AG Mortgage Investment Trust, Inc. Reports First Quarter Results
FIRST QUARTER 2015 FINANCIAL HIGHLIGHTS
-
$0.33 of Net Income per diluted common share(6) -
$0.63 of Core Earnings per diluted common share(6)-
$0.65 less a$0.02 retrospective adjustment -
Includes
$0.04 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 -
$19.87 net book value per share as ofMarch 31, 2015 (1), net of the first quarter common dividend - 1.7% economic return on equity for the quarter, 6.8% annualized (14)
- 18.7% annualized year-to-date return on stock, including price appreciation and reinvestment of dividends
Q4 2014 | Q1 2015 | ||||||
Summary of Operating Results: | |||||||
GAAP Net Income Available to Common Stockholders | $ | 11.3mm | $ | 9.4mm | |||
GAAP Net Income Available to Common Stockholders, per |
$ | 0.40 | $ | 0.33 | |||
Non-GAAP-Results: | |||||||
Core Earnings | $ | 18.4mm | $ | 17.9mm | |||
Core Earnings, per diluted common share (6) | $ | 0.65 | $ | 0.63 | |||
* For a reconciliation of GAAP Income to Core Earnings, please refer to the Reconciliation of Core Earnings at the end of this press release.
INVESTMENT HIGHLIGHTS
-
$3.5 billion investment portfolio value including net TBA position as ofMarch 31, 2015 (2) (4)- 53.9% Agency RMBS investment portfolio including net TBA position
- 46.1% credit investment portfolio, comprised of Non-Agency RMBS, ABS, CMBS, mortgage loans and excess mortgage servicing rights
-
Hedge ratio at quarter end of 65% of Agency RMBS repo notional, or 34%
of financing (8) (15)
- Hedge ratio at quarter end including net TBA position was 58% of Agency RMBS repo notional and 33% of financing (8) (15)
- At the beginning of the quarter, in response to the lower interest rate environment, terminated approximately $400mm of interest rate swap hedges and added treasury longs, which widened duration gap
-
6.8% constant prepayment rate (“CPR”) on the Agency RMBS investment
portfolio for the first quarter, excluding net TBA position (5)
- 11.1% CPR on the Agency RMBS investment portfolio in April, excluding net TBA position(5)
-
3.97x “at risk” leverage including net TBA position and 3.71x leverage
excluding net TBA position and 3.08% net interest margin excluding net
TBA position as of
March 31, 2015 (2) (3) (7) - MITT leveraging AG’s multi-discipline investment platform during the quarter
- Agency MBS: actively adjusted the portfolio and hedges in response to lower interest rates
-
Credit MBS: rotation out of floating rate non-agency MBS and select
CMBS, and further allocation into short and long duration MBS, ABS,
CMBS, and GSE risk transfer securities.
- Senior short duration NPLs - front pay/mezz
- Long duration Non-Agency MBS
- New investment in CRE B piece
- New investment in small ABS consumer portfolio
“We are pleased with MITT’s performance and the investment opportunities
