AG Mortgage Investment Trust, Inc. ("MITT," "we," the “Company”
or "our") (NYSE: MITT) today reported financial results for the
quarter-ended June 30, 2019. AG Mortgage Investment Trust, Inc. is
a hybrid mortgage REIT that opportunistically invests in, acquires
and manages a diversified risk-adjusted portfolio of Agency RMBS,
Credit Investments, and Single-Family Rental Properties. Our Credit
Investments include our Residential Investments, Commercial
Investments, and ABS Investments.
SECOND QUARTER 2019 FINANCIAL HIGHLIGHTS
- $0.47 of Net Income/(Loss) per diluted common share(1)
- $0.36 of Core Earnings per diluted common share(1)
- Includes $(0.04) retrospective adjustment
- Decrease in Core Earnings from last quarter primarily due to
the flattening of the yield curve and a change in prepayment
expectations
- 2.9% economic return on equity for the quarter, 11.6%
annualized(2)
- $17.42 Book value per share(1) as of June 30, 2019
- $17.57 Undepreciated Book Value per share(1) as of June 30,
2019 versus $17.56 as of March 31, 2019
- Undepreciated Book Value increased $0.01 or 0.1% from the prior
quarter primarily due to:
- $0.01 or 0.1% due to our investments in Agency RMBS,
Residential Loans(a) and associated derivatives
- Agency RMBS spreads widened versus benchmarks as the interest
rate rally resulted in elevated gross supply, prepayment
uncertainty and increased implied volatility offset by
short-duration non-performing and re-performing loan spreads
tightening during the quarter
- $0.13 or 0.7% due to our Credit Investments excluding
Residential Loans(a)
- CRT and Legacy RMBS spreads tightened during the quarter, while
CMBS spreads remained relatively unchanged despite some volatility
in AAA rated securities
- $(0.13)(b) or (0.7)% due to core earnings below the $0.50
dividend
(a)
Residential Loans includes
Re/Non-Performing Loans and New Origination Loans
(b)
Includes $0.01 or 0.1% due to equity based
compensation
Q1 2019
Q2 2019
Summary of Operating Results:
GAAP Net Income/(Loss) Available to Common
Stockholders
$
25.8
mm
$
15.3
mm
GAAP Net Income/(Loss) Available to Common
Stockholders, per diluted common share(1)
$
0.84
$
0.47
Non-GAAP Results:
Core Earnings*
$
13.6
mm
$
11.8
mm
Core Earnings, per diluted common
share(1)
$
0.45
$
0.36
*A reconciliation of net income/(loss) per
diluted common share to core earnings per diluted common share for
the three months ended June 30, 2019, along with an explanation of
this non-GAAP financial measure, is provided at the end of this
press release.
MANAGEMENT REMARKS
"MITT's undepreciated book value was relatively flat quarter
over quarter, increasing by one cent to $17.57," said Chief
Executive Officer, David Roberts. "While our core earnings during
the quarter were less than our $0.50 dividend, that shortfall was
made up by an increase in the value of our credit investments."
"Our core earnings decreased from the prior quarter by $0.09 to
$0.36 per share, after a $0.04 negative retrospective adjustment.
Asset yields decreased in the quarter while our funding costs
remained sticky," Mr. Roberts continued.
Mr. Roberts added, "We anticipate that our Board will adjust our
quarterly common dividend to $0.45 per share for the third quarter
of 2019, subject to any changes in our outlook at that time. We
believe that this level of dividend better reflects the modeled
earnings power of our targeted asset portfolio, anticipated
leverage, and projected funding costs in the current market
environment."
"The mortgage-backed sector performed well during the second
quarter," said Chief Investment Officer, T.J. Durkin. "The credit
risk transfer market extended its first quarter spread tightening,
which serves as a barometer of overall mortgage credit. During the
quarter we rotated out of Agency RMBS into credit investments,
increasing our exposure in newly originated non-QM loans, credit
risk transfer securities, and commercial real estate loans, while
also committing to purchase re/non-performing loans. Going forward,
we continue to see a pipeline of credit opportunities at favorable
risk-adjusted returns; and we intend to remain active in the
securitization markets."
