AG Mortgage Investment Trust(MITT) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited consolidated financial statements and management's discussion for the periods ended June 30, 2025 Item 1. Financial Statements (unaudited) This section presents AG Mortgage Investment Trust's unaudited consolidated financial statements for the periods ended June 30, 2025 Consolidated Balance Sheets This section summarizes the company's assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $7,462,425 | $6,913,609 | | Securitized residential mortgage loans, at fair value | $6,648,988 | $6,197,678 | | Residential mortgage loans, at fair value | $327,454 | $220,217 | | Total Liabilities | $6,926,018 | $6,370,186 | | Securitized debt, at fair value | $5,937,637 | $5,491,967 | | Financing arrangements | $843,537 | $742,108 | | Total Stockholders' Equity | $536,407 | $543,423 | Consolidated Statements of Operations This section details net interest income, expenses, and net income for the three and six months ended June 30, 2025 and 2024 Consolidated Statements of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Net Interest Income | $17,752 | $16,381 | $36,601 | $33,560 | | Total Other Income/(Loss) | $(2,713) | $(4,896) | $(1,164) | $5,915 | | Total Expenses | $11,325 | $8,471 | $21,431 | $17,608 | | Net Income/(Loss) | $3,945 | $3,925 | $15,422 | $24,815 | | Net Income/(Loss) Available to Common Stockholders | $(1,376) | $(661) | $4,797 | $15,643 | | Basic EPS | $(0.05) | $(0.02) | $0.16 | $0.53 | | Diluted EPS | $(0.05) | $(0.02) | $0.16 | $0.53 | Consolidated Statements of Stockholders' Equity This section outlines changes in stockholders' equity, including net income and dividends, for the periods presented - Total Stockholders' Equity decreased from $543.4 million at the beginning of 2025 to $536.4 million at June 30, 2025, primarily due to common and preferred dividends declared exceeding net income for the period[20] - For the three months ended June 30, 2025, the company declared common dividends of $0.21 per share, totaling $6,235 thousand[18] Consolidated Statements of Cash Flows This section summarizes cash flows from operating, investing, and financing activities for the six months ended June 30, 2025 and 2024 Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $23,515 | $25,704 | | Net cash used in investing activities | $(485,249) | $(921,516) | | Net cash provided by financing activities | $423,335 | $918,673 | | Net change in cash | $(38,399) | $22,861 | Notes to Consolidated Financial Statements (unaudited) This section provides detailed explanations and disclosures supporting the unaudited consolidated financial statements Note 1. Organization AG Mortgage Investment Trust (MITT) is a residential mortgage REIT primarily acquiring and securitizing U.S. residential mortgage loans - The Company's primary business involves acquiring and securitizing newly-originated residential mortgage loans, sourced through its affiliate Arc Home (in which it holds a ~44.6% interest) and other third-party partners[28] - The Company acquired Western Asset Mortgage Capital Corporation ("WMC") on December 6, 2023, expanding its portfolio with residential mortgage loans, real estate securities, and commercial real estate loans[29] - The Company operates as a single reportable segment, "Loans and Securities," and is externally managed by AG REIT Management, LLC, a subsidiary of TPG Angelo Gordon[34][35] Note 3. Loans This note details the company's $7.0 billion residential and commercial loan portfolio, including securitized loans and geographic concentration Residential Mortgage Loan Portfolio Summary (in thousands) | Category | Unpaid Principal Balance | Fair Value | | :--- | :--- | :--- | | June 30, 2025 | | | | Securitized residential mortgage loans | $6,910,472 | $6,648,988 | | Residential mortgage loans | $305,290 | $327,454 | | Total | $7,215,762 | $6,976,442 | | December 31, 2024 | | | | Securitized residential mortgage loans | $6,565,315 | $6,197,678 | | Residential mortgage loans | $216,547 | $220,217 | | Total | $6,781,862 | $6,417,895 | - For the six months ended June 30, 2025, the company purchased residential mortgage loans with a fair value of $939.9 million, a significant increase from $708.5 million in the same period of 2024[63] - The company's residential loan portfolio has a significant geographic concentration in California (33%), Florida (10%), and New York (10%) as of June 30, 2025[67] - Three commercial loans (Loans A, B, and C) with a combined fair value of $42.8 