net cash provided by (used in) financing activities(2,685,150) 197,755  
Net change in cash, cash equivalents and restricted cash(55,885) 8,592  
Cash, cash equivalents, and restricted cash, Beginning of Period125,369  84,358  
Effect of exchange rate changes on cash(250) —  
Cash, cash equivalents, and restricted cash, End of Period$69,234  $92,950  
Supplemental disclosure of cash flow information:
Cash paid for interest on financing arrangements$38,778  $49,651  
Cash paid for excise and income taxes$1,010  $1,407  
Supplemental disclosure of non-cash financing and investing activities:
Payable on unsettled trades$—  $23,944  
Common stock dividends declared but not paid$—  $16,355  
Decrease in securitized debt$7,091  $2,215  
Transfer of real estate securities in satisfaction of repurchase agreements$345,066  $—  
Change in repurchase agreements from transfer of real estate securities$344,685  $—  
Transfer from residential mortgage loans to other assets$793  $1,466  
Transfer from investments in debt and equity of affiliates to CMBS$11,769  $—  
Six Months Ended
June 30, 2021June 30, 2020
Net change in cash and cash equivalents and restricted cash25,387 (55,885)
Cash and cash equivalents and restricted cash, Beginning of Period62,318 125,369 
Effect of exchange rate changes on cash10 (250)
Cash and cash equivalents and restricted cash, End of Period$87,715 $69,234 
Supplemental disclosure of cash flow information:
Cash paid for interest on financing arrangements$8,917 $38,778 
Cash paid for excise and income taxes$16 $1,010 
Supplemental disclosure of non-cash financing and investing activities:
Receivable on unsettled trades$106,247 $0 
Common stock dividends declared but not paid$3,394 $0 
Exchange Offers (Note 11)$18,006 $0 
Transfer of real estate securities in satisfaction of repurchase agreements$0 $345,066 
Change in repurchase agreements from transfer of real estate securities$0 $344,685 
Decrease in securitized debt$0 $7,091 
Transfer from residential mortgage loans to other assets$923 $793 
Transfer from investments in debt and equity of affiliates to CMBS$0 $11,769 

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:
June 30, 2020June 30, 2019
Cash and cash equivalents$68,150  $60,097  
Restricted cash1,084  27,847  
Restricted cash included assets held for sale - Single-family rental properties, net—  5,006  
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows$69,234  $92,950  
June 30, 2021June 30, 2020
Cash and cash equivalents$64,007 $68,150 
Restricted cash23,708 1,084 
Total cash and cash equivalents and restricted cash shown in the consolidated statements of cash flows$87,715 $69,234 
 
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)
June 30, 20202021
 
1. Organization

AG Mortgage Investment Trust, Inc. (the "Company") was incorporated in the state of Maryland on March 1, 2011. The Company is a hybrid mortgage REIT that opportunistically invests in a diversified risk adjusted portfolio of credit investments and agency investments, and credit investments. Historically, agency investments have included Agency RMBS and Agency Excess MSRs, and credit investments have included Non-Agency RMBS, ABS, CMBS, loans, and Credit Excess MSRs, as definedwhich contains the asset classes further described below.
Residential mortgage-backed securities ("RMBS") include mortgage pass-through certificates or collateralized mortgage obligations ("CMOs") representing interests in or obligations backed by pools of residential mortgage loans issued or guaranteed by a U.S. government-sponsored entity such as Fannie Mae or Freddie Mac (collectively, "GSEs"), or any agency of the U.S. Government such as Ginnie Mae (collectively, "Agency RMBS"). The principal and interest payments on Agency RMBS securities have an explicit guarantee by either an agency of the U.S. government or a U.S. government-sponsored entity.

Non-Agency RMBS represent fixed- and floating-rate RMBS issued by entities or organizations other than a GSE or agency of the U.S. government, or that are collateralized by non-U.S. mortgages, including investment grade (AAA through BBB) and non-investment grade classes (BB and below). The mortgage loan collateral for Non-Agency RMBS consists of residential mortgage loans that do not generally conform to underwriting guidelines issued by U.S. government agencies or U.S. government-sponsored entities or are non-U.S. mortgages. Non-Agency RMBS also includes securities issued by companies whose primary assets are land and real estate.
Asset Backed Securities ("ABS") are securitized investments for which the underlying assets are diverse, not only representing real estate related assets.
Commercial Mortgage Backed Securities ("CMBS") represent investments of fixed- and floating-rate CMBS, including investment grade (AAA through BBB) and non-investment grade classes (BB and below), secured by, or evidencing an ownership interest in, a single commercial mortgage loan or a pool of commercial mortgage loans.

The Company’s Non-Agency RMBS, CMBS and ABS portfoliosCompany's investment groups are generally not issued or guaranteed by Fannie Mae, Freddie Mac or any agencyprimarily comprised of the U.S. Government, or are collateralized by non-U.S. mortgages and are therefore subject to credit risk.following:
Collectively, the Company refers to Agency RMBS, Non-Agency RMBS, ABS and CMBS asset types as "real estate securities" or "securities.
Investment GroupsDescription
Credit - Residential
Residential mortgage loans
•Residential mortgage loans represent pools of fixed- and adjustable-rate loans collateralized by Non-QM, re-performing, and non-performing mortgages.
•Non-QM Loans are residential mortgage loans that are not deemed "qualified mortgage," or "QM," loans under the rules of the Consumer Finance Protection Bureau.
•Performing, re-performing, and non-performing loans are residential mortgage loans collateralized by a first lien mortgaged property.
Non-Agency Residential Mortgage-Backed Securities ("RMBS")
•Non-Agency RMBS represent fixed- and floating-rate RMBS issued by entities other than U.S. government-sponsored entity ("GSE") or agency of the U.S. government. The mortgage loan collateral for Non-Agency RMBS consists of residential mortgage loans that do not generally conform to underwriting guidelines issued by a GSE or agency of the U.S. government.
Credit - Commercial
Commercial Mortgage-Backed Securities ("CMBS")
•CMBS represent investments of fixed- and floating-rate CMBS secured by, or evidencing an ownership interest in, a single commercial mortgage loan or a pool of commercial mortgage loans. Single-Asset/Single-Borrower securities are CMBS which securitize a single loan that is backed by a single asset (usually a large commercial property) or by a pool of cross collateralized mortgage obligations to a single borrower or related borrowers. Conduit CMBS are CMBS that are collateralized by commercial mortgage loans to multiple borrowers.
Commercial Loans
•Commercial loans are collateralized by an interest in commercial real estate and represent a contractual right to receive money on demand or on fixed or determinable dates.
Agency RMBS
•Agency RMBS represent interests in pools of residential mortgage loans guaranteed by a GSE such as Fannie Mae or Freddie Mac, or an agency of the U.S. Government such as Ginnie Mae.
Excess MSRs
•Excess MSRs represent the excess servicing spread related to mortgage servicing rights, whose underlying collateral is securitized in a trust held by a GSE or agency of the U.S. government ("Agency Excess MSR").

Residential mortgage loans refer to performing, re-performing and non-performing loans secured by a first lien mortgage on residential mortgaged property located in any of the 50 states of the United States or in the District of Columbia. Commercial loans are secured by an interest in commercial real estate and represent a contractual right to receive money on demand or on fixed or determinable dates. The Company refers to its residential and commercial mortgage loans as "mortgage loans" or "loans."

Excess MSRs referThe Company refers to the excess servicing spread related to mortgage servicing rights, whose underlying collateral is securitized in a trust either held by a U.S. government agencyAgency RMBS, Non-Agency RMBS, and CMBS asset types as "real estate securities" or GSE ("Agency Excess MSR") or not held by a U.S. government agency or GSE ("Credit Excess MSR")."securities."

Prior to December 31, 2019, theCredit investments include loans, Non-Agency RMBS, and CMBS and agency investments include Agency RMBS and Agency Excess MSRs.

The Company conductedconducts its business through the following segments; (i)1 reportable segment, Securities and Loans, which reflects how the Company manages its business and (ii) Single-Family Rental Properties.analyzes and reports its results of operations. On November 15, 2019, the Company sold its portfolio of single-family rental properties ("SFR portfolio") to a third party, and no longer separated its business into segments.which was previously reported as a separate operating segment. The sale of the Company's SFR portfolio has met the criteria for discontinued operations. Accordingly, for all current and prior periods presented, the related assets and liabilities are presented as assets and liabilities held for sale on the consolidated balance sheets and the related operating results are presented as income/(loss) from discontinued operations on the consolidated statement of operations. See Note 14 for further details.

The Company is externally managed by AG REIT Management, LLC, a Delaware limited liability company (the "Manager"), a wholly-owned subsidiary of Angelo, Gordon & Co., L.P. ("Angelo Gordon"), a privately-held, SEC-registered investment
8
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
adviser, pursuant to a management agreement. The Manager pursuant to a delegation agreement dated as of June 29, 2011, has delegated to Angelo Gordon the overall responsibility of its day-to-day duties and obligations arising under the management agreement.
 
8

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
The Company conducts its operations to qualify and be taxed as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code").
 
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

COVID-19 Impact

On March 11, 2020, the World Health Organization declared the outbreak of theThe novel coronavirus ("COVID-19") a pandemic. On March 13, 2020, the U.S. declared a national emergency concerning the COVID-19 pandemic and several states and municipalities have subsequently declared public health emergencies. These conditions havehas caused and continue to cause, a significant disruptiondisruptions in the U.S. and world economies. To slow the spread of COVID-19, many countries, including the U.S., have implemented social distancing measures, which have substantially prohibited large gatherings, including at sporting events, religious services and schools. Further, many regions, including the majority of U.S. states, have implemented additional measures, such as shelter-in-place and stay-at-home orders. Many businesses have moved to a remote working environment, temporarily suspended operations, laid off a significant percentage of their workforce and/or shut down completely. Moreover, the COVID-19 pandemic and certain of the actions taken to reduce its spread have resultedeconomies resulting in lost business revenue, rapid andrevenues, significant increases in unemployment, changes in consumer behavior and significant reductions in liquidity and the fair value of many assets, including those in which the Company invests. Although many of the government restrictions are in the process of being relaxed, these conditions, or some level thereof, are expected to continue over the near term and may prevail throughout 2020.

Beginning in mid-March 2020, the global pandemic associated with COVID-19 and the related economic conditions caused financial and mortgage-related asset markets to come under extreme duress, resulting in credit spread widening, a sharp decrease in interest rates and unprecedented illiquidity in repurchase agreement financing and mortgage-backed securities ("MBS") markets. The illiquidity was exacerbated by inadequate demand for MBS among primary dealers due to balance sheet constraints. These events, in turn, resulted in declines inRefer to Note 2 "Financing arrangements" for further details related to the value of our assets and margin calls from our repurchase agreement financing counterparties. In orderimpact to satisfy the margin calls, the Company sold a significant portion of its investments resulting in a material adverse impact on book value, earnings and financial position. The Company's book value decreased from $17.61 at December 31, 2019 to $2.75 at June 30, 2020.

In an effort to manage the Company's portfolio through this unprecedented turmoil in the financial markets and improve liquidity, the Company executed the following measures during the six months ended June 30, 2020:

•The Company reduced its investment portfolio from $4.0 billion at December 31, 2019 to $652.3 million at June 30, 2020 through sales, directly or as a result of financing counterparty seizures.
•The Company terminated its entire portfolio of pay-fixed, receive-variable interest rate swaps, recognizing net realized losses of $(65.4) million.
•The Company reduced its outstanding financing arrangements from $3.2 billion at December 31, 2019these economic conditions. Although market conditions have improved in quarters subsequent to $251.1 million at June 30,March 2020, resulting in a decline of its overall leverage ratio from 4.1x to 1.3x.

Thethe full impact of COVID-19 on the mortgage REIT industry, the credit markets, and, consequently, on the Company’s financial condition and results of operations is uncertain and cannot be predicted at the current time as it depends on several factors beyond the control of the Company including, but not limited to (i) the uncertainty around the severity, duration and spread of the outbreak, (ii) the effectiveness of the United States public health response, (iii) the pandemic’s impact on the U.S. and global economies, (iv) the timing, scope and effectiveness of additional governmental responses to the pandemic, including the availability of a treatment or vaccination for COVID-19, (v) the impact of government interventions, and (vi) the negative impact on our borrowers, asset values and cost of capital.future periods remains uncertain.

In March 2020, the Company's Manager transitioned to a fully remote work force, to protect the safety and well-being of the Company's personnel. The Company's Manager’s prior investments in technology, business continuity planning and cyber-security protocols have enabled us to continue working with limited operational impact.
9
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
2. Summary of significant accounting policies
 
The accompanying unaudited consolidated financial statements and related notes have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. For all periods presented, all per share amounts and common shares outstanding have been adjusted on a retroactive basis to reflect the Company's one-for-three reverse stock split which was effected following the close of business on July 22, 2021. Certain prior period amounts have been reclassified to conform to the current period’s presentation. In the opinion of management, all adjustments considered necessary for a fair statementpresentation 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. Certain reclassifications have been made to the prior year's consolidated financial statements to conform to the three months ended June 30, 2020 presentation, primarily in the Consolidated Statement of Operations and all related notes in which prior periods have been retrospectively adjusted to reflect the classification of the operations of the Company's SFR portfolio to discontinued operations.

The accompanying unaudited consolidated financial statements and related notes have been prepared assuming that the Company will continue as a going concern. The Company continues to conduct extensive going concern analyses as a result of market volatility from the COVID-19 pandemic. A going concern analysis has a look-forward period of one year from the financial statement issuance date. The Company expects its current cash resources, operating cash flows, positive equity on its remaining assets, and its ability to obtain financing will be sufficient to sustain operations for a period greater than one year after the issuance of the date of this report. Management believes that the Company will have sufficient liquidity to meet its obligations, as they become due, for the next twelve months. To the extent that actual available cash differs materially from the current cash flow forecast, management has the ability to consider certain asset sales to increase the amount of available cash.

The global impact of the COVID-19 pandemic continues to evolve as state and local governments adopt a number of emergency measures and recommendations in response to the outbreak, including imposing travel bans, "shelter in place" restrictions, curfews, canceling events, banning large gatherings, closing non-essential businesses and generally promoting social distancing. Although certain states and localities have recently begun easing some of these new measures and providing recommendations regarding recommencing economic activity, renewed outbreaks of COVID-19 may continue to occur and result in additional or different policy action at the federal, state and local level in the near future. The COVID-19 pandemic and resulting emergency measures has led (and may continue to lead) to significant disruptions in the global supply chain, global capital markets, the economy of the U.S. and the economies of other countries impacted by COVID-19. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions. The Company believes the estimates and assumptions underlying our condensed consolidated financial statements are reasonable and supportable based on the information available as of June 30, 2020; however, uncertainty over the ultimate impact COVID-19 will have on the global economy generally, and our business in particular, makes any estimates and assumptions as of June 30, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19. Accordingly, it is reasonably possible that actual conditions could be different than anticipated in those estimates, which could materially impact the Company’s results of operations and its financial condition and therefore the going concern analysis.
 
Cash and cash equivalents

Cash is comprised of cash on deposit with financial institutions. The Company classifies highly liquid investments with original maturities of three months or less from the date of purchase as cash equivalents. Cash equivalents includesmay include cash invested in money market funds. As of June 30, 2020, the Company held $68.2 million of cashCash and cash equivalents NaN ofare carried at cost, which were cash equivalents. As of December 31, 2019, the Company held $81.7 million of cash and cash equivalents, of which $53.2 million were cash equivalents.approximates fair value. The Company places its cash with high credit quality institutions to reduceminimize credit risk exposure. Cash pledged to the Company as collateral is unrestricted in use and, accordingly, is included as a component of "Cash and cash equivalents" on the consolidated balance sheets. Any cash held by the Company as collateral is included in the "Other liabilities" line item on the consolidated balance sheets and in cash flows from financing activities on the consolidated statement of cash flows. Due to broker, which is included in the "Other liabilities" line item on the consolidated balance sheets, does not include variation margin received on centrally cleared derivatives. See Note 8 for more detail. Any cash due to the Company in the form of principal payments is included in the "Other assets" line item on the consolidated balance sheets and in cash flows from operating activities on the consolidated statement of cash flows.
 
10
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
Restricted cash
 
Restricted cash includes cash pledged as collateral for clearing and executing trades, derivatives, and financing arrangements. Prior to the disposition of the Company's SFR portfolio,arrangements, as well as restricted cash also included cash deposited into accounts related to rent deposits and collections, security deposits, property taxes, insurance premiums, interest expenses, property management fees and capital expenditures.held at certain consolidated trusts. Restricted cash is not available to the Company for general corporate purposes. Restricted cash may be returned to the Company when the related collateral requirements are exceeded or at the maturity of the derivative or financing arrangement. Restricted cash is carried at cost, which approximates fair value. Restricted cash does not include variation margin pledged on centrally cleared derivatives. See Note 8 for more detail.
Offering costs
The Company has incurred offering costs in connection with common stock offerings, registration statements and preferred stock offerings. Where applicable, the offering costs were paid out of the proceeds of the respective offerings. Offering costs in connection with common stock offerings and costs in connection with registration statements have been accounted for as a reduction of additional paid-in capital. Offering costs in connection with preferred stock offerings have been accounted for as a reduction of their respective gross proceeds.
 
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. See Note 1 under "COVID-19 Impact" for more detail.
 
9

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
Earnings/(Loss) per share
 
In accordance with the provisions of Accounting Standards Codification ("ASC") 260, "Earnings per Share," the Company calculates basic income/(loss) per share by dividing net income/(loss) available to common stockholders for the period by weighted average shares of the Company’s common stock outstanding for that period. Diluted income per share takes into account the effect of dilutive instruments, such as stock options, warrants, unvested restricted stock, and unvested restricted stock units, but usesusing the average share price for the period in determining the number of incremental shares that are to be added to the weighted average number of shares outstanding. In periods in which the Company records a loss, potentiallyPotential dilutive securitiesshares are excluded from the diluted loss per share calculation as theirif they have an anti-dilutive effect in the period.
Reverse stock split

On July 12, 2021, the Company announced that its board of directors approved a one-for-three reverse stock split of the Company's outstanding shares of common stock. The reverse stock split was effected following the close of business on loss per share is anti-dilutive. See Note 9 for aggregate amountsJuly 22, 2021 (the "Effective Time"). At the Effective Time, every three issued and outstanding shares of arrearages in cumulative preferred dividends and Note 12 for further detail on the Company’s common stock were combined into one share of the Company’s common stock. No fractional shares were issued in connection with the reverse stock split. Instead, each stockholder holding fractional shares was entitled to receive, in lieu of such fractional shares, cash in an amount determined based on the closing price of the Company's common stock on the date of the Effective Time. The reverse stock split applied to all of the Company's outstanding shares of common stock and preferred stock.did not affect any stockholder’s ownership percentage of shares of the Company's common stock, except for immaterial changes resulting from the payment of cash for fractional shares. There was no change in the Company's authorized capital stock or par value of each share of common stock as a result of the reverse stock split. All per share amounts and common shares outstanding for all periods presented in the unaudited consolidated financial statements have been adjusted on a retroactive basis to reflect the Company's reverse stock split.

Valuation of financial instruments
 
The fair value of the financial instruments that the Company records at fair value is determined by the Manager, subject to oversight of the Company’s Board of Directors, and in accordance with ASC 820, "Fair Value Measurements and Disclosures." When possible, the Company determines fair value using independentthird-party data sources. ASC 820 establishes a hierarchy that prioritizes the inputs to valuation techniques giving the highest priority to readily available unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements) when market prices are not readily available or reliable.
 
The three levels of the hierarchy under ASC 820 are described below: 
•Level 1 – Quoted prices in active markets for identical assets or liabilities.
•Level 2 – Prices determined using other significant observable inputs. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others.
•Level 3 – Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Company’s assumptions about the factors that market participants would use in pricing an asset or liability, and would be based on the best information available.

Transfers between levels are assumed to occur at the beginning of the reporting period.

11
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
At the beginning of the first quarter of 2020, the Manager completed a data collection and analysis effort, which supported an update to its Leveling policy under ASC 820. Among the data collected and analyzed were: (i) reports from TRACE, FINRA’s Trade Reporting and Compliance Engine, that reports over-the-counter secondary market transactions in eligible fixed income securities, (ii) information from pricing vendors regarding valuation approaches and observability of market color, (iii) data points collected from discussions with industry sources, including peer firms and audit firms, and (iv) its own data from back testing vendor pricing against its own trades. After analyzing this data, the Manager concluded that there was sufficient observability of market inputs used by its third-party pricing services for certain RMBS and CMBS positions previously categorized as Level 3 to meet the criteria for a Level 2 classification.

The Company considered whether the volatile market conditions related to the COVID-19 pandemic would have an impact on its Leveling policy under ASC 820, as amended on January 1, 2020. Based on due diligence, there have been no significant changes in any of the pricing services’ fair value methodologies or processes as a result of COVID-19. Additionally, despite increased price volatility and widening of bid-ask spreads, the Company does not believe the pricing services’ ability to determine fair values was adversely impacted. As a result, the Company concluded there was no migration from Level 2 to Level 3 as a result of COVID-19.
Accounting for real estate securitiesloans
 
Investments in real estate securitiesloans are recorded in accordance with ASC 320-10, "Investments – Debt and Equity Securities," ASC 325-40, "Beneficial Interests in Securitized Financial Assets," or ASC 310-30, "Loans and Debt Securities Acquired with Deteriorated Credit Quality.310-10, "Receivables." The Company has chosen to make a fair value election pursuant to ASC 825 "Financial Instruments" for its real estate securitiesloan portfolio. Real estate securities are recorded at fair value on the consolidated balance sheets and the periodic change in fair value is recorded in current period earnings on the consolidated statement of operations as a component of "Unrealized gain/(loss) on real estate securities and loans, net." Real estate securities acquired through securitizations are shown in the line item "Purchase of real estate securities" on the consolidated statement of cash flows. Purchases and sales of real estate securities are recorded on the trade date.
These investments meet the requirements to be classified as available for sale under ASC 320-10-25 which requires the securities to be carried at fair value on the consolidated balance sheets with changes in fair value recorded to other comprehensive income, a component of stockholders’ equity. Electing the fair value option allows the Company to record changes in fair value in the consolidated statement of operations, which, in management’smanagement's view, more appropriately reflects the results of operations for a particular reporting period as all securitiesloan activities will be recorded in a similar manner. The Company recognizes certain upfront costs and fees relating to securities for which the fair value option has been elected in current period earnings as incurred and does not defer those costs, which is in accordance with ASC 825-10-25.
When the Company purchases securities with evidence of credit deterioration since origination, it will analyze the securities to determine if the guidance found in ASC 310-30 is applicable.
In June 2016, FASB issued ASU 2016-13, "Financial Instruments – Credit Losses" ("ASU 2016-13"). This new guidance significantly changes how entities will measure credit losses for most financial assets, includingAs such, loans that are not measured at fair value with changes in fair value recognized through net income. The Company adopted the new guidance as of January 1, 2020. The new guidance specifically excludes available-for-sale securities and loans measured at fair value, with changes in fair value recognized through net income. Accordingly, the impact of the new guidance on accounting for the Company's debt securities and loans is limited to recognition of effective yield which was historically impacted by other than temporary impairment recorded under current standards. As the new guidance eliminates the accounting for other than temporary impairment, this guidance has impacted the Company's unrealized and realized gain/(loss) amounts. Depending on the fair value and projected cash flows as of a given reporting date, the impact of this guidance could be material.

Prior to the adoption of ASU 2016-13, the Company accounted for its securities under ASC 310 and ASC 325 and evaluated securities for other-than-temporary impairment ("OTTI") on at least a quarterly basis. The determination of whether a security was other-than-temporarily impaired involved judgments and assumptions based on subjective and objective factors. When the fair value of a real estate security was less than its amortized cost at the balance sheet date, the security was considered impaired, and the impairment was designated as either "temporary" or "other-than-temporary."
When a real estate security was impaired, an OTTI was considered to have occurred if (i) the Company intended to sell the security (i.e., a decision has been made as of the reporting date) or (ii) it was more likely than not that the Company was required to sell the security before recovery of its amortized cost basis. If the Company intended to sell the security or if it was more likely than not that the Company was required to sell the real estate security before recovery of its amortized cost basis,
12
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
the entire amount of the impairment loss, if any, was recognized in earnings as a realized loss and the cost basis of the security was adjusted to its fair value. Additionally, for securities accounted for under ASC 325-40 an OTTI was deemed to have occurred when there was an adverse change in the expected cash flows to be received and the fair value of the security was less than its carrying amount. In determining whether an adverse change in cash flows occurred, the present value of the remaining cash flows, as estimated at the initial transaction date (or the last date previously revised), was compared to the present value of the expected cash flows at the current reporting date. The estimated cash flows reflected those a "market participant" would use and included observations of current information and events, and assumptions related to fluctuations in interest rates, prepayment speeds and the timing and amount of potential credit losses. Cash flows were discounted at a rate equal to the current yield used to accrete interest income. Any resulting OTTI adjustments were reflected in the "Net realized gain/(loss)" line item on the consolidated statement of operations.
The determination as to whether an OTTI existed was subjective, given that such determination was based on information available at the time of assessment as well as the Company’s estimate of the future performance and cash flow projections for the individual security. As a result, the timing and amount of an OTTI constituted an accounting estimate that could change materially over time. Increases in interest income could have been recognized on a security on which the Company previously recorded an OTTI charge if the performance of such security subsequently improved.

Sales of securities are driven by the Manager’s portfolio management process. The Manager seeks to mitigate risks including those associated with prepayments, defaults, severities, amongst others and will opportunistically rotate the portfolio into securities with more favorable attributes. Strategies may also be employed to manage net capital gains, which need to be distributed for tax purposes.
Realized gains or losses on sales of securities, loans and derivatives are included in the "Net realized gain/(loss)" line item on the consolidated statement of operations. The cost of positions sold is calculated using a first in, first out ("FIFO") basis. Realized gains and losses are recorded in earnings at the time of disposition.
Accounting for residential and commercial mortgage loans
Investments in mortgage loans are recorded in accordance with ASC 310-10, "Receivables." At purchase, the Company may aggregate its mortgage loans into pools based on common risk characteristics. Once a pool of loans is assembled, its composition is maintained. The Company has chosen to make a fair value election pursuant to ASC 825 for its mortgage loan portfolio. Loans are recorded at fair value on the consolidated balance sheets and any periodic change in fair value is recorded in current period earnings on the consolidated statement of operations as a component of "Unrealized gain/(loss) on real estate securities and loans,, net." The Company recognizes certain upfront costs and fees relating to loans for which the fair value option has been elected in current period earnings as incurred and does not defer those costs, which is in accordance with ASC 825-10-25. Purchases and sales of mortgage loans are recorded on the settlement date, concurrent with the completion of due diligence and the removal of any contingencies. Prior to the
10

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
settlement date, the Company will include commitments to purchase loans within the Commitments and Contingencies footnote to the financial statements.

The Company amortizes or accretes any premium or discount over the life of the loans utilizing the effective interest method. On at least a quarterly basis, the Company evaluates the collectability of both interest and principal on its loans to determine whether they are impaired. A loan or pool of loans is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms. Income recognition is suspended for loans at the earlier of the date at which payments become 90-days past due or when, in the opinion of the Manager, a full recovery of income and principal becomes doubtful. When the ultimate collectability of the principal of an impaired loan or pool of loans is in doubt, all payments are applied to principal under the cost recovery method. When the ultimate collectability of the principal of an impaired loan is not in doubt, contractual interest is recorded as interest income when received under the cash basis method until an accrual is resumed when the loan becomes contractually current and performance is demonstrated to be resumed. A loan is written off when it is no longer realizable and/or legally discharged.

Residential Mortgage Loans

At purchase, the Company may aggregate its residential mortgage loans into pools based on common risk characteristics. Once a pool of loans is assembled, its composition is maintained. When the Company purchases mortgage loans with evidence of credit deterioration since origination and it determines that it is probable it will not collect all contractual cash flows on those loans, it will apply the guidance found in ASC 310-30. Mortgage loans that are delinquent 60 or more days are considered non-performing.
 
The Company updates its estimate of the cash flows expected to be collected on at least a quarterly basis for loans accounted for under ASC 310-30. In estimating these cash flows, there are a number of assumptions that will be subject to uncertainties and contingencies including both the rate and timing of principal and interest receipts, and assumptions of prepayments, repurchases, defaults and liquidations. If based on the most current information and events it is probable that there is a
13
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
significant increase in cash flows previously expected to be collected or if actual cash flows are significantly greater than cash flows previously expected, the Company will recognize these changes prospectively through an adjustment of the loan’s yield over its remaining life. The Company will adjust the amount of accretable yield by reclassification from the nonaccretable difference. The adjustment is accounted for as a change in estimate in conformity with ASC 250, "Accounting Changes and Error Corrections" with the amount of periodic accretion adjusted over the remaining life of the loan. Prior to the adoption of ASU 2016-13, decreases in cash flows expected to be collected from previously projected cash flows, which included all cash flows originally expected to be collected by the investor plus any additional cash flows expected to be collected arising from changes in estimate after acquisition, could have been recognized as impairment. Increases in interest income could have been recognized on a loan on which the Company previously recorded an OTTI charge if the performance of such loan subsequently improved.

As previously stated,Commercial Loans

Commercial loans are classified as held for sale upon the Company determining that it intends to sell or liquidate the loan in the short-term and certain criteria have been met. Commercial loans meeting all criteria for reclassification are presented separately on the consolidated balance sheets in the "Commercial loans held for sale" line item. Estimated costs incurred to sell a loan are included within the fair value of the loan.

Accounting for real estate securities
Investments in real estate securities are recorded in accordance with ASC 320-10, "Investments – Debt and Equity Securities," ASC 325-40, "Beneficial Interests in Securitized Financial Assets," or ASC 310-30, "Loans and Debt Securities Acquired with Deteriorated Credit Quality." The Company has chosen to make a fair value election pursuant to ASC 825, "Financial Instruments" for its real estate securities portfolio. Real estate securities are recorded at fair value on the consolidated balance sheets and the periodic change in fair value is recorded in current period earnings on the consolidated statement of operations as a component of "Unrealized gain/(loss), net." Purchases and sales of real estate securities are recorded on the trade date.
These investments meet the requirements to be classified as available for sale under ASC 320-10-25 which requires the securities to be carried at fair value on the consolidated balance sheets with changes in fair value recorded to other comprehensive income, a component of stockholders’ equity. Electing the fair value option allows the Company to record changes in fair value in the consolidated statement of operations, which, in management’s view, more appropriately reflects the results of operations for a particular reporting period as all securities activities will be recorded in a similar manner.
When the Company purchases securities with evidence of credit deterioration since origination, it will analyze the securities to determine if the guidance found in ASC 310-30 is applicable.
11

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
On January 1, 2020, the Company adopted ASU 2016-13, as of January 1, 2020."Financial Instruments – Credit Losses" ("ASU 2016-13"). The new guidance specifically excludes available-for-sale securities and loans measured at fair value with changes in fair value recognized through net income. Accordingly, the impact of the new guidance on accounting for the Company's debt securities and loans is limited to recognition of effective yield. The Company measures its debt securities and loans at fair value with any changes recognized through net income and it updates its estimate of the cash flows expected to be collected on these asset classes on at least a quarterly basis recognizing changes in cash flows in interest income prospectively through an adjustment of an asset’s yield which was previously impacted by other than temporary impairment recorded under previous standards. Asover its remaining life.
Realized gains or losses on sales of securities, loans and derivatives are included in the new guidance eliminates the accounting for other than temporary impairment, this guidance has impacted the Company's recorded unrealized and"Net realized gain/(loss) amounts. Depending" line item on the fair valueconsolidated statement of operations. The cost of positions sold is calculated using a first in, first out ("FIFO") basis. Realized gains and projected cash flows aslosses are recorded in earnings at the time of a given reporting date, the impact of this guidance could be material.disposition.

Investments in debt and equity of affiliates

The Company’s unconsolidated ownership interests in affiliates are accounted for using the equity method. A majoritySubstantially all of the Company’s investments held through affiliated entities are comprised of real estate securities, Excess MSRs, loans, and certain derivatives.its interest in AG Arc LLC. These types of investments may also be held directly by the Company. TheseCertain entities have chosen to make a fair value election on their financial instruments and certain financing arrangements pursuant to ASC 825; as such, the Company will treat these financial instruments and financing arrangements consistently with this election.
 
Arc Home

On December 9, 2015, the Company, alongside private funds managed by Angelo Gordon, through AG Arc LLC, one of the Company’s indirect subsidiaries ("AG Arc"), formed Arc Home LLC ("Arc Home"). In June 2016, Arc Home closed on the acquisition of a Fannie Mae, Freddie Mac, FHA, VA and Ginnie Mae seller/servicer of residential mortgages. Through this subsidiary, Arc Home originates conforming, Government, Jumbo, Non-QM, and other non-conforming residential mortgage loans and retains the mortgage servicing rights associated with the loans it originates, and purchases additional mortgage servicing rights from third-party sellers.originates. Arc Home is led by an external management team. The Company has chosen to make a fair value election with respect to its investment in AG Arc pursuant to ASC 825. The Company elected to treat its investment in AG Arc as a taxable REIT subsidiary. As a result, income or losses recognized by the Company from its investment in AG Arc are recorded in "Equity in earnings/(loss) from affiliates" line item on the Company's consolidated statement of operations net of income taxes.

From time to time, the Company acquires newly originated Non-QM Loans from Arc Home with the intent to securitize the assets and obtain non-recourse financing. In connection with the sale of loans from Arc Home to the Company, gains or losses recorded by Arc Home are consolidated into AG Arc. In accordance with ASC 323-10, for loans acquired from Arc Home that remain on the Company's consolidated balance sheet at period end, the Company eliminates any profits or losses typically recognized through the "Equity in earnings/(loss) from affiliates" line item on the Company's consolidated statement of operations and adjusts the cost basis of the underlying loans accordingly. For the three and six months ended June 30, 2021, the Company eliminated $1.4 million and $1.9 million of intra-entity profits recognized by Arc Home, respectively, and also decreased the cost basis of the underlying loans by the same amount in connection with loan sales to the Company. As the Company did not purchase any loans from Arc Home during three and six months ended June 30, 2020, it did 0t eliminate any intra-entity profits during the three and six months ended June 30, 2020.
 
MATH

On August 29, 2017, the Company, alongside private funds managed by Angelo Gordon, formed Mortgage Acquisition Holding I LLC ("MATH") to conduct a residential mortgage investment strategy. MATH in turn sponsored the formation of an entity called Mortgage Acquisition Trust I LLC ("MATT") to purchase predominantly "Non-QM" loans, which are residential mortgage loans that are not deemed "qualified mortgage," or "QM," loans under the rules of the CFPB. Non-QM loans are not eligible for delivery to Fannie Mae, Freddie Mac, or Ginnie Mae.Loans. MATT has made an election to be treated as a real estate investment trust beginning with the 2018 tax year. As of June 30, 2021, MATT primarily holds retained tranches from securitizations.

On April 3, 2020, the Company, alongside private funds under the management of Angelo Gordon, restructured its financing arrangements in MATT ("Restructured Financing Arrangement"). The Restructured Financing Arrangement requires all principal and interest on the underlying assets in MATT be used to pay down principal and interest on the outstanding financing arrangement. As of April 3, 2020, the Restructured Financing Arrangement is no longer a mark-to-market facility with respect to margin calls and is non-recourse to the Company. The Restructured Financing Arrangement provides for a termination date of October 1, 2021. At the earlier of the termination date or the securitization or sale by the Company of the remaining assets subject to the Restructured Financing Arrangement, the financing counterparty (which is a non-affiliate) will be entitled to 35% of the remaining equity in the assets. The Company evaluated this restructuring and concluded it was an extinguishment of debt. MATT has chosen to make a fair value election on this financing arrangement, and the Company will treat this arrangement consistently with this election.LOTS

On May 15, 2019 and November 14, 2019, the Company, alongside private funds managed by Angelo Gordon, formed LOT SP I LLC and LOT SP II LLC, respectively, (collectively, "LOTS"). LOTS were formed to originate first mortgage loans to third partythird-party land developers and home builders for the acquisition and horizontal development of land ("Land Related Financing").

1412

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 20202021
During Q3 2018, the Company transferred certainSummary of its CMBS from certain of its non-wholly owned subsidiaries accounted for as an equity method investment to a consolidated entity. The Company executed this transfer in order to obtain financing on these real estate securities. As a result, there was a reclassification of these assets from the "Investmentsinvestments in debt and equity of affiliates" line item to the "CMBS" line item on the Company's consolidated balance sheets. In addition, the Company has also shown this reclassification as a non-cash transfer from the "Investments in debt and equity of affiliates" line item to the "CMBS" line item on its consolidated statements of cash flows.affiliates

The below table reconcilestables reconcile the fair value of investments to the "Investments in debt and equity of affiliates" line item on the Company's consolidated balance sheetsheets (in thousands).
June 30, 2020December 31, 2019June 30, 2021December 31, 2020
AssetsLiabilitiesEquityAssetsLiabilitiesEquityAssetsLiabilitiesEquityAssetsLiabilitiesEquity
Real Estate Securities, Excess MSRs and Loans, at fair value (1)(2)$307,130  $(217,856) $89,274  $373,126  $(257,068) $116,058  
Non-QM Loans (1)Non-QM Loans (1)$77,683 $(48,813)$28,870 $153,200 $(111,135)$42,065 
Land Related FinancingLand Related Financing17,857 0 17,857 22,824 0 22,824 
Other (2)Other (2)44,445 (11,351)33,094 41,940 (5,588)36,352 
Real Estate Securities and Loans, at fair valueReal Estate Securities and Loans, at fair value$139,985 $(60,164)$79,821 $217,964 $(116,723)$101,241 
AG Arc, at fair valueAG Arc, at fair value28,030  —  28,030  28,546  —  28,546  AG Arc, at fair value50,862 0 50,862 45,341 0 45,341 
Cash and Other assets/(liabilities)Cash and Other assets/(liabilities)9,276  (3,651) 5,625  12,953  (1,246) 11,707  Cash and Other assets/(liabilities)8,177 (2,992)5,185 5,279 (1,194)4,085 
Investments in debt and equity of affiliatesInvestments in debt and equity of affiliates$344,436  $(221,507) $122,929  $414,625  $(258,314) $156,311  Investments in debt and equity of affiliates$199,024 $(63,156)$135,868 $268,584 $(117,917)$150,667 
(1)As of June 30, 2021 and December 31, 2020, Non-QM Loans excluded loans with an unpaid principal balance of $11.2 million and $17.3 million, respectively, whereby an affiliate of MATT has the right, but not the obligation, to repurchase loans from a trust that are 90 days or more delinquent at its discretion. These loans, which are eligible to be repurchased, would be recorded on the balance sheet of MATT, an unconsolidated equity method investee of the Company, with a corresponding and offsetting liability.
(2)Certain loans held in securitized form are presented net of non-recourse securitized debt.
(2)
Within Real Estate Securities, Excess MSRs and Loans is $243.7 million and $254.3 million of fair value of Non-QM loans held in MATT at June 30, 2020 and December 31, 2019, respectively. Additionally, there is $23.8 million and $17.0 million of fair value of Land Related Financing held in LOTS at June 30, 2020 and December 31, 2019, respectively.
The Company’s investments in debt and equity of affiliates are recorded at fair value onbelow table reconciles the consolidated balance sheets innet income/(loss) to the "Investments in debt and equity of affiliates" line item and periodic changes in fair value are recorded in current period earnings on the consolidated statement of operations as a component of "Equity in earnings/(loss) from affiliates." Capital contributions, distributionsaffiliates" line item on the Company's consolidated statements of operations (in thousands).
Three Months EndedSix Months Ended
June 30, 2021June 30, 2020June 30, 2021June 30, 2020
Non-QM Loans$1,275 $(8,115)$15,921 $(34,844)
AG Arc (1)(2,706)9,510 3,634 (516)
Land Related Financing540 473 1,250 1,137 
Other2,169 1,566 6,809 (6,535)
Equity in earnings/(loss) from affiliates$1,278 $3,434 $27,614 $(40,758)
(1)The earnings/(loss) at AG Arc during the three and profitssix months ended June 30, 2021 were primarily the result of $0.2 million and losses$4.4 million, respectively, of such entities are allocated in accordance with the terms of the applicable agreements.

Accounting for excess mortgage servicing rights
The Company has acquired the right to receive the excess servicing spreadnet income related to Excess MSRs. The Company has chosenArc Home's lending and servicing operations and $(2.8) million and $(1.2) million, respectively, related to make a fair value election pursuant to ASC 825 for Excess MSRs. Excess MSRs are recorded at fair value on the consolidated balance sheets and any periodic change in fair value is recorded in current period earnings on the consolidated statement of operations as a component of "Unrealized gain/(loss) on derivative and other instruments, net."
The Company amortizes or accretes any premium or discount over the life of the related Excess MSRs utilizing the effective interest method. On at least a quarterly basis, the Company evaluates the collectability of interest of its Excess MSRs to determine whether they are impaired.
The Company updates its estimate of the cash flows expected to be collected on at least a quarterly basis for Excess MSRs. In estimating these cash flows, there are a number of assumptions that will be subject to uncertainties and contingencies including both the rate and timing of interest receipts, and assumptions of prepayments, repurchases, defaults and liquidations. If there is a significant increase in expected cash flows over what was previously expected to be collected or if actual cash flows are significantly greater than cash flows previously expected, the Company will recognize these changes prospectively through an adjustment of the Excess MSR’s yield over its remaining life. Prior to the adoption of ASU 2016-13, decreases in cash flows expected to be collected from previously projected cash flows, which included all cash flows originally expected to be collected by the investor plus any additional cash flows expected to be collected arising from changes in estimate after acquisition, could have been recognized as impairment. Increases in interest income could have been recognized on an Excess MSR on which the Company previously recorded an OTTI charge if the performance of such Excess MSR subsequently improved.

As previously stated, the Company adopted ASU 2016-13 as of January 1, 2020. The new guidance specifically excludes available-for-sale securities, loans and Excess MSRs measured at fair value with changes in fair value recognized through net income. Accordingly, the impact of the new guidance on accounting for the Company's debt securities and loans is limited to recognition of effective yield which was previously impacted by other than temporary impairment recorded under current standards. As the new guidance eliminates the accounting for other than temporary impairment, this guidance has impacted the Company's recorded unrealized and realized gain/(loss) amounts. Depending on the fair value of the MSR portfolio held by Arc Home. Earnings/(loss) recognized by AG Arc does not include the Company's portion of gains recorded by Arc Home in connection with the sale of residential mortgage loans to the Company. For the three and projected cash flowssix months ended June 30, 2021, the Company eliminated $1.4 million and $1.9 million, respectively, of intra-entity profits recognized by Arc Home and also decreased the cost basis of the underlying loans the Company purchased by the same amount, as of a given reporting date, the impact of this guidance could be material.described above.

15
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
Investment consolidation and transfers of financial assets

For each investment made, the Company evaluates the underlying entity that issued the securities acquired or to which the Company makes a loan to determine the appropriate accounting. A similar analysis is performed for each entity with which the Company enters into an agreement for management, servicing or related services. In performing the analysis, the Company refers to guidance in ASC 810-10, "Consolidation." In situations where the Company is the transferor of financial assets, the Company refers to the guidance in ASC 860-10 "Transfers and Servicing."
 
In variable interest entities ("VIEs"), an entity is subject to consolidation under ASC 810-10 if the equity investors either(i) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support, (ii) are unable to direct the entity’s activities, or (iii) are not exposed to the entity’s losses or entitled to its residual returns. VIEs within the scope of ASC 810-10 are required to be consolidated by their primary beneficiary. The primary beneficiary of a VIE is determined to be the party that has both the power to direct the activities of a VIE that most significantly impact the VIE’s
13

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
economic performance and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. This determination can sometimes involve complex and subjective analyses. Further, ASC 810-10 also requires ongoing assessments of whether an enterprise is the primary beneficiary of a VIE. In accordance with ASC 810-10, all transferees, including variable interest entities, must be evaluated for consolidation. If the Company determines that consolidation is not required, it will then assess whether the transfer of the underlying assets would qualify as a sale, should be accounted for as secured financings under GAAP, or should be accounted for as an equity method investment, depending on the circumstances. See Note 3 and Note 4 for more detail.

A Special Purpose Entity ("SPE") is an entity designed to fulfill a specific limited need of the company that organized it. SPEs are often used to facilitate transactions that involve securitizing financial assets or resecuritizing previously securitized financial assets. The objective of such transactions may include obtaining non-recourse financing, obtaining liquidity, or refinancing the underlying securitized financial assets on improved terms. Securitization involves transferring assets to an SPE to convert all or a portion of those assets into cash before they would have been realized in the normal course of business through the SPE’s issuance of debt or equity instruments. Investors in an SPE usually have recourse only to the assets in the SPE and depending on the overall structure of the transaction, may benefit from various forms of credit enhancement, such as over-collateralization in the form of excess assets in the SPE, priority with respect to receipt of cash flows relative to holders of other debt or equity instruments issued by the SPE, or a line of credit or other form of liquidity agreement that is designed with the objective of ensuring that investors receive principal and/or interest cash flow on the investment in accordance with the terms of their investment agreement.

The Company enteredenters into a resecuritization transaction in 2014 (the "December 2014 VIE")securitization transactions of certain of its residential mortgage loans, which resultedresults in the Company consolidating the VIErespective VIEs that wasare created to facilitate the transactionthese transactions and to which the underlying assets in connection with the resecuritization were transferred. In determining the accounting treatment to be applied to this resecuritization transaction, the Company evaluated whether the entity used to facilitate this transaction was a VIE and, if so, whether it should be consolidated. Thethese securitizations are transferred assets were recorded as a secured borrowing, based on the Company’s involvement in the December 2014 VIE, including the design and purpose of the SPE, and whether the Company’s involvement reflected a controlling financial interest that resulted in the Company being deemed the primary beneficiary of the December 2014 VIE.("Residential Mortgage Loan VIEs"). The Company has chosen to make a fair value election pursuant to ASC 825 for its secured borrowings. As of June 30, 2020, the Company did not hold any interest in the December 2014 VIE. In connection with the deconsolidation, the Company recorded a realized gain of $2.1 million. See Note 3 below for more detail.

The Company transferredentered into securitization transactions on certain of its CMBS in Q3 2018 fromNon-QM Loans ("Non-QM VIEs"), as well as certain of its non-wholly owned subsidiaries into a newly formed wholly owned entity so the Company could obtain financing on these real estate securities (the "August 2018 VIE"re- and non-performing loans ("RPL/NPL VIEs"). The Company evaluated whether this newly formed entity was a VIE and, whether it should be consolidated. The Company determined that the August 2018 VIE should be consolidated by the Company basedBased on the Company’s 100% equity ownership in the August 2018evaluations of each VIE, (despite a profit participation interest held by an unaffiliated third party in the August 2018 VIE), the Company's involvement in the August 2018 VIE, including the design and purpose of the entity, and whether the Company’s involvement reflected a controlling financial interest that resulted in the Company being deemed the primary beneficiary of the August 2018 VIE. As of June 30, 2020, the Company did not hold any interest in the August 2018 VIE. In connection with the deconsolidation, the Company recorded a loss of $8.3 million. See Note 3 below as well as the "Investments in debt and equity of affiliates" section above for more detail.

The Company entered into a securitization transaction of certain of its re-performing residential mortgage loans in Q3 2019, which resulted in the Company consolidating the VIE that was created to facilitate the transaction and to which the underlying
16
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
assets in connection with the securitization were transferred. In determining the accounting treatment to be applied to this securitization transaction, the Company evaluated whether the entity used to facilitate this transaction was a VIE and, if so, whether it should be consolidated. Based on its evaluation, the Company concluded that the VIEVIEs should be consolidated and, as a result, transferred assets of the VIEthese VIEs were determined to be secured borrowings. TheUpon consolidation, the Company has chosen to make aelected the fair value electionoption pursuant to ASC 825 for its secured borrowings.the assets and liabilities of the Residential Mortgage Loan 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 ASU 2014-13, "Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity," whereby the Company determines whether the fair value of the assets or liabilities of the Residential Mortgage Loan 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 Residential Mortgage Loan 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 4 below3 for more detail.detail regarding the Residential Mortgage Loan 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.

From time to time the Company purchases residual positions where it consolidates the securitization and the positions are recorded on the Company's books as residential mortgage loans. There may be limited data available regarding the underlying collateral of such securitizations.

The Company may periodically enter into transactions in which it transfers assets to a third party. Upon a transfer of financial assets, the Company will sometimes retain or acquire senior or subordinated interests in the related assets. Pursuant to ASC 860-10, a determination must be made as to whether a transferor has surrendered control over transferred financial assets. That determination must consider the transferor’s continuing involvement in the transferred financial asset, including all arrangements or agreements made contemporaneously with, or in contemplation of, the transfer, even if they were not entered into at the time of the transfer. The financial components approach under ASC 860-10 limits the circumstances in which a financial asset, or portion of a financial asset, should be derecognized when the transferor has not transferred the entire original financial asset to an entity that is not consolidated with the transferor in the financial statements being presented and/or when the transferor has continuing involvement with the transferred financial asset. It defines the term "participating interest" to establish specific conditions for reporting a transfer of a portion of a financial asset as a sale.
 
Under ASC 860-10, after a transfer of financial assets that meets the criteria for treatment as a sale—legal isolation, ability of transferee to pledge or exchange the transferred assets without constraint and transferred control—an entity recognizes the financial and servicing assets it acquired or retained and the liabilities it has incurred, derecognizes financial assets it has sold and derecognizes liabilities when extinguished. The transferor would then determine the gain or loss on sale of financial assets
14

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
by allocating the carrying value of the underlying mortgage between securities or loans sold and the interests retained based on their fair values.value. The gain or loss on sale is the difference between the cash proceeds from the sale and the amount allocated to the securities or loans sold. When a transfer of financial assets does not qualify for sale accounting, ASC 860-10 requires the transfer to be accounted for as a secured borrowing with a pledge of collateral.
 
From time to time, the Company may securitize mortgage loans it holds if such financing is available. These transactions will be recorded in accordance with ASC 860-10 and will be accounted for as either a "sale" and the loans will be removed from the consolidated balance sheets or as a "financing" and will be classified as "residential mortgage loans" on the consolidated balance sheets, depending upon the structure of the securitization transaction. ASC 860-10 is a standard that may require the Company to exercise significant judgment in determining whether a transaction should be recorded as a "sale" or a "financing."

Interest income recognition
 
Interest income on the Company’s real estate securities portfolio and loan portfolio is accrued based on the actual coupon rate and the outstanding principal balance of such securities.securities or loans. The Company has elected to record interest in accordance with ASC 835-30-35-2, "Imputation of Interest," using the effective interest method for all securities and loans accounted for under the fair value option (ASC 825)in accordance with ASC 825, "Financial Instruments". As such, premiums and discounts are amortized or accreted into interest income over the lives of the securities or loans in accordance with ASC 310-20, "Nonrefundable Fees and Other Costs," ASC 320-10 or ASC 325-40, as applicable. Total interest income is recorded in the "Interest income" line item on the consolidated statement of operations.
 
On at least a quarterly basis for securities accounted for under ASC 320-10 and ASC 310-20 (generallyFor Agency RMBS, exclusive of interest-only securities),securities, prepayments of the underlying collateral must beare estimated on a quarterly basis, which directly affect the speed at which the Company amortizes premiums on its securities. If actual and anticipated cash flows differ from previous estimates, the Company records an adjustment in the current period to the amortization of premiums for the impact of the cumulative change in the effective yield retrospectively through the reporting date.
  
Similarly, the Company also reassesses the cash flows on at least a quarterly basis for securities accounted for under ASC 325-40 (generallyand loans, including Non-Agency RMBS, ABS, CMBS, interest-only securities, Non-QM Loans, and Excess MSRs).MSRs. In estimating these cash flows, there are a number of assumptions made that are uncertain and subject to judgments and assumptions based on subjective and objective factors and contingencies. These include the rate and timing of principal and interest receipts (including assumptions of prepayments, repurchases, defaults, and liquidations), the pass-through or coupon rate and interest rate fluctuations. In addition, interest payment shortfalls due to delinquencies on the underlying mortgage loans have to be
17
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
estimated. Differences between previously estimated cash flows and current actual and anticipated cash flows are recognized prospectively through an adjustment of the yield over the remaining life of the security based on the current amortized cost of the investment as adjusted for credit impairment, if any.
Interest income on the Company’s loan portfolio is accrued based on the actual coupon rate and the outstanding principal balance of such loans. The Company has elected to record interest in accordance with ASC 835-30-35-2 using the effective interest method for all loans accounted for under the fair value option (ASC 825). Any amortization is reflected as an adjustment to interest income in the consolidated statement of operations.investment.
 
For security and loan investments purchased with evidence of deterioration of credit quality for which it is probable, at acquisition, that the Company will be unable to collect all contractually required payments receivable, the Company will apply the provisions of ASC 310-30. For purposes of income recognition, the Company may aggregateaggregates loans that have common risk characteristics into pools and uses a composite interest rate and expectation of cash flows expected to be collected for the pool. ASC 310-30 addresses accounting for differences between contractual cash flows and cash flows expected to be collected from an investor’s initial investment in loans or debt securities (loans) acquired in a transfer if those differences are attributable, at least in part, to credit quality. ASC 310-30 limits the yield that may be accreted (accretable yield) to the excess of the investor’s estimate of undiscounted expected principal, interest and other cash flows (cash flows expected at acquisition to be collected) over the investor’s initial investment in the loan. ASC 310-30 requires that the excess of contractual cash flows over cash flows expected to be collected (nonaccretable difference) not be recognized as an adjustment of yield, loss accrual or valuation allowance. Subsequent changes in cash flows expected to be collected generally should be recognized prospectively through an adjustment of the loan’s yield over its remaining life.

Financing arrangements

The Company finances the acquisition of certain assets within its portfolio through the use of financing arrangements. Financing arrangements include repurchase agreements and financing facilities. The Company's financing facilities include revolving facilities. Repurchase agreements and financingrevolving facilities are treated as collateralized financing transactions and carried at their contractual amounts, including accrued interest, as specified in the respective agreements. The carrying amount of the Company’s repurchase agreements and revolving facilities approximates fair value.
 
15

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
The Company pledges certain securities, loans, or properties as collateral under financing arrangements with financial institutions, the terms and conditions of which are negotiated on a transaction-by-transaction basis. The amounts available to be borrowed under repurchase agreements and revolving facilities are dependent upon the fair value of the securities or loans pledged as collateral, which can fluctuate with changes in interest rates, type of security and liquidity conditions within the banking, mortgage finance, and real estate industries. In response to declines inIf the fair value of pledged assets pledged under repurchase agreements and revolving facilities,declines due to changes in market conditions, lenders maytypically would require the Company to post additional securities as collateral, or pay down borrowings or establish cash margin accounts with the counterparties in order to re-establish agreed uponthe agreed-upon collateral requirements, referred to as margin calls. The fair value of financial instruments pledged as collateral on the Company’s financing arrangements represents the Company’s fair value of such instruments which may differ from the fair value assigned to the collateral by its counterparties. The Company maintains a level of liquidity in order to meet these obligations. If the fair value of pledged assets increases due to changes in market conditions, counterparties may be required to return collateral to us in the form of securities or cash or post additional collateral to us. Financings pursuant to repurchase agreements and revolving facilities are generally recourse to the Company. As of June 30, 2021 and December 31, 2020, the Company had met all margin call requirements. 

On March 20, 2020,Forbearance and Reinstatement Agreements

In connection with the Company notified its financing counterparties that it did not expect to be in a position to fund the anticipated volume of future margin calls under its financing arrangements in the near term as a result of market disruptionsdisruption created by the COVID-19 pandemic. Sincepandemic, in March 23, 2020, the Company has received notifications of alleged events of default and deficiency notices from several of its financing counterparties. Subject to the terms of the applicable financing arrangement, if the Company fails to deliver additional collateral or otherwise meet margin calls when due, the financing counterparties may be able to demand immediate payment by the Company of the aggregate outstanding financing obligations owed to such counterparties, and if such financing obligations are not paid, may be permitted to sell the financed assets and apply the proceeds to the Company's financing obligations and/or take ownership of the assets securing the Company's financing obligations. During this period of market upheaval, theThe Company engaged in discussions with its financing counterparties with regard to entering into forbearance agreements pursuant to which each counterparty would agree to forbear from exercising its rights and, remedies with respect to an event of default under the applicable financing arrangement for an agreed-upon period. On April 10, 2020, the Companyas a result, entered into a series of forbearance agreement for an initial 15 day period, on April 27, 2020, a second forbearance agreement for an extended period ending on June 1, 2020, and a third forbearance agreement on June 1, 2020 for an additional period ending June 15, 2020agreements (collectively, the "Forbearance Agreement") with certain of its financing counterparties (the "Participating Counterparties"). Pursuant pursuant to the terms of the Forbearance Agreement, thewhich each Participating CounterpartiesCounterparty agreed to forbear from exercising any of theirits rights and remedies inwith respect ofto events of default and any and all other defaults under the applicable financing arrangement with the Company(each, a “Bilateral Agreement”) for the duration of the forbearance period specified in the Forbearance Agreement (the "Forbearance Period").
18
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
ending June 30, 2020
15, 2020.

On June 10, 2020, the Company and the Participating Counterparties entered into a Reinstatement Agreement,reinstatement agreement (the “Reinstatement Agreement”), pursuant to which the parties agreed to terminate the Forbearance Agreement was terminated and each Participating Counterparty agreed to permanently waivewaived all existing and prior events of default under its financing agreementsthe applicable Bilateral Agreements. Pursuant to the Reinstatement Agreement, the Bilateral Agreements were reinstated with certain amendments to reflect current market terms (i.e., increased haircuts and higher coupons), updated financial covenants and various reporting requirements from the Company (each, a “Bilateral Agreement”) and to reinstate each Bilateral Agreement, as it may be amended by agreement between the Participating CounterpartyCounterparties, releases, certain netting obligations and the Company.cross-default provisions. As a result of the termination of the Forbearance Agreement and entry into the Reinstatement Agreement, default interest on the Company’s outstanding borrowings under eachthe Bilateral Agreements has ceased to accrue as of June 10, 2020, and the interest rate was the non-default rate of interest or pricing rate, as set forth in the applicable Bilateral Agreements, all cash margin has beenwas applied to outstanding balances owed by the Company, and the DTC repo tracker coding for each Bilateral Agreement has been reinstated, thereby allowing principal and interest payments on the underlying collateral were permitted to flow to and be used by the Company, just as it was beforeprior to the prior forbearance agreements were put in place.Forbearance Agreements. In addition, pursuant to the terms of the Reinstatement Agreement, the security interests granted to Participating Counterparties as additional collateral under the various forbearance agreementsForbearance Agreement have been terminated and released. The Company also agreed to pay the reasonable fees and out-of-pocket expenses of counsel and other professional advisors for the Participating Counterparties and the collateral agent. Additionally, the Reinstatement Agreement provided a set of financial covenants that override and replace the financial covenants in each Bilateral Agreement and sets forth various reporting requirements from the Company to the Participating Counterparties, releases, certain netting obligations and cross-default provisions. In connection with the negotiation and execution of the Reinstatement Agreement, the Company entered into certain amendments to the Bilateral Agreements with certain of the Participating Counterparties to reflect current market terms. In general, the amendments reflect increased haircuts and higher coupons.

OnConcurrently, on June 10, 2020, the Company also entered a separate reinstatement agreement with JPMorgan Chase Bank (the “JPM Reinstatement Agreement”)one of its financing counterparties on substantially the same terms as those set forth in the Reinstatement Agreement. The Reinstatement Agreement and the JPM Reinstatement Agreement collectively cover all of the Company’s existing financing arrangements as of the date of this report.

Refer to Note 13 for more information on outstanding deficiencies.

Dividends on Preferred Stock

Holders 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 StockStock") are entitled to receive cumulative cash dividends at a rate of 8.25%, 8.00% and 8.000% per annum, respectively, of the $25.00 per share liquidation preference for each series. On and after September 17, 2024, dividends on the Series C Preferred Stock will accumulate at a percentage of the $25.00 liquidation preference equal to an annual floating rate of the then three-month LIBOR plus a spread of 6.476% per annum. If the Company’s Board of Directors does not declare a dividend in a given period, an accrual is not recorded on the balance sheet. However, undeclared preferred stock dividends are reflected in earnings per share as discussed in ASC 260-10-45-11. Preferred stock dividends that are not declared accumulate and are added to the liquidation preference as of the scheduled payment date for the respective series of the preferred stock. The undeclared and unpaid dividends on the Company’s preferred stock accrue without interest, and if dividends on the Company's preferred stock are in arrears, the Company cannot pay cash dividends with respect to its Common Stock.common stock. See Note 9 for aggregate amounts of arrearages in cumulative preferred dividends and Note 1211 for further detail on the Company’s Preferred Stock.

Recent accounting pronouncements
16

In June 2016, FASB issued ASU 2016-13, "Financial Instruments – Credit Losses" ("ASU 2016-13"). This new guidance significantly changes how entities will measure credit losses for most financial assets, including loans, that are not measured at fair value with changes in fair value recognized through net income. The guidance replaces the existing “incurred loss” model with an “expected loss” model for instruments measured at amortized cost. It requires entities to record credit allowances for available-for-sale debt securities rather than reduce the carrying amount, as it currently is under the other-than temporary impairment model. The new guidance also simplifies the accounting model for purchased credit-impaired debt securities and loans. The Company adopted the new guidance as of January 1, 2020. The new guidance specifically excludes available-for-sale securities and loans measured at fair value with changes in fair value recognized through net income. Accordingly, the impact of the new guidance on accounting for the Company's debt securities and loans is limited to recognition of effective yield which was historically impacted by other than temporary impairment recorded under previously existing standards. As the new guidance eliminates the accounting for other than temporary impairment, this guidance had an impact on the Company's unrealized and realized gain/(loss) amounts. See the "Accounting for real estate securities," "Accounting for residential and commercial mortgage loans," "Accounting for excess mortgage servicing rights," and "Interest income recognition" sections above for more detail.
19
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 20202021
Accounting for derivative financial instruments

Derivative contracts
The Company enters into derivative contracts as a means of mitigating interest rate risk or foreign currency risk rather than to enhance returns. The Company accounts for derivative financial instruments in accordance with ASC 815-10, "Derivatives and Hedging." ASC 815-10 requires an entity to recognize all derivatives as either assets or liabilities on the balance sheet and to measure those instruments at fair value. Additionally, if or when hedge accounting is elected, the fair value adjustments will affect either other comprehensive income in stockholders’ equity until the hedged item is recognized in earnings or net income depending on whether the derivative instrument is designated and qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity. As of June 30, 2021 and December 31, 2020, the Company did not have any interest rate derivatives designated as hedges. All derivatives have been recorded at fair value in accordance with ASC 820-10, with corresponding changes in value recognized in the consolidated statement of operations. The Company records derivative asset and liability positions on a gross basis with respect to its counterparties. During the period in which the Company unwinds a derivative, it records a realized gain/(loss) in the "Net realized gain/(loss)" line item in the consolidated statement of operations.

To-be-announced securities

A to-be-announced security ("TBA") is a forward contract for the purchase or sale of Agency RMBS at a predetermined price, face amount, issuer, coupon and stated maturity on an agreed-upon future date. The specific Agency RMBS delivered into or received from the contract upon the settlement date, published each month by the Securities Industry and Financial Markets Association, are not known at the time of the transaction. The Company may also choose, prior to settlement, to move the settlement of these securities out to a later date by entering into an offsetting short or long position (referred to as a pair off), net settling the paired off positions for cash, simultaneously purchasing or selling a similar TBA contract for a later settlement date. This transaction is commonly referred to as a dollar roll. The Agency RMBS purchased or sold for a forward settlement date are typically priced at a discount to Agency RMBS for settlement in the current month. This difference, or discount, is referred to as the price drop. The price drop is the economic equivalent of net interest carry income on the underlying Agency RMBS over the roll period (interest income less implied financing cost) and is commonly referred to as dollar roll income/(loss). Consequently, forward purchases of Agency RMBS and dollar roll transactions represent a form of off-balance sheet financing. Dollar roll income is recognized in the consolidated statement of operations in the line item "Unrealized gain/(loss), net."