INVESTMENT HIGHLIGHTS
- $4.0 billion investment portfolio as of June 30, 2019 as
compared to the $4.1 billion investment portfolio as of March 31,
2019(3) (4)
- 2.0% Net Interest Margin (“NIM”) as of June 30, 2019 (5)
- 4.4x “At Risk” Leverage as of June 30, 2019 (6)
- 7.1% constant prepayment rate ("CPR") on the Agency RMBS
investment portfolio for the second quarter (7)
- Duration gap was approximately 0.98 years as of June 30, 2019
(8)
- Duration gap is presented pro-forma for the purchase of $234.2
million of Re/Non-Performing Loans that we have committed to
purchase but that have not settled as the hedges related to these
purchases have already been added to the portfolio. The duration
gap exclusive of these commitments would be 0.67.
SECOND QUARTER ACTIVITY
($ in millions)
Description
Purchased
(Sold/Payoff)
Net Activity
30 Year Fixed Rate
$—
$(123.6)
$(123.6)
Inverse Interest Only
—
(3.2)
(3.2)
Fixed Rate 30 Year TBA
746.6
(748.7)
(2.1)
Total Agency RMBS
746.6
(875.5)
(128.9)
Prime
1.2
(32.4)
(31.2)
Alt-A/Subprime
7.3
—
7.3
Credit Risk Transfer
53.1
(0.9)
52.2
Re/Non-Performing Loans
6.3
(13.1)
(6.8)
New Origination Loans
206.2
(181.9)
24.3
Total Residential Investments
274.1
(228.3)
45.8
CMBS
23.7
(21.1)
2.6
CMBS Interest Only
—
(1.7)
(1.7)
Commercial Real Estate Loans
7.8
—
7.8
Total Commercial Investments
31.5
(22.8)
8.7
Total Q2 Activity
$1,052.2
$(1,126.6)
$(74.4)
Note: The chart above is based on trade
date for securities and settle date for loans.
Re/Non-Performing Loan Activity
- Participated in a term securitization alongside another Angelo
Gordon fund in June which refinanced previously securitized
primarily re-performing mortgage loans into a new lower cost, fixed
rate long-term financing, returning $14.0mm of equity to MITT
- MITT maintained exposure to the securitization through an
interest in the subordinated tranches
- Entered into commitments to purchase two pools of
Re/Non-Performing loans which are not included in the table
above
New Origination Loan Activity
- Purchased several Non-QM pools alongside other Angelo Gordon
funds
- Participated in Angelo Gordon's first rated Non-QM
securitization alongside other Angelo Gordon funds in June, which
refinanced Non-QM loans from repurchase agreement financing into
lower cost, fixed rate, non-recourse long-term financing, returning
$16.7mm of equity to MITT
- MITT maintained exposure to the securitization through an
interest in the subordinated tranches
SINGLE-FAMILY RENTAL PORTFOLIO UPDATE
- Occupancy remained stable throughout the 2nd quarter in the
92-93% range
- The slight occupancy dip in June is related to seasonally
higher number of lease expirations and lower renewal
pull-through
- Decline in operating margin primarily due to the aging and
subsequent write-off of certain rent receivables
3/31/2019
6/30/2019
Gross Carrying Value(a)
$
141.7
$
141.3
Accumulated Depreciation and
Amortization(a)
(3.8
)
(4.9
)
Net Carrying Value(a)
$
137.9
$
136.4
Occupancy(b)
93.7
%
92.1
%
Average Square Footage(b)
1,463
1,455
Average Monthly Rental Income per
Home(b)(c)
$
1,020
$
1,028
Operating Margin(11)
45.2
%
(d)
41.5
%
(a)
$ in millions
(b)
Based on occupied residences as of each
corresponding period end
(c)
Based on straight-line rent as of each
corresponding period end
(d)
Includes a write-off of approximately $0.1
million of rental income receivable taken in Q2 2019
KEY STATISTICS
($ in millions)
June 30, 2019
Investment portfolio(3) (4)
$3,951.8
Financing arrangements, net(4)
3,176.5
Total financing(6)
3,232.5
Stockholders’ equity
730.9
GAAP Leverage
4.1x
“At Risk” Leverage(6)
4.4x
Yield on investment portfolio(9)
5.0%
Cost of funds(10)
3.0%
Net interest margin(5)
2.0%
Other operating expenses
(corporate)(12)
1.5%
Book value, per share(1)
$17.42
Undepreciated Book Value, per share(1)
$17.57
Undistributed taxable income, per share(1)
(13)
$1.28
Dividend, per share(1)
$0.50
Note: Cost of funds and NIM shown include
the costs or benefits of our interest rate hedges. Cost of funds
and NIM excluding the cost or benefit of our interest rate hedges
would be 3.2% and 1.8%, respectively.
