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):
Fair Value
Weighted Average Yield
Financing
Cost of Funds(a), (8)
Percent of Fair Value
Percent of Equity(9)
Residential Investments(b)
$4,202.8
5.1%
$3,890.2
4.4%
99.5%
98.2%
Agency RMBS
19.1
7.5%
14.2
4.5%
0.5%
1.8%
Total
$4,221.9
5.1%
$3,904.4
4.3%
100.0%
100.0%
(a) Total Cost of Funds shown includes the
cost or benefit from our interest rate hedges. Total Cost of Funds
as of December 31, 2022 excluding the cost or benefit of our
interest rate hedges would be 4.4%. (b) As of December 31, 2022,
the table above excludes our investment in Arc Home and includes
fair value of $49.6 million of Residential Investments that are
included in the “Investments in debt and equity of affiliates” line
item on our consolidated balance sheet. These Residential
Investments include $31.1 million of Non-QM Loans, $7.8 million of
Re/Non-Performing Loans, and $10.7 million of Land Related
Financing.
FINANCING PROFILE
The following summarizes the Company’s financing as of December
31, 2022(4)(5) ($ in millions):
Securitized Debt
Residential Bond
Financing(a)
Residential Loan Warehouse
Financing
Agency Financing
Total
Amount
$3,262.4
$267.6
$360.2
$14.2
$3,904.4
Cost of Funds(8),(b)
4.1%
6.0%
6.2%
4.5%
4.3%
Advance Rate
88%
55%
86%
83%
N/A
Available Borrowing Capacity(c)
N/A
N/A
$2,189.8
N/A
$2,189.8
Recourse/Non-Recourse
Non-Recourse
Recourse
Recourse
Recourse
16% Recourse
84% Non-Recourse
(a) Includes financing on the retained
tranches from securitizations issued by the Company and
consolidated in the “Securitized residential mortgage loans, at
fair value” line item on the Company’s consolidated balance sheets.
(b) Total Cost of Funds shown includes the cost or benefit from the
Company's interest rate hedges. Cost of Funds as of December 31,
2022 excluding the cost or benefit of our interest rate hedges
would be 4.4%. (c) The borrowing capacity under the Company's
Non-Agency Loan and Agency-Eligible Loan warehouse financing
arrangements is uncommitted by the lenders.
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 $0.2 million during the fourth quarter of
2022(b)
- As of December 31, 2022, the fair value of MITT’s investment in
Arc Home was calculated using a valuation multiple of 0.94x book
value.
(a) Non-Agency includes Non-QM Loans, QM
Loans, Jumbo Loans, and Agency-Eligible Loans. Agency-Eligible
Loans are loans that conform with GSE underwriting guidelines but
are sold to Non-Agency investors, including MITT (b) MITT
eliminates any gains or losses on loans acquired by MITT from Arc
Home from the "Equity in earnings/(loss) from affiliates" line item
and decreases or increases the cost basis of the underlying loans
accordingly resulting in unrealized gains or losses, which are
recorded in the "Net unrealized gains/(losses)" line item on the
Company's consolidated income statement.
BOOK VALUE ROLL-FORWARD
The below table provides a summary of our fourth quarter and
full year 2022 activity impacting book value as well as a
reconciliation to adjusted book value ($ in thousands, except per
share data).
Quarter Ended
December 31, 2022
Year Ended
December 31, 2022
Amount
Per Diluted Share(3)
Amount
Per Diluted Share(3)
Beginning Book Value(1)
$
243,824
$
11.02
$
349,908
$
14.64
Common dividend
(3,846
)
(0.18
)
(18,246
)
(0.81
)
Net issuance/(repurchase) of common
stock
(4,758
)
0.23
(17,890
)
0.68
Earnings available for distribution
1,187
0.05
1,900
0.08
Net realized and unrealized gain/(loss)
included within equity in earnings/(loss) from affiliates
793
0.03
2,062
0.09
Net realized gain/(loss)
21,317
0.98
81,389
3.56
Net unrealized gain/(loss)
(14,602
)
(0.67
)
(137,634
)
(6.01
)
Dollar roll (income)/loss
—
—
(1,999
)
(0.09
)
Transaction related expenses and deal
related performance fees
(1,587
)
(0.07
)
(17,162
)
(0.75
)
12/31/22 Book Value(1)
$
242,328
$
11.39
$
242,328
$
11.39
Change in Book Value
(1,496
)
0.37
(107,580
)
(3.25
)
12/31/22 Book Value(1)
$
242,328
$
11.39
$
242,328
$
11.39
Net proceeds less liquidation preference
of preferred stock
(7,519
)
(0.36
)
(7,519
)
(0.36
)
12/31/22 Adjusted Book Value(1)
$
234,809
$
11.03
$
234,809
$
11.03
12/31/21 Book Value(1)
$
349,908
$
14.64
Net proceeds less liquidation preference
of preferred stock
(7,519
)
(0.32
)
12/31/21 Adjusted Book Value(1)
$
342,389
$
14.32
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.
