AG Mortgage Investment Trust, Inc. Reports Full Year and Fourth Quarter 2022 Results

AG Mortgage Investment Trust, Inc. ("MITT," "we," the "Company," or "our") (NYSE: MITT) today reported financial results for the full year and quarter ended December 31, 2022.

FULL YEAR AND FOURTH QUARTER 2022 FINANCIAL HIGHLIGHTS

Full Year 2022:

• $11.39 Book Value per share as of December 31, 2022 as compared to $14.64 as of December 31, 2021⁽¹⁾
• $11.03 Adjusted Book Value per share as of December 31, 2022 as compared to $14.32 as of December 31, 2021⁽¹⁾
  • Decrease of approximately (23.0)% from December 31, 2021
  • Annual Economic Return on Equity of (17.3)%⁽²⁾
• $(3.12) and $0.08 of Net Income/(Loss) and Earnings Available for Distribution ("EAD") per diluted common share, respectively⁽³⁾
  • EAD replaces our prior presentation of Core Earnings with no changes to the definition
• $0.81 dividend per common share

Fourth Quarter 2022:

• Increase in Book Value per share and Adjusted Book Value per share of approximately 3% from September 30, 2022
  • Quarterly Economic Return on Equity of 5.0%⁽²⁾
• $0.33 and $0.05 of Net Income/(Loss) and EAD per diluted common share, respectively⁽³⁾
• $0.18 dividend per common share

MANAGEMENT REMARKS

"During a volatile 2022, MITT remained disciplined by programmatically terming out its financing resulting in MITT being materially de-risked with ample liquidity as we head into 2023 in position to play offense," said TJ Durkin, Chief Executive Officer and President. "Notably, our adjusted book value improved 3% during the fourth quarter and we’re seeing that trend continue as the markets have shown modest signs of recovery."

INVESTMENT, FINANCING, AND CAPITAL HIGHLIGHTS

• $4.2 billion Investment Portfolio as of December 31, 2022⁽⁴⁾⁽⁵⁾
  • Purchased $2.6 billion of Non-Agency and Agency-Eligible Loans during 2022, $142.1 million of which were purchased in the fourth quarter 2022
• $3.9 billion of financing as of December 31, 2022⁽⁴⁾⁽⁵⁾
  • $3.3 billion of non-recourse financing and $0.6 billion of recourse financing
  • Executed eight rated securitizations during 2022, one of which was executed in the fourth quarter 2022, converting recourse financing with mark-to-market margin calls to non-recourse financing without mark-to-market margin calls
  • Subsequent to year end, executed a rated Non-Agency securitization of $271.2 million of unpaid principal balance, converting recourse financing with mark-to-market margin calls to non-recourse financing without mark-to-market margin calls
• 8.4x GAAP Leverage Ratio and 1.3x Economic Leverage Ratio as of December 31, 2022⁽⁶⁾
• 0.8% Net Interest Margin⁽⁷⁾
• $86.7 million of total liquidity as of December 31, 2022
  • Consisted of $84.6 million of cash and cash equivalents and $2.1 million of unencumbered Agency RMBS
  • As of the date of this release, total liquidity of approximately $120 million
• Accretive repurchase of 2.7 million shares of common stock for $18.2 million during 2022, representing a weighted average cost of $6.82 per share
  • 0.9 million shares of common stock repurchased at a weighted average cost of $5.68 per share during the fourth quarter 2022
  • $7.3 million of capacity remaining under our existing repurchase program as of the date of this release

INVESTMENT PORTFOLIO

The following summarizes the Company’s investment portfolio as of December 31, 2022⁽⁴⁾⁽⁵⁾ ($ in millions):

FINANCING PROFILE

The following summarizes the Company’s financing as of December 31, 2022⁽⁴⁾⁽⁵⁾ ($ in millions):

ARC HOME UPDATE⁽¹⁰⁾

• Arc Home continues to focus on Non-Agency Loan originations^(a):
  • Arc Home originated $1.9 billion of residential mortgage loans during 2022, of which $1.1 billion were Non-Agency Loans
  • Arc Home originated $171.3 million of residential mortgage loans during the fourth quarter 2022, of which $86.1 million were Non-Agency Loans
  • MITT purchased loans with an unpaid principal balance of $1.1 billion from Arc Home during 2022 including $58.6 million during the fourth quarter 2022
• Cash of $20.7 million as of December 31, 2022, along with Arc Home's $91.6 million MSR portfolio that is largely unlevered, provides Arc Home with a strong financial position to manage the current dynamics in the mortgage origination market
• Arc Home generated an after-tax net loss of $(6.1) million in the fourth quarter primarily resulting from declines in origination volumes and gain on sale margins during the quarter, coupled with mark to market losses in the fair value of Arc Home's mortgage servicing right portfolio
  • MITT's portion of the after-tax net loss was $(2.7) million, prior to removing any gains on loans acquired by MITT from Arc Home which approximated $0.2 million during the fourth quarter of 2022^(b)
• As of December 31, 2022, the fair value of MITT’s investment in Arc Home was calculated using a valuation multiple of 0.94x book value.