INVESTMENT PORTFOLIO
The following summarizes the Company’s investment portfolio as of
June 30, 2019(3) (4):
($ in millions)
Amortized Cost
Net Carrying Value
Percent of Net Carrying
Value
Allocated Equity(15)
Percent of Equity
Leverage Ratio*
Agency RMBS
$2,211.6
$2,270.5
57.5%
$263.8
36.1%
7.5x
Residential Investments
1,047.6
1,119.7
28.3%
287.2
39.3%
3.1x
Commercial Investments
379.5
404.6
10.2%
133.0
18.2%
2.1x
ABS
20.7
20.6
0.5%
11.1
1.5%
0.9x
Single-Family Rental Properties
136.4
136.4
3.5%
35.8
4.9%
2.8x
Total
$3,795.8
$3,951.8
100.0%
$730.9
100.0%
4.4x
*The leverage ratio on Agency RMBS
includes any net receivables on TBA. The leverage ratio by type of
investment is calculated by dividing the investment type's total
financing by its allocated equity.(15)
Note: The chart above includes fair value
of $0.6 million of Agency RMBS, $239.1 million of Residential
Investments and $5.6 million of Commercial Investments that are
included in the “Investments in debt and equity of affiliates” line
item on our consolidated balance sheet.
Premiums and discounts associated with purchases of the
Company’s investments are amortized or accreted into interest
income over the estimated life of such investments, using the
effective yield method. The Company recorded a $(0.04)
retrospective adjustment per diluted common share, excluding
interest-only securities and TBAs. Since the cost basis of the
Company’s Agency RMBS securities, excluding interest-only
securities and TBAs, exceeds the underlying principal balance by
2.7% as of June 30, 2019, slower actual or projected prepayments
can have a meaningful positive impact on the Company's asset
yields, while faster actual or projected prepayments can have a
meaningful negative impact on the yields.
FINANCING AND HEDGING ACTIVITIES
The Company, either directly or through its equity method
investments in affiliates, had financing arrangements with 45
counterparties, under which it had debt outstanding with 33
counterparties as of June 30, 2019. Our weighted average days to
maturity is 138 days and our weighted average original days to
maturity is 236 days. The Company's financing arrangements as of
June 30, 2019 are summarized below:
($ in millions)
Agency
Credit
SFR**
Maturing Within:*
Amount Outstanding
WA Funding Cost
Amount Outstanding
WA Funding Cost
Amount
Outstanding
WA Funding Cost
Overnight
$
118.3
2.7%
$
—
—%
$
—
—%
30 Days or Less
999.2
2.7%
571.0
3.5%
—
—%
31-60 Days
428.1
2.6%
134.1
3.8%
—
—%
61-90 Days
147.2
2.6%
74.9
3.9%
—
—%
91-180 Days
249.0
2.6%
—
—%
—
—%
Greater than 180 Days
—
—%
352.7
4.5%
102.0
4.8%
Total / Weighted Avg
$
1,941.8
2.7%
$
1,132.7
3.9%
$
102.0
4.8%
*Amounts in table above do not include
securitized debt of $8.6 million.
**Includes $0.9 million of deferred
financing costs.
The Company’s interest rate swaps as of June 30, 2019 are
summarized as follows:
($ in millions)
Maturity
Notional Amount
WA Pay-Fixed Rate
WA Receive-Variable
Rate*
WA Years to Maturity
2020
$
105.0
1.5%
2.6%
0.7
2022
778.8
1.9%
2.5%
3.0
2023
5.7
3.2%
2.6%
4.4
2024
345.0
2.0%
2.1%
5.0
2026
20.0
1.9%
2.5%
7.4
2027
10.0
2.2%
2.3%
8.0
2029
38.0
1.9%
2.3%
10.0
Total/Wtd Avg
$
1,302.5
1.9%
2.4%
3.6
* 100% of our receive-variable interest
rate swap notional resets quarterly based on three-month LIBOR.
