AG Mortgage Investment Trust, Inc. Reports Second Quarter Results
SECOND QUARTER 2015 FINANCIAL HIGHLIGHTS
-
$(0.05) of Net Income/(Loss) per diluted common share(6) -
$0.65 of Core Earnings per diluted common share(6)-
$0.61 plus a$0.04 retrospective adjustment -
Includes
$0.03 of dollar roll income associated with the net position in agency mortgage-backed securities (“MBS”) in the “to-be-announced” (“TBA”) market
-
-
$0.60 per share common dividend declared -
$19.21 net book value per share as ofJune 30, 2015 (1), net of the second quarter common dividend -
Book value declined
$0.66 or 3.3% from last quarter, inclusive of:-
Agency and derivatives realized and unrealized change of
$(0.61) or (3.1%). Mortgage basis continues to be volatile and constrain performance -
Credit realized and unrealized change of
$(0.10) or (0.5%) -
Core earnings in excess of the
$0.60 dividend of$0.05 or 0.3%
-
Agency and derivatives realized and unrealized change of
Q1 2015 | Q2 2015 | ||||||||
Summary of Operating Results: | |||||||||
GAAP Net Income/(Loss) Available to Common Stockholders | $ | 9.4mm | $ | (1.5)mm | |||||
GAAP Net Income/(Loss) Available to Common Stockholders, |
$ | 0.33 | $ | (0.05) | |||||
Non-GAAP-Results: | |||||||||
Core Earnings | $ | 17.9mm | $ | 18.6mm | |||||
Core Earnings, per diluted common share (6) | $ | 0.63 | $ | 0.65 |
* For a reconciliation of GAAP Income to Core Earnings, refer to the Reconciliation of Core Earnings at the end of this press release. |
INVESTMENT HIGHLIGHTS
-
$3.2 billion investment portfolio value as ofJune 30, 2015 (2) (4) as compared to the$3.5 billion investment portfolio as ofMarch 31, 2015 -
As of
June 30 th, we exited all of our TBA positions. - 51.6% Agency RMBS investment portfolio
- 48.4% credit investment portfolio, comprised of Non-Agency RMBS, ABS, CMBS, mortgage loans and excess mortgage servicing rights
-
As of
- Hedge ratio at quarter end of 84% of Agency RMBS repo notional, or 47% of financing (8) (14)
-
11.4% constant prepayment rate (“CPR”) on the Agency RMBS investment
portfolio for the second quarter, excluding net TBA position (5)
- 11.6% CPR on the Agency RMBS investment portfolio in July (5)
- Moderate increase in prepayment speeds is consistent with seasonality, collateral aging curve and lower interest rates in Q1
-
3.64x leverage and 2.86% net interest margin as of
June 30, 2015 (2)(3)(7)
SECOND QUARTER ACTIVITY
- Agency MBS: actively adjusted the portfolio and hedges in response to higher interest rates; rotation out of select Inverse IOs and TBA positions
-
Credit MBS: purchase of long duration Non-Agency MBS and CMBS and
rotation out of select CMBS, ABS and short duration MBS
-
Investments in
$25.5 mm of new issue Alt-A Non Agency MBS with$14.2 mm of associated financing- Received favorable ‘40 Act treatment on purchase, allowing MITT to meet the ‘40 Act requirements without increasing our Agency exposure
-
Investments in
-
MITT along with other AG funds participated in two term
securitizations in May and July. In each instance, the securitization
term funds mortgage loans with fixed rate financing
- Sold senior bonds to a third party while retaining the lower tranches
-
Subsequent to quarter end, membership of wholly-owned subsidiary
accepted by the
Federal Home Loan Bank (“FHLB”) ofCincinnati
MANAGEMENT REMARKS
“During the second quarter, we experienced uncertainty in the global
markets as well as mortgage basis and interest rate volatility,”
commented