BOOK VALUE ROLL-FORWARD

The below table provides a summary of our fourth quarter and full year 2022 activity impacting book value as well as a reconciliation to adjusted book value ($ in thousands, except per share data).

DIVIDENDS

The Company announced that on February 16, 2023 its Board of Directors (the "Board") declared first quarter 2023 preferred stock dividends as follows:

In accordance with the terms of its 8.25% Series A Cumulative Redeemable Preferred Stock (the "Series A Preferred Stock"), the Board declared a quarterly cash dividend of $0.51563 per share on its Series A Preferred Stock;

In accordance with the terms of its 8.00% Series B Cumulative Redeemable Preferred Stock (the "Series B Preferred Stock"), the Board declared a quarterly cash dividend of $0.50 per share on its Series B Preferred Stock; and

In accordance with the terms of its 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (the "Series C Preferred Stock"), the Board declared a quarterly cash dividend of $0.50 per share on its Series C Preferred Stock.

The above dividends for the Series A Preferred Stock, the Series B Preferred Stock, and the Series C Preferred Stock are payable on March 17, 2023 to preferred shareholders of record on February 28, 2023.

On December 19, 2022, the Board declared a fourth quarter dividend of $0.18 per share of common stock that was paid on January 31, 2023 to common stockholders of record as of December 30, 2022.

On November 3, 2022, the Board declared a quarterly dividend of $0.51563 per share on the Series A Preferred Stock, $0.50 per share on the Series B Preferred Stock, and $0.50 per share on the Series C Preferred Stock. The dividends were paid on December 19, 2022 to preferred stockholders of record as of November 30, 2022.

STOCKHOLDER CALL

The Company invites stockholders, prospective stockholders, and analysts to participate in MITT’s fourth quarter earnings conference call on February 23, 2023 at 8:30 am Eastern Time. The stockholder call can be accessed by dialing (800) 445-7795. International callers should dial (785) 424-1699. The Conference ID is MITTQ422.

A presentation will accompany the conference call and will be available under "Presentations" in the "Investor Relations" section on the Company’s website at www.agmit.com. Select the Q4 2022 Earnings Presentation link to download the presentation in advance of the stockholder call.

For those unable to listen to the live call, an audio replay will be available on February 23, 2023 through 9:00 a.m. Eastern Time on March 23, 2023. To access the replay, please go to https://event.on24.com/wcc/r/4111737/68DEE1BBD51982EACF4D3E177E1FF8CC.

For further information or questions, please e-mail ir@agmit.com.

ABOUT AG MORTGAGE INVESTMENT TRUST, INC.

AG Mortgage Investment Trust, Inc. 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. AG Mortgage Investment Trust, Inc. is externally managed and advised by AG REIT Management, LLC, a subsidiary of Angelo, Gordon & Co., L.P., a leading privately-held alternative investment firm focusing on credit and real estate strategies.

Additional information can be found on the Company’s website at www.agmit.com.

ABOUT ANGELO, GORDON & CO.

Angelo, Gordon & Co., L.P. ("Angelo Gordon") is a privately-held alternative investment firm founded in November 1988. The firm currently manages approximately $52 billion with a primary focus on credit and real estate strategies. Angelo Gordon has over 650 employees, including more than 200 investment professionals, and is headquartered in New York, with associated offices elsewhere in the U.S., Europe and Asia. For more information, visit www.angelogordon.com.