Variation margin

The Company may exchange cash "variation margin" with the counterparties to its derivative instruments on a daily basis based upon changes in the fair value of such derivative instruments as measured by the Chicago Mercantile Exchange ("CME") and the London Clearing House ("LCH"), the central clearinghouses ("CCPs") through which those derivatives are cleared. In addition, the CCPs require market participants to deposit and maintain an "initial margin" amount which is determined by the CCPs and is generally intended to be set at a level sufficient to protect the CCPs from the maximum estimated single-day price movement in that market participant’s contracts.

Receivables recognized for the right to reclaim cash initial margin posted in respect of derivative instruments are included in the "Restricted cash" line item in the consolidated balance sheets. The daily exchange of variation margin associated with a CCP instrument is legally characterized as the daily settlement of the derivative instrument itself, as opposed to a pledge of collateral. Accordingly, the Company accounts for the daily receipt or payment of variation margin associated with its centrally cleared derivative instruments as a direct reduction to the carrying value of the derivative asset or liability, respectively. The carrying amount of centrally cleared derivative instruments reflected in the Company’s consolidated balance sheets approximates the unsettled fair value of such instruments. As variation margin is exchanged on a one-day lag, the unsettled fair value of such instruments represents the change in fair value that occurred on the last day of the reporting period.

Manager compensation
The management agreement provides for payment to the Manager of a management fee as well as a reimbursement of certain expenses incurred by the Manager or its affiliates on behalf of the Company. The management fee and reimbursement are accrued and expensed during the period for which they are earned or for which the expenses are incurred, respectively. The management fee and reimbursement are included in the "Management fee" and "Other operating expenses" line items, respectively, on the consolidated statement of operations. For a more detailed discussion on the fees payable under the management agreement, see Note 10.
17

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021

Income taxes
The Company conducts its operations to qualify and be taxed as a REIT. Accordingly, the Company will generally not be subject to federal or state corporate income tax to the extent that the Company makes qualifying distributions to its stockholders, and provided that it satisfies on a continuing basis, through actual investment and operating results, the REIT requirements including certain asset, income, distribution and stock ownership tests. If the Company fails to qualify as a REIT, and does not qualify for certain statutory relief provisions, it will be subject to U.S. federal, state and local income taxes and may be precluded from qualifying as a REIT for the four taxable years following the year in which the Company fails to qualify as a REIT.
The dividends paid deduction of a REIT for qualifying dividends to its stockholders is computed using the Company’s taxable income/(loss) as opposed to net income/(loss) reported on the Company’s GAAP financial statements. Taxable income/(loss), generally, will differ from net income/(loss) reported on the financial statements because the determination of taxable income/(loss) is based on tax principles and not financial accounting principles.

Cash distributions declared by the Company that do not exceed its current or accumulated earnings and profits will be considered ordinary income to stockholders for income tax purposes unless all or a portion of a distribution is designated by the Company as a capital gain dividend. Distributions in excess of the Company’s current and accumulated earnings and profits will be characterized as return of capital or capital gains. 

The Company elected to treat certain domestic subsidiaries as taxable REIT subsidiaries ("TRSs") and may elect to treat other subsidiaries as TRSs. In general, a TRS may hold assets and engage in activities that the Company cannot hold or engage in directly and generally may engage in any real estate or non-real estate-related business.
A domestic TRS may declare dividends to the Company which will be included in the Company’s taxable income/(loss) which may necessitate a distribution to stockholders. Conversely, if the Company retains earnings at the domestic TRS level, no distribution is required and the Company can increase book equity of the consolidated entity. A domestic TRS is subject to U.S. federal, state and local corporate income taxes.
The Company elected to treat one of its foreign subsidiaries as a TRS and, accordingly, taxable income generated by this foreign TRS may not be subject to local income taxation, but generally will be included in the Company’s taxable income on a current basis as Subpart F income, whether or not distributed.
The Company’s financial results are generally not expected to reflect provisions for current or deferred income taxes, except for any activities conducted through one or more TRSs that are subject to corporate income taxation. The Company believes that it will operate in a manner that will allow it to qualify for taxation as a REIT. As a result of the Company’s expected REIT qualification, it does not generally expect to pay federal or state corporate income tax. Many of the REIT requirements, however, are highly technical and complex.
As a REIT, if the Company fails to distribute in any calendar year (subject to specific timing rules for certain dividends paid in January) at least the sum of (i) 85% of its ordinary income for such year, (ii) 95% of its capital gain net income for such year, and (iii) any undistributed taxable income from the prior year, the Company would be subject to a non-deductible 4% excise tax on the excess of such required distribution over the sum of (i) the amounts actually distributed and (ii) the amounts of income retained and on which the Company has paid corporate income tax.
The Company evaluates uncertain income tax positions, if any, in accordance with ASC 740, "Income Taxes." The Company classifies interest and penalties, if any, related to unrecognized tax benefits as a component of provision for income taxes. See Note 9 for further details.

Deal related performance fees

The Company may incur deal related performance fees, payable to Arc Home and third-party operators, on certain of its CMBS, Excess MSRs, and Land Related Financing. The deal related performance fees are based on these investments meeting certain performance hurdles. The fees are accrued and expensed during the period for which they are incurred and are included in the "Other operating expenses" and "Equity in earnings/(loss) from affiliates" line items on the consolidated statement of operations.
18

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021

Offering costs
The Company has incurred offering costs in connection with common stock offerings, registration statements, preferred stock offerings, and exchanges. Where applicable, the offering costs were paid out of the proceeds of the respective offerings. Offering costs in connection with common stock offerings and costs in connection with registration statements have been accounted for as a reduction of additional paid-in capital. Offering costs in connection with preferred stock offerings have been accounted for as a reduction of their respective gross proceeds. Exchange costs in connection with the Company's preferred stock exchanges have been accounted for as a reduction to the Company's retained earnings.

Recent accounting pronouncements

In March 2020, FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." This ASU provides temporary optional guidance intended to ease the burden of reference rate reform on financial reporting. This ASU was effective upon its issuance on March 12, 2020 and applies to all entities that have contracts, hedging relationships and other transactions that reference LIBOR and certain other reference rates that are expected to be discontinued. However, it cannot be applied to contract modifications that occur after December 31, 2022. With certain exceptions, this ASU also cannot be applied to hedging relationships entered into or evaluated after that date. The guidance provides optional expedients and exceptions for applying existing guidance to contract modifications, hedging relationships and other transactions that are expected to be affected by reference rate reform and meet certain scope guidance. The Company is currently evaluating the effect this guidance will have on its consolidated financial statements.

3. Loans
Residential mortgage loans

For the three months ended June 30, 2021, the Company purchased Non-QM Loans with a gross aggregate unpaid principal balance and a gross acquisition fair value of $426.8 million and $446.2 million, respectively. For the six months ended June 30, 2021, the Company purchased Non-QM Loans with a gross aggregate unpaid principal balance and a gross acquisition fair value of $625.2 million and $654.7 million, respectively. A portion of these loans were purchased from Arc Home. See Note 10 for more detail.

For the three and six months ended June 30, 2021, the Company sold 367 loans for total proceeds of $45.6 million and 1 residual position where the Company previously consolidated the securitization for total proceeds of $1.6 million, which was unsettled as of quarter end, recording realized gains of $8.1 million and realized losses of $0.4 million. For the three months ended June 30, 2020, the Company sold 2,357 loans for total proceeds of $382.8 million, recording realized gains of $1.4 million and realized losses of $55.5 million. For the six months ended June 30, 2020, the Company sold 2,358 loans for total proceeds of $391.5 million, recording realized gains of $1.4 million and realized losses of $58.6 million.

19

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
The table below details information regarding the Company’s residential mortgage loan portfolio as of June 30, 2021 and December 31, 2020 ($ in thousands):
    Gross Unrealized Weighted Average
Unpaid 
Principal Balance
Premium
(Discount)		Amortized CostGainsLossesFair ValueCouponYieldLife 
(Years) (1)
Non-QM Loans$621,095 $26,556 $647,651 $8,473 $(972)$655,152 4.86 %3.61 %3.85
Re- and Non-Performing Loans415,942 (52,530)363,412 15,947 (5,267)374,092 3.59 %6.00 %6.98
Total at June 30, 2021 (2)$1,037,037 $(25,974)$1,011,063 $24,420 $(6,239)$1,029,244 4.36 %4.48 %5.11
Re- and Non-Performing Loans at December 31, 2020 (3)$500,980 $(69,007)$431,973 $13,640 $(10,172)$435,441 3.58 %5.69 %6.67
(1)This is based on projected life. Typically, actual maturities are shorter than stated contractual maturities. Maturities are affected by the lives of the underlying mortgages, periodic payments of principal, and prepayments of principal.
(2)As of June 30, 2021, the Company’s residential mortgage loan portfolio was comprised of 3,825 loans with original loan balances between $5.6 thousand and $3.7 million. Additionally, the Company had residential mortgage loans that were in the process of foreclosure with a fair value of $28.9 million.
(3)As of December 31, 2020, the Company’s residential mortgage loan portfolio was comprised of 3,273 conventional loans with original loan balances between $5.6 thousand and $3.4 million. Additionally, the Company had residential mortgage loans that were in the process of foreclosure with a fair value of $37.1 million.
The table below details information regarding the Company’s residential mortgage loans as of June 30, 2021 and December 31, 2020 (in thousands):
 June 30, 2021December 31, 2020
 Fair ValueUnpaid Principal BalanceFair ValueUnpaid Principal Balance
Non-QM Loans$655,152 $621,095 $0 $0 
Re-Performing267,853 291,301 312,733 347,359 
Non-Performing99,689 116,520 113,976 134,129 
Other (1)6,550 8,121 8,732 19,492 
 $1,029,244 $1,037,037 $435,441 $500,980 
(1)Represents residual positions where the Company consolidates a securitization and the positions are recorded in the Company's consolidated balance sheets as residential mortgage loans. There may be limited data available regarding the underlying collateral of such securitizations.
The Company’s residential mortgage loan portfolio consisted of mortgage loans on residential real estate located throughout the United States. The following is a summary of the geographic concentration of credit risk within the Company’s residential mortgage loan portfolio as of June 30, 2021 and December 31, 2020, excluding any loans classified as Other above:
Geographic Concentration of Credit RiskJune 30, 2021December 31, 2020
Percentage of fair value of mortgage loans secured by properties in the following states representing 5% or more of fair value:  
California36 %17 %
Florida13 %11 %
New York11 %10 %
New Jersey5 %6 %
20

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
The following is a summary of the changes in the accretable portion of the discount for the Company’s re-performing and non-performing loan portfolios for the three and six months ended June 30, 2021 and 2020, which is determined by the excess of the Company’s estimate of undiscounted principal expected to be collected in excess of the amortized cost of the mortgage loan (in thousands). The table excludes residual positions where the Company consolidates a securitization and the positions are recorded in the Company's consolidated balance sheets as residential mortgage loans.
 Three Months EndedSix Months Ended
 June 30, 2021June 30, 2020June 30, 2021June 30, 2020
Beginning Balance$55,003 $50,291 $56,907 $41,472 
Additions0 0 0 15,250 
Accretion(789)(1,021)(2,351)(3,290)
Reclassifications from/(to) non-accretable difference2,955 2,230 2,677 (1,850)
Disposals(5,497)(14,213)(5,561)(14,295)
Ending Balance$51,672 $37,287 $51,672 $37,287 

Variable interest entities
The following table details certain information related to the assets and liabilities of the Residential Loan VIEs as of June 30, 2021 and December 31, 2020 (in thousands):
June 30, 2021December 31, 2020
Assets
Residential mortgage loans, at fair value$589,394 $426,604 
Restricted cash1,561 2,110 
Other assets3,228 3,705 
Total assets$594,183 $432,419 
Liabilities
Financing arrangements$42,158 $25,590 
Securitized debt, at fair value482,533 355,159 
Other liabilities498 519 
Total liabilities$525,189 $381,268 

The following table details additional information regarding residential mortgage loans and securitized debt related to the Residential Loan VIEs as of June 30, 2021 and December 31, 2020 ($ in thousands):
  Weighted Average
As of: Current Unpaid Principal BalanceFair ValueCouponYieldLife (Years) (1)
June 30, 2021
Non-QM Loan VIEsNon-QM Loans$208,505 $221,852 4.63 %3.65 %3.69
Securitized debt201,383 201,580 1.25 %1.25 %2.05
RPL/NPL VIEsRe- and Non-Performing Loans407,822 367,542 4.07 %4.98 %6.12
Securitized debt279,713 280,953 2.26 %2.28 %3.19
December 31, 2020
RPL/NPL VIEsRe- and Non-Performing Loans$481,346 $426,604 3.58 %5.61 %6.78
Securitized debt356,631 355,159 2.98 %3.00 %3.85
(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.

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 Residential Loan VIEs.
21

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021

Commercial loans

For the three months ended June 30, 2021, the Company did 0t sell any commercial loans. For the six months ended June 30, 2021, the Company sold 2 commercial loans for total proceeds of $74.3 million, recording realized losses of $2.9 million. For the three and six months ended June 30, 2020, the Company sold 1 commercial loan for total proceeds of $34.2 million, recording realized losses of $1.7 million.

During the fourth quarter of 2020, the Company and the borrower of Commercial Loan L entered into a modification agreement which, among other things, required the borrower to pay previously deferred interest in full, deferred interest for the 12-month period following the modification, and required funding of capital reserves by the borrower. The loan was placed on non-accrual status upon modification and was on non-accrual status as of June 30, 2021 and December 31, 2020. As a result of the modification, the loan is classified as a troubled debt restructuring under GAAP.

As of June 30, 2021, Commercial Loan K was in maturity default as a result of failing to meet the required terms for extension under the loan documents. The Company continues to evaluate its options with respect to the Commercial Loan K and may exercise its remedies under the loan documents, which may include a foreclosure against the collateral.

The following tables present detail on the Company’s commercial loan portfolio as of June 30, 2021 and December 31, 2020 ($ in thousands). The gross unrealized gains/(losses) columns in the tables below represent inception to date unrealized gains/(losses).
June 30, 2021  Weighted Average  
Loan (1)(2)Current FacePremium
(Discount)		Amortized CostGross Unrealized LossesFair Value (3)Coupon
(4)		Yield (5)Life 
(Years)
(6)		Extended Maturity 
Date (7)		LocationCollateral Type
Loan K (8)$18,809 $0 $18,809 $(400)$18,409 10.00 %12.75 %0.09February 22, 2024NYHotel, Retail
Loan L (8)51,000 (337)50,663 (6,793)43,870 N/AN/A3.11July 22, 2024ILHotel, Retail
Total$69,809 $(337)$69,472 $(7,193)$62,279 2.69 %3.77 %2.29
(1)The Company has the contractual right to receive a balloon payment for each loan.
(2)Refer to Note 12 "Commitments and Contingencies" for details on the Company's commitments on its Commercial Loans as of June 30, 2021.
(3)Fair value includes the value of unfunded commitments.
(4)Each commercial loan investment has a variable coupon rate.
(5)Yield includes any exit fees.
(6)Actual maturities may be shorter or longer than stated contractual maturities. Maturities are affected by prepayments of principal.
(7)Represents the maturity date of the last possible extension option. As of June 30, 2021, Commercial Loan K was in maturity default related to its initial maturity which was in May 2021 as described above.
(8)Loan K and Loan L are comprised of first mortgage and mezzanine loans.

December 31, 2020Weighted Average
Loan (1)Current FacePremium
(Discount)		Amortized CostGross Unrealized LossesFair Value (2)Coupon  (3)Yield (4)Life
(Years) 
(5)		Extended
Maturity 
Date (6)		LocationCollateral Type
Commercial Loans, at fair value
Loan G (7)$59,451 $0 $59,451 $(3,940)$55,511 5.27 %5.27 %1.54July 9, 2022CACondo, Retail, Hotel
Loan K (8)15,787 0 15,787 (1,100)14,687 10.00 %10.83 %1.27February 22, 2024NYHotel, Retail
Loan L (8)51,000 (337)50,663 (9,312)41,351 N/AN/A3.61July 22, 2024ILHotel, Retail
126,238 (337)125,901 (14,352)111,549 3.73 %4.05 %2.34
Commercial Loans Held for Sale, at fair value
Loan I (9)15,929 (175)15,754 (1,795)13,959 11.50 %12.23 %2.22February 9, 2023MNOffice, Retail
Total$142,167 $(512)$141,655 $(16,147)$125,508 4.60 %4.96 %2.33
(1)The Company has the contractual right to receive a balloon payment for each loan. 
(2)Fair value includes the value of unfunded commitments.
(3)Each commercial loan investment has a variable coupon rate.
(4)Yield includes any exit fees.
(5)Actual maturities may be shorter or longer than stated contractual maturities. Maturities are affected by prepayments of principal.
22

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
(6)Represents the maturity date of the last possible extension option.
(7)Loan G is a first mortgage loan.
(8)Loan K and Loan L are comprised of first mortgage and mezzanine loans.
(9)Loan I is a mezzanine loan.

4. Real Estate Securities
 
The following tables detail the Company’s real estate securities portfolio as of June 30, 20202021 and December 31, 2019.2020 ($ in thousands). The gross unrealized gains/(losses) stated in the tables below represent inception to date unrealized gains/(losses). 
June 30, 2021   Gross Unrealized Weighted Average
 Current Face
Premium /
(Discount)
Amortized CostGainsLossesFair ValueCoupon (1)Yield
Agency RMBS:        
30 Year Fixed Rate$677,514 $24,329 $701,843 $1,425 $(6,564)$696,704 2.26 %1.73 %
Credit Investments:
Residential Investments
Prime6,874 (4,646)2,228 467 0 2,695 3.50 %15.21 %
Re/Non-Performing Securities1,170(157)1,013 170 0 1,183 5.25 %21.28 %
Total Residential Investments:8,044 (4,803)3,241 637 0 3,878 3.92 %17.06 %
Commercial Investments
Single-Asset/Single-Borrower35,500 (48)35,452 0 (3,838)31,614 4.03 %4.39 %
Total Credit Investments:43,544 (4,851)38,693 637 (3,838)35,492 4.02 %5.78 %
Total$721,058 $19,478 $740,536 $2,062 $(10,402)$732,196 2.36 %1.92 %

The following table details the Company’s real estate securities portfolio as of June 30, 2020 ($ in thousands):
    Gross Unrealized Weighted Average
 Current Face
Premium /
(Discount)
Amortized CostGainsLossesFair ValueCoupon (1)Yield
Credit Investments:
Non-Agency RMBS$63,228  $(16,880) $46,348  $3,736  $(4,593) $45,491  4.95 %8.43 %
Non-Agency RMBS Interest Only (2)183,667  (183,590) 77  301  (52) 326  0.59 %NM
Total Non-Agency:246,895  (200,470) 46,425  4,037  (4,645) 45,817  2.40 %8.43 %
CMBS121,193  (17,692) 103,501  1,584  (22,664) 82,421  4.06 %5.63 %
CMBS Interest Only687,447  (683,134) 4,313  87  (167) 4,233  0.10 %7.02 %
Total CMBS:808,640  (700,826) 107,814  1,671  (22,831) 86,654  0.63 %5.70 %
Total Credit Investments:$1,055,535  $(901,296) $154,239  $5,708  $(27,476) $132,471  0.89 %6.64 %

December 31, 2020   Gross Unrealized Weighted Average
 Current Face
Premium /
(Discount)
Amortized CostGainsLossesFair ValueCoupon (1)Yield
Agency RMBS:        
30 Year Fixed Rate$494,307 $22,368 $516,675 $1,794 $(117)$518,352 2.10 %1.17 %
Credit Investments:
Residential Investments
Prime15,093 (7,081)8,012 663 (10)8,665 3.68 %8.97 %
Alt-A/Subprime16,287 (9,377)6,910 4,586 0 11,496 4.25 %12.52 %
Credit Risk Transfer13,880 0 13,880 15 (587)13,308 4.71 %4.70 %
Non-U.S. RMBS2,435 706 3,141 51 (92)3,100 6.45 %6.41 %
Non-Agency RMBS Interest Only (2)157,590 (157,513)77 207 (48)236 0.53 %NM
Re/Non-Performing Securities1,690 (238)1,452 149 0 1,601 5.25 %14.05 %
Total Residential Investments:206,975 (173,503)33,472 5,671 (737)38,406 2.01 %8.50 %
Commercial Investments
Conduit4,925 (1,024)3,901 0 (606)3,295 4.62 %11.89 %
Single-Asset/Single-Borrower50,480 (1,494)48,986 668 (9,464)40,190 4.15 %4.81 %
Freddie Mac K-Series CMBS22,572 (12,062)10,510 47 (1,557)9,000 3.83 %9.00 %
CMBS Interest Only (3)687,077 (682,961)4,116 256 (69)4,303 0.10 %6.93 %
Total Commercial Investments:765,054 (697,541)67,513 971 (11,696)56,788 0.44 %6.04 %
Total Credit Investments:972,029 (871,044)100,985 6,642 (12,433)95,194 0.65 %7.04 %
Total$1,466,336 $(848,676)$617,660 $8,436 $(12,550)$613,546 1.18 %2.08 %
(1)Equity residual investments and principal only securities with a zero coupon rate are excluded from this calculation.
(2)Non-Agency RMBS Interest Only includes only two investments.investments as of December 31, 2020. The overall impact of the investments' yields on the Company's portfolio is immaterial.not meaningful.
(3)Comprised of Freddie Mac K-Series interest-only bonds.

The following table details the Company’s real estate securities portfolio as of December 31, 2019 ($ in thousands):
    Gross Unrealized Weighted Average
 Current Face
Premium /
(Discount)
Amortized CostGainsLossesFair ValueCoupon (1)Yield
Agency RMBS:        
30 Year Fixed Rate$2,125,067  $59,123  $2,184,190  $57,404  $(296) $2,241,298  3.73 %3.17 %
Interest Only476,192  (403,248) 72,944  2,330  (1,133) 74,141  3.93 %5.87 %
Total Agency RMBS:2,601,259  (344,125) 2,257,134  59,734  (1,429) 2,315,439  3.77 %3.26 %
Credit Investments:
Non-Agency RMBS769,254  (107,848) 661,406  55,343  (353) 716,396  4.84 %6.28 %
Non-Agency RMBS Interest Only209,362  (207,948) 1,414  —  (340) 1,074  0.77 %5.96 %
Total Non-Agency:978,616  (315,796) 662,820  55,343  (693) 717,470  4.40 %6.28 %
CMBS485,713  (134,596) 351,117  18,720  (906) 368,931  4.91 %7.28 %
CMBS Interest Only3,427,025  (3,382,273) 44,752  3,486  (246) 47,992  0.24 %6.68 %
Total CMBS:3,912,738  (3,516,869) 395,869  22,206  (1,152) 416,923  0.60 %7.21 %
Total Credit Investments:4,891,354  (3,832,665) 1,058,689  77,549  (1,845) 1,134,393  1.31 %6.62 %
Total$7,492,613  $(4,176,790) $3,315,823  $137,283  $(3,274) $3,449,832  2.20 %4.37 %
23

(1)Equity residual investments and principal only securities with a zero coupon rate are excluded from this calculation.
As described in Note 2, prior to the adoption of ASU 2016-13, the Company evaluated securities for OTTI on at least a quarterly basis. The determination of whether a security was other-than-temporarily impaired involved judgments and assumptions based on subjective and objective factors. When the fair value of a real estate security was less than its amortized cost at the balance sheet date, the security was considered impaired, and the impairment was designated as either "temporary" or "other-than-temporary."
For the three months ended June 30, 2019, the Company recognized an OTTI charge of $8.7 million on its securities, which is included in the "Net realized gain/(loss)" line item on the consolidated statement of operations. The Company recorded $8.7 million of OTTI due to an adverse change in cash flows on certain securities where the fair values of the securities were less
20
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 20202021
than their carrying amounts. Of the $8.7 million of OTTI recorded, $0.9 million related to securities where OTTI was not recognized in a prior year.

For the six months ended June 30, 2019, the Company recognized an OTTI charge of $11.1 million on its securities, which is included in the "Net realized gain/(loss)" line item on the consolidated statement of operations. The Company recorded $11.1 million of OTTI due to an adverse change in cash flows on certain securities where the fair values of the securities were less than their carrying amounts. Of the $11.1 million of OTTI recorded, $1.2 million related to securities where OTTI was not recognized in a prior year.

As of December 31, 2019, the unrealized losses on the remaining real estate securities were solely due to market conditions and not the credit quality of the assets. The investments in any remaining unrealized loss positions were not considered other than temporarily impaired because the Company had the ability and intent to hold the investments to maturity or for a period of time sufficient for a forecasted market price recovery up to or beyond the cost of the investments and the Company was not required to sell the investments for regulatory or other reasons.
The following table detailstables detail the weighted average life of our real estate securities as of June 30, 2021 and December 31, 2020 ($ in thousands):
June 30, 2021Agency RMBSCredit Investments
Weighted Average Life (1)Fair ValueAmortized CostWeighted Average CouponFair ValueAmortized Cost
Weighted Average
Coupon (2)
Less than or equal to 1 year$0 $0 0 %$32,596 $36,349 4.07 %
Greater than five years and less than or equal to ten years662,740 667,450 2.28 %2,472 2,195 3.50 %
Greater than ten years33,964 34,393 2.00 %424 149 0 %
Total$696,704 $701,843 2.26 %$35,492 $38,693 4.02 %

Credit Investments
Weighted Average Life (1)Fair ValueAmortized Cost
Weighted Average
Coupon (2)
Less than or equal to 1 year$21,836  $29,004  1.55 %
Greater than one year and less than or equal to five years43,984  56,366  0.64 %
Greater than five years and less than or equal to ten years29,651  31,077  0.53 %
Greater than ten years37,000  37,792  4.32 %
Total$132,471  $154,239  0.89 %

December 31, 2020Agency RMBSCredit Investments
Weighted Average Life (1)Fair ValueAmortized CostWeighted Average CouponFair ValueAmortized Cost
Weighted Average
Coupon (2)
Less than or equal to 1 year$0 $0 0 %$31,166 $39,588 1.81 %
Greater than one year and less than or equal to five years181,947 181,209 2.29 %20,131 21,634 0.33 %
Greater than five years and less than or equal to ten years336,405 335,466 2.00 %20,310 20,808 0.36 %
Greater than ten years0 0 0 23,587 18,955 4.18 %
Total$518,352 $516,675 2.10 %$95,194 $100,985 0.65 %
(1)This is based on projected life. Typically, actual maturities of mortgage-backed securities are shorter than stated contractual maturities. Maturities are affected by the contractual lives of the underlying mortgages, periodic payments of principal, and prepayments of principal.
(2)Equity residual investments and principal only securities with a zero coupon rate are excluded from this calculation.

The following table detailsFor the weighted average life of ourthree months ended June 30, 2021, the Company sold 39 real estate securities broken out by Agency RMBSfor total proceeds of $341.5 million, with an additional $104.6 million of proceeds on 3 unsettled security sales, recording realized gains of $9.9 million and Credit Investments asrealized losses of December 31, 2019 ($ in thousands):$14.3 million. For the six months ended June 30, 2021, the Company sold 66 real estate securities for total proceeds of $453.3 million, with an additional $104.6 million of proceeds on 3 unsettled security sales, recording realized gains of $12.4 million and realized losses $17.3 million.

Agency RMBSCredit Investments
Weighted Average Life (1)Fair ValueAmortized CostWeighted Average CouponFair ValueAmortized Cost
Weighted Average
Coupon (2)
Less than or equal to 1 year$—  $—  — %$82,474  $82,273  0.56 %
Greater than one year and less than or equal to five years313,855  302,520  4.01 %525,192  508,038  1.29 %
Greater than five years and less than or equal to ten years2,001,584  1,954,614  3.71 %296,665  263,300  1.06 %
Greater than ten years—  —  —  230,062  205,078  5.46 %
Total$2,315,439  $2,257,134  3.77 %$1,134,393  $1,058,689  1.31 %

(1)This is based on projected life. Typically, actual maturities of mortgage-backed securities are shorter than stated contractual maturities. Maturities are affected by the contractual lives of the underlying mortgages, periodic payments of principal and prepayments of principal.
(2)Equity residual investments and principal only securities with a zero coupon rate are excluded from this calculation.
For the three months ended June 30, 2020, the Company sold, directly or as a result of financing counterparty seizures, 87 securities for total proceeds of $234.5 million, recording realized gains of $9.3 million and realized losses of $45.6 million. For the six months ended June 30, 2020, the Company sold, directly or as a result of financing counterparty seizures, 316 securities for total proceeds of $2.7 billion, recording realized gains of $53.2 million and realized losses of $175.8 million.

21
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
For the three months ended June 30, 2019, the Company sold 15 securities for total proceeds of $233.1 million, recording realized gains of $3.8 million and realized losses of $0.1 million. For the six months ended June 30, 2019, the Company sold 46 securities for total proceeds of $446.1 million, recording realized gains of $8.1 million and realized losses of $2.3 million.24

See Notes 4 and 8 for amounts realized on sales of loans and the settlement of certain derivatives, respectively.

The following table details certain information related to the December 2014 VIE and August 2018 VIE as further described in Note 2 as of December 31, 2019 (in thousands). As of June 30, 2020, the Company did not hold any interest in these VIEs.

December 31, 2019
Assets
Real estate securities, at fair value:
Non-Agency$13,838 
CMBS94,500 
Other assets808 
Total assets$109,146 
Liabilities
Financing arrangements$70,712 
Securitized debt, at fair value7,230 
Other liabilities3,553 
Total liabilities$81,495 

The holders of the consolidated tranche of the December 2014 VIE, shown within the Non-Agency line item above, have no recourse to the general credit of the Company and the Company has no obligation to provide any other explicit or implicit support to the December 2014 VIE. Except for restricted cash, shown within the Other assets line item above, assets held by the August 2018 VIE are not restricted and can be used to settle any obligations of the Company. The liabilities of the August 2018 VIE are recourse to the Company and can be satisfied with assets of the Company.
The following table details certain information related to the December 2014 VIE as of December 31, 2019 ($ in thousands):
   Weighted Average
 Current FaceFair ValueCouponYieldLife (Years) (1)
Consolidated tranche (2)$7,204  $7,230  3.46 %4.11 %1.96
Retained tranche7,851  6,608  5.37 %18.14 %7.64
Total resecuritized asset (3)$15,055  $13,838  4.46 %10.81 %4.92
(1)This is based on projected life. Typically, actual maturities of investments and loans 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)As of December 31, 2019, the Company has recorded secured financing of $7.2 million on the consolidated balance sheets in the "Securitized debt, at fair value" line item. The Company recorded the proceeds from the issuance of the secured financing in the "Cash Flows from Financing Activities" section of the consolidated statement of cash flows at the time of securitization.
(3)As of December 31, 2019, the fair market value of the total resecuritized asset is included in the Company’s consolidated balance sheets as "Non-Agency."
22
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 20202021
4. Loans
Residential mortgage loans

In January 2020, the Company purchased a residential mortgage loan portfolio with a gross aggregate unpaid principal balance and a gross acquisition fair5. Fair value of $481.7 million and $450.3 million, respectively.

For the three months ended June 30, 2020, the Company sold 2,357 loans for total proceeds of $382.8 million, recording realized gains of $1.4 million and realized losses of $55.5 million. For the six months ended June 30, 2020, the Company sold 2,358 loans for total proceeds of $391.5 million, recording realized gains of $1.4 million and realized losses of $58.6 million.

For the three months ended June 30, 2019, the Company sold 78 loans for total proceeds of $12.7 million, recording realized gains of $1.0 million and realized losses of $0.2 million. For the six months ended June 30, 2019, the Company sold 79 loans for total proceeds of $12.8 million, recording realized gains of $1.0 million and realized losses of $0.2 million.measurements

The following table presents the Company’s financial instruments measured at fair value on a recurring basis as of June 30, 2021 (in thousands): 
 Fair Value at June 30, 2021
 Level 1Level 2Level 3Total
Assets:    
Residential mortgage loans$0 $866 $1,028,378 $1,029,244 
Agency RMBS:    
30 Year Fixed Rate0 696,704 0 696,704 
Credit Investments:
Non-Agency RMBS (1)0 2,695 1,183 3,878 
CMBS (2)0 31,614 0 31,614 
Commercial loans0 0 62,279 62,279 
Excess mortgage servicing rights0 0 2,608 2,608 
Derivative assets (3)0 13,409 0 13,409 
AG Arc (4)0 0 50,862 50,862 
Total Assets Measured at Fair Value$0 $745,288 $1,145,310 $1,890,598 
Liabilities:
Securitized debt$0 $0 $(482,533)$(482,533)
Derivative liabilities (3)0 (1,334)0 (1,334)
Total Liabilities Measured at Fair Value$0 $(1,334)$(482,533)$(483,867)
(1)Non-Agency RMBS is comprised of Prime and Re/Non-Performing Securities.
(2)CMBS represents Single-Asset/Single-Borrower Securities.
(3)As of June 30, 2021, the Company applied a reduction in fair value of $13.3 million and $1.0 million to its interest rate swap assets and liabilities, respectively, related to variation margin with a corresponding increase or decrease in restricted cash, respectively. Refer to Note 2 and Note 7 for more information on the Company's accounting policies with regard to derivatives.
(4)Refer to Note 2 for more information on the Company's accounting policies with regard to cash equivalents, if applicable, and AG Arc. The table above includes the Company's investment in AG Arc, which is included in its "Investments in debt and equity of affiliates" line item on the consolidated balance sheets, as the Company has chosen to make aelect the fair value electionoption with respect to its investment pursuant to ASC 825 for its residential mortgage loan portfolio. Unrealized gains and losses are recognized in current period earnings in the "Unrealized gain/(loss) on real estate securities and loans, net" line item. The gross unrealized gains/(losses) stated in the tables below represents inception to date unrealized gains/(losses).
The table below details information regarding the Company’s residential mortgage loan portfolio as of June 30, 2020 and December 31, 2019 ($ in thousands):
    Gross Unrealized Weighted Average
As of
Unpaid 
Principal
Balance
Premium
(Discount)		Amortized CostGainsLossesFair ValueCouponYieldLife 
(Years) (1)
June 30, 2020$471,458  $(65,122) $406,336  $829  $(27,343) $379,822  3.52 %5.25 %6.45
December 31, 2019464,041  (55,219) 408,822  9,065  (102) 417,785  4.09 %5.72 %7.36
(1)This is based on projected life. Typically, actual maturities of residential mortgage loans are shorter than stated contractual maturities. Maturities are affected by the lives of the underlying mortgages, periodic payments of principal and prepayments of principal.
The table below details information regarding the Company’s residential mortgage loans as of June 30, 2020 and December 31, 2019 (in thousands):
 June 30, 2020December 31, 2019
 Fair ValueUnpaid Principal BalanceFair ValueUnpaid Principal Balance
Re-Performing$292,102  $348,003  $330,234  $357,678  
Non-Performing78,251  101,375  87,551  106,363  
Other (1)9,469  22,080  —  —  
 $379,822  $471,458  $417,785  $464,041  
(1)Represents residual positions where the Company consolidates a securitization and the positions are recorded on the Company's books as residential mortgage loans. There may be limited data available regarding the underlying collateral of such securitizations.825.

As described in Note 2, prior to the adoption of ASU 2016-13, the Company evaluated loans for OTTI on at least a quarterly basis. The determination of whether a loan was other-than-temporarily impaired involved judgments and assumptions based on subjective and objective factors. When the fair value of a loan was less than its amortized cost at the balance sheet date, the loan was considered impaired, and the impairment was designated as either "temporary" or "other-than-temporary."
25

NaN OTTI was recorded for the three and six months ended June 30, 2019 on the Company’s residential mortgage loans.
23
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
As of June 30, 2020 and December 31, 2019, the Company had residential mortgage loans with a fair value of $33.7 million and $35.6 million, respectively, that were in the process of foreclosure, excluding any loans classified as Other above.
The Company’s mortgage loan portfolio consisted of mortgage loans on residential real estate located throughout the United States. The following is a summary of the geographic concentration of credit risk within the Company’s mortgage loan portfolio as of June 30, 2020 and December 31, 2019, excluding any loans classified as Other above:
Geographic Concentration of Credit RiskJune 30, 2020December 31, 2019
Percentage of fair value of mortgage loans secured by properties in the following states representing 5% or more of fair value:  
California18 %19 %
Florida10 %11 %
New York9 %9 %
New Jersey6 %6 %
The Company records interest income on an effective interest basis. The accretable discount is determined by the excess of the
Company’s estimate of undiscounted principal, interest, and other cash flows expected to be collected over its initial investment
in the mortgage loan. The following is a summary of the changes in the accretable portion of discounts for the three and six months ended June 30, 2020 and June 30, 2019, respectively (in thousands):
 Three Months EndedSix Months Ended
 June 30, 2020June 30, 2019June 30, 2020June 30, 2019
Beginning Balance$263,111  $99,504  $168,877  $79,610  
Additions—  505  129,017  20,236  
Accretion(8,037) (3,438) (16,465) (6,701) 
Reclassifications from/(to) non-accretable difference1,335  (2,245) (24,677) 1,604  
Disposals(118,248) (4,811) (118,591) (5,234) 
Ending Balance$138,161  $89,515  $138,161  $89,515  
As of June 30, 2020, the Company’s residential mortgage loan portfolio was comprised of 3,239 conventional loans with individual original loan balances between $5.6 thousand and $3.4 million, excluding loans classified as Other above.
As of December 31, 2019, the Company’s residential mortgage loan portfolio was comprised of 3,413 conventional loans with individual original loan balances between $3.8 thousand and $3.4 million.
The Company entered into a securitization transaction of certain of its residential mortgage loans in August 2019 (the "August 2019 VIE"). The Company concluded that the SPE created to facilitate this transaction was a VIE and also determined that the August 2019 VIE should be consolidated by the Company. The transferred assets were recorded as a secured borrowing, based on the Company’s involvement in the August 2019 VIE, including the design and purpose of the SPE, and whether the Company’s involvement reflected a controlling financial interest that resulted in the Company being deemed the primary beneficiary of the August 2019 VIE.

Upon consolidation, the Company elected the fair value option for the assets and liabilities of the August 2019 VIE in order to avoid an accounting mismatch between its assets and its liabilities and to more accurately represent the economics of its interest in the entity. Electing the fair value option allows the Company to record changes in fair value in the consolidated statement of operations. The Company applied the guidance under ASU 2014-13, "Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity," whereby the Company determines whether the fair value of the assets or liabilities of the August 2019 VIE is more observable as a basis for measuring the less observable financial instruments. The Company has determined that the fair value of the liabilities of the August 2019 VIE 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 VIE.
24
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 20202021
The following table details certain information related topresents the assets and liabilities of the August 2019 VIECompany’s financial instruments measured at fair value on a recurring basis as of June 30, 2020 and December 31, 2019 ($ in2020 (in thousands):

June 30, 2020December 31, 2019
Assets
Residential mortgage loans, at fair value$223,119  $255,171  
Other assets766  898  
Total assets$223,885  $256,069  
Liabilities
Financing arrangements$9,392  $24,584  
Securitized debt, at fair value198,974  217,118  
Other liabilities534  596  
Total liabilities$208,900  $242,298  

The following table details additional information regarding loans and securitized debt related to the August 2019 VIE as of June 30, 2020 and December 31, 2019 ($ in thousands):

  Weighted Average
As of: Current Unpaid Principal BalanceFair ValueCouponYieldLife (Years) (1)
June 30, 2020Residential mortgage loans (2)$254,936  $223,119  3.51 %4.81 %6.85
Securitized debt (3)213,233  198,974  2.95 %2.95 %5.19
December 31, 2019Residential mortgage loans (2)263,956  255,171  3.96 %5.11 %7.66
Securitized debt (3)217,455  217,118  2.92 %2.86 %5.00

 Fair value at December 31, 2020
 Level 1Level 2Level 3Total
Assets:    
Residential mortgage loans$0 $2,134 $433,307 $435,441 
Agency RMBS:    
30 Year Fixed Rate0 518,352 0 518,352 
Credit Investments:
Non-Agency RMBS (1)0 35,070 3,100 38,170 
Non-Agency RMBS Interest Only0 236 0 236 
CMBS (2)0 52,485 0 52,485 
CMBS Interest Only0 4,303 0 4,303 
Commercial loans0 0 125,508 125,508 
Excess mortgage servicing rights0 0 3,158 3,158 
Derivative assets (3)0 1,356 0 1,356 
AG Arc (4)0 0 45,341 45,341 
Total Assets Measured at Fair Value$0 $613,936 $610,414 $1,224,350 
Liabilities:
Securitized debt$0 $0 $(355,159)$(355,159)
Derivative liabilities (3)0 (294)0 (294)
Total Liabilities Measured at Fair Value$0 $(294)$(355,159)$(355,453)
(1)ThisNon-Agency RMBS is based on projected life. Typically, actual maturitiescomprised of investmentsPrime, Alt-A/Subprime, Credit Risk Transfer, Non-US RMBS, and loans 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.Re/Non-Performing Securities.
(2)This represents all loans contributed to the August 2019 VIE.CMBS is comprised of Conduit, Single-Asset/Single-Borrower, and Freddie Mac K-Series CMBS.
(3)As of June 30, 2020 and December 31, 2019,2020, the Company has recorded secured financingapplied a reduction in fair value of $199.0$1.4 million and $217.1$0.2 million to its interest rate swap assets and liabilities, respectively, related to variation margin with a corresponding increase or decrease in restricted cash, respectively. Refer to Note 2 and Note 7 for more information on the Company's accounting policies with regard to derivatives.
(4)Refer to Note 2 for more information on the Company's accounting policies with regard to cash equivalents, if applicable, and AG Arc. The table above includes the Company's investment in AG Arc, which is included in its "Investments in debt and equity of affiliates" line item on the consolidated balance sheets, inas the "Securitized debt, at fair value" line item. The Company recorded the proceeds from the issuance of the secured financing in the "Cash Flows from Financing Activities" section of the consolidated statement of cash flows at the time of securitization.

The holders of the securitized debt have no recourse to the general credit of the Company. The Company has no obligation to provide any other explicit or implicit support to the August 2019 VIE.

Commercial loans

The Company has chosen to make aelect the fair value electionoption with respect to its investment pursuant to ASC 825 for its commercial loan portfolio. Unrealized gains and losses are recognized in current period earnings in the "Unrealized gain/(loss) on real estate securities and loans, net" line item. The gross unrealized gains/(losses) columns in the tables below represent inception to date unrealized gains/(losses).

For the three and six months ended June 30, 2020, the Company sold 1 commercial loan for total proceeds of $34.2 million, recording realized losses of $1.7 million. For the three and six months ended June 30, 2019, the Company did not sell any commercial loans.

25
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
The following table presents detail on the Company’s commercial loan portfolio on June 30, 2020 ($ in thousands). 

     Weighted Average   
Loan 
(1)(2)		Current Face
Premium
(Discount)
Amortized CostGross Unrealized LossesFair Value (3)Coupon
(4)		Yield (5)Life 
(Years)
(6)		Initial Stated
Maturity Date		Extended
Maturity 
Date (7)		LocationCollateral Type
Loan G (8)(9)$56,710  $—  $56,710  $(4,225) $52,485  5.27 %5.27 %1.55July 9, 2020July 9, 2022CACondo, Retail, Hotel
Loan I (10)15,212  (211) 15,001  (789) 14,212  11.50 %12.26 %1.80February 9, 2021February 9, 2023MNOffice, Retail
Loan J (8)6,291  —  6,291  (4,051) 2,240  5.65 %5.65 %2.12January 1, 2023January 1, 2024NYHotel, Retail
Loan K (11)12,673  —  12,673  (1,100) 11,573  10.00 %11.22 %1.27May 22, 2021February 22, 2024NYHotel, Retail
Loan L (11)51,000  (344) 50,656  (3,481) 47,175  5.40 %5.66 %4.12July 22, 2022July 22, 2024ILHotel, Retail
$141,886  $(555) $141,331  $(13,646) $127,685  6.42 %6.74 %2.50
(1)The Company has the contractual right to receive a balloon payment for each loan.
(2)Refer to Note 13 "Commitments and Contingencies" for details on the Company's commitments on its Commercial Loans as of June 30, 2020.
(3)Pricing is reflective of marks on unfunded commitments.
(4)Each commercial loan investment has a variable coupon rate.
(5)Yield includes any exit fees.
(6)Actual maturities of commercial mortgage loans may be shorter or longer than stated contractual maturities. Maturities are affected by prepayments of principal.
(7)Represents the maturity date of the last possible extension option.
(8)Loan G and Loan J are first mortgage loans.
(9)Loan G matured on July 9, 2020. Discussions are ongoing between the borrower and the lenders related to the extension of the loan. However, there can be no guaranty that an agreement will be reached with respect to any such discussions.
(10)Loan I is a mezzanine loan.
(11)Loan K and Loan L are comprised of first mortgage and mezzanine loans.825.


26
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
The following table presents detail on the Company’s commercial loan portfolio on December 31, 2019 ($ in thousands).
     Weighted Average   
Loan (1)Current FacePremium
(Discount)		Amortized CostGross 
Unrealized
Gains		Fair ValueCoupon
(2)		Yield (3)Life 
(Years)
(4)		Initial Stated
Maturity Date		Extended
Maturity 
Date (5)		LocationCollateral Type
Loan G (6)$45,856  $—  $45,856  $—  $45,856  6.46 %6.46 %0.53July 9, 2020July 9, 2022CACondo, Retail, Hotel
Loan H (6)36,000  —  36,000  —  36,000  5.49 %5.49 %0.19March 9, 2019June 9, 2020AZOffice
Loan I (7)11,992  (184) 11,808  184  11,992  12.21 %14.51 %1.04February 9, 2021February 9, 2023MNOffice, Retail
Loan J (6)4,674  —  4,674  —  4,674  6.36 %6.36 %2.12January 1, 2023January 1, 2024NYHotel, Retail
Loan K (8)9,164  —  9,164  —  9,164  10.71 %11.86 %1.72May 22, 2021February 22, 2024NYHotel, Retail
Loan L (8)51,000  (502) 50,498  502  51,000  6.16 %6.50 %4.63July 22, 2022July 22, 2024ILHotel, Retail
 $158,686  $(686) $158,000  $686  $158,686  6.82 %7.17 %1.92
(1)The Company has the contractual right to receive a balloon payment for each loan.
(2)Each commercial loan investment has a variable coupon rate.
(3)Yield includes any exit fees.
(4)Actual maturities of commercial mortgage loans may be shorter or longer than stated contractual maturities. Maturities are affected by prepayments of principal.
(5)Represents the maturity date of the last possible extension option.
(6)Loan G, Loan H, and Loan J are first mortgage loans.
(7)Loan I is a mezzanine loan.
(8)Loan K and Loan L are comprised of first mortgage and mezzanine loans.

During the three and six months ended June 30, 2020, the Company recorded $163.6 thousand and $129.9 thousand of discount accretion on its commercial loans, respectively. During the three and six months ended June 30, 2019, the Company recorded a de minimis amount of discount accretion on its commercial loans.

5. Excess MSRs

The Company has chosen to make a fair value election pursuant to ASC 825 for its Excess MSR portfolio.  Unrealized gains and losses are recognized in current period earnings in the "Unrealized gain/(loss) on derivative and other instruments, net" line item.  The gross unrealized gains/(losses) columns below represent inception to date unrealized gains/(losses). 
The following table presents detail on the Company’s Excess MSR portfolio on June 30, 2020 ($ in thousands).
   Gross Unrealized Weighted Average
 Unpaid Principal
Balance		Amortized
Cost		GainsLossesFair ValueYieldLife 
(Years) (1)
Agency Excess MSRs$2,327,265  $17,619  $8  $(5,435) $12,192  4.68 %6.41
Credit Excess MSRs31,508  172  —  (70) 102  23.60 %7.29
Total Excess MSRs$2,358,773  $17,791  $8  $(5,505) $12,294  4.84 %6.42
(1)This is based on projected life. Actual maturities of Excess MSRs may be shorter than stated contractual maturities.  Maturities are affected by prepayments of principal.
27
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
The following table presents detail on the Company’s Excess MSR portfolio on December 31, 2019 ($ in thousands).
   Gross Unrealized Weighted Average
 Unpaid Principal
Balance		Amortized
Cost		GainsLossesFair ValueYieldLife 
(Years) (1)
Agency Excess MSRs$2,910,735  $19,570  $93  $(2,031) $17,632  8.32 %5.58
Credit Excess MSRs34,753  178  2  (37) 143  21.38 %5.25
Total Excess MSRs$2,945,488  $19,748  $95  $(2,068) $17,775  8.42 %5.58

(1)This is based on projected life. Actual maturities of Excess MSRs may be shorter than stated contractual maturities.  Maturities are affected by prepayments of principal.
As described in Note 2, prior to the adoption of ASU 2016-13, the Company evaluated Excess MSRs for OTTI on at least a quarterly basis. For the three months ended June 30, 2019, the Company recognized an OTTI charge of $1.6 million on its Excess MSRs, which is included in the "Net realized gain/(loss)" line item on the consolidated statement of operations. Of the $1.6 million of OTTI recorded for the three months ended June 30, 2019, $0.4 million was related to Excess MSRs where OTTI was not recognized in a prior year. For the six months ended June 30, 2019, the Company recognized an OTTI charge of $2.2 million on its Excess MSRs, which is included in the "Net realized gain/(loss)" line item on the consolidated statement of operations. Of the $2.2 million of OTTI recorded for the six months ended June 30, 2019, $0.5 million was related to Excess MSRs where OTTI was not recognized in a prior year.
6. Fair value measurements
As described in Note 2, the fair value of financial instruments that are recorded at fair value is determined by the Manager, subject to oversight of the Company’s Board of Directors, and in accordance with ASC 820, "Fair Value Measurements and Disclosures." When possible, the Company determines fair value using independent data sources. ASC 820 establishes a hierarchy that prioritizes the inputs to valuation techniques giving the highest priority to readily available unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements) when market prices are not readily available or reliable.
Values for the Company’s securities, Excess MSRs, securitized debt of the December 2014 VIE,and derivatives and U.S. Treasury securities are based upon prices obtained from third partythird-party pricing services, which are indicative of market activity. The fair value of the Company’s obligation to return securities borrowed under reverse repurchase agreements is based upon the value of the underlying borrowed U.S. Treasury securities as of the reporting date. The evaluation methodology of the Company’s third-party pricing services incorporates commonly used market pricing methods, including a spread measurement to various indices such as the one-year constant maturity treasury and LIBOR, which are observable inputs. The evaluation also considers the underlying characteristics of each investment, which are also observable inputs, including: coupon; maturity date; loan age; reset date; collateral type; periodic and life cap; geography; and prepayment speeds. The Company collects and considers current market intelligence on all major markets, including benchmark security evaluations and bid-lists from various sources, when available. As part of the Company’s risk management process, the Company reviews and analyzes all prices obtained by comparing prices to recently completed transactions involving the same or similar investments on or near the reporting date. If, in the opinion of the Manager, one or more prices reported to the Company are not reliable or unavailable, the Manager reviews the fair value based on characteristics of the investment it receives from the issuer and available market information.

In valuing its derivatives, the Company considers the creditworthiness of both the Company and its counterparties, along with collateral provisions contained in each derivative agreement, from the perspective of both the Company and its counterparties. All of the Company’s derivatives are either subject to bilateral collateral arrangements or clearing in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the "Dodd Frank Act"). For swaps cleared under the Dodd Frank Act, a Central Counterparty Clearing House ("CCCH") now stands between the Company and the over-the-counter derivative counterparties. In order to access clearing, the Company has entered into clearing agreements with Futures Commissions Merchants ("FCMs").
The daily exchange of variation margin associated with a CCCH centrally cleared derivative instrument is legally characterized as the daily settlement of the derivative instrument itself. Accordingly, the Company accounts for the daily receipt or payment of variation margin associated with its centrally cleared interest rate swaps and futures as a direct reduction to the carrying value of the interest rate swap and future derivative asset or liability, respectively. The carrying amount of centrally cleared
28
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
interest rate swaps and futures reflected in the Company’s consolidated balance sheets is equal to the unsettled fair value of such instruments. See Note 8 for more information.
 
In determining the fair value of the Company's mortgage loans and securitized debt relating to the August 2019 VIE,Residential Loan VIEs, the Company considers data such as loan origination information, additional updated borrower information, loan servicing data, as available, forward interest rates, general economic conditions, home price index forecasts, and valuations of the underlying properties. The variables considered most significant to the determination of the fair value of the Company's mortgage loans include market-implied discount rates, projections of default rates, delinquency rates, prepayment rates, and loss severity, (considering mortgage insurance).loan-to-value ratios, and recovery rates. Projections of default and prepayment rates are impacted by other variables such as reperformance rates and timeline to liquidation. The Company uses loan level data and macro-economic inputs to generate loss
26

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
adjusted cash flows and other information in determining the fair value of its mortgage loans. Because of the inherent uncertainty of such valuation, the fair valuesvalue established for mortgage loans held by the Company may differ from the fair valuesvalue that would have been established if a ready market existed for these mortgage loans.

The ManagerManagement may also engage specialized third partybase its valuation on prices obtained from a third-party pricing service providersprovider to assess and corroborate the valuation of a selection of investments in the Company’s loan and securitized debt portfolio and the Company's investment in Arc Home on a periodic basis. These specialized third party valuationthird-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.
TBA instruments are similar in form to the Company’s Agency RMBS portfolio, and the Company therefore estimates fair value based on similar methods.

Cash equivalents include investments in money market funds that invest primarily in short-term U.S. Treasury and Agency securities. These cash equivalent instruments are valued at their market quoted prices, which generally approximate cost plus accrued interest.

Refer to Note 2 for more information on changes regarding the Company's leveling policy.

The following table presents the Company’s financial instruments measured at fair value on a recurring basis as of June 30, 2020 (in thousands):
 Fair Value at June 30, 2020
 Level 1Level 2Level 3Total
Assets:    
Credit Investments:
Non-Agency RMBS$—  $40,995  $4,496  $45,491  
Non-Agency RMBS Interest Only—  326  —  326  
CMBS—  82,421  —  82,421  
CMBS Interest Only—  4,233  —  4,233  
Residential mortgage loans—  —  379,822  379,822  
Commercial loans—  —  127,685  127,685  
Excess mortgage servicing rights—  —  12,294  12,294  
Derivative assets84  —  —  84  
AG Arc (1)—  —  28,030  28,030  
Total Assets Measured at Fair Value$84  $127,975  $552,327  $680,386  
Liabilities:
Securitized debt$—  $—  $(198,974) $(198,974) 
Total Liabilities Measured at Fair Value$—  $—  $(198,974) $(198,974) 
(1)Refer to Note 2 for more information on the Company's accounting policies with regard to cash equivalents, if applicable, and AG Arc.
29
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
The following table presents the Company’s financial instruments measured at fair value on a recurring basis as of December 31, 2019 (in thousands):
 Fair value at December 31, 2019
 Level 1Level 2Level 3Total
Assets:    
Agency RMBS:    
30 Year Fixed Rate$—  $2,241,298  $—  $2,241,298  
Interest Only—  74,141  —  74,141  
Credit Investments:
Non-Agency RMBS—  86,281  630,115  716,396  
Non-Agency RMBS Interest Only—  —  1,074  1,074  
CMBS—  2,365  366,566  368,931  
CMBS Interest Only—  —  47,992  47,992  
Residential mortgage loans—  —  417,785  417,785  
Commercial loans—  —  158,686  158,686  
Excess mortgage servicing rights—  —  17,775  17,775  
Cash equivalents (1)53,243  —  —  53,243  
Derivative assets—  2,282  —  2,282  
AG Arc (1)—  —  28,546  28,546  
Total Assets Measured at Fair Value$53,243  $2,406,367  $1,668,539  $4,128,149  
Liabilities:
Securitized debt$—  $(151,933) $(72,415) $(224,348) 
Derivative liabilities(122) (289) —  (411) 
Total Liabilities Measured at Fair Value$(122) $(152,222) $(72,415) $(224,759) 

(1)Refer to Note 2 for more information on the Company's accounting policies with regard to cash equivalents and AG Arc.
 
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 six months ended June 30, 20202021 and June 30, 2019.2020.