“We focused on risk management during the quarter, actively managing our
interest rate hedging and repositioning our portfolio toward a more
defensive stance, as interest rates rose and the discussion of an
impending rate hike by the Federal Reserve continued,” commented
KEY STATISTICS
($ in thousands) | ||||||
June 30, 2015 | ||||||
Investment portfolio (2) (4) | $ | 3,179,055 | ||||
Repurchase agreements (2) | 2,534,309 | |||||
Total financing (15) | 2,570,928 | |||||
Stockholders' equity | 706,568 | |||||
Leverage ratio (7) | 3.64x | |||||
Hedge ratio - Total financing (8) (15) | 47 | % | ||||
Hedge ratio - Agency repo (8) | 84 | % | ||||
Yield on investment portfolio (9) | 4.64 | % | ||||
Cost of funds (10) | 1.78 | % | ||||
Net interest margin (3) | 2.86 | % | ||||
Management fees (11) | 1.42 | % | ||||
Other operating expenses (12) | 1.86 | % | ||||
Book value, per share (1) | $ | 19.21 | ||||
Undistributed taxable income, per common share (13) | $ | 1.73 | ||||
Dividend, per share | $ | 0.60 | ||||
INVESTMENT PORTFOLIO
The following summarizes the Company’s investment portfolio as of
($ in thousands) | ||||||||||||||||||||
Current Face | Premium (Discount) | Amortized Cost | Fair Value | WA Yield | ||||||||||||||||
Agency RMBS: | ||||||||||||||||||||
20-Year Fixed Rate |
$ |
115,434 |
$ | 5,525 |
120,959 |
122,309 |
2.8 | % | ||||||||||||
30-Year Fixed Rate | 890,074 | 41,994 | 932,068 | 936,242 | 3.1 | % | ||||||||||||||
Fixed Rate CMO | 82,478 | 796 | 83,274 | 85,442 | 2.9 | % | ||||||||||||||
Hybrid ARM | 391,491 | 7 | 391,498 | 398,034 | 2.8 | % | ||||||||||||||
Inverse Interest Only | 239,459 | (196,262 | ) | 43,197 | 45,546 | 8.4 | % | |||||||||||||
Interest Only | 523,785 | (473,560 | ) | 50,225 | 51,924 | 7.2 | % | |||||||||||||
Credit Investments: | ||||||||||||||||||||
Non-Agency RMBS |
1,863,828 |
(703,298 | ) |
1,160,530 |
1,179,417 |
5.7 | % | |||||||||||||
ABS | 61,003 | (461 | ) | 60,542 | 61,094 | 5.7 | % | |||||||||||||
CMBS | 277,345 | (152,142 | ) | 125,203 | 127,769 | 7.9 | % | |||||||||||||
CMBS Interest Only | 454,826 | (447,004 | ) | 7,822 | 7,955 | 7.4 | % | |||||||||||||
Commercial Loans | 72,800 | (305 | ) | 72,495 | 72,800 | 8.3 | % | |||||||||||||
Residential Loans | 124,131 | (37,190 | ) | 86,941 | 89,993 | 7.4 | % | |||||||||||||
Excess Mortgage Servicing Rights | 79,107 | (78,564 | ) | 543 | 530 | 14.6 | % | |||||||||||||
Total |
$ |
5,175,761 |
$ |
(2,040,464 |
) |
$ |
3,135,297 |
$ |
3,179,055 |
4.6 | % |
As of
The Company had net realized losses of
-
$(2.6) million or$(0.09) per share from net U.S. Treasury positions -
$(2.5) million , or$(0.09) per share from credit investments -
$0.5 million , or$0.02 per share from Agency RMBS -
$0.7 million , or$0.02 per share from TBA gains
Premiums and discounts associated with purchases of the Company's
securities are amortized or accreted into interest income over the
estimated life of such securities, using the effective yield method. The
Company recorded a
FINANCING AND HEDGING ACTIVITIES
The Company, either directly or through its equity method investments in
affiliates, has entered into repurchase agreements with 37
counterparties, under which it had debt outstanding with 22
counterparties as of
($ in thousands) | ||||||||||||||||
Repurchase Agreements |
Repo Outstanding | WA Funding Cost |
WA Days to |
% Repo Outstanding | ||||||||||||
30 Days or Less |
1,784,481 |
0.8 | % | 12 | 70.4 | % | ||||||||||
31-60 Days | 213,157 | 1.2 | % | 47 | 8.4 | % | ||||||||||
