Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   

 

AG Mortgage Investment Trust, Inc. (the "Company" or "MITT") is a residential mortgage REIT with a focus on investing in a diversified risk-adjusted portfolio of residential mortgage-related assets in the U.S. mortgage market. The Company’s investment activities primarily include acquiring and securitizing newly-originated residential mortgage loans within the non-agency segment of the housing market. The Company obtains its assets through Arc Home, LLC ("Arc Home"), a residential mortgage loan originator in which the Company owns an approximate 44.6% interest, and through other third-party origination partners.

The Company’s assets, excluding its ownership in Arc Home, include Residential Investments, Agency RMBS and Agency RMBS.Legacy WMC Commercial Investments. Currently, its Residential Investments primarily consist of newly originated Non-Agency Loans and Agency-Eligible Loans. The Company may invest in other types of residential mortgage loans and other mortgage related assets. The Company also invests in Residential Investments through its unconsolidated ownership interests in affiliates which are included in the "Investments in debt and equity of affiliates" line item on its consolidated balance sheets.

The Company's asset classes are primarily comprised of the following:

The Company conducts its business through one reportable segment, Loans and Securities, which reflects how the Company manages its business and analyzes and reports its results of operations.

The Company was incorporated in the state of Maryland on March 1, 2011 and commenced operations in July 2011. The Company conducts its operations to qualify and be taxed as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). The Company is externally managed by AG REIT Management, LLC, a Delaware limited liability company (the "Manager"), a wholly-owned subsidiary of Angelo, Gordon & Co., L.P. ("TPG Angelo Gordon"), a diversified credit and real estate investing platform within TPG Inc. ("TPG"). TPG (Nasdaq: TPG) is a leading global alternative asset management firm. The Manager has delegated to TPG Angelo Gordon the overall responsibility of its day-to-day duties and obligations arising under the management agreement.

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.

On August 8,December 6, 2023 (the "Closing Date"), the Company entered into an Agreement and Plancompleted its acquisition of Merger (the "Merger Agreement") with Western Asset Mortgage Capital Corporation,WMC, a Delaware corporation ("WMC"),corporation. WMC was an externally managed mortgage REIT that focused on investing in, financing and managing a portfolio of residential mortgage loans, real estate related securities, and commercial real estate loans. On the Closing Date, WMC merged with and into AGMIT Merger Sub, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company ("Merger Sub"), with Merger Sub continuing as the surviving company (the "Merger"). As contemplated by the Agreement and solely forPlan of Merger, dated as of August 8, 2023 (the "Merger Agreement"), the purposes set forth incertificate of merger was filed with the Secretary of State of the State of Delaware, and the Merger Agreement,was effective at 8:15 a.m., Eastern Time, on the Manager. Closing Date (the "Effective Time").

Pursuant to the terms and subject to the terms and conditions set forth in the Merger Agreement, WMC will merge with and into Merger Sub, with Merger Sub surviving (the "Merger").

Pursuant to the Merger Agreement, the amount of the Per Share Additional Manager Consideration was reduced by the smallest amount (rounded to the nearest cent) necessary to cause the Per Share Additional Manager Consideration to be less than 10% of the total value of the Per Share Merger Consideration received by a holder of WMC Common Stock under the Merger Agreement. Pursuant to the previously disclosed amendment to the Company's management agreement, dated as of August 8, 2023, by and between MITT and the Manager (the "MITT Management Agreement Amendment"), which became effective on the Closing Date and amends the existing management agreement, dated as of June 29, 2011 (as amended, the "Existing MITT Management Agreement"), (i) the Manager will waive its right to seek reimbursement from MITT for any expenses otherwise reimbursable by MITT under the Existing MITT Management Agreement in an amount equal to approximately $1.3 million, which is the excess of $7.0 million or approximately 9.9% ofover the aggregate Per Share Merger Consideration. Cash will beAdditional Manager Consideration paid in lieu of any fractional shares of the Company's common stock that would otherwise have been received as a result of the Merger.

Additionally, each outstanding share of WMC’s restricted common stock and (ii)each WMC restricted stock unit (each, a "WMC Equity Award") vested in full immediately prior to the Manager will waive itsEffective Time and, as of the Effective Time, was considered outstanding for all purposes of the Merger Agreement, including the right to seek reimbursement from the Company for any expenses otherwise reimbursable by the Company under the management agreement in an amount equal to the excess, if any, of $7.0 million over the aggregate cash portion ofreceive the Per Share Merger Consideration, paid by the Managerexcept that WMC Equity Awards granted to the holders of WMC common stock in the Merger. The MITT Management Agreement Amendment will become effective automatically upon the closingcertain members of the Merger, and will have no force and effect ifWMC board of directors at WMC’s 2023 annual stockholders’ meeting (collectively, the Merger does not close.