Refer to the tables below for details on transfers between the Level 3 and Level 2 categories under ASC 820. Transfers into the Level 3 category of the fair value hierarchy occur due to instruments exhibiting indications of reduced levels of market transparency. Transfers out of the Level 3 category of the fair value hierarchy occur due to instruments exhibiting indications of increased levels of market transparency and updates to the Company's leveling policy, which are detailed in Note 2. Indications of increases or decreases in levels of market transparency include a change in observable transactions or executable quotes involving these instruments or similar instruments. Changes in these indications could impact price transparency, and thereby cause a change in level designations in future periods.
30
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020

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 June 30, 2020 (in thousands)
Three Months Ended June 30, 2021 (in thousands)Three Months Ended June 30, 2021 (in thousands)
Non-Agency
RMBS
Residential
Mortgage Loans
Commercial
Loans
Excess Mortgage
Servicing Rights		AG Arc
Securitized
debt
Residential
Mortgage Loans		Non-Agency
RMBS		Commercial
Loans		Excess Mortgage
Servicing Rights		AG ArcSecuritized
debt
Beginning balanceBeginning balance$5,533  $766,960  $158,051  $14,066  $18,519  $(191,346) Beginning balance$640,739 $1,641 $58,209 $3,000 $52,138 $(344,429)
Purchases/TransfersPurchases/Transfers—  —  7,759  —  —  —  Purchases/Transfers444,737 0 1,589 0 0 0 
Issuances of Securitized DebtIssuances of Securitized Debt—  —  —  —  —  (3,000) Issuances of Securitized Debt0 0 0 0 0 (203,392)
Proceeds from sales of assetsProceeds from sales of assets(68) (378,729) (34,200) —  —  —  Proceeds from sales of assets(45,615)0 0 0 0 0 
Proceeds from settlementProceeds from settlement(1,159) (14,716) —  —  —  3,517  Proceeds from settlement(21,357)(469)0 0 0 66,154 
Total net gains/(losses) (1)Total net gains/(losses) (1)Total net gains/(losses) (1)
Included in net incomeIncluded in net income190  6,307  (3,925) (1,772) 9,511  (8,145) Included in net income9,874 11 2,481 (392)(1,276)(866)
Ending BalanceEnding Balance$4,496  $379,822  $127,685  $12,294  $28,030  $(198,974) Ending Balance$1,028,378 $1,183 $62,279 $2,608 $50,862 $(482,533)
Change in unrealized appreciation/(depreciation) for level 3 assets/liabilities still held as of June 30, 2020 (2)$4  $60,434  $(2,134) $(1,780) $9,511  $(8,145) 
Change in unrealized appreciation/(depreciation) for level 3 assets/liabilities still held as of June 30, 2021 (2)Change in unrealized appreciation/(depreciation) for level 3 assets/liabilities still held as of June 30, 2021 (2)$2,840 $11 $2,481 $(392)$(1,276)$(866)

(1) Gains/(losses) are recorded in the following line items in the consolidated statement of operations:
Unrealized gain/(loss) on real estate securities and loans,, net$58,3023,982 
Unrealized gain/(loss) on derivative and other instruments, net(9,917)
Net realized gain/(loss)(55,730)7,126 
Equity in earnings/(loss) from affiliates9,511 (1,276)
Total$2,1669,832 
(2) Unrealized gains/(losses) are recorded in the following line items in the consolidated statement of operations:
Unrealized gain/(loss) on real estate securities and loans,, net$58,3044,074 
Unrealized gain/(loss) on derivative and other instruments, net(9,925)
Equity in earnings/(loss) from affiliates9,511 (1,276)
Total$57,8902,798 

Three Months Ended June 30, 2019 (in thousands)
 
Non-Agency
RMBS
Non-Agency
RMBS
Interest Only
ABSCMBS
CMBS Interest
Only
Residential
Mortgage
Loans
Commercial
Loans
Excess
Mortgage
Servicing
Rights
AG Arc
Securitized
debt
Beginning balance$506,103  $2,501  $20,199  $212,904  $49,397  $202,047  $110,223  $24,301  $23,775  $(10,515) 
Transfers (1):
Transfers into level 324,194  —  —  —  —  —  —  —  —  —  
Purchases/Transfers61,496  —  819  23,656  —  6,250  8,132  —  —  —  
Proceeds from sales/redemptions(14,606) —  —  (14,097) (1,714) (12,704) —  —  —  —  
Proceeds from settlement(22,573) —  (634) (7,570) —  (4,152) —  —  —  1,898  
Total net gains/(losses) (2)
Included in net income6,531  (667) 187  5,332  (847) 8,529  (350) (3,408) (5,058) (13) 
Ending Balance$561,145  $1,834  $20,571  $220,225  $46,836  $199,970  $118,005  $20,893  $18,717  $(8,630) 
Change in unrealized appreciation/(depreciation) for level 3 assets/liabilities still held as of June 30, 2019 (3)$5,108  $(386) $187  $5,329  $(772) $7,847  $(350) $(1,803) $(5,058) $(13) 
27
(1) Transfers are assumed to occur at the beginning of the period. During the three months ended June 30, 2019, the Company transferred 3 Non-Agency RMBS securities into the Level 3 category from the Level 2 category under the fair value hierarchy of ASC 820.
31
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 20202021
Three Months Ended June 30, 2020 (in thousands)
Residential
Mortgage Loans		Non-Agency
RMBS		Commercial
Loans		Excess Mortgage
Servicing Rights		AG ArcSecuritized
debt
Beginning balance$766,960 $5,533 $158,051 $14,066 $18,519 $(191,346)
Purchases/Transfers0 0 7,759 0 0 0 
Issuances of Securitized Debt0 0 0 0 0 (3,000)
Proceeds from sales of assets(378,729)(68)(34,200)0 0 0 
Proceeds from settlement(14,716)(1,159)0 0 0 3,517 
Total net gains/(losses) (1)
Included in net income6,307 190 (3,925)(1,772)9,511 (8,145)
Ending Balance$379,822 $4,496 $127,685 $12,294 $28,030 $(198,974)
Change in unrealized appreciation/(depreciation) for level 3 assets/liabilities still held as of June 30, 2020 (2)$60,434 $4 $(2,134)$(1,780)$9,511 $(8,145)

(1) Gains/(losses) are recorded in the following line items in the consolidated statement of operations:
Unrealized gain/(loss), net$48,385 
Net realized gain/(loss)(55,730)
Equity in earnings/(loss) from affiliates9,511 
Total$2,166 
(2) Unrealized gains/(losses) are recorded in the following line items in the consolidated statement of operations:
Unrealized gain/(loss), net$48,379 
Equity in earnings/(loss) from affiliates9,511 
Total$57,890 
Six Months Ended June 30, 2021 (in thousands)
Residential
Mortgage Loans		Non-Agency
RMBS		Commercial
Loans		Excess Mortgage
Servicing Rights		AG ArcSecuritized
debt
Beginning balance$433,307 $3,100 $125,508 $3,158 $45,341 $(355,159)
Transfers (1):
Transfers out of level 30 (1,499)0 0 0 0 
Purchases/Transfers652,797 0 5,258 0 0 0 
Issuances of Securitized Debt0 0 0 0 0 (203,392)
Proceeds from sales of assets and seizures of assets(45,615)0 (74,342)0 0 0 
Proceeds from settlement(33,651)(501)(195)0 0 78,931 
Total net gains/(losses) (2)
Included in net income21,540 83 6,050 (550)5,521 (2,913)
Ending Balance$1,028,378 $1,183 $62,279 $2,608 $50,862 $(482,533)
Change in unrealized appreciation/(depreciation) for level 3 assets/liabilities still held as of June 30, 2021 (3)$14,601 $83 $3,219 $(550)$5,521 $(2,913)
(1) Transfers are assumed to occur at the beginning of the period. During the six months ended June 30, 2021, the Company transferred 1 Non-Agency RMBS into the Level 2 category from the Level 3 category under the fair value hierarchy of ASC 820.
(2) Gains/(losses) are recorded in the following line items in the consolidated statement of operations:
Unrealized gain/(loss) on real estate securities and loans,, net$18,33220,083 
Unrealized gain/(loss) on derivative and other instruments, net(3,421)
Net realized gain/(loss)3834,127 
Equity in earnings/(loss) from affiliates(5,058)5,521 
Total$10,23629,731 
(3) Unrealized gains/(losses) are recorded in the following line items in the consolidated statement of operations:
Unrealized gain/(loss) on real estate securities and loans,, net$16,96314,440 
Unrealized gain/(loss) on derivative and other instruments, net(1,816)
Equity in earnings/(loss) from affiliates(5,058)5,521 
Total$10,08919,961 

28

Six Months Ended June 30, 2020 (in thousands)
Non-Agency
RMBS
Non-Agency
RMBS Interest Only
CMBS
CMBS Interest
Only
Residential
Mortgage
Loans
Commercial
Loans
Excess
Mortgage
Servicing
Rights
AG Arc
Securitized
debt
Beginning balance$630,115  $1,074  $366,566  $47,992  $417,785  $158,686  $17,775  $28,546  $(72,415) 
Transfers (1):
Transfers into level 3—  —  —  —  —  —  —  —  (151,933) 
Transfers out of level 3(210,709) (1,074) (170,816) (22,054) —  —  —  —  7,230  
Purchases/Transfers1,559  —  3,540  —  479,195  19,200  —  —  —  
Issuances of Securitized Debt—  —  —  —  —  —  —  —  (3,000) 
Proceeds from sales of assets and seizures of assets(362,199) —  (148,111) (21,996) (387,408) (34,200) —  —  —  
Proceeds from settlement(10,869) —  (9,367) —  (37,390) —  —  —  9,223  
Total net gains/(losses) (2)
Included in net income(43,401) —  (41,812) (3,942) (92,360) (16,001) (5,481) (516) 11,921  
Ending Balance$4,496  $—  $—  $—  $379,822  $127,685  $12,294  $28,030  $(198,974) 
Change in unrealized appreciation/(depreciation) for level 3 assets/liabilities still held as of June 30, 2020 (3)$(550) $—  $—  $—  $(35,221) $(14,210) $(5,481) $(516) $11,921  
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
Six Months Ended June 30, 2020 (in thousands)
Residential
Mortgage
Loans		Non-Agency
RMBS		Non-Agency
RMBS Interest Only		CMBSCMBS Interest
Only		Commercial
Loans		Excess
Mortgage
Servicing
Rights		AG ArcSecuritized
debt
Beginning balance$417,785 $630,115 $1,074 $366,566 $47,992 $158,686 $17,775 $28,546 $(72,415)
Transfers (1):
Transfers into level 30 0 0 0 0 0 0 0 (151,933)
Transfers out of level 30 (210,709)(1,074)(170,816)(22,054)0 0 0 7,230 
Purchases/Transfers479,195 1,559 0 3,540 0 19,200 0 0 0 
Issuances of Securitized Debt0 0 0 0 0 0 00(3,000)
Proceeds from sales of assets and seizures of assets(387,408)(362,199)0 (148,111)(21,996)(34,200)0 0 0 
Proceeds from settlement(37,390)(10,869)0 (9,367)0 0 0 0 9,223 
Total net gains/(losses) (2)
Included in net income(92,360)(43,401)0 (41,812)(3,942)(16,001)(5,481)(516)11,921 
Ending Balance$379,822 $4,496 $0 $0 $0 $127,685 $12,294 $28,030 $(198,974)
Change in unrealized appreciation/(depreciation) for level 3 assets/liabilities still held as of June 30, 2020 (3)$(35,221)$(550)$0 $0 $0 $(14,210)$(5,481)$(516)$11,921 
(1) Transfers are assumed to occur at the beginning of the period. During the six months ended June 30, 2020, the Company transferred 50 Non-Agency RMBS securities, 2 Non-Agency RMBS Interest Only securities, 32 CMBS securities, 15 CMBS Interest Only securities and 1 securitized debt security into the Level 2 category from the Level 3 category under the fair value hierarchy of ASC 820. During the six months ended June 30, 2020, the Company transferred 1 securitized debt security into the Level 3 category from the Level 2 category under the fair value hierarchy of ASC 820. Refer to Note 2 for more information on changes regarding the Company's leveling policy.
(2) Gains/(losses) are recorded in the following line items in the consolidated statement of operations:
Unrealized gain/(loss) on real estate securities and loans,, net$(87,515)(81,075)
Unrealized gain/(loss) on derivative and other instruments, net6,440 
Net realized gain/(loss)(110,001)
Equity in earnings/(loss) from affiliates(516)
Total$(191,592)
(3) Unrealized gains/(losses) are recorded in the following line items in the consolidated statement of operations:
Unrealized gain/(loss) on real estate securities and loans,, net$(49,981)(43,541)
Unrealized gain/(loss) on derivative and other instruments, net6,440 
Equity in earnings/(loss) from affiliates(516)
Total$(44,057)


3229

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 20202021
Six Months Ended June 30, 2019 (in thousands)
 
Non-Agency
RMBS
Non-Agency
RMBS
Interest Only
ABSCMBS
CMBS Interest
Only
Residential
Mortgage
Loans
Commercial
Loans
Excess
Mortgage
Servicing
Rights
AG Arc
Securitized
debt
Beginning balance$491,554  $3,099  $21,160  $211,054  $50,331  $186,096  $98,574  $26,650  $20,360  $(10,858) 
Transfers (1):
Transfers into level 355,174  —  —  —  —  —  —  —  —  —  
Transfers out of level 3(61,531) —  —  (5,279) —  —  —  —  —  —  
Purchases/Transfers140,562  —  1,158  43,445  —  25,995  29,648  —  —  —  
Capital Contributions—  —  —  —  —  —  —  —  6,689  —  
Proceeds from sales/redemptions(49,242) —  (1,283) (20,165) (1,714) (12,780) —  —  —  —  
Proceeds from settlement(27,873) —  (1,183) (22,934) —  (8,189) (10,417) —  —  2,215  
Total net gains/(losses) (2)
Included in net income12,501  (1,265) 719  14,104  (1,781) 8,848  200  (5,757) (8,332) 13  
Ending Balance$561,145  $1,834  $20,571  $220,225  $46,836  $199,970  $118,005  $20,893  $18,717  $(8,630) 
Change in unrealized appreciation/(depreciation) for level 3 assets/liabilities still held as of June 30, 2019 (3)$10,087  $(984) $654  $10,733  $(1,706) $7,992  $200  $(3,539) $(8,332) $13  
(1) Transfers are assumed to occur at the beginning of the period. During the six months ended June 30, 2019, the Company transferred 7 Non-Agency RMBS securities into the Level 3 category from the Level 2 category and 6 Non-Agency RMBS and 2 CMBS securities into the Level 2 category from the Level 3 category under the fair value hierarchy of ASC 820.
(2) Gains/(losses) are recorded in the following line items in the consolidated statement of operations:
Unrealized gain/(loss) on real estate securities and loans, net$29,745 
Unrealized gain/(loss) on derivative and other instruments, net(5,744)
Net realized gain/(loss)3,581 
Equity in earnings/(loss) from affiliates(8,332)
Total$19,250 
(3) Unrealized gains/(losses) are recorded in the following line items in the consolidated statement of operations:
Unrealized gain/(loss) on real estate securities and loans, net$26,976 
Unrealized gain/(loss) on derivative and other instruments, net(3,526)
Equity in earnings/(loss) from affiliates(8,332)
Total$15,118 

33
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
The following tables present a summary of quantitative information about the significant unobservable inputs used in the fair value measurement of investments for which the Company has utilized Level 3 inputs to determine fair value.
Asset ClassFair Value at June 30, 20202021 (in thousands)Valuation TechniqueUnobservable InputRange
(Weighted Average) (1)
Yield6.50%1.62% - 8.29% (8.00%10.00% (3.42%)
Non-Agency RMBSResidential Mortgage Loans$3,204982,331 Discounted Cash FlowProjected Collateral Prepayments5.82%4.41% - 5.95% (5.84%37.62% (14.40%)
Projected Collateral Losses3.70%0.05% - 5.74% (5.41%4.65% (0.96%)
Projected Collateral Severities-3.70%-15.61% - 19.66% (0.17%26.81% (11.99%)
$1,2925,684 Consensus PricingOffered Quotes86.9985.67 - 86.99 (86.99)113.14 (104.07)
$40,363 Recent TransactionCostN/A
Yield8.37% - 8.37% (8.37%)
Non-Agency RMBS$1,183 Discounted Cash FlowProjected Collateral Prepayments5.41% - 5.41% (5.41%)
Projected Collateral Losses2.92% - 2.92% (2.92%)
Projected Collateral Severities-30.09% - -30.09% (-30.09%)
Yield10.12% - 30.06% (13.28%)
Commercial Loans$62,279 Discounted Cash FlowCredit Spread901 bps - 2,568 bps (1,185 bps)
Recovery Percentage (2)100.00% - 100.00% (100.00%)
Loan-to-Value48.10% - 92.70% (73.46%)
Excess Mortgage Servicing RightsDiscounted Cash FlowYield9.00% - 9.70% (9.09%)
$2,521 Projected Collateral Prepayments10.97% - 16.00% (12.06%)
$87 Consensus PricingOffered Quotes0.30 - 0.30 (0.30)
AG Arc$50,862 Comparable MultipleBook Value Multiple1.06x - 1.06x (1.06x)
Liability ClassFair Value at June 30, 2021 (in thousands)Valuation TechniqueUnobservable InputRange
(Weighted Average)
Yield0.98% - 5.00% (2.04%)
Securitized debt$(482,533)Discounted Cash FlowProjected Collateral Prepayments5.44% - 11.03% (8.65%)
Projected Collateral Losses0.36% - 3.27% (1.42%)
Projected Collateral Severities8.49% - 16.97% (12.33%)
(1) Amounts are weighted based on fair value.
(2) Represents the proportion of the principal expected to be collected relative to the loan balances as of June 30, 2021.
30

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
Asset ClassFair Value at December 31, 2020 (in thousands)Valuation TechniqueUnobservable InputRange
(Weighted Average) (1)
Yield4.50% - 10.00% (5.01%)
Residential Mortgage Loans$426,709 Discounted Cash FlowProjected Collateral Prepayments4.30% - 9.31% (7.28%)
Projected Collateral Losses1.66% - 5.75% (2.58%)
Projected Collateral Severities-9.29% - 49.43% (15.68%)
$6,598 Consensus PricingOffered Quotes82.03 - 106.29 (99.96)
Yield8.05% - 8.05% (8.05%)
Non-Agency RMBS$1,601 Discounted Cash FlowProjected Collateral Prepayments5.46% - 5.46% (5.46%)
Projected Collateral Losses5.37% - 5.37% (5.37%)
Projected Collateral Severities-20.89% - -20.89% (-20.89%)
$1,499 Consensus PricingOffered Quotes91.59 - 91.59 (91.59)
Yield5.50% - 10.00% (6.67%)
Residential Mortgage Loans$370,353 Discounted Cash FlowProjected Collateral Prepayments5.94% - 10.10% (8.16%)
Projected Collateral Losses2.04% - 5.39% (3.01%)
Projected Collateral Severities-9.12% - 59.16% (23.43%)
$9,469 Consensus PricingOffered Quotes13.93 - 103.20 (79.57)
Yield8.04% - 17.60% (10.89%)
Commercial Loans$127,685 Discounted Cash FlowCredit Spread738 bps - 1,586 bps (995 bps)
Recovery Percentage (2)100.00% - 100.00% (100.00%)
Excess Mortgage Servicing RightsDiscounted Cash FlowYield8.50% - 11.81% (9.26%)
$12,192 Projected Collateral Prepayments11.27% - 16.93% (14.06%)
$102 Consensus PricingOffered Quotes0.00 - 0.32 (0.32)
AG Arc$28,030 Comparable MultipleBook Value Multiple1.0x - 1.0x (1.0x)
Liability ClassFair Value at June 30, 2020 (in thousands)Valuation TechniqueUnobservable InputRange
(Weighted Average)
Yield3.50% - 7.00% (4.20%)
Securitized debt$(198,974)Discounted Cash FlowProjected Collateral Prepayments8.87% - 8.87% (8.87%)
Projected Collateral Losses2.41% - 2.41% (2.41%)
Projected Collateral Severities23.34% - 23.34% (23.34%)
(1) Amounts are weighted based on fair values.
(2) Represents the proportion of the principal expected to be collected relative to the loan balances as of June 30, 2020.

34
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
Asset ClassFair Value at December 31, 2019 (in thousands)Valuation TechniqueUnobservable InputRange
(Weighted Average) (1)
Yield1.71% - 100.00% (5.99%)
Non-Agency RMBS$625,537 Discounted Cash FlowProjected Collateral Prepayments0.00% - 100.00% (14.60%)
Projected Collateral Losses0.00% - 100.00% (2.93%)
Projected Collateral Severities0.00% - 100.00% (21.37%)
$4,578 Consensus PricingOffered Quotes100.00 - 100.00 (100.00)
Yield27.50% - 27.50% (27.50%)
Non-Agency RMBS Interest Only$1,074 Discounted Cash FlowProjected Collateral Prepayments18.00% - 18.00% (18.00%)
Projected Collateral Losses2.00% - 2.00% (2.00%)
Projected Collateral Severities35.00% - 35.00% (35.00%)
Yield0.00% - 13.89% (6.33%)
CMBS$366,566 Discounted Cash FlowProjected Collateral Prepayments0.00% - 0.00% (0.00%)
Projected Collateral Losses0.00% - 0.00% (0.00%)
Projected Collateral Severities0.00% - 0.00% (0.00%)
Yield-2.57%10.95% - 9.86% (4.19%)
CMBS Interest Only$47,992 Discounted Cash FlowProjected Collateral Prepayments99.00% - 100.00% (99.93%)
Projected Collateral Losses0.00% - 0.00% (0.00%)
Projected Collateral Severities0.00% - 0.00% (0.00%)
Yield4.00% - 8.25% (4.81%)
Residential Mortgage Loans$364,107 Discounted Cash FlowProjected Collateral Prepayments4.81% - 9.04% (7.78%)
Projected Collateral Losses1.64% - 4.94% (2.36%)
Projected Collateral Severities-7.32% - 36.91% (23.15%)
$53,678 Recent TransactionCostN/A
Yield6.16% - 10.76% (6.86%39.54% (14.09%)
Commercial Loans$60,164125,508 Discounted Cash FlowCredit Spread4401,001 bps - 9003,304 bps (510(1,279 bps)
Recovery Percentage (2)100.00% - 100.00% (100.00%)
$
98,522 Loan-to-ValueConsensus PricingOffered Quotes100.0043.60% - 100.00 (100.00)97.50% (62.04%)
Excess Mortgage Servicing RightsYield8.50%9.00% - 11.60% (9.20%9.70% (9.08%)
$17,6333,073 Discounted Cash FlowProjected Collateral Prepayments9.35%11.11% - 16.90% (12.36%15.51% (12.49%)
$14285 Consensus PricingOffered Quotes0.010.25 - 0.40 (0.40)0.25 (0.25)
AG Arc$28,54645,341 Comparable MultipleBook Value Multiple1.0x1.05x - 1.0x (1.0x)1.05x (1.05x)
Liability ClassFair Value at December 31, 20192020 (in thousands)Valuation TechniqueUnobservable InputRange
(Weighted Average)
Yield2.98%2.45% - 4.70% (3.54%5.50% (2.98%)
Securitized debt$(72,415)(355,159)Discounted Cash FlowProjected Collateral Prepayments10.00%5.90% - 10.04% (10.04%8.20% (7.17%)
Projected Collateral Losses2.04%1.94% - 3.50% (2.19%3.46% (2.62%)
Projected Collateral Severities20.13%12.70% - 45.00% (22.61%20.03% (16.75%)
(1) Amounts are weighted based on fair values.value.
(2) Represents the proportion of the principal expected to be collected relative to the loan balances as of December 31, 2019.2020.
 
As further described above, fair valuesvalue for the Company’s securities portfolio are based upon prices obtained from third-party pricing services. Broker quotations may also be used. The significant unobservable inputs used in the fair value measurement of the Company’s securities are yields, prepayment rates, probability of default, and loss severity in the event of default. Significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for prepayment rates.
 
Also, as described above, valuation of the Company’s loan portfolio is determined by the Manager using third-party pricing services where available, specialized third party valuation analyses from third-party pricing service providers, or model-based pricing. The evaluation considers the underlying characteristics of each loan, which are observable inputs, including: coupon, maturity date, loan age, reset date, collateral type, periodic and life cap, geography, and prepayment speeds. TheseThe valuations of commercial loans also require significant judgments, which include assumptions regarding capitalization rates, re-performance rates, leasing, creditworthiness of major tenants, occupancy rates, availability of financing, exit plan, loan sponsorship, actions of other lenders, and other factors deemed
35
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
necessary by management. Changes in the market environment and other events that may occur over the life of our investments may cause the gains or losses ultimately realized on these investments to be different than the valuations currently estimated. If applicable, analyses provided by valuation service providers are reviewed and considered by the Manager.

31
7.
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
6. Financing arrangements

The following table presents a summary of the Company's financing arrangements as of June 30, 20202021 and December 31, 2019 (in2020 ($ in thousands).

June 30, 2020December 31, 2019
Repurchase agreements$188,286  $3,121,966  
Revolving facilities (1)62,812  111,502  
Financing arrangements, net$251,098  $3,233,468  
June 30, 2021December 31, 2020
Weighted AverageCollateral (1)(2)(3)
Carrying ValueStated MaturityFunding CostLife (Years)Amortized Cost BasisFair ValueCarrying Value
Repurchase Agreements
Residential Mortgage Loans (4)(5)$408,656 Sept 2021 - Jan 20222.56 %0.53$491,795 $502,956 $25,590 
Agency RMBS (6)752,723 July 20210.10 %0.04694,925 794,643 435,893 
Non-Agency RMBS1,621 July 2021 - Oct 20211.97 %0.083,091 3,454 14,550 
CMBS18,518 July 20211.59 %0.0235,452 31,614 24,881 
Total Repurchase Agreements$1,181,518 0.98 %0.21$1,225,263 $1,332,667 $500,914 
Revolving Facilities
Commercial Loans (7)(8)(9)$25,950 Aug 20233.16 %2.11$50,663 $43,870 $63,133 
Total Financing Arrangements$1,207,468 1.03 %0.25$1,275,926 $1,376,537 $564,047 
(1)IncreasingThe Company also had $0.3 million of cash pledged under repurchase agreements as of June 30, 2021.
(2)Under the terms of the Company’s financing agreements, the Company's financing counterparties may, in certain cases, sell or re-hypothecate the pledged collateral.
(3)Amounts pledged as collateral under Residential Mortgage Loans include certain of the Company's retained interests in securitizations. Refer to Note 3 for more information on the Residential Loan VIEs.
(4)The Company's Residential Mortgage Loan financing arrangements include a maximum uncommitted borrowing capacity underof $800 million on facilities used to finance Non-QM Loans. Subsequent to quarter end, the Company amended certain financing arrangements to increase the maximum uncommitted borrowing capacity used to finance Non-QM Loans by $300 million.
(5)The funding cost includes deferred financing costs. The stated rate on the Residential Mortgage Loans repurchase agreements was 2.53% as of June 30, 2021.
(6)As of June 30, 2021, repurchase agreements on Agency RMBS includes repurchase agreements and collateral on unsettled Agency RMBS sales.
(7)The revolving facility is interest only until maturity.
(8)The funding cost includes deferred financing costs. The stated rate on the Commercial Loans revolving facility was 2.11% as of June 30, 2021.
(9)The Company's commercial loan revolving facilities requires consentfacility includes a maximum uncommitted borrowing capacity of the lenders.$100 million.

DuringThe following table presents contractual maturity information about the six months endedCompany's borrowings under repurchase agreements and revolving facilities as of June 30, 2020, the Company completed the sale of its 30 Year Fixed Rate Agency securities and sold additional assets2021 ($ in an effort to satisfy outstanding financial obligations, to weather the economic and market instability and to reduce its exposure to various financing counterparties.thousands).
Within 30 DaysOver 30 Days to 3 MonthsOver 3 Months to 12 MonthsOver 12 MonthsTotal
Repurchase Agreements
Residential Mortgage Loans$0 $42,158 $366,498 $0 $408,656 
Agency RMBS752,723 0 0 0 752,723 
Non-Agency RMBS1,282 0 339 0 1,621 
CMBS18,518 0 0 0 18,518 
Total Repurchase Agreements$772,523 $42,158 $366,837 $0 $1,181,518 
Revolving Facilities
Commercial Loans$0 $0 $0 $25,950 $25,950 
Total Financing Arrangements$772,523 $42,158 $366,837 $25,950 $1,207,468 

In March 2020, the Company began engaging in discussions with its financing counterparties with regard to entering into forbearance agreements pursuant to which each participating counterparty would agree to forbear from exercising its rights and remedies with respect to an event of default under the applicable financing arrangement for an agreed-upon period. Pursuant to the terms of the Forbearance Agreement, the Participating Counterparties agreed to forbear from exercising any of their rights and remedies in respect of events of default and any and all other defaults under the applicable financing arrangement with the Company for the duration of the Forbearance Period.
32

As of March 31, 2020, the Company had received notifications from several of its financing counterparties of alleged events of default under their repurchase agreements, and of those counterparties' intentions to accelerate the Company's performance obligations under the relevant agreements due to the Company's inability to meet certain margin calls as a result of market disruptions created by the COVID-19 pandemic. As discussed above, until a formal agreement was reached, the Company negotiated with its financing counterparties regarding the lenders' forbearance from exercising their rights and remedies under their applicable repurchase agreements. While as of March 31, 2020 certain lenders had accelerated the Company's obligations under their applicable repurchase agreements, upon execution of the Reinstatement Agreement, the terms of the Bilateral Agreements were reinstated, including the maturity dates of the repurchase agreements.

As described above, on June 10, 2020, the Company and the Participating Counterparties entered into a Reinstatement Agreement, pursuant to which the parties agreed to terminate the Forbearance Agreement and each Participating Counterparty agreed to permanently waive all existing and prior events of default under its financing agreements with the Company and to reinstate each Bilateral Agreement, as it may be amended by agreement between the Participating Counterparty and the Company. As of June 30, 2020, the Company had met all margin calls related to its repurchase agreements. Refer to Note 13 for more information on outstanding deficiencies. For additional information related to the Forbearance Agreement and the Reinstatement Agreement, see Note 2 under "Financing Arrangements."

Repurchase agreements
A vast majority of the Company's financing arrangements have historically been effectuated through repurchase agreements. The Company pledges certain real estate securities and loans as collateral under repurchase agreements with financial institutions, the terms and conditions of which are negotiated on a transaction-by-transaction basis. Repurchase agreements involve the sale and a simultaneous agreement to repurchase the transferred assets or similar assets at a future date. The amount borrowed generally is equal to the fair value of the assets pledged less an agreed-upon discount, referred to as a "haircut." The Company calculates haircuts disclosed in the tables below by dividing the equity on each borrowing by the current fair value of each investment. Repurchase agreements are accounted for as financings and require the repurchase of the transferred assets at the end of each agreement’s term, typically 30 to 90 days. The carrying amount of the Company’s repurchase agreements approximates fair value due to their short-term maturities or floating rate coupons. If the Company maintains the beneficial interest in the specific assets pledged during the term of the borrowing, it receives the related principal and interest payments. If the Company does not maintain the beneficial interest in the specific assets pledged during the term of the borrowing, it will
36
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 20202021
have the related principal and interest payments remitted to it by the lender. Interest rates on these borrowings are fixed based on prevailing rates corresponding to the terms of the borrowings, and interest is paid at the termination of the borrowing at which time the Company may enter into a new borrowing arrangement at prevailing market rates with the same counterparty or repay that counterparty and negotiate financing with a different counterparty. If the fair value of pledged assets declines due to changes in market conditions or the publishing of monthly security paydown factors, lenders typically would require the Company to post additional securities as collateral, pay down borrowings or establish cash margin accounts with the counterparties in order to re-establish the agreed-upon collateral requirements, referred to as margin calls. The fair value of financial instruments pledged as collateral on the Company’s repurchase agreements disclosed in the tables below represent the Company’s fair value of such instruments which may differ from the fair value assigned to the collateral by its counterparties. Counterparties

The Company maintains a levelhad exposure to 5 counterparties as of liquidity in order to meet these obligations. Under the terms of the Company’s master repurchase agreements, the counterparties may, in certain cases, sell or re-hypothecate the pledged collateral. If the fair value of pledged assets increases due to changes in market conditions, counterparties may be required to return collateral to us in the form of securities or cash or post additional collateral to us.June 30, 2021 and December 31, 2020.

The following table presents a summary of financialtables present information regarding the Company’s repurchase agreements and corresponding real estate securities pledged as collateral as of June 30, 2020 ($ in thousands):
 Repurchase AgreementsReal Estate Securities Pledged
Repurchase Agreements Maturing Within:Balance
Weighted 
Average Rate
Weighted 
Average Haircut
Fair Value 
Pledged
Amortized 
Cost
Accrued 
Interest
30 days or less$55,658  3.43 %46.9 %$107,533  $125,911  $570  
61-90 days1,704  4.50 %35.0 %2,674  2,553  2  
Total / Weighted Average$57,362  3.46 %46.5 %$110,207  $128,464  $572  
The following table presents a summary of financial information regarding the Company’s repurchase agreements and corresponding real estate securities pledged as collateral as of December 31, 2019 ($ in thousands):
 Repurchase AgreementsReal Estate Securities Pledged
Repurchase Agreements Maturing Within:Balance
Weighted 
Average Rate
Weighted 
Average Haircut
Fair Value 
Pledged
Amortized 
Cost
Accrued 
Interest
30 days or less$1,550,508  2.33 %9.0 %$1,728,837  $1,660,649  $5,402  
31-60 days1,362,121  2.13 %7.0 %1,501,850  1,453,257  5,191  
61-90 days71,753  2.99 %23.5 %93,957  92,901  245  
Greater than 180 days2,973  3.79 %23.7 %4,039  3,690  3  
Total / Weighted Average$2,987,355  2.25 %8.5 %$3,328,683  $3,210,497  $10,841  
The following table presents a summary of financial information regarding the Company’s repurchase agreements and corresponding residential mortgage loans pledged as collateral as of June 30, 2020 ($ in thousands):

 Repurchase AgreementsResidential Mortgage Loans Pledged
Repurchase Agreements Maturing Within:Balance
Weighted 
Average
Rate
Weighted Average
Funding Cost
Weighted 
Average
Haircut
Fair Value 
Pledged
Amortized 
Cost
Accrued 
Interest
61-90 days$9,392  4.65 %4.65 %61.2 %$24,206  $23,441  $766  
Greater than 180 days118,072  3.68 %4.10 %19.4 %147,110  164,348  477  
Total / Weighted Average$127,464  3.76 %4.14 %22.4 %$171,316  $187,789  $1,243  

The following table presents a summary of financial information regarding the Company’s repurchase agreements and corresponding residential mortgage loans pledged as collateral as of December 31, 2019 ($ in thousands):

 Repurchase AgreementsResidential Mortgage Loans Pledged
Repurchase Agreements Maturing Within:Balance
Weighted 
Average
Rate
Weighted Average
Funding Cost
Weighted 
Average
Haircut
Fair Value 
Pledged
Amortized 
Cost
Accrued 
Interest
31-60 days$24,584  3.14 %3.14 %33.7 %$37,546  $25,192  $377  
Greater than 180 days107,010  3.61 %3.80 %19.3 %133,678  135,409  443  
Total / Weighted Average$131,594  3.53 %3.68 %22.0 %$171,224  $160,601  $820  
37
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020

The following table presents a summary of financial information regarding the Company’s repurchase agreements and corresponding commercial loans pledged as collateral as of June 30, 2020 ($ in thousands):

 Repurchase AgreementsCommercial Loans Pledged
Repurchase Agreements Maturing Within:Balance
Weighted 
Average
Rate
Weighted Average
Funding Cost
Weighted 
Average
Haircut
Fair Value 
Pledged
Amortized 
Cost
Accrued 
Interest
Greater than 180 days$3,460  4.75 %6.00 %36.4 %$5,441  $6,291  $30  

The following table presents a summary of financial information regarding the Company’s repurchase agreements and corresponding commercial loans pledged as collateral as of December 31, 2019 ($ in thousands):

 Repurchase AgreementsCommercial Loans Pledged
Repurchase Agreements Maturing Within:Balance
Weighted 
Average
Rate
Weighted Average
Funding Cost
Weighted 
Average
Haircut
Fair Value 
Pledged
Amortized 
Cost
Accrued 
Interest
Greater than 180 days$3,017  4.46 %5.89 %35.4 %$4,674  $4,674  $26  

Although repurchase agreements are committed borrowings until maturity, the lender retains the right to mark the underlying collateral to fair value. A reduction in the value of pledged assets resulting from changes in market conditions or factor changes would require the Company to provide additional collateral or cash to fund margin calls. See Note 8 for details on collateral posted/received against certain derivatives. As of June 30, 2020, the Company pledged cash of $1.0 million as collateral for clearing trades. The following table presents information with respect to the Company’s posting of collateral under repurchase agreements on June 30, 20202021 and December 31, 2019, broken out by investment type (in thousands):
 June 30, 2020December 31, 2019
Fair Value of investments pledged as collateral under repurchase agreements  
Agency RMBS$—  $2,231,933  
Non-Agency RMBS36,913  682,828  
CMBS73,294  413,922  
Residential Mortgage Loans171,316  171,224  
Commercial Loans5,441  4,674  
Cash pledged (i.e., restricted cash) under repurchase agreements48  11,565  
Total collateral pledged under repurchase agreements$287,012  $3,516,146  
As of June 30, 2020, the Company had 0 investments posted to it under repurchase agreements. As of December 31, 2019, the Company had fair value of $1.1 million of U.S. Treasury Securities posted to it under repurchase agreements.
The following table presents information with respect to the Company’s total borrowings under repurchase agreements on June 30, 2020 and December 31, 2019, broken out by investment type (in thousands):
 June 30, 2020December 31, 2019
Repurchase agreements secured by investments:  
Agency RMBS$—  $2,109,278  
Non-Agency RMBS20,498  565,450  
CMBS36,864  312,627  
Residential Mortgage Loans127,464  131,594  
Commercial Loans3,460  3,017  
Gross Liability for repurchase agreements$188,286  $3,121,966  

38
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
The following table presents both gross information and net information about repurchase agreements eligible for offset in the consolidated balance sheets as of June 30, 2020 and December 31, 2019 (in thousands):
    
Gross Amounts Not Offset in the
Consolidated Balance Sheets
 
As of
Gross Amounts of
Recognized
Liabilities
Gross Amounts Offset in the Consolidated 
Balance Sheets
Net Amounts of 
Liabilities Presented in the 
Consolidated Balance Sheets
Financial
Instruments
Posted
Cash Collateral
Posted
Net Amount
June 30, 2020$188,286  $—  $188,286  $188,286  $—  $—  
December 31, 20193,121,966  —  3,121,966  3,121,966  —  —  
Revolving facilities

The following table presents information regarding the Company's revolving facilities, excluding facilities within investments in debt and equity of affiliates, as of June 30, 2020 and December 31, 2019 ($ in thousands).

June 30, 2020December 31, 2019
Facility (1)(2)(3)InvestmentMaturity DateRateFunding CostBalanceNet Carrying Value of Assets Pledged as CollateralMaximum Aggregate Borrowing CapacityRateFunding CostBalanceNet Carrying Value of Assets Pledged as Collateral
Revolving facility BResidential mortgage loansJune 28, 2021— %— %$—  $—  $—  3.80 %3.80 %$21,546  $27,476  
Revolving facility CCommercial loansAugust 10, 20232.33 %2.68 %62,812  99,660  100,000  3.85 %4.01 %89,956  132,856  
Total revolving facilities$62,812  $99,660  $100,000  $111,502  $160,332  
(1)All revolving facilities listed above are interest only until maturity.
(2)Under the terms of the Company’s financing agreements, the Company's financial counterparties may, in certain cases, sell or re-hypothecate the pledged collateral.
(3)Increasing the Company's borrowing capacity under this facility requires consent of the lender.
In June 2018, AG MIT WFB1 2014 LLC ("AG MIT WFB1"), a subsidiary of the Company, entered into Amendments Seven and Eight of the Master Repurchase Agreement and Securities Contract (as amended, the "WFB1 Repurchase Agreement" or "Revolving facility B") with Wells Fargo to finance the ownership and acquisition of certain pools of residential mortgage loans. In July 2019, AG MIT WFB1 entered into the Third Amended and Restated Fee and Pricing Letter, which provides for a funding period ending June 26, 2020 and a facility termination date of June 28, 2021. During the second quarter of 2020, Revolving facility B was paid off.

In August 2018, AG MIT CREL II, LLC, a subsidiary of the Company, entered into a Master Repurchase Agreement with JP Morgan (the "JPM Repurchase Agreement" or "Revolving facility C") to finance certain commercial loans. The JPM Repurchase Agreement contains representations, warranties, covenants, including financial covenants, events of default and indemnities that are customary for agreements of this type.

Financing arrangements

The Company continues to take steps to manage and de-lever its portfolio. Through asset sales and related repurchase financing paydowns and pay-offs, the Company has reduced its exposure to various counterparties, bringing the total number of counterparties with debt outstanding down from 30 as of December 31, 2019 to 6 as of June 30, 2020.
39
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020

The following table presents information at June 30, 2020 with respect to each counterparty that provides the Company with financing for which the Company had greater than 5% of its stockholders’ equity at risk, excluding stockholders’ equity at risk under financing through affiliated entities ($ in thousands).

June 30, 2021
CounterpartyStockholders’ Equity
at Risk		Weighted Average
Maturity (days)		Percentage of
Stockholders’ Equity
Barclays Capital Inc.$105,759 10322.7 %
CounterpartyStockholders’ Equity
at Risk		Weighted Average
Maturity (days)		Percentage of
Stockholders’ Equity
Credit Suisse AG, Cayman Islands Branch$50,756  2413.9 %
Barclays Bank PLC28,966  3297.9 %
December 31, 2020
CounterpartyStockholders’ Equity
at Risk		Weighted Average
Maturity (days)		Percentage of
Stockholders’ Equity
BofA Securities, Inc.$28,091 196.9 %
Credit Suisse AG, Cayman Islands Branch26,305 356.4 %
Barclays Capital Inc.24,890 156.1 %


The following table presents information at December 31, 2019 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).
CounterpartyStockholders’ Equity
at Risk		Weighted Average
Maturity (days)		Percentage of
Stockholders’ Equity
Barclays Capital Inc.$77,334  2779.1 %
Citigroup Global Markets Inc.50,263  225.9 %
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 triggerstriggers. 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 otheris otherwise found to be in default under the terms of such agreements, the counterparty has the right to accelerate amounts due under the associated agreement. Financings pursuant to repurchase agreements and revolving facilities are generally recourse to the Company. As of June 30, 2021, the Company is in compliance with all of its financial ratios.covenants.

8.7. 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 June 30, 20202021 and December 31, 20192020 (in thousands):

June 30, 2020December 31, 2019June 30, 2021December 31, 2020
Other assetsOther assetsOther assets
Interest receivableInterest receivable$2,815  $13,548  Interest receivable$6,525 $2,962 
Derivative assets, at fair valueDerivative assets, at fair value84  2,282  Derivative assets, at fair value89 0 
Other assetsOther assets4,149  4,378  Other assets3,703 5,538 
Due from brokerDue from broker4,115  1,697  Due from broker1,816 907 
Total Other assetsTotal Other assets$11,163  $21,905  Total Other assets$12,133 $9,407 
Other liabilitiesOther liabilitiesOther liabilities
Interest payableInterest payable$810  $10,941  Interest payable$976 $853 
Derivative liabilities, at fair valueDerivative liabilities, at fair value—  411  Derivative liabilities, at fair value310 68 
Due to affiliates (1)Due to affiliates (1)3,326 14,041 
Accrued expensesAccrued expenses2,266 2,521 
Accrued expenses2,734  6,175  
Deficiencies payable (1)2,200  —  
Taxes payable—  815  
Due to brokerDue to broker2,702  1,107  Due to broker2,140 1,272 
Total Other liabilitiesTotal Other liabilities$8,446  $19,449  Total Other liabilities$9,018 $18,755 
(1)Refer to Note 1310 for more information.
4033

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 20202021

Derivative assets and liabilitiesDerivatives
The Company’s derivatives may include interest rate swaps ("swaps"), TBAs, and swaption contracts. They may also include Eurodollar Futures, U.S. Treasury Futures, British Pound Futures, and Euro Futures (collectively, "Futures"). Derivatives have not been designated as hedging instruments. The Company uses these derivatives and may also utilize other instruments to manage interest rate risk, including long and short positions in U.S. Treasury securities. The Company uses foreign currency forward contracts to manage foreign currency risk and to protect the value or to fix the amount of certain investments or cash flows in terms of U.S. dollars.
During the six months ended June 30, 2020, in an effort to prudently manage its portfolio through unprecedented market volatility resulting from the COVID-19 pandemic and preserve long-term stockholder value, the Company sold its 30 Year Fixed Rate Agency securities, its most interest rate sensitive assets.

The following table presents the fair value of the Company's derivatives and other instruments and their balance sheet location atas of June 30, 20202021 and December 31, 20192020 (in thousands).

Derivatives and Other Instruments (1)DesignationBalance Sheet 
Location		June 30, 2020December 31, 2019
Pay Fix/Receive Float Interest Rate Swap Agreements (2)Non-HedgeOther assets$— $199 
Pay Fix/Receive Float Interest Rate Swap Agreements (2)Non-HedgeOther liabilities— (411)
Payer SwaptionsNon-HedgeOther assets— 2,083 
Short positions on British Pound FuturesNon-HedgeOther assets84 — 
Derivatives and Other Instruments (1)DesignationBalance Sheet 
Location		June 30, 2021December 31, 2020
Pay Fix/Receive Float Interest Rate Swap Agreements (1)Non-HedgeOther liabilities$(289)$(68)
TBAsNon-HedgeOther assets89 0 
TBAsNon-HedgeOther liabilities(21)0 
(1)As of June 30, 2020, the Company did not apply a fair value reduction on its assets or liabilities related to variation margin. As of December 31, 2019, the Company applied a fair value reduction of $19.7 thousand and $0.1 million to its Euro Futures liabilities and British Pound Futures liabilities, respectively, related to variation margin.
(2)The Company did not hold any interest rate swap assets or liabilities as of June 30, 2020. As of December 31, 2019,2021, the Company applied a reduction in fair value of $10.8$13.3 million and $2.2$1.0 million to its interest rate swap assets and liabilities, respectively, related to variation margin. margin with a corresponding increase or decrease in restricted cash, respectively. As of December 31, 2020, the Company applied a reduction in fair value of $1.4 million and $0.2 million to its interest rate swap assets and liabilities, respectively, related to variation margin with a corresponding increase or decrease in restricted cash, respectively.
 
The following table summarizes information related to derivatives and other instruments (in thousands):

Notional amount of non-hedge derivatives and other instruments:Notional amount of non-hedge derivatives and other instruments:Notional CurrencyJune 30, 2020December 31, 2019Notional amount of non-hedge derivatives and other instruments:Notional CurrencyJune 30, 2021December 31, 2020
Pay Fix/Receive Float Interest Rate Swap AgreementsPay Fix/Receive Float Interest Rate Swap AgreementsUSD$—  $1,848,750  Pay Fix/Receive Float Interest Rate Swap AgreementsUSD$806,000 $417,000 
Payer SwaptionsUSD350,000  650,000  
Short TBAsShort TBAsUSD(130,000)0 
Short positions on British Pound Futures (1)Short positions on British Pound Futures (1)GBP3,250  6,563  Short positions on British Pound Futures (1)GBP0 3,313 
Short positions on Euro Futures (2)EUR—  1,500  
(1)Each British Pound Future contract embodies £62,500 of notional value.
(2)Each Euro Future contract embodies €125,000 of notional value.

41
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
The following table summarizes gains/(losses) related to derivatives and other instruments (in thousands):
Three Months EndedSix Months Ended
June 30, 2021June 30, 2020June 30, 2021June 30, 2020
Included within Unrealized gain/(loss), net
Interest Rate Swaps$(15,865)$0 $12,555 $(11,588)
Swaptions0 (5)0 (697)
British Pound Futures0 239 64 186 
Euro Futures0 (28)0 20 
TBAs67 (392)67 0 
(15,798)(186)12,686 (12,079)
Included within Net realized gain/(loss)
Interest Rate Swaps897 0 897 (65,368)
Swaptions0 0 0 (1,386)
British Pound Futures0 (150)(165)514 
Euro Futures0 66 0 68 
TBAs0 392 0 4,610 
897 308 732 (61,562)
Total income/(loss)$(14,901)$122 $13,418 $(73,641)
Three Months EndedSix Months Ended
June 30, 2020June 30, 2019June 30, 2020June 30, 2019
Included within Unrealized gain/(loss) on derivative and other instruments, net
Interest Rate Swaps$—  $(9,102) $(11,588) $(19,764) 
Eurodollar Futures—  (266) —  768  
Swaptions(5) (256) (697) (774) 
U.S. Treasury Futures—  1  —  (144) 
British Pound Futures239  —  186  —  
Euro Futures(28) —  20  —  
TBAs(392) (452) —  441  
U.S. Treasuries—  —  —  82  
(186) (10,075) (12,079) (19,391) 
Included within Net realized gain/(loss)
Interest Rate Swaps—  (23,538) (65,368) (41,080) 
Eurodollar Futures—  11  —  (1,229) 
Swaptions—  (227) (1,386) (861) 
U.S. Treasury Futures—  302  —  371  
British Pound Futures(150) —  514  —  
Euro Futures66  —  68  —  
TBAs392  1,957  4,610  1,601  
U.S. Treasuries—  (176) —  (249) 
308  (21,671) (61,562) (41,447) 
Total income/(loss)$122  $(31,746) $(73,641) $(60,838) 

The following table presents both gross information and net information about derivativeDerivative and other instruments eligible for offset inare presented gross on the consolidated balance sheets as of June 30, 2020 (in thousands): 
    
Gross Amounts Not Offset in the
Consolidated Balance Sheet
 
Description
Gross Amounts of
Recognized Assets 
(Liabilities)
Gross Amounts 
Offset in the 
Consolidated
Balance Sheets
Net Amounts of 
Assets (Liabilities) 
Presented in the
Consolidated 
Balance Sheets
Financial
Instruments
(Posted)/Received
Cash Collateral
(Posted)/Received
Net Amount
Derivative Assets      
British Pound Futures$84  $—  $84  $—  $—  $84  

The following table presents both gross information2021 and net information about derivative instruments eligible for offset in the
42
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
consolidated balance sheets as of December 31, 2019 (in thousands):
    
Gross Amounts Not Offset in the
Consolidated Balance Sheet
 
Description (1)Gross Amounts of
Recognized Assets 
(Liabilities)		Gross Amounts 
Offset in the 
Consolidated
Balance Sheets
Net Amounts of 
Assets (Liabilities) 
Presented in the
Consolidated 
Balance Sheets
Financial
Instruments
(Posted)/Received		Cash Collateral
(Posted)/Received		Net Amount
Derivative Assets (2)
Interest Rate Swaps$1,980  $—  $1,980  $—  $1  $1,979  
Interest Rate Swaptions2,083  —  2,083  —  —  2,083  
Total Derivative Assets$4,063  $—  $4,063  $—  $1  $4,062  
Derivative Liabilities (3)
Interest Rate Swaps$977  $—  $977  $—  $1  $976  
Total Derivative Liabilities$977  $—  $977  $—  $1  $976  
(1)2020, if applicable. The Company applied a reduction in fair value of $10.8 million and $2.2 million to its interest rate swap assets and liabilities, respectively, related to variation margin. The Company applied a reduction in fair value of $19.7 thousand and $0.1 million to its Euro Futures liabilities and British Pound Futures liabilities, respectively, related to variation margin.
(2)Included in Other assets on the consolidated balance sheet is $4.1 million less accrued interest of $(1.8) million for a total of $2.3 million.
(3)Included in Other liabilities on the consolidated balance sheet is $1.0 million less accrued interest of $(1.4) million for a total of $(0.4) million.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
34

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
the derivatives involved. The posting of collateral is generally bilateral, meaning that if the fair value of the Company’s derivatives increases, its counterparty will post collateral to it. As of December 31, 2019,June 30, 2021, the Company's restricted cash balance included $21.9 million of collateral related to certain derivatives, of which $9.6 million represents cash collateral posted by the Company pledged real estate securities with a fair value of $3.0 million and cash of $32.1 million as collateral against certain derivatives. Of the $32.1 million of cash pledged as collateral against certain derivatives, $8.5$12.3 million represents amounts related to variation margin. The Company’s counterpartiesAs of December 31, 2020, the Company's restricted cash balance included $10.8 million of collateral related to certain derivatives, of which $9.7 million represents cash collateral posted a de minimis amount of cash as collateral against certain derivatives.by the Company and $1.1 million represents amounts related to variation margin.

Interest rate swaps
 
To help mitigate exposure to increases in interest rates, the Company may use currently-paying and forward-starting, one- or three-month LIBOR-indexed, pay-fixed, receive-variable, interest rate swap agreements. This arrangement hedges the Company's exposure to higher interest rates because the variable-rate payments received on the swap agreements largely offset additional interest accruing on the related borrowings due to the higher interest rate, leaving the fixed-rate payments to be paid on the swap agreements as the Company’s effective borrowing rate, subject to certain adjustments including changes in spreads between variable rates on the swap agreements and actual borrowing rates.

During the six months endedAs of June 30, 2020,2021, the Company sold its interest rate sensitive assets. As a result, the Company did 0t hold anyCompany’s interest rate swap positions consisted of pay-fixed interest rate swaps. The following table presents information about the Company’s interest rate swaps as of June 30, 2020.2021 ($ in thousands):
43
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
MaturityNotional AmountWeighted Average
Pay-Fixed Rate		Weighted Average
Receive-Variable Rate		Weighted Average
Years to Maturity
2025$296,000 0.39 %0.18 %4.26
2026202,000 0.76 %0.16 %4.75
202895,000 1.02 %0.16 %6.62
203086,000 0.76 %0.17 %9.27
2031112,000 1.23 %0.17 %9.59
205115,000 1.96 %0.19 %29.80
Total/Wtd Avg$806,000 0.74 %0.17 %6.41
 
As of December 31, 2019,2020, the Company’s interest rate swap positions consisted of pay-fixed interest rate swaps. The following table presents information about the Company’s interest rate swaps as of December 31, 20192020 ($ in thousands):
MaturityNotional AmountWeighted Average
Pay-Fixed Rate		Weighted Average
Receive-Variable Rate		Weighted Average
Years to Maturity
2020$105,000  1.54 %1.91 %0.20
2022743,000  1.64 %1.91 %2.68
20235,750  3.19 %1.91 %3.85
2024650,000  1.52 %1.90 %4.80
2026180,000  1.50 %1.89 %6.70
2029165,000  1.77 %1.94 %9.85
Total/Wtd Avg$1,848,750  1.60 %1.91 %4.32
MaturityNotional AmountWeighted Average
Pay-Fixed Rate		Weighted Average
Receive-Variable Rate		Weighted Average
Years to Maturity
2025$296,000 0.39 %0.23 %4.76
202620,000 0.45 %0.24 %5.01
203086,000 0.76 %0.23 %9.77
203115,000 0.95 %0.24 %10.01
Total/Wtd Avg$417,000 0.49 %0.23 %5.99
 
35

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
TBAs
 
The Company did not hold any TBA positions for the three months ended June 30, 2020. The following tables present information about the Company’s TBAs for the three months ended June 30, 20192021 and the six months ended June 30, 2021 and June 30, 2020 (in thousands): 
For the Three Months Ended:
Beginning
Notional
Amount
Buys or CoversSales or Shorts
Ending Net Notional
Amount
Net Fair Value as of
Period End
Net Receivable/(Payable)
from/to Broker
Derivative
Asset
Derivative
Liability
June 30, 2021TBAs - Short$0 $0 $(130,000)$(130,000)$(134,171)$134,239 $89 $(21)
For the Six Months Ended:
Beginning
Notional
Amount
Buys or CoversSales or Shorts
Ending Net Notional
Amount
Net Fair Value as of
Period End
Net Receivable/(Payable)
from/to Broker
Derivative
Asset
Derivative
Liability
June 30, 2021TBAs - Short$0 $0 $(130,000)$(130,000)$(134,171)$134,239 $89 $(21)
June 30, 2020TBAs - Long0 728,000 (728,000)0 0 0 0 0 

8. Earnings per share

Following the close of business on July 22, 2021, the Company effected a one-for-three reverse stock split of its outstanding shares of common stock. All per share amounts and common shares outstanding for all periods presented in the unaudited consolidated financial statements have been adjusted on a retroactive basis to reflect the Company’s one-for-three reverse stock split. Refer to Note 2 and Note 11 for additional information.

The following table presents a reconciliation of the earnings and shares used in calculating basic and diluted earnings per share for the three and six months ended June 30, 2021 and 2020.
(in thousands, except per share data)Three Months EndedSix Months Ended
June 30, 2021June 30, 2020June 30, 2021June 30, 2020
Numerator:    
Net Income/(Loss) from Continuing Operations$15,493 $2,700 $58,742 $(482,317)
Gain on Exchange Offers, net (Note 11)114 0 472 0 
Dividends on preferred stock(4,689)(5,667)(9,613)(11,334)
Net income/(loss) from continuing operations available to common stockholders$10,918 $(2,967)$49,601 $(493,651)
Net Income/(Loss) from Discontinued Operations0 361 0 361 
Net income/(loss) available to common stockholders$10,918 $(2,606)$49,601 $(493,290)
Denominator:
Basic weighted average common shares outstanding15,595 10,953 14,860 10,935 
Diluted weighted average common shares outstanding (1)15,595 10,953 14,860 10,935 
Earnings/(Loss) Per Share - Basic (2)
Continuing Operations$0.70 $(0.27)$3.34 $(45.14)
Discontinued Operations0 0.03 0 0.03 
Total Earnings/(Loss) Per Share of Common Stock (2)$0.70 $(0.24)$3.34 $(45.11)
Earnings/(Loss) Per Share - Diluted (2)
Continuing Operations$0.70 $(0.27)$3.34 $(45.14)
Discontinued Operations0 0.03 0 0.03 
Total Earnings/(Loss) Per Share of Common Stock (2)$0.70 $(0.24)$3.34 $(45.11)
36

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
(1) Manager restricted stock units of 5.5 thousand and 5.8 thousand were excluded from the computation of diluted earnings per share because its effect would be anti-dilutive for the three and six months ended June 30, 2020, and June 30, 2019 (in thousands):
For the Three Months Ended:
Beginning
Notional
Amount
Buys or CoversSales or Shorts
Ending Net Notional
Amount
Net Fair Value as of
Period End
Net Receivable/(Payable)
from/to Broker
Derivative
Asset
Derivative
Liability
June 30, 2019TBAs - Long$125,000  $737,500  $(737,500) $125,000  $126,064  $(125,612) $625  $(173) 
TBAs - Short$—  $—  $(100,000) $(100,000) $(102,242) $102,230  $—  $(12) 
respectively.

For the Six Months Ended:
Beginning
Notional
Amount
Buys or CoversSales or Shorts
Ending Net Notional
Amount
Net Fair Value as of
Period End
Net Receivable/(Payable)
from/to Broker
Derivative
Asset
Derivative
Liability
June 30, 2020TBAs - Long$—  $728,000  $(728,000) $—  $—  $—  $—  $—  
June 30, 2019TBAs - Long$—  $1,394,500  $(1,269,500) $125,000  $126,064  $(125,612) $625  $(173) 
TBAs - Short$—  $185,000  $(285,000) $(100,000) $(102,242) $102,230  $—  $(12) 

9. Earnings per share
Basic earnings per share ("EPS") is calculated by dividing net income/(loss) available to common stockholders for the period by the weighted average shares of the Company’s common stock outstanding for that period that participate in the Company’s common dividends. Diluted EPS takes into account the effect of dilutive instruments, such as stock options, warrants, unvested restricted stock and unvested restricted stock units but uses the average share price for the period in determining the number of incremental shares that are to be added to the weighted average number of shares outstanding.
As of June 30, 2020 and June 30, 2019, the Company’s unvested restricted stock units were as follows 20.0 thousand and 40.0 thousand, respectively.
Restricted stock units grantedissued to the managerManager do not entitle the participant the rights of a shareholder of the Company’s common stock, such as dividend and voting rights, until shares are issued in settlement of the vested units. The restricted stock
44
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
units are not considered to be participating shares. The dilutive effects of the restricted stock units are only included in diluted weighted average common shares outstanding.
The following table presents a reconciliation of the earnings and shares used in calculating basic and diluted EPS for the three and six months ended June 30, 2020 and June 30, 2019 (in thousands, except per share data):
Three Months EndedSix Months Ended
June 30, 2020June 30, 2019June 30, 2020June 30, 2019
Numerator:    
Net Income/(Loss) from Continuing Operations$2,700  $19,871  $(482,317) $50,060  
Dividends on preferred stock5,667  3,367  11,334  6,734  
Net income/(loss) from continuing operations available to common stockholders$(2,967) $16,504  $(493,651) $43,326  
Net Income/(Loss) from Discontinued Operations361  (1,193) 361  (2,227) 
Net income/(loss) available to common stockholders$(2,606) $15,311  $(493,290) $41,099  
Denominator:
Basic weighted average common shares outstanding32,859  32,709  32,804  31,636  
Dilutive effect of restricted stock units (1)—  28  —  28  
Diluted weighted average common shares outstanding32,859  32,737  32,804  31,664  
Earnings/(Loss) Per Share - Basic
Continuing Operations$(0.09) $0.50  $(15.05) $1.37  
Discontinued Operations0.01  (0.03) 0.01  (0.07) 
Total Earnings/(Loss) Per Share of Common Stock$(0.08) $0.47  $(15.04) $1.30  
Earnings/(Loss) Per Share - Diluted
Continuing Operations$(0.09) $0.50  $(15.05) $1.37  
Discontinued Operations0.01  (0.03) 0.01  (0.07) 
Total Earnings/(Loss) Per Share of Common Stock$(0.08) $0.47  $(15.04) $1.30  
(1) ManagerCompany had 0 unvested restricted stock units as of 16.4 thousand and 17.3 thousand were excluded from the computation of diluted earnings per share because its effect would be anti-dilutive for the three and six months ended June 30, 2021 and December 31, 2020, respectively.

45
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
On March 27, 2020, the Company announced that its Board of Directors approved a suspension of the Company's quarterly dividends on its common stock, 8.25% Series A Cumulative Redeemable Preferred Stock, 8.00% Series B Cumulative Redeemable Preferred Stock, and 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, beginning with the common stock dividend that normally would have been declared in March 2020 and the preferred stock dividend that would have been declared in May 2020, in order to conserve capital and improve its liquidity position during the market volatility due to the COVID-19 pandemic. Based on current conditions for the Company, the Company does not anticipate paying dividends on its common or preferred stock for the foreseeable future. As a result, the Company did not declare or accrue quarterly dividends on its Common or Preferred Stock during the three months ended June 30, 2020. If the Company’s Board of Directors does not declare a dividend in a given period, an accrual is not recorded on the balance sheet. However, undeclared preferred stock dividends are reflected in earnings per share as discussed in ASC 260-10-45-11. Pursuant to their terms, all unpaid dividends on the Company’s preferred stock accrue without interest, and if dividends on the Company's preferred stock are in arrears, the Company cannot pay cash dividends with respect to its Common Stock. Refer to Note 12 for more information on the Company's common and preferred stock. Refer to "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Book value per share" for a discussion of the treatment of accumulated, unpaid, or undeclared preferred dividends on the Company's book value.

The following table details the aggregate and per-share amounts of arrearages in cumulative, unpaid, and undeclared preferred dividends as of June 30, 2020 (in thousands, except per share data):

Class of StockDividend Per Preferred Share in ArrearsAmount of Preferred Dividend in Arrears
8.25% Series A$0.51563  $1,067  
8.00% Series B0.50  2,300  
8.000% Series C0.50  2,300  
Total$5,667  

Preferred stock dividends that are not declared accumulate and are added to the liquidation preference as of the scheduled payment date for the respective series of the preferred stock.

The following tables detail the Company's common stock dividends declared during the six months ended June 30, 2019:
2021:
20192021   
Declaration DateRecord DatePayment DateCash Dividend Per Share
3/15/201922/20213/29/20194/1/20214/30/20192021$0.500.18 
6/14/201915/20216/28/201930/20217/31/201930/20210.500.21 
Total$1.000.39 

The Company did 0t declare any common stock dividends during the three and six months ended June 30, 2020.
The following tables detail the Company's preferred stock dividends declared and paid during the six months ended June 30, 20202021 and June 30, 2019.2020:
   Cash Dividend Per Share
Declaration DateRecord DatePayment Date8.25% Series A8.00% Series B8.000% Series C
2/14/20202/28/20203/17/2020$0.51563  $0.50  $0.50  
2/15/20192/28/20193/18/20190.51563  0.50  —  
5/17/20195/31/20196/17/20190.51563  0.50  —  
2021  Cash Dividend Per Share
Declaration DateRecord DatePayment Date8.25% Series A8.00% Series B8.000% Series C
2/16/20212/26/20213/17/2021$0.51563 $0.50 $0.50 
5/17/20215/28/20216/17/20210.51563 0.50 0.50 
Total$1.03126 $1.00 $1.00 
2020  Cash Dividend Per Share
Declaration DateRecord DatePayment Date8.25% Series A8.00% Series B8.000% Series C
2/14/20202/28/20203/17/2020$0.51563 $0.50 $0.50 

10.9. Income taxes
 
As a REIT, the Company is not subject to federal income tax to the extent that it makes qualifying distributions to its stockholders, and provided it satisfies on a continuing basis, through actual investment and operating results, the REIT requirements including certain asset, income, distribution and stock ownership tests. Most states follow U.S. federal income tax treatment of REITs.
46
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
For the three months ended June 30, 2020, the Company did not record any excise tax expense. For the six months ended June 30, 2020, the Company recorded excise tax expense of $(0.8) million. The reversal of the previously accrued excise tax expense is a result of losses resulting from market conditions associated with the COVID-19 pandemic. For the three and six months ended June 30, 2019, the Company recorded excise tax expense of $0.2 million and $0.3 million, respectively. Excise tax represents a four percent tax on the required amount of the Company’s ordinary income and net capital gains not distributed during the year. The expense is calculated in accordance with applicable tax regulations. For the three and six months ended June 30, 2021, as well as the three months ended June 30, 2020, the Company did 0t record any excise tax expense. For the six months ended June 30, 2020, the Company recorded excise tax expense of $(0.8) million. The reversal of the previously accrued excise tax expense during the six months ended June 30, 2020 was a result of losses resulting from market conditions associated with the COVID-19 pandemic.
 
The Company files tax returns in several U.S jurisdictions. There are no ongoing U.S. federal, state or local tax examinations related to the Company.
The Company elected to treat certain domestic subsidiaries as TRSs and may elect to treat other subsidiaries as TRSs. In general, a TRS may hold assets and engage in activities that the Company cannot hold or engage in directly, and generally may engage in any real estate or non-real estate-related business.
The Company elected to treat one of its foreign subsidiaries as a TRS and, accordingly, taxable income generated by this TRS may not be subject to local income taxation, but generally will be included in the Company’s income on a current basis as Subpart F income, whether or not distributed.
Cash distributions declared by the Company that do not exceed its current or accumulated earnings and profits will be considered ordinary income to stockholders for income tax purposes unless all or a portion of a distribution is designated by the Company as a capital gain dividend. Distributions in excess of the Company’s current and accumulated earnings and profits will be characterized as return of capital or capital gains.
 
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 June 30, 2020 or June 30, 2019.2021. The Company’s federal income tax returns for the last three tax years are open to examination by the Internal Revenue Service. In the event that the Company incurs income tax related interest and penalties, its policy is to classify them as a component of provision for income taxes.

37
11.
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
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. As of June 30, 2020 and December 31, 2019, no event of termination had occurred. The Company is externally managed and advised by the Manager. Pursuant to the terms of the management agreement, which became effective July 6, 2011 (upon the consummation of the Company’s initial public offering (the "IPO")), the Manager provides the Company with its management team, including its officers, along with appropriate support personnel. Each of the Company’s officers is an employee of Angelo Gordon. The Company does not have any employees. The Manager, pursuant to a delegation agreement dated as of June 29, 2011, has delegated to Angelo Gordon the overall responsibility of its day-to-day duties and obligations arising under the Company’s management agreement. Below is a description of the fees and reimbursements provided in the management agreements.
 
Management fee
 
The Manager is entitled to a management fee equal to 1.50% per annum, calculated and paid quarterly, of the Company’s Stockholders’ Equity. For purposes of calculating the management fee, "Stockholders’ Equity" means the sum of the net proceeds from any issuances of equity securities (including preferred securities) since inception (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance, and excluding any future equity issuance to the Manager), plus the Company’s retained earnings at the end of such quarter (without taking into account any non-cash equity compensation expense or other non-cash items described below incurred in current or prior periods), less any amount that the Company pays for repurchases of its common stock, excluding any unrealized gains, losses or other non-cash items that have impacted stockholders’ equity as reported in the Company’s financial statements prepared in accordance with GAAP, regardless of whether such items are included in other comprehensive income or loss, or in net income, and excluding one-time events pursuant to changes in GAAP, and certain other non-cash charges after discussions between the Manager and the Company’s independent directors and after approval by a majority of the Company’s independent directors. Stockholders’ Equity, for purposes of calculating the management fee, could be greater or less than the amount of stockholders’ equity shown on the Company’s financial statements.
47
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020

For the three and six months ended June 30, 2021, the Company incurred management fees of approximately $1.7 million and $3.3 million, respectively. For the three and six months ended June 30, 2020, the Company incurred management fees of approximately $1.7 million and $3.8 million, respectively. For the three and six months endedAs of June 30, 2019,2021 and December 31, 2020, the Company incurredrecorded management fees payable of approximately $2.4$1.7 million and $4.7$1.7 million, respectively.

On April 6, 2020, the Company and the Manager executed an amendment to the management agreement pursuant to which the Manager agreed to defer the Company's payment of the management fee effective Q1the first quarter of 2020 through September 30, 2020.

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

Termination fee
 
The termination fee, payable uponUpon 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 June 30, 20202021 and December 31, 2019,2020, no event of termination of the management agreement had occurred.
 
38

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
Expense reimbursement
 
The Company is required to reimburse the Manager or its affiliates for operating expenses which are incurred by the Manager or its affiliates on behalf of the Company, including expenses relating to legal, accounting, due diligence and other services. The Company’s reimbursement obligation is not subject to any dollar limitation; however, the reimbursement is subject to an annual budget process which combines guidelines from the Management Agreement with oversight by the Company’s Board of Directors.
 
The Company reimburses the Manager or its affiliates for the Company’s allocable share of the compensation, including, without limitation, annual base salary, bonus, any related withholding taxes and employee benefits paid to (i) the Company’s chief financial officer based on the percentage of time spent on Company affairs, (ii) the Company’s general counsel based on the percentage of time spent on the Company’s affairs, and (iii) other corporate finance, tax, accounting, internal audit, legal, risk management, operations, compliance and other non-investment personnel of the Manager and its affiliates who spend all or a portion of their time managing the Company’s affairs based upon the percentage of time devoted by such personnel to the Company’s affairs. In their capacities as officers or personnel of the Manager or its affiliates, they devote such portion of their time to the Company’s affairs as is necessary to enable the Company to operate its business.
 