FORWARD LOOKING STATEMENTS

This press release includes "forward-looking statements" within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995 related to dividends, book value, adjusted book value, our investments, our business and investment strategy, investment returns, return on equity, liquidity, financing, taxes, our assets, our interest rate sensitivity, and our views on certain macroeconomic trends and conditions, among others. Forward-looking statements are based on estimates, projections, beliefs and assumptions of management of our company at the time of such statements and are not guarantees of future performance. Forward-looking statements involve risks and uncertainties in predicting future results and conditions. Actual results could differ materially from those projected in these forward-looking statements due to a variety of factors, including, without limitation, the uncertainty and economic impact of the COVID-19 pandemic and of responsive measures implemented by various governmental authorities, businesses and other third parties; whether market conditions will continue to recover; whether challenging market conditions will provide us with attractive investment opportunities we anticipate or at all; our ability to continue to grow our residential investment portfolio; our acquisition pipeline; our ability to invest in higher yielding assets through Arc Home, other origination partners or otherwise; our levels of liquidity, including whether our liquidity will sufficiently enable us to continue to deploy capital within the residential whole loan space as anticipated or at all; the impact of market, regulatory and structural changes on the market opportunities we expect to have, and whether we will be able to capitalize on such opportunities in the manner we anticipate; the impact of market volatility and economic recession on our business and ability to execute our strategy; whether we will be able to generate liquidity from additional opportunistic liquidations in our Re/Non-performing loan portfolio; our portfolio mix, including levels of Non-Agency and Agency mortgage loans; our ability to manage warehouse exposure as anticipated or at all; our levels of leverage, including our levels of recourse and non-recourse financing; our ability to execute securitizations, including at the pace anticipated or at all; our ability to achieve our forecasted returns on equity on warehoused assets and post-securitization, including whether such returns will support earnings growth; changes in our business and investment strategy; our ability to grow our adjusted book value; our ability to predict and control costs; changes in inflation, interest rates and the fair value of our assets, including negative changes resulting in margin calls relating to the financing of our assets; the impact of credit spread movements on our business; the impact of interest rate changes on our asset yields and net interest margin; changes in the yield curve; the timing and amount of stock issuances pursuant to our ATM program or otherwise; the timing and amount of stock repurchases, if any; our capitalization, including the timing and amount of preferred stock repurchases or exchanges, if any; expense levels, including levels of management fees; changes in prepayment rates on the loans we own or that underlie our investment securities; our distribution policy; Arc Home’s performance, including its liquidity position and ability to manage current dynamics of the mortgage origination market; Arc Home’s Non-Agency origination volumes; the composition of Arc Home’s portfolio, including levels of MSR exposure; levels of leverage on Arc Home’s MSR portfolio; our percentage allocation of loans originated by Arc Home; increased rates of default or delinquencies and/or decreased recovery rates on our assets; the availability of and competition for our target investments; our ability to obtain and maintain financing arrangements on terms favorable to us or at all; changes in general economic or market 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 and Agency RMBS; our levels of EAD; legislative and regulatory actions by the U.S. Department of the Treasury, the Federal Reserve and other agencies and instrumentalities; how COVID-19 may affect us, our operations and personnel; our ability 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. Additional information concerning these and other risk factors are contained in our filings with the Securities and Exchange Commission ("SEC"), including those described in Part I – Item 1A. "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as such factors may be updated from time to time in our filings with the SEC. Copies are available free of charge on the SEC's website, http://www.sec.gov/. All forward looking statements in this press release speak only as of the date of this press release. We undertake no duty to update any forward-looking statements to reflect any change in our expectations or any change in events, conditions or circumstances on which any such statement is based. All financial information in this press release is as of December 31, 2022, unless otherwise indicated.

NON-GAAP FINANCIAL INFORMATION

In addition to the results presented in accordance with GAAP, this press release includes certain non-GAAP financial results and financial metrics derived therefrom, including Earnings Available for Distribution, investment portfolio, financing arrangements, and economic leverage ratio, which are calculated by including or excluding unconsolidated investments in affiliates or, with respect to our equity allocation calculation, by allocating all non-investment portfolio related assets and liabilities to our investment portfolio categories based on the characteristics of such assets and liabilities, as described in the footnotes to this press release. Our management team believes that this non-GAAP financial information, when considered with our GAAP financial information, provides supplemental information useful for investors as it enables them to evaluate our current core performance using the same metrics that management uses to operate the business. Our presentation of non-GAAP financial information may not be comparable to similarly-titled measures of other companies, who may use different calculations. This non-GAAP financial information 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 of the non-GAAP financial measures included in this press release to the most directly comparable financial measures prepared in accordance with GAAP should be carefully evaluated.

NON-GAAP FINANCIAL MEASURES

Earnings Available for Distribution

This press release contains Earnings Available for Distribution ("EAD"), a non-GAAP financial measure. Our presentation of EAD 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.

We define EAD, a non-GAAP financial measure, as Net Income/(loss) available to common stockholders excluding (i) (a) unrealized gains/(losses) on loans, real estate securities, 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, disposition, or securitization of our investments, (iii) accrued deal-related performance fees payable to third party operators to the extent the primary component of the accrual relates to items that are excluded from EAD, 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, and (vi) any gains/(losses) associated with exchange transactions on our common and preferred stock. Items (i) through (vi) 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, disposition, or securitization 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 EAD on the remainder of its portfolio. Management excludes all deferred taxes because it believes deferred taxes are not representative of current operations. EAD includes the net interest income and other income earned on our investments on a yield adjusted basis, including TBA dollar roll income/(loss) or any other investment activity that may earn or pay net interest or its economic equivalent.

A reconciliation of GAAP Net Income/(loss) available to common stockholders to EAD for the three months ended December 31, 2022, the three months ended December 31, 2021, and the year ended December 31, 2022 is set forth below (in thousands, except per share data):

The components of EAD for the three months ended December 31, 2022, the three months ended December 31, 2021, and the year ended December 31, 2022 is set forth below (in thousands, except per share data):

Economic Leverage Ratio

This press release contains Economic Leverage Ratio, a non-GAAP financial measure. Our presentation of Economic Leverage Ratio 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.

We define GAAP leverage as the sum of (1) GAAP Securitized debt, at fair value, (2) our GAAP Financing arrangements, net of any restricted cash posted on such financing arrangements, and (3) the amount payable on purchases that have not yet settled less the financing remaining on sales that have not yet settled. 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 non-recourse financing arrangements and (iii) our net TBA position (at cost), if any.

The calculation in the table below divides GAAP leverage and Economic Leverage by our GAAP stockholders’ equity to derive our leverage ratios. The following table presents a reconciliation of our Economic Leverage ratio to GAAP Leverage ($ in thousands).

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