61-90 Days | 19,727 | 1.8 | % | 72 | 0.8 | % | ||||||||||
Greater than 90 Days | 516,944 | 1.9 | % | 513 | 20.4 | % | ||||||||||
Total / Weighted Average |
2,534,309 |
1.1 | % | 117 | 100.0 | % | ||||||||||
*Numbers in table above do not include securitized debt of $36.0 million. | ||||||||||||||||
**Our weighted average original days to maturity is 157 days. | ||||||||||||||||
The Company has entered into interest rate swap agreements to hedge its
portfolio. The Company’s interest rate swaps as of
($ in thousands) | ||||||||||||
Maturity |
Notional Amount |
Weighted Average |
Weighted |
Weighted |
||||||||
2017 | 80,000 | 0.87 | % | 0.32 | % | 2.18 | ||||||
2018 | 210,000 | 1.05 | % | 0.27 | % | 2.76 | ||||||
2019 | 260,000 | 1.27 | % | 0.27 | % | 4.14 | ||||||
2020 | 290,000 | 1.67 | % | 0.27 | % | 4.76 | ||||||
2022 | 70,000 | 1.75 | % | 0.27 | % | 7.02 | ||||||
2023 | 160,000 | 2.31 | % | 0.28 | % | 7.92 | ||||||
2025 | 40,000 | 2.48 | % | 0.28 | % | 9.93 | ||||||
Total/Wtd Avg |
$ |
1,110,000 |
1.53 | % | 0.28 | % | 4.84 | |||||
* 100% of our receive float interest rate swap notionals reset quarterly based on three-month LIBOR. | ||||||||||||
As of
TAXABLE INCOME
The primary differences 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 certain terminated derivatives
and (v) taxes. As of
DIVIDEND
On
On
STOCKHOLDER CALL
The Company invites stockholders, prospective stockholders and analysts
to attend MITT’s second quarter earnings conference call on
A presentation will accompany the conference call and will be available on the Company’s website at www.agmit.com. Select the Q2 2015 Earnings Presentation link to download and print the presentation in advance of the stockholder call.
An audio replay of the stockholder call combined with the presentation
will be made available on our website after the call. The replay will be
available until midnight on
For further information or questions, please email ir@agmit.com.
ABOUT
Additional information can be found on the Company's website at www.agmit.com.
ABOUT
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 future dividends,
the credit component of our portfolio book value, deploying capital, the
common and preferred stock offerings and repurchase agreements.
Forward-looking statements are based on estimates, projections, beliefs
and assumptions of management of the 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, changes in interest rates,
changes in the yield curve, changes in prepayment rates, the
availability and terms of financing, changes in the market value of our
assets, general economic conditions, market conditions, conditions in
the market for Agency RMBS, Non-Agency RMBS, ABS and CMBS securities and
loans, and legislative and regulatory changes that could adversely
affect the business of the Company. Additional information concerning
these and other risk factors are contained in the Company's filings with
the
AG Mortgage Investment Trust, Inc. and Subsidiaries | |||||||||
Consolidated Balance Sheets | |||||||||
(Unaudited) | |||||||||
June 30, 2015 |
December 31, 2014 |
||||||||
Assets | |||||||||
Real estate securities, at fair value: | |||||||||
Agency - $1,520,424,707 and $1,691,194,581 pledged as collateral, respectively | $ | 1,639,497,291 | $ | 1,808,314,746 | |||||
Non-Agency - $1,117,558,576 and $1,088,398,641 pledged as collateral, respectively | 1,164,542,624 | 1,140,077,928 | |||||||
ABS - $61,094,356 and $66,693,243 pledged as collateral, respectively | 61,094,356 | 66,693,243 | |||||||