Of the $4.5$4.9 million and $5.3$8.8 million of Other operating expenses for the three and six months ended June 30, 2021, respectively, the Company has incurred $1.1 million and $2.7 million, respectively, representing a reimbursement of expenses. Of the $4.6 million and $5.5 million of Other operating expenses for the three and six months ended June 30, 2020, respectively, the Company has incurred $1.9 million and $3.9 million, respectively, representing a reimbursement of expenses. Of

As of June 30, 2021 and December 31, 2020, the $3.8Company recorded a reimbursement payable to the Manager of $1.5 million and $7.6$1.8 million, respectively. For the year ended December 31, 2021, the Manager agreed to waive its right to receive expense reimbursements of Other operating expenses for the three and six months ended June 30, 2019, respectively, the Company has incurred $1.9 million and $3.9 million, respectively, representing a reimbursement of expenses.$0.8 million.

On April 6, 2020, the Company and the Manager executed an amendment to the management agreement pursuant to which the Manager agreed to defer the Company's payment of the reimbursement of expenses, effective Q1the first quarter of 2020 through September 30, 2020, or such other time2020. All deferred expense reimbursements were paid as the Company and the Manager agree.of September 30, 2020.

Secured debt

On April 10, 2020, in connection with the first Forbearance Agreement, the Company issued a secured promissory note (the "Note") to the Manager evidencing a $10 million loan made by the Manager to the Company. Additionally, on April 27, 2020, in connection with the second Forbearance Agreement, the Company and the Manager entered into an amendment to the Note to reflect an additional $10 million loan by the Manager to the Company. The $10 million loan made by the Manager on April 10, 2020 is payablewas repaid in full with interest when it matured on March 31, 2021 and the $10 million loan made on April 27, 2020 was repaid in full with interest when it matured on July 27, 2020. The unpaid balance of the Note accruesaccrued interest at a rate of 6.0% per annum. Interest on the Note iswas payable monthly in kind through the addition of such accrued monthly interest to the outstanding principal balance of the Note.

The Manager agreedNote and accrued interest on the Note, when outstanding, were included within the due to subordinateaffiliates amount, which is included within the obligations"Other Liabilities" line item in the consolidated balance sheets. See Note 7 for a breakout of the Company with respect to the Note and liens held by the Manager for the security of the performance of the Company's obligations under the Note to the Company's obligations to the Participating Counterparties and to the secured promissory note payable to Royal Bank of Canada. The Company's obligations to the Participating Counterparties and to the secured promissory note payable to Royal Bank of Canada were satisfied or released as
48
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
of June 30, 2020."Other liabilities" line item.
 
Restricted stock grants
 
Equity Incentive Plans

Effective on April 15, 2020 upon the approval of the Company's stockholders at its Annual Meeting,2020 annual meeting of stockholders, the 2020 Equity Incentive Plan provides for 2,000,000a 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 June 30, 2020, 1,925,2092021, 612,676 shares of common stock were available to be awarded under the 2020 Equity Incentive Plan.
 
Since its IPO, the Company has granted an aggregate of 180,58535,264 and 40,25053,990 shares of restricted common stock to its independent directors under its equity incentive plan dated July 6, 2011 and its 2020 Equity Incentive Plan, respectively. As of June 30, 2021, all shares of restricted common stock granted to its independent directors have vested.
39

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021

Manager respectively,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 120,000provides for a maximum of 573,425 shares of common stock to be issued to the Manager. As of June 30, 2021, there were 0 shares or awards issued under the 2021 Manager Plan.

The AG Mortgage Investment Trust, Inc. Manager Equity Incentive Plan became effective on July 6, 2011 (the "2011 Manager Plan"). Since its IPO, the Company has issued 13,416 shares of restricted common stock and 40,000 restricted stock units to its Manager under its equity incentive plans.the 2011 Manager Plan. Upon the adoption of the 2020 Equity Incentive Plan on April 15, 2020, the Company was no longer permitted to issue any shares of our common stock under the 2011 Manager Plan. As of June 30,July 1, 2020, all the shares of restricted common stock granted to the Company’s Manager and independent directors have vested and 99,991 restricted stock units granted to its Manager under the Company’s2011 Manager havePlan fully vested. The 20,009 restricted stock units that have not vested as of June 30, 2020 were granted to the Manager on July 1, 2017 and represent the right to receive an equivalent number of shares of the Company’s common stock to be issued when the units vest on July 1, 2020. The units do not entitle the participant the rights of a holder of the Company’s common stock, such as dividend and voting rights, until shares are issued in settlement of the vested units. The vesting of such units is subject to the continuation of the management agreement. If the management agreement terminates, all unvested units then held by the Manager or the Manager’s transferee shall be immediately cancelled and forfeited without consideration.

Director compensation

Beginning in 2018,January 1, 2021, the Company began paying a $160,000 annual base director’sdirector's fee tofor each independent director. Base director’s fees are paid 50%director decreased from $160,000 to $150,000, $70,000 of which is payable on a quarterly basis in cash and 50%$80,000 of which is payable on a quarterly basis in shares of restricted common stock. The number of shares of restricted common stock to be issued each quarter to each independent director is determined based on the average of the high and low prices of the Company’s common stock on the New York Stock Exchange on the last trading day of each fiscal quarter. To the extent that any fractional shares would otherwise be issuable and payable to each independent director, a cash payment is made to each independent director in lieu of any fractional shares. All directors’ fees are paid pro rata (and restricted stock grants determined) on a quarterly basis in arrears, and shares issued are fully vested and non-forfeitable. These shares may not be sold or transferred by such director during the time of his service as an independent member of the Company’s board. Beginning in 2019, the Company increased the annual fee paid to the lead independent director from $15,000 to $25,000. On March 25, 2020,As of June 30, 2021, the Company's Board of Directors decreased from 5 independent directors toconsisted of 4 independent directors. On June 19, 2020, the Company's Board of Directors decreased from 4 independent directors to 3 independent directors.

Pursuant to the Forbearance Agreement previously discussed, the Company, among other things, agreed to compensate its independent directors solely with common stock for the quarter ended March 31, 2020.
 
Investments in debt and equity of affiliates
 
The Company invests in credit sensitive residential and commercial real estate assets through affiliated entities which hold an ownership interest in the assets. The Company is one investor, amongst other investors managed by affiliates of Angelo Gordon, in such entities and has applied the equity method of accounting for such investments. See Note 2 for the gross fair value of the Company's share of these investments as of June 30, 20202021 and December 31, 2019.2020 and the net income/(loss) generated by these investments for the three and six months ended June 30, 2021 and 2020.

During Q3 2018, the Company transferred certain of its CMBS from certain of its non-wholly owned subsidiaries to a fully consolidated entity. See Note 2 for further detail.
The Company’s investment in AG Arc is reflected onwithin the "Investments in debt and equity of affiliates" line item on its consolidated balance sheets. The Company has an approximate 44.6% interest in AG Arc. See Note 2 for the fair value of AG Arc as of June 30, 20202021 and December 31, 2019.

In June 2016, Arc Home closed on the acquisition of a Fannie Mae, Freddie Mac, Federal Housing Administration ("FHA"), Veteran’s Administration ("VA") and Ginnie Mae seller/servicer of mortgages, currently with licenses to conduct business in 50 states, including Washington D.C. Through this subsidiary, Arc Home originates conforming, Government, Jumbo, Non-QM and other non-conforming residential mortgage loans, retains the mortgage servicing rights associated with the loans it
49
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
originates, and purchases additional mortgage servicing rights from third-party sellers. Arc Home is led by an external management team.2020.

Arc Home may sell loans to the Company, to third parties, or to affiliates of the Manager. Arc Home may also enter into agreements with us, third parties, or affiliates of the Manager to sell rights to receive the excess servicing spread related to MSRs that it either purchases from third parties or originates. The Company, directly or through its subsidiaries, has entered into agreements with Arc Home to purchase rights to receive the excess servicing spread related to certain of Arc Home's MSRs. As of June 30, 20202021 and December 31, 2019,2020, these Excess MSRs had a fair value of approximately $12.7$2.9 million and $18.2$3.5 million, respectively. See below "Transactions with affiliates" for details regarding the sale of a portion of the Company's Excess MSRs during the third quarter of 2020. In July 2021, subsequent to quarter end, the Company sold the remaining Excess MSR portfolio to Arc Home. Arc Home subsequently sold the MSR portfolio to a third-party.

On AugustApril 3, 2020, the Company, alongside private funds under the management of Angelo Gordon, restructured its financing arrangements in MATT ("Restructured Financing Arrangement"). The Restructured Financing Arrangement required all principal and interest on the underlying assets in MATT to be used to pay down principal and interest on the outstanding financing arrangement. As of April 3, 2020, the Restructured Financing Arrangement did not have mark-to-market margin calls and was non-recourse to the Company. The Restructured Financing Arrangement provided for a termination date of October 1, 2021. At the earlier of the termination date or the securitization or sale by the Company of the remaining assets subject to the Restructured Financing Arrangement, the financing counterparty (which is a non-affiliate) was entitled to 35% of the remaining
40

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
equity in the assets. The Company evaluated this restructuring and concluded it was an extinguishment of debt. MATT chose to make a fair value election on this financing arrangement and the Company treated this arrangement consistently with this election.
On January 29, 2017,2021, the Company, alongside private funds under the management of Angelo Gordon, entered into an amendment with respect to its Restructured Financing Arrangement in MATT. The amendment serves to convert the MATH LLC Agreement, which requiresexisting financing to a mark-to-market facility that MATH fund a capitalis recourse to the Company and the private funds managed by Angelo Gordon that invest in MATT up to the below mentioned commitment of $75.0 millionfrom MATH to MATT. This commitment was increased by $25.0 million to $100.0 million on March 28, 2019 and by $5.0 million to $105.0 million on August 23, 2019Upon amending the agreement, the Company settled the premium recapture fee with amendments to the MATH LLC Agreement. On April 3, 2020, the financing arrangements within MATT were restructured and the previously mentioned commitment was removed. Refer to Note 2 for further detail on this restructuring. The Company has an approximate 44.6% interest in MATH.counterparty.
On May 15, 2019 and November 14, 2019,January 29, 2021, the Company alongside private funds under the management of Angelo Gordon, and a third party, entered into an amendment to the LOTS I and LOTS II Agreements, respectively (collectively, "LOTS"),MATH LLC Agreement, which requires MATH to fund a capital commitment of $50.0 million to MATT. The Company, through its investment in MATH, is responsible for its pro-rata share of the Companycapital commitment. Refer to Note 12 for additional information.

The Company's investment in LOTS require it to fund various commitments to LOTS in connection with the origination of Land Related Financing. Refer to Note 1312 for additional information. The Company has an approximate 47.5% and 50% interest in LOTS I and LOTS II, respectively.

Transactions with affiliates
 
In connection with the Company’s investments in residential mortgage loans, residential mortgage loans in securitized form which are issued by an entity in which the Company holds an equity interest in and which are held alongside other private funds under the management of Angelo Gordon (the "Re/Non-Performing Loans") and non-QM loans,Non-QM Loans, the Company may engageengages asset managers to provide advisory, consultation, asset management and other services. Beginning in November 2015, the Company also engaged Red Creek Asset Management LLC ("Asset Manager"), an affiliatea related party of the Manager and direct subsidiary of Angelo Gordon, as the asset manager for certain of its Re/Non-Performing Loans. Beginning in September 2019, the Company engaged the Asset Manager as the asset manager for its non-QM loans.Non-QM Loans. The Company pays the Asset Manager separate arm’s-length asset management fees as assessed and confirmed periodically by a third partythird-party valuation firm for its Re/Non-Performing Loans and non-QM loans.Non-QM Loans. In the third quarter of 2019, the third partythird-party assessment of asset management fees resulted in the Company updating the fee amount for its Re/Non-Performing Loans. The Company also utilized the third partythird-party valuation firm to establish the fee level for non-QM loansNon-QM Loans in the third quarter of 2019. ForThe fees paid by the Company to the Asset Manager totaled $0.6 million and $1.1 million for the three and six months ended June 30, 2020, the2021, respectively. The fees paid by the Company to the Asset Manager totaled $0.3 million. Formillion for the three and six months ended June 30, 2019, the fees paid by the Company to the Asset Manager totaled $0.1 million and $0.3 million, respectively.2020. For the three and six months ended June 30, 2020, the Company deferred $0.3 million and $0.4 million, respectively, of fees owed to the Asset Manager and plans to continuecontinued to defer fees through September 30, 2020 or such other time as the Company and the Manager agree.2020.

In connection with the Company’s investments in Excess MSRs purchased throughDuring 2020, Arc Home began selling Non-QM Loans to a private fund under the Company paysmanagement of Angelo Gordon. Arc Home sold Non-QM Loans with an administrative feeunpaid principal balance of $191.7 million and $268.6 million to Arc Home. this affiliate of the Manager during the three and six months ended June 30, 2021, respectively.

For the three and six months ended June 30, 2020, the administrative fees paid by2021, Arc Home sold Non-QM Loans with an unpaid principal balance of $192.8 million and $250.5 million to the Company, to Arc Home totaled $0.1 million and $0.2 million, respectively. For the three and six months ended June 30, 2019, the administrative fees paid by the Company to Arc Home totaled $0.1 million and $0.2 million, respectively.

In March 2019, in accordance with the Company’s Affiliated Transactions Policy, the Company executed one trade whereby the Company acquired a real estate security from an affiliate of the Manager (the "March 2019 Selling Affiliate"). As of the date of the trade, the security acquired from the March 2019 Selling Affiliate had a total fair value of $0.9 million. The March 2019 Selling Affiliate sold the real estate security through a BWIC (Bids Wanted in Competition). Prior to the submission of the BWIC by the March 2019 Selling Affiliate, the Company submitted its bid for the real estate security to the March 2019 Selling Affiliate. The pre-submission of the Company's bid allowed the Company to confirm third-party market pricing and best execution.

In June 2019, the Company, alongside private funds under the management of Angelo Gordon, participated, through its unconsolidated ownership interest in MATT, in a rated non-QM loan securitization, in which non-QM loans with a fair value of $408.0 million were securitized. Certain senior tranches in the securitization were sold to third parties with the Company and
50
AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
private funds under the management of Angelo Gordon retaining the subordinate tranches, which had a fair value of $42.9 million as of June 30, 2019. The Company has a 44.6% interest in the retained subordinate tranches.

In July 2019, in accordance with the Company’s Affiliated Transactions Policy, the Company acquired certain real estate securities from an affiliate of the Manager (the "July 2019 Selling Affiliate"). As of the date of the trade, the real estate securities acquired from the July 2019 Selling Affiliate had a total fair value of $2.0 million. As procuring market bids for the real estate securities was determined to be impracticable in the Manager’s reasonable judgment, appropriate pricing was based on a valuation prepared by independent third-party pricing vendors. The third-party pricing vendors allowed the Company to confirm third-party market pricing and best execution.

In September 2019, the Company, alongside private funds under the management of Angelo Gordon, participated, through its unconsolidated ownership interest in MATT, in a rated non-QM loan securitization, in which non-QM loans with a fair market value of $415.1 million were securitized. Certain senior tranches in the securitization were sold to third parties with the Company and private funds under the management of Angelo Gordon retaining the subordinate tranches, which had a fair market value of $28.7 million as of September 30, 2019. The Company has a 44.6% interest in the retained subordinate tranches.

In October 2019, in accordance with the Company’s Affiliated Transactions Policy, the Company acquired certain real estate securities from an affiliate of the Manager (the "October 2019 Selling Affiliate"). As of the date of the trade, the real estate securities acquired from the October 2019 Selling Affiliate had a total fair value of $2.2 million. The October 2019 Selling Affiliate sold the real estate securities through a BWIC. Prior to the submission of the BWIC by the October 2019 Selling Affiliate, the Company submitted its bid for real estate securities to the October 2019 Selling Affiliate. The Company’s pre-submission of its bid allowed the Company to confirm third-party market pricing and best execution.

In November 2019, the Company, alongside private funds under the management of Angelo Gordon, participated through its unconsolidated ownership interest in MATT in a rated non-QM loan securitization, in which non-QM loans with a fair value of $322.1 million were securitized. Certain senior tranches in the securitization were sold to third parties with the Company and private funds under the management of Angelo Gordon retaining the subordinate tranches, which had a fair value of $21.4 million as of December 31, 2019. The Company has a 44.6% interest in the retained subordinate tranches.

In February 2020, the Company, alongside private funds under the management of Angelo Gordon, participated through its unconsolidated ownership interest in MATT in a rated non-QM loanNon-QM Loan securitization, in which non-QM loansNon-QM Loans with a fair value of $348.2 million were securitized. Certain senior tranches in the securitization were sold to third parties with the Company and private funds under the management of Angelo Gordon retaining the subordinate tranches, which had a fair value of $26.6 million as of March 31, 2020. The Company has a 44.6% interest in the retained subordinate tranches.

12. Equity
On May 2, 2018,In July 2020, in accordance with the Company’s Affiliated Transactions Policy, the Company filed a shelf registration statement registering upsold certain real estate securities to $750.0 millionan affiliate of its securities, including capital stockthe Manager (the "2018 Registration Statement""July 2020 Acquiring Affiliate"). As of June 30, 2020, $591.2 millionthe date of the Company’stransaction, the real estate securities including capital stock, was available for issuance undersold to the 2018 Registration Statement.July 2020 Acquiring Affiliate had a total fair value of $1.9 million. The 2018 Registration Statement became effective on May 18, 2018 and will expire on May 18, 2021.
Concurrently withJuly 2020 Acquiring Affiliate purchased the IPO in 2011,real estate securities by submitting an offer to purchase the securities from the Company completedin a private placement of 3,205,000 units at $20.00 per sharecompetitive bidding process. This allowed the Company to a limited number of investors qualifying as "accredited investors" under Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act"). Each unit consisted of one share of common stock ("private placement share")confirm third-party market pricing and a warrant ("private placement warrant") to purchase 0.50 of a share of common stock. Each private placement warrant had an exercise price of $20.50 per share (as adjusted for reorganizations, reclassifications, consolidations, mergers, sales, transfers or other dispositions) and expired on July 6, 2018. No warrants were exercised in 2018 through the expiration date on July 6, 2018.best execution.

In addition to the Company’s Series A and Series B Preferred Stock,August 2020, the Company, completedalongside private funds under the management of Angelo Gordon, participated through its unconsolidated ownership interest in MATT in a public offering of 4,000,000 shares of 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stockrated Non-QM Loan securitization, in which Non-QM Loans with a liquidation preference of $25.00 per share (the "Series C Preferred Stock") on September 17, 2019. The Company subsequently issued 600,000 shares of Series C Preferred Stock pursuant to the underwriters' exercise of their over-allotment option. The Company received total gross proceeds of $115.0 million and net proceeds of approximately $111.2 million, net of underwriting discounts, commissions and expenses. The Company’s Series A, Series B and Series C Preferred Stock have no stated maturity and are not subject tofair value
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AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 20202021
any sinking fund or mandatory redemption. Under certain circumstances uponof $226.0 million were securitized. Certain senior tranches in the securitization were sold to third parties with the Company and private funds under the management of Angelo Gordon retaining the subordinate tranches, which had a changefair value of control,$24.3 million as of September 30, 2020. The Company has a 44.6% interest in the retained subordinate tranches.

In August 2020, the Company, alongside private funds under the management of Angelo Gordon, sold its Ginnie Mae Excess MSR portfolio to Arc Home for total proceeds of $18.9 million. The portfolio had a total unpaid principal balance of $3.5 billion. The Company's share of the total proceeds approximated $8.5 million, representing its approximate 45% ownership interest. Arc Home subsequently sold its Ginnie Mae MSR portfolio to a third party.

In October 2020, in accordance with the Company’s Series A, Series BAffiliated Transactions Policy, the Company acquired certain real estate securities and Series C Preferred StockExcess MSRs from an affiliate of the Manager (the "October 2020 Selling Affiliate"). As of the date of the transaction, the real estate securities and Excess MSRs acquired from the October 2020 Selling Affiliate had a total fair value of $0.5 million and $20.0 thousand, respectively. As procuring market bids for the real estate securities was determined to be impracticable in the Manager’s reasonable judgment, appropriate pricing was based on a valuation prepared by third-party pricing vendors. The third-party pricing vendors allowed the Company to confirm third-party market pricing and best execution.

In March 2021, in accordance with the Company’s Affiliated Transactions Policy, the Company sold certain real estate securities to an affiliate of the Manager (the "March 2021 Acquiring Affiliate"). As of the date of the transaction, the real estate securities sold to the March 2021 Acquiring Affiliate had a total fair value of $6.9 million. The March 2021 Acquiring Affiliate purchased the real estate securities by submitting an offer to purchase the securities from the Company in a competitive bidding process. This allowed the Company to confirm third-party market pricing and best execution.

In April 2021, in accordance with the Company’s Affiliated Transactions Policy, the Company sold certain CMBS to affiliates of the Manager (the "April 2021 Acquiring Affiliates"). As of the date of the transaction, the CMBS sold to the April 2021 Acquiring Affiliates had a total fair value of $16.8 million. Pricing was based on valuations prepared by third-party pricing vendors in accordance with the Company's policy. The third-party pricing vendors allowed the Company to confirm third-party market pricing and best execution.

In May 2021, the Company, alongside private funds under the management of Angelo Gordon, participated through its unconsolidated ownership interest in MATT in a rated Non-QM Loan securitization, in which Non-QM Loans with a fair value of $171.4 million were securitized. Certain senior tranches in the securitization were sold to third parties with the Company and private funds under the management of Angelo Gordon retaining the subordinate tranches, which had a fair value of $25.7 million as of June 30, 2021. Subsequent to this transaction, MATT had securitized a majority of Non-QM Loans previously acquired and its remaining portfolio consisted primarily of the subordinate tranches retained from this securitization and past securitizations. During the current year, the Company has begun acquiring Non-QM Loans directly which are convertible torecorded in the "Residential mortgage loans, at fair value" line item on the consolidated balance sheets.

11. Equity

Reverse stock split

On July 12, 2021, the Company announced that its board of directors approved a one-for-three reverse stock split of its outstanding shares of common stock. The reverse stock split was effected following the close of business on July 22, 2021. At the Effective Time, every three issued and outstanding shares of the Company’s common stock. Holdersstock were converted into one share of the Company’s Series A, Series B and Series C Preferred Stock have no voting rights, except under limited conditions, and holders arecommon stock. No fractional shares were issued in connection with the reverse stock split. Instead, each stockholder holding fractional shares was entitled to receive, cumulativein lieu of such fractional shares, cash dividends at ain an amount determined based on the respective stated rate per annum before holdersclosing price of the Company's common stock are entitled to receive any cash dividends. The dividend rate of the Series A and Series B preferred stock is 8.25% and 8.00% per annum, respectively, of the $25.00 per share liquidation preference. The initial dividend rate for the Series C Preferred Stock, from and includingon the date of original issuethe Effective Time. As a result, the number of common shares outstanding was reduced from 48,510,978 immediately prior 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 equalEffective Time to an annual floating rate of the three-month LIBOR plus a spread of 6.476% per annum. Shares of the Company’s Series A and Series B Preferred Stock are currently redeemable at $25.00 per share plus accumulated and unpaid dividends (whether or not declared) exclusively at the Company’s option. Shares16,170,312. The reverse stock split applied to all of the Company's Series C Preferred Stock are redeemable at $25.00 per share plus accumulatedoutstanding shares of common stock and unpaid dividends (whether ordid not declared) exclusively at the Company’s option commencing on September 17, 2024, or earlier under certain circumstances intended to preserve our qualification as a REIT for Federal income tax purposes. Dividends are payable quarterly in arrears on the 17th dayaffect any stockholder’s ownership percentage of each March, June, September and December. The Company's Series A, Series B 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 6 or more quarterly periods (whether or not consecutive). Under such circumstances, holdersshares of the Company's Series A, Series B and Series C Preferred Stock voting togethercommon stock, except for immaterial changes resulting from the payment of cash for fractional shares. There was no change in the Company's authorized capital stock or par value of each share of common stock as a single class withresult of the holders ofreverse stock split. All per share amounts and common shares outstanding for all other classes or series of our preferred stock upon which like voting rightsperiods presented in the unaudited consolidated financial statements have been conferred and are exercisable and which are entitledadjusted on a retroactive basis to vote as a class withreflect the Company's Series A, Series Bone-for-three reverse stock split.
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AG Mortgage Investment Trust Inc. and Series C Preferred Stock will be entitledSubsidiaries
Notes 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, Series B 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, Series B and Series C Preferred Stock whose terms are being changed. As of Consolidated Financial Statements (Unaudited)
June 30, 2020, the Company had not declared all required quarterly dividends on the Company’s Series A, Series B and Series C Preferred Stock.2021

On March 27, 2020, the Company announced that its Board of Directors approved a suspension of the Company's quarterly dividends on its 8.25% Series A Cumulative Redeemable Preferred Stock 8.00% Series B Cumulative Redeemable Preferred Stock and 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, beginning with the preferred dividend that would have been declared in May 2020, in order to conserve capital and improve its liquidity position during the market volatility due to the COVID-19 pandemic as well as a suspension of the quarterly dividend on the Common Stock, beginning with the dividend that normally would have been declared in March 2020. Based on current conditions for the Company, the Company does not anticipate paying dividends on its common or preferred stock for the foreseeable future. Refer to Note 9 for more information on the arrearages related to the Company's preferred stock. Under the terms governing our series of preferred stock, we cannot pay cash dividends with respect to our common stock if dividends on our preferred stock are in arrears.repurchase programs

On November 3, 2015, the Company’s Board of Directors authorized a stock repurchase program ("Repurchase Program") to repurchase up to $25.0 million of the Company's outstanding common stock. Such authorization does not have an expiration date. As part of the Repurchase Program, shares may be purchased in open market transactions, including through block purchases, through privately negotiated transactions, or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Exchange Act. Open market repurchases will be made in accordance with Exchange Act Rule 10b-18, which sets certain restrictions on the method, timing, price and volume of open market stock repurchases. Subject to applicable securities laws, the timing, manner, price and amount of any repurchases of common stock under the Repurchase Program may be determined by the Company in its discretion, using available cash resources. Shares of common stock repurchased by the Company under the Repurchase Program, if any, will be cancelled and, until reissued by the Company, will be deemed to be authorized but unissued shares of its common stock as required by Maryland law. The Repurchase Program may be suspended or discontinued by the Company at any time and without prior notice and the authorization does not obligate the Company to acquire any particular amount of common stock. The cost of the acquisition by the Company of shares of its own stock in excess of the aggregate par value of the shares first reduces additional paid-in capital, to the extent available, with any residual cost applied against retained earnings. NaN shares were repurchased under the Repurchase Program during the three and six months ended June 30, 20202021 and June 30, 2019,2020 and approximately $14.6 million of common stock remained authorized for future share repurchases under the Repurchase Program.

On February 22, 2021, the Company's Board of Directors authorized a stock repurchase program (the "Preferred Repurchase Program") pursuant to which the Company's Board of Directors granted a repurchase authorization to acquire shares of its Series A Preferred Stock, its Series B Preferred Stock, and its Series C Preferred Stock having an aggregate value of up to $20.0 million. NaN shares were repurchased under the Repurchase Program during the three and six months ended June 30, 2021.

Equity distribution agreements

On May 5, 2017, the Company entered into an equity distribution agreement with each of Credit Suisse Securities (USA) LLC and JMP Securities LLC (collectively, the "Sales Agents"), which the Company refers to as the "Equity Distribution Agreements," pursuant to which the Company may sell up to $100.0 million aggregate offering price of shares of its common stock from time to time through the Sales Agents under the Securities Act of 1933. TheFor the three months ended June 30, 2021, the Company issued 0.2 million shares of common stock under the Equity Distribution Agreements were amended on May 22, 2018 in conjunction withfor net proceeds of approximately $3.1 million. For the filingsix months ended June 30, 2021, the Company sold 1.0 million shares of common stock under the Company’s 2018 Registration Statement.Equity Distribution Agreements for net proceeds of approximately $13.1 million. For the three and six months ended June 30, 2020, the Company issued 0.3 million shares of common stock under the Equity Distribution Agreements for net proceeds of approximately $3.5 million. 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.

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 June 30, 2021, 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. As of December 31, 2020, there were 1.8 million, 4.2 million, and 3.9 million of Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock, respectively, issued and outstanding.

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AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 20202021
months endedThe following table includes a summary of preferred stock issued and outstanding as of June 30, 2021 ($ and shares in thousands):
Preferred Stock SeriesIssuance DateShares OutstandingCarrying ValueAggregate Liquidation Preference (1)Optional Redemption
Date (2)		Rate (3)(4)
Series A Preferred StockAugust 3, 20121,663 $40,110 $41,580 August 3, 20178.25 %
Series B Preferred StockSeptember 27, 20123,728 90,187 93,191 September 17, 20178.00 %
Series C Preferred StockSeptember 17, 20193,729 90,175 93,220 September 17, 20248.000 %
Total9,120 $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 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 state 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 6 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.

Dividends

On March 27, 2020, the Company announced that its Board of Directors approved a suspension of the Company's quarterly dividends on its Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock, beginning with the preferred dividend that would have been declared in May 2020, as well as a suspension of the quarterly dividend on the Company's common stock, beginning with the dividend that normally would have been declared in March 2020, in order to conserve capital and improve its liquidity position during the market volatility due to the COVID-19 pandemic. Under the terms of the Company's charter governing its series of preferred stock, the Company cannot pay cash dividends with respect to its common stock if dividends on its preferred stock are in arrears.
On December 17, 2020, the Company paid its Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock dividends that were in arrears as well as the full dividends payable on the preferred stock for the fourth quarter of 2020 in the amount of $1.54689, $1.50, and $1.50 per share, respectively. On December 22, 2020, the Company's Board of Directors declared a dividend of $0.09 per common share for the fourth quarter 2020 which was paid on January 29, 2021 to shareholders of record at the close of business on December 31, 2020. During the first and second quarters of 2021, the Company declared its preferred and common dividends in ordinary course. Refer to Note 8 for more information on dividends declared during the period.
Exchange offers

On August 14, 2020, the Company announced the commencement of an offer to exchange newly issued shares of common stock for up to 250,470 shares of its Series A Preferred Stock, up to 556,600 shares of its Series B Preferred Stock, and up to
44

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
556,600 shares of its Series C Preferred Stock. This offer had an expiration date of September 11, 2020. Based on the final count provided by the Exchange Agent, American Stock Transfer & Trust Company, LLC, a total of 42,820 shares of Series A Preferred Stock, 31,085 Series B Preferred Stock and 29,355 Series C Preferred Stock were validly tendered and not properly withdrawn prior to the expiration of the offer. The Company accepted all such 103,260 validly tendered shares of preferred stock, and issued in exchange a total of 172,100 shares of common stock in reliance upon the exemption from registration provided under Section 3(a)(9) of the Securities Act of 1933, as amended.

On September 30, 2020, the Company sold 1.0 million sharesagreed to issue an aggregate of common stock under the Equity Distribution Agreements for net proceeds of approximately $3.5 million. For the three and six months ended June 30, 2019, the Company sold 0.5 million shares of common stock under the Equity Distribution Agreements for net proceeds of approximately $8.6 million. As of June 30, 2020, the Company has sold approximately 2.5 million shares of common stock under the Equity Distribution Agreements for gross proceeds of $31.1 million, with $68.9 million available to be issued.

On February 14, 2019, the Company completed a public offering of 3,000,0001,226,544 shares of its common stock and subsequently issued an additional 450,000agreed to pay aggregate cash consideration of $6.3 million in exchange for 210,662 shares of Series A Preferred Stock, 404,187 shares of Series B Preferred Stock, and 427,467 shares of Series C Preferred Stock, pursuant to a privately negotiated exchange agreement with existing holders of the preferred stock. After the transaction closed, the Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock exchanged pursuant to the underwriters' exerciseexchange agreement were reclassified as authorized but unissued shares of their over-allotment option atpreferred stock without designation as to class or series.

On October 2, 2020, the Company agreed to issue an aggregate of 300,000 shares of its common stock and agreed to pay aggregate cash consideration of $1.7 million in exchange for 260,000 shares of Series C Preferred Stock, pursuant to a priceprivately negotiated exchange agreement with existing holders of $16.70 per share. Net proceedsthe Series C Preferred Stock. After the transaction closed, the Series C Preferred Stock exchanged pursuant to the exchange agreement were reclassified as authorized but unissued shares of preferred stock without designation as to class or series.

On March 17, 2021, the Company fromagreed to issue an aggregate of 937,462 shares of its common stock in exchange for 153,325 shares of Series A Preferred Stock and 350,609 shares of Series B Preferred Stock, pursuant to a privately negotiated exchange agreement with existing holders of the offeringpreferred stock. After the transaction closed, the Series A Preferred Stock and Series B Preferred Stock exchanged pursuant to the exchange agreement were approximately $57.4reclassified as authorized but unissued shares of preferred stock without designation as to class or series.

On June 14, 2021, the Company agreed to issue an aggregate of 429,802 shares of its common stock in exchange for 86,478 shares of Series B Preferred Stock and 154,383 shares of Series C Preferred Stock, pursuant to privately negotiated exchange agreements with certain existing holders of the preferred stock. After the transaction closed, the Series B Preferred Stock and Series C Preferred Stock exchanged pursuant to the exchange agreements were reclassified as authorized but unissued shares of preferred stock without designation as to class or series.

As of June 30, 2021, the Company had outstanding 1,663,193 shares of Series A Preferred Stock, 3,727,641 shares of Series B Preferred Stock, and 3,728,795 shares of Series C Preferred Stock.

Common stock issuance to the Manager

On September 24, 2020, the Company issued (i) 405,123 shares of common stock to the Manager in full satisfaction of the deferred base management fee of $3.8 million after deductingpayable by the Company in respect to the first and second quarters of 2020 and (ii) 51,500 shares of common stock in satisfaction of $0.5 million of the base management fee payable by the Company in respect to the third quarter of 2020. The shares of Common Stock issued to the Manager were valued at $9.45 per share based on the midpoint of the estimated offering expenses.range of the Company’s book value per share as of August 31, 2020. The remaining third quarter management fee was paid in the normal course of business. Refer to Note 10 for more information on this transaction.

13.12. 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 June 30, 2020,2021, other than as set forth below, the Company was not involved in any material legal proceedings.

On March 25, 2020, certain of the Company's subsidiaries filed a suit in federal district court in New York seeking to enjoin Royal Bank of Canada and one of its affiliates ("RBC") from selling certain assets that the Company had on repo with RBC and seeking damages (AG MIT CMO et al. v. RBC (Barbados) Trading Corp. et al., 20-cv-2547, U.S. District Court, Southern District of New York). On March 31, 2020, the Company withdrew, as moot, its request for injunctive relief in the complaint based on the court's ruling on March 25, 2020 relating to the sale at issue. As previously disclosed in a Form 8-K filed with the SEC on June 2, 2020, the Company entered into a settlement agreement with RBC on May 28, 2020, pursuant to which the Company and RBC mutually released each other from further claims related to the repurchase agreements at issue. As part of the settlement, and to resolve all claims by either party under the repurchase agreements, the Company paid RBC $5.0 million
45

AG Mortgage Investment Trust Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2021
in cash and issued to RBC a secured promissory note in the principal amount of $2.0 million. On June 11, 2020, the Company repaid the secured promissory note due to RBC in full. The Company has recognized this settlement in the "Net realized gain/(loss)" line item on the consolidated statement of operations.operations in the second quarter of 2020. As a result, as of June 30, 2020, the Company has satisfied all of its payment obligations to RBC under the settlement agreement and promissory note, and, as previously reported, the federal lawsuit has been voluntarily dismissed with prejudice.

As of June 30,For the year ended December 31, 2020, the Company has also recorded a loss of $11.6 million related to deficiencies asserted by other counterparties. The Company has recognized these losses in the "Net realized gain/(loss)" line item on the consolidated statement of operations. As of the date of issuance of these financial statements,August 2020, MITT has resolved and settled all deficiency claims with lenders.

The below table details the Company's outstanding commitments as of June 30, 20202021 (in thousands):
Commitment typeDate of CommitmentTotal CommitmentFunded CommitmentRemaining Commitment
Commercial loan G (a)July 26, 2018$84,515  $56,710  $27,805  
Commercial loan I (a)January 23, 201920,000  15,212  4,788  
Commercial loan J (a)February 11, 201930,000  6,291  23,709  
Commercial loan K (a)February 22, 201920,000  12,673  7,327  
LOTS (b)Various40,819  22,999  17,820  
Total$195,334  $113,885  $81,449  

Commitment typeDate of CommitmentTotal CommitmentFunded CommitmentRemaining Commitment
Commercial loan K (a)February 22, 2019$20,000 $18,809 $1,191 
LOTS (b)Various24,638 15,877 8,761 
MATH (b)January 29, 202122,295 0 22,295 
Total$66,933 $34,686 $32,247 
(a)The Company entered into commitments on commercial loans relating to construction projects. See Note 43 for further details.
(b)Refer to Note 1110 "Investments in debt and equity of affiliates" for more information regarding LOTS.

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AG Mortgage Investment Trust Inc.LOTS and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
June 30, 2020
14. Discontinued Operations and Assets and Liabilities Held for Sale

MATH.
In November 2019, the Company signed a purchase and sale agreement whereby it agreed to sell its portfolio of single-family rental properties to a third party at a price of approximately $137 million as the portfolio was under-performing. The Company recognized a gain of $0.2 million as a result of the transaction. The Company reclassified the operating results of its single-family rental properties segment as discontinued operations and excluded it from continuing operations for all periods presented. As of June 30, 2020 and December 31, 2019, the Company has disposed of substantially all of its single-family rental properties segment.

The table below presents our results of operations for the three and six months ended June 30, 2020 and June 30, 2019, for the single-family rental properties segment's discontinued operations as reported separately as net income (loss) from discontinued operations, net of tax (in thousands):

Three Months EndedSix Months Ended
June 30, 2020June 30, 2019June 30, 2020June 30, 2019
Interest expense$—  $(1,247) $—  $(2,494) 
Other Income/(Loss)
Rental income—  3,162  —  6,559  
Net realized gain/(loss)—  (69) —  (96) 
Other income—  130  —  312  
Total Other Income/(Loss)—  3,223  —  6,775  
Expenses
Other operating expenses(80) 43  (80) 92  
Property depreciation and amortization—  1,180  —  2,627  
Property operating expenses(281) 1,946  (281) 3,789  
Total Expenses(361) 3,169  (361) 6,508  
Net Income/(Loss) from Discontinued Operations$361  $(1,193) $361  $(2,227) 

In the second quarter of 2020, the Company reversed certain previously accrued expenses related to discontinued operations.

The table below presents our statement of net position for the years ended June 30, 2020 and December 31, 2019, respectively, for the single-family rental properties segment's discontinued operations as reported separately as assets and liabilities held for sale on our consolidated balance sheets (in thousands):

June 30, 2020December 31, 2019
Assets
Other assets$—  $154  
Total Assets—  154  
Liabilities
Other liabilities305  1,546  
Total$305  $1,546  

15.13. Subsequent Events

TheDuring July 2021, the Company sold 0.4 million shares of common stock under the Equity Distribution Agreementsits remaining CMBS portfolio for nettotal proceeds of approximately $1.2$33.7 million. A portion of the CMBS portfolio representing $17.6 million which settledof total proceeds was sold at fair value to an affiliate of the Manager and was executed in July.accordance with the Company’s Affiliated Transactions Policy.

Subsequent to quarter end, the Company sold certain CMBS positions for proceedspurchased $86.1 million of approximately $24.4Non-QM Loans, inclusive of $58.5 million which were purchased from Arc Home.

During July 2021, the Company agreed to purchase a pool of residential mortgage loans collateralized by GSE-eligible investment properties with an aggregate unpaid principal balance of $114.7 million. In connection with these acquisitions, the Company entered into a financing arrangement with a maximum uncommitted borrowing capacity of $500 million.
54
AG Mortgage Investment Trust Inc. and Subsidiaries
NotesDuring July 2021, the Company amended its financing arrangements to Consolidated Financial Statements (Unaudited)
June 30, 2020
increase the maximum uncommitted borrowing capacity to finance Non-QM Loans from $800 million to $1.1 billion.

On July 27, 2020,12, 2021, the Company repaid $10.0 millionannounced that its board of directors approved a one-for-three reverse stock split of the secured debt plus accrued interest toCompany's outstanding shares of common stock. The reverse stock split was effected following the Manager as it became due. Subsequent to quarter end, the Company also paid $2.2 millionclose of deficiencies to non-affiliated counterparties that were accrued for as of June 30, 2020. As of the date of issuance of these financial statements, MITT has resolved and settled all deficiency claims with lenders.business on July 22, 2021. Refer to Note 2 and Note 11 for more information regarding the secured debt and Note 13 regarding the deficiencies.additional information.

Subsequent to quarter end,In July 2021, the Company, alongside private funds under the management of Angelo Gordon, participated throughsold its unconsolidated ownership interest in MATT inremaining Excess MSR portfolio to Arc Home. Arc Home subsequently sold the MSR portfolio to a rated non-QM loan securitization, in which non-QM loans with a fair valuethird-party.

On July 30, 2021, the Company announced that its Board of $221.6 million were securitized. Certain senior tranchesDirectors has declared third quarter 2021 preferred stock dividends on its Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock in the securitization were soldamount of $0.51563, $0.50 and $0.50 per share, respectively. The dividends will be paid on September 17, 2021 to third parties with the Company and private funds under the managementholders of Angelo Gordon retaining the subordinate tranches. The Company has a 44.6% interest in the retained subordinated tranches.record on August 31, 2021.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
In this quarterly report on Form 10-Q, or this "report," we refer to AG Mortgage Investment Trust, Inc. as "we," "us," the "Company," or "our," unless we specifically state otherwise or the context indicates otherwise. We refer to our external manager, AG REIT Management, LLC, as our "Manager," and we refer to the direct parent company of our Manager, Angelo, Gordon & Co., L.P., as "Angelo Gordon."
 
The following discussion should be read in conjunction with our consolidated financial statements and the accompanying notes to our consolidated financial statements, which are included in Item 1 of this report, as well as the information contained in our Annual Report on Form 10-K for the year ended December 31, 2019, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and in Current Reports on Form 8-K that we may file from time to time.
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any subsequent filings.
 
Forward-Looking Statements
 
We make forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in this report that are subject to substantial known and unknown risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, returns, results of operations, plans, yields, objectives, the composition of our portfolio, actions by governmental entities, including the Federal Reserve, and the potential effects of actual and proposed legislation on us, and our views on certain macroeconomic trends, and the impact of the novel coronavirus ("COVID-19"). When we use the words "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "may" or similar expressions, we intend to identify forward-looking statements.

These forward-looking statements are based upon information presently available to our management and are inherently subjective, uncertain and subject to change. There can be no assurance that actual results will not differ materially from our expectations. Some, but not all, of the factors that might cause such a difference include, without limitation:

•the uncertainty and economic impact of the COVID-19 pandemic (including the impact of of any significant variants) and of responsive measures implemented by various governmental authorities, businesses and other third parties;parties, and the potential impact of COVID-19 on our personnel;
•changes in our business and investment strategy;
•our ability to predict and control costs;
•changes in interest rates and the fair value of our assets, including negative changes resulting in margin calls relating to the financing of our assets;
•changes in the yield curve;
•changes in prepayment rates on the loans we own or that underlie our investment securities;
•regulatory and structural changes in the residential loan market and its impact on non-agency mortgage markets;
•increased rates of default or delinquencies and/or decreased recovery rates on our assets;
•our ability to obtain and maintain financing arrangements on terms favorable to us or at all, particularly in light ofall;
•whether the current disruption inCompany's legacy commercial loans will be resolved on the financial markets;terms and within the timeframes anticipated;
•changes in general economic conditions, in our industry and in the finance and real estate markets, including the impact on the value of our assets;
•conditions in the market for Residential Investments, Agency RMBS, Residential Investments, including Non-Agency RMBS, CRTs, Non-U.S. RMBS, interest only securities, and residential mortgage loans, Commercial Investments, including CMBS, interest only securities, and commercial real estate loans, and Excess MSRs;Investments;
•legislative and regulatory actions by the U.S. Congress, U.S. Department of the Treasury, the Federal Reserve and other agencies and instrumentalities in response to the economic effects of the COVID-19 pandemic;
•how COVID-19 may affect us, our operations and personnel;
•the forbearance program included in the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act");
•our ability to reinstate quarterly dividends on our common and preferred stock and to make distributions to our stockholders in the future;
•our ability to maintain our qualification as a REIT for federal tax purposes; and
•our ability to qualify for an exemption from registration under the Investment Company Act of 1940, as amended, prior to the expiration of our one year grace period.amended.

We caution investors not to rely unduly on any forward-looking statements, which speak only as of the date made, and urge you to carefully consider the risks noted above and identified under the captions "Risk Factors," and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 20192020 and any subsequent filings. New risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements that we make, or that are attributable to us, are expressly qualified by this cautionary notice.

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Special Note Regarding COVID-19 Pandemic

As a result of the global COVID-19The novel coronavirus ("COVID-19") pandemic has and our disposition of assets to preserve liquidity, we incurred large realized losses during the six months ended June 30, 2020 and a sharp decline in book value. Our Net Loss Available to Common Stockholders during this period was $493.3 million and our book value per share decreased $14.86 per share from $17.61 as of December 31, 2019 to $2.75 as of June 30, 2020.

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We recognized net realized losses of $181.4 million on the sale of real estate securities, loans and related collateral and realized losses of $61.4 million on the termination of the related derivatives. We also recognized $204.3 million in net unrealized losses for the period comprised of unrealized losses on securities and unrealized losses on loans of $154.4 million and $49.9 million, respectively. These realized and unrealized losses were due directly to the disruptions of the financial markets caused by the COVID-19 pandemic and the actions we took to maintain liquidity and preserve capital, including $3.0 billion in asset sales and a significant decrease in asset valuations during the period. Included in unrealized losses on both securities and loans are net unrealized gain reversals due to sales during the first and second quarters of 2020 totaling $131.2 million. The remaining unrealized losses of $73.1 million relate to mark to market losses on securities and loans still held.

In the six month period ended June 30, 2020, we reduced the size of our GAAP investment portfolio from $4.0 billion to $652.3 million, and at June 30, 2020, our equity capital allocation was 3% to Agency RMBS and 97% to Credit Investments. In an effort to prudently manage our portfolio through unprecedented market volatility and preserve long-term stockholder value, we completed the sale of our portfolio of 30 year fixed rate Agency securities during the six months ended June 30, 2020. We believe the resulting capital allocation will impact our yield, cost of funds and leverage ratio as described more fully below.We believe the drastic reduction in the size of our investment portfolio will also materially limit our earnings going forward.

We do not yet know the full extent of the effects of the COVID-19 pandemic on our business, operations, personnel, or the U.S. economy as a whole. We cannot predict future developments, including the scope and duration of the pandemic, the effectiveness of our work from home arrangements, third-party providers' ability to support our operations, the nature and effect of any actions taken by governmental authorities and other third parties in response to the pandemic, and the other factors discussed above and throughout this report as discussed more fully under "Risk Factors." Future developments with respect to the COVID-19 pandemic and the actions taken to reduce its spread couldmay continue to materially and adversely affect our business, operations, operating results, financial condition, liquidity or capital levels.

Executive Summary

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a pandemic. On March 13, 2020, the U.S. declared a national emergency concerning the COVID-19 pandemic, and several states and municipalities subsequently declared public health emergencies. These conditions have caused, and continue to cause a significant disruption in the U.S. and world economies. To slow the spread of COVID-19, many countries, including the U.S., implemented social distancing measures, which have substantially prohibited large gatherings, including at sporting events, religious services and schools. Further, many regions, including the majority of U.S. states, have implemented additional measures, such as shelter-in-place and stay-at-home orders. Many businesses have moved to a remote working environment, temporarily suspended operations, laid off a significant percentage of their workforce and/or shut down completely. Moreover, the COVID-19 pandemic and certain of the actions taken to reduce its spread have resultedeconomies resulting in lost business revenue, rapid andrevenues, significant increases in unemployment, changes in consumer behavior and significant reductions in liquidity and the fair value of many assets, including those in which we invest. Although many of the government restrictions are in the process of being relaxed, these conditions, or some level thereof, and others are expected to continue over the near term and may prevail throughout 2020.

invest in. Beginning in mid-March 2020, the global pandemic associated with COVID-19 and the related economic conditions caused financial and mortgage-related asset markets to come under extreme duress, resulting in credit spread widening, a sharp decrease in interest rates and unprecedented illiquidity in repurchase agreement financing and MBS markets. These events, in turn, resulted in falling prices of our assets and increased margin calls from our repurchase agreement counterparties. To conserve capital, protect assets andThe illiquidity was exacerbated by inadequate demand for MBS among primary dealers due to pause the escalating negative impacts caused by the market dislocation and allow the markets for many of our assetsbalance sheet constraints. Refer to stabilize, on March 20, 2020, we notified our repurchase agreement counterparties that we did not expect to fund the existing and anticipated future margin calls under our repurchase agreements and commenced discussions with our counterparties with regard to entering into forbearance agreements. We entered into three consecutive forbearance agreements, pursuant to which the forbearing counterparties agreed not to exercise any of their rights or remedies under their applicable financing arrangement with us through June 15, 2020. We terminated the Forbearance Agreement on June 10, 2020 pursuant to which each Participating Counterparty agreed to permanently waive all existing and prior events of default under our financing agreements and reinstate our financing arrangements described in more detail below under the "Financing arrangements" headingactivities–Forbearance and Reinstatement Agreements" section below for further details related to the impact these economic conditions had on us.

Although market conditions have improved in quarters subsequent to March 2020, the full impact of this Item 2. In an effortCOVID-19 (including the impact of any significant variants) on the mortgage REIT industry, credit markets, and, consequently, on our financial condition and results of operations for future periods remains uncertain. Future developments with respect to managethe COVID-19 pandemic, including among others, the emergence of new variants, the effectiveness and durability of current vaccines and government stimulus measures, could materially and adversely affect our business, operations, operating results, financial condition, liquidity, or capital levels.

Executive Summary

During the second quarter of 2021, we continued to focus our efforts on growing our portfolio through this unprecedented turmoilof Residential Credit Investments, investing in residential mortgage loans with the financial markets,intent to improve liquidity,securitize these assets as market conditions permit. We completed two rated Non-QM securitizations and preservecontinued to purchase Non-QM Loans from both third-party originators as well as Arc Home. During the quarter, we sold Agency RMBS, Non-Agency RMBS, and Commercial Investments to continue reallocating capital we executed the following measuresto our Non-QM Loan portfolio. The information presented below provides a summary of investment and capital activity during the six months ended June 30, 2020:current quarter:

Investment Activity

•Reduced GAAP investment portfolio by $3.3 billionPurchased $446.2 million of Non-QM Loans, $197.5 million of which were purchased from $4.0 billion at December 31, 2019Arc Home, a licensed mortgage originator we invest in alongside other Angelo Gordon funds;
◦During the quarter we entered into or amended certain financing arrangements to $652.3increase the maximum uncommitted borrowing capacity to $800 million at June 30, 2020 and investment portfolio on a non-GAAP basis by $3.4 billionto finance the acquisition of Non-QM Loans;
◦Subsequent to quarter end, we purchased an additional $86.1 million of Non-QM Loans, inclusive of $58.5 million which were purchased from $4.4 billion at December 31, 2019Arc Home, while also increasing our maximum uncommitted borrowing capacity under certain financing arrangements to $1.0 billion at June 30, 2020 through sales, directly or as a result of financing counterparty seizures.support our continued growth within the Non-QM Loan market;
•Reduced financing arrangement balance on a GAAP basis by $2.9 billion from $3.2 billion at December 31, 2019 to $251.1Net sold 30 Year Fixed Rate Agency RMBS, Non-Agency RMBS, and CMBS positions for total net proceeds of $244.2 million, atof which $104.6 million is unsettled as of June 30, 20202021;
◦Subsequent to quarter end, we sold our remaining CMBS portfolio for proceeds of $33.7 million;
•Participated in a rated securitization in which Non-QM Loans with a fair value of $223.9 million were securitized, converting financing from recourse financing with mark-to-market margin calls to non-recourse financing without mark-to-market margin calls; and financing arrangements on
•Alongside private funds under the management of Angelo Gordon, participated through our unconsolidated ownership interest in MATT, in a non-GAAP basis by $3.0 billion from $3.5 billion at December 31, 2019rated Non-QM Loan securitization in which Non-QM Loans with a fair value of $171.4 million were securitized. Certain senior tranches in the securitization were sold to $469.2third parties with us and private funds under the management of Angelo Gordon retaining the subordinate tranches, which had a fair value of $25.7 million atas of June 30, 2020.2021. We have a 44.6% interest in the retained subordinate tranches. Subsequent to this transaction, MATT had securitized a majority of Non-QM Loans previously acquired and its remaining portfolio consisted primarily of the subordinate tranches retained from this securitization and past securitizations.

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Capital Activity
◦Reduced the aggregate number of our financing counterparties from 30 as of December 31, 2019 to 6 as of June 30, 2020.
•Reduced mark-to-market recourse financing by $3.2 billion from $3.5 billion at December 31, 2019Utilized our ATM program to $278.7issue 0.2 million at June 30, 2020
◦Increased non mark-to-market non-recourse financing by $185.3 million from $224.3 million at December 31, 2019 to $409.6 million at June 30, 2020shares of common stock, raising net proceeds of approximately $3.1 million;
•Reduced our GAAP leverage ratioEntered into a privately negotiated exchange offer with existing holders of the preferred stock, issuing 0.4 million shares of common stock in exchange for 0.2 million shares of preferred stock; and Economic Leverage Ratio from 4.1x and 4.1x at December 31, 2019, respectively, to 1.3x and 0.8x at June 30, 2020, respectively.
•Unwound entire portfolio of pay-fixed, receive-variable interest rate swaps held directly and through investmentsImplemented a reverse stock split primarily to decrease volatility in debt and equity of affiliates, recording net realized losses of $(65.4) million on a GAAP basis and $(67.9) million on a non-GAAP basistrading for the six months ended June 30, 2020.
•Did not declare quarterly dividends on our common or preferredstock. The reverse stock split was effective following the close of business on July 22, 2021 (the "Effective Time"). At the Effective Time, every three issued and outstanding shares of our common stock was converted into one share of common stock. No fractional shares were issued in connection with the reverse stock split. Instead, each stockholder holding fractional shares was entitled to receive, in lieu of such fractional shares, cash in an amount determined based on current conditions for the Company, we do not anticipate paying dividends onclosing price of our common or preferred stock foron the foreseeable future. Refer todate of the "Dividends" section of this Item 2 for more detail on arrearages.Effective Time.

Reconciliations of GAAP and non-GAAP financial measures appear below.

In March 2020, our Manager transitioned to a fully remote work force, to protect the safety and well-being of our personnel. Our Manager’s prior investments in technology, business continuity planning and cyber-security protocols have enabled us to continue working with limited operational impact.

Our company
 
We are a hybrid mortgage REIT that opportunistically invests in a diversified risk adjusted portfolio of Credit Investments and Agency RMBS and Credit Investments.RMBS. Our Credit Investments include Residential Investments and Commercial Investments. We are a Maryland corporation and are externally managed by our Manager, a wholly-owned subsidiary of Angelo Gordon, pursuant to a management agreement. Our Manager, pursuant to a delegation agreement dated as of June 29, 2011, has delegated to Angelo Gordon the overall responsibility of its day-to-day duties and obligations arising under the management agreement. We conduct our operations to qualify and be taxed as a real estate investment trust ("REIT"), for U.S. federal income tax purposes. Accordingly, we generally will not be subject to U.S. federal income taxes on our taxable income that we distribute currently to our stockholders as long as we maintain our intended qualification as a REIT.REIT, with the exception of our domestic taxable REIT subsidiaries ("TRS"). We also operate our business in a manner that permits us to maintain our exemption from registration under the Investment Company Act of 1940, as amended, or the Investment Company Act. Our common stock is traded on the New York Stock Exchange ("NYSE") under the symbol MITT. Our 8.25% Series A Cumulative Redeemable Preferred Stock, our 8.00% Series B Cumulative Redeemable Preferred Stock, and our 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock trade on the NYSE under the symbols MITT PrA, MITT PrB, and MITT PrC, respectively.

Prior to December 31, 2019, we conducted our business through the following segments; (i) Securities and Loans and (ii) Single-Family Rental Properties. On November 15, 2019, we sold ourOur investment portfolio of single-family rental properties and no longer separate our business into segments. We reclassified the operating results
Our investment portfolio is comprised of our Single-Family Rental Properties segment to discontinued operationsCredit Investments and excluded the income associated with the portfolio from continuing operations for all periods presented. See Note 14 to the "Notes to Consolidated Financial Statements (unaudited)" for additional financial information regarding our discontinued operations.Agency RMBS. Our Credit Investments include Residential Investments and Commercial Investments. These investments are described in more detail below.

Credit Investments

Residential Investments

Our Residential Investments include:

Compliance with Investment Company Act•Non-QM Loans, which include:
◦Residential mortgage loans that do not qualify for the Consumer Finance Protection Bureau's (the "CFPB") safe harbor provision for "qualifying mortgages," or "QM." When held directly, these investments are included in the "Residential mortgage loans, at fair value" line item on our consolidated balance sheets.
◦Non-QM Loans held alongside other private funds under the management of Angelo Gordon are held in one of our unconsolidated subsidiaries, Mortgage Acquisition Trust I LLC ("MATT") (see the "Contractual obligations" section below for more detail). These investments are included in the "Investments in debt and REIT Testsequity of affiliates" line item on our consolidated balance sheets.
◦Non-QM Loans in securitized form that are issued by MATT. The securitizations typically take the form of various classes of notes. These investments are included in the "Investments in debt and equity of affiliates" line item on our consolidated balance sheets.

We intend to conduct our business so as to maintain our exempt status•Re/Non-Performing Loans, which include:
◦RPLs or NPLs in securitized form issued by an entity in which we own an equity interest and that we hold alongside other private funds under the management of Angelo Gordon. The securitizations typically take the form of equity and not to become regulated as an investment company for purposes,various classes of the Investment Company Act. Under Section 3(a)(1)(A) of the Investment Company Act, a company is an investment company if it is, or holds itself out as being, engaged primarily, or proposes to engage primarily,notes. These investments are included in the business"RMBS" and "Investments in debt and equity of investing, reinvestingaffiliates" line items on our consolidated balance sheets.
◦RPLs or tradingNPLs we hold through interests in securities. Under Section 3(a)(1)(C) of the Investment Company Act, a company is deemed to be an investment company if it is engaged, or proposes to engage,certain consolidated trusts. These investments are secured by residential real property, including prime, Alt-A, and subprime mortgage loans, and are included in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire "investment securities" having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items)"Residential mortgage loans, at fair value" line item on an unconsolidated basis (the "40% Test"). "Investment securities" do not include, among other things, U.S. government securities, and securities issued by majority-owned subsidiaries that (i) are not investment companies and (ii) are not relying on the exceptions from the definition of investment company provided by Section 3(c)(1) or 3(c)(7) of the Investment Company Act (the so called "private investment company" exemptions).our consolidated balance sheets.

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If•Land Related Financing includes first mortgage loans we failedoriginate to comply with the 40% Test or another exemptionunder the Investment Company Actthird-party land developers and became regulated as an investment company, our ability to, among other things, use leverage would be substantially reduced and, as a result, we would be unable to conduct our business as described in this Report. Accordingly, in order to maintain our exempt status, we monitor our subsidiaries' compliance with Section 3(c)(5)(C)home builders for purposes of the Investment Company Act, which exempts from the definitionacquisition and horizontal development of "investment company" entities primarily engagedland. These loans may be held through our unconsolidated subsidiaries. These loans are included in the business"Investments in debt and equity of purchasing or otherwise acquiring mortgages and other liensaffiliates" line item on and interests in real estate. The staff of the Securities and Exchange Commission, or the SEC, generally requires an entity relying on Section 3(c)(5)(C) to invest at least 55% of its portfolio in "qualifying assets" and at least another 25% in additional qualifying assets or in "real estate-related" assets (with no more than 20% comprised of miscellaneous assets). As of December 31, 2019, we determined that our subsidiaries maintained compliance with both the 55% Test and the 80% Test requirements.consolidated balance sheets.

DueThe Residential Investments that we own also include residential mortgage-backed securities ("RMBS") that are not issued or guaranteed by Ginnie Mae or a GSE. We collectively refer to the recent market conditionsthese investments as a resultour Non-Agency RMBS. The mortgage loan collateral for residential Non-Agency RMBS consists of the COVID-19 pandemicresidential mortgage loans that do not generally conform to underwriting guidelines issued by U.S. government agencies or U.S. government-sponsored entities. Our Non-Agency RMBS include investment grade and the resultant issues related to our financing arrangements, we sold assets to meet margin calls on our financing arrangements,non-investment grade fixed and some of our subsidiaries currently fail to meet the 55% Test, and as a result must rely on Section 3(c)(7) to avoid registration as investment companies. As a result, we no longer satisfy the 40% Test.floating-rate securities.

As we cannot rely on our historical exemption from regulation as an investment company, we now must rely upon Rule 3a-2 of the Investment Company Act, which provides a safe harbor exemption, not to exceed one year, for companies that have a bona fide intent to be engaged in an excepted activity but that temporarily fail to meet the requirements for another exemption from registration as an investment company. As required by the rule, after we learned that we would become out of compliance with the exemption, our board of directors promptly adopted a resolution declaring our bona fide intent to be engaged in excepted activities and we are currently working to restore our assets to compliance. The one year grace period ends in March 2021. See Part II. Item 1A. "Risk Factors" for additional information regarding the risks associated with the failure to comply with the exemptions under the Investment Company Act.Commercial Investments
 
We calculate that at least 75% of our assets were real estate assets, cash and cash items and government securities for the year ended December 31, 2019. We also calculate that a sufficient portion of our revenue qualifies for the 75% gross income test and for the 95% gross income test rules for the year ended December 31, 2019. Overall, we believe that we met the REIT income and asset tests. We also believe that we met all other REIT requirements, including the ownership of our stock and the distribution of our taxable income. Therefore, for the year ended December 31, 2019, we believe that we qualified as a REIT under the Code. See Part II. Item 1A. "Risk Factors" for additional information regarding the risks associated with the failure to comply with the REIT rules.Our Commercial Investments include:

Our target investments
Our investment portfolio has historically been comprised of Agency RMBS, Residential Investments•Fixed and Commercial Investments, each offloating rate commercial mortgage-backed securities ("CMBS") secured by commercial mortgage loans to multiple borrowers ("Conduit") or secured by a single commercial mortgage loan which is described in more detail below. We intendbacked by a single asset (usually a large commercial property) or by a pool of cross collateralized mortgage obligations to continue to focus on our core portfolio strengthsa single borrower or related borrowers ("Single-Asset/Single-Borrower");
•Interest Only securities (CMBS backed by interest-only strips);
•Commercial real estate loans secured by commercial real property, including first mortgages and mezzanine loans for construction or redevelopment of residentiala property; and commercial credit assets. In periods where we have working capital in excess of our short-term liquidity needs, we may invest the excess in more liquid assets until such time
•CMBS, Interest-Only securities and CMBS principal-only securities which are regularly-issued by Freddie Mac as we are able to re-invest that capital in credit assets that meet our underwriting requirements. Our investment and capital allocation decisions depend on prevailing market conditions and compliance with Investment Company Act and REIT tests, among other factors, and may change over time in response to opportunities available in different economic and capital market environments.structured pass-through securities backed by multifamily mortgage loans ("Freddie Mac K-Series" or "K-Series").