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 investments and derivatives, (v) taxes and
(vi) methods of depreciation between GAAP and tax. As of June 30,
2019, the Company had estimated undistributed taxable income of
approximately $1.28 per share.(1) (13)
DIVIDEND
On June 14, 2019, the Company’s board of directors declared a
second quarter dividend of $0.50 per share of common stock that was
paid on July 31, 2019 to stockholders of record as of June 28,
2019.
On May 17, 2019, the Company’s board of directors declared a
quarterly dividend of $0.51563 per share on its 8.25% Series A
Cumulative Redeemable Preferred Stock and a quarterly dividend of
$0.50 per share on its 8.00% Series B Cumulative Redeemable
Preferred Stock. The preferred distributions were paid on June 17,
2019 to stockholders of record as of May 31, 2019.
STOCKHOLDER CALL
The Company invites stockholders, prospective stockholders and
analysts to participate in MITT’s second quarter earnings
conference call on August 6, 2019 at 9:30 am Eastern Time. The
stockholder call can be accessed by dialing (888) 424-8151 (U.S.
domestic) or (847) 585-4422 (international). Please enter code
number 5976527.
A presentation will accompany the conference call and will be
available on the Company’s website at www.agmit.com. Select the Q2
2019 Earnings Presentation link to download 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 September 5, 2019. If you are
interested in hearing the replay, please dial (888) 843-7419 (U.S.
domestic) or (630) 652-3042 (international). The conference ID
number is 5976527.
For further information or questions, please e-mail
ir@agmit.com.
ABOUT AG MORTGAGE INVESTMENT TRUST, INC.
AG Mortgage Investment Trust, Inc. is a hybrid mortgage REIT
that opportunistically invests in, acquires and manages a
diversified risk-adjusted portfolio of Agency RMBS, Credit
Investments, and Single-Family Rental Properties. Its Credit
Investments include Residential Investments, Commercial
Investments, and ABS Investments. AG Mortgage Investment Trust,
Inc. is externally managed and advised by AG REIT Management, LLC,
a subsidiary of Angelo, Gordon & Co., L.P., an SEC-registered
investment adviser that specializes in alternative investment
activities.
Additional information can be found on the Company’s website at
www.agmit.com.
ABOUT ANGELO GORDON
Angelo, Gordon & Co., L.P. is a privately held limited
partnership founded in November 1988. The firm manages
approximately $33 billion as of June 30, 2019 with a primary focus
on credit and real estate strategies. Angelo Gordon has over 500
employees, including more than 200 investment professionals, and is
headquartered in New York, with offices 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, our investments, our investment and
portfolio 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
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, changes in default rates, the
availability and terms of financing, changes in the market value of
our assets, general economic conditions, conditions in the market
for Agency RMBS, Non-Agency RMBS, ABS and CMBS securities, Excess
MSRs and loans, our ability to integrate single-family rental
assets into our investment portfolio, our ability to predict and
control costs, conditions in the real estate market, 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 Securities and Exchange Commission (“SEC”), including its most
recent Annual Report on Form 10-K and subsequent filings. Copies
are available free of charge on the SEC’s website, http://www.sec.gov/. All information in this press
release is as of August 5, 2019. The Company undertakes no duty to
update any forward-looking statements to reflect any change in its
expectations or any change in events, conditions or circumstances
on which any such statement is based.