during the first quarter, as we delivered satisfactory risk adjusted
returns during a period of shifting interest rates and agency MBS
spreads,” commented
“We continue to incrementally increase capital allocation to credit
assets, increasing our credit portfolio to 46.1%, from 44.6% in the
prior quarter,” commented
KEY STATISTICS |
||||
($ in thousands) |
||||
|
March 31, 2015 | |||
Investment portfolio including net TBA position (2) (4) | $ | 3,541,219 | ||
Investment portfolio excluding net TBA position | 3,351,259 | |||
Repurchase agreements* | 2,617,014 | |||
Financing (15) |
2,881,427 | |||
Stockholders' equity | 725,145 | |||
Leverage ratio (7) | 3.71x | |||
Hedge ratio - Financing (8) (15) |
34% | |||
Hedge ratio - Agency repo (8) | 65% | |||
"At Risk" Leverage including net TBA position (7) | 3.97x | |||
Hedge ratio - Financing including net TBA position (8) (15) |
33% | |||
Hedge ratio - Agency repo including net TBA position (8) | 58% | |||
Yield on investment portfolio (9) | 4.61% | |||
Cost of funds (10) | 1.53% | |||
Net interest margin (3) | 3.08% | |||
Management fees (11) | 1.38% | |||
Other operating expenses (12) | 1.70% | |||
Book value, per share (1) | $ | 19.87 | ||
Undistributed taxable income, per common share (13) | $ | 1.81 | ||
Dividend, per share | $ | 0.60 | ||
*Excludes
INVESTMENT PORTFOLIO
The following summarizes the Company’s investment portfolio as of
($ in thousands) | |||||||||||||||||
Current Face |
Premium |
Amortized Cost | Fair Value |
WA |
|||||||||||||
Agency RMBS: | |||||||||||||||||
20-Year Fixed Rate | $ | 120,482 | $ | 5,631 | $ | 126,113 | $ | 129,005 | 2.8 | % | |||||||
30-Year Fixed Rate | 907,692 | 41,573 | 949,265 | 971,362 | 3.1 | % | |||||||||||
Fixed Rate CMO | 85,659 | 827 | 86,486 | 89,711 | 2.8 | % | |||||||||||
Hybrid ARM | 408,558 | (803 | ) | 407,755 | 418,687 | 2.7 | % | ||||||||||
Inverse Interest Only | 329,617 | (269,510 | ) | 60,107 | 61,168 | 9.4 | % | ||||||||||
Interest Only | 382,803 | (334,258 | ) | 48,545 | 47,339 | 5.8 | % | ||||||||||
Fixed Rate 30 Year TBA | 180,000 | 7,793 | 187,793 | 189,960 | N/A | ||||||||||||
Credit Investments: | |||||||||||||||||
Non-Agency RMBS | 1,738,236 | (492,993 | ) | 1,245,243 | 1,265,811 | 5.5 | % | ||||||||||
ABS | 68,968 | (524 | ) | 68,444 | 69,067 | 5.5 | % | ||||||||||
CMBS | 283,535 | (163,501 | ) | 120,034 | 123,367 | 7.8 | % | ||||||||||
CMBS Interest Only | 455,139 | (447,115 | ) | 8,024 | 8,250 | 7.4 | % | ||||||||||
Commercial Loans | 72,800 | (391 | ) | 72,409 | 72,800 | 8.6 | % | ||||||||||
Residential Loans | 132,233 | (38,860 | ) | 93,373 | 94,114 | 8.7 | % | ||||||||||
Excess Mortgage Servicing Rights | 94,317 | (93,738 | ) | 579 | 580 | 7.2 | % | ||||||||||
Total | $ | 5,260,039 | $ | (1,785,869 | ) | $ | 3,474,170 | $ | 3,541,221 | 4.6 | % | ||||||
* Fixed Rate 30 Year TBA are excluded from this calculation.