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. ForThe operating results presented for interim periods are not necessarily indicative of the three months ended September 30, 2022, the Company reclassified $2.5 million and $1.6 million ofresults that may be expected for any other operating expenses into the "Non-investment related expenses" and "Investment related expenses" line items on the consolidated statement of operations, respectively. For the nine months ended September 30, 2022, the Company reclassified $7.7 million and $3.9 million of other operating expenses into the "Non-investment related expenses" and "Investment related expenses" line items on the consolidated statement of operations, respectively. Furthermore,interim period or for the three and nine months ended September 30, 2022, the Company reclassified $1.0 million and $3.0 million of servicing fees into the "Investment related expenses" line item on the consolidated statement of operations, respectively. These expenses were reclassified to conform to the current year presentation of expenses.entire year. In the opinion of management, all adjustments considered necessary for a fair statement of the Company’s financial position, results of operations, and cash flows have been included for the interim period and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year.

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.

 

An entity is a variable interest entity ("VIE") if the equity investors (i) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support, (ii) are unable to direct the entity’s activities or (iii) are not exposed to the entity’s losses or entitled to its residual returns. VIEs within the scope of Accounting Standards Codification ("ASC") 810-10, "Consolidation" are required to be consolidated by their primary beneficiary. The primary beneficiary of a VIE is determined to be the party that has both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. This determination can sometimes involve complex and subjective analyses. Further, ASC 810-10 also requires ongoing assessments of whether an enterprise is the primary beneficiary of a VIE. In accordance with ASC 810-10, all transferees, including variable interest entities, must be evaluated for consolidation. If the Company determines that consolidation is not required, it will then assess whether the transfer of the underlying assets would qualify as a sale, should be accounted for as secured financings under GAAP, or should be accounted for as an equity method investment, depending on the circumstances.

 

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

The Company enters into securitization transactions collateralized by its Non-Agency Loans/Agency-Eligible Loans and re- and non-performing loans (the trusts in which these loans are deposited are referred to as "Non-Agency VIEs" and "RPL/NPL VIEs", respectively), which may result in the Company consolidating the respective VIEs that are created to facilitate these securitizations. Based on the evaluations of each VIE, the Company may conclude that the VIEs should be consolidated and, as a result, transferred assets of these VIEs would be determined to be secured borrowings. Upon consolidation, the Company elected the fair value option pursuant to ASC 825 for the assets and liabilities of the Non-Agency VIEs and RPL/NPL VIEs. Electing the fair value option allows the Company to record changes in fair value in the consolidated statement of operations, which, in management's view, more appropriately reflects the results of operations for a particular reporting period as all activities will be recorded in a similar manner. The Company applied the guidance under ASC 810-10 (Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity) whereby the Company determines whether the fair value of the assets or liabilities of the Non-Agency VIEs and RPL/NPL VIEs are more observable as a basis for measuring the less observable financial instruments. The Company has determined that the fair value of the liabilities of the Non-Agency VIEs and RPL/NPL VIEs are more observable since the prices for these liabilities are more easily determined as similar instruments trade more frequently on a relative basis than the individual assets of the VIEs. See Note 3 for more detail regarding the Non-Agency VIEs and RPL/NPL VIEs and Note 5 for more detail related to the Company's determination of fair value for the assets and liabilities included within these VIEs.

In MarchAugust 2020, FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of2020-06, "Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging- Contracts in Entity's Own Equity (Subtopic 815-40)." The amendments in this update affect entities that issue convertible instruments and/or contracts in an entity's own equity. For convertible instruments, the Effects of Reference Rate Reform on Financial Reporting." This ASU provides temporary optional guidance intended to easeinstruments primarily affected are those issued with beneficial conversion features or cash conversion features because the burden of reference rate reform on financial reporting and may be elected over time as reference rate reform activities occur.accounting models for those specific features are removed. This ASU is effective as of March 12, 2020 and was amended by ASU 2022-06 to sunset onfor the year ended December 31, 2024. The ASU applies to all entities that have contracts, hedging relationships and other transactions that reference LIBOR and certain other reference rates that are expected to be discontinued. However, it cannot be applied to contract modifications that occur after December 31, 2024. With certain exceptions, this ASU also cannot be applied to hedging relationships entered into or evaluated after that date. The guidance provides optional expedients and exceptions for applying existing guidance to contract modifications, hedging relationships and other transactions that are expected to be affected by reference rate reform and meet certain scope guidance.

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to LIBOR has historically included its financing arrangements and derivative contracts.Reportable Segment Disclosures." ASU 2023-07 intends to improve reportable segment disclosure requirements, primarily through enhanced disclosures related to significant segment expenses. In addition, the Company's Series C Preferred Stockthis standard is setexpected to transition toenhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss and provides new segment disclosure requirements for entities with a floating rate in September of 2024. At the time of transition, the Company no longer had derivative contracts indexed to LIBORsingle reportable segment. ASU 2023-07 is effective on a retrospective basis for annual periods beginning after December 15, 2023, for interim periods within fiscal years beginning after December 15, 2024, and all LIBOR-based financing arrangements transitioned to alternative benchmark rates.early adoption is permitted. The Company does not currently intendexpect the adoption of the new standard to amend the Series C Preferred Stock to change the existing LIBOR cessation fallback language.have a material effect on its consolidated financial statements.

 

The tabletables below detailsdetail information regarding the Company’s residential mortgage loan portfolio as of September 30, 2023March 31, 2024 and December 31, 20222023 ($ in thousands). The gross unrealized gains/(losses) in the table below represent inception to date gains/(losses).

The following tables present information regarding credit quality of the Company's residential mortgage loans ($ in thousands).