AG Mortgage Investment Trust,
Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
(in thousands, except per
share data)
December 31, 2022
December 31, 2021
Assets
Securitized residential mortgage loans, at
fair value - $423,967 and $119,947 pledged as collateral,
respectively
$
3,707,146
$
1,158,134
Residential mortgage loans, at fair value
- $353,039 and $1,469,358 pledged as collateral, respectively
356,467
1,476,972
Residential mortgage loans held for sale,
at fair value - $64,984 and $0 pledged as collateral,
respectively
64,984
—
Real estate securities, at fair value -
$41,653 and $444,481 pledged as collateral, respectively
43,719
514,470
Investments in debt and equity of
affiliates
71,064
92,023
Cash and cash equivalents
84,621
68,079
Restricted cash
14,182
32,150
Other assets
27,595
20,900
Total Assets
$
4,369,778
$
3,362,728
Liabilities
Securitized debt, at fair value
$
3,262,352
$
999,215
Financing arrangements
621,187
1,777,743
Dividend payable
3,846
5,021
Other liabilities
19,593
10,369
Total Liabilities
3,906,978
2,792,348
Commitments and Contingencies
Stockholders' Equity
Preferred stock - $227,991 aggregate
liquidation preference
220,472
220,472
Common stock, par value $0.01 per share;
450,000 shares of common stock authorized and 21,284 and 23,908
shares issued and outstanding at December 31, 2022 and December 31,
2021, respectively
212
239
Additional paid-in capital
778,606
796,469
Retained earnings/(deficit)
(536,490
)
(446,800
)
Total Stockholders' Equity
462,800
570,380
Total Liabilities & Stockholders'
Equity
$
4,369,778
$
3,362,728
AG Mortgage Investment Trust,
Inc. and Subsidiaries
Consolidated Statements of
Operations (Unaudited)
(in thousands, except per
share data)
Three Months Ended
December 31, 2022
Three Months Ended
December 31, 2021
Year Ended December 31,
2022
Net Interest Income
Interest income
$
57,286
$
24,686
$
180,303
Interest expense
44,924
10,698
118,918
Total Net Interest Income
12,362
13,988
61,385
Other Income/(Loss)
Net interest component of interest rate
swaps
927
(1,364
)
(4,922
)
Net realized gain/(loss)
21,317
6,822
81,389
Net unrealized gain/(loss)
(14,602
)
3,704
(137,634
)
Total Other Income/(Loss)
7,642
9,162
(61,167
)
Expenses
Management fee to affiliate
2,112
1,800
8,096
Non-investment related expenses
1,582
1,992
9,292
Investment related expenses
2,309
2,289
9,198
Transaction related expenses
1,535
3,597
16,474
Total Expenses
7,538
9,678
43,060
Income/(loss) before equity in
earnings/(loss) from affiliates
12,466
13,472
(42,842
)
Equity in earnings/(loss) from
affiliates
(772
)
(2,607
)
(10,258
)
Net Income/(Loss)
11,694
10,865
(53,100
)
Dividends on preferred stock
(4,586
)
(4,586
)
(18,344
)
Net Income/(Loss) Available to Common
Stockholders
$
7,108
$
6,279
$
(71,444
)
Earnings/(Loss) Per Share of Common
Stock
Basic
$
0.33
$
0.33
$
(3.12
)
Diluted
$
0.33
$
0.33
$
(3.12
)
Weighted Average Number of Shares of
Common Stock Outstanding
Basic
21,824
19,096
22,890
Diluted
21,824
19,096
22,890
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):
Three Months Ended December
31, 2022
Three Months Ended December
31, 2021
Year Ended December 31,
2022
Net Income/(loss) available to common
stockholders
$
7,108
$
6,279
$
(71,444
)
Add (Deduct):
Net realized (gain)/loss
(21,317
)
(6,822
)
(81,389
)
Net unrealized (gain)/loss
14,602
(3,704
)
137,634
Transaction related expenses and deal
related performance fees
1,587
4,062
17,162
Equity in (earnings)/loss from
affiliates
772
2,607
10,258
EAD from equity method
investments(a)(b)
(1,565
)
(1,054
)
(12,320
)
Dollar roll income(c)
—
(2,264
)
1,999
Earnings available for distribution
$
1,187
$
(896
)
$
1,900
Earnings available for distribution, per
diluted share
$
0.05
$
(0.05
)
$
0.08
(a) For the three months ended December