As of
The Company had net realized losses of
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 35
counterparties, under which it had debt outstanding with 23
counterparties as of
($ in thousands) | |||||||||||
Repurchase Agreements |
Repo Outstanding | WA Funding Cost |
WA Days to |
% Repo |
|||||||
30 Days or Less | 1,849,734 | 0.90 | % | 13 | 70.68 | % | |||||
31-60 Days | 349,901 | 1.08 | % | 41 | 13.37 | % | |||||
61-90 Days | 27,423 | 1.82 | % | 69 | 1.05 | % | |||||
Greater than 90 Days | 389,956 | 1.99 | % | 674 | 14.90 | % | |||||
Total / Weighted Average | $ | 2,617,014 | 1.10 | % | 116 | 100.00 | % | ||||
*Numbers in table above do not include securitized debt of
**Our weighted average original days to maturity is 151 days.
Subsequent to quarter end, we renewed the
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% | 0.30% | 2.43 | ||||||
2018 | 210,000 | 1.05% | 0.26% | 3.01 | ||||||
2019 | 260,000 | 1.27% | 0.26% | 4.39 | ||||||
2020 | 265,000 | 1.95% | 0.29% | 6.07 | ||||||
2022 | 70,000 | 1.75% | 0.25% | 7.27 | ||||||
2023 | 160,000 | 1.80% | 0.20% | 6.38 | ||||||
Total/Wtd Avg | $ 1,045,000 | 1.48% | 0.26% | 4.89 | ||||||
* 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 first 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 Q1 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) | |||||||||
March 31, 2015 | December 31, 2014 | ||||||||
Assets | |||||||||
Real estate securities, at fair value: | |||||||||
Agency - $1,567,961,574 and $1,691,194,581 pledged as collateral, respectively | $ | 1,717,271,435 | $ | 1,808,314,746 | |||||
Non-Agency - $1,169,149,256 and $1,088,398,641 pledged as collateral, respectively | 1,249,988,396 | 1,140,077,928 | |||||||
ABS - $69,067,254 and $66,693,243 pledged as collateral, respectively | 69,067,254 | 66,693,243 | |||||||
CMBS - $101,522,360 and $96,920,646 pledged as collateral, respectively | 105,122,313 | 100,520,652 | |||||||
Residential mortgage loans, at fair value -$72,247,373 and $73,407,869 pledged as collateral, respectively | 82,392,720 | 85,089,859 | |||||||
Commercial loans, at fair value - $62,800,000 pledged as collateral | 72,800,000 | 72,800,000 | |||||||
U.S. Treasury securities, at fair value - $75,509,766 and $0 pledged as collateral, respectively | 100,679,688 | - | |||||||
Investments in affiliates | 33,125,334 | 20,345,131 | |||||||
Excess mortgage servicing rights, at fair value | 579,734 | 628,367 | |||||||
Linked transactions, net, at fair value | - | 26,695,091 | |||||||
Cash and cash equivalents | 42,107,692 | 64,363,514 | |||||||
Restricted cash | 30,655,747 | 34,477,975 | |||||||
Interest receivable | 11,789,233 | 11,886,019 | |||||||
Receivable under reverse repurchase agreements | 25,125,000 | - | |||||||
Derivative assets, at fair value | 4,031,370 | 11,382,622 | |||||||
Other assets | 10,142,710 | 10,543,072 | |||||||
Due from broker | 4,826,056 | 4,586,912 | |||||||
Total Assets | $ | 3,559,704,682 | $ | 3,458,405,131 | |||||
Liabilities | |||||||||
Repurchase agreements | $ | 2,670,615,233 | $ | 2,644,955,948 | |||||
Securitized debt | 38,405,163 | 39,777,914 | |||||||
Obligation to return securities borrowed under reverse repurchase agreements, at fair value | 25,009,766 | - | |||||||
Payable on unsettled trades | 63,437,176 | - | |||||||
Interest payable | 2,598,608 | 2,461,494 | |||||||
Derivative liabilities, at fair value | 8,812,676 | 8,608,209 | |||||||
Dividend payable | 17,032,569 | 17,031,609 | |||||||
Due to affiliates | 4,416,366 | 4,850,807 | |||||||
Accrued expenses | 2,376,904 | 2,285,339 | |||||||
Taxes payable | 596,191 | 1,743,516 | |||||||
Due to broker | 1,258,715 | 4,015,152 | |||||||
Total Liabilities | 2,834,559,367 | 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 |
49,920,772 | 49,920,772 | |||||||
8.00% Series B Cumulative Redeemable Preferred Stock, 4,600,000
shares issued and outstanding |
111,293,233 | 111,293,233 | |||||||
Common stock, par value $0.01 per share; 450,000,000 shares of
common stock authorized and |
283,877 | 283,861 | |||||||
Additional paid-in capital | 586,158,388 | 586,051,751 | |||||||
Retained earnings/(deficit) | (22,510,955 | ) | (14,874,474 | ) | |||||
Total Stockholders' Equity | 725,145,315 | 732,675,143 | |||||||
Total Liabilities & Stockholders' Equity | $ | 3,559,704,682 | $ | 3,458,405,131 | |||||