Agency RMBSCommercial Investments
 
Prior to the COVID-19 pandemic, our investment portfolio was comprised primarily of residential mortgage-backed securities ("RMBS"). Certain of the assets that were in our RMBS portfolio had a guarantee of principal and interest by a U.S. government agency such as the Government National Mortgage Association, or Ginnie Mae, or by a government-sponsored entity such as the Federal National Mortgage Association, or Fannie Mae, or the Federal Home Loan Mortgage Corporation, or Freddie Mac (each, a "GSE"). We referred to these securities as Agency RMBS. Our Agency RMBS portfolio has historically included:Commercial Investments include:

•Fixed and floating rate commercial mortgage-backed securities (held as("CMBS") secured by commercial mortgage pass-through securities);
•Sequential pay fixed rateloans to multiple borrowers ("Conduit") or secured by a single commercial mortgage loan which is backed by a single asset (usually a large commercial property) or by a pool of cross collateralized mortgage obligations to a single borrower or related borrowers ("CMOs"Single-Asset/Single-Borrower");
•CMOs are structured debt instruments representing interests in specified pools of mortgage loans subdivided into multiple classes, or tranches, of securities, with each tranche having different maturities or risk profiles.
•Inverse Interest Only securities (CMOs where the holder is entitled only to the interest payments made on the mortgages underlying certain mortgage backed securities ("MBS") whose coupon has an inverse relationship to its benchmark rate, such as LIBOR);
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•Interest Only securities (CMOs where the holder is entitled only to the interest payments made on the mortgages underlying certain MBS "interest-only strips");
•Certain Agency RMBS for which the underlying collateral is not identified until shortly (generally two days) before the purchase or sale settlement date ("TBAs"); and
•Excess mortgage servicing rights ("Excess MSRs") whose underlying collateral is securitized in a trust held by a U.S. government agency or GSE.
•Excess MSRs are interests in an MSR, representing a portion of the interest payment collected from a pool of mortgage loans, net of a basic servicing fee paid to the mortgage servicer. An MSR provides a mortgage servicer with the right to service a mortgage loan or a pool of mortgages in exchange for a portion of the interest payments made on the mortgage or the underlying mortgages. An MSR is made up of two components: a basic servicing fee and an Excess MSR. The basic servicing fee is the compensation received by the mortgage servicer for the performance of its servicing duties.

As of June 30, 2020, our Agency RMBS portfolio only includes Excess mortgage servicing rights as we sold out of all other Agency investments during the six months ended June 30, 2020.

Residential Investments
The Residential Investments that we own include RMBS that are not issued or guaranteed by Ginnie Mae or a GSE or that are collateralized by non-U.S. mortgages, which we collectively refer to as our Non-Agency RMBS. The mortgage loan collateral for residential Non-Agency RMBS consists of residential mortgage loans that do not generally conform to underwriting guidelines issued by U.S. government agencies or U.S. government-sponsored entities, or are non-U.S. mortgages. Our Non-Agency RMBS include investment grade and non-investment grade fixed and floating-rate securities.

We categorize certain of our Residential Investments by weighted average credit score at origination:
•Prime (weighted average credit score above 700)
•Alt-A/Subprime
•Alt-A (weighted average credit score between 700 and 620); and
•Subprime (weighted average credit score below 620).
The Residential Investments that we do not categorize by weighted average credit score at origination include our:
•CRTs (described below)
•Non-U.S. RMBS
•Non-Agency RMBS which are collateralized by non-U.S. mortgages.
•Interest Only securities (Non-Agency RMBS(CMBS backed by interest-only strips)
•Excess MSRs whose underlying collateral is securitized in a trust not held by a U.S. government agency or GSE;
•Excess MSRs are grouped within "Interest Only and Excess MSR" throughout Part I, Item 2 of this Report and are grouped within Excess mortgage servicing rights or Excess MSRs in the Notes to the Consolidated Financial Statements (Unaudited) included in Part I, Item 1 of this Report;
•Re/Non-Performing Loans (described below);
•Non-QM Loans (described below);Commercial real estate loans secured by commercial real property, including first mortgages and mezzanine loans for construction or redevelopment of a property; and
•Land Related Financing (described below)CMBS, Interest-Only securities and CMBS principal-only securities which are regularly-issued by Freddie Mac as structured pass-through securities backed by multifamily mortgage loans ("Freddie Mac K-Series" or "K-Series").

Credit Risk Transfer securities ("CRTs") include:
•Unguaranteed and unsecured mezzanine, junior mezzanine and first loss securities issued either by GSEs or issued by other third-party institutions to transfer their exposure to mortgage default risk to private investors. These securities reference a specific pool of newly originated single family mortgages from a specified time period (typically around the time of origination). The risk of loss on the reference pool of mortgages is transferred to investors who may experience losses when adverse credit events such as defaults, liquidations or delinquencies occur in the underlying mortgages. Owners of these securities generally receive an uncapped floating interest rate equal to a predetermined spread over one-month LIBOR.

Re/Non-Performing Loans include:
•RPLs or NPLs in securitized form that are issued by an entity in which we own an equity interest and that we hold alongside other private funds under the management of Angelo Gordon. The securitizations typically take the form of
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equity and various classes of notes. These investments are included in the "RMBS" and "Investments in debt and equity of affiliates" line items on our consolidated balance sheets.
•RPLs or NPLs that we hold through interests in certain consolidated trusts. These investments are secured by residential real property, including prime, Alt-A, and subprime mortgage loans, and are included in the "Residential mortgage loans, at fair value" line item on our consolidated balance sheets.

Non-QM Loans include:

•Residential mortgage loans that do not qualify for the Consumer Finance Protection Bureau's (the "CFPB") safe harbor provision for "qualifying mortgages," or "QM," that we hold alongside other private funds under the management of Angelo Gordon. These investments are held in one of our unconsolidated subsidiaries, Mortgage Acquisition Trust I LLC ("MATT") (see the "Contractual obligations" section of this Item 2 for more detail), and are included in the "Investments in debt and equity of affiliates" line item on our consolidated balance sheets.
•Non-QM loans in securitized form that are issued by MATT. The securitizations typically take the form of various classes of notes. These investments are included in the "Investments in debt and equity of affiliates" line item on our consolidated balance sheets.

Land Related Financing includes:

•First mortgage loans we originate to third party land developers and home builders for the acquisition and horizontal development of land. These loans may be held through our unconsolidated subsidiaries or in securitized form. These loans are included either in the "Investments in debt and equity of affiliates" or in the "RMBS" line items on our consolidated balance sheets.

Commercial Investments
 
We also invest in Commercial Investments. Our Commercial Investments include:

•CommercialFixed and floating rate commercial mortgage-backed securities ("CMBS") secured by commercial mortgage loans to multiple borrowers ("Conduit") or secured by a single commercial mortgage loan which is backed by a single asset (usually a large commercial property) or by a pool of cross collateralized mortgage obligations to a single borrower or related borrowers ("Single-Asset/Single-Borrower");
•Interest Only securities (CMBS backed by interest-only strips);
•Commercial real estate loans secured by commercial real property, including first mortgages and mezzanine loans preferred equity, first or second lien loans, subordinate interests in first mortgages, bridge loans to be used in the acquisition,for construction or redevelopment of a propertyproperty; and mezzanine financing secured by interests in commercial real estate; and
•Freddie Mac K-Series (described below).

CMBS include:

•Fixed and floating-rate CMBS, including investment grade and non-investment grade classes. CMBS are secured by, or evidence ownership interest in, a single commercial mortgage loan or a pool of commercial mortgage loans.

Freddie Mac K-Series ("K-Series") include:
•CMBS, Interest-Only securities and CMBS principal-only securities which are regularly-issued by Freddie Mac as structured pass-through securities backed by multifamily mortgage loans. These K-Series featureloans ("Freddie Mac K-Series" or "K-Series").

Agency RMBS
Our investment portfolio includes RMBS. Certain of the assets in our RMBS portfolio have a wide rangeguarantee of investor options which include guaranteed seniorprincipal and interest-only bondsinterest by a U.S. government agency such as the Government National Mortgage Association, or Ginnie Mae, or by a government-sponsored entity such as the Federal National Mortgage Association, or Fannie Mae, or the Federal Home Loan Mortgage Corporation, or Freddie Mac (each, a "GSE"). We refer to these securities as Agency RMBS ("Agency RMBS"). Our Agency RMBS includes fixed rate securities held as mortgage pass-through securities, as well as unguaranteed senior, mezzanine, subordinate and interest-only bonds. Our K-Series portfolio includes unguaranteed senior, mezzanine, subordinate and interest-only bonds. Throughout Item 2, we categorize our Freddie Mac K-Series interest-only bonds as partexcess mortgage servicing rights ("Excess MSRs"). Excess MSRs are interests in mortgage servicing rights ("MSR"), representing a portion of our Interest-Only securities.the interest payment collected from a pool of mortgage loans, net of a basic servicing fee paid to the mortgage servicer. An MSR provides a mortgage servicer with the right to service a mortgage loan or a pool of mortgages in exchange for a portion of the interest payments made on the mortgage or the underlying mortgages.
 
Investment classification
 
Throughout this Report,report, (1) we use the terms "credit portfolio" and "credit investments" to refer to our Residential Investments and Commercial Investments, and, if applicable, ABS, inclusive of investments held within affiliated entities but exclusive of AG Arc (discussed below); (2) we refer to our Re/Non-Performing Loans (exclusive of our RPLs or NPLs in securitized form that we purchase from an affiliate or affiliates of the Manager)form), Non-QM Loans (exclusive of those in securitized form), Land Related Financing, (exclusive of loans in securitized form), and commercial real estate loans, collectively, as our "loans"; (3) we use the term "credit securities" to refer to our credit portfolio, excluding Excess MSRs and loans; and (4) we use the term "real estate securities" or "securities" to refer to our Agency RMBS portfolio, exclusive of Excess MSRs, and our credit securities.
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Our "investment portfolio" refers to our combined Agency RMBS portfolio and credit portfolio and encompasses all of the investments described above.
 
We also use the term "GAAP investment portfolio" which consists of (i) our Agency RMBS, exclusive of (x) TBAsto-be-announced securities ("TBAs"), if any, and (y) any investmentsinvestment classified as "Other assets" on our consolidated balance sheets (our "GAAP Agency RMBS portfolio"), and (ii) our
credit portfolio, exclusive of (x) all investments held within affiliated entities and (y) any investments classified as "Other assets" on our consolidated balance sheets (our "GAAP credit portfolio"). See Note 2 to the "Notes to Consolidated Financial Statements (unaudited)"Statements" for a discussion of our investments held within affiliated entities. For a reconciliation of our investment portfolio to our GAAP investment portfolio, see the GAAP Investment Portfolio Reconciliation Table below.

This presentation of our investment portfolio is consistent with how our management team evaluates our business, and we believe this presentation, when considered with the GAAP presentation, provides supplemental information useful for investors in evaluating our investment portfolio and financial condition.
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Arc Home LLC

We, alongside private funds under the management of Angelo Gordon, through AG Arc LLC, one of our indirect subsidiaries ("AG Arc"), formed Arc Home LLC ("Arc Home"). Arc Home through its wholly-owned subsidiary, originates conforming, Government, Jumbo, Non-QM, and other non-conforming residential mortgage loans and retains the mortgage servicing rights associated with the loans that it originates, and purchases additional mortgage servicing rights from third-party sellers.

Discontinued Operations

On November 15, 2019, we sold our portfoliooriginates. From time to time, Arc Home may sell originated loans to us or other private funds under the management of single-family rental properties to a third party. We reclassified the operating results of our single-family rental properties segment to discontinued operations and excluded the income associated with the portfolio from continuing operations for all periods presented.Angelo Gordon. See Note 1410 to the "Notes to Consolidated Financial Statements (unaudited)" for additional financial information regarding our discontinued operations.transactions with affiliates.
 
Market conditions

During the second quarter of 2020,2021, the financial markets began to recovergenerally continued their recovery from the significantunprecedented dislocation caused by the COVID-19 outbreakpandemic and the resultantresulting economic shutdown across the majoritymuch of the U.S. economy. The uncertain conditions prevailing atWe believe several factors have contributed to the endmomentum of the first quarterongoing rise in risk asset prices, including, most recently, vaccination rates, reopening of businesses, demand for fixed income assets, and the start of the second quarter caused significant spread widening, an unprecedented liquidity void, which along with other factors put significant pressure on the mortgage REIT industry. This pressure has largely abated as the U.S.improving economic data. The Federal Reserve committed to a broad array of programs designed to support the financial markets, including unlimited purchases of Agency RMBS and U.S. Treasuries, as well as purchases in certain segments of the corporate credit market. See "Recent government activity" below. Furthermore, the large-scale liquidity-driven selling from a broad array of fixed income investors in March has reversed as many bond funds experienced inflows during the quarter. The Fed has also consistently signaled that it intends to maintain low interest rates for the foreseeable future. Home price indices continued to point to double-digit growth for national home prices, and in its April 2021 reading, the Case-Shiller index rose almost 15% year-over-year. We expect that the mortgage and consumer sectors will continue to benefit from the unemployment support, which some states are phasing out, and stimulus disbursements, which were included in the Bipartisan-Bicameral Omnibus COVID Relief Deal bill, which was passed by Congress in December 2020.

After recordingNon-QM Whole Loans and Securitizations: In the widestsecond quarter of 2021, loan originators shifted their monetization strategies away from broadly syndicated sales in favor of negotiated flow agreements and loan sales targeted towards much smaller audiences. In the securitization space, we observed over $5 billion of Non-QM transactions price, almost twice the volume observed in the first quarter. We expect volumes to continue at this pace throughout the year as rates in the Non-QM space have noticeably decreased over the course of this year. In general, the price of residential whole loans continued to remain high as aggregators accounted for the decreased cost of funds in securitization, new government stimulus packages, and the demand for Non-QM assets remains outsized compared to originators ability to reach pre-COVID volumes.

Agency RMBS: Nominal spreads sinceon generic Agency RMBS versus benchmark rates continued to experience volatility in the Global Financial Crisissecond quarter 2021. Although there was continued positive momentum in April 2021, spreads began widening during the following two months. Continued strong bank demand and steady buying by the Federal Reserve remain broadly supportive of the sector, but the Federal Reserve has signaled that it is beginning to prepare for a reduction of its asset purchases in the future. Payups on specified pools also saw significant volatility during the second quarter 2021, initially falling sharply in response to market participants selling higher coupon pools and a slowing of collateralized mortgage obligation activity, then partially recovering late in the quarter as lower yields forced accounts to refocus on prepayment protection.

Non-Agency RMBS: Spread tightening for most securitized residential debt sectors extended through the second quarter supported by strong collateral fundamentals, sharply higher home prices, demand for yield, and the ongoing employment recovery. Spreads for most mortgage sub-asset classes narrowed to levels below February 2020 levels, including AAA tranches of re-performing and non-qualified mortgage securitizations and mezzanine Credit Risk Transfer ("GFC"CRT"), tranches. Issuance of new RMBS rose 35% from the mortgage backed sectors rebounded considerably from late Marchfirst quarter to over $40 billion, largely due to prime and agency-eligible issuance, which nearly doubled to $16.5 billion. Issuance of non-QM loans and CRT rose 36% to $6 billion and 20% to $6.7 billion, respectively. RMBS volume in the first half of 2021 totaled $70 billion and was around 11% higher than the same period in 2019 (comparison provided to 2019 as volumes in 2020 were impacted as a result of increased liquidity and better-than-expected data through the second quarter along with relatively broad-based risk-on sentiment across the financial markets. At the end of June, spreads had tightened significantly but nonetheless remain wide compared to pre-COVID levels, which we believe is due to the ongoing uncertainty created by regional re-opening plans and the impact of federal stimulus on employment and hiring.

COVID-19 pandemic).
Following one of the most violent market moves ever in Agency MBS, decisive action from, and broad-based support by, the Federal Reserve was able to stabilize both the Agency MBS and funding markets by early May. This allowed for the generic current coupon MBS spread versus the 10-year Treasury rate to recoup 22 basis points of the 33 basis points of Q1 widening by the end of June. Specified pools also recovered much of their price declines as demand for protection from refinancing-driven prepayments surged in the face of historically low interest rates. Federal Reserve buying, strong bank deposit growth, broad demand for yield and declining interest rate volatility have all combined to create a very supportive backdrop for valuations despite elevated gross issuance.

In the RMBS sectors, including Credit Risk Transfer ("CRT"), the spread recovery began in April at the top of the capital structure, and by June, spreads for assets lower in the structure also experienced material tightening. Similarly, senior tranches were the first to rally, particularly on the heels of the Federal Reserve’s announcement of a GFC-era lending facility (TALF) for some senior ABS and CMBS positions. By the end of the second quarter, demand was visible lower in the capital structure as market participants searched for yield in the ongoing low interest rate environment.

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Tighter secondary spreads brought issuers to market beginning in May across a range of residential sub-sectors, including: Non-QM, Non-/Re-Performing, Prime Jumbo, Single-Family Rental and CRT. Non-QM represented the majority of the RMBS issuance as issuers capitalized on rebounding spreads and investor demand. CRT issuance included the first benchmark deal from Freddie Mac since March, which priced on June 30, 2020, and a deal from a mortgage insurer. Both were well oversubscribed. The quarter’s RMBS issuance totaled $8.2 billion, well off first quarter and year-ago levels around $30 billion.

Renewed primary issuance and tighter spreads are welcome developments, but spreads for most mortgage sub-sectors remain wide of pre-COVID levels as uncertainty hangs over the market, reflecting a wide range of potential outcomes. In the months following COVID, mortgage payment forbearances and consumer relief have largely been within the market’s initial expectations, helping fuel the spread rally. Home prices have been well supported given strong demand and limited supply in the marketplace. Government stimulus through the CARES Act and various payment relief programs have helped maintain a level of continuity that was critical to the performance of consumer assets in particular.

The senior parts of the CMBS capital structure that initially led the market wider in March also led the market tighter during the quarter as fixed income mutual funds experienced inflows and opportunistic capital was directed to CMBS. After trading as wide as swaps plus approximately 3.25%, AAA conduit CMBS spreads ended the quarter at approximately swaps plus 1.10%, only about 0.20% wide to pre-COVID-19 levels. The tightening in AAA spreads improved economics for issuers enough to slowly restart the new issue market; however, second quarter CMBS issuance of $7 billion was the lowest amount in eight years and a far cry from the $23 billion issued in the first quarter.

After AAA CMBS pricing recovered, AA rated securities were quick to follow. Eventually, we saw a similar dynamic in single A rated bonds. In June, the rally began extending into our target assets, such as BBB rated conduit CMBS (and even some bonds originally rated BB). While prices have moved higher from the distressed levels of March, fundamentals remain under pressure with the conduit delinquency rate rising to 10.3% at the end of June, just 2 basis points below the record high set in July 2012. An additional 4.1% of loans are in their grace period (not current, but not listed as more than 30 days delinquent).

The heavy selling pressure in Single-Asset/Single-Borrower ("SA/SB") bonds in March also reversed in April and deals from favored assets classes such as industrial, multifamily and even office are back to trading within a few points of their pre-COVID levels with very flat credit curves. Certain hotel and retail deals have rallied from their lows, but this is much more deal specific with a high level of focus on sponsorship and much steeper credit curves.

Finally, in the Agency CMBS market, Freddie K B-Pieces were one of the first sectors to recover in April, likely driven in large part by the assumption that the multifamily loans that secure these deals are unlikely to default. While historical performance of these deals has been strong, the asset class in general may not be immune from credit challenges going forward.

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

Recent government activity

The Federal Reserve has taken a number of actions to stabilize markets as a result of the impact of the COVID-19 pandemic. Since late 2019, the Federal Reserve has been conducting large scale overnight repo operations to address disruptions in the U.S. Treasury, Agency debt and Agency RMBS financing markets and has substantially increased these operations to address funding disruptions resulting from the economic crisis and market dislocations resulting from the COVID-19 pandemic. On March 15, 2020, the Federal Reserve announced a $700 billion asset purchase program to provide liquidity to the U.S. Treasury and Agency RMBS markets. Specifically, the Federal Reserve announced that it would purchase at least $500 billion of U.S. Treasuries and at least $200 billion of Agency RMBS. The Federal Reserve also lowered the federal funds rate by 100 basis points to a range of 0.0% - 0.25%, after having already lowered the federal funds rate by 50 basis points on March 3, 2020.

The markets for U.S. Treasuries, MBS and other mortgage and fixed income markets experienced severe dislocations in March as a result of the COVID-19 pandemic. To address these issues in the fixed income and funding markets, on March 23, 2020, the Federal Reserve announced a program to acquire U.S. Treasuries and Agency RMBS in the amounts needed to support smooth market functioning. Since that date, the Federal Reserve and the Federal Housing Finance Agency (“FHFA”) have taken various other steps to support certain other fixed income markets, to support mortgage servicers and to implement various portions of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The FHFA instructed the GSEs on how to handle servicer advances for loans that back Agency RMBS that enter into forbearance, which limits prepayments during the forbearance period that could have resulted otherwise. Further, the FHFA announced a loan payment deferment plan for Agency multi-family borrowers facing hardship from revenue losses caused by COVID-19, with the condition that these borrowers suspend all evictions for renters unable to pay rent due to the impact of COVID-19.

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On March 27, 2020, the CARES Act was signed into law to provide many forms of direct support to individuals and small businesses in order to stem the steep decline in economic activity resulting from the COVID-19 pandemic. The over $2 trillion relief bill, among other things, provided for direct payments to each American making up to $75,000 a year, increased unemployment benefits for up to four months (on top of state benefits), funding to hospitals and health care providers, loans and investments to businesses, states and municipalities and grants to the airline industry. On April 24, 2020, President Trump signed an additional funding bill into law that provided an additional $484 billion of funding to individuals, small businesses, hospitals, health care providers and additional coronavirus testing efforts. In addition, in response to the economic impact of the COVID-19 pandemic, governors of several states issued executive orders prohibiting evictions and foreclosures for specified periods of time, and many courts enacted emergency rules delaying hearings related to evictions industry and/or foreclosures.

One additional provision of the CARES Act provides up to 360 days of forbearance relief from mortgage loan payments for borrowers with federally backed (e.g. Fannie Mae or Freddie Mac) mortgages who experience financial hardship related to the pandemic. Combined with expected widespread unemployment stemming from the economic slowdown caused by the pandemic, residential mortgage assets came under extreme spread pressure. The CARES Act also prohibits foreclosures for 60 days and evictions by landlords for 120 days after its enactment. On June 17, 2020, the FHFA announced that Fannie Mae and Freddie Mac will extend their single-family moratorium on foreclosure and evictions until at least August 31, 2020. These legislative and agency actions have created uncertainty around the ultimate effects on delinquencies, defaults, prepayment speeds, low interest rates and home price appreciation.

The scope and nature of any future actions the Federal Reserve and other governmental authorities will ultimately undertake are unknown and will continue to evolve, especially in light of the COVID-19 pandemic and the upcoming presidential and Congressional elections in the United States. We cannot predict how, in the long term, these and other actions, as well as the negative impacts from the ongoing COVID-19 pandemic, will affect the efficiency, liquidity and stability of the financial, credit and mortgage markets, and thus, our business. Greater uncertainty frequently leads to wider asset spreads or lower prices and higher hedging costs.

The current regulatory environment may be impacted by future legislative developments, such as changes to Fannie Mae and Freddie Mac, including their continued existence and their roles in the market. The impact of such potential reforms on our operations remains unclear.Company.    
 
Results of operationsOperations
 
Our operating results can be affected by a number of factors and primarily depend on the size and composition of our investment portfolio, the level of our net interest income, the fair value of our assets and the supply of, and demand for, our target assetsinvestments in residential mortgages in the marketplace, among other things, which can be impacted by unanticipated credit events, such as defaults, liquidations or delinquencies, experienced by borrowers whose mortgage loans are included in our investment portfolio and other unanticipated events in our markets. Our primary source of net income or loss available to common stockholders is our net interest income, less our cost of hedging, which represents the difference between the interest
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earned on our investment portfolio and the costs of financing and hedging our investment portfolio. Prior to the sale of our 30 year fixed rate Agency RMBS portfolioeconomic hedges in March 2020, our net interest income varied primarily as a result of changes in market interest rates, prepayment speeds, as measured by the Constant Prepayment Rate ("CPR")place on the Agency RMBS in our investment portfolio, andas well as any income or losses from our funding and hedging costs. As a result of the global COVID-19 pandemic and our disposition of assets to preserve liquidity, we incurred large realized lossesequity investments in 2020 and a sharp decline in book value. Additionally, we believe the drastic reduction in the size of our investment portfolio will materially limit our earnings going forward.affiliates.
 
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Three Months Ended June 30, 20202021 compared to the Three Months Ended June 30, 20192020

The table below presents certain information from our consolidated statements of operations for the three months ended June 30, 20202021 and June 30, 20192020 (in thousands):
Three Months EndedThree Months Ended
June 30, 2020June 30, 2019Increase/(Decrease)June 30, 2021June 30, 2020Increase/(Decrease)
Statement of Operations Data:Statement of Operations Data:   Statement of Operations Data:   
Net Interest IncomeNet Interest Income   Net Interest Income   
Interest incomeInterest income$13,369  $40,901  $(27,532) Interest income$14,228 $13,369 $859 
Interest expenseInterest expense8,613  23,030  (14,417) Interest expense5,294 8,613 (3,319)
Total Net Interest IncomeTotal Net Interest Income4,756  17,871  (13,115) Total Net Interest Income8,934 4,756 4,178 
Other Income/(Loss)Other Income/(Loss)  Other Income/(Loss)  
Net realized gain/(loss)Net realized gain/(loss)(91,609) (27,510) (64,099) Net realized gain/(loss)4,374 (91,609)95,983 
Net interest component of interest rate swapsNet interest component of interest rate swaps—  1,800  (1,800) Net interest component of interest rate swaps(1,573)— (1,573)
Unrealized gain/(loss) on real estate securities and loans, net109,632  43,165  66,467  
Unrealized gain/(loss) on derivative and other instruments, net(9,453) (10,839) 1,386  
Foreign currency gain/(loss), net(156) —  (156) 
Other income1  216  (215) 
Unrealized gain/(loss), netUnrealized gain/(loss), net9,685 100,179 (90,494)
Other income/(loss), netOther income/(loss), net— (155)155 
Total Other Income/(Loss)Total Other Income/(Loss)8,415  6,832  1,583  Total Other Income/(Loss)12,486 8,415 4,071 
ExpensesExpenses  Expenses  
Management fee to affiliateManagement fee to affiliate1,678  2,400  (722) Management fee to affiliate1,667 1,678 (11)
Other operating expensesOther operating expenses4,482  3,807  675  Other operating expenses4,866 4,557 309 
Restructuring related expensesRestructuring related expenses7,104  —  7,104  Restructuring related expenses— 7,104 (7,104)
Equity based compensation to affiliate75  73  2  
Excise tax—  186  (186) 
Servicing feesServicing fees566  416  150  Servicing fees672 566 106 
Total ExpensesTotal Expenses13,905  6,882  7,023  Total Expenses7,205 13,905 (6,700)
Income/(loss) before equity in earnings/(loss) from affiliatesIncome/(loss) before equity in earnings/(loss) from affiliates(734) 17,821  (18,555) Income/(loss) before equity in earnings/(loss) from affiliates14,215 (734)14,949 
Equity in earnings/(loss) from affiliatesEquity in earnings/(loss) from affiliates3,434  2,050  1,384  Equity in earnings/(loss) from affiliates1,278 3,434 (2,156)
Net Income/(Loss) from Continuing OperationsNet Income/(Loss) from Continuing Operations2,700  19,871  (17,171) Net Income/(Loss) from Continuing Operations15,493 2,700 12,793 
Net Income/(Loss) from Discontinued OperationsNet Income/(Loss) from Discontinued Operations361  (1,193) 1,554  Net Income/(Loss) from Discontinued Operations— 361 (361)
Net Income/(Loss)Net Income/(Loss)3,061  18,678  (15,617) Net Income/(Loss)15,493 3,061 12,432 
Gain on Exchange Offers, netGain on Exchange Offers, net114 — 114 
Dividends on preferred stockDividends on preferred stock5,667  3,367  2,300  Dividends on preferred stock(4,689)(5,667)978 
Net Income/(Loss) Available to Common StockholdersNet Income/(Loss) Available to Common Stockholders$(2,606) $15,311  $(17,917) Net Income/(Loss) Available to Common Stockholders$10,918 $(2,606)$13,524 

Interest income

Interest income is calculated using the effective interest method for our GAAP investment portfolio and calculated based on the actual coupon rate and the outstanding principal balance on our U.S. Treasury securities, if any.rate.
 
Interest income decreasedincreased from June 30, 20192020 to June 30, 20202021 primarily due to the drastic reductionan increase in the size of our investment portfolio as a result of the global COVID-19 pandemic.portfolio. The weighted average amortized cost of our GAAP investment portfolio and U.S. Treasury securities, if any, of $2.4increased by $0.7 billion from $3.4 billion for the three months ended June 30, 2019 to $1.0 billion for the three months ended June 30, 2020. We expect2020 to $1.7 billion for the three months ended June 30, 2021. The increase was primarily driven by purchases of Non-QM Loans and Agency RMBS during the period. This increase was offset by a decrease in the weighted average yield of our interest income going forwardGAAP investment portfolio by 1.82% from 5.14% for the three months ended June 30, 2020 to be materially lower compared3.32% for the three months ended June 30, 2021.
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to comparable prior periods as a result of the changes in our investment portfolio as set forth in the tables of the "Investment activities" section below as a result of the COVID-19 pandemic.

Interest expense

Interest expense is calculated based on the actual financing rate and the outstanding financing balance of our GAAP investment portfolio and U.S. Treasury securities, if any.portfolio. 

Interest expense decreased from June 30, 20192020 to June 30, 20202021 primarily due to the drastic reductiona decrease in the size ofweighted average financing rate on our GAAP investment portfolio and relatedduring the period. The weighted average financing as a result ofrate on our GAAP investment portfolio decreased by 4.44% from 6.25% for the global COVID-19 pandemic. Thethree months ended June 30, 2020 to 1.81% for the three months ended June 30, 2021. This was offset by an increase in the weighted average financing balance on our GAAP investment portfolio and U.S. Treasury securities, if any, during the period of $2.5$0.6 billion from $3.1$0.6 billion for the three months ended June 30, 20192020 to $551.3 million$1.2 billion for the three months ended June 30, 2020. Refer to the "Financing activities" section below for a discussion of the material changes in our cost of funds. We do not expect our interest expense, set forth in the consolidated statements of operations table above, to be indicative of our future interest expense due to the changes in our financing arrangements described in the "Financing activities" section below.2021. Additionally,

Net realized gain/(loss)
 
Net realized gain/(loss) represents the net gain or loss recognized on any (i) sales and seizures by financing counterparties of real estate securities out of our GAAP investment portfolio, including any associated deficiencies recognized, (ii) sales of loans out of our GAAP investment portfolio, transfers of loans from our GAAP investment portfolio to real estate owned included in Other assets, and sales of Other assets, (iii) settlement of derivatives and other instruments, and (iv) prior to the adoption of ASU 2016-13, other-than-temporary-impairment ("OTTI") charges recorded during the period. See Note 2, Note 3, Note 4 and Note 5 to the "Notes to Consolidated Financial Statements (unaudited)" for further discussion on OTTI. The following table presents a summary of Net realized gain/(loss) for the three months ended June 30, 20202021 and June 30, 20192020 (in thousands):
Three Months Ended
 June 30, 2020June 30, 2019
Sale/seizures of real estate securities and related collateral$(36,288) $3,745  
Sale of loans and loans transferred to or sold from Other assets(55,798) 775  
Settlement of derivatives and other instruments477  (21,671) 
OTTI—  (10,359) 
Total Net realized gain/(loss)$(91,609) $(27,510) 
Three Months Ended
 June 30, 2021June 30, 2020
Sales/Seizures of real estate securities$(4,382)$(36,288)
Sales of loans and loans transferred to or sold from Other assets7,859 (55,798)
Settlement of derivatives and other instruments897 477 
Total Net realized gain/(loss)$4,374 $(91,609)

Due to the unprecedented market conditions experienced as a result of the global COVID-19 pandemic and in order to continue to preserve liquidity and meet margin calls, we sold approximately $0.6 billion of securities and loans during the three months ended June 30, 2020.
Net interest component of interest rate swaps

Net interest component of interest rate swaps represents the net interest income received or expense paid on our interest rate swaps.
 
Net interest component of interest rate swaps decreased from June 30, 20192020 to June 30, 2020 as2021. As of the June 30, 2021, we held an interest rate swap portfolio of $806.0 million of notional with a weighted average receive-variable rate of 0.17% and a weighted average pay-fix rate of 0.74%. We did not hold any interest rate swaps during the three months ended June 30, 2020.

Unrealized gain/(loss), net

The following table presents a summary of Unrealized gain/(loss), net for the three months ended June 30, 2020. For the three months ended June 30, 2019, the net interest component of interest rate swaps was $1.8 million. Refer to the "Hedging activities" section below for a discussion of material changes in our interest rate swap portfolio.2021 and 2020 (in thousands):
Three Months Ended
 June 30, 2021June 30, 2020
Real estate securities$19,693 $48,924 
Loans6,823 60,708 
Excess mortgage servicing rights(176)(888)
Derivatives(15,798)(186)
Securitized debt(857)(8,379)
Total Unrealized gain/(loss), net$9,685 $100,179 

Unrealized gain/(loss) on real estate securities and loans, net

During the second quarter of 2020, the Company recognized $109.6 million in net unrealized gains comprised of unrealized gains on securities and unrealized gains on loans of $48.9 million and $60.7 million, respectively. Included in unrealized gains on both securities and loans are net unrealized loss reversals due to sales during the second quarter of 2020 totaling $88.1 million. The remaining gains of $21.5 million relate to mark to market gains on securities and loans still held at June 30, 2020.
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Unrealized gain/(loss) on derivative and other instruments, net
For the three months ended June 30, 2020, the losses of $9.5 million were comprised of unrealized losses on securitized debt, Excess MSRs, and derivatives.

Foreign currency gain/Other income/(loss), net

Foreign currency gain/Other income/(loss), net pertainsincludes gains or losses on foreign currency pertaining to the effects of remeasuring the monetary assets and liabilities of our foreign investments into U.S. dollars using foreign currency exchange rates at the end of the reporting period. Refer to Note 2 of the "Notes to the Consolidated Financial Statements" for details on what specifically is included in the "Foreign currency gain/(loss), net" line item. ForDuring the three months ended June 30, 2019,2021, we did not hold any positions denominated in foreign currencies.

Other income
Other income currently includes certain fees we receive on our loans and CMBS portfolios. Other income decreased from June 30, 2019 to June 30, 2020 due to a premium received on a credit default swap during the three months ended June 30, 2019 that we did not receive during the three months ended June 30, 2020.53


Management fee to affiliate
 
Our management fee is based upon a percentage of our Stockholders’ Equity. See the "Contractual obligations" section of this Item 2 for further detail on the calculation of our management fee and for the definition of Stockholders’ Equity. Management fees decreasedremained relatively flat from June 30, 20192020 to June 30, 2020 primarily due to a decrease in our Stockholders' Equity as calculated pursuant to our Management Agreement.2021.

On April 6, 2020, we executed an amendment to our Management Agreement pursuant to which our Manager agreed to defer our payment of the management fee and reimbursement of expenses beginning with the first quarter of 2020 through September 30, 2020, or such other time as we and the Manager agree.

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Other operating expenses
 
These amounts areThis amount is primarily comprised of professional fees, directors’ and officers’ ("D&O") insurance and directors’ fees, as well as certain expenses reimbursable to the Manager. We are required to reimburse our Manager or its affiliates for operating expenses which are incurred by our Manager or its affiliates on our behalf, including certain salary expenses and other expenses relating to legal, accounting, due diligence, and other services. Refer to the "Contractual obligations" section below for more detail on certain expenses reimbursable to the Manager. The following table presents a summary of expenses within Other operating expenses broken out between non-investment related expenses and investment related expenses for the three months ended June 30, 20202021 and June 30, 20192020 (in thousands):
Three Months Ended
 June 30, 2020June 30, 2019
Non Investment Related Expenses
Affiliate expense reimbursement - Operating expenses$1,697  $1,745  
Professional fees648  469  
D&O insurance174  174  
Directors' compensation173  218  
Other198  220  
Total Corporate Expenses2,890  2,826  
Investment Related Expenses
Affiliate expense reimbursement - Deal related expenses162  173  
Professional fees47  46  
Residential mortgage loan related expenses887  216  
Transaction related expenses and deal related performance fees (1)373  409  
Other123  137  
Total Investment Expenses1,592  981  
Total Other operating expenses$4,482  $3,807  

Three Months Ended
 June 30, 2021June 30, 2020
Non Investment Related Expenses
Affiliate expense reimbursement - Operating expenses (1)$1,000 $1,697 
Professional fees480 648 
D&O insurance394 174 
Directors' compensation167 173 
Equity based compensation to affiliate— 75 
Other258 198 
Total Non Investment Related Expenses2,299 2,965 
Investment Related Expenses
Affiliate expense reimbursement - Deal related expenses48 162 
Affiliate expense reimbursement - Transaction related expenses80 — 
Residential mortgage loan related expenses642 887 
Transaction related expenses and deal related performance fees (2)1,805 373 
Other(8)170 
Total Investment Expenses2,567 1,592 
Total Other operating expenses$4,866 $4,557 
(1)For the year ended December 31, 2021, the Manager agreed to waive its right to receive expense reimbursements of $0.8 million. For the three months ended June 30, 2020 and June 30, 2019, total transaction2021, $0.2 million of the reduction in reimbursable expenses is included within the "Affiliated expense reimbursement - Operating expenses" line item above.
(2)The increase in Transaction related expenses and deal related performance fees were $0.6 million and $0.4 million, respectively. Forfrom the three months ended June 30, 2020 the $0.6 million includes $0.2 million of deferred financing costs that are included within interest expense. Forto the three months ended June 30, 2019,2021 is primarily a result of expenses incurred in relation to the $0.4 million includes $30.5 thousand deferred financing costs that are included within interest expense.settlement of the June 2021 securitization of Non-QM Loans.
 
Restructuring related expenses

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

Equity based compensation to affiliate
Equity based compensation to affiliate represents the amortization of the fair value of our restricted stock units granted to our Manager, less the present value of dividends expected to be paid on the underlying shares through the requisite period.
For the three months ended June 30, 2020 and June 30, 2019, our equity based compensation to affiliate remained relatively unchanged.

Excise tax
Excise tax represents a four percent tax on the required amount of any ordinary income and net capital gains not distributed during the year. The quarterly expense is calculated in accordance with applicable tax regulations. For the three months ended June 30, 2020, our excise tax decreased primarily due to losses associated with COVID-19.

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Servicing fees
 
We incur servicing fee expenses in connection with the servicing of our Residential mortgage loans. As of June 30, 20202021 and June 30, 2019,2020, we owned Residential mortgage loans with a fair value of $379.8 million$1.0 billion and $200.0$379.8 million, respectively. This increase in the fair value of the Residential mortgage loans was a result of net purchases of Residential mortgage loan poolsNon-QM Loans in 2019 and 2020.
2021. For the three months ended June 30, 20202021 and June 30, 2019,2020, our servicing fees increased primarily due to our purchasesas a result of residential mortgage loans described above.these net purchases.

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Equity in earnings/(loss) from affiliates
 
Equity in earnings/(loss) from affiliates represents our share of earnings and profits of investments held within affiliated entities. A majoritySubstantially all of these investments are comprised of real estate securities, loans, and our investment in AG Arc. The increase frombelow table reconciles the quarter ended June 30, 2019net income/(loss) to the quarter"Equity in earnings/(loss) from affiliates" line item on our consolidated statements of operations (in thousands).
Three Months Ended
June 30, 2021June 30, 2020
Non-QM Loans (1)$1,275 $(8,115)
AG Arc (2)(2,706)9,510 
Land Related Financing540 473 
Other2,169 1,566 
Equity in earnings/(loss) from affiliates$1,278 $3,434 
(1)The increase in earnings within MATT for the three months ended June 30, 2020 to the three months ended June 30, 2021 was the primarily pertains to our sharethe result of mark-to-market gains on the Non-QM Loan portfolio.
(2)The loss at AG Arc during the three months ended June 30, 2021 was primarily the result of losses on the fair value of the unrealizedMSR portfolio held by Arc Home. The loss recognized by AG Arc also does not include our portion of gains recorded by Arc Home in connection with the sale of residential mortgage loans to us. For the three months ended June 30, 2021, we eliminated $1.4 million of intra-entity profits recognized by Arc Home and also decreased the cost basis of the underlying loans we purchased by the same amount. Refer to Note 2 to the "Notes to Consolidated Financial Statements (unaudited)" for more information on investments held within affiliated entities.this accounting policy.

Discontinued operationsGain on Exchange Offers, net

On November 15, 2019,We completed a privately negotiated exchange offer during the three months ended June 30, 2021. As a result of the exchange offer, we soldexchanged 86,478 shares of our portfolio8.00% Series B Cumulative Redeemable Preferred Stock ("Series B Preferred Stock") and 154,383 shares of single-family rental properties toour 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock ("Series C Preferred Stock") for a third party at a pricetotal of approximately $137 million.429,802 shares of common stock. We recognized a gain of $0.2$0.1 million as a result ofin connection with the transaction. We reclassifiedoffer. Refer to the operating results of"Liquidity and capital resources" section below for more information on the single-family rental properties segment to discontinued operations and excluded the income from continuing operations for all periods presented.
exchange offer.
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Six Months Ended June 30, 20202021 compared to the Six Months Ended June 30, 20192020

The table below presents certain information from our consolidated statements of operations for the six months ended June 30, 20202021 and June 30, 20192020 (in thousands):
Six Months EndedSix Months Ended
June 30, 2020June 30, 2019Increase/(Decrease)June 30, 2021June 30, 2020Increase/(Decrease)
Statement of Operations Data:Statement of Operations Data:   Statement of Operations Data:   
Net Interest IncomeNet Interest Income   Net Interest Income  
Interest incomeInterest income$53,637  $82,391  $(28,754) Interest income$26,347 $53,637 $(27,290)
Interest expenseInterest expense28,584  45,124  (16,540) Interest expense9,355 28,584 (19,229)
Total Net Interest IncomeTotal Net Interest Income25,053  37,267  (12,214) Total Net Interest Income16,992 25,053 (8,061)
Other Income/(Loss)Other Income/(Loss)  Other Income/(Loss) 
Net realized gain/(loss)Net realized gain/(loss)(242,752) (48,093) (194,659) Net realized gain/(loss)336 (242,752)243,088 
Net interest component of interest rate swapsNet interest component of interest rate swaps923  3,581  (2,658) Net interest component of interest rate swaps(2,314)923 (3,237)
Unrealized gain/(loss) on real estate securities and loans, net(204,265) 89,918  (294,183) 
Unrealized gain/(loss) on derivative and other instruments, net(3,767) (20,925) 17,158  
Foreign currency gain/(loss), net1,493  —  1,493  
Other income4  630  (626) 
Unrealized gain/(loss), netUnrealized gain/(loss), net29,534 (208,032)237,566 
Other income/(loss), netOther income/(loss), net37 1,497 (1,460)
Total Other Income/(Loss)Total Other Income/(Loss)(448,364) 25,111  (473,475) Total Other Income/(Loss)27,593 (448,364)475,957 
ExpensesExpenses  Expenses 
Management fee to affiliateManagement fee to affiliate3,827  4,745  (918) Management fee to affiliate3,321 3,827 (506)
Other operating expensesOther operating expenses5,324  7,588  (2,264) Other operating expenses8,849 5,487 3,362 
Restructuring related expensesRestructuring related expenses8,604  —  8,604  Restructuring related expenses— 8,604 (8,604)
Equity based compensation to affiliate163  199  (36) 
Excise taxExcise tax(815) 278  (1,093) Excise tax— (815)815 
Servicing feesServicing fees1,145  787  358  Servicing fees1,287 1,145 142 
Total ExpensesTotal Expenses18,248  13,597  4,651  Total Expenses13,457 18,248 (4,791)
Income/(loss) before equity in earnings/(loss) from affiliatesIncome/(loss) before equity in earnings/(loss) from affiliates(441,559) 48,781  (490,340) Income/(loss) before equity in earnings/(loss) from affiliates31,128 (441,559)472,687 
Equity in earnings/(loss) from affiliatesEquity in earnings/(loss) from affiliates(40,758) 1,279  (42,037) Equity in earnings/(loss) from affiliates27,614 (40,758)68,372 
Net Income/(Loss) from Continuing OperationsNet Income/(Loss) from Continuing Operations(482,317) 50,060  (532,377) Net Income/(Loss) from Continuing Operations58,742 (482,317)541,059 
Net Income/(Loss) from Discontinued OperationsNet Income/(Loss) from Discontinued Operations361  (2,227) 2,588  Net Income/(Loss) from Discontinued Operations— 361 (361)
Net Income/(Loss)Net Income/(Loss)(481,956) 47,833  (529,789) Net Income/(Loss)58,742 (481,956)540,698 
Gain on Exchange Offers, netGain on Exchange Offers, net472 — 472 
Dividends on preferred stockDividends on preferred stock11,334  6,734  4,600  Dividends on preferred stock(9,613)(11,334)1,721 
Net Income/(Loss) Available to Common StockholdersNet Income/(Loss) Available to Common Stockholders$(493,290) $41,099  $(534,389) Net Income/(Loss) Available to Common Stockholders$49,601 $(493,290)$542,891 

Interest income

Interest income decreased from June 30, 20192020 to June 30, 20202021 primarily due to the drastic reductiona decrease in the size of our investment portfolio as a result of the global COVID-19 pandemic.portfolio. The weighted average amortized cost of our GAAP investment portfolio and U.S. Treasury securities, if any, of $1.0decreased by $0.7 billion from $3.3$2.3 billion atfor the six months ended June 30, 20192020 to $2.3$1.6 billion atfor the six months ended June 30, 2020. We expect our interest income going forward2021. The decrease was driven by sales and seizures which occurred primarily during the first and second quarters of 2020 due to be materially lower compared to comparable prior periods as a result of the changes in our investment portfolio as set forth in the tables of the "Investment activities" section below as a result ofmarket volatility caused by the COVID-19 pandemic.

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Interest expense

Interest expense decreased from June 30, 20192020 to June 30, 20202021 primarily due to the drastic reductiona decrease in the sizeamount of financing on our GAAP investment portfolio and related financing as a result ofduring the global COVID-19 pandemic.period. The weighted average financing balance on our GAAP investment portfolio and U.S. Treasury securities, if any, during the period of $1.2decreased by $0.8 billion from $3.0 billion for the six months ended June 30, 2019 to $1.8 billion for the six months ended June 30, 2020. Refer2020 to $1.0 billion for the "Financing activities" section below forsix
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months ended June 30, 2021. The decrease was driven by financing removed on sales and seizures which occurred primarily during the first and second quarters of 2020 due to market volatility caused by the COVID-19 pandemic. This was offset by a discussion of the material changes in our cost of funds. We do not expect our interest expense, set forthdecrease in the consolidated statementsweighted average financing rate on our GAAP investment portfolio of operations table above,1.34% from 3.20% for the six months ended June 30, 2020 to be indicative of our future interest expense due to1.86% for the changes in our financing arrangements described in the "Financing activities" section below.six months ended June 30, 2021.

Net realized gain/(loss)
 
The following table presents a summary of Net realized gain/(loss) for the six months ended June 30, 20202021 and June 30, 20192020 (in thousands):
Six Months Ended
 June 30, 2020June 30, 2019
Sale/seizures of real estate securities and related collateral$(122,593) $5,807  
Sale of loans and loans transferred to or sold from Other assets(58,765) 948  
Settlement of derivatives and other instruments(61,394) (41,447) 
OTTI—  (13,401) 
Total Net realized gain/(loss)$(242,752) $(48,093) 

As previously discussed, in order to preserve liquidity and meet margin calls, we sold approximately $3.5 billion of securities and loans during the six months ended June 30, 2020, a majority of which were sold due to the unprecedented market conditions experienced as a result of the global COVID-19 pandemic.
Six Months Ended
 June 30, 2021June 30, 2020
Sales/Seizures of real estate securities$(4,882)$(122,593)
Sales of loans and loans transferred to or sold from Other assets4,486 (58,765)
Settlement of derivatives and other instruments732 (61,394)
Total Net realized gain/(loss)$336 $(242,752)

Net interest component of interest rate swaps

Net interest component of interest rate swaps decreased from June 30, 2019 to June 30, 2020 as we sold out of our interest rate swaps positions in March 2020. For the six months ended June 30, 2019, theWe recognized losses on net interest component of interest rate swaps was $3.6 million. Refer to the "Hedging activities" section below for a discussion of material changes in our interest rate swap portfolio.

Unrealized gain/(loss) on real estate securities and loans, net
The disruptions of the financial markets due to the COVID-19 pandemic have caused credit spread widening, a sharp decrease in interest rates and unprecedented illiquidity in repurchase agreement financing and MBS markets. These conditions have put significant downward pressure on the fair value of our assets and resulted in unrealized losses for the six months ended June 30, 2021 compared with gains for the six months June 30, 2020 primarily due to the difference in terms on the outstanding interest rate swaps during the periods coupled with our exiting our interest rate swap portfolio in the first quarter of 2020. As of the June 30, 2021, we held an interest rate swap portfolio of $806.0 million of notional with a weighted average receive-variable rate of 0.17% and a weighted average pay-fix rate of 0.74%.

During the six months ended 2020, the Company recognized $204.3 million in net unrealized losses comprised of unrealized losses on securities and unrealized losses on loans of $154.4 million and $49.9 million, respectively. These losses were due directly to the disruptions of the financial markets caused by the COVID-19 pandemic and the Company's response thereto. Included in unrealized losses on both securities and loans are net unrealized gain reversals due to sales during the period totaling $131.2 million. The remaining losses of $73.1 million relate to mark to market losses on securities and loans still held at June 30, 2020.
Unrealized gain/(loss) on derivative and other instruments,, net

ForThe following table presents a summary of Unrealized gain/(loss), net for the six months ended June 30, 2021 and 2020 the losses of $3.8 million was comprised of unrealized losses on derivatives and excess MSRs offset by unrealized gains on securitized debt.(in thousands):

Six Months Ended
 June 30, 2021June 30, 2020
Real estate securities$(4,266)$(154,427)
Loans24,124 (49,838)
Excess mortgage servicing rights(108)(3,524)
Derivatives12,686 (12,079)
Securitized debt(2,902)11,836 
Total Unrealized gain/(loss), net$29,534 $(208,032)
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Foreign currency gain/Other income/(loss), net

During the six months ended June 30, 2020, the value of GBP relative to USD decreased, resulting in a gain on the liabilities held in foreign currencies. WeAs of June 30, 2021, we did not hold any positions denominated in foreign currencies during the six months ended June 30, 2019.

Other income
Other income currently includes certain fees we receive on our loans and CMBS portfolios. Other income decreased from June 30, 2019 to June 30, 2020 as a result of origination fees received related to new commercial real estate loans and a premium received on a credit default swap 2019 that we did not receive in 2020.currencies.

Management fee to affiliate
 
Management fees decreased from June 30, 20192020 to June 30, 20202021 primarily due to a decrease in our Stockholders' Equity as calculated pursuant to our Management Agreement.

On April 6, 2020, we executed an amendment to our Management Agreement pursuant to which our Manager agreed to defer our payment of the management fee and reimbursement of expenses beginning with the first quarter of 2020 through September 30, 2020, or such other time as we and the Manager agree.
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Other operating expenses
 
The following table presents a summary of expenses within Other operating expenses broken out between non-investment related expenses and investment related expenses for the threesix months ended June 30, 20202021 and June 30, 20192020 (in thousands):

Six Months Ended
 June 30, 2020June 30, 2019
Non Investment Related Expenses
Affiliate expense reimbursement - Operating expenses$3,576  $3,490  
Professional fees1,193  909  
D&O insurance348  348  
Directors' compensation391  439  
Other427  454  
Total Corporate Expenses5,935  5,640  
Investment Related Expenses
Affiliate expense reimbursement - Deal related expenses324  367  
Affiliate expense reimbursement - Transaction related expenses and deal related performance fees (1)—  42  
Professional fees94  92  
Residential mortgage loan related expenses1,579  398  
Transaction related expenses and deal related performance fees (1)(2,846) 763  
Other238  286  
Total Investment Expenses(611) 1,948  
Total Other operating expenses$5,324  $7,588  

Six Months Ended
 June 30, 2021June 30, 2020
Non Investment Related Expenses
Affiliate expense reimbursement - Operating expenses (1)$2,250 $3,576 
Professional fees1,705 1,193 
D&O insurance788 348 
Directors' compensation335 391 
Equity based compensation to affiliate— 163 
Other414 427 
Total Non Investment Related Expenses5,492 6,098 
Investment Related Expenses
Affiliate expense reimbursement - Deal related expenses$329 $324 
Affiliate expense reimbursement - Transaction related expenses80 — 
Residential mortgage loan related expenses1,250 1,579 
Transaction related expenses and deal related performance fees (2)1,638 (2,846)
Other60 332 
Total Investment Expenses3,357 (611)
Total Other operating expenses$8,849 $5,487 
(1)For the year ended December 31, 2021, the Manager agreed to waive its right to receive expense reimbursements of $0.8 million. For the six months ended June 30, 2020 and June 30, 2019, total transaction related2021, $0.4 million of the reduction in reimbursable expenses and deal related performance fees were $(2.8) million and $0.8 million, respectively. For the six months ended June 30, 2020, the $(2.8) million includes a de minimis amount of deferred financing costs that areis included within interest expense. For the six months ended June 30, 2019, the $0.8 million includes $30.5 thousand of deferred financing costs that are included within interest expense. "Affiliated expense reimbursement - Operating expenses" line item above.
(2)The decreaseincrease in Transaction related expenses and deal related performance fees from the six months ended June 30, 20192020 to the six months ended June 30, 20202021 is primarily athe result of accrued deal related performance fees being reversed in the current period ended March 31, 2020 due to a decline in the price of the related assets, as well as the seizure of such assets by financing counterparties.counterparties, coupled with expenses incurred in relation to the settlement of the June 2021 securitization of Non-QM Loans in Q2 2021.
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Restructuring related expenses

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

Equity based compensation to affiliateExcise tax

ForDuring the six months ended June 30, 2020, and June 30, 2019, our equity based compensation to affiliate remained relatively unchanged.

Excise tax
Forwe reversed previously accrued excise taxes primarily as a result of losses associated with COVID-19. We did not record any excise taxes for the six months ended June 30, 2020 and June 30, 2019, our excise tax decreased primarily due to losses associated with COVID-19.2021.

Servicing fees
 
For the six months ended June 30, 20202021 and June 30, 2019,2020, our servicing fees increased primarily due toas a result of net purchases of residential mortgage loans described above.Non-QM Loans during 2021.

Equity in earnings/(loss) from affiliates
 
The decreasebelow table reconciles the net income/(loss) to the "Equity in earnings/(loss) from affiliates" line item on our consolidated statements of operations (in thousands).
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Six Months Ended
June 30, 2021June 30, 2020
Non-QM Loans (1)$15,921 $(34,844)
AG Arc (2)3,634 (516)
Land Related Financing1,250 1,137 
Other6,809 (6,535)
Equity in earnings/(loss) from affiliates$27,614 $(40,758)
(1)The increase in earnings within MATT for the six months ended June 30, 20192020 to the six months ended June 30, 20202021 was the primarily pertainsthe result of mark-to-market gains on the Non-QM Loan portfolio and related financing.
(2)The earnings at AG Arc during the six months ended June 30, 2021 were primarily the result of $4.4 million net income related to our shareArc Home's lending and servicing operations, offset by $(1.2) million related to changes in the fair value of the unrealized lossesMSR portfolio held by Arc Home. The loss recognized by AG Arc also does not include our portion of gains recorded by Arc Home in connection with the sale of residential mortgage loans to us. For the six months ended June 30, 2021, we eliminated $1.9 million of intra-entity profits recognized by Arc Home and also decreased the cost basis of the underlying loans we purchased by the same amount. Refer to Note 2 to the "Notes to Consolidated Financial Statements (unaudited)" for more information on investments held within affiliated entities.this accounting policy.

Gain on Exchange Offers, net

We completed two privately negotiated exchange offers during the six months ended June 30, 2021. As a result of the exchange offers, we exchanged 153,325 shares of our 8.25% Series A Cumulative Redeemable Preferred Stock ("Series A Preferred Stock"), 437,087 shares of our Series B Preferred Stock, and 154,383 shares of our Series C Preferred Stock for a total of 1,367,264 shares of common stock. We recognized a gain of $0.5 million in connection with the offers. Refer to the "Liquidity and capital resources" section below for more information on the exchange offers.

Book value per share
As of June 30, 2020 and December 31, 2019, ourAdjusted book value per share

On July 12, 2021, we announced a one-for-three reverse stock split of our outstanding shares of common stock. The reverse stock split was effected following the close of business on July 22, 2021. All per share was $2.75amounts and $17.61, respectively.common shares outstanding for all periods presented have been adjusted on a retroactive basis to reflect the one-for-three reverse stock split.

Per share amounts for book value are calculated using all outstanding common shares in accordance with GAAP, including all vested shares grantedissued to our Manager, and our independent directors under our equity incentive plans as of quarter-end. BookAs of June 30, 2021, the net proceeds for the Series A Preferred Stock, Series B Preferred Stock, and our Series C Preferred Stock were $40.1 million, $90.2 million, and $90.2 million, respectively. As of June 30, 2021, the liquidation preference for the issued and outstanding Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock was $41.6 million, $93.2 million, and $93.2 million, respectively.

As of June 30, 2021 and December 31, 2020, our book value isper common share calculated using stockholders’ equity less net proceeds ofon our 8.25% Series A Cumulative Redeemable Preferred Stock ($49.9 million), 8.00% Series B Cumulative Redeemable Preferred Stock ($111.3 million), and 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock ($111.2 million)preferred stock as the numerator. The liquidation preference for the Series A, Series Bnumerator was $15.18 and Series C Preferred Stock is $52.8 million, $117.3 million and $117.3 million,$12.40, respectively. The liquidation preference asAs of June 30, 2021 and December 31, 2020, includes accumulatedour adjusted book value per common share calculated using stockholders’ equity less the liquidation preference of our preferred stock as the numerator was $14.72 and unpaid dividends (whether or not authorized or declared) in the aggregate amount of $5.7 million. Book value does not include any accrual of accumulated, unpaid, or undeclared dividends on our Cumulative Redeemable Preferred Stock. Refer to the "Dividends" section below and Note 9 in the "Notes to Consolidated Financing Statements (Unaudited)" for more information on the arrearages related to the preferred stock.$11.81, respectively

Presentation of investment, financing and hedging activities
 
In the "Investment activities," "Financing activities," "Hedging activities"activities," and "Liquidity and capital resources" sections of this Item 2, where we disclose our investment portfolio and the related financing arrangements, we have presented this information inclusive of (i) unconsolidated ownership interests in affiliates that are accounted for under GAAP using the equity method and (ii) TBAs, which are accounted for as derivatives under GAAP. Our investment portfolio and the related financing arrangements are presented along with a reconciliation to GAAP. This presentation of our investment portfolio is consistent with how our management team evaluates the business, and we believe this presentation, when considered with the GAAP presentation, provides supplemental information useful for investors in evaluating our investment portfolio and financial condition. See Note 2 to the "Notes to Consolidated Financial Statements (unaudited)" for a discussion of investments in debt and equity of affiliates and TBAs.affiliates.
 
74

Net interest margin and leverage ratio

GAAP net interest margin and non-GAAP net interest margin, a non-GAAP financial measure, are calculated by subtracting the
59


weighted average cost of funds from the weighted average yield for our GAAP investment portfolio or our investment portfolio, respectively, both of which both exclude cash held by us and any net TBA position. The weighted average yield on our Agency RMBScredit portfolio and our creditAgency RMBS portfolio represents an effective interest rate, which utilizes all estimates of future cash flows and adjusts for actual prepayment and cash flow activity as of quarter-end. The calculation of weighted average yield is weighted on fair value.value at quarter-end. The weighted average cost of funds is the sum of the weighted average funding costs on total financing arrangements outstanding at quarter-end, including all non-recourse financing arrangements, and our weighted average hedging cost, which is the weighted average of the net pay rate on our interest rate swaps, the net receive/pay rate on our Treasury long and short positions, respectively, and the net receivable rate on our IO index derivatives, if any.swaps. Both elements of cost of funds are weighted by the outstanding financing arrangements on our GAAP investment portfolio or our investment portfolio and securitized debt at quarter-end, exclusive of repurchase agreements associated with U.S. Treasury securities, if any.quarter-end.

As our capital allocation shifts, our weighted average yields and weighted average cost of funds will also shift. Our Agency Investments, given their liquidity and high credit quality, are eligible for higher levels of leverage, while our Credit Investments, with less liquidity and/or more exposure to credit risk and prepayment, utilize lower levels of leverage. As a result, our leverage ratio is determined by our portfolio mix as well as many additional factors, including the liquidity of our portfolio, the availability and price of our financing, the diversification of our counterparties and their available capacity to finance our assets, and anticipated regulatory developments. Prior to COVID-19, we generally maintained a leverage ratio range of 4.0 to 5.0 times to finance our investment portfolio, on a fully deployed capital basis. Our debt-to-equity ratio is directly correlated to the composition of our portfolio; specifically, the higher percentage of Agency Investments we hold, the higher our leverage ratio is, while the higher percentage of Credit Investments we hold, the lower our leverage ratio is. As previously mentioned, in an effort to prudently manage our portfolio through unprecedented market volatility and preserve long-term stockholder value, we completed the sale of our 30 year fixed rate Agency securities during the first quarter of 2020. We believe the resulting capital allocation impacts the weighted average yield, weighted average cost of funds and leverage ratio as illustrated below.

Net interest margin and leverage ratio are metrics that management believes should be considered when evaluating the performance of our investment portfolio. See the "Financing activities" section below for more detail on our leverage ratio.
 
The chart below sets forth the net interest margin and leverage ratio from our investment portfolio as of June 30, 20202021 and June 30, 20192020 and a reconciliation to our GAAP investment portfolio:
June 30, 2021June 30, 2021   
Weighted AverageWeighted AverageGAAP Investment PortfolioInvestments in Debt and Equity of AffiliatesInvestment Portfolio (a)
YieldYield3.43 %16.55 %4.36 %
Cost of Funds (b)Cost of Funds (b)1.66 %3.11 %1.70 %
Net Interest MarginNet Interest Margin1.77 %13.44 %2.66 %
Leverage Ratio (c)Leverage Ratio (c)3.4x(d)2.2x
June 30, 2020June 30, 2020   June 30, 2020   
Weighted AverageWeighted AverageGAAP Investment PortfolioInvestments in Debt and Equity of AffiliatesInvestment Portfolio (a)Weighted AverageGAAP Investment PortfolioInvestments in Debt and Equity of AffiliatesInvestment Portfolio (a)
YieldYield5.55 %8.00 %6.52 %Yield5.55 %8.00 %6.52 %
Cost of Funds (b)Cost of Funds (b)3.34 %4.94 %3.86 %Cost of Funds (b)3.34 %4.94 %3.86 %
Net Interest MarginNet Interest Margin2.21 %3.06 %2.66 %Net Interest Margin2.21 %3.06 %2.66 %
Leverage Ratio (c)Leverage Ratio (c)1.3x(d)0.8xLeverage Ratio (c)1.3x(d)0.8x
June 30, 2019   
Weighted AverageGAAP Investment PortfolioInvestments in Debt and Equity of AffiliatesInvestment Portfolio (a)
Yield4.91 %5.92 %5.07 %
Cost of Funds (b)2.88 %4.62 %2.92 %
Net Interest Margin2.03 %1.30 %2.15 %
Leverage Ratio (c)4.0x(d)4.2x
(a)Excludes any net TBA position.position, if any.
(b)Includes cost of non-recourse financing arrangements.
(c)The leverage ratio on our GAAP investment portfolio represents GAAP leverage. The leverage ratio on our investment portfolio represents Economic Leverage as defined below in the "Financing Activities" section.
(d)Refer to the "Financing activities" section below for an aggregate breakout of leverage.
 