AG Mortgage Investment Trust,
Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
(in thousands, except per
share data)
June 30, 2019
December 31, 2018
Assets
Real estate securities, at fair value:
Agency - $2,062,928 and $1,934,562 pledged
as collateral, respectively
$
2,123,088
$
1,988,280
Non-Agency - $652,582 and $605,243 pledged
as collateral, respectively
680,492
625,350
ABS - $12,781 and $13,346 pledged as
collateral, respectively
20,571
21,160
CMBS - $258,424 and $248,355 pledged as
collateral, respectively
281,040
261,385
Residential mortgage loans, at fair value
- $127,854 and $99,283 pledged as collateral, respectively
199,970
186,096
Commercial loans, at fair value - $3,233
and $- pledged as collateral, respectively
118,005
98,574
Single-family rental properties, net
136,374
138,678
Investments in debt and equity of
affiliates
99,955
84,892
Excess mortgage servicing rights, at fair
value
20,893
26,650
Cash and cash equivalents
60,097
31,579
Restricted cash
32,853
52,779
Other assets
24,577
33,503
Total Assets
$
3,797,915
$
3,548,926
Liabilities
Financing arrangements, net
$
2,993,233
$
2,822,505
Securitized debt, at fair value
8,630
10,858
Dividend payable
16,355
14,372
Other liabilities
48,833
45,180
Total Liabilities
3,067,051
2,892,915
Commitments and Contingencies
Stockholders’ Equity
Preferred stock - $0.01 par value; 50,000
shares authorized:
8.25% Series A Cumulative
Redeemable Preferred Stock, 2,070 shares issued and outstanding
($51,750 aggregate liquidation preference)
49,921
49,921
8.00% Series B Cumulative
Redeemable Preferred Stock, 4,600 shares issued and outstanding
($115,000 aggregate liquidation preference)
111,293
111,293
Common stock, par value $0.01 per share;
450,000 shares of common stock authorized and 32,709 and 28,744
shares issued and outstanding at June 30, 2019 and December 31,
2018, respectively
327
287
Additional paid-in capital
661,833
595,412
Retained earnings/(deficit)
(92,510
)
(100,902
)
Total Stockholders’ Equity
730,864
656,011
Total Liabilities & Stockholders’
Equity
$
3,797,915
$
3,548,926
AG Mortgage Investment Trust,
Inc. and Subsidiaries
Consolidated Statements of
Operations (Unaudited)
(in thousands, except per
share data)
Three Months Ended
June 30, 2019
June 30, 2018
Net Interest Income
Interest income
$
40,901
$
36,012
Interest expense
24,277
16,271
Total Net Interest Income
16,624
19,741
Other Income/(Loss)
Rental income
3,162
—
Net realized gain/(loss)
(27,579
)
(11,060
)
Net interest component of interest rate
swaps
1,800
1,262
Unrealized gain/(loss) on real estate
securities and loans, net
43,165
(578
)
Unrealized gain/(loss) on derivative and
other instruments, net
(10,839
)
4,781
Other income
346
20
Total Other Income/(Loss)
10,055
(5,575
)
Expenses
Management fee to affiliate
2,400
2,387
Other operating expenses
3,850
3,443
Equity based compensation to affiliate
73
94
Excise tax
186
375
Servicing fees
416
22
Property depreciation and amortization
1,180
—
Property operating expenses
1,946
—
Total Expenses
10,051
6,321
Income/(loss) before equity in
earnings/(loss) from affiliates
16,628
7,845
Equity in earnings/(loss) from
affiliates
2,050
323
Net Income/(Loss)
18,678
8,168
Dividends on preferred stock
3,367
3,367
Net Income/(Loss) Available to Common
Stockholders
$
15,311
$
4,801
Earnings/(Loss) Per Share of Common
Stock
Basic
$
0.47
$
0.17
Diluted
$
0.47
$
0.17
Weighted Average Number of Shares of
Common Stock Outstanding
Basic
32,709
28,201
Diluted
32,737
28,228
NON-GAAP FINANCIAL MEASURE
This press release contains Core Earnings, a non-GAAP financial
measure. Our presentation of Core Earnings 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 Core Earnings, a non-GAAP financial measure, as Net
Income/(loss) available to common stockholders excluding (i)
unrealized gains/(losses) on real estate securities, loans,
derivatives and other investments and realized gains/(losses) on
the sale or termination of such instruments, (ii) beginning with Q2
2018, as a policy change, any transaction related expenses incurred
in connection with the acquisition or disposition of our
investments, (iii) beginning with Q3 2018, concurrent with a change
in the Company's business, any depreciation or amortization expense
related to the Company's SFR portfolio, (iv) beginning with Q3
2018, as a policy change, accrued deal related performance fees
payable to Arc Home and third party operators to the extent the
primary component of the accrual relates to items that are excluded
from Core Earnings, such as unrealized and realized gains/(losses),
and (v) beginning with Q4 2018 and applied retrospectively, as a
policy change, realized and unrealized changes in the fair value of
Arc Home's net mortgage servicing rights as well as realized and
unrealized changes in the fair value of derivatives that are
intended to offset changes in the fair value of those net mortgage
servicing rights. Items (i) through (v) above include any amounts
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 acquisition or
disposition and does not view them as being part of its core
operations. Management views the exclusion described in (v) above
to be consistent with how it calculates Core Earnings on the
remainder of its portfolio. As defined, Core Earnings include the
net interest income and other income earned on the Company's
investments on a yield adjusted basis, including TBA dollar roll
income, or any other investment activity that may earn or pay net
interest or its economic equivalent. One of the Company's
objectives is to generate net income from net interest margin on
the portfolio, and management uses Core Earnings to help measure
this objective. Management believes that this non-GAAP measure,
when considered with its GAAP financials, provides supplemental
information useful for investors as it enables them to evaluate the
Company's current core performance using the same measure that
management uses to operate the business. This metric, in
conjunction with related GAAP measures, provides greater
transparency into the information used by the Company's management
team in its financial and operational decision-making.