CMBS - $105,167,321 and $96,920,646 pledged as collateral, respectively | 108,767,353 | 100,520,652 | |||||||
Residential mortgage loans, at fair value -$74,328,679 and $73,407,869 pledged as collateral, respectively | 80,725,305 | 85,089,859 | |||||||
Commercial loans, at fair value - $62,800,000 pledged as collateral | 72,800,000 | 72,800,000 | |||||||
Investments in affiliates | 33,637,519 | 20,345,131 | |||||||
Excess mortgage servicing rights, at fair value | 529,946 | 628,367 | |||||||
Linked transactions, net, at fair value | - | 26,695,091 | |||||||
Cash and cash equivalents | 73,802,887 | 64,363,514 | |||||||
Restricted cash | 23,070,257 | 34,477,975 | |||||||
Interest receivable | 11,513,517 | 11,886,019 | |||||||
Receivable under reverse repurchase agreements | 104,868,750 | - | |||||||
Derivative assets, at fair value | 4,313,897 | 11,382,622 | |||||||
Other assets | 9,603,578 | 10,543,072 | |||||||
Due from broker | 3,254,746 | 4,586,912 | |||||||
Total Assets | $ | 3,392,022,026 | $ | 3,458,405,131 | |||||
Liabilities | |||||||||
Repurchase agreements | $ | 2,513,218,214 | $ | 2,644,955,948 | |||||
Securitized debt | 36,009,319 | 39,777,914 | |||||||
Obligation to return securities borrowed under reverse repurchase agreements, at fair value | 102,891,797 | - | |||||||
Interest payable | 2,865,826 | 2,461,494 | |||||||
Derivative liabilities, at fair value | 2,897,666 | 8,608,209 | |||||||
Dividend payable | 17,033,527 | 17,031,609 | |||||||
Due to affiliates | 4,774,983 | 4,850,807 | |||||||
Accrued expenses | 2,227,218 | 2,285,339 | |||||||
Taxes payable | 977,216 | 1,743,516 | |||||||
Due to broker | 2,558,314 | 4,015,152 | |||||||
Total Liabilities | 2,685,454,080 | 2,725,729,988 | |||||||
Stockholders' Equity | |||||||||
Preferred stock - $0.01 par value; 50,000,000 shares authorized: | |||||||||
8.25% Series A Cumulative Redeemable Preferred Stock, 2,070,000 shares issued and outstanding ($51,750,000 aggregate liquidation preference) | 49,920,772 | 49,920,772 | |||||||
8.00% Series B Cumulative Redeemable Preferred Stock, 4,600,000 shares issued and outstanding ($115,000,000 aggregate liquidation preference) | 111,293,233 | 111,293,233 | |||||||
Common stock, par value $0.01 per share; 450,000,000 shares of common stock authorized and 28,389,211 and 28,386,015 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively | 283,893 | 283,861 | |||||||
Additional paid-in capital | 586,141,440 | 586,051,751 | |||||||
Retained earnings/(deficit) | (41,071,392 | ) | (14,874,474 | ) | |||||
Total Stockholders' Equity | 706,567,946 | 732,675,143 | |||||||
Total Liabilities & Stockholders' Equity | $ | 3,392,022,026 | $ | 3,458,405,131 | |||||
AG Mortgage Investment Trust, Inc. and Subsidiaries | ||||||
Consolidated Statements of Operations | ||||||
(Unaudited) | ||||||
Three Months Ended |
Three Months Ended |
|||||
June 30, 2015 | June 30, 2014 | |||||
Net Interest Income | ||||||
Interest income | $ 37,278,271 | $ 36,079,435 | ||||
Interest expense | 7,574,429 | 6,783,768 | ||||
29,703,842 | 29,295,667 | |||||
Other Income | ||||||
Net realized gain/(loss) | (2,153,328) | (1,826,360) | ||||
Income/(loss) from linked transactions, net | - | 3,409,366 | ||||
Realized loss on periodic interest settlements of derivative instruments, net | (3,228,729) | (5,773,644) | ||||
Unrealized gain/(loss) on real estate securities and loans, net | (22,256,001) | 42,653,828 | ||||