million were in default and on non-accrual status as of June 30, 2025[83] Note 4. Real Estate Securities This note details the company's $223.3 million real estate securities portfolio, including Non-Agency RMBS and CMBS Real Estate Securities Portfolio Summary (in thousands) | Security Type | Fair Value at June 30, 2025 | Fair Value at Dec 31, 2024 | | :--- | :--- | :--- | | Non-Agency RMBS | $149,117 | $127,579 | | Legacy WMC CMBS | $56,205 | $52,785 | | Agency RMBS Interest Only | $17,954 | $20,996 | | Total | $223,276 | $201,360 | Note 5. Fair Value Measurements This note details fair value measurements, with most assets ($7.2 billion) and liabilities ($5.9 billion) classified as Level 3 - As of June 30, 2025, financial instruments measured at fair value totaled $7.39 billion in assets and $5.94 billion in liabilities, with the majority, including securitized residential mortgage loans and securitized debt, classified as Level 3, indicating reliance on unobservable inputs for valuation[95] Level 3 Asset/Liability Reconciliation for Six Months Ended June 30, 2025 (in thousands) | Category | Beginning Balance | Purchases/Issuances | Sales/Repayments | Net Unrealized Gain/(Loss) | Ending Balance | | :--- | :--- | :--- | :--- | :--- | :--- | | Residential Mortgage Loans | $6,416,066 | $939,621 | $(480,146) | $96,383 | $6,974,999 | | Legacy WMC Commercial Loans | $67,005 | $0 | $0 | $(2,455) | $64,883 | | Non-Agency RMBS | $115,533 | $25,963 | $(3,702) | $1,669 | $137,945 | | AG Arc | $30,778 | $0 | $0 | $0 | $32,205 | | Securitized Debt | $(5,491,967) | $(723,330) | $383,149 | $(92,032) | $(5,937,637) | Note 6. Financing This note details the company's $6.88 billion financing structure, primarily non-recourse securitized debt Financing Summary as of June 30, 2025 (in thousands) | Financing Type | Carrying Value | Weighted Avg Funding Cost | | :--- | :--- | :--- | | Financing Arrangements | $843,537 | 6.20% | | Securitized debt, at fair value | $5,937,637 | 5.22% | | Senior Unsecured Notes | $96,080 | 10.61% | | Total Financing | $6,877,254 | 5.41% | - The company has financing arrangements with six counterparties, with significant exposure to Goldman Sachs Bank USA ($137.7 million at risk) and BofA Securities, Inc. ($129.6 million at risk), representing 25.7% and 24.2% of stockholders' equity, respectively[141][142] - As of June 30, 2025, the company was in compliance with all financial covenants related to its financing arrangements[145] Note 8. Earnings per share This note details basic and diluted EPS, reporting $(0.05) for Q2 2025 and $0.16 for the six months ended June 30, 2025 Earnings Per Share Calculation (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | Net Income/(Loss) Available to Common Stockholders | $(1,376) | $4,797 | | Basic weighted average common shares outstanding | 29,686 | 29,672 | | Diluted weighted average common shares outstanding | 29,686 | 29,697 | | Basic EPS | $(0.05) | $0.16 | | Diluted EPS | $(0.05) | $0.16 | - The company declared a common stock dividend of $0.21 per share for the quarter ended June 30, 2025, and $0.20 for the quarter ended March 31, 2025, totaling $0.41 for the six-month period[163] Note 10. Related party transactions This note details related party transactions, including management fees and expense reimbursements to the external manager Fees to Manager (in thousands) | Fee Type | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | Management fee to affiliate | $2,301 | $4,628 | | Expense reimbursements | $1,508 | $3,807 | - The company's investment in AG Arc, which holds its interest in mortgage originator Arc Home, was carried at a fair value of $32.2 million as of June 30, 2025[199] - For the six months ended June 30, 2025, Arc Home sold residential mortgage loans with an unpaid principal balance of $61.0 million to the company[206] Note 11. Equity This note details equity structure, including common and preferred stock repurchase programs and the 2025 Equity Incentive Plan - The company has two active common stock repurchase programs with a total of $16.5 million remaining authorized for future repurchases as of June 30, 2025, with no repurchases made during the first six months of 2025[212][213] - A preferred stock repurchase program with up to $20.0 million in authorization is in place, but no shares have been repurchased since its authorization in February 2021[214] - On May 5, 2025, the company's 2025 Equity Incentive Plan became effective, authorizing up to 800,000 new shares of common stock for issuance, plus