A reconciliation of GAAP Net Income/(loss) available to common
stockholders to Core Earnings for the three months ended June 30,
2019 and June 30, 2018 is set forth below (in thousands, except per
share data):
Three Months Ended
June 30, 2019
June 30, 2018
Net Income/(loss) available to common
stockholders
$
15,311
$
4,801
Add (Deduct):
Net realized (gain)/loss
27,579
11,060
Unrealized (gain)/loss on real estate
securities and loans, net
(43,165
)
578
Unrealized (gain)/loss on derivative and
other instruments, net
10,839
(4,781
)
Property depreciation and amortization
1,180
—
Transaction related expenses and deal
related performance fees(a)
484
314
Equity in (earnings)/loss from
affiliates
(2,050
)
(323
)
Net interest income and expenses from
equity method investments(b)
1,352
2,326
Dollar roll income
363
656
Other Income
(114
)
—
Core Earnings (c)
$
11,779
$
14,631
Core Earnings, per Diluted Share (c)
$
0.36
$
0.52
(a)
For the three months ended June 30, 2018,
the above chart was not adjusted for deal related performance fees
as they did not have a material impact on Core Earnings for the
period. Our policy with respect to deal related performance fees
was modified in Q3 2018.
(b)
For the three months ended June 30, 2019
and June 30, 2018, $(4.8) million or $(0.15) per diluted share and
$0.8 million or $0.03 per diluted share, respectively, of realized
and unrealized changes in the fair value of Arc Home's net mortgage
servicing rights and corresponding derivatives were excluded from
Core earnings per diluted share as a result of our modification to
the definition and calculation of Core Earnings in Q4 2018.
(c)
The three months ended June 30, 2019 and
June 30, 2018 include cumulative retrospective adjustments of
$(1.3) million or $(0.04) per diluted share and $(0.1) million or
de minimis per diluted share, respectively, on the premium
amortization for investments accounted for under ASC 320-10.
Footnotes
(1)
Diluted per share figures are
calculated using weighted average outstanding shares in accordance
with GAAP. Per share figures are calculated using a denominator of
all outstanding common shares including vested shares granted to
our Manager and our independent directors under our equity
incentive plans as of quarter-end. 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.
Undepreciated book value per share is a non-GAAP book value metric
which adds accumulated depreciation and amortization back to book
value to present an adjusted book value that incorporates the
Company's single-family rental property portfolio at its
undepreciated basis. This metric allows management to consider the
investment portfolio exclusive of non-cash adjustments and
facilitates the comparison of our financial performance to peer
REITs. Book value and Undepreciated book value include the current
quarter dividend.
(2)
The economic return on equity for
the quarter represents the change in undepreciated book value per
share from March 31, 2019 to June 30, 2019, plus the common
dividends declared over that period, divided by undepreciated book
value per share as of March 31, 2019. The annualized economic
return on equity is the quarterly return on equity multiplied by
four.
(3)
The investment portfolio at
period end is calculated by summing the net carrying value of our
Agency RMBS, any long positions in TBAs, Residential Investments,
Commercial Investments, ABS Investments and our SFR portfolio,
including securities and mortgage loans owned through investments
in affiliates, exclusive of AG Arc LLC. Our Agency RMBS,
Residential Investments, Commercial Investments, and ABS
Investments are held at fair market value and our SFR portfolio is
held at purchase price plus capitalized expenses less accumulated
depreciation and amortization and any adjustments related to
impairment. Our Credit Investments refer to our Residential
Investments, Commercial Investments and ABS Investments. Refer to
footnote (4) for more information on the GAAP accounting for
certain items included in our investment portfolio. See footnote
(14) for further details on AG Arc LLC.