Unrealized gain/(loss) on derivative and other instruments, net | 5,798,988 | (23,917,820) | ||||
(21,839,070) | 14,545,370 | |||||
Expenses | ||||||
Management fee to affiliate | 2,502,091 | 2,507,487 | ||||
Other operating expenses | 3,285,942 | 2,739,225 | ||||
Servicing fees | 144,999 | 162,717 | ||||
Equity based compensation to affiliate | 36,738 | 73,586 | ||||
Excise tax | 375,000 | 375,000 | ||||
6,344,770 | 5,858,015 | |||||
Income/(loss) before equity in earnings/(loss) from affiliates | 1,520,002 | 37,983,022 | ||||
Income tax benefit/(expense) | - | (92,795) | ||||
Equity in earnings/(loss) from affiliates | 320,442 | 3,275,056 | ||||
Net Income/(Loss) | 1,840,444 | 41,165,283 | ||||
Dividends on preferred stock | 3,367,354 | 3,367,354 | ||||
Net Income/(Loss) Available to Common Stockholders | $ (1,526,910) | $ 37,797,929 | ||||
Earnings/(Loss) Per Share of Common Stock | ||||||
Basic | $ (0.05) | $ 1.33 | ||||
Diluted | $ (0.05) | $ 1.33 | ||||
Weighted Average Number of Shares of Common Stock Outstanding | ||||||
Basic | 28,389,211 | 28,377,245 | ||||
Diluted | 28,389,211 | 28,380,458 | ||||
NON-GAAP FINANCIAL MEASURE
This press release contains Core Earnings, a non-GAAP financial measure.
Core Earnings are defined by the Company as net income excluding both realized and unrealized gains/(losses) on the sale or termination of securities and the related tax expense/benefit or disposition expense, if any, on such, including investments held in affiliated entities and derivatives. As defined, Core Earnings include the net interest earned on these transactions on a yield adjusted basis, including credit derivatives, investments in affiliates, inverse Agency interest-only securities, interest rate derivatives or any other investment activity that may earn or pay net interest. One of the objectives of the Company is to generate net income from net interest margin on the portfolio and management uses Core Earnings to measure this objective.
A reconciliation of GAAP net income to Core Earnings for the three
months ended
Three Months Ended | Three Months Ended | |||||||||||||
June 30, 2015 | June 30, 2014 | |||||||||||||
Net Income/(loss) available to common stockholders | $ | (1,526,910 | ) | $ | 37,797,929 | |||||||||
Add (Deduct): | ||||||||||||||
Net realized (gain)/loss | 2,153,328 | 1,826,360 | ||||||||||||
Tax (benefit)/expense related to realized gain | - | 92,795 | ||||||||||||
Drop income | 962,240 | 258,304 | ||||||||||||
(Income)/loss from linked transactions, net | - |
(3,409,366 |
) |
|||||||||||
Net interest income on linked transactions | - | 1,916,986 | ||||||||||||
Equity in (earnings)/loss from affiliates | (320,442 | ) | (3,275,056 |
) |
|
|||||||||
Net interest income from equity method investments | 835,071 | 502,210 | ||||||||||||
Unrealized (gain)/loss on real estate securities and loans, net | 22,256,001 | (42,653,828 |
) |
|
||||||||||
Unrealized (gain)/loss on derivative and other instruments, net | (5,798,988 | ) | 23,917,820 | |||||||||||
Core Earnings | $ | 18,560,300 | $ | 16,974,154 | ||||||||||
Core Earnings, per Diluted Share | $ | 0.65 | $ | 0.60 | ||||||||||
Footnotes
(1) Per share figures are calculated using a denominator of all outstanding common shares including all shares granted to our Manager and our independent directors under our equity incentive plans as of quarter end. Net book value uses stockholders’ equity less net proceeds of the Company’s 8.25% Series A and 8.00% Series B Cumulative Redeemable Preferred Stock as the numerator.