AG Mortgage Investment Trust, Inc. and Subsidiaries | |||||||||
Consolidated Statements of Operations | |||||||||
(Unaudited) | |||||||||
Three Months Ended | Three Months Ended | ||||||||
March 31, 2015 | March 31, 2014 | ||||||||
Net Interest Income | |||||||||
Interest income | $ | 36,380,265 | $ | 34,142,740 | |||||
Interest expense | 7,514,178 | 6,146,587 | |||||||
28,866,087 | 27,996,153 | ||||||||
Other Income | |||||||||
Net realized gain/(loss) | (9,649,926 | ) | 548,860 | ||||||
Income/(loss) from linked transactions, net | - | 4,126,741 | |||||||
Realized loss on periodic interest settlements of derivative instruments, net | (3,461,227 | ) | (6,307,857 | ) | |||||
Unrealized gain/(loss) on real estate securities and loans, net | 11,259,718 | 29,367,044 | |||||||
Unrealized gain/(loss) on derivative and other instruments, net | (8,920,798 | ) | (19,180,715 | ) | |||||
(10,772,233 | ) | 8,554,073 | |||||||
Expenses | |||||||||
Management fee to affiliate | 2,507,090 | 2,500,525 | |||||||
Other operating expenses | 3,077,998 | 2,643,681 | |||||||
Servicing fees | 174,999 | - | |||||||
Equity based compensation to affiliate | 76,680 | 81,073 | |||||||
Excise tax | 375,000 | 500,000 | |||||||
6,211,767 | 5,725,279 | ||||||||
Income/(loss) before equity in earnings/(loss) from affiliates | 11,882,087 | 30,824,947 | |||||||
Equity in earnings/(loss) from affiliates | 881,355 | 361,295 | |||||||
Net Income/(Loss) | 12,763,442 | 31,186,242 | |||||||
Dividends on preferred stock | 3,367,354 | 3,367,354 | |||||||
Net Income/(Loss) Available to Common Stockholders | $ | 9,396,088 | $ | 27,818,888 | |||||
Earnings/(Loss) Per Share of Common Stock | |||||||||
Basic | $ | 0.33 | $ | 0.98 | |||||
Diluted | $ | 0.33 | $ | 0.98 | |||||
Weighted Average Number of Shares of Common Stock Outstanding | |||||||||
Basic | 28,387,615 | 28,371,419 | |||||||
Diluted | 28,412,205 | 28,373,794 | |||||||
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 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 | ||||||||
March 31, 2015 | March 31, 2014 | ||||||||
Net Income/(loss) available to common stockholders | $ | 9,396,088 | $ | 27,818,888 | |||||
Add (Deduct): | |||||||||
Net realized (gain)/loss | 9,649,926 | (548,860 | ) | ||||||
Drop income | 1,204,776 | - | |||||||
(Income)/loss from linked transactions, net | - | (4,126,741 | ) | ||||||
Net interest income on linked transactions | - | 4,512,909 | |||||||
Equity in (earnings)/loss from affiliates | (881,355 | ) | (361,295 | ) | |||||
Net interest income from equity method investments | 916,721 | 551,081 | |||||||
Unrealized (gain)/loss on real estate securities and loans, net | (11,259,718 | ) | (29,367,044 | ) | |||||
Unrealized (gain)/loss on derivative and other instruments, net | 8,920,798 | 19,180,715 | |||||||
Core Earnings | $ | 17,947,236 | $ | 17,659,653 | |||||
Core Earnings, per Diluted Share | $ | 0.63 | $ | 0.62 | |||||
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 have 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 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 our net TBA position.
(4) The total investment portfolio at period end is calculated by summing the fair market value of our Agency RMBS, net TBA position, Non-Agency RMBS, ABS, CMBS, mortgage loan assets, and excess mortgage servicing rights, including assets 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 the net TBA positions as Agency RMBS and assets 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. Our 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 our net TBA position (at cost) of
(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
the net TBA position are calculated as previously stated plus an
additional
(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 our 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 our 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) The economic return on equity for the quarter represents the change in net book value per share from prior period, plus the dividend declared in the current period, divided by prior period’s net book value per share.
(15) Financing at quarter end 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 our net TBA position. Financing excludes repurchase agreements and unsettled trades on U.S. Treasuries.
Source:
AG Mortgage Investment Trust, Inc.
Karen Werbel, 212-692-2110
ir@agmit.com