(4)
Generally, when we purchase an
investment and finance it, the investment is included in our assets
and the financing is reflected in our liabilities on our
consolidated balance sheet as either “Financing arrangements, net”
or “Securitized debt, at fair value.” Throughout this press release
where we disclose our investment portfolio and the related
financing, we have presented this information inclusive of (i)
securities and mortgage loans owned through investments in
affiliates that are accounted for under GAAP using the equity
method and (ii) long positions in TBAs, which are accounted for as
derivatives under GAAP. This press release excludes investments
through AG Arc LLC unless otherwise noted. This presentation of our
investment portfolio is consistent with how our management
evaluates the business, and we believe this presentation, when
considered with the GAAP presentation, provides supplemental
information useful for investors in evaluating our investment
portfolio and financial condition. See footnote (14) for further
details on AG Arc LLC.
(5)
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 footnotes (9) and (10) for
further detail. Net interest margin also excludes any net TBA
position.
(6)
“At Risk” Leverage is calculated
by dividing total financing including any net TBA position by our
GAAP stockholders’ equity at quarter-end. Total financing at
quarter-end includes financing arrangements through affiliated
entities, exclusive of any financing utilized through AG Arc LLC,
plus the payable on all unsettled buys less the financing on all
unsettled sells, securitized debt, and any net TBA position (at
cost). Total financing excludes any financing arrangements and
unsettled trades on U.S. Treasuries.
(7)
This represents the weighted
average monthly CPRs published during the quarter for our in-place
portfolio during the same period. Any net TBA position is excluded
from the CPR calculation.
(8)
The Company estimates duration
based on third-party models. Different models and methodologies can
produce different effective duration estimates for the same
securities. Duration does not include our equity interest in AG Arc
LLC or our investment in SFR.
(9)
The yield on our debt investments
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. The yield on our SFR portfolio
represents annualized net operating income for the quarter divided
by its carrying value, gross of accumulated depreciation and
amortization. Net operating income on our SFR portfolio is
comprised of rental income and other SFR related income less
property operating expenses. Our calculation excludes cash held by
the Company and excludes any net TBA position. The calculation of
weighted average yield is weighted based on net carrying value.
(10)
The cost of funds at quarter-end
is calculated as the sum of (i) the weighted average funding costs
on total financing outstanding at quarter-end and (ii) the weighted
average of the net pay rate on our interest rate swaps, the net
receive rate on our Treasury long positions, the net pay rate on
our Treasury short positions, and the net receivable rate on our IO
index derivatives, if any. Both elements of the cost of funds at
quarter-end are weighted by the outstanding financing arrangements
and securitized debt outstanding at quarter-end, excluding
financing arrangements associated with U.S. Treasury positions. The
cost of funds excludes any net TBA position.
(11)
Operating margin on our SFR
portfolio is calculated as net operating income divided by revenues
from our SFR portfolio adjusted for rent write-offs taken in the
relevant quarter. Net operating income on our SFR portfolio is
comprised of rental income and other SFR related income less
property operating expenses.
(12)
The other operating expenses
(corporate) percentage at quarter-end is calculated by annualizing
other operating expenses (corporate) recorded during the quarter
and dividing by our quarter-end stockholders’ equity.
(13)
This estimate of undistributed
taxable income per share represents the total estimated
undistributed taxable income as of quarter-end. Undistributed
taxable income is based on current estimates and projections. As a
result, the actual amount is not finalized until we file our annual
tax return, typically in October of the following year.
(14)
The Company invests in Arc Home
LLC through AG Arc LLC, one of its indirect subsidiaries.
(15)
The Company allocates its equity
by investment using the fair market value of our investment
portfolio, less any associated leverage, inclusive of any long TBA
position (at cost). The Company allocates all non-investment
portfolio related items based on their respective characteristics,
beginning by allocating those items within the Securities and Loans
Segment and Single-Family Rental Properties Segment and then
allocating Corporate between the Securities and Loans Segment and
Single-Family Rental Properties Segment in order to sum to
stockholders’ equity per the consolidated balance sheets. The
Company's equity allocation method is a non-GAAP methodology and
may not be comparable to the similarly titled measure or concepts
of other companies, who may use different calculations and
allocation methodologies.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190805005668/en/
AG Mortgage Investment Trust, Inc. Investor Relations
(212) 692-2110 ir@agmit.com
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