shares available from the prior 2020 plan[221] Note 14. Subsequent Events This note discloses subsequent events, including preferred dividends, securitizations, and increased ownership in AG Arc - On August 1, 2025, the company acquired an additional 21.4% interest in AG Arc, bringing its total ownership to approximately 66.0%, by issuing 2,027,676 restricted shares of common stock[247] - In July 2025, the company executed two rated Non-Agency securitizations of Home Equity Loans with a combined total unpaid principal balance of $948.3 million, converting recourse financing to non-recourse financing[243][246] - On July 31, 2025, the Board of Directors declared third quarter 2025 dividends for its Series A, B, and C preferred stock[242] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2025 financial condition, operating results, investment activities, and liquidity, highlighting key metrics Second Quarter 2025 Executive Summary This section provides a high-level overview of the company's financial performance and key strategic activities for Q2 2025 Q2 2025 Financial Highlights | Metric | Value | | :--- | :--- | | Book Value per share | $10.39 | | Net Income/(Loss) per diluted common share | $(0.05) | | Earnings Available for Distribution (EAD) per diluted common share | $0.18 | | GAAP Leverage Ratio | 12.8x | | Economic Leverage Ratio | 1.3x | | Dividend per common share | $0.21 | - Subsequent to quarter end, the company purchased an additional 21.4% interest in AG Arc, increasing its ownership to approximately 66.0%[258] - The company executed a rated securitization of Agency-Eligible Loans with a total unpaid principal balance of $331.4 million during the quarter[261] Market Conditions This section analyzes the broader financial market environment, including interest rates, monetary policy, and RMBS activity - In Q2 2025, financial markets saw positive performance with rising equities and bond prices, though uncertainty persisted around inflation and monetary policy, with the 2-year U.S. Treasury yield declining by 17 bps to 3.72% and the 10-year yield relatively flat at 4.23%[274] - The Federal Reserve maintained a data-dependent approach, holding the federal funds rate steady at 4.25%-4.50% in its July 2025 meeting, but indicated openness to rate cuts later in the year[275][276] - Primary RMBS market activity was $35 billion in Q2 2025, up 6% year-over-year, with Non-QM issuance rising 57% YoY to nearly $16 billion, while home price growth decelerated nationally, with the S&P Case-Shiller Index up 2.3% YoY in May 2025[278][279] Results of Operations This section provides a detailed analysis of net interest income, other income, expenses, and net income for the reporting periods - Net interest income for Q2 2025 was $17.8 million, an increase from $16.4 million in Q2 2024, driven by a larger investment portfolio and a higher weighted average yield, which offset increased interest expense[290][292][295] - The company reported a net loss available to common stockholders of $1.4 million in Q2 2025, compared to a net loss of $0.7 million in Q2 2024, primarily due to higher net realized losses and increased transaction expenses[290] - For the six months ended June 30, 2025, net income available to common stockholders was $4.8 million, a decrease from $15.6 million in the prior year period, mainly due to lower other income and higher expenses[323] Earnings Available for Distribution This section reconciles GAAP net income to Earnings Available for Distribution (EAD) for the three and six months ended June 30, 2025 Reconciliation of Net Income to Earnings Available for Distribution (EAD) (in thousands) | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :--- | :--- | :--- | | Net Income/(loss) available to common stockholders | $(1,376) | $4,797 | | Adjustments (Net realized/unrealized losses, transaction expenses, etc.) | $6,727 | $6,536 | | Earnings available for distribution | $5,351 | $11,333 | | EAD per Diluted Share | $0.18 | $0.38 | Investment activities This section details the company's investment portfolio, strategy, and activities, including residential and commercial investments Investment Portfolio Summary as of June 30, 2025 (in thousands) | Asset Class | Amortized Cost | Fair Value | Allocated Equity | | :--- | :--- | :--- | :--- | | Residential Investments | $7,397,253 | $7,138,182 | $419,940 | | Agency RMBS | $17,787 | $17,954 | $6,122 | | Legacy WMC Commercial Investments | $126,001 | $121,088 | $69,988 | | Total Investment Portfolio | $7,541,041 | $7,277,224 | $496,050 | - The company's investment strategy primarily involves acquiring newly-originated residential mortgage loans and securitizing them to obtain long-term, non-recourse financing[354] - As of June 30, 2025, the company held retained certificates from its Non-Agency VIEs with a fair value of $675.6 million, of which $472.4 million was held to comply with Risk Retention Rules[372][373] Financing activities This section describes the company's financing structure, including recourse and non-recourse debt, and leverage ratio Leverage Ratio Reconciliation as of June 30, 2025 (in thousands) | Metric | Amount | Ratio | | :--- | :--- | :--- | | GAAP Leverage | $6,875,160 | 12.8x | | Less: Non-recourse financing arrangements | $(5,981,082) | | | Less: Net TBA (receivable)/payable adjustment | $(194,855) | | | Economic Leverage | $699,223 | 1.3x | | Stockholders' Equity | $536,407 | | - The company utilizes a mix of recourse financing (repurchase agreements, senior unsecured notes) and non-recourse financing (securitized debt), with total recourse financing at $896.2 million and non-recourse financing at $5.98 billion as of June 30, 2025[397] Liquidity and capital resources This section discusses the company's liquidity position, capital resources, and management of liquidity risk - As of June 30, 2025, the company had $89.7 million of liquidity, consisting of $88.7 million in cash and cash equivalents and $1.0 million in unencumbered Agency RMBS[408] - The company's primary liquidity risk arises from financing long-maturity assets with shorter-term borrowings and potential margin calls on pledged collateral and derivatives if asset values decline[409][410] - For the six months ended June 30, 2025, cash and restricted cash decreased by $38.4 million, resulting from $485.2 million used in investing activities, partially offset by $423.3 million provided by financing activities and $23.5 million from operating activities[413] Quantitative and Qualitative Disclosures About Market Risk This section details the company's market risk exposures, including interest rate, credit, and liquidity risks Interest Rate Sensitivity Analysis as of June 30, 2025 | Change in Interest Rates (bps) | Change in Fair Value as a % of GAAP Equity | Change in Fair Value as a % of Assets | % Change in Projected Net Interest Income | | :--- | :--- | :--- | :--- | | +75 | (0.7)% | (0.1)% | 1.2% | | +50 | (0.5)% | 0.0% | 0.9% | | +25 | (0.2)% | 0.0% | 0.5% | | -25 | 0.3% | 0.0% | (0.5)% | | -50 | 0.6% | 0.0% | (1.4)% | | -75 | 0.9% | 0.1% | (2.1)% | - The company is exposed to credit risk from potential borrower defaults and credit spread widening, managed through pre-acquisition due diligence and non-recourse financing[471] - Liquidity risk, stemming from financing long-term assets with short-term borrowings and potential margin calls, is mitigated by maintaining cash, unpledged securities, and managing counterparty relationships[465] Controls and Procedures Management concluded disclosure controls were effective as of June 30, 2025, with no material changes to internal control - The company's principal executive officer and principal financial officer concluded that as of June 30, 2025, the disclosure controls and procedures were effective to provide reasonable assurance[481] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[482] PART II. OTHER INFORMATION This section provides additional information, including legal proceedings, risk factors, and other significant disclosures Legal Proceedings The company is not currently involved in legal proceedings expected to materially impact its financial condition - The company is not currently party to any litigation or legal proceedings that would have a material adverse effect on its results of operations or financial condition[484] Risk Factors This section directs readers to the comprehensive risk factors detailed in the company's Annual Report on Form 10-K - The report directs investors to refer to the Risk Factors section in the Annual Report on Form 10-K for the year ended December 31, 2024 for a discussion of potential risks[485] Other Information This section discloses the acquisition of an additional 21.385% interest in AG Arc, increasing total ownership to 66.0% - On August 1, 2025, the company acquired an additional 21.385% interest in AG Arc, LLC, increasing its total interest to approximately 66.0%[489] - The acquisition was completed by issuing 2,027,676 restricted shares of common stock as consideration in a private placement[489]