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Core Earnings
 
We are not currently disclosingdefine Core Earnings, a non-GAAP financial measure, as Net Income/(loss) available to common stockholders excluding (i) (a) unrealized gains/(losses) on real estate securities, loans, derivatives and other investments, inclusive of our investment in AG Arc, and (b) net realized gains/(losses) on the sale or termination of such instruments, (ii) any transaction related expenses incurred in connection with the acquisition or disposition of our investments, (iii) accrued deal-related performance fees payable to Arc Home and third party operators to the extent the primary component of the accrual relates to items that are excluded from Core Earnings, such as unrealized and realized gains/(losses), (iv) realized and unrealized changes in the fair value of Arc Home's net mortgage servicing rights and the derivatives intended to offset changes in the fair value of those net mortgage servicing rights, (v) deferred taxes recognized at our taxable REIT subsidiaries, if any, (vi) any foreign currency gain/(loss) relating to monetary assets and liabilities, (vii) income from discontinued operations, and (viii) any gains/(losses)
60


associated with exchange transactions on our common and preferred stock. Items (i) through (viii) above include any amount related to those items held in affiliated entities. Management considers the transaction related expenses referenced in (ii) above to be similar to realized losses incurred at the acquisition or disposition of an asset and does not view them as being part of its core operations. Management views the exclusion described in (iv) above to be consistent with how it calculates Core Earnings on the remainder of its portfolio. Management excludes all deferred taxes because it believes deferred taxes are not representative of current operations.

As defined, Core Earnings include the net interest income and other income earned on our investments on a yield adjusted basis, including TBA dollar roll income or any other investment activity that may earn or pay net interest or its economic equivalent. One of our objectives is to generate net income from net interest margin on the portfolio, and management uses Core Earnings, as one of several metrics, to help measure our performance against this objective. Management believes that this non-GAAP measure, when considered with our GAAP financial statements, provides supplemental information useful for investors to help evaluate our financial performance. This metric, in conjunction with related GAAP measures, provides greater transparency into the information used by our management team in its financial and operational decision-making. Our presentation of Core Earnings may not be comparable to similarly-titled measures of other companies, who may use different calculations. This non-GAAP measure should not be considered a substitute for, or superior to, the financial measures calculated in accordance with GAAP. Our GAAP financial results and the reconciliations from these results should be carefully evaluated. Refer to the "Results of Operations" section above for a detailed discussion of our GAAP financial results.

A reconciliation of "Net Income/(loss) available to common stockholders" to Core Earnings for the three and six months ended June 30, 2021 and 2020 is set forth below (in thousands, except per share data):
Three Months EndedSix Months Ended
June 30, 2021June 30, 2020June 30, 2021June 30, 2020
Net Income/(loss) available to common stockholders$10,918 $(2,606)$49,601 $(493,290)
Add (Deduct):
Net realized (gain)/loss(4,374)91,609 (336)242,752 
Unrealized (gain)/loss, net(9,685)(100,179)(29,534)208,032 
Transaction related expenses and deal related performance fees (1)2,024 572 2,012 (2,840)
Equity in (earnings)/loss from affiliates(1,278)(3,434)(27,614)40,758 
Net interest income and expenses from equity method investments (2)(3)2,539 11,233 9,861 12,466 
Net (income)/loss from discontinued operations— (361)— (361)
Other (income)/loss, net— 156 (14)(1,493)
(Gains) from Exchange Offers, net(114)— (472)— 
Drop income— — — 322 
Core Earnings$30 $(3,010)$3,504 $6,346 
Core Earnings, per Diluted Share (4)$— $(0.27)$0.24 $0.58 
(1)For the three months ended June 30, 2021 and 2020, total transaction related expenses and deal related performance fees included $1.9 million and $0.4 million, respectively, recorded within the "Other operating expenses" line item and $0.1 million and $0.2 million, respectively, recorded within the "Interest expense" line item, which relates to the amortization of deferred financing costs. For the six months ended June 30, 2021 and 2020, total transaction related expenses and deal related performance fees included $1.7 million and $(2.8) million, respectively, recorded within the "Other operating expenses" line item and $0.3 million and a de minimis amount, respectively, recorded within the "Interest expense" line item, which relates to the amortization of deferred financing costs.
(2)For the three months ended June 30, 2021 and 2020, $(1.5) million or $(0.10) per share and $(0.4) million or $(0.04) per share, respectively; and for the six months ended June 30, 2021 and 2020, $1.1 million or $0.07 per share and $(5.0) million or $(0.46) per share, respectively, of realized and unrealized changes in the fair value of Arc Home's net mortgage servicing rights and corresponding derivatives net of taxes were excluded from Core Earnings per diluted share.
(3)Core income or loss recognized by AG Arc does not include our portion of gains recorded by Arc Home in connection with the sale of residential mortgage loans to us. For the three and six months ended June 30, 2021, we eliminated $1.4 million and $1.9 million of intra-entity profits recognized by Arc Home, respectively, and also decreased the cost basis of the underlying loans we purchased by the same amount. We did not eliminate any intra-entity profits for the three and six months ended June 30, 2020. Refer to Note 2 to the "Notes to Consolidated Financial Statements (unaudited)"
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for more information on this accounting policy.
(4)All per share amounts for all periods presented have been adjusted to reflect the one-for-three reverse stock split.

For the first three quarters of 2020, we determined that this measure,Core Earnings, as we have historically calculated it, woulddid not appropriately capture the materially negative economic impact of the COVID-19 pandemic on our business, liquidity, results of operations, financial condition, andor our ability to make distributions to our stockholders. As financial markets stabilize, we will evaluate whether core earnings or other non-GAAP financial measures would help both management and investors evaluatestockholders due to the impact of COVID-19 on our operating performance for future periods.business.

Investment activities

Overall, our intention is to allocate capital to investment opportunities with attractive risk/return profiles in our target asset classes. Historically, our investment portfolio has been comprisedconsisted of Residential Investments, Agency RMBS, Residential Investments and Commercial Investments.Investments however, we have focused our efforts more recently on growing our portfolio of Residential Credit Investments, investing in residential mortgage loans with the intent to securitize these assets as market conditions permit. Our capital allocation to each of these investments is set forth in more detail below. Our investment and capital allocation decisions depend on prevailing market conditions and compliance with Investment Company Act and REIT tests, among other factors, and may change over time in response to opportunities available in different economic and capital market environments. The risk-reward profile of our investment opportunities changes continuously with the market, with labor, housing and economic fundamentals, and with U.S. monetary policy, among others. As a result, in reacting to market conditions and taking into account a variety of other factors, including liquidity, duration, interest rate expectations and hedging, the mix of our assets changes over time as we opportunistically deploy capital.

As a resultOur credit investments are subject to risk of loss with regard to principal and interest payments. We evaluate each investment in our credit portfolio based on the characteristics of the market turmoil relatedunderlying collateral, the securitization structure, expected return, geography, collateral type, and the cost and availability of financing, among others. We maintain a comprehensive portfolio management process that generally includes day-to-day oversight by the portfolio management team and a quarterly credit review process for each investment that examines the need for a potential reduction in accretable yield, missed or late contractual payments, significant declines in collateral performance, prepayments, projected defaults, loss severities and other data that may indicate a potential issue in our ability to the COVID-19 pandemic, we maintained a defensive posture during the second quarter as it related to new investments. We prioritized liquidity and capital preservation to acquisition. During the six months ended June 30, 2020, we reduced the size of our GAAP investment portfolio from $4.0 billion to $652.3 million, and at June 30, 2020, our equity capital allocation was 3% to Agency RMBS and 97% to Credit Investments. We have expertise in Agency RMBS, and may choose to allocate additional capital in those assets should the opportunity arise; however, in the near term we expectrecover our capital from the investment. These processes are designed to enable our Manager to evaluate and proactively to manage asset-specific credit issues and identify credit trends on a portfolio-wide basis. Nevertheless, we cannot be almost entirely allocatedcertain that our review will identify all issues within our portfolio due to, Credit Investments. Overall,among other things, adverse economic conditions or events adversely affecting specific assets. Therefore, potential future losses may also stem from issues with our intention is to allocate capital to investment opportunities with attractive risk/return profiles ininvestments that are not identified by our target asset classes.credit reviews.

We evaluate investments in Agency RMBS using factors including, among others, expected future prepayment trends, supply of and demand for Agency RMBS, costs of financing, costs of hedging, liquidity, expected future interest rate volatility and the overall shape of the U.S. Treasury and interest rate swap yield curves. Prepayment speeds, as reflected by the CPR, and interest rates vary according to the type of investment, conditions in financial markets, competition and other factors, none of which can be predicted with any certainty. In general, as prepayment speeds on our Agency RMBS portfolio increase, the related purchase premium amortization increases, thereby reducing the net yield on such assets.
Our credit investments are subject to risk of loss with regard to principal and interest payments. We evaluate each investment in our credit portfolio based on the characteristics of the underlying collateral, the securitization structure, expected return, geography, collateral type, and the cost and availability of financing, among others. We maintain a comprehensive portfolio management process that generally includes day-to-day oversight by the portfolio management team and a quarterly credit review process for each investment that examines the need for a potential reduction in accretable yield, missed or late contractual payments, significant declines in collateral performance, prepayments, projected defaults, loss severities and other data which may indicate a potential issue in our ability to recover our capital from the investment. These processes are designed to enable our Manager to evaluate and proactively manage asset-specific credit issues and identify credit trends on a portfolio-wide basis. Nevertheless, we cannot be certain that our review will identify all issues within our portfolio due to, among other things, adverse economic conditions or events adversely affecting specific assets. Therefore, potential future losses may also stem from issues with our investments that are not identified by our credit reviews.

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The following table presents a detailed break-down of our investment portfolio as of June 30, 20202021 and December 31, 20192020 and a reconciliation to our GAAP Investment Portfolio ($ in thousands):
 Fair ValuePercent of Investment Portfolio
Fair Value		Leverage Ratio (a)
 June 30, 2020December 31, 2019June 30, 2020December 31, 2019June 30, 2020December 31, 2019
Agency RMBS (b)$12,688  $2,333,626  1.3 %52.8 %—  7.1x
Residential Investments732,375  1,493,869  76.3 %33.8 %1.6x2.7x
Commercial Investments214,339  589,709  22.4 %13.4 %1.0x2.1x
Total: Investment Portfolio$959,402  $4,417,204  100.0 %100.0 %0.8x4.1x
Investments in Debt and Equity of Affiliates (c)$307,130  $373,126  N/AN/A(d)(d)
Total: GAAP Investment Portfolio$652,272  $4,044,078  N/AN/A1.3x4.1x
 Fair ValuePercent of Investment Portfolio
Fair Value		Leverage Ratio (a)
 June 30, 2021December 31, 2020June 30, 2021December 31, 2020June 30, 2021December 31, 2020
Residential Investments$1,172,851 $691,478 59.6 %49.5 %0.9x0.2x
Commercial Investments93,893 182,296 4.8 %13.1 %0.8x0.9x
Agency RMBS699,568 521,843 35.6 %37.4 %6.6x6.1x
Total: Investment Portfolio$1,966,312 $1,395,617 100.0 %100.0 %2.2x1.5x
Investments in Debt and Equity of Affiliates (b)$139,985 $217,964 N/AN/A(c)(c)
Total: GAAP Investment Portfolio$1,826,327 $1,177,653 N/AN/A3.4x2.4x
(a)The leverage ratio on our investment portfolio represents Economic Leverage as defined below in the "Financing Activities" section and is calculated by dividing each investment type's total recourse financing arrangements by its allocated equity (described in the chart below). Cash posted as collateral has been allocated pro-rata by each respective asset class'class's Economic Leverage amount. The Economic Leverage Ratio excludes any fully non-recourse financing arrangements. The leverage ratio on our Agency RMBSarrangements and includes any net receivables or payables on TBA. The leverage ratio on our GAAP Investment Portfolio represents GAAP leverage.
(b)As of June 30, 2020, Agency RMBS includes only Excess MSRs.
(c)Certain Re/Non-Performing Loans held in securitized form are presented net of non-recourse securitized debt.
(d)(c)Refer to the "Financing activities" section below for an aggregate breakout of leverage.

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

The following table presents a summary of the allocated equity of our investment portfolio as of June 30, 20202021 and December 31, 20192020 ($ in thousands):
Allocated EquityPercent of Equity Allocated EquityPercent of Equity
June 30, 2020December 31, 2019June 30, 2020December 31, 2019 June 30, 2021December 31, 2020June 30, 2021December 31, 2020
Agency RMBS$11,426  $295,358  3.1 %34.8 %
Residential InvestmentsResidential Investments242,320  359,923  66.3 %42.4 %Residential Investments$313,133 $229,183 67.2 %56.0 %
Commercial InvestmentsCommercial Investments111,632  193,765  30.6 %22.8 %Commercial Investments53,269 99,668 11.4 %24.3 %
Agency RMBSAgency RMBS99,475 80,854 21.4 %19.7 %
TotalTotal$365,378  $849,046  100.0 %100.0 %Total$465,877 $409,705 100.0 %100.0 %
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The following table presents a reconciliation of our Investment Portfolio to our GAAP Investment Portfolio as of June 30, 2021 and December 31, 2020 ($ in thousands):
InstrumentCurrent FaceAmortized Cost
Unrealized Mark-
to-Market
Fair Value (1)
Weighted Average
Coupon (2)
Weighted
Average Yield
Weighted Average
Life  (Years) (3)
Agency RMBS:       
Excess MSR (4)$2,441,668  $18,174  $(5,486) $12,688  N/A4.85 %6.38
Total Agency RMBS2,441,668  18,174  (5,486) 12,688  N/A4.85 %6.38
Credit Investments:
Residential Investments
Prime (5)14,243  7,995  624  8,619  3.70 %7.11 %19.77
Alt-A/Subprime (5)16,887  6,902  2,373  9,275  4.25 %9.02 %14.00
Credit Risk Transfer16,294  16,294  (4,043) 12,251  4.70 %4.62 %16.52
Non-U.S. RMBS3,213  4,113  (469) 3,644  6.06 %6.00 %3.16
Interest Only and Excess MSR (4)(6)215,176  249  179  428  0.59 %NM1.13
Re/Non-Performing Loans562,418  447,075  (24,879) 422,196  3.53 %6.09 %5.88
Non-QM Loans1,330,697  263,080  (19,406) 243,674  1.82 %6.67 %4.37
Land Related Financing32,418  32,227  61  32,288  12.76 %12.91 %2.23
Total Residential Investments2,191,346  777,935  (45,560) 732,375  2.67 %6.61 %4.67
Commercial Investments
CMBS98,622  93,305  (19,282) 74,023  4.08 %5.25 %3.36
Freddie Mac K-Series22,572  10,196  (1,798) 8,398  3.84 %8.97 %10.83
Interest Only (7)687,446  4,313  (80) 4,233  0.10 %7.02 %4.37
Commercial Real Estate Loans (8)141,886  141,331  (13,646) 127,685  6.42 %6.74 %2.50
Total Commercial Investments950,526  249,145  (34,806) 214,339  1.51 %6.32 %4.14
Total Credit Investments3,141,872  1,027,080  (80,366) 946,714  2.22 %6.55 %4.51
Total: Investment Portfolio$5,583,540  $1,045,255  $(85,852) $959,402  2.22 %6.52 %5.33
Investments in Debt and Equity of Affiliates$1,555,887  $325,558  $(18,428) $307,130  2.28 %8.00 %4.34
Total: GAAP Investment Portfolio$4,027,653  $719,696  $(67,424) $652,272  2.18 %5.55 %5.74

June 30, 2021December 31, 2020
InstrumentCurrent FaceAmortized CostUnrealized Mark-
to-Market		Fair Value (1)Weighted Average
Coupon (2)		Weighted
Average Yield		Weighted Average
Life  (Years) (3)		Fair Value (1)
Credit Investments:
Residential Investments
Non-QM Loans (4)$621,095 $647,651 $7,501 $655,152 4.86 %3.61 %3.85$— 
MATT Non-QM Loans (5)1,082,974 75,316 2,367 77,683 0.68 %14.49 %0.82153,200 
Re/Non-Performing Loans490,424 400,663 18,713 419,376 3.74 %7.63 %6.21478,565 
Land Related Financing17,857 17,857 — 17,857 14.50 %14.50 %0.8622,824 
Prime6,874 2,228 467 2,695 3.50 %15.21 %10.488,665 
Alt-A/Subprime— — — — — %— %— 11,496 
Credit Risk Transfer— — — — — %— %— 13,308 
Non-U.S. RMBS— — — — — %— %— 3,100 
Interest Only and Excess MSR28,711 188 (100)88 N/A8.71 %3.78320 
Total Residential Investments2,247,935 1,143,903 28,948 1,172,851 3.23 %5.96 %2.90691,478 
Commercial Investments
Commercial Real Estate Loans (6)69,809 69,472 (7,193)62,279 2.69 %3.77 %2.29125,508 
Conduit— — — — — %— %— 3,295 
Single-Asset/Single-Borrower35,500 35,452 (3,838)31,614 4.03 %4.39 %0.6740,190 
Freddie Mac K-Series— — — — — %— %— 9,000 
CMBS Interest Only (7)— — — — — %— %— 4,303 
Total Commercial Investments105,309 104,924 (11,031)93,893 3.15 %3.98 %1.74182,296 
Total Credit Investments2,353,244 1,248,827 17,917 1,266,744 3.22 %4.13 %2.85873,774 
Agency RMBS:       
30 Year Fixed Rate677,514 701,843 (5,139)696,704 2.26 %1.73 %7.81518,352 
Excess MSR489,643 4,491 (1,627)2,864 N/A0.58 %5.623,491 
Total Agency RMBS1,167,157 706,334 (6,766)699,568 2.26 %1.72 %6.89521,843 
Total: Investment Portfolio$3,520,401 $1,955,161 $11,151 $1,966,312 2.96 %4.36 %4.19$1,395,617 
Investments in Debt and Equity of Affiliates$1,245,802 $129,858 $10,127 $139,985 1.38 %16.55 %1.16$217,964 
Total: GAAP Investment Portfolio$2,274,599 $1,825,303 $1,024 $1,826,327 3.51 %3.43 %5.85$1,177,653 
(1)Refer to "Off-balance sheet arrangements" section below and Note 2 to the "Notes of the Consolidated Financial Statements" sectionStatements (unaudited)" for more detail on what is included in our "Investments in debt and equity of affiliates" line item on our consolidated balance sheet and a discussion of oursheets. Our assets held through Investments in debt and equity of affiliates.affiliates are included in the "MATT Non-QM Loans," "Re/Non-Performing Loans," "Land Related Financing," and "Excess MSR" line items above.
(2)Equity residuals, principal only securities and Excess MSRs with a zero coupon rate are excluded from this calculation.
(3)Weighted average life is based on projected life. Typically, actual maturities of investments and loans are shorter than stated contractual maturities. Maturities are affected by the contractual lives of the underlying mortgages, periodic payments of principal, and prepayments of principal.
(4)Within Agency RMBS, Excess MSRs whose underlying collateral is securitizedPrior to 2021, we acquired Non-QM Loans through our equity method investment in a trust held by a U.S. government agency or GSE. Within Residential Investments, Excess MSRs whose underlying collateral is securitizedMATT. This line item represents direct purchases of Non-QM Loans, which began in a trust not held by a U.S. government agency or GSE.Q1 2021.
(5)Non-Agency RMBS with credit scores above 700, between 700 and 620 and below 620 at origination are classified as Prime, Alt-A, and Subprime, respectively. The weighted average credit scoresAs of our Prime and Alt-A/Subprime Non-Agency RMBS were 744 and 687, respectively.June 30, 2021, this line item primarily includes retained tranches from securitizations.
(6)A majority of the Interest Only and Excess MSR line is made up of two Residential Interest Only positions. The overall impact of these investments' yieldsYield on the Investment Portfolio is immaterial.Commercial Real Estate Loans includes any exit fees.
(7)Comprised of Freddie Mac K-Series interest-only bonds.
(8)
Yield on Commercial Real Estate Loans includes any exit fees.
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The following table presents a reconciliation of our Investment Portfolio to our GAAP Investment Portfolio as of December 31, 2019 ($ in thousands):
InstrumentCurrent FaceAmortized Cost
Unrealized Mark-
to-Market
Fair Value (1)
Weighted Average
Coupon (2)
Weighted
Average Yield
Weighted Average
Life  (Years) (3)
Agency RMBS:       
30 Year Fixed Rate$2,125,067  $2,184,190  $57,108  $2,241,298  3.73 %3.17 %5.85
Inverse Interest Only217,031  37,611  627  38,238  4.37 %6.66 %4.97
Interest Only259,161  35,333  570  35,903  3.56 %5.02 %4.01
Excess MSR (4)3,042,841  20,188  (2,001) 18,187  N/A8.33 %5.56
Total Agency RMBS5,644,100  2,277,322  56,304  2,333,626  3.77 %3.30 %5.57
Credit Investments:
Residential Investments
Prime (5)297,932  213,056  28,831  241,887  4.92 %7.44 %11.63
Alt-A/Subprime (5)141,464  110,605  12,107  122,712  4.40 %6.89 %8.23
Credit Risk Transfer270,397  270,988  8,967  279,955  5.17 %5.27 %5.66
Non-U.S. RMBS44,867  54,340  3,391  57,731  3.21 %3.58 %2.53
Interest Only and Excess MSR (4)244,115  1,592  (376) 1,216  0.77 %7.73 %6.34
Re/Non-Performing Loans605,844  493,734  16,449  510,183  4.14 %6.48 %6.56
Non-QM Loans1,141,131  250,087  4,189  254,276  1.69 %5.35 %1.71
Land Related Financing25,607  25,395  514  25,909  12.27 %12.40 %3.00
Total Residential Investments2,771,357  1,419,797  74,072  1,493,869  3.53 %6.24 %4.99
Commercial Investments
CMBS277,020  262,233  784  263,017  4.87 %5.57 %4.07
Freddie Mac K-Series235,810  100,427  17,723  118,150  5.01 %11.34 %8.34
Interest Only (6)3,650,693  46,606  3,250  49,856  0.23 %6.64 %3.02
Commercial Real Estate Loans (7)158,686  158,000  686  158,686  6.82 %7.17 %1.92
Total Commercial Investments4,322,209  567,266  22,443  589,709  0.82 %7.25 %3.33
Total Credit Investments7,093,566  1,987,063  96,515  2,083,578  1.74 %6.53 %3.98
Total: Investment Portfolio$12,737,666  $4,264,385  $152,819  $4,417,204  2.34 %4.82 %4.69
Investments in Debt and Equity of Affiliates$1,676,838  $361,992  $11,134  $373,126  1.82 %6.75 %2.71
Total: GAAP Investment Portfolio$11,060,828  $3,902,393  $141,685  $4,044,078  2.41 %4.57 %4.94

(1)Refer to "Off-balance sheet arrangements" section below and Note 2 to the "Notes of the Consolidated Financial Statements" section for more detail on what is included in our "Investments in debt and equity of affiliates" line item on our consolidated balance sheet and a discussion ofCredit Investments in debt and equity of affiliates.
(2)Equity residuals, principal only securities and Excess MSRs with a zero coupon rate are excluded from this calculation.
(3)Weighted average life is based on projected life. Typically, actual maturities of investments and loans are shorter than stated contractual maturities. Maturities are affected by the contractual lives of the underlying mortgages, periodic payments of principal and prepayments of principal.
(4)Within Agency RMBS, Excess MSRs whose underlying collateral is securitized in a trust held by a U.S. government agency or GSE. Within Residential Investments, Excess MSRs whose underlying collateral is securitized in a trust not held by a U.S. government agency or GSE.
(5)Non-Agency RMBS with credit scores above 700, between 700 and 620 and below 620 at origination are classified as Prime, Alt-A, and Subprime, respectively. The weighted average credit scores of our Prime and Alt-A/Subprime Non-Agency RMBS were 719 and 674, respectively.
(6)Comprised of Freddie Mac K-Series interest-only bonds.
(7)Yield on Commercial Real Estate Loans includes any exit fees.
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The following table presents the fair value ($ in thousands) and the CPR experienced on our GAAP Agency RMBS portfolio for the periods presented. We did not hold any GAAP Agency RMBS as of June 30, 2020.
 Fair ValueCPR (1)(2)(3)
Agency RMBSDecember 31, 2019December 31, 2019
30 Year Fixed Rate (3)$2,241,298  8.1 %
Inverse Interest Only (3)38,238  11.7 %
Interest Only (3)35,903  10.3 %
Total/Weighted Average$2,315,439  8.2 %
(1)Represents the weighted average monthly CPRs published during the year ended December 31, 2019 for our in-place portfolio during the same period.
(2)Source: Bloomberg.
(3)CPRs are shown only for securities with fair values as of period end.

The following table presents the fair value of the securities and loans in our credit portfolio, and a reconciliation to our GAAP credit portfolio (in thousands):

Fair Value
June 30, 2020December 31, 2019
Non-Agency RMBS (1)$117,149  $835,325  
CMBS (2)86,654  431,023  
Total Credit securities203,803  1,266,348  
Residential loans (3)615,226  658,544  
Commercial real estate loans127,685  158,686  
Total loans742,911  817,230  
Total Credit investments$946,714  $2,083,578  
Less: Investments in Debt and Equity of Affiliates$306,634  $372,571  
Total GAAP Credit Portfolio$640,080  $1,711,007  

Fair Value
June 30, 2021December 31, 2020
Residential loans (1)$1,061,732 $563,263 
Commercial real estate loans62,279 125,508 
Total loans1,124,011 688,771 
Non-Agency RMBS (2)$111,119 $128,215 
CMBS (3)31,614 56,788 
Total Credit securities142,733 185,003 
Total Credit Investments$1,266,744 $873,774 
Less: Investments in Debt and Equity of Affiliates$139,641 $217,547 
Total GAAP Credit Portfolio$1,127,103 $656,227 
(1)Includes investments in Prime, Alt-A/Subprime, Credit Risk Transfer, Non-U.S RMBS, Interest-Only and Excess MSR, Re/Non-Performing Loans, Non-QM Loans, and Land Related Financing held in securitized form.
(2)Includes CMBS, Freddie Mac K-Series, and Interest-Only investments.
(3)Includes Re/Non-Performing Loans, Non-QM Loans, and Land Related Financing not held in securitized form.
(2)Includes Prime, Alt-A/Subprime, Credit Risk Transfer, Non-U.S RMBS, Interest-Only and Excess MSR, Re/Non-Performing Loans, and Non-QM Loans held in securitized form.
(3)Includes Conduit, Single-Asset/Single-Borrower, Freddie Mac K-Series, and Interest-Only investments.

Residential loans

The following tables present certain information regarding credit quality for certain categories within our Residential loan portfolio ($ in thousands):
June 30, 2021December 31, 2020
Weighted Average (1)(2)Aging by Unpaid Principal Balance (1)(2)
Unpaid Principal BalanceFair ValueCurrent LTV RatioCurrent FICO (3)Current30-59 Days60-89 Days90+ DaysFair Value
Non-QM Loans$621,095 $655,152 68.60 %734 $612,436 $8,659 $— $— $— 
MATT Non-QM Loans12,005 12,327 58.36 %690 2,980 874 1,338 6,813 100,264 
Re/Non-Performing Loans418,829 376,396 80.41 %634 269,914 36,398 11,993 92,403 440,175 
Land Related Financing17,857 17,857 N/AN/AN/AN/AN/AN/A22,824 
Total Residential loans$1,069,786 $1,061,732 73.13 %694 $885,330 $45,931 $13,331 $99,216 $563,263 
Less: Investments in Debt and Equity of Affiliates32,749 32,488 63.27 %671 3,582 1,048 1,500 8,762 127,822 
Total GAAP Residential Loans$1,037,037 $1,029,244 73.27 %694 $881,748 $44,883 $11,831 $90,454 $435,441 
(1)Weighted average and aging data excludes residual positions where we consolidate a securitization and the positions are recorded on our balance sheet as Re/Non-Performing Loans. There may be limited data available regarding the underlying collateral of the residual positions.
(2)Weighted average and aging data excludes Land Related Financing.
(3)Weighted average current FICO excludes borrowers where FICO scores were not available.

See Note 3 to the "Notes to Consolidated Financial Statements (unaudited)" for a breakout of geographic concentration of credit risk within loans we include in the "Residential mortgage loans, at fair value" line item on our consolidated balance sheets.

Commercial loans

Refer to Note 3 to the "Notes of the Consolidated Financial Statements (unaudited)" section for more detail on what is included in our "Commercial Loans" line item on our consolidated balance sheets.

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The following table presents certain information grouped by vintage as it relates to our creditCredit securities portfolio as of June 30, 2020 ($ in thousands). We have also presented a reconciliation to GAAP.
Credit Securities:Current FaceAmortized Cost
Unrealized Mark-to-
Market
Fair Value (1)
Weighted Average
Coupon (2)
Weighted
Average Yield
Weighted  Average Life (Years) (3)
Pre 2009$2,189  $2,057  $277  $2,334  7.05 %7.90 %9.14
20131,168  759  91  850  3.60 %5.09 %19.07
201415,439  11,974  (2,011) 9,963  4.54 %14.56 %7.39
2015341,896  16,455  3,734  20,189  0.72 %8.09 %2.06
2016130,379  2,566  511  3,077  0.17 %11.06 %4.67
2017197,285  11,646  (765) 10,881  0.34 %6.28 %3.99
2018187,882  25,968  (7,362) 18,606  0.62 %4.61 %5.33
20191,039,621  121,618  (23,470) 98,148  0.98 %9.00 %4.75
2020338,775  42,453  (2,698) 39,755  1.20 %13.69 %4.33
Total: Credit Securities$2,254,634  $235,496  $(31,693) $203,803  0.82 %9.56 %4.29
Investments in Debt and Equity of Affiliates$1,199,099  $81,257  $(9,925) $71,332  0.71 %14.96 %4.35
Total: GAAP Basis$1,055,535  $154,239  $(21,768) $132,471  0.89 %6.64 %4.22
(1)Certain Re/Non-Performing Loans held in securitized form are presented net of non-recourse securitized debt.
(2)Equity residual investments and principal only securities are excluded from this calculation.
(3)Weighted average life is based on projected life. Typically, actual maturities of mortgage-backed securities are shorter than stated contractual maturities. Actual maturities are affected by the contractual lives of the underlying mortgages, periodic payments of principal and prepayments of principal.

The following table presents certain information grouped by vintage as it relates to our credit securities portfolio as of December 31, 2019 ($ in thousands). We have also presented a reconciliation to GAAP.
Credit Securities:Current FaceAmortized Cost
Unrealized Mark-to-
Market
Fair Value (1)
Weighted Average
Coupon (2)
Weighted
Average Yield
Weighted  Average Life (Years) (3)
Pre 2009$278,125  $198,225  $25,099  $223,324  5.07 %7.12 %12.67
20101,070  948  42  990  1.97 %6.68 %2.94
20114,812  4,302  29  4,331  4.44 %5.73 %4.93
20123,740  3,062  510  3,572  4.05 %7.61 %3.42
201376,869  17,724  1,367  19,091  2.18 %7.06 %2.58
2014974,525  38,454  4,320  42,774  0.31 %10.46 %0.56
2015895,235  108,425  17,520  125,945  0.84 %9.24 %4.22
20161,139,729  80,162  11,595  91,757  0.60 %8.67 %4.57
20171,054,591  176,767  8,632  185,399  0.88 %6.43 %4.27
2018275,234  104,090  3,040  107,130  2.08 %5.48 %5.77
20191,498,432  449,682  12,353  462,035  2.07 %6.05 %2.73
Total: Credit Securities$6,202,362  $1,181,841  $84,507  $1,266,348  1.24 %6.92 %3.78
Investments in Debt and Equity of Affiliates$1,311,008  $123,152  $8,803  $131,955  0.78 %9.50 %2.50
Total: GAAP Basis$4,891,354  $1,058,689  $75,704  $1,134,393  1.31 %6.62 %4.13
(1)Certain Re/Non-Performing Loans held in securitized form are recorded net of non-recourse securitized debt.
(2)Equity residual investments and principal only securities are excluded from this calculation.
(3)Weighted average life is based on projected life. Typically, actual maturities of mortgage-backed securities are shorter than stated contractual maturities. Actual maturities are affected by the contractual lives of the underlying mortgages, periodic payments of principal and prepayments of principal.
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The following table presents the fair value of our credit securities portfolio by credit rating as of June 30, 20202021 and December 31, 20192020 (in thousands):
Credit Rating - Credit Securities (1)Credit Rating - Credit Securities (1)June 30, 2020 (2)December 31, 2019 (2)Credit Rating - Credit Securities (1)June 30, 2021 (2)(3)December 31, 2020 (2)(3)
AAAAAA$631  $4,975  AAA$— $630 
A—  13,792  
BBB1,445  65,454  
BBBB3,234  106,311  BB5,728 9,037 
BB38,183  226,083  B18,422 25,318 
Below BBelow B9,226  103,985  Below B16,035 17,046 
Not RatedNot Rated151,084  745,748  Not Rated102,548 132,972 
Total: Credit SecuritiesTotal: Credit Securities$203,803  $1,266,348  Total: Credit Securities$142,733 $185,003 
Less: Investments in Debt and Equity of AffiliatesLess: Investments in Debt and Equity of Affiliates$71,332  $131,955  Less: Investments in Debt and Equity of Affiliates$107,153 $89,725 
Total: GAAP BasisTotal: GAAP Basis$132,471  $1,134,393  Total: GAAP Basis$35,580 $95,278 
(1)Represents the minimum rating for rated assets of S&P, Moody and Fitch credit ratings, stated in terms of the S&P equivalent.
(2)Certain Re/Non-Performing Loans held in securitized form are presented net of non-recourse securitized debt.
(3)As of June 30, 2021 and December 31, 2020, includes $0.1 million of credit Excess MSRs.
 
The following tables present the geographic concentration of the underlying collateral for our Non-Agency RMBS portfolioand CMBS portfolios ($ in thousands). The geographic markets that we invest in have been and continue to be severely impacted by the ongoing COVID-19 pandemic.

June 30, 2020
Non-Agency RMBSCMBS (1) 
June 30, 2021June 30, 2021December 31, 2020
StateStateFair Value (2)Percentage (2)StateFair ValuePercentageStateFair Value (1)Percentage (1)StateFair Value (2)Percentage (2)
CaliforniaCalifornia$30,202  28.8 %Florida$13,771  15.9 %California$40,538 32.8 %California$40,593 32.5 %
New YorkNew York14,442  13.8 %California12,607  14.5 %New York19,544 17.9 %New York17,742 14.2 %
FloridaFlorida8,914  8.5 %Texas9,296  10.7 %Florida8,971 8.5 %Florida10,982 8.8 %
Texas3,553  3.4 %New York9,107  10.5 %
New JerseyNew Jersey3,438 3.3 %Texas4,216 3.4 %
MarylandMaryland3,420  3.3 %New Jersey5,740  6.6 %Maryland3,310 3.3 %New Jersey4,028 3.2 %
OtherOther56,618  42.2 %Other36,133  41.8 %Other35,318 34.2 %Other50,654 37.9 %
TotalTotal$117,149  100.0 %Total$86,654  100.0 %Total$111,119 100.0 %Total$128,215 100.0 %
(1)CMBS includes all commercial credit securities, including CMBS, Freddie Mac K-Series, and Interest-Only investments.
(2)As of June 30, 2021, Non-Agency RMBS fair value includes $12.1$0.1 million of investmentscredit Excess MSRs where there was no data regarding the underlying collateral. These positions were excluded from the percent calculation.

December 31, 2019
Non-Agency RMBS CMBS (1) 
StateFair Value (2)Percentage (2)StateFair ValuePercentage
California$174,569  24.5 %California$52,647  12.2 %
Florida62,796  8.8 %New York46,317  10.7 %
New York57,931  8.1 %Texas45,619  10.6 %
Texas33,890  4.8 %Florida45,032  10.4 %
New Jersey22,736  3.3 %New Jersey31,396  7.3 %
Other483,403  50.5 %Other210,012  48.8 %
Total$835,325  100.0 %Total$431,023  100.0 %
(1)CMBS includes all commercial credit securities, including CMBS, Freddie Mac K-Series, and Interest-Only investments.
(2)As of December 31, 2020, Non-Agency RMBS fair value includes $123.0$3.2 million of investments where there was no data regarding the underlying collateral.collateral, including $0.1 million of credit Excess MSRs. These positions were excluded from the percent calculation.
82


See Note 4 to the "Notes to Consolidated Financial Statements (unaudited)" for a breakout of geographic concentration of credit risk within loans we include in the "Residential mortgage loans, at fair value" line item on our consolidated balance sheets.

The following tables present certain information regarding credit quality for certain categories within our Non-AgencyAgency RMBS and CMBS portfolios ($ in thousands):

June 30, 2020
Non-Agency RMBS*
CategoryFair ValueWeighted 
Average 60+ Days 
Delinquent		Weighted 
Average Loan
Age (Months)		Weighted 
Average Credit 
Enhancement
Prime$8,619  3.9 %66.7  1.9 %
Alt-A/Subprime9,275  6.7 %156.0  0.1 %
Credit Risk Transfer12,251  1.6 %13.9  0.3 %
Non-U.S. RMBS3,644  4.6 %70.5  1.0 %
CMBS*
CategoryFair ValueWeighted 
Average 60+ Days 
Delinquent		Weighted 
Average Loan
Age (Months)		Weighted 
Average Credit 
Enhancement
CMBS$74,023  1.2 %29.3  10.4 %
Freddie Mac K Series8,398  0.6 %19.9  0.0 %
December 31, 2019
Non-Agency RMBS*
CategoryFair ValueWeighted 
Average 60+ Days 
Delinquent		Weighted 
Average Loan
Age (Months)		Weighted 
Average Credit 
Enhancement
Prime$241,887  10.6 %136.7  9.8 %
Alt-A/Subprime122,712  12.8 %162.3  17.7 %
Credit Risk Transfer279,955  0.4 %24.5  1.8 %
Non-U.S. RMBS57,731  7.3 %147.8  15.8 %
CMBS*   
CategoryFair ValueWeighted 
Average 60+ Days 
Delinquent		Weighted 
Average Loan
Age (Months)		Weighted 
Average Credit 
Enhancement
CMBS$263,017  0.2 %22.1  9.3 %
Freddie Mac K Series118,150  0.6 %45.3  0.4 %
*Sources: Intex, Trepp

In our Re/Non-Performing Loan portfolio, 22% of the overall population has requested COVID related assistance as of June 30, 2020; approximately 40% of the population requesting assistance is being reported as contractually current as of quarter end.

At the end of the initial forbearance period, those borrowers who can make their regular monthly scheduled payment will do so and the payment terms of the forbearance amounts will be negotiated (reinstatement, repayment or deferral). For those borrowers who cannot make their scheduled payment, the servicer will initiate phone contact with such borrowers to determine income status and ability to make future mortgage payments. The servicer will collect documents (where allowed by state laws) to initiate further forbearance or loss mitigation strategies for those borrowers who cannot make their regularly scheduled mortgage payments at the end of the initial forbearance period.

83

Prior to COVID, the three month average monthly default rate, or rate at which a borrower moved from current to 30 days delinquent, was 6.4%. The default rate for June was 4.5%. COVID related delinquencies made up approximately 56% of those defaults in June.

Our Re/Non-Performing Loan valuation process in Q1 and Q2 2020 has incorporated a more conservative view of defaults, liquidation timelines and discount rates.

In our Non-QM Loan portfolio, 30% of the overall population has requested COVID related assistance as of June 30, 2020; approximately 31% of the population requesting assistance is being reported as contractually current as of quarter end.

At the end of the forbearance period, the servicer will complete the same steps as described above with regards to Re/Non-Performing Loans.

Prior to COVID, the three month average monthly default rate was 1.3%. The default rate for June was 2.5%. COVID related delinquencies made up approximately 69% of those defaults in June.

As it relates to our Non-QM Loans, our valuation no longer reflects a call assumption, given the greater uncertainty around future performance and market conditions at the time of call.

The following table presents detailthe fair value ($ in thousands) and the Constant Prepayment Rate ("CPR") experienced on our commercial real estate loanGAAP Agency RMBS portfolio on June 30, 2020 ($ in thousands).for the periods presented.
     Weighted Average   
Loan 
(1)(2)		Current Face
Premium
(Discount)
Amortized CostGross Unrealized LossesFair Value (3)Coupon
(4)		Yield (5)Life 
(Years)
(6)
Initial Stated
Maturity Date
Extended
Maturity 
Date (7)		LocationCollateral Type
Loan G (8)(9)$56,710  $—  $56,710  $(4,225) $52,485  5.27 %5.27 %1.55July 9, 2020July 9, 2022CACondo, Retail, Hotel
Loan I (10)15,212  (211) 15,001  (789) 14,212  11.50 %12.26 %1.80February 9, 2021February 9, 2023MNOffice, Retail
Loan J (8)6,291  —  6,291  (4,051) 2,240  5.65 %5.65 %2.12January 1, 2023January 1, 2024NYHotel, Retail
Loan K (11)12,673  —  12,673  (1,100) 11,573  10.00 %11.22 %1.27May 22, 2021February 22, 2024NYHotel, Retail
Loan L (11)51,000  (344) 50,656  (3,481) 47,175  5.40 %5.66 %4.12July 22, 2022July 22, 2024ILHotel, Retail
 $141,886  $(555) $141,331  $(13,646) $127,685  6.42 %6.74 %2.50
 Fair ValueCPR (1)(2)
Agency RMBSJune 30, 2021December 31, 2020June 30, 2021December 31, 2020
30 Year Fixed Rate$696,704 $518,352 4.4 %2.7 %
(1)We haveRepresents the contractual right to receive a balloon paymentweighted average monthly CPRs published during the period for each loan.our in-place portfolio.
(2)See our "Off-balance sheet arrangements" section below for details on our commitments on commercial real estate loans as of June 30, 2020.
(3)Pricing is reflective of marks on unfunded commitments.
(4)Each commercial real estate loan investment has a variable coupon rate.
(5)Yield includes any exit fees.
(6)Actual maturities of commercial real estate loans may be shorter or longer than stated contractual maturities. Maturities are affected by prepayments of principal.
(7)Represents the maturity date of the last possible extension option.
(8)Loan G and Loan J are first mortgage loans.
(9)Loan G matured on July 9, 2020. Discussions are ongoing between the borrower and the lenders related to the extension and restructuring of the loan. However, there can be no guaranty that an agreement will be reached with respect to any such discussions.
(10)Loan I is a mezzanine loan.
(11)Loan K and Loan L are comprised of first mortgage and mezzanine loans.Source: Bloomberg.

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Investments in debt and equity of affiliates

The followingbelow table presents detail ondetails our commercial real estate loan portfolio oninvestments in debt and equity of affiliates as of June 30, 2021 and December 31, 2019 ($ in2020 (in thousands).:
     Weighted Average   
Loan (1)Current Face
Premium
(Discount)
Amortized CostGross Unrealized GainsFair ValueCoupon
(2)		Yield (3)Life 
(Years)
(4)
Initial Stated
Maturity Date
Extended
Maturity 
Date (5)		LocationCollateral Type
Loan G (6)$45,856  $—  $45,856  $—  $45,856  6.46 %6.46 %0.53July 9, 2020July 9, 2022CACondo, Retail, Hotel
Loan H (6)36,000  —  36,000  —  36,000  5.49 %5.49 %0.19March 9, 2019June 9, 2020AZOffice
Loan I (7)11,992  (184) 11,808  184  11,992  12.21 %14.51 %1.04February 9, 2021February 9, 2023MNOffice, Retail
Loan J (6)4,674  —  4,674  —  4,674  6.36 %6.36 %2.12January 1, 2023January 1, 2024NYHotel, Retail
Loan K (8)9,164  —  9,164  —  9,164  10.71 %11.86 %1.72May 22, 2021February 22, 2024NYHotel, Retail
Loan L (8)51,000  (502) 50,498  502  51,000  6.16 %6.50 %4.63July 22, 2022July 22, 2024ILHotel, Retail
 $158,686  $(686) $158,000  $686  $158,686  6.82 %7.17 %1.92
June 30, 2021December 31, 2020
AssetsLiabilitiesEquityAssetsLiabilitiesEquity
MATT Non-QM Loans (2)$77,683 $(48,813)$28,870 $153,200 $(111,135)$42,065 
Re/Non-Performing Loans (1)44,101 (11,351)32,750 41,523 (5,588)35,935 
Land Related Financing17,857 — 17,857 22,824 — 22,824 
Total Residential Investments139,641 (60,164)79,477 217,547 (116,723)100,824 
Excess MSR344 — 344 417 — 417 
Total Investments excluding AG Arc139,985 (60,164)79,821 217,964 (116,723)101,241 
AG Arc, at fair value50,862 — 50,862 45,341 — 45,341 
Cash and Other assets/(liabilities) (3)8,177 (2,992)5,185 5,279 (1,194)4,085 
Investments in debt and equity of affiliates$199,024 $(63,156)$135,868 $268,584 $(117,917)$150,667 
(1)We have the contractual right to receive a balloon payment for each loan.Certain Re/Non-Performing Loans held in securitized form are presented net of non-recourse securitized debt.
(2)Each commercial real estate loan investmentAs of June 30, 2021 and December 31, 2020, Non-QM Loans excluded loans with an unpaid principal balance of $11.2 million and $17.3 million, respectively, whereby an affiliate of MATT has the right, but not the obligation, to repurchase loans from a variable coupon rate.trust that are 90 days or more delinquent at its discretion. These loans, which are eligible to be repurchased, would be recorded on the balance sheet of MATT, an unconsolidated equity method investee of the Company, with a corresponding and offsetting liability.
(3)Yield includes any exit fees.
(4)Actual maturitiesIncludes financing arrangements of commercial$(9.4) thousand on real estate loans may be shorter or longer than stated contractual maturities. Weighted average maturities are affected by prepaymentsowned as of principal.
(5)Represents the maturity date of the last possible extension option.
(6)Loan G, Loan H, and Loan J are first mortgage loans.
(7)Loan I is a mezzanine loan.
(8)Loan K and Loan L are comprised of first mortgage and mezzanine loans.December 31, 2020.

Financing activities

Prior to the recent turmoil in the financial markets, we sought to achieve a balanced and diverse funding mix to finance our assets and operations, which included a combination of short-term borrowings, such as repurchase agreements with terms typically of 30-90 days, longer term repurchase agreement borrowings, and longer term financings, such as securitizations and revolving facilities, with terms longer than one year. We have explored and will continue in the near term to explore additional financing arrangements to further strengthen our balance sheet and position ourselves for future investment opportunities, including, without limitation, issuances of equity or debt securities and longer-termed financing arrangements; however, no assurance can be given that we will be able to access any such financing or the size, timing or terms thereof.

In 2020, in response to the unprecedented illiquidity and drop in demand for MBS due to the COVID-19 pandemic, which resulted in a significant decline in the value of our assets, which, in turn, resulted in an unusually high number of margin calls from our financing counterparties, we reduced our overall exposure to our financing counterparties by selling a significant portion of our investment portfolio and reducing the amount of our financing arrangements from $3.2 billion to $251.1 million on a GAAP basis and from $3.5 billion to $469.2 million on a Non-GAAP basis, including a reduction in our repurchase agreement balance from $3.2 billion to $208.0 million. Additionally, the Federal Reserve cut the federal funds rate by a total of 150 basis points during the first quarter of 2020. As previously described, we sold our entire portfolio of 30 year fixed rate Agency RMBS in March of 2020. As a result, our investment portfolio was primarily comprised of Credit Investments as of June 30, 2020. This reallocation resulted in an increase in our financing costs from 2.51% at December 31, 2019 to 3.86% at June 30, 2020 due to the increased expense associated with financing Credit Investments as compared to Agency RMBS.

On March 20, 2020, we notified our financing counterparties that we did not expect to be in a position to fund the anticipated volume of future margin calls under our financing arrangements in the near term as a result of market disruptions created by the COVID-19 pandemic. Since March 23, 2020, we have received notifications of alleged events of default and deficiency notices from several of our financing counterparties. Subject to the terms of the applicable financing arrangement, if we fail to deliver additional collateral or otherwise meet margin calls when due, the financing counterparties may be able to demand immediate payment by us of the aggregate outstanding financing obligations owed to such counterparties, and if such financing obligations are not paid, may be permitted to sell the financed assets and apply the proceeds to our financing obligations and/or take ownership of the assets securing our financing obligations. During this period of market upheaval, we engaged in discussions with our financing counterparties with regard to entering into forbearance agreements pursuant to which each counterparty would agree to forbear from exercising its rights and remedies with respect to an event of default under the applicable financing arrangement for an agreed-upon period. On April 10, 2020, we entered into a forbearance agreement for an initial 15 day
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period, a second forbearance agreement on April 27, 2020, for an extended period ending on June 1, 2020, and a third forbearance agreement on June 1, 2020 for an additional period ending June 15, 2020 (collectively, the "Forbearance Agreement") with certain of our financing counterparties (the "Participating Counterparties"). Pursuant to the terms of the Forbearance Agreement, the Participating Counterparties agreed to forbear from exercising any of their right and remedies in respect of events of default and any and all other defaults under the applicable financing arrangement with us for the duration of the forbearance period specified in the Forbearance Agreement (the "Forbearance Period").

On June 10, 2020, we entered into a Reinstatement Agreement with the Participating Counterparties, pursuant to which the parties agreed to terminate the Forbearance Agreement and each Participating Counterparty agreed to permanently waive all existing and prior events of default under our financing agreements (each, a "Bilateral Agreement") and to reinstate each Bilateral Agreement, as it may be amended by agreement between the Participating Counterparty and the Company. As a result of the termination of the Forbearance Agreement and entry into the Reinstatement Agreement, default interest on the our outstanding borrowings under each Bilateral Agreement has ceased to accrue as of June 10, 2020 and the interest rate was the non-default rate of interest or pricing rate, as set forth in the applicable Bilateral Agreements, all cash margin has been applied to outstanding balances we owe, and the DTC repo tracker coding for each Bilateral Agreement has been reinstated, thereby allowing principal and interest payments on the underlying collateral to flow to and be used by us, just as it was before the prior forbearance agreements were put in place. In addition, pursuant to the terms of the Reinstatement Agreement, the security interests granted to Participating Counterparties as additional collateral under the various forbearance agreements have been terminated and released. We also agreed to pay the reasonable fees and out-of-pocket expenses of counsel and other professional advisors for the Participating Counterparties and the collateral agent. Additionally, the Reinstatement Agreement provides a set of financial covenants that override and replace the financial covenants in each Bilateral Agreement and sets forth various reporting requirements from the Company to the Participating Counterparties, releases, certain netting obligations and cross-default provisions. In connection with the negotiation and execution of the Reinstatement Agreement, we entered into certain amendments to the Bilateral Agreements with certain of the Participating Counterparties to reflect current market terms. In general, the amendments reflect increased haircuts and higher coupons.

On June 10, 2020, we also entered a separate reinstatement agreement with JPMorgan Chase Bank (the "JPM Reinstatement Agreement") on substantially the same terms as those set forth in the Reinstatement Agreement. The Reinstatement Agreement and the JPM Reinstatement Agreement collectively cover all of our existing financing arrangements as of the date of this Report.

Refer to Note 13 in the "Notes to Consolidated Financial Statements (Unaudited)" for more information on outstanding deficiencies.

We use leverage to finance the purchase of our target assets.investment portfolio. In 20202021 and 2019,2020, our leverage has primarily been in the form of repurchase agreements, revolving facilities, and securitized debt. Repurchase agreements involve the sale and a simultaneous agreement to repurchase the transferred assets or similar assets at a future date. The amount borrowed generally is equal to the fair value of the assets pledged less an agreed-upon discount, referred to as a "haircut." The size of the haircut reflects the perceived risk associated with the pledged asset. Haircuts may change as our financing arrangements mature or roll and are sensitive to governmental regulations. We experienced fluctuations in our haircuts that caused us to alter our business and financing strategies for the three and six monthsyear ended June 30,December 31, 2020. As previously described, this resulted in us raising liquidity and de-riskingreducing the risk within our portfolio. Through asset sales and related debt pay-offs, we have reduced the aggregate number of ourWe had outstanding financing counterparties, bringing the counterparties we have debt outstandingarrangements with down from 30 as of December 31, 2019 to 65 counterparties as of June 30, 2021 and December 31, 2020.
 
Our repurchase agreements are accounted for as financings and require the repurchase of the transferred securities or loans or repayment of the advance at the end of each agreement’s term, typically 30 to 90 days. If we maintain the beneficial interest in the specific assets pledged during the term of the borrowing, we receive the related principal and interest payments. If we do not maintain the beneficial interest in the specific assets pledged during the term of the borrowing, wethe lender will haveremit to us the related principal and interest payments remitted to us by the lender.payments. Interest rates on borrowings are fixed based on prevailing rates corresponding to the terms of the borrowings, and interest is paid at the termination of the borrowing at which time we may enter into a new borrowing arrangement at prevailing market rates with the same counterparty or repay that counterparty and negotiate financing with a different counterparty.

We have also entered into revolving facilities to purchase certain loans in our investment portfolio. These facilities typically have longer stated maturities than repurchase agreements. Interest rates on these facilities are based on prevailing rates corresponding to the terms of the borrowings, and interest is paid on a monthly basis. Additionally, these facilities contain

Our financing arrangements generally include customary representations, warranties, and covenants, including financial covenants, eventsbut may also contain more restrictive supplemental terms and conditions. Although specific to each financing arrangement, typical supplemental terms include requirements of defaultminimum equity and indemnities that are customary for agreementsliquidity, leverage ratios, and performance triggers. In addition, some of these types.the
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financing arrangements contain cross default features, whereby default under an agreement with one lender simultaneously causes default under agreements with other lenders. To the extent that we fail to comply with the covenants contained in these financing arrangements or is otherwise found to be in default under the terms of such agreements, the counterparty has the right to accelerate amounts due under the associated agreement. Financings pursuant to repurchase agreements and revolving facilities are generally recourse to us. As of June 30, 2021, we are in compliance with all of our financial covenants.

In response to declines in fair value of pledged assets due to changes in market conditions, or the publishing of monthly security paydown factors, lenders typically require us to post additional assets as collateral, pay down borrowings or establish cash margin accounts with the counterparties in order to re-establish the agreed-upon collateral requirements, referred to as margin calls.
The following table presents the quarter-end balance, average quarterly balance and maximum balance at any month-end for our (i) financing arrangements on our investment portfolio and U.S Treasury securities ("Non-GAAP Basis" below), and (ii) financing arrangements through affiliated entities, excluding any financing utilized in our investment in AG Arc, with a reconciliation of all quarterly figures to GAAP ("GAAP Basis" below) (in thousands). Refer to the "Hedging Activities""Liquidity and capital resources" section below for more information on repurchase agreements secured by U.S. Treasury securities.information.
Quarter EndedQuarter-End
Balance		Average 
Quarterly
 Balance		Maximum 
Balance at
Any Month-End
June 30, 2020
Non-GAAP Basis$469,153  $642,182  $939,056  
Less: Investments in Debt and Equity of Affiliates218,055  255,764  276,149  
GAAP Basis$251,098  $386,418  $662,907  
March 31, 2020
Non-GAAP Basis$1,231,231  $2,878,844  $3,904,578  
Less: Investments in Debt and Equity of Affiliates261,374  260,737  280,196  
GAAP Basis$969,857  $2,618,107  $3,624,383  
December 31, 2019
Non-GAAP Basis$3,490,884  $3,703,921  $3,929,708  
Less: Investments in Debt and Equity of Affiliates257,416  240,602  257,830  
GAAP Basis$3,233,468  $3,463,319  $3,671,878  
September 30, 2019
Non-GAAP Basis$3,720,937  $3,301,725  $3,720,937  
Less: Investments in Debt and Equity of Affiliates195,949  238,144  279,478  
GAAP Basis$3,524,988  $3,063,581  $3,441,459  
June 30, 2019
Non-GAAP Basis$3,074,536  $3,166,610  $3,263,481  
Less: Investments in Debt and Equity of Affiliates183,286  216,024  238,045  
GAAP Basis$2,891,250  $2,950,586  $3,025,436  
March 31, 2019
Non-GAAP Basis$3,290,383  $3,069,958  $3,290,383  
Less: Investments in Debt and Equity of Affiliates177,548  174,672  179,524  
GAAP Basis$3,112,835  $2,895,286  $3,110,859  
December 31, 2018
Non-GAAP Basis$2,860,227  $2,851,744  $2,866,872  
Less: Investments in Debt and Equity of Affiliates139,739  125,851  139,739  
GAAP Basis$2,720,488  $2,725,893  $2,727,133  
September 30, 2018
Non-GAAP Basis$2,913,543  $2,862,935  $2,913,543  
Less: Investments in Debt and Equity of Affiliates102,149  92,833  102,149  
GAAP Basis$2,811,394  $2,770,102  $2,811,394  
June 30, 2018
Non-GAAP Basis$2,719,376  $2,792,123  $2,932,186  
Less: Investments in Debt and Equity of Affiliates85,194  170,006  213,489  
GAAP Basis$2,634,182  $2,622,117  $2,718,697  
March 31, 2018
Non-GAAP Basis$3,035,398  $2,954,404  $3,043,392  
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Less: Investments in Debt and Equity of Affiliates208,819  77,309  208,819  
GAAP Basis$2,826,579  $2,877,095  $2,834,573  
December 31, 2017
Non-GAAP Basis$3,011,591  $2,882,548  $3,011,591  
Less: Investments in Debt and Equity of Affiliates7,184  8,849  9,807  
GAAP Basis$3,004,407  $2,873,699  $3,001,784  
September 30, 2017
Non-GAAP Basis$2,703,069  $2,596,533  $2,746,151  
Less: Investments in Debt and Equity of Affiliates8,517  8,697  8,869  
GAAP Basis$2,694,552  $2,587,836  $2,737,282  
June 30, 2017
Non-GAAP Basis$2,265,227  $2,209,991  $2,339,133  
Less: Investments in Debt and Equity of Affiliates8,485  8,806  9,116  
GAAP Basis$2,256,742  $2,201,185  $2,330,017  
The balance on our financing arrangements can reasonably be expected to (i) increase as the size of our investment portfolio increases primarily through equity capital raises and as we increase our investment allocation to Non-QM Loans not held in securitized form and Agency RMBS and (ii) decrease as the size of our portfolio decreases through asset sales, principal paydowns, and as we increase our investment allocation to credit investments. Credit investments, dueexcluding Non-QM Loans not held in securitized form. Due to their risk profile, credit investments generally have lower leverage ratios than Agency RMBS, which restricts our financing counterparties from providing as much financing to us and lowers the balance of our total financing.

Forbearance and Reinstatement Agreements

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

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

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

Refer to Note 12 in the "Notes to Consolidated Financial Statements (unaudited)" for more information on deficiencies that are now settled.

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Recourse and non-recourse financing

We utilize both recourse and non-recourse debt to finance our portfolio. Non-recourse financing includes securitized debt and other non-recourse financing. Recourse financing includes the secured debt from our Manager, as further described in the "Contractual obligations–Secured debt" section below, and other recourse financing. The below table provides detail on the breakout between recourse and non-recourse financing as of June 30, 20202021 and December 31, 2019 ($ in2020 (in thousands):


June 30, 2020December 31, 2019
Recourse financing$278,723  $3,490,884  
Non-recourse financing (1)409,549  224,348  
Total (2)$688,272  $3,715,232  
Recourse financing - Investments in Debt and Equity of Affiliates7,480  257,416  
Non-recourse financing - Investments in Debt and Equity of Affiliates210,575  —  
Total Investments in Debt and Equity of Affiliates218,055  257,416  
Total: GAAP Basis$470,217  $3,457,816  

June 30, 2021December 31, 2020
Recourse financing$1,241,114 $580,037 
Non-recourse financing509,051 466,294 
Total (1)1,750,165 1,046,331 
Recourse financing - Investments in Debt and Equity of Affiliates33,646 5,597 
Non-recourse financing - Investments in Debt and Equity of Affiliates (2)26,518 111,135 
Total Investments in Debt and Equity of Affiliates60,164 116,732 
Total: GAAP Basis$1,690,001 $929,599 
(1)Not mark-to-market with respect to margin calls.
(2)As of June 30, 2021, total financing includes $1.3 billion of financing arrangements, collateralized by various asset types in our investment portfolio, and $482.5 million of securitized debt, collateralized by Non-QM and Re/Non-Performing Loans. As of December 31, 2020, total financing includes $469.2$680.8 million of financing arrangements, $199.0collateralized by various asset types in our investment portfolio; $355.2 million of securitized debt, collateralized by Re/Non-Performing Loans; and $20.1$10.4 million of secured debt. As
(2)On January 29, 2021, we and private funds under the management of December 31, 2019, totalAngelo Gordon entered into an amendment with respect to our Restructured Financing Arrangement in MATT. The amendment serves to convert the existing financing includes $3.5 billionto a mark-to-market facility with respect to margin calls that is recourse to us and the private funds managed by Angelo Gordon that invest in MATT up to our and each funds' allocation of financing arrangementsthe $50.0 million commitment to MATH, which is further described in the "Contractual Obligations–MATT Financing Arrangement Restructuring" section below and $224.3 millionNote 12 to the "Notes of securitized debt.the Consolidated Financial Statements (unaudited)".

Financing arrangements on our investment portfolio

As of March 31, 2020, we had received notifications from several of our financing counterparties of alleged events of default under their financing agreements, and of those counterparties' intentions to accelerate our performance obligations under the relevant agreements as a result of our inability to meet certain margin calls as a result of market disruptions created by the COVID-19 pandemic. As discussed above, until a formal agreement was reached, we negotiated with our financing
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counterparties regarding the lenders' forbearance from exercising their rights and remedies under their applicable financing arrangements. While as of March 31, 2020 certain lenders had accelerated our obligations under their applicable financing arrangements, once subject to the Reinstatement Agreement, the Participating Counterparties agreed to extend the maturity dates of each of their respective repurchase agreements as determined by their respective Bilateral Agreements.

We continue to take steps to manage and de-lever our portfolio. Through asset sales and related debt pay-offs, we have reduced our exposure to various counterparties, bringing the counterparties with debt outstanding down from 30 as of December 31, 2019 to 6 as of June 30, 2020. See Note 76 to the "Notes to Consolidated Financial Statements (unaudited)" for a description of our material financing arrangements as of June 30, 2020.
Our financing arrangements generally include customary representations, warranties, and covenants, but may also contain more restrictive supplemental terms and conditions. Although specific to each repurchase agreement, typical supplemental terms include requirements of minimum equity, leverage ratios, performance triggers or other financial ratios.

The following table presents a summarybreakout of the financing arrangements"Financing arrangements" line item on our investment portfolio as of June 30, 2020 and December 31, 2019 (in thousands).

June 30, 2020December 31, 2019
Repurchase agreements$208,032  $3,194,409  
Revolving facilities (1)261,121  296,475  
Total: Non-GAAP Basis$469,153  $3,490,884  
Investments in Debt and Equity of Affiliates218,055  257,416  
Total: GAAP Basis$251,098  $3,233,468  
(1)Increasing our borrowing capacity under a majority of our revolving facilities requires consent of the lenders.

The following table presents a summary of the financing arrangements on our Investment Portfolio as of June 30, 2020 ($ in thousands):
Credit
Financing Arrangements Maturing Within: (1)BalanceWeighted Average Funding Cost
30 days or less$55,658  3.43 %
61-90 days14,429  4.67 %
91-180 days1,253  2.20 %
Greater than 180 days397,813  4.35 %
Total: Non-GAAP Basis$469,153  4.25 %
Investments in Debt and Equity of Affiliates$218,055  4.94 %
Total: GAAP Basis$251,098  3.64 %
(1)As of June 30, 2020, our weighted average days to maturity is 457 days and our weighted average original days to maturity is 749 days on a GAAP Basis. As of June 30, 2020, our weighted average days to maturity is 360 days and our weighted average original days to maturity is 878 days on a Non-GAAP Basis.  