(2) Generally when we purchase a security and finance it with a repurchase agreement, the security is included in our assets and the repurchase agreement is separately reflected in our liabilities on the balance sheet. We invested in certain credit sensitive commercial real estate securities and mortgage loans through affiliated entities, for which we have used the equity method of accounting. Throughout this press release where we disclose our investment portfolio, we have presented the underlying assets and repurchase financings consistently with all other investments and financings. Additionally, GAAP requires TBAs to be accounted for as derivatives, representing a forward purchase, or sale, of Agency RMBS. We have included any net TBA positions as part of Agency RMBS in our portfolio composition unless otherwise stated. This presentation is consistent with how the Company’s management evaluates the business, and believes provides the most accurate depiction of the Company’s investment portfolio and financial condition.
(3) Net interest margin is calculated by subtracting the weighted average cost of funds from the weighted average yield for the Company’s investment portfolio, which excludes cash held by the Company. See notes footnotes (9) and (10) for further detail. NIM also excludes any net TBA position.
(4) The total investment portfolio at period end is calculated by summing the fair market value of our Agency RMBS, any net TBA position, Non-Agency RMBS, ABS, CMBS, mortgage loan assets, and excess mortgage servicing rights, including securities and mortgage loans owned through investments in affiliates. The percentage of Agency RMBS and credit investments is calculated by dividing the respective fair market value of each, including any net TBA positions as Agency RMBS and securities and mortgage loans owned through investments in affiliates as credit investments, by the total investment portfolio.
(5) This represents the weighted average monthly CPRs published during the quarter, or month, as applicable, for our in-place portfolio during the same period. Any net TBA position is excluded from CPR calculation.
(6) Diluted per share figures are calculated using weighted average outstanding shares in accordance with GAAP.
(7) The leverage ratio at quarter end was calculated by dividing financing, plus or minus the net payable or receivable, as applicable, on unsettled trades, excluding unsettled U.S. Treasury trades, by our GAAP stockholders’ equity at quarter end. “At Risk” Leverage includes the components of “leverage” plus any net TBA position (at cost). See footnote 14 for further detail.
(8) The hedge ratio at quarter end was calculated by dividing the notional value of our interest rate swaps, net positions in U.S. Treasury securities, IO Index notionals, and interest rate swaptions, including receive fixed swap notionals and long positions in U.S. Treasury securities as negative values as applicable, by either financing or repurchase agreements secured by Agency RMBS, as indicated, plus the net payable/receivable on either all unsettled trades, or unsettled Agency RMBS trades as indicated. The hedge ratios including any net TBA position are calculated as previously stated plus any at risk TBA position (at cost) added to either financing or repurchase agreements secured by Agency RMBS. See footnote 14 for further details.
(9) The yield on our investment 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. This calculation excludes cash held by the Company and excludes any net TBA position.
(10) The cost of funds at quarter end was calculated as the sum of the weighted average funding costs on financing outstanding at quarter end and 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. Both elements of the cost of funds at quarter end were weighted by the outstanding repurchase agreements and securitized debt outstanding at quarter end, excluding repurchase agreements associated with U.S. Treasury positions. The cost of funds excludes any net TBA position.
(11) The management fee percentage at quarter end was calculated by annualizing management fees recorded during the quarter and dividing by quarter end stockholders’ equity.
(12) The other operating expenses percentage at quarter end was calculated by annualizing other operating expenses recorded during the quarter and dividing by quarter end stockholders’ equity.
(13) Undistributed taxable income per common share represents total undistributed taxable income as of quarter end.
(14) Financing at quarter end, and when shown, daily weighted average, includes repurchase agreements inclusive of repurchase agreements through affiliated entities, plus or minus the net payable or receivable, as applicable, on unsettled trades, securitized debt and any net TBA position. Financing excludes repurchase agreements and unsettled trades on U.S. Treasuries.
View source version on businesswire.com: http://www.businesswire.com/news/home/20150805006774/en/
Source:
AG Mortgage Investment Trust, Inc.
Karen Werbel, 212-692-2110
ir@agmit.com