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The following table presents a summary of the financing arrangements by maturity on our Investment Portfolio as of December 31, 2019 ($ in thousands):
AgencyCreditTotal
Financing Arrangements Maturing Within: (1)BalanceWeighted 
Average
Funding Cost		BalanceWeighted 
Average
Funding Cost		BalanceWeighted 
Average
Funding Cost
30 days or less$1,011,185  2.05 %$587,325  2.92 %$1,598,510  2.37 %
31-60 days1,098,093  1.96 %470,568  3.29 %1,568,661  2.36 %
61-90 days—  —  71,753  2.99 %71,753  2.99 %
91-180 days—  —  20,384  3.79 %20,384  3.79 %
Greater than 180 days—  —  231,576  3.90 %231,576  3.90 %
Total: Non-GAAP Basis$2,109,278  2.01 %$1,381,606  3.23 %$3,490,884  2.49 %
Investments in Debt and Equity of Affiliates$—  —  $257,416  3.94 %$257,416  3.94 %
Total: GAAP Basis$2,109,278  2.01 %$1,124,190  3.07 %$3,233,468  2.38 %
(1)As of December 31, 2019, our weighted average days to maturity is 94 days and our weighted average original days to maturity is 164 days on a GAAP Basis. As of December 31, 2019, our weighted average days to maturity is 92 days and our weighted average original days to maturity is 196 days on a Non-GAAP Basis.

Repurchase agreements

The following table presents, as of June 30, 2020, a summary of the repurchase agreements on our real estate securities ($ in thousands). It also reconciles these items to GAAP:
Repurchase Agreements Maturing Within:BalanceWeighted 
Average
Rate		Weighted Average
Funding Cost
Weighted 
Average Days 
to Maturity
Weighted 
Average
Haircut
30 days or less$55,658  3.43 %3.43 %12  46.9 %
61-90 days5,037  4.71 %4.71 %70  43.3 %
Greater than 180 days16,413  5.00 %5.00 %458  42.5 %
Total: Non-GAAP Basis$77,108  3.85 %3.85 %111  45.7 %
Investments in Debt and Equity of Affiliates$19,746  4.97 %4.97 %393  43.3 %
Total: GAAP Basis$57,362  3.46 %3.46 %14  46.5 %
The following table presents, as of December 31, 2019, a summary of the repurchase agreements by maturity on our real estate securities ($ in thousands). It also reconciles these items to GAAP:

Repurchase Agreements Maturing Within:BalanceWeighted 
Average
Rate		Weighted 
Average
Funding Cost		Weighted 
Average Days 
to Maturity		Weighted 
Average
Haircut
30 days or less$1,598,510  2.37 %2.37 %14  9.8 %
31-60 days1,366,178  2.13 %2.13 %46  7.0 %
61-90 days71,753  2.99 %2.99 %67  23.5 %
91-180 days20,384  3.79 %3.79 %176  21.1 %
Greater than 180 days2,973  3.79 %3.79 %283  23.7 %
Total: Non-GAAP Basis$3,059,798  2.29 %2.29 %31  9.0 %
Investments in Debt and Equity of Affiliates$72,443  3.76 %3.76 %67  29.8 %
Total: GAAP Basis$2,987,355  2.25 %2.25 %30  8.5 %
The decrease in theconsolidated balance of our repurchase agreements from December 31, 2019 to June 30, 2020 is due primarily to selling collateral in order to meet margin calls.

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The following table presents, as of June 30, 2020, a summary of our repurchase agreements on our Re/Non-performing loans ($ in thousands).
Repurchase Agreements Maturing Within:BalanceWeighted 
Average
Rate		Weighted 
Average
Funding Cost
Weighted 
Average Days 
to Maturity
Weighted 
Average
Haircut
61-90 days$9,392  4.65 %4.65 %70  61.2 %
Greater than 180 days118,072  3.68 %4.10 %329  19.4 %
Total: GAAP Basis$127,464  3.76 %4.14 %310  22.4 %

The following table presents, as of December 31, 2019, a summary of repurchase agreements on our Re/Non-performing loans ($ in thousands).

Repurchase Agreements Maturing Within:BalanceWeighted 
Average
Rate		Weighted 
Average
Funding Cost
Weighted 
Average Days 
to Maturity
Weighted 
Average
Haircut
31-60 days$24,584  3.14 %3.14 %56  33.7 %
Greater than 180 days107,010  3.61 %3.80 %727  19.3 %
Total: GAAP Basis$131,594  3.53 %3.68 %602  22.0 %

The following table presents, as of June 30, 2020, a summary of repurchase agreements on our commercial real estate loans ($ in thousands).

Repurchase Agreements Maturing Within:BalanceWeighted 
Average
Rate		Weighted 
Average
Funding Cost
Weighted 
Average Days 
to Maturity
Weighted 
Average
Haircut
Greater than 180 days$3,460  4.75 %6.00 %915  36.4 %

The following table presents, as of December 31, 2019, a summary of repurchase agreements on our commercial real estate loans ($ in thousands).

Repurchase Agreements Maturing Within:BalanceWeighted 
Average
Rate		Weighted 
Average
Funding Cost
Weighted 
Average Days 
to Maturity
Weighted 
Average
Haircut
Greater than 180 days$3,017  4.46 %5.89 %1,097  35.4 %

Financing facilities

The following table presents information regarding revolving facilities as of June 30, 2020 and December 31, 2019 ($ in thousands). It also reconciles these items to GAAP.
June 30, 2020December 31, 2019
FacilityInvestmentMaturity DateRateFunding Cost (1)BalanceMaximum Aggregate Borrowing CapacityRateFunding Cost (1)Balance
Revolving facility B (2)(3)Re/Non-performing loansJune 28, 2021— %— %$—  $—  3.80 %3.80 %$21,546  
Revolving facility C (2)(3)Commercial loansAugust 10, 20232.33 %2.68 %62,812  100,000  3.85 %4.01 %89,956  
Revolving facility D (2)(3)(4)Non-QM loansOctober 1, 20215.00 %5.00 %194,162  194,162  3.61 %4.02 %177,899  
Revolving facility E (2)Re/Non-performing loansNovember 25, 20202.20 %2.20 %1,253  1,253  3.73 %3.73 %1,808  
Revolving facility F (2)Re/Non-performing loansJuly 25, 20211.94 %1.94 %2,894  14,120  3.55 %3.55 %5,266  
Total: Non-GAAP Basis$261,121  $309,535  $296,475  
Investments in Debt and Equity of Affiliates$198,309  $209,535  $184,973  
Total: GAAP Basis$62,812  $100,000  $111,502  

(1)Funding costs represent the stated rate inclusive of any deferred financing costs.
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(2)Under the terms of our financing agreements, the counterparties may, in certain cases, sell or re-hypothecate the pledged collateral.
(3)Increasing our borrowing capacity under this facility requires consent of the lender.
(4)Refer to the "MATT Financing Arrangement Restructuring" Section below for additional information.sheets.

Other financing transactions
 
In 2014,addition to our financing arrangements, we enteredalso finance our Re/Non-performing loans and certain Non-QM Loans with securitized debt. From time to time, we enter into a resecuritization transaction, pursuant to which we created asecuritization transactions of certain Re/Non-performing loans and certain Non-QM Loans where special purpose entityentities ("SPE"SPEs") are created to facilitate the transaction. We determined that the SPE was atransactions. These SPEs are considered variable interest entityentities ("VIE"VIEs") and that the VIE, which should be consolidated by us under ASC 810-10. The transferred assets were recorded as a secured borrowing (the "Consolidated December 2014 VIE"). See Note 2 to the "Notes to Consolidated Financial Statements (unaudited)" for more detail on Consolidated December 2014 VIE. As of June 30, 2020, we did not hold any interest in the December 2014 VIE.
The following table details certain information related to the Consolidated December 2014 VIE as of2021 and December 31, 2019 ($ in thousands):
   Weighted Average
 Current FaceFair ValueCouponYieldLife (Years) (1)
Consolidated tranche (2)$7,204  $7,230  3.46 %4.11 %1.96
Retained tranche7,851  6,608  5.37 %18.14 %7.64
Total resecuritized asset (3)$15,055  $13,838  4.46 %10.81 %4.92
(1)This is based on projected life. Typically, actual maturities of investments and loans 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)As of December 31, 2019,2020, we have recorded secured financing in connection with these VIEs of $7.2 million on our consolidated balance sheets in the "Securitized debt, at fair value" line item. We recorded the proceeds from the issuance of the secured financing in the "Cash Flows from Financing Activities" section of the consolidated statement of cash flows at the time of securitization.
(3)As of December 31, 2019, the fair market value of the total resecuritized asset is included on our consolidated balance sheets as "Non-Agency RMBS."
In August 2019, we entered into a securitization transaction of certain of our residential mortgage loans, pursuant to which we created an SPE to facilitate the transaction. We determined that the SPE was a VIE and that the VIE should be consolidated by us under ASC 810-10. The transferred assets were recorded as a secured borrowing (the "Consolidated August 2019 VIE"). See Note 2 to the "Notes to Consolidated Financial Statements (unaudited)" for more detail on the Consolidated August 2019 VIE.
The following table details certain information related to the Consolidated August 2019 VIE as of June 30, 2020 and December 31, 2019 ($ in thousands):
   Weighted Average
As of: Current Unpaid Principal BalanceFair ValueCouponYieldLife (Years) (1)
June 30, 2020Residential mortgage loans (2)$254,936  $223,119  3.51 %4.81 %6.85
Securitized debt (3)213,233  198,974  2.95 %2.95 %5.19
December 31, 2019Residential mortgage loans (2)263,956  255,171  3.96 %5.11 %7.66
Securitized debt (3)217,455  217,118  2.92 %2.86 %5.00

(1)Weighted average life is based on projected life. Typically, actual maturities of investments and loans 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)This represents all loans contributed to the Consolidated August 2019 VIE.
(3)As of June 30, 2020 and December 31, 2019, we have recorded secured financing of $199.0$482.5 million and $217.1$355.2 million, respectively, on the consolidated balance sheets in the "Securitized debt, at fair value" line item. We recordedSee Note 2 and Note 3 to the proceeds from the issuance of the secured financing in the "Cash Flows from Financing Activities" section of the"Notes to Consolidated Financial Statements (unaudited)" for more detail on securitized debt and our consolidated statement of cash flows at the time of securitization.VIEs.

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Leverage

We define GAAP leverage as the sum of (1) our GAAP financing arrangements, net of any restricted cash posted on such financing arrangements, (2) the amount payable on purchases that have not yet settled less the financing remaining on sales that have not yet settled, and (3) securitized debt, at fair value. We define Economic Leverage, a non-GAAP metric, as the sum of: (i) our GAAP leverage, exclusive of any fully non-recourse financing arrangements, (ii) financing arrangements held through affiliated entities, net of any restricted cash posted on such financing arrangements, exclusive of any financing utilized through AG Arc, any adjustment related to unsettled trades as described in (2) in the previous sentence, and any fully non-recourse financing arrangements and (iii) our net TBA position (at cost). Our calculations of GAAP leverage and Economic Leverage exclude financing arrangements and net receivables/payables on unsettled trades pertaining to U.S. Treasury securities due to the highly liquid and temporary nature of these investments.

Historically, we reported non-GAAP "At-Risk" leverage, which included non-recourse financing arrangements, but we believe that the adjustments made to our GAAP leverage in order to compute Economic Leverage, including the exclusion of non-recourse financing arrangements, allow investors the ability to identify and track the leverage metric that management uses to evaluate and operate the business. Our obligation to repay our non-recourse financing arrangements is limited to the value of the pledged collateral thereunder and does not create a general claim against us as an entity., if any.

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

June 30, 2020LeverageStockholders’ EquityLeverage Ratio
GAAP Leverage$470,169  $365,378  1.3x
Financing arrangements through affiliated entities218,055  
Non-recourse financing arrangements(409,549) 
Economic Leverage$278,675  $365,378  0.8x
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December 31, 2019LeverageStockholders’ EquityLeverage Ratio
GAAP Leverage$3,441,451  $849,046  4.1x
Financing arrangements through affiliated entities257,416  
Non-recourse financing arrangements(224,348) 
Economic Leverage$3,474,519  $849,046  4.1x

The amount of leverage, or debt, we may deploy for particular assets depends upon our Manager’s assessment of the credit and other risks of those assets, and also depends on any limitations placed upon us through covenants contained in our financing arrangements. We generate income principally from the yields earned on our investments and, to the extent that leverage is deployed, on the difference between the yields earned on our investments and our cost of borrowing and the cost of any hedging activities. Subject to maintaining both our qualification as a REIT for U.S. federal income tax purposes and our Investment Company Act exemption, to the extent leverage is deployed, we may use a number of sources to finance our investments.
As previously described, due to market volatility caused by the COVID-19 pandemic, we executed on various asset sales in an effort to create additional liquidity and de-risk our portfolio. As a result of these asset sales and related debt pay-offs, we have reduced the number of financing counterparties we have, bringing the overall number of counterparties with debt outstanding down from 30 as of December 31, 2019 to 6 as of June 30, 2020 with debt outstanding of $469.2 million, inclusive of financing arrangements through affiliated entities. These agreements generally include customary representations, warranties, and covenants, but may also contain more restrictive supplemental terms and conditions. Although specific to each lending agreement, typical supplemental terms include requirements of minimum equity, leverage ratios, performance triggers or other financial ratios.
Under our financing arrangements, we may be required to pledge additional assets to our lenders in the event the estimated fair value of the existing pledged collateral under such agreements declines and such lenders demand additional collateral, which may take the form of additional securities or cash. Certain securities that are pledged as collateral under our financing arrangements are in unrealized loss positions.
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See "Financing arrangements on our investment portfolio" section above for information on the contractual maturity of our
June 30, 2021LeverageStockholders’ EquityLeverage Ratio
GAAP Leverage$1,590,715 $465,877 3.4x
Financing arrangements through affiliated entities60,038 
Non-recourse financing arrangements(509,051)
Net TBA (receivable)/payable adjustment(134,239)
Economic Leverage$1,007,463 $465,877 2.2x
(1) Non-recourse financing arrangements at June 30, 2020include securitized debt and December 31, 2019.
As described above in the "Otherother non-recourse financing transactions" section, we entered into a resecuritization transaction in 2014 and a securitization transaction of certain of our residential mortgage loans in August 2019 that resulted in the consolidation of those VIEs created with the SPEs. We recorded the proceeds from the issuance of the secured financing in the "Cash Flows from Financing Activities" section of the consolidated statement of cash flows. See Note 3 and 4 to the "Notes to Consolidated Financial Statements (unaudited)" for more detail.held within MATT.

During the quarter, we entered into the Forbearance Agreement pursuant to which the consent of the Participating Counterparties was required in order for us to increase our leverage. As described above, upon entering in to the Reinstatement Agreement, we are no longer subject to the restrictive covenants set forth in the Forbearance Agreement, though the Reinstatement Agreement limits our Recourse Indebtedness to Stockholder's Equity (both as defined therein) leverage ratio to no greater than 3:1.
December 31, 2020LeverageStockholders’ EquityLeverage Ratio
GAAP Leverage$979,303 $409,705 2.4x
Financing arrangements through affiliated entities116,688 
Non-recourse financing arrangements(466,294)
Economic Leverage$629,697 $409,705 1.5x
The following table presents information at June 30, 2020 with respect to each counterparty that provides us with financing for which we had greater than 5% of our stockholders’ equity at risk ($ in thousands).
CounterpartyStockholders’ Equity
at Risk		Weighted Average
Maturity (days)		Percentage of
Stockholders’ Equity
Credit Suisse AG, Cayman Islands Branch - Non-GAAP$79,134  12921.6 %
Non-GAAP Adjustments (a)(28,378) (105)(7.8)%
Credit Suisse AG, Cayman Islands Branch - GAAP$50,756  2413.9 %
Barclays Bank PLC$28,966  3297.9 %
(a)Represents stockholders' equity at risk, weighted average maturity and percentage of stockholders' equity from(1) Non-recourse financing arrangements held in investments ininclude securitized debt and equity of affiliates.other non-recourse financing held within MATT.

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

On March 23, 2020, in an effort to prudently manage our portfolio through unprecedented market volatility resulting from the COVID-19 pandemic and preserve long-term stockholder value, we sold our 30 Year Fixed Rate Agency securities, our most interest rate sensitive assets, and as a result, removed all of our interest rate swap positions, a decrease of $1.9 billion swap notional amount.
The following table summarizes certain information on our non-hedge derivatives and other instruments (in thousands) as of the dates indicated.
June 30, 2020December 31, 2019
Notional amount of non-hedge derivatives and other instruments:Notional CurrencyNotional AmountWeighted Average Life (Years)Notional AmountWeighted Average Life (Years)
Pay Fix/Receive Float Interest Rate Swap Agreements (1)(2)USD$—  —  $1,943,281  4.25  
Payer SwaptionsUSD350,000  0.18  650,000  0.42  
Short positions on British Pound Futures (3)GBP3,250  0.216,563  0.21  
Short positions on Euro Futures (4)EUR—  —  1,500  0.21  
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(1)As of December 31, 2019, there were $94.5 million notional amount of pay fix/receive float interest rate swap agreements held through investments in debt and equity of affiliates.
(2)As of December 31, 2019, the weighted average life of interest rate swaps on a GAAP basis was 4.32 years and the weighted average life of interest rate swaps held through investments in debt and equity of affiliates was 2.83 years.
(3)Each British Pound Future contract embodies £62,500 of notional value.
(4)Each Euro Future contract embodies €125,000 of notional value.
Interest rate swaps
To help mitigate exposure to increases in interest rates, we may use currently-paying and forward-starting, one- or three-month LIBOR-indexed, pay-fixed, receive-variable, interest rate swap agreements. This arrangement helps hedge our exposure to higher interest rates because the variable-rate payments received on the swap agreements help to offset additional interest accruing on the related borrowings due to the higher interest rate, leaving the fixed-rate payments to be paid on the swap agreements as our effective borrowing rate, subject to certain adjustments including changes in spreads between variable rates on the swap agreements and actual borrowing rates.
During the quarter ended March 31, 2020, we sold our interest rate sensitive assets. As a result, we did not hold any interest rate swap positions as of June 30, 2020.
Dividends
 
Federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT ordinary taxable income, without regard to the deduction for dividends paid and excluding net capital gains and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its net taxable income. Before we pay any dividend, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service on our financing arrangements and other debt payable. If our cash available for distribution is less than our net taxable income, we could be required to sell assets or borrow funds to make required cash distributions or we may make a portion of the required distribution in the form of a taxable stock distribution or distribution of debt securities. In addition, prior to the time we have fully deployed the net proceeds of our follow-on offerings to acquire assets in our target asset classes we may fund our quarterly distributions out of such net proceeds.
 
As described above, our distribution requirements are based on taxable income rather than GAAP net income. The primary differencesDifferences between taxable income and GAAP net income include (i) unrealized gains and losses associated with investment and derivative portfolios which are marked-to-market in current income for GAAP purposes, but excluded from taxable income until realized or settled, (ii) temporary differences related to amortization of premiums and discounts paid on investments, (iii) the timing and amount of deductions related to stock-based compensation, (iv) temporary differences related to the recognition of realized gains and losses on sold investments and certain terminated derivatives, (v) taxes and (vi) methods of depreciation. Undistributed taxable income is based on current estimates and is not finalized until we file our annual tax return for that tax year, typically in SeptemberOctober of the following year. We estimate that we dodid not have any undistributed taxable income as of June 30, 2020.2021. Refer to the "Results of operations" section above for more detail.

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On March 27, 2020, we announced that our Board of Directors approved a suspension of our quarterly dividends on our common stock, 8.25% Series A Cumulative Redeemable Preferred Stock, 8.00% Series B Cumulative Redeemable Preferred Stock, and 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, beginning with the common dividends that normally would have been declared in March 2020 and the preferred dividend that would have been declared in May 2020, as well as a suspension of the quarterly dividend on the common stock, beginning with the dividend that normally would have been declared in March 2020, in order to conserve capital and preserve liquidity. Based on current conditions for the Company, we do not anticipate paying dividends on our common or preferred stock for the foreseeable future. If the Company’s Board of Directors does not declare a dividend in a given period, an accrual is not recorded on the balance sheet. However, undeclared preferred stock dividends are reflected in earnings per share as discussed in ASC 260-10-45-11. As a result, we did not declare or accrue quarterly dividends on our Common or Preferred Stockimprove its liquidity position during the three months ended June 30, 2020. Pursuantmarket volatility due to the COVID-19 pandemic. Under the terms of the Articles Supplementary governing our Preferred Stock, all unpaid dividends on ourseries of preferred stock, accrue without interest and,we cannot pay cash dividends with respect to our common stock if dividends on our preferred stock are in arrears.

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On December 17, 2020, we paid our Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock dividends that were in arrears as well as the full dividends payable on the preferred stock for the fourth quarter of 2020 in the amount of $1.54689, $1.50 and $1.50 per share, respectively. On December 22, 2020, our Board of Directors declared a dividend of $0.09 per common share for the fourth quarter 2020 which was paid on January 29, 2021 to shareholders of record at the close of business on December 31, 2020. During the first quarter of 2021, we cannot pay cashdeclared its preferred and common dividends onin the ordinary course of business.

On July 12, 2021, we announced a one-for-three reverse stock split of our outstanding shares of common stock. ReferThe reverse stock split was effected following the close of business on July 22, 2021. All per share amounts and common shares outstanding for all periods presented have been adjusted on a retroactive basis to Note 12 inreflect the "Notes to Consolidated Financing Statements (Unaudited)" for more information on our preferred stock. Refer to the "Book value per share" section above for a discussion of the treatment of accumulated, unpaid, or undeclared preferred dividends on our book value.one-for-three reverse stock split.

The following table details the aggregate and per-share amounts of arrearages in cumulative, unpaid, and undeclared preferred dividends as of June 30, 2020 (in thousands, except per share data):

Class of StockDividend Per Preferred Share in ArrearsAmount of Preferred Dividend in Arrears
8.25% Series A$0.51563  $1,067  
8.00% Series B0.50  2,300  
8.000% Series C0.50  2,300  
Total$5,667  

Preferred stock dividends that are not declared accumulate and are added to the liquidation preference as of the scheduled payment date for the respective series of the preferred stock. We expect cumulative preferred dividends to continue to accrue for the foreseeable future, thereby increasing the aggregate liquidation preference of the preferred stock. Subject to market conditions, our liquidity, applicable contractual restrictions, the terms of the preferred stock and applicable law, we may from time to time seek to manage this liability by acquiring shares of our preferred stock in public offers, privately negotiated transactions, open market purchases or other transactions.

No common stock dividends were declared during the three months or the six months ended June 30, 2020. The following tables detail our common stock dividends during the six months ended June 30, 2019:2021:
20192021 
Declaration DateRecord DatePayment DateCash Dividend Per Share
3/15/201922/20213/29/20194/1/20214/30/20192021$0.500.18 
6/14/201915/20216/28/201930/20217/31/201930/20210.500.21 
Total$1.000.39 

We did not declare any common stock dividends during the three months ended June 30, 2020.
 
The following table detailstables detail our preferred stock dividends on our 8.25% Series A, 8.00% Series B,declared and 8.000% Series C Preferred Stockpaid during the six months ended June 30, 20202021 and June 30, 2019.2020:

2021  Cash Dividend Per Share
Declaration DateRecord DatePayment Date8.25% Series A8.00% Series B8.000% Series C
2/16/20212/26/20213/17/2021$0.51563 $0.50 $0.50 
5/17/20215/28/20216/17/20210.51563 0.50 0.50 
Total$1.03126 $1.00 $1.00 
   Cash Dividend Per Share
Declaration DateRecord DatePayment Date8.25% Series A8.00% Series B8.000% Series C
2/14/20202/28/20203/17/2020$0.51563  $0.50  $0.50  
2/15/20192/28/20193/18/20190.51563  0.50  —  
5/17/20195/31/20196/17/20190.51563  0.50  —  
2020  Cash Dividend Per Share
Declaration DateRecord DatePayment Date8.25% Series A8.00% Series B8.000% Series C
2/14/20202/28/20203/17/2020$0.51563 $0.50 $0.50 
 
Liquidity and capital resources
 
Our liquidity determines our ability to meet our cash obligations, including distributions to our stockholders, payment of our expenses, financing our investments and satisfying other general business needs.

Our principal sources of cash as of June 30, 20202021 consisted of proceeds from sales of assets in an effort to prudently manage our portfolio through unprecedented market volatility resulting from the global pandemic of the COVID-19 virus, borrowings under financing arrangements, principal and
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interest payments we receive on our investment portfolio, cash generated from our operating results, and proceeds from capital market transactions. We typically use cash to repay principal and interest on our financing arrangements, to purchase real estate securities, loans and other real estate related assets, to make dividend payments on our capital stock, and to fund our operations. At June 30, 2020,2021, we had $68.1$70.8 million of liquidity, which consisted of $64.0 million of cash and $6.8 million of unencumbered assets available to support our liquidity needs. Refer to the "Contractual obligations" section of this Item 2 for additional obligations that could impact our liquidity.

As previously discussed, on June 1, 2020, we entered into a third forbearance agreement with the Participating Counterparties, providing for a forbearance period ending on June 15, 2020. We exited forbrearance on June 10, 2020. Pursuant to the terms of the Forbearance Agreement, we were obligated to comply with a set of restrictive covenants set forth in the Forbearance Agreement, including restrictions on the use of our cash, restrictions on our incurrence of additional debt, and restrictions on the sale of our assets. We also granted to the Participating Counterparties a lien and security interest in all of our unencumbered assets. Upon entering into the Reinstatement Agreement with the Participating Counterparties, we are no longer subject to the restrictive covenants set forth in the Forbearance Agreement and the lien and security interest granted to the Participating Counterparties on all of our unencumbered assets were terminated and released.

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

Similar to the margin calls that we receive on our borrowing agreements, we may also receive margin calls on our derivative instruments when their fair values decline.value declines. This typically occurs when prevailing market rates change adversely, with the severity of the change also dependent on the terms of the derivatives involved. We may also receive margin calls on our derivatives based on the implied volatility of interest rates. Our posting of collateral with our counterparties can be done in cash or securities, and is generally bilateral, which means that if the fair value of our interest rate hedges increases, our counterparty will be required to post collateral with us. Refer to the "Liquidity risk – derivatives" section of Item 3 below for a further discussion on margin.

On March 20, 2020, we notified our financing counterparties that we did not expectRefer to be in a position to fund the anticipated volume"Financing activities–Forbearance and Reinstatement Agreements" section above for information on the impact of futureCOVID-19 on margin calls under our financing arrangements in the near term as a result of market disruptions created by the COVID-19 pandemic. Since March 23, 2020, we have received notifications of alleged events of default and deficiency notices from several of our financing counterparties. Subject to the terms of the applicable financing arrangement, if we fail to deliver additional collateral or otherwise meet margin calls when due, the financing counterparties may be able to demand immediate payment by us of the aggregate outstanding financing obligations owed to such counterparties, and if such financing obligations are not paid, may be permitted to sell the financed assets and apply the proceeds to our financing obligations and/or take ownership of the assets securing our financing obligations. During this period of market upheaval, we engaged in discussions with our financing counterparties and entered into the Forbearance Agreement. During the Forbearance Period, we did not have any obligation to make any margin payments as it related to the Participating Counterparties. As described above, on June 10, we entered into a Reinstatement Agreement with the Participating Counterparties and the JPM Reinstatement Agreement which
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reinstates each Bilateral Agreement. As a result, we will be responsible for making any future margin payments with respect to any financing arrangements relating to these agreements.2020.

As of June 30, 2020, we have met all margin calls. Refer to Note 13 in the "Notes to Consolidated Financial Statements (Unaudited)" for more information on outstanding deficiencies.
Cash Flows

As of June 30, 2020,The below details changes to our cash, cash equivalents, and restricted cash totaled $69.2 million representing a net decrease of $56.2 million from $125.4 million at December 31, 2019. for the six months ended June 30, 2021 and 2020 (in thousands).
Six Months Ended
June 30, 2021June 30, 2020Change
Cash and cash equivalents and restricted cash, Beginning of Period$62,318 $125,369 $(63,051)
Net cash provided by (used in) operating activities (1)9,876 841 9,035 
Net cash provided by (used in) investing activities (2)(742,636)2,628,424 (3,371,060)
Net cash provided by (used in) financing activities (3)758,147 (2,685,150)3,443,297 
Net change in cash and cash equivalents and restricted cash25,387 (55,885)81,272 
Effect of exchange rate changes on cash10 (250)260 
Cash and cash equivalents and restricted cash, End of Period$87,715 $69,234 $18,481 
(1)Cash provided by continuing operating activities of $0.8 million wasis primarily attributable to net interest income less operating expenses.expenses for the six months ended June 30, 2021 and 2020, respectively.
(2)Cash used in investing activities for the six months ended June 30, 2021 was primarily attributable to purchases of investments less sales of investments and principal repayments of investments. Cash provided by continuing investing activities of $2,628.4 millionfor the six months ended June 30, 2020 was primarily attributable to sales of investments and principal repayments of investments, lessoffset by purchases of investments. The difference period over period is primarily due to significant sales in 2020 as a result of the global COVID-19 pandemic.
(3)Cash provided by financing activities for the six months ended June 30, 2021 was primarily attributable to borrowings under financing arrangements offset by repayments of financing arrangements and dividend payments. Cash used in continuing financing activities of $(2,685.2) millionfor the six months ended June 30, 2020 was primarily attributable to repayments of financing arrangements and dividend payments offset by borrowings under financing arrangements. The difference period over period is primarily due to a reduction in financing arrangements as a result of significant sales in 2020 due to the global COVID-19 pandemic.

Equity distribution agreementagreements
 
On May 5, 2017, we entered into an equity distribution agreement with each of Credit Suisse Securities (USA) LLC and JMP
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Securities LLC (collectively, the "Sales Agents"), which we refer to as the "Equity Distribution Agreements," pursuant to which we may sell up to $100.0 million aggregate offering price of shares of our common stock from time to time through the Sales Agents, under the Securities Act of 1933. TheFor the three months ended June 30, 2021, we issued 0.2 million shares of common stock under the Equity Distribution Agreements were amended on May 2, 2018 in conjunction withfor net proceeds of approximately $3.1 million. For the filingsix months ended June 30, 2021, we issued 1.0 million shares of our shelf registration statement registering up to $750.0 millioncommon stock under the Equity Distribution Agreements for net proceeds of its securities, including capital stock (the "2018 Registration Statement").approximately $13.1 million. For the three and six months ended June 30, 2020, we sold 1.0issued 0.3 million shares of common stock under the Equity Distribution Agreements for net proceeds of approximately $3.5 million. ForSince inception of the three and six months ended June 30, 2019, we sold 0.5 million shares of common stock under the Equity Distribution Agreements for net proceeds of approximately $8.6 million. As of June 30, 2020,program, we have soldissued approximately 2.52.2 million shares of common stock under the Equity Distribution Agreements for gross proceeds of $31.1 million, with $68.9 million available to be issued.$48.3 million.

Common stock offeringExchange Offers

On February 14, 2019,March 17, 2021, we completed a public offeringagreed to issue an aggregate of 3,000,000937,462 shares of our common stock in exchange for 153,325 shares of Series A Preferred Stock and subsequently issued an additional 450,000350,609 shares of Series B Preferred Stock, pursuant to a privately negotiated exchange agreement with existing holders of the preferred stock. After the transaction closed, the Series A Preferred Stock and Series B Preferred Stock exchanged pursuant to the underwriters' exerciseexchange agreement were reclassified as authorized but unissued shares of their over-allotment option at a price of $16.70 per share. Net proceedspreferred stock without designation as to us from the offering were approximately $57.4 million, after deducting estimated offering expenses.

Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock issuanceclass or series.

On September 17, 2019,June 14, 2021, we completed a public offeringagreed to issue an aggregate of 4,000,000429,802 shares of 8.000%our common stock in exchange for 86,478 shares of Series C Fixed-to-Floating Rate Cumulative RedeemableB Preferred Stock with a liquidation preference of $25.00 per share (the "Series C Preferred Stock") and subsequently issued 600,000154,383 shares of Series C Preferred Stock, pursuant to privately negotiated exchange agreements with certain existing holders of the underwriters' exercise of their over-allotment option. We received total gross proceeds of $115.0 millionpreferred stock. After the transaction closed, the Series B Preferred Stock and net proceeds of approximately $111.2 million, net of underwriting discounts, commissions and expenses. The Series C Preferred Stock has no stated maturity and is not subjectexchanged pursuant to any sinking fundthe exchange agreements were reclassified as authorized but unissued shares of preferred stock without designation as to class or mandatory redemption. Under certain circumstances upon a changeseries.

As of control, theJune 30, 2021, we had outstanding 1,663,193 shares of Series CA Preferred Stock, is convertible to3,727,641 shares of our common stock. HoldersSeries B Preferred Stock, and 3,728,795 shares of Series C Preferred Stock have no voting rights, except under limited conditions,outstanding.

Common stock issuance to the Manager

Refer to "Contractual obligations–Management agreement" below for more detail related to the Second Management Agreement Amendment.

Forward-looking statements regarding liquidity
Based upon our current portfolio, leverage and holders are entitled to receive cumulative cash dividends before holdersavailable borrowing arrangements, we believe the net proceeds of our common stock are entitledequity offerings, preferred equity offerings, and private placements, combined with cash flow from operations and our available borrowing capacity will be sufficient to receive any dividends. The initial dividend rate for the Series C Preferred Stock, fromenable us to meet our anticipated liquidity requirements, including funding our investment activities, paying fees under our management agreement, funding our distributions to stockholders and including the date of original issue to, but not including, September 17, 2024, is equal to 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 three-month LIBOR plus a spread of 6.476% per annum. Shares of our Series C Preferred Stock are redeemable at $25.00 per share plus accumulated and unpaid dividends (whether or not declared) exclusively at our option commencing on September 17, 2024, or earlier under certain circumstances intended to preserve our qualification as a REIT for Federal income tax purposes. Dividends are payable quarterly in arrears on the 17th day of each March, June, September and December. Based on current conditions for the Company, we do not anticipate paying dividends on our common or preferred stock for the foreseeable future. Refer to the "Dividends" section above for more detail on arrearages.general corporate expenses.
 
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Contractual obligations
 
Management agreement
 
On June 29, 2011, we entered into ana management agreement with our Manager, pursuant to which our Manager is entitled to receive a management fee and the reimbursement of certain expenses. The management fee is calculated and payable quarterly in arrears in an amount equal to 1.50% of our Stockholders’ Equity, per annum.
 
For purposes of calculating the management fee, "Stockholders’ Equity" means the sum of the net proceeds from any issuances of equity securities (including preferred securities) since inception (allocated on a pro rata daily basis for such issuances during the fiscal quarter of any such issuance, and excluding any future equity issuance to the Manager), plus our retained earnings at the end of such quarter (without taking into account any non-cash equity compensation expense or other non-cash items described below incurred in current or prior periods), less any amount that we pay for repurchases of our common stock, excluding any unrealized gains, losses or other non-cash items that have impacted stockholders’ equity as reported in our financial statements prepared in accordance with GAAP, regardless of whether such items are included in other comprehensive income or loss, or in net income, and excluding one-time events pursuant to changes in GAAP, and certain other non-cash charges after discussions between the Manager and our independent directors and after approval by a majority of our independent directors. Stockholders’ Equity, for purposes of calculating the management fee, could be greater or less than the amount of stockholders’ equity shown on our financial statements. For the three and six months ended June 30, 2021, we
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incurred management fees of approximately $1.7 million and $3.3 million, respectively. For the three and six months ended June 30, 2020, we incurred management fees of approximately $1.7 million and $3.8 million, respectively. For the three and six months endedAs of June 30, 2019,2021 and December 31, 2020, we incurredhave recorded management fees payable of approximately $2.4$1.7 million and $4.7$1.7 million, respectively.
 
Our Manager uses the proceeds from its management fee in part to pay compensation to its officers and personnel, who, notwithstanding that certain of them also are our officers, receive no compensation directly from us. We are required to reimburse our Manager or its affiliates for operating expenses which are incurred by our Manager or its affiliates on our behalf, including certain salary expenses and other expenses relating to legal, accounting, due diligence and other services. Our reimbursement obligation is not subject to any dollar limitation; however, the reimbursement is subject to an annual budget process which combines guidelines from the Management Agreement with oversight by our Board of Directors and discussions with our Manager. Of the $4.5$4.9 million and $5.3$8.8 million of Other operating expenses for the three and six months ended June 30, 2021, respectively, we have incurred $1.1 million and $2.7 million, respectively, representing a reimbursement of expenses. Of the $4.6 million and $5.5 million of Other operating expenses for the three and six months ended June 30, 2020, respectively, we have accruedincurred $1.9 million and $3.9 million, respectively, representing a reimbursement of expenses. Of

As of June 30, 2021 and December 31, 2020, we recorded a reimbursement payable to the $3.8Manager of $1.5 million and $7.6$1.8 million, respectively. For the year ended December 31, 2021, the Manager agreed to waive its right to receive expense reimbursements of Other operating expenses for the three and six months ended June 30, 2019, respectively, we have accrued $1.9 million and $3.9 million, respectively, representing a reimbursement of expenses.$0.8 million.

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

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

Secured debt

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

The Manager agreed to subordinate our obligations with respect toNote and accrued interest on the Note, and liens held bywhen outstanding, were included within the Manager fordue to affiliates amount, which is included within the security of"Other Liabilities" line item in the performance of our obligations under the Note to our obligations to the Participating Counterparties and to the secured promissory note payable to Royal Bank of Canada. Our obligations to the Participating Counterparties and to the secured promissory note payable to Royal Bank of Canada were satisfied or released as of June 30, 2020.consolidated balance sheets.

Share-based compensation
 
Effective on April 15, 2020 upon the approval of our stockholders at our Annual Meeting,2020 annual meeting of stockholders, the 2020 Equity Incentive Plan provides for 2,000,000666,666 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 June 30, 2020, 1,925,2092021, 612,676 shares of common stock were available to be awarded under the Equity Incentive Plan.
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Since our IPO, we have granted an aggregate of 180,58535,264 and 40,25053,990 shares of restricted common stock to our independent directors under our equity incentive plans, dated July 6, 2011 (the "2011 Equity Incentive Plans") and our 2020 Equity Incentive Plan, respectively. As of June 30, 2021, all shares of restricted common stock granted to our independent directors have vested.

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Following approval of our stockholders at our 2021 annual meeting of stockholders, the AG Mortgage Investment Trust, Inc. 2021 Manager respectively,Equity Incentive Plan (the "2021 Manager Plan") became effective on April 7, 2021 and 120,000provides for a maximum of 573,425 shares of common stock to be issued to our Manager. As of June 30, 2021, there were no shares or awards issued under the 2021 Manager Plan.

Further, since our IPO, we have issued 13,416 shares of restricted common stock and 40,000 restricted stock units to our Manager under our equity incentive plans.2011 Equity Incentive Plans. As of June 30,July 1, 2020, all the shares of restricted common stock granted to our Manager and independent directors have vested and 99,991 restricted stock units granted to our Manager have fully vested. The 20,009 restricted stock units that have not vested as of June 30, 2020 were granted to the Manager on July 1, 2017, and represent the right to receive an equivalent number of shares of our common stock when the units vest on July 1, 2020. The units do not entitle the recipient the rights of a holder of our common stock, such as dividend and voting rights, until shares are issued in settlement of the vested units. The vesting of such units is subject to the continuation of the management agreement. If the management agreement terminates, all unvested units then held by the Manager or the Manager’s transferee shall be immediately cancelled and forfeited without consideration.
 
Unfunded commitments

See our "Off-balance sheet arrangements" section below and Note 1312 of the "Notes to Consolidated Financial Statements"Statements (unaudited)" for detail on our unfunded commitments as of June 30, 2020.2021.

MATT Financing Arrangement Restructuring

On April 3, 2020, we, alongside private funds underSee Note 10 and Note 12 of the management of Angelo Gordon, restructured our financing arrangements in"Notes to Consolidated Financial Statements (unaudited)" for detail on the MATT ("Restructured Financing Arrangement"). The Restructured Financing Arrangement requires all principal and interest on the underlying assets in MATT be used to pay down principal and interest on the outstanding financing arrangement. Asour commitments as of April 3, 2020, The Restructured Financing Arrangement is not a mark-to-market facility and is non-recourse to us. The Restructured Financing Arrangement provides for a termination date of October 1,June 30, 2021. At the earlier of the termination date or the securitization or sale by us of the remaining assets subject to the Restructured Financing Arrangement, the financing counterparty will be entitled to 35% of the remaining equity in the assets. We evaluated this restructuring and concluded it was an extinguishment of debt. MATT has chosen to make a fair value election on the new financing arrangement, and we will treat this arrangement consistently with this election.

Other
As of June 30, 2020 and December 31, 2019, we are obligated to pay accrued interest on our financing arrangements in the amount of $0.7 million and $10.8 million, respectively, inclusive of accrued interest accounted for through investments in debt and equity of affiliates, and exclusive of accrued interest on any financing utilized through AG Arc. The change in accrued interest on our financing arrangements was due primarily to the repayment of financing arrangements in conjunction with the sales of various assets by us and the seizures of various assets by financing counterparties in 2020.
Off-balance sheet arrangements
We may enter into long TBA positions to facilitate the future purchase or sale of Agency RMBS. We may also enter into short TBA positions to hedge Agency RMBS. We record TBA purchases/shorts and sales/covers on the trade date and present the amount net of the corresponding payable or receivable until the settlement date of the transaction. As of June 30, 2020, we did not hold any TBA positions.
 
Our investments in debt and equity of affiliates are primarily comprisedconsist of real estate securities, Excess MSRs, loans, and our interest in AG Arc, and certain derivatives.Arc. Investments in debt and equity of affiliates are accounted for using the equity method of accounting. MATT performs securitizations of Non-QM Loans and retains tranches from these securitizations which are included in the MATT Non-QM Loans line item of our investment portfolio. See Note 2 to the "Notes to Consolidated Financial Statements (unaudited)" for a discussion of investments in debt and equity of affiliates. The below table details

In addition to our investments in debt and equity of affiliates as of June 30, 2020 and December 31, 2019 (in thousands):

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June 30, 2020December 31, 2019
Assets (1)LiabilitiesEquityAssets (1)LiabilitiesEquity
Agency Excess MSR$496  $—  $496  $555  $—  $555  
Total Agency RMBS496  —  496  555  —  555  
Re/Non-Performing Loans39,170  (7,281) 31,889  87,216  (56,811) 30,405  
Non-QM Loans243,674  (210,575) 33,099  254,276  (200,257) 54,019  
Land Related Financing23,790  —  23,790  16,979  —  16,979  
Total Residential Investments306,634  (217,856) 88,778  358,471  (257,068) 101,403  
Freddie Mac K-Series—  —  —  12,237  —  12,237  
CMBS Interest Only—  —  —  1,863  —  1,863  
Total Commercial—  —  —  14,100  —  14,100  
Total Credit Investments306,634  (217,856) 88,778  372,571  (257,068) 115,503  
Total Investments excluding AG Arc307,130  (217,856) 89,274  373,126  (257,068) 116,058  
AG Arc, at fair value28,030  —  28,030  28,546  —  28,546  
Cash and Other assets/(liabilities) (2)9,276  (3,651) 5,625  12,953  (1,246) 11,707  
Investments in debt and equity of affiliates$344,436  $(221,507) $122,929  $414,625  $(258,314) $156,311  
(1)Certain Re/Non-Performing Loans held in securitized form are presented net of non-recourse securitized debt.
(2)Includes financing arrangementsdescribed above, we also have commitments outstanding on real estate owned as of June 30, 2020 and December 31, 2019 of $(0.2) million and $(0.3) million, respectively.

The table below detailscertain loans. For additional information on our additional commitments as of June 30, 2020 (in thousands):

Commitment TypeDate of CommitmentTotal CommitmentFunded CommitmentRemaining Commitment
Commercial loan G (a)(b)July 26, 2018$84,515  $56,710  $27,805  
Commercial loan I (a)January 23, 201920,000  15,212  4,788  
Commercial loan J (a)(c)February 11, 201930,000  6,291  23,709  
Commercial loan K (a)February 22, 201920,000  12,673  7,327  
LOTS (d)Various40,819  22,999  17,820  
Total$195,334  $113,885  $81,449  

(a)We entered into commitments on commercial loans relating2021, refer to construction projects. See "Investment activities" section above for further details.
(b)We expectNote 12 of the "Notes to receive financing of approximately $18.1 million on our remaining commitment, which would cause our remaining equity commitment to be approximately $9.7 million. This financing is not committed and actual financing could vary significantly from our expectations.
(c)We expect to receive financing of approximately $13.0 million on our remaining commitment, which would cause our remaining equity commitment to be approximately $10.7 million. This financing is not committed and actual financing could vary significantly from our expectations.
(d)Refer to "Contractual obligations" section above for more information regarding LOTS.
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Certain related person transactions
Our Board of Directors has adopted a policy regarding the approval of any "related person transaction,Consolidated Financial Statements (unaudited)." which is any transaction or series of transactions in which (i) we or anyExclusive of our subsidiaries is or are to be a participant, (ii) the amount involved exceeds $120,000, and (iii) a "related person" (as defined under SEC rules) has a direct or indirect material interest. Under the policy, a related person would need to promptly disclose to our Secretary or Assistant Secretary any related person transaction and all material facts about the transaction. Our Secretary or Assistant Secretary, in consultation with outside counsel, to the extent appropriate, would then assess and promptly communicate that information to the audit committee of our Board of Directors. Based on its consideration of all of the relevant facts and circumstances, the audit committee will review, approve or ratify such transactions as appropriate. The audit committee will not approve or ratify a related person transaction unless it shall have determined that such transaction is in, or is not inconsistent with, our best interests and does not create a conflict of interest. If we become aware of an existing related person transaction that has not been approved under this policy, the transaction will be referred to the audit committee which will evaluate all options available, including ratification, revision or termination of such transaction. Our policy requires any director who may be interested in a related person transaction to recuse himself or herself from any consideration of such related person transaction.
Grants of restricted common stock
See "Share-based compensation" section above for detail on our grants of restricted common stock.

Red Creek
In connection with our investments in Re/Non-Performing Loans and non-QM loans, we may engage asset managers to provide advisory, consultation, asset management and other services. Beginning in November 2015, we also engaged Red Creek Asset Management LLC ("Asset Manager"), an affiliate of the Manager and direct subsidiary of Angelo Gordon, as the asset manager for certain of our Re/Non-Performing Loans. Beginning in September 2019, we engaged the Asset Manager as the asset manager for our non-QM loans. We pay the Asset Manager separate arm’s-length asset management fees as assessed and confirmed periodically by a third party valuation firm for our Re/Non-Performing Loans and non-QM loans. In the third quarter of 2019, the third party assessment of asset management fees resulted in our updating the fee amount for our Re/Non-Performing Loans. We also utilized the third party valuation firm to establish the fee level for non-QM loans in the third quarter of 2019. For the six months ended June 30, 2020, the fees paid by us to the Asset Manager totaled $0.3 million. For the three and six months ended June 30, 2019, the fees paid by us to the Asset Manager totaled $0.1 million and $0.3 million, respectively. For the three and six months ended June 30, 2020, we deferred $0.3 million and $0.4 million, respectively, of fees owed to the Asset Manager and plan to continue to defer fees through September 30, 2020 or such other time as we and the Manager agree.

Arc Home
On December 9, 2015, we, alongside private funds under the management of Angelo Gordon, through AG Arc, formed Arc Home, a Delaware limited liability company. Arc Home originates conforming, Government, Jumbo, Non-QM and other non-conforming residential mortgage loans, retains the mortgage servicing rights associated with the loans it originates, and purchases additional mortgage servicing rights from third-party sellers.

Our investment in Arc Home, which is conducted through AG Arc, one of our indirect subsidiaries, is reflected on the "Investments in debt and equity of affiliates" line itemaffiliates described above, we do not expect these commitments, taken as a whole, to be significant to, or to have a material impact on, our consolidated balance sheets. See "Off-balance sheet arrangements" section above for the fair value as Arc Home of June 30, 2020 and December 31, 2019.
Arc Home may sell loans to usoverall liquidity or to affiliates ofcapital resources or our Manager. Arc Home may also enter into agreements with us, third parties, or affiliates of our Manager to sell Excess MSRs on the mortgage loans that it either purchases from third parties or originates. We, directly or through our subsidiaries, have entered into agreements with Arc Home to purchase rights to receive the excess servicing spread related to certain of its MSRs and as of June 30, 2020 and December 31, 2019, these Excess MSRs had fair values of approximately $12.7 million and $18.2 million, respectively.
In connection with our investments in Excess MSRs purchased through Arc Home, we pay an administrative fee to Arc Home. For the three and six months ended June 30, 2020, the administrative fees paid by us to Arc Home totaled $0.1 million and $0.2 million, respectively. For the three and six months ended June 30, 2019, the administrative fees paid by us to Arc Home totaled $0.1 million and $0.2 million, respectively.
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Mortgage Acquisition Trust I LLC
See our "MATT Financing Arrangement Restructuring" sections above.

LOT SP I LLC and LOT SP II LLC
See our "Off-balance sheet arrangements" section above.
Management agreement
On June 29, 2011 we entered into a management agreement with our Manager, which governs the relationship between us and our Manager and describes the services to be provided by our Manager and its compensation for those services. The terms of our management agreement, including the fees payable by us to Angelo Gordon, were not negotiated at arm’s length, and its terms may not be as favorable to us as if they had been negotiated with an unaffiliated party. Our Manager, pursuant to the delegation agreement dated as of June 29, 2011, has delegated to Angelo Gordon the overall responsibility of its day-to-day duties and obligations arising under our management agreement. For further detail on the Management Agreement, see the "Contractual obligations–Management agreement" section of this Item 2. 

Secured debt

See our "Contractual obligations–Secured debt" section above.
Other transactions with affiliates
Our Board of Directors has adopted a policy regarding the approval of any "affiliated transaction," which is any transaction or series of transactions in which Angelo Gordon arranges for the purchase and sale of a security or other investment between or among us, on the one hand, and an entity or entities under Angelo Gordon’s management, on the other hand (an "Affiliated Transaction"). In order for us to enter into an Affiliated Transaction, the Affiliated Transaction must be approved by our Chief Risk Officer and the Chief Compliance Officer of Angelo Gordon. For most instruments, if market bids are available, the trading desk will request external bids from the market while simultaneously submitting an internal bid to Compliance and/or Risk. If the highest bid is an external bid, the security or other instrument will be sold to the external bidder and no affiliated transaction will take place. If the highest bid is the internal bid, the price will be the midpoint between the internal bid and the highest external bid. If market bids are not available or prove to be impracticable in Angelo Gordon's reasonable judgment, appropriate pricing will generally be based on a valuation analysis prepared by an independent third party. Our Affiliated Transactions are reviewed by our Audit Committee on a quarterly basis to confirm compliance with the policy.

In March 2019, in accordance with our Affiliated Transactions Policy, we executed one trade whereby we acquired a real estate security from an affiliate of the Manager (the "March 2019 Selling Affiliate"). As of the date of the trade, the security acquired from the March 2019 Selling Affiliate had a total fair value of $0.9 million. The March 2019 Selling Affiliate sold the real estate security through a BWIC. Prior to the submission of the BWIC by the March 2019 Selling Affiliate, we submitted our bid for the real estate security to the March 2019 Selling Affiliate. The pre-submission of our bid allowed us to confirm third-party market pricing and best execution.

In June 2019, we, alongside private funds under the management of Angelo Gordon, participated through our unconsolidated ownership interest in MATT in a rated non-QM loan securitization, in which non-QM loans with a fair value of $408.0 million were securitized. Certain senior tranches in the securitization were sold to third parties with us and private funds under the management of Angelo Gordon retaining the subordinate tranches, which had a fair value of $42.9 million as of June 30, 2019. We have a 44.6% interest in the retained subordinate tranches.

In July 2019, in accordance with our Affiliated Transactions Policy, we acquired certain real estate securities from an affiliate of the Manager (the "July 2019 Selling Affiliate"). As of the date of the trade, the real estate securities acquired from the July 2019 Selling Affiliate had a total fair value of $2.0 million. As procuring market bids for the real estate securities was determined to be impracticable in the Manager’s reasonable judgment, appropriate pricing was based on a valuation prepared by independent third-party pricing vendors. The third-party pricing vendors allowed us to confirm third-party market pricing and best execution.

In September 2019, we, alongside private funds managed by Angelo Gordon, participated through our unconsolidated ownership interest in MATT in a rated non-QM loan securitization, in which non-QM loans with a fair value of $415.1 million were securitized. Certain senior tranches in the securitization were sold to third parties with us and private funds under the
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management of Angelo Gordon retaining the subordinate tranches, which had a fair value of $28.7 million as of September 30, 2019. We have a 44.6% interest in the retained subordinate tranches.

In October 2019, in accordance with our Affiliated Transactions Policy, we acquired certain real estate securities from an affiliate of the Manager (the "October 2019 Selling Affiliate"). As of the date of the trade, the real estate securities acquired from the October 2019 Selling Affiliate had a total fair value of $2.2 million. The October 2019 Selling Affiliate sold the real estate securities through a BWIC. Prior to the submission of the BWIC by the October 2019 Selling Affiliate, we submitted its bid for the real estate securities to the October 2019 Selling Affiliate. The pre-submission of our bid allowed us to confirm third-party market pricing and best execution.

In November 2019, we, alongside private funds managed by Angelo Gordon, participated through our unconsolidated ownership interest in MATT in a rated non-QM loan securitization, in which non-QM loans with a fair value of $322.1 million were securitized. Certain senior tranches in the securitization were sold to third parties with us and private funds under the management of Angelo Gordon retaining the subordinate tranches, which had a fair value of $21.4 million as of December 31, 2019. We have a 44.6% interest in the retained subordinate tranches.

In February 2020, we, alongside private funds managed by Angelo Gordon, participated through our unconsolidated ownership interest in MATT in a rated non-QM loan securitization, in which non-QM loans with a fair value of $348.2 million were securitized. Certain senior tranches in the securitization were sold to third parties with us and private funds under the management of Angelo Gordon retaining the subordinate tranches, which had a fair value of $26.6 million as of March 31, 2020. We have a 44.6% interest in the retained subordinate tranches.operations.

Critical accounting policies
 
We prepare our consolidated financial statements in conformity with GAAP, which requires the use of estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are based, in part, on our judgment and assumptions regarding various economic conditions that we believe are reasonable based on facts and circumstances existing at the time of reporting. We believe that the estimates, judgments and assumptions utilized in the preparation of our consolidated financial statements are prudent and reasonable. Although our estimates contemplate conditions as of June 30, 20202021 and how we expect them to change in the future, it is reasonably possible that actual conditions could be different than anticipated in arriving at those estimates, which could materially affect reported amounts of assets, liabilities and accumulated other comprehensive income at the date of the consolidated financial statements and the reported amounts of income, expenses and other comprehensive income during the periods presented. Moreover, the uncertainty over the ultimate impact that that the COVID-19 pandemic will have on the global economy generally, and on our business in particular, makes any estimates and assumptions inherently less certain than they would be absent the current and potential impacts of the COVID-19 pandemic.

Accounting policies and estimates related to specific components of ourOur consolidated financial statements are disclosedprepared in accordance with GAAP, which requires the notesuse of estimates that involve the exercise of judgment and the use of assumptions as to our consolidated financial statements.future uncertainties. A discussion of the critical accounting policies and the possible effects of changes in estimates on our consolidated financial statements is included in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 20192020 and in Note 2 to the "Notes to Consolidated Financial Statements (unaudited)." Some of theOur most critical accounting policies described thereinare believed to include but are not limited to:(i) Valuation of financial instruments, (ii) Accounting for real estate securities, (iii) Accounting for residential and commercial mortgage loans, (iv) Interest income recognition, and (v) Financing arrangements.

Additionally, we
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See Note 2 to the "Notes to Consolidated Financial Statements (unaudited)" for more detail on these critical accounting policies. These policies involve decisions and assessments that could affect our reported assets and liabilities, as well as our reported revenues and expenses. We believe that all of the decisions and assessments upon which our consolidated financial statements are based are reasonable at the time made and based upon information available to us at that time. We rely upon the independentthird-party pricing of our assets at each quartereach-quarter end to arrive at what we believe to be reasonable estimates of fair value, whenever available. For more information on our fair value measurements, see Note 65 to the "Notes to Consolidated Financial Statements (unaudited)". For a review of our significant accounting policies and the recent accounting pronouncements that may impact our results of operations, see Note 2 to the "Notes to Consolidated Financial Statements (unaudited)."

Inflation

Virtually all of our assets and liabilities are interest rate sensitive in nature. As a result, interest rates and other factors influence our performance far more than inflation. Changes in interest rates do not necessarily correlate with inflation rates or changes in inflation rates.

Compliance with Investment Company Act and REIT tests
We intend to conduct our business so as to maintain our exempt status under, and not to become regulated as an investment company for purposes, of the Investment Company Act. Under Section 3(a)(1)(A) of the Investment Company Act, a company is an investment company if it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities. Under Section 3(a)(1)(C) of the Investment Company Act, a company is deemed to be an investment company if it is engaged, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire "investment securities" having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis (the "40% Test"). "Investment securities" do not include, among other things, U.S. government securities, and securities issued by majority-owned subsidiaries that (i) are not investment companies and (ii) are not relying on the exceptions from the definition of investment company provided by Section 3(c)(1) or 3(c)(7) of the Investment Company Act (the so called "private investment company" exemptions). As of December 31, 2020 and for the three months ended June 30, 2021, we determined that we maintained compliance with the 40% test requirements.

If we failed to comply with the 40% Test or another exemptionunder the Investment Company Act and became regulated as an investment company, our ability to, among other things, use leverage would be substantially reduced and, as a result, we would be unable to conduct our business as described in this Report. Accordingly, in order to maintain our exempt status, we monitor our subsidiaries' compliance with Section 3(c)(5)(C) of the Investment Company Act, which exempts from the definition of "investment company" entities primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate. The staff of the Securities and Exchange Commission, or the SEC, generally requires an entity relying on Section 3(c)(5)(C) to invest at least 55% of its portfolio in "qualifying assets" and at least another 25% in additional qualifying assets or in "real estate-related" assets (with no more than 20% comprised of miscellaneous assets). As of December 31, 2020 and for the three months ended June 30, 2021, we determined that our subsidiaries maintained compliance with both the 55% Test and the 80% Test requirements.
We calculate that at least 75% of our assets were real estate assets, cash and cash items and government securities for the year ended December 31, 2020. We also calculate that a sufficient portion of our revenue qualifies for the 75% gross income test and for the 95% gross income test rules for the year ended December 31, 2020. Overall, we believe that we met the REIT income and asset tests. We also believe that we met all other REIT requirements, including the ownership of our stock and the distribution of our taxable income. Therefore, for the year ended December 31, 2020, we believe that we qualified as a REIT under the Code.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary components of our market risk relate to interest rates, liquidity, prepayment rates, real estate, credit and basis risk. While we do not seek to avoid risk completely, we seek to assume risk that can be reasonably quantified from historical experience and to actively manage that risk, to earn sufficient returns to justify taking those risks and to maintain capital levels consistent with the risks we undertake. Many of these risks have become particularly heightened due to the COVID-19 pandemic and related economic and market conditions.
 
Interest rate risk
 
Interest rate risk is highly sensitive to many factors, including governmental monetary, fiscal and tax policies, domestic and international economic and political considerations and other factors beyond our control. We are subject to interest rate risk in connection with both our investments and the financing under our financing arrangements. We generally seek to manage this risk by monitoring the reset index and the interest rate related to our target assetsinvestment portfolio and our financings; by structuring our financing arrangements to have a range of maturity terms, amortizations and interest rate adjustment periods; and by using derivative instruments to adjust interest rate sensitivity of our target assetsinvestment portfolio and borrowings. Our hedging techniques can be highly complex, and the value of our target assetsinvestment portfolio and derivatives may be adversely affected as a result of changing interest rates. Given current market volatility and historically low interest rates and the fact that we removed our interest rate sensitive assets from our portfolio, as of June 30, 2020, we did not have any hedges in place to mitigate the risk of rising interest rates.
 
Interest rate effects on net interest income
 
Our operating results depend in large part upon differences between the yields earned on our investments and our cost of borrowing and upon the effectiveness of our interest rate hedging activities. The majority of our financing arrangements are short term in nature with an initial term of between 30 and 90 days. The financing rate on these agreements will generally be determined at the outset of each transaction by reference to prevailing rates plus a spread. As a result, our borrowing costs will tend to increase during periods of rising interest rates as we renew, or "roll", maturing transactions at the higher prevailing rates. When combined with the fact that the income we earn on our fixed interest rate investments will remain substantially unchanged, this will result in a narrowing of the net interest spread between the related assets and borrowings and may even result in losses. We have obtained term financing on certain borrowing arrangements. The financing on term facilities generally are fixed at the outset of each transaction by reference to a pre-determined interest rate plus a spread.
 
In an attempt to offset the increase in funding costs related to rising interest rates, our Manager may cause us to enter into hedging transactions structured to provide us with positive cash flow in the event interest rates rise. Our Manager accomplishes this through the use of interest rate derivatives. Some hedging strategies involving the use of derivatives are highly complex, may produce volatile returns and may expose us to increased risks relating to counterparty defaults.
 
Interest rate effects on fair value
 
Another component of interest rate risk is the effect that changes in interest rates will have on the fair value of the assets that we acquire.
 
Generally, in a rising interest rate environment, the fair value of our real estate securities and loan portfolios would be expected to decrease, all other factors being held constant. In particular, the portion of our real estate securities and loan portfolios with fixed-rate coupons would be expected to decrease in value more severely than that portion with a floating-rate coupon. This is because fixed-rate coupon assets tend to have significantly more duration, or price sensitivity to changes in interest rates, than floating-rate coupon assets. Fixed-rate assets currently compriserepresent a majority of our portfolio.

The fair value of our investment portfolio could change at a different rate than the fair value of our liabilities when interest rates change. We measure the sensitivity of our portfolio to changes in interest rates by estimating the duration of our assets and liabilities. Duration is the approximate percentage change in fair value for a 100 basis point parallel shift in the yield curve. In general, our assets have higher duration than our liabilities. In order to reduce this exposure, we use hedging instruments to reduce the gap in duration between our assets and liabilities.

We calculate estimated effective duration (i.e., the price sensitivity to changes in risk-free interest rates) to measure the impact of changes in interest rates on our portfolio value. We estimate duration based on third-party models. Different models and methodologies can produce different effective duration estimates for the same securities. We allocate the net duration by asset type based on the interest rate sensitivity. Duration does not include our investment in AG Arc LLC.

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The following chart details information about our duration gap as of June 30, 2020:2021:
Duration (1)Years
Agency RMBS(0.11)Years
Residential Loans (2)1.89 1.29 
Agency RMBS2.02 
Hedges(2.87)
Subtotal0.44 
Credit Investments, excluding Residential Loans (2)0.500.02 
Duration Gap2.280.46 
(1)Duration related to financing arrangements and hedges is netted within its respective line items.
(2)Residential Loans include Re/Non Performing Loans, Non-QM Loans, and Land Related Financing.
 
The following tables quantifytable quantifies the estimated percent changes in GAAP equity, the fair value of our assets, and projected net interest income should interest rates go up or down instantaneously by 25, 50, and 75 basis points, assuming (i) the yield curves of the rate shocks will be parallel to each other and the current yield curve and (ii) all other market risk factors remain constant. These estimates were compiled using a combination of third-party services and models, market data and internal models. All changes in equity, assets and income are measured as percentage changes from the projected net interest income and GAAP equity from our base interest rate scenario. The base interest rate scenario assumes spot and forward interest rates which existedexisting as of June 30, 2020.2021. Actual results could differ materially from these estimates.
 
Agency RMBS assumptions attempt to predict default and prepayment activity at projected interest rate levels. To the extent that these estimates or other assumptions do not hold true, actual results will likely differ materially from projections and could beresult in percentage changes larger or smaller than the estimates in the table below. Moreover, if different models were employed in the analysis, materially different projections could result. In addition, while the table below reflects the estimated impact of interest rate increases and decreases on a static portfolio as of June 30, 2020,2021, our Manager may from time to time sell any of our investments as a part of the overall management of our investment portfolio.

Change in Interest Rates (basis
points) (1)(2)
Change in Interest Rates (basis
points) (1)(2)
Change in Fair
Value as a Percentage
of GAAP Equity		Change in Fair Value as a
Percentage of Assets
Percentage Change in
Projected Net Interest
Income (3)
Change in Interest Rates (basis
points) (1)(2)
Change in Fair
Value as a Percentage
of GAAP Equity		Change in Fair Value as a
Percentage of Assets
Percentage Change in
Projected Net Interest
Income (3)
7575(3.6)%(1.6)%(2.6)%75(1.9)%(0.4)%(2.6)%
5050(2.5)%(1.1)%(1.8)%50(1.2)%(0.3)%(1.7)%
2525(1.3)%(0.5)%(0.9)%25(0.5)%(0.1)%(0.9)%
(25)(25)1.3 %0.6 %0.3 %(25)0.3 %0.1 %(1.5)%
(50)(50)2.8 %1.2 %0.2 %(50)0.5 %0.1 %(6.1)%
(75)(75)4.3 %1.8 %0.2 %(75)0.4 %0.1 %(10.7)%
 
(1)Includes investments held through affiliated entities that are reported as "Investments in debt and equity of affiliates" on our consolidated balance sheet, but excludes AG Arc.
(2)Does not include cash investments, which typically have overnight maturities and are not expected to change in value as interest rates change.
(3)Interest income includes trades settled as of June 30, 2020.2021.

The information set forth in the interest rate sensitivity table above and all related disclosures constitute forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Actual results could differ significantly from those estimated in the foregoing interest rate sensitivity table. See below for additional risks which may impact the fair value of our assets, GAAP equity and net income.

Liquidity risk
 
Our primary liquidity risk arises from financing long-maturity assets with shorter-term financings primarily in the form of repurchase agreements.financing arrangements. Our Manager seeks to mitigate our liquidity risks by maintaining a prudent level of leverage, monitoring our liquidity position on a daily basis and maintaining a substantial cushion of cash and unpledged real estate securities and loans in our portfolio in order to meet future margin calls. In addition, our Manager seeks to further mitigate our liquidity risk by (i) diversifying our exposure acrossmaintaining relationships with a broad number of financing counterparties and (ii) monitoring the ongoing financial stability of our financing counterparties.
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As discussed throughout this report, the COVID-19 pandemic drivenpandemic-driven disruptions in the real estate, mortgage and financial markets have negatively affected and are expected tomay continue to negatively affect our liquidity. During the three months ended March 31, 2020, we observed a mark-down of a portion of our assets by the counterparties to our repurchase agreements, resulting in us having to pay cash or additional securities to counterparties to satisfy margin calls that were well beyond historical norms. To conserve capital, protect assets and to pause the escalating negative impacts caused by the market dislocation and allow the markets for many of our assets to stabilize, on March 20, 2020 we notified our repurchase agreement counterparties that we did not expect to fund the existing and anticipated future margin calls under our repurchase agreements and commenced discussions with our counterparties with regard to entering into forbearance agreements.

In response to these conditions, we sold assets, reduced the amount of our outstanding financing arrangements and the number of our financing counterparties, and entered into forbearance agreements with our largest financing counterparties. As previously described, on June 10, 2020, we entered into a Reinstatement Agreement, pursuant to which the parties thereto agreed to terminate the Forbearance Agreement and to permanently waive all existing and prior events of default under our financing agreements and to reinstate each Bilateral Agreement, as each may be amended by agreement. For additional information related to the Forbearance Agreement and the Reinstatement Agreement, see Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Financing activities.

Liquidity risk – financing arrangements
 
We pledge real estate securities or mortgage loans and cash as collateral to secure our financing arrangements. Should the fair value of our real estate securities or mortgage loans pledged as collateral decrease (as a result of rising interest rates, changes in prepayment speeds, widening of credit spreads or otherwise), we will likely be subject to margin calls for additional collateral from our financing counterparties. Should the fair value of our real estate securities or mortgage loans decrease materially and suddenly, margin calls will likely increase causing an adverse change to our liquidity position which could result in substantial losses. In addition, we cannot be assured that we will always be able to roll our financing arrangements at their scheduled maturities, which could cause material additional harm to our liquidity position and result in substantial losses. Further, should funding conditions tighten as they did in 2007, 2009 and more recently in March of 2020, our financing arrangement counterparties may increase our margin requirements on new financings, including repurchase transactions that we roll at maturity with the same counterparty, whichcounterparty. This would require us to post additional collateral and would reduce our ability to use leverage and could potentially cause us to incur substantial losses.
 
Liquidity risk - derivatives
 
The terms of our interest rate swaps and futures require us to post collateral in the form of cash or Agency RMBS to our counterparties to satisfy two types of margin requirements: variation margin and initial margin.
 
We and our swap and futures counterparties are both required to post variation margin to each other depending upon the daily moves in prevailing benchmark interest rates. The amount of this variation margin is derived from the mark to market valuation of our swaps or futures.swaps. Hence, as our swaps or futures lose value in a falling interest rate environment, we are required to post additional variation margin to our counterparties on a daily basis; conversely, as our swaps or futures gain value in a rising interest rate environment, we are able to recall variation margin from our counterparties. By recalling variation margin from our swaps or futures counterparties, we are able to partially mitigate the liquidity risk created by margin calls on our repurchase transactions during periods of rising interest rates.
 
Initial margin works differently. Collateral posted to meet initial margin requirements is intended to create a safety buffer to benefit our counterparties if we were to default on our payment obligations under the terms of the swaps or futures and our counterparties were forced to unwind the swap or futures.swap. For trades executed on a bilateral basis, the initial margin is set at the outset of each trade as a fixed percentage of the notional amount of the trade. This means that once we post initial margin at the outset of a bilateral trade, we will have no further posting obligations as it pertains to initial margin. However, the initial margin on our centrally cleared trades varies from day to day depending upon various factors, including the absolute level of interest rates and the implied volatility of interest rates. There is a distinctly positive correlation between initial margin, on the one hand, and the absolute level of interest rates and implied volatility of interest rates, on the other hand. As a result, in times of rising interest rates or increasing rate volatility, we anticipate that the initial margin required on our centrally-cleared trades will likewise increase, potentially by a substantial amount. These margin increases will have a negative impact on our liquidity position and will likely impair the intended liquidity risk mitigation effect of our swaps and futures discussed above.

Our TBA dollar roll contractsReal estate value risk
Residential and commercial property values are also subject to margin requirements governedvolatility and may be affected adversely by the Mortgage-Backed Securities Division ("MBSD")a number of the Fixed Income Clearing Corporation and by our prime brokerage agreements, which may establish margin levels in excess of the MBSD. Such provisions require that we establish an initial margin based on the notional value of thefactors
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TBA contract, which is subject to increase if the estimated fair valueoutside of our TBA contractcontrol, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions (such as an oversupply of housing or the estimated fair value of our pledged collateral declines. The MBSD has the sole discretioncommercial real estate); construction quality, age and design; demographic factors; and retroactive changes to determinebuilding or similar codes. Decreases in property values could cause us to suffer losses and reduce the value of the collateral underlying our TBA contractsRMBS and ofCMBS portfolios as well as the pledged collateral securing such contracts. Inpotential sale proceeds available to repay our loans in the event of a margin call, we must generally providedefault. In addition, substantial decreases in property values can increase the rate of strategic defaults by residential mortgage borrowers which can impact and create significant uncertainty in the recovery of principal and interest on our investments. Given the combination of low interest rates, government stimulus and high unemployment, and other disruptions related to the COVID-19 pandemic, it has become more difficult to predict prepayment levels for the securities in our portfolio.
Credit risk
We are exposed to the risk of potential credit losses from an unanticipated increase in borrower defaults as well as general credit spread widening on any Non-Agency assets in our portfolio, including residential and commercial mortgage loans as well as Non-Agency RMBS, CMBS, Excess MSRs and Interest Only investments related to Non-Agency and CMBS. We seek to manage this risk through our Manager’s pre-acquisition due diligence process and, if available, through the use of non-recourse financing, which limits our exposure to credit losses to the specific pool of collateral which is the subject of the non-recourse financing. Our Manager’s pre-acquisition due diligence process includes the evaluation of, among other things, relative valuation, supply and demand trends, the shape of various yield curves, prepayment rates, delinquency and default rates, recovery of various sectors and vintage of collateral.

Concern surrounding the ongoing COVID-19 pandemic and certain of the actions taken to reduce its spread have caused and may continue to cause business shutdowns, limitations on commercial activity and financial transactions, labor shortages, supply chain interruptions, increased unemployment and property vacancy and lease default rates, reduced profitability and ability for property owners to make loan, mortgage and other payments, and overall economic and financial market instability, all of which may cause an increase in credit risk of our credit sensitive assets. Any future period of payment deferrals, forbearance, delinquencies, defaults, foreclosures or losses will likely adversely affect our net interest income from residential loans, mezzanine loans and RMBS and CMBS investments, the fair value of these assets, our ability to liquidate the collateral that may underlie these investments and obtain additional collateral, either securitiesfinancing and the future profitability of our investments. Further, in the event of delinquencies, defaults and foreclosure, regulatory changes and policies designed to protect borrowers and renters may slow or cash, on the same business day.prevent us from taking remediation actions.

Prepayment risk
 
Premiums arise when we acquire real estate assets at a price in excess of the principal balance of the mortgages securing such assets (i.e., par value). Conversely, discounts arise when we acquire assets at a price below the principal balance of the mortgages securing such assets. Premiums paid on our assets are amortized against interest income and accretable purchase discounts on our assets are accreted to interest income. Purchase premiums on our assets, which are primarily carried on our Agency RMBS, are amortized against interest income over the life of each respective asset using the effective yield method, adjusted for actual prepayment activity. An increase in the prepayment rate, as measured by the CPR, will typically accelerate the amortization of purchase premiums, thereby reducing the yield or interest income earned on such assets. Generally, if prepayments on our Non-Agency RMBS or mortgage loans are less than anticipated, we expect that the income recognized on such assets would be reduced due to the slower accretion of purchase discounts, and impairments could result.discounts.
 
As further discussed in Note 2 of the "Notes to Consolidated Financial Statements (unaudited)," differences between previously estimated cash flows and current actual and anticipated cash flows caused by changes to prepayment or other assumptions are adjusted retrospectively through a "catch up" adjustment for the impact of the cumulative change in the effective yield through the reporting date for securities accounted for under ASC 320-10 (generally, Agency RMBS) or adjusted prospectively through an adjustment of the yield over the remaining life of the investment for investments accounted for under ASC 325-40 (generally, Non-Agency RMBS, ABS, CMBS, Excess MSR and interest-only securities) and mortgage loans accounted for under ASC 310-30.
 
In addition, our interest rate hedges are structured in part based upon assumed levels of future prepayments within our real estate securities or mortgage loan portfolio. If prepayments are slower or faster than assumed, the life of the real estate securities or mortgage loans will be longer or shorter than assumed, respectively, which could reduce the effectiveness of our Manager’s hedging strategies and may cause losses on such transactions.
 
Our Manager seeks to mitigate our prepayment risk by investing in real estate assets with a variety of prepayment characteristics as well as by attempting to maintain in our portfolio a mix of assets purchased at a premium with assets purchased at a discount. Given the combination of low interest rates, government stimulus and high unemployment, and other disruptions related to COVID-19, it has become more difficult to predict prepayment levels for the securities in our portfolio. characteristics.
Real estate value risk
Residential and commercial property values are subject to volatility and may be affected adversely by a number of factors outside of our control, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions (such as an oversupply of housing or commercial real estate); construction quality, age and design; demographic factors; and retroactive changes to building or similar codes. Decreases in property values could cause us to suffer losses and reduce the value of the collateral underlying our RMBS and CMBS portfolios as well as the potential sale proceeds available to repay our loans in the event of a default. In addition, substantial decreases in property values can increase the rate of strategic defaults by residential mortgage borrowers which can impact and create significant uncertainty in the recovery of principal and interest on our investments.
Credit risk
We are exposed to the risk of potential credit losses from an unanticipated increase in borrower defaults as well as general credit spread widening on any Non-Agency assets in our portfolio, including residential and commercial mortgage loans as well as Non-Agency RMBS, CMBS, Excess MSRs and Interest Only investments related to Non-Agency and CMBS. We seek to manage this risk through our Manager’s pre-acquisition due diligence process and, if available, through the use of non-recourse financing, which limits our exposure to credit losses to the specific pool of collateral which is the subject of the non-recourse financing. Our Manager’s pre-acquisition due diligence process includes the evaluation of, among other things, relative valuation, supply and demand trends, the shape of various yield curves, prepayment rates, delinquency and default rates, recovery of various sectors and vintage of collateral.80

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Concern surrounding the ongoing COVID-19 pandemic and certain of the actions taken to reduce its spread has caused and is likely to continue to cause business shutdowns, limitations on commercial activity and financial transactions, labor shortages, supply chain interruptions, increased unemployment and property vacancy and lease default rates, reduced profitability and ability for property owners to make loan, mortgage and other payments, and overall economic and financial market instability, all of which may cause an increase in credit risk of our credit sensitive assets. We expect delinquencies, defaults and requests for forbearance arrangements to rise as savings, incomes and revenues of borrowers, operating partners and other businesses become increasingly constrained from the resulting slow-down in economic activity. Any future period of payment deferrals, forbearance, delinquencies, defaults, foreclosures or losses will likely adversely affect our net interest income from residential loans, mezzanine loans and our RMBS and CMBS investments, the fair value of these assets, our ability to liquidate the collateral that may underlie these investments and obtain additional financing and the future profitability of our investments. Further, in the event of delinquencies, defaults and foreclosure, regulatory changes and policies designed to protect borrowers and renters may slow or prevent us from taking remediation actions. See “Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources,” and “Part II – Item 1A. Risk Factors” in this report for more information on how COVID-19 may impact the credit quality of our credit sensitive assets and the credit quality of the underlying borrowers or operating partners.
 
Basis risk
 
Basis risk refers to the possible decline in our book value triggered by the risk of incurring losses on the fair value of our Agency RMBS as a result of widening market spreads between the yields on our Agency RMBS and the yields on comparable duration Treasury securities. The basis risk associated with fluctuations in fair value of our Agency RMBS may relate to factors impacting the mortgage and fixed income markets other than changes in benchmark interest rates, such as actual or anticipated monetary policy actions by the Federal Reserve, market liquidity, or changes in required rates of return on different assets. Consequently, while we use interest rate swaps and other hedges to protect against moves in interest rates, such instruments will generally not protect our net book value against basis risk.

Foreign currency risk

We intend to hedge our currency exposures in a prudent manner. However, our currency hedging strategies may not eliminate all of our currency risk due to, among other things, uncertainties in the timing and/or amount of payments received on the related investments, and/or unequal, inaccurate, or unavailable hedges to perfectly offset changes in future exchange rates. Additionally, we may be required under certain circumstances to collateralize our currency hedges for the benefit of the hedge counterparty, which could adversely affect our liquidity.

Consistent with our strategy of hedging foreign currency exposure on certain investments, we typically enter into a series of forwards to fix the U.S. dollar amount of foreign currency denominated cash flows (interest income and principal payments) we expect to receive from our foreign currency denominated investments. Accordingly, the notional values and expiration dates of our foreign currency hedges approximate the amounts and timing of future payments we expect to receive on the related investments.

Capital Market Risk

We are exposed to risks related to the equity capital markets, and our related ability to raise capital through the issuance of our common stock, preferred stock or other equity instruments. We are also exposed to risks related to the debt capital markets, and our related ability to finance our business through creditrevolving facilities or other debt instruments. As a REIT, we are required to distribute a significant portion of our taxable income annually, which constrains our ability to accumulate operating cash flow and therefore may require us to utilize debt or equity capital to finance our business. We seek to mitigate these risks by monitoring the debt and equity capital markets to inform our decisions on the amount, timing, and terms of capital we raise. The ongoing COVID-19 pandemic has resulted in extreme volatility in a variety of global markets, including the U.S. financial, mortgage and real estate markets. U.S. financial markets, in particular, are experiencing limited liquidity and a high level of volatility. In reaction to these tumultuous market conditions, banks and other financing participants have generally restricted or limited lending activity and requested margin posting or repayments where applicable. We expect these conditions to persist for the near future and this may adversely affect our ability to access capital to fund our operations, meet our obligations and make distributions to our stockholders.

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ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining disclosure controls and procedures that are designed to ensure that information the Company is required to disclose in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that the Company’s management, including its principal executive officer and principal financial officer, as appropriate, allow for timely decisions regarding required disclosure.
 
We have evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures as of June 30, 2020.2021. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow for timely decisions regarding required disclosure.
 
(b) Changes in Internal Control over Financial Reporting

No change occurred in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
 

ITEM 1.LEGAL PROCEEDINGS.
 
We are at times subject to various legal proceedings arising in the ordinary course of business. In addition, in the ordinary course of business, we can be and are involved in governmental and regulatory examinations, information gathering requests, investigations, proceedings and proceedings.settlements. As of the date of this report, we are not party to any litigation or legal proceedings, or to our knowledge, any threatened litigation or legal proceedings, which we believe, individually or in the aggregate, would have a material adverse effect on our results of operations or financial condition. 

On March 25, 2020, certain of the Company's subsidiaries filed a suit in federal district court in New York seeking to enjoin Royal Bank of Canada and one of its affiliates ("RBC") from selling certain assets that the Company had on repo with RBC and seeking damages (AG MIT CMO et al. v. RBC (Barbados) Trading Corp. et al., 20-cv-2547, U.S. District Court, Southern District of New York). On March 31, 2020, the Company withdrew, as moot, its request for injunctive relief in the complaint based on the court's ruling on March 25, 2020 relating to the sale at issue. As previously disclosed on Form 8-K, filed with the SEC on June 2, 2020, the Company entered into a settlement agreement with RBC on May 28, 2020, pursuant to which the Company and RBC mutually released each other from further claims related to the repurchase agreements at issue. As part of the settlement, and to resolve all claims by either party under the repurchase agreements, the Company paid RBC $5.0 million in cash and issued to RBC a secured promissory note in the principal amount of $2.0 million. On June 11, 2020, the Company repaid the secured promissory note due to RBC in full. The Company has recognized this settlement in the "Net realized gain/(loss)" line item on the consolidated statement of operations. As a result, as of June 30, 2020, the Company has satisfied all of its payment obligations to RBC under the settlement agreement and promissory note, and, as previously reported, the federal lawsuit has been voluntarily dismissed with prejudice.


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ITEM 1A.RISK FACTORS.
 
Refer to the risks identified under the caption "Risk Factors", in our Annual Report on Form 10-K for the year ended December 31, 20192020 and our subsequent filings, which are available on the Securities and Exchange Commission’s website at www.sec.gov, and in the "Forward-Looking Statements" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" sections herein.

The novel coronavirus pandemic, measures intended to prevent its spread and government actions to mitigate its economic impact has had and may continue to have a material adverse effect on our business, liquidity, results of operations, financial condition, and ability to make distributions to our stockholders.
The novel coronavirus (COVID-19) pandemic is causing significant disruptions to the U.S. and global economies and has contributed to volatility and negative pressure in financial markets. The outbreak has led governments and other authorities around the world to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place orders. The impact of the pandemic and measures to prevent its spread have negatively impacted us and could further negatively impact our business. Recently, we have experienced declines in the value of our target assets as well as adverse developments with respect to the cost and terms of financing available to us, and have received margin calls, default notices and deficiency letters from certain of our financing counterparties. Additionally, we expect over the near and long term that the economic impacts of the pandemic will impact the financial stability of the mortgage loans and mortgage loan borrowers underlying the residential and commercial securities and loans that we own and, as a result, anticipate that the number of borrowers who become delinquent or default on their loans may increase significantly. Elevated levels of delinquency or default would have an adverse impact on our income and the value of our assets. Forced sales of the securities and other assets that secure our repurchase and other financing arrangements in the current environment have been, and will likely continue to be, on terms less favorable to us than might otherwise be available in a regularly functioning market and could result in deficiency judgments and other claims against us. To the extent current conditions persist or worsen, we expect there to be a materially negative effect on our results of operations, and, in turn, cash available for distribution to our stockholders and on the value of our assets.

In response to the pandemic, the U.S. government has taken various actions to support the economy and the continued functioning of the financial markets. The Federal Reserve has announced its commitment to purchase unlimited amounts of U.S. Treasuries, mortgage-backed securities, municipal bonds and other assets. In addition, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which will provide billions of dollars of relief to individuals, businesses, state and local governments, and the health care system suffering the impact of the pandemic, including mortgage loan forbearance and modification programs to qualifying borrowers who have difficulty making their loan payments. Moreover, certain actions taken by U.S. or other governmental authorities, including the Federal Reserve, that are intended to ameliorate the macroeconomic effects of COVID-19 may harm our business. Decreases in short-term interest rates, such as those announced by the Federal Reserve late in our 2019 fiscal year and during the first fiscal quarter of 2020, may have a negative impact on our results, as we have certain assets and liabilities which are sensitive to changes in interest rates. The Federal Reserve recently significantly further lowered interest rates in response to COVID-19 pandemic concerns. These market interest rate declines have negatively affected our results of operations for prior periods and may continue to negatively affect our results of operations for future periods.

There can be no assurance as to how, in the long term, these and other actions by the U.S. government will affect the efficiency, liquidity and stability of the financial and mortgage markets. To the extent the financial or mortgage markets do not respond favorably to any of these actions, or such actions do not function as intended, our business, results of operations and financial condition may continue to be materially adversely affected.

Our inability to access funding or the terms on which funding is available could have a material adverse effect on our results of operations and financial condition, particularly in light of ongoing market dislocations resulting from the COVID-19 pandemic.

Our ability to fund our operations, meet financial obligations and finance asset acquisitions may be impacted by an inability to secure and maintain our repurchase agreements with our counterparties. Because repurchase agreements are short-term commitments of capital, repurchase agreement counterparties may respond to market conditions in a manner that makes it more difficult for us to renew or replace on a continuous basis our maturing short-term financings and have and may continue to impose more onerous conditions when rolling such financings. If we are not able to renew or roll our existing repurchase agreements or arrange for new financing on terms acceptable to us, or if we default on our financial covenants, are otherwise
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unable to access funds under our financing arrangements, or if we are required to post more collateral or face larger haircuts on our financings, we may have to dispose of assets at significantly depressed prices and at inopportune times, which could cause significant losses, and may also force us to curtail our asset acquisition activities. If we are faced with a larger haircut in order to roll a financing with a particular counterparty, or in order to move a financing from one counterparty to another, then we would need to make up the difference between the two haircuts in the form of cash, which could similarly require us to dispose of assets at significantly depressed prices and at inopportune times, which could cause significant losses.

Issues related to financing are exacerbated in times of significant dislocation in the financial markets, such as those being experienced now in connection with the COVID-19 pandemic. It is possible that our financing counterparties will become unwilling or unable to provide us with financing, and we could be forced to sell our assets at an inopportune time when prices are depressed or markets are illiquid, which could cause significant losses. In addition, if the regulatory capital requirements imposed on our financing counterparties change, they may be required to significantly increase the cost of the financing that they provide to us, or to increase the amounts of collateral they require as a condition to providing us with financing. Our financing counterparties also have revised, and may continue to revise, their eligibility requirements for the types of assets that they are willing to finance or the terms of such financings, including increased haircuts and requiring additional cash collateral, based on, among other factors, the regulatory environment and their management of actual and perceived risk, particularly with respect to assignee liability. Moreover, the amount of financing that we receive under our repurchase agreements will be directly related to our counterparties’ valuation of our assets that collateralize the outstanding repurchase agreement financing. Typically, repurchase agreements grant the repurchase agreement counterparty the absolute right to reevaluate the fair market value of the assets that cover the amount financed under the repurchase agreement at any time. If a repurchase agreement counterparty determines in its sole discretion that the value of the assets subject to the repurchase agreement financing has decreased, it has the right to initiate a margin call. These valuations may be different than the values that we ascribe to these assets and may be influenced by recent asset sales at distressed levels by forced sellers. A margin call requires us to transfer additional assets to a repurchase agreement counterparty without any advance of funds from the counterparty for such transfer or to repay a portion of the outstanding repurchase agreement financing. We would also be required to post additional collateral if haircuts increase under a repurchase agreement. In these situations, we could be forced to sell assets at significantly depressed prices to meet such margin calls and to maintain adequate liquidity, which could cause significant losses.

Significant margin calls could have a material adverse effect on our results of operations, financial condition, business, liquidity, and ability to make distributions to our stockholders, and could cause the value of our capital stock to decline. As a result of the COVID-19 outbreak, late in the first quarter of 2020, we observed a mark-down of a portion of our assets by our repurchase agreement counterparties, resulting in us having to pay cash or additional securities to satisfy margin calls that were well beyond historical norms. These trends had and, if continued, could continue to have a material adverse impact on our liquidity and could lead to significant losses.

We expect that the economic and market disruptions caused by COVID-19 will adversely impact the financial condition of the borrowers of our loans and the loans that underlie our investment securities and limit our ability to grow our business.

We are subject to risks related to residential mortgage loans, commercial mortgage loans, and mezzanine loans. Over the near and long term, we expect that the economic and market disruptions caused by COVID-19 will adversely impact the financial condition of the borrowers of our residential mortgage loans and the loans that underlie our residential MBS (“RMBS”), commercial MBS (“CMBS”) and commercial loan investments. As a result, we anticipate that the number of borrowers who become delinquent or default on their financial obligations may increase significantly, and in addition to borrowers who are seeking to defer the payment of principal and/or interest or other payments on certain of the loans that we own. When a residential mortgage loan is delinquent, or in default, forbearance or foreclosure, we may be required to advance payments for taxes and insurance associated with the underlying property to protect our interest in the loan collateral when we might otherwise use the cash to invest in our targeted assets or reduce our financings. Such increased levels of payment delinquencies, defaults, foreclosures, forbearance arrangements or losses would adversely affect our business, financial condition, results of operations and our ability to make distributions to our stockholders, and any such impact may be material. Moreover, a number of states are considering or have already implemented temporary moratoriums on the ability of lenders to initiate foreclosures, which could further limit our ability to foreclose and recover against our collateral, or pursue recourse claims (should they exist) against a borrower or operating partner in the event of a default or failure to meet its financial obligations to us. In addition, our portfolio includes commercial loans collateralized by hotel, retail and other asset classes which have been significantly negatively impacted by the ongoing COVID-19 pandemic and various governmental and consumer responses to the pandemic, including government-mandated closures and travel restrictions. While we believe the principal amount of our loans are generally adequately protected by the value of the underlying collateral, there can be no assurance that we will realize the entire principal value of certain investments or that the value of the underlying collateral will continue to protect our investment.

We expect delinquencies, defaults and requests for forbearance arrangements to rise as savings, incomes and revenues of borrowers, operating partners and other businesses become increasingly constrained from the slow-down in economic activity caused by the COVID-19 pandemic and government-mandated closures and travel restrictions. Any future period of payment
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deferrals, forbearance, delinquencies, defaults, foreclosures or losses will likely adversely affect our net interest income from residential mortgage loans, mezzanine loans and our RMBS and commercial loan investments, the fair value of these assets and our ability to originate and acquire our target assets, which would materially and adversely affect us. In addition, to the extent current conditions persist or worsen, we expect that real estate values may decline, which will likely reduce the fair value of our assets and may also reduce the level of new mortgage and other residential real estate-related investment opportunities available to us, which would adversely affect our ability to grow our business and fully execute our investment strategy, could decrease our earnings and liquidity, and may expose us to further margin calls.

Market disruptions caused by COVID-19 may make it more difficult for the loan servicers we rely on to perform a variety of services for us, which may adversely impact our business and financial results.

In connection with our business of acquiring and holding residential mortgage loans and investing in CMBS, and non-Agency RMBS, we rely on third-party service providers, principally loan servicers, to perform a variety of services, comply with applicable laws and regulations, and carry out contractual covenants and terms. For example, we rely on the mortgage servicers who service the mortgage loans we purchase as well as the loans underlying our CMBS and non-Agency RMBS to, among other things, collect principal and interest payments on such loans and perform loss mitigation services, such as forbearance, workouts, modifications, foreclosures, short sales and sales of foreclosed property. Over the near and long term, we expect that the economic and market disruptions caused by COVID-19 will adversely impact the financial condition of the borrowers of our residential mortgage loans and the loans that underlie our RMBS and CMBS investments. As a result, we anticipate that the number of borrowers who request a payment deferral or forbearance arrangement or become delinquent or default on their financial obligations may increase significantly, and such increase may place greater stress on the servicers’ finances and human capital, which may make it more difficult for these servicers to successfully service these loans. In addition, many loan servicing activities are not permitted to be done through a remote work setting. To the extent that shelter-in-place orders and remote work arrangements for non-essential businesses continue in the future, loan servicers may be materially adversely impacted. As a result, we could be materially and adversely affected if a mortgage servicer is unable to adequately or successfully service our residential mortgage loans and the loans that underlie our RMBS and CMBS or if any such servicer experiences financial distress.

Our ability to make distributions to our stockholders has been and may continue to be adversely affected by COVID-19.

We are generally required to distribute to our stockholders at least 90% of our REIT taxable income (excluding net capital gain and without regard to the deduction for dividends paid) each year for us to qualify as a REIT under the Internal Revenue Code, which requirement we have historically satisfied through quarterly distributions of all or substantially all of our REIT taxable income in such year, subject to certain adjustments. However, in light of the negative impact on our liquidity caused by the recent economic and market turmoil resulting from COVID-19, we announced on March 27, 2020 that our board of directors elected to suspend the payment of quarterly dividends on our common stock and our 8.25% Series A Cumulative Redeemable Preferred Stock, 8.00% Series B Cumulative Redeemable Preferred Stock, and our 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock. As of the date of this report, we have not yet reinstated quarterly dividends on any of our capital stock. Further, we have noted that, based on current conditions for the Company, we do not anticipate paying dividends on our common or preferred stock for the foreseeable future. No assurance can be given that we will be able to reinstate quarterly dividends on our common stock and/or preferred stock or make any other distributions to our stockholders at any time in the future or that the level of any distributions we do make to our stockholders will achieve a market yield or increase or even be maintained over time. Under the terms governing our series of preferred stock, we cannot pay cash dividends with respect to our common stock if dividends on our preferred stock are in arrears.

Additionally, in 2017, the Internal Revenue Service issued a revenue procedure permitting “publicly offered” REITs (i.e., REITs required to file annual and periodic reports with the SEC under the Exchange Act) to make elective cash/stock dividends (i.e., dividends paid in a mixture of stock and cash), with at least 20% of the total distribution being paid in cash, to satisfy their REIT distribution requirements. In May 2020, the Internal Revenue Service temporarily reduced the minimum cash component from 20% to 10% for dividends declared on or after April 1, 2020 until December 31, 2020. Pursuant to this revenue procedure, we may elect to make future distributions of our taxable income to common stockholders in a mixture of our common stock and cash. Taxable stockholders receiving such distributions will be required to include the full amount of the distribution as ordinary income to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes. As a result, common stockholders may be required to pay income taxes with respect to such dividends in excess of cash received. If a U.S. stockholder sells the common stock that it receives as a dividend in order to pay this tax, the sale proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of our common stock at the time of the sale. Furthermore, with respect to certain non-U.S. stockholders, we or the applicable withholding agent may be required to withhold U.S. tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in common stock. In addition, if a significant number of our stockholders determine to sell shares of our common stock in order to pay taxes owed on dividends, it may put downward pressure on the trading price of our common stock.

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We have experienced, and may experience in the future, a decline in the fair value of our investments as a result of COVID-19, which could materially and adversely affect us.

During the six months ended June 30, 2020, we experienced a significant amount of realized and unrealized losses on our assets. A future decline in the fair value of our investments as a result of COVID-19 may require us to recognize an impairment under U.S. GAAP if we were to determine that, with respect to any assets in unrealized loss positions, we do not have the ability and intent to hold such assets to maturity or for a period of time sufficient to allow for recovery to the original acquisition cost of such assets. If such a determination were to be made, we would recognize unrealized losses through earnings and write down the amortized cost of such assets to a new cost basis, based on the fair value of such assets on the date they are considered to be impaired. Such impairment charges reflect non-cash losses at the time of recognition. The subsequent disposition or sale of such assets could further affect our future losses or gains, as they are based on the difference between the sale price received and adjusted amortized cost of such assets at the time of sale. If we experience a decline in the fair value of our investments, it could materially and adversely affect our business, results of operations, financial condition and ability to make distributions to our stockholders.

Negative impacts on our business caused by COVID-19 may cause us to default on certain financial covenants contained in our financing arrangements.

The repurchase agreements that finance a portion of our investment portfolio, and repurchase agreements we enter into in the future, may contain financial covenants. The negative impacts on our business caused by COVID-19 have and may make it more difficult to meet or satisfy these covenants, and we cannot assure you that we will remain in compliance with these covenants in the future.

If we fail to meet or satisfy any of these covenants, we would be in default under these agreements, which could result in a cross-default or cross-acceleration under other financing arrangements, and the financing counterparties could elect to declare the repurchase price due and payable (or such amounts may automatically become due and payable), terminate their commitments, require the posting of additional collateral and enforce their respective interests against existing collateral. A default also could significantly limit our financing alternatives, which could cause us to curtail our investment activities or dispose of assets when we otherwise would not choose to do so. As a result, a default on any of our financing agreements could materially and adversely affect our business, results of operations, financial condition and ability to make distributions to our stockholders.

Measures intended to prevent the spread of COVID-19 have disrupted our ability to operate our business.

In response to the outbreak of COVID-19 and the federal and state mandates implemented to control its spread, all of our Manager's personnel are working remotely at least a few days a week. If our Manager's personnel are unable to work effectively as a result of COVID-19, including because of illness, quarantines, office closures, ineffective remote work arrangements or technology failures or limitations, our operations would be adversely impacted. Further, remote work arrangements may increase the risk of cyber-security incidents and cyber-attacks, which could have a material adverse effect on our business and results of operations, due to, among other things, the loss of investor or proprietary data, interruptions or delays in the operation of our business and damage to our reputation.

We cannot predict the effect that government policies, laws, and plans adopted in response to the COVID-19 pandemic or other future outbreaks involving highly infectious or contagious diseases and resulting recessionary economic conditions will have on us.

Governments have adopted, and we expect will continue to adopt, policies, laws, and plans intended to address the COVID-19 pandemic and adverse developments in the credit, financial, and mortgage markets that it has caused. We cannot assure you that these programs will be effective, sufficient, or otherwise have a positive impact on our business.

We may incur losses as a result of unforeseen or catastrophic events, including the emergence of a pandemic, terrorist attacks, extreme weather events or other natural disasters.

The occurrence of unforeseen or catastrophic events, including the emergence of a pandemic, such as COVID-19, or other widespread health emergency (or concerns over the possibility of such an emergency), terrorist attacks, extreme terrestrial or solar weather events or other natural disasters, could create economic and financial disruptions, and could lead to materially adverse declines in the market values of our assets, illiquidity in our investment and financing markets and our ability to effectively conduct our business.

We are subject to margin calls that could result in defaults or force us to sell assets under adverse market conditions or through foreclosure.
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We enter into financing arrangements to finance the acquisition of our target assets. Pursuant to the terms of the Bilateral Agreements and any future borrowings under additional financing arrangements, a decline in the value of the collateral may result in our lenders initiating margin calls. A margin call requires us to pledge additional collateral to re-establish the ratio of the value of the collateral to the amount borrowed. The specific collateral value to borrowing ratio that would trigger a margin call is not set in the master repurchase agreements or loan agreements and is not determined until we engage in a repurchase transaction or borrowing arrangement under these agreements. In addition, some collateral may be more illiquid than other instruments in which we invest, which typically have more stringent margin requirements in a volatile market environment. Moreover, collateral that prepays more quickly increases the frequency and magnitude of potential margin calls as there is a significant time lag between when the prepayment is reported (which reduces the market value of the security) and when the principal payment is actually received. If we are unable to satisfy margin calls, our lenders may foreclose on our collateral. The threat, or occurrence of, a margin call could force us to sell, either directly or through a foreclosure, our collateral under adverse market conditions. Because of the leverage we have and expect to have and our size, we may incur substantial losses upon the threat or occurrence of a margin call as occurred in the first quarter of 2020 as a result of the COVID-19 pandemic.

We may be adversely affected by risks affecting borrowers or the asset or property types in which our investments may be concentrated at any given time, as well as from unfavorable changes in the related geographic regions.
Our assets are not subject to any geographic diversification or concentration limitations. We concentrate in residential mortgage-related investments. Accordingly, our investment portfolio may be concentrated by geography, asset, property type and/or borrower, increasing the risk of loss to us if the particular concentration in our portfolio is subject to greater risks or undergoing adverse developments. A significant percentage of our residential mortgage loans are concentrated in California and New York, two states adversely impacted by the COVID-19 pandemic. In addition, some of our commercial loans are located in states where recently there have been bouts of civil unrest. Adverse conditions in these areas (including business layoffs or downsizing, industry slowdowns, property damage and other factors) may have an adverse effect on the value of our investments. A material decline in the demand for real estate in these areas may materially and adversely affect us.

We may change our investment strategy, operating policies, dividend policy, and/or asset allocations without shareholder consent and/or in a manner in which shareholders, analysts, and capital markets may not agree, which could adversely affect our financial condition, results of operations, the market price of our common stock, and our ability to pay dividends to our shareholders.

A change in our investment strategy or asset allocation may materially change our exposure to interest rate and/or credit risk, default risk and real estate market fluctuations. These changes could have a material impact on our ability to re-establish a dividend at a level that we had previously paid before the change in strategy. Furthermore, if any change in investment strategy, asset allocation, operating or dividend policy is perceived negatively by the markets or analysts covering our stock, our stock price may decline. Part of our investment strategy includes deciding whether to reinvest payments received on our existing investment portfolio. Based on market conditions, our leverage, and our liquidity profile, we may decide to not reinvest the cash flows we receive from our investment portfolio. If we retain, rather than reinvest, these cash flows, the size of our investment portfolio and the amount of net interest income generated by our investment portfolio will likely decline. In addition, if the assets we acquire in the future earn lower yields than the assets we currently own, our reported earnings per share will likely decline over time as the older assets pay down or are sold.

Loss of our exemption from regulation under the Investment Company Act would negatively affect the value of shares of our common stock and our ability to distribute cash to our stockholders.
We conduct our operations so that we maintain an exemption from the Investment Company Act. Under Section 3(a)(1)(C) of the Investment Company Act, a company is deemed to be an investment company if it is engaged, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire "investment securities" having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis (the "40% test"). "Investment securities" do not include, among other things, U.S. government securities, and securities issued by majority-owned subsidiaries that (i) are not investment companies and (ii) are not relying on the exceptions from the definition of investment company provided by Section 3(c)(1) or 3(c)(7) of the Investment Company Act (the so called "private investment company" exemptions).

In order to maintain our exempt status, we monitor our subsidiaries' compliance with Section 3(c)(5)(C) of the Investment Company Act, which exempts from the definition of "investment company" entities primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate. The staff of the Securities and Exchange Commission, or the SEC, generally requires an entity relying on Section 3(c)(5)(C) to invest at least 55% of its
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portfolio in "qualifying assets" and at least another 25% in additional qualifying assets or in "real estate-related" assets (with no more than 20% comprised of miscellaneous assets). As of December 31, 2019, we determined that our subsidiaries maintained compliance with both the 55% Test and the 80% Test requirements.

Due to the recent market deterioration and resulting defaults on our financing arrangements, we have sold assets to meet margin calls on our financing arrangements, and some of our subsidiaries designed to rely on Section 3(c)(5)(C) currently fail to meet the 55% Test, and as a result must rely on Section 3(c)(7) to avoid registration as investment companies. As a result, we no longer satisfy the 40% Test.

As we cannot rely on our historical exemption from regulation as an investment company, we now must rely upon Rule 3a-2, which provides a safe harbor exemption, not to exceed one year, for companies that have a bona fide intent to be engaged in an excepted activity but that temporarily fail to meet the requirements for another exemption from registration as an investment company. As required by the rule, after we learned that we would become out of compliance, our board of directors promptly adopted a resolution declaring our bona fide intent to be engaged in excepted activities and we are currently working to restore our assets to compliance. The one-year grace period started when we sold our 30 Year Fixed Rate Agency securities, which was in March of 2020.

There is no assurance that we will not be deemed subject to the 1940 Act and be required to register as an investment company. While in transient investment company status, we will actively pursue alternatives for regaining compliance with the exemption. Qualification for exemption from the definition of investment company under the Investment Company Act limits our ability to make certain investments. For example, these restrictions limit our and our subsidiaries’ ability to invest directly in mortgage-related securities that represent less than the entire ownership in a pool of mortgage loans, debt and equity tranches of securitizations, certain real estate companies or assets not related to real estate. If we fail to qualify for these exemptions, or the SEC determines that companies that invest in RMBS are no longer able to rely on these exemptions, we would become subject to substantial regulation with respect to our capital structure (including our ability to use leverage), management, operations, transactions with affiliated persons (as defined in the Investment Company Act), and portfolio composition, including restrictions with respect to diversification and industry concentration and other matters. In either case we could be required to restructure our activities and investments in a manner that, or at a time when, we would not otherwise choose to do so, or we may be required to register as an investment company under the Investment Company Act. Either of these outcomes could negatively affect our business, the value of shares of our stock and our ability to make distributions to our stockholders.

ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
 
None.
On April 1, 2021, in connection with our non-employee director compensation policy, the Company granted an aggregate of 6,440 shares of restricted common stock to its independent directors under the Company's 2020 Equity Incentive Plan in a private transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. The shares of restricted common stock were fully vested upon grant.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES.
In order to conserve capital and preserve liquidity, on March 27, 2020, our Board of Directors approved a suspension of our quarterly dividends on our common stock, 8.25% Series A Cumulative Redeemable Preferred Stock, 8.00% Series B Cumulative Redeemable Preferred Stock, and 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, beginning with the common dividends that normally would have been declared in March 2020 and the preferred dividend that would have been declared in May 2020. Based on current conditions for the Company, we do not anticipate paying dividends on our common or preferred stock for the foreseeable future. As a result, we did not declare or accrue quarterly dividends on our Common or Preferred Stock during the three months ended June 30, 2020. Pursuant to the terms of our Preferred Stock, all unpaid dividends on our preferred stock accrue without interest and such accumulated and unpaid dividend must be satisfied before any cash dividends can be paid to the holders of our common stock.None.

As of June 30, 2020, the amount of accrued and unpaid dividends on our Series A, Series B and Series C Preferred Stock is $1.1 million, $2.3 million and $2.3 million, respectively. Refer to Note 9 of the "Notes to the Consolidated Financial Statements" for details regarding arrearages on our Series A, Series B and Series C Preferred Stock and Note 12 of the "Notes to the Consolidated Financial Statements" for further detail on our Series A, Series B and Series C Preferred Stock.

ITEM 4.MINE SAFETY DISCLOSURES
 
None.

116

ITEM 5.OTHER INFORMATION.
 
None.
82

117


ITEM 6.EXHIBITS.
Exhibit
No.
 
Description  
 
Articles of Amendment and Restatement of AG Mortgage Investment Trust, Inc., incorporated by reference to Exhibit 3.1 of Amendment No. 2 to ourthe Company's Registration Statement on Form S-11, filed with the Securities and Exchange Commission on April 18, 2011 ("Pre-Effective Amendment No. 2").
 
Articles of Amendment to Articles of Amendment and Restatement of AG Mortgage Investment Trust, Inc., incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on May 5,8, 2017.
 
Amended and Restated Bylaws of AG Mortgage Investment Trust, Inc., incorporated by reference to Exhibit 3.13.2 of Pre-Effective Amendment No. 2.
 
Articles Supplementary of 8.25% Series A Cumulative Redeemable Preferred Stock, incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 2, 2012.
 
Articles Supplementary of 8.00% Series B Cumulative Redeemable Preferred Stock, incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 24, 2012.
*3.6
Articles Supplementary of 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, incorporated by reference to Exhibit 3.5 of the Company's Registration Statement on Form 8-A12B, filed with the Securities and Exchange Commission on September 16, 2019.
*4.13.7
Specimen Stock CertificateArticles of Amendment of AG Mortgage Investment Trust, Inc., incorporated by reference to Exhibit 4.13.1 of Pre-Effective Amendment No. 2.the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 27, 2021.
*3.8
Articles of Amendment of AG Mortgage Investment Trust, Inc., incorporated by reference to Exhibit 3.2 of the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 27, 2021.
Specimen Common Stock Certificate of AG Mortgage Investment Trust, Inc., incorporated by reference to Exhibit 4.1 on Form 10-Q filed with the Securities and Exchange Commission on May 7, 2021
 
Specimen 8.25% Series A Cumulative Redeemable Preferred Stock Certificate, incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K, filed with the Securities and Exchange Commission on August 2, 2012.
 
Specimen 8.00% Series B Cumulative Redeemable Preferred Stock Certificate, incorporated by reference to Exhibit 4.1 of the Company's Current Report onForm 8-K, filed with the Securities and Exchange Commission on September 24, 2012.
*4.4 
Specimen 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock Certificate, incorporated by reference to Exhibit 3.9 of the Company's Registration Statement on Form 8-A12B, filed with the Securities and Exchange Commission on September 16, 2019.
10.1*4.5†
Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, incorporated by reference to Exhibit 4.5 of Form 10-K, filed with the Securities and Exchange Commission on February 28, 2020.AG Mortgage Investment Trust, Inc. 2020 Equity Incentive Plan.
10.2*10.1†
Form of Registration Rights Agreement by and between the Company and the purchasers of units and shares in the private placement, dated June 29, 2011, incorporated by reference to Exhibit 10.1 of Amendment No. 7 to our Registration Statement on Form S-11, filed with the Securities and Exchange Commission on June 29, 2011 ("Pre-Effective Amendment No. 7").
Form of Management Agreement, dated June 29, 2011 by and between the Company and AG REIT Management, LLC, incorporated by reference to Exhibit 10.3 of Amendment No. 3 to our Registration Statement on Form S-11, filed with the Securities and Exchange Commission on April 25, 2011.**
Equity Incentive Plan, dated July 6, 2011, incorporated by reference to Exhibit 10.4 of Pre-Effective Amendment No. 2.**
Manager Equity Incentive Plan, dated July 6, 2011, incorporated by reference to Exhibit 10.5 of Pre-Effective Amendment No. 2.**
118

Form of Equity Incentive Plan Restricted Stock Award Agreement, dated July 6, 2011, incorporated by reference to Exhibit 10.6 of Pre-Effective Amendment No. 2.**
Form of Manager Equity Incentive Plan Restricted Stock Award Agreement, dated July 6, 2011, incorporated by reference to Exhibit 10.7 of Pre-Effective Amendment No. 2.**
Form of Indemnification Agreement, dated July 6, 2011, by and between the Company and the Company’s directors and officers, incorporated by reference to Exhibit 10.10 of Pre-Effective Amendment No. 7.
Amended and Restated Master Repurchase and Securities Contract dated as of April 12, 2013 between AG MIT, LLC, AG Mortgage Investment Trust, Inc. and Wells Fargo Bank, National Association, incorporated by reference to Exhibit 99.1 of Form 8-K, filed with the Securities and Exchange Commission on April 15, 2013.
Guarantee Agreement dated as of April 9, 2012 by AG Mortgage Invest Trust, Inc. in favor of Wells Fargo Bank, National Association, incorporated by reference to Exhibit 99.2 of Form 8-K, filed with the Securities and Exchange Commission on April 10, 2012.
Amended and Restated Master Repurchase and Securities Contract dated as of February 11, 2014 between AG MIT WFB1 2014 LLC and Wells Fargo Bank, National Association, incorporated by reference to Exhibit 99.1 of Form 8-K, filed with the Securities and Exchange Commission on February 21, 2014.2021 Manager Equity Incentive Plan.
Guarantee Agreement dated as of February 11, 2014 by AG MIT, LLC and AG Mortgage Invest Trust, Inc. in favor of Wells Fargo Bank, National Association, incorporated by reference to Exhibit 99.2 of Form 8-K, filed with the Securities and Exchange Commission on February 21, 2014.
Master Repurchase and Securities Contract dated as of September 17, 2014, as amended by Omnibus Amendment No.1, dated as of August 4, 2015, between AG MIT CREL LLC and Wells Fargo Bank, National Association, incorporated by reference to Exhibit 99.1 of Form 8-K, filed with the Securities and Exchange Commission on September 18, 2014.
Guarantee Agreement dated as of September 17, 2014 as amended by Omnibus Amendment No.1, dated as of August 4, 2015, by AG MIT, LLC and AG Mortgage Investment Trust, Inc. in favor of Wells Fargo Bank, National Association, incorporated by reference to Exhibit 99.2 of Form 8-K, filed with the Securities and Exchange Commission on September 18, 2014.
Form of Restricted Stock Unit Award Agreement, dated July 1, 2014, incorporated by reference to Exhibit 10.14 on Form 10-Q, filed with the Securities and Exchange Commission on November 6, 2014.**
Omnibus Amendment No.1 to Master Repurchase and Securities Contract, Guarantee Agreement and Fee and Pricing Letter dated as of August 4, 2015 between AG MIT CREL, LLC and Wells Fargo Bank, National Association, incorporated by reference to Exhibit 10.15 of Form 10-Q, filed with the Securities and Exchange Commission on August 6, 2015.
Form of Restricted Stock Unit Award Agreement, dated July 1, 2017, incorporated by reference to Exhibit 10.14 on Form 10-Q, filed with the Securities and Exchange Commission on August 9, 2017.**
Amendment No. 1 to the Equity Distribution Agreement, dated May 22, 2018, by and among the Company  and JMP Securities LLC, incorporated by reference to Exhibit 1.1 of Form 8-K, filed with the Securities and Exchange Commission on May 22, 2018.
Amendment No. 1 to the Equity Distribution Agreement, dated May 22, 2018, by and among the Company  and Credit Suisse Securities (USA) LLC, incorporated by reference to Exhibit 1.2 of Form 8-K, filed with the Securities and Exchange Commission on May 22, 2018.
Amendment Number 7 to the  Master Repurchase and Securities Contract dated as of and effective as of February 18, 2014 between AG MIT WFB1 2014 LLC and Wells Fargo Bank, National Association, incorporated by reference to Exhibit 10.1 of Form 8-K, filed with the Securities and Exchange Commission on June 25, 2018.
119

Purchase and Sale Agreement, dated August 31, 2018, by and among Conrex Residential Property Group 2012-2, LLC, Conrex Residential Property Group 2012-2 Operating Company, LLC, Conrex Residential Property Group 2012-2 (B2R-1) Operating Company, LLC, Conrex Residential Property Group 2012-2 (B2R-2) Operating Company, LLC, Ovation Properties, LLC, and SFR MT LLC, incorporated by reference to Exhibit 10.20 on Form 10-Q, filed with the Securities and Exchange Commission on November 9, 2018.
Loan Agreement, dated as of September 10, 2018, by and between SFR MT LLC and Metropolitan Life Insurance Company, incorporated by reference to Exhibit 10.21 on Form 10-Q, filed with the Securities and Exchange Commission on November 9, 2018.
Underwriting Agreement, dated February 11, 2019, by and among AG Mortgage Investment Trust, Inc., AG REIT Management, LLC and Morgan Stanley & Co. LLC, as representative of the several underwriters, incorporated by reference to Exhibit 1.1 on Form 8-K, filed with the Securities and Exchange Commission on February 14, 2019.
Underwriting Agreement, dated September 11, 2019, by and among AG Mortgage Investment Trust, Inc., AG REIT Management, LLC and BofA Securities, Inc., as representative of the several underwriters, incorporated by reference to Exhibit 1.1 on Form 8-K, filed with the Securities and Exchange Commission on September 17, 2019.
Purchase and Sale Agreement, dated November 4, 2019, by and between SFR MT LLC and Conrex ML Portfolio 2019-01 Operating Company, LLC, incorporated by reference to Exhibit 10.24 on Form 10-Q, filed with the Securities and Exchange Commission on November 5, 2019.
First Amendment to Management Agreement, dated April 6, 2020, by and between AG Mortgage Investment Trust, Inc. a Maryland corporation (the “Company”) and AG REIT Management, LLC, incorprated by reference to Exhibit 10.1 on Form 8-K, filed with the Securities and Exchange Commission on April 8, 2020.
The Forbearance Agreement, dated April 10, 2020, by and among AG Mortgage Investment Trust, Inc. and its undersigned affiliates, incorporated by reference to Exhibit 10.1 on Form 8-K, filed with the Securities and Exchange Commission on April 13, 2020.
Secured Promissory Note, dated April 10, 2020, by and between AG Mortgage Investment Trust, Inc. a Maryland corporation (the “Company”) and AG REIT Management, LLC, incorporated by reference to Exhibit 10.2 on Form 8-K, filed with the Securities and Exchange Commission on April 13, 2020.
Security and Collateral Agency Agreement, dated April 10, 2020, by and between AG Mortgage Investment Trust, Inc. a Maryland corporation (the “Company”) and Participating Counterparties, incorporated by reference to Exhibit 10.3 on Form 8-K, filed with the Securities and Exchange Commission on April 13, 2020.
Security Agreement, dated April 10, 2020, by and between AG Mortgage Investment Trust, Inc. a Maryland corporation (the “Company”) and Participating Counterparties, incorprated by reference to Exhibit 10.4 on Form 8-K, filed with the Securities and Exchange Commission on April 13, 2020.
Intercreditor and Subordination Agreement, dated April 10, 2020, by and between AG Mortgage Investment Trust, Inc. a Maryland corporation (the “Company”) and Wilmington Trust, incorporated by reference to Exhibit 10.5 on Form 8-K, filed with the Securities and Exchange Commission on April 13, 2020.
Second Forbearance Agreement, dated April 27, 2020, by and among AG Mortgage Investment Trust, Inc. and its undersigned affiliates, incorprated by reference to Exhibit 10.1 on Form 8-K, filed with the Securities and Exchange Commission on April 28, 2020.
Amendment No. 1 to Secured Promissory Note, dated April 27, 2020, by and between AG Mortgage Investment Trust, Inc. a Maryland corporation (the “Company”) and AG REIT Management, LLC, incorporated by reference to Exhibit 10.2 on Form 8-K, filed with the Securities and Exchange Commission on April 28, 2020.
120

Amendment No. 1 to Security Agreement, dated April 27, 2020, by and between AG Mortgage Investment Trust, Inc. a Maryland corporation (the “Company”) and Participating Counterparties, incorporated by reference to Exhibit 10.3 on Form 8-K, filed with the Securities and Exchange Commission on April 28, 2020.
Amendment No. 1 to Intercreditor and Subordination Agreement, dated April 27, 2020, by and between AG Mortgage Investment Trust, Inc. a Maryland corporation (the “Company”) and Wilmington Trust, incorporated by reference to Exhibit 10.4 on Form 8-K, filed with the Securities and Exchange Commission on April 28, 2020.
Mortgage Loan Purchase and Sale Agreement, dated May 28, 2020, by and between UMB Bank, Wilmington Savings Fund Society, and AG Mortgage Investment Trust, Inc. a Maryland corporation (the “Company”), incorporated by reference to Exhibit 10.1 on Form 8-K, filed with the Securities and Exchange Commission on June 2, 2020.
Third Forbearance Agreement, dated June 1, 2020, by and among AG Mortgage Investment Trust, Inc. and its undersigned affiliates, incorprated by reference to Exhibit 10.2 on Form 8-K, filed with the Securities and Exchange Commission on June 2, 2020.
Secured Promissory Note, dated May 28, 2020, by and between AG Mortgage Investment Trust, Inc. a Maryland corporation (the “Company”) and Royal Bank of Canada, incorporated by reference to Exhibit 99.2 on Form 8-K, filed with the Securities and Exchange Commission on June 2, 2020.
Security Agreement, dated May 28, 2020, by and between AG Mortgage Investment Trust, Inc. a Maryland corporation (the “Company”) and Participating Counterparties, incorprated by reference to Exhibit 99.3 on Form 8-K, filed with the Securities and Exchange Commission on June 2, 2020.
Intercreditor and Subordination Agreement, dated May 28, 2020, by and between AG Mortgage Investment Trust, Inc. a Maryland corporation (the “Company”), Wilmington Trust, and Royal Bank of Canada, incorporated by reference to Exhibit 99.4 on Form 8-K, filed with the Securities and Exchange Commission on June 2, 2020.
Amended and Restated Promissory Note, dated May 28, 2020, by and between AG Mortgage Investment Trust, Inc. a Maryland corporation (the “Company”) and AG REIT Management, LCC, incorporated by reference to Exhibit 99.5 on Form 8-K, filed with the Securities and Exchange Commission on June 2, 2020.
Amended and Restated Security Agreement, dated May 28, 2020, by and between AG Mortgage Investment Trust, Inc. a Maryland corporation (the “Company”) and Participating Counterparties, incorporated by reference to Exhibit 99.6 on Form 8-K, filed with the Securities and Exchange Commission on June 2, 2020.
Intercreditor and Subordination Agreement, dated May 28, 2020, by and between AG Mortgage Investment Trust, Inc. a Maryland corporation (the “Company”), AG REIT Management LLC, and Royal Bank of Canada, incorporated by reference to Exhibit 99.7 on Form 8-K, filed with the Securities and Exchange Commission on June 2, 2020.
Reinstatement Agreement, dated as of June 10, 2020, by and between AG Mortgage Investment Trust, Inc. and BofA securities, Inc., Credit Suisse Securities (USA) LLC, Credit Suisse AG, Credit Suisse International, Barclays Capital Inc., Barclays Bank PLC, Wells Fargo Bank, National Association and Goldman Sachs Bank USA, incorporated by reference to Exhibit 10.43 on Form 10-Q, filed with the Securities and Exchange Commission on June 12, 2020.
Master Repurchase Agreement, dated as of August 10, 2018, by and between AG MIT CREL II, LLC and JPMorgan Chase Bank, National Association,incorporated by reference to Exhibit 10.44 on Form 10-Q, filed with the Securities and Exchange Commission on June 12, 2020.
Guarantee Agreement, dated as of August 10, 2018, by and between AG Mortgage Investment Trust, Inc. and JPMorgan Chase Bank, National Association.,incorporated by reference to Exhibit 10.45 on Form 10-Q, filed with the Securities and Exchange Commission on June 12, 2020.
121

Amended and Restated Master Repurchase Agreement, dated as of April 3, 2020, by and between Credit Suisse First Boston Mortgage Capital LLC, Credit Suisse AG, Alpine Securitization LTD and Mortgage Acquisition Trust I LLC,incorporated by reference to Exhibit 10.46 on Form 10-Q, filed with the Securities and Exchange Commission on June 12, 2020.
Master Repurchase Agreement, dated as of June 6, 2019, by and between Credit Suisse AG, Cayman Islands Branch, Mortgage Acquisition Trust I LLC and Mortgage Acquisition Holding I LLC,incorporated by reference to Exhibit 10.47 on Form 10-Q, filed with the Securities and Exchange Commission on June 12, 2020.
Amendment No. 1 to Master Repurchase Agreement, dated as of April 3, 2020, by and between Credit Suisse AG, Cayman Islands Branch, Mortgage Acquisition Trust I LLC and Mortgage Acquisition Holding I LLC,incorporated by reference to Exhibit 10.48 on Form 10-Q, filed with the Securities and Exchange Commission on June 12, 2020.
Master Repurchase Agreement, dated as of February 21, 2018, by and between Credit Suisse AG, Cayman Islands Branch and GCAT Depositor 2017-19, LLC,incorporated by reference to Exhibit 10.49 on Form 10-Q, filed with the Securities and Exchange Commission on June 12, 2020.
Guaranty, dated as of February 21, 2018, by and between AG Mortgage Investment Trust, Inc. and Credit Suisse AG, Cayman Islands Branch,incorporated by reference to Exhibit 10.50 on Form 10-Q, filed with the Securities and Exchange Commission on June 12, 2020.
Master Repurchase Agreement, dated as of November 25, 2019, by and between Credit Suisse AG, Cayman Islands Branch and GCAT Depositor 2017-19, LLC,incorporated by reference to Exhibit 10.51 on Form 10-Q, filed with the Securities and Exchange Commission on June 12, 2020.
Master Repurchase Agreement, dated as of February 18, 2015, by and between Credit Suisse Securities (USA) LLC and AG MIT CMO EC LLC,incorporated by reference to Exhibit 10.52 on Form 10-Q, filed with the Securities and Exchange Commission on June 12, 2020.
Guarantee, dated as of December 19, 2018, made by AG Mortgage Investment Trust, Inc. and Barclays Bank PLC,incorporated by reference to Exhibit 10.53 on Form 10-Q, filed with the Securities and Exchange Commission on June 12, 2020.
Amendment No. 1 to Guarantee, dated as of May 28, 2020, by and between AG Mortgage Investment Trust, Inc. and Barclays Bank PLC,incorporated by reference to Exhibit 10.54 on Form 10-Q, filed with the Securities and Exchange Commission on June 12, 2020.
Third Amended and Restated Annex I.A Amended and Restated Additional Supplemental Terms and Conditions, dated as of May 28, 2020, by and between Barclays Bank PLC and AG MIT, LLC, incorporated by reference to Exhibit 10.55 on Form 10-Q, filed with the Securities and Exchange Commission on June 12, 2020.
Master Repurchase Agreement, dated as of December 19, 2018, by and between Barclays Bank PLC and AG MIT, LLC,incorporated by reference to Exhibit 10.56 on Form 10-Q, filed with the Securities and Exchange Commission on June 12, 2020.
Reinstatement Agreement, dated as of June 10, 2020, by and between AG Mortgage Investment Trust, Inc., AG MIT CREL II, LLC and JPMorgan Chase Bank, National Association,incorporated by reference to Exhibit 10.57 on Form 10-Q, filed with the Securities and Exchange Commission on June 12, 2020.
Guaranty, dated as of February 18, 2015, by and between AG Mortgage Investment Trust, Inc. and Credit Suisse Securities (USA) LLC,incorporated by reference to Exhibit 10.58 on Form 10-Q, filed with the Securities and Exchange Commission on June 12, 2020.
122

31.1*10.59
2020 Equity Incentive Plan, dated as of April 15, 2020, by and between AG Mortgage Investment Trust, Inc. and its affiliates, incorporated by reference to Exhibit 10.1 on Form 8-K, filed with the Securities and Exchange Commission on June 23, 2020.**
Certification of David N. Roberts pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Brian C. SigmanAnthony W. Rossiello pursuant to Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
83


32.1*
Certification of David N. Roberts pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
Certification of Brian C. SigmanAnthony W. Rossiello pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL)

*Fully or partly previously filed.Filed herewith.

**†Management contract or compensatory plan or arrangement.
 
12384


SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 AG MORTGAGE INVESTMENT TRUST, INC.
  
August 10, 20202, 2021By:/s/ DavidDAVID N. RobertsROBERTS
 David N. Roberts
 Chief Executive Officer (principal executive officer)
  
August 10, 20202, 2021By:/s/ Brian C. SigmanANTHONY W. ROSSIELLO
 Brian C. SigmanAnthony W. Rossiello
 Chief Financial Officer and Treasurer (principal financial
officer)
August 10, 2020By:/s/ Alison Halpern
Alison Halpern
Chief Accounting Officer (principalofficer and principal accounting officer)
 

12485