31, 2022, the three months ended December 31, 2021, and the year
ended December 31, 2022, $43.0 thousand or $0.00 per share, $1.2
million or $0.06 per share, and $9.2 million or $0.40 per share,
respectively, of realized and unrealized changes in the fair value
of Arc Home's net mortgage servicing rights, changes in the fair
value of corresponding derivatives, and other asset impairments
were excluded from EAD, net of deferred tax expense. (b) EAD
recognized by AG Arc does not include our portion of gains recorded
by Arc Home in connection with the sale of residential mortgage
loans to us. For the three months ended December 31, 2022, the
three months ended December 31, 2021, and the year ended December
31, 2022, $0.2 million or $0.01 per share, $1.8 million or $0.10
per share, and $6.0 million or $0.26 per share of intra-entity
profits recognized by Arc Home, respectively, and also decreased
the cost basis of the underlying loans we purchased by the same
amount. (c) TBA dollar roll income/(loss) is the economic
equivalent of net interest carry income on the underlying Agency
RMBS of TBAs over the roll period (interest income less implied
financing cost).
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):
Three Months Ended December
31, 2022
Three Months Ended December
31, 2021
Year Ended December 31,
2022
Net Interest Income
$
13,875
$
15,580
$
67,619
MITT’s After-Tax Share of Arc Home Net
Income
(2,724
)
1,424
(2,135
)
Less: Elimination of gains on loans sold
to MITT(a)
(163
)
(1,839
)
(6,032
)
Less: MSR MTM gains / deferred tax
benefit(b)
(43
)
(1,201
)
(9,227
)
Arc Home EAD to MITT
(2,930
)
(1,616
)
(17,394
)
Net interest component of interest rate
swaps
927
(1,364
)
(4,922
)
Dollar roll income/(loss)
—
(2,264
)
1,999
Hedge Income/(Expense)
927
(3,628
)
(2,923
)
Management fee to affiliate
(2,112
)
(1,800
)
(8,096
)
Non-investment related expenses
(1,582
)
(1,992
)
(9,292
)
Investment related expenses
(2,405
)
(2,854
)
(9,670
)
Dividends on preferred stock
(4,586
)
(4,586
)
(18,344
)
Operating Expense
(10,685
)
(11,232
)
(45,402
)
Earnings available for distribution
$
1,187
$
(896
)
$
1,900
Earnings available for distribution, per
diluted share
$
0.05
$
(0.05
)
$
0.08
(a) EAD excludes our portion of gains recorded by Arc Home in
connection with the sale of residential mortgage loans to us. We
eliminated such gains recognized by Arc Home and also decreased the
cost basis of the underlying loans we purchased by the same amount.
Upon reducing our cost basis, unrealized gains are recorded within
net income based on the fair value of the underlying loans at
quarter end. (b) EAD excludes realized and unrealized changes in
the fair value of Arc Home’s net mortgage servicing rights, changes
in the fair value of corresponding derivatives, and other asset
impairments, net of any deferred tax benefit.
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).
December 31, 2022
Leverage
Stockholders' Equity
Leverage Ratio
GAAP Securitized debt, at fair value
$
3,262,352
GAAP Financing arrangements
621,187
Restricted cash posted on Financing
arrangements
(3,357
)
GAAP Leverage
$
3,880,182
$
462,800
8.4x
Financing arrangements through affiliated
entities
20,790
Non-recourse financing arrangements(a)
(3,278,761
)
Net TBA receivable/(payable)
adjustment
(39,206
)
Economic Leverage
$
583,005
$
462,800
1.3x
(a) Non-recourse financing arrangements
include securitized debt and other non-recourse financing on
certain Non-QM Loans.
Footnotes
(1) As of December 31, 2022, book value
per share is calculated using stockholders’ equity less net
proceeds of our cumulative redeemable preferred stock ($220.5
million) as the numerator. As of December 31, 2022, adjusted book
value per share is calculated using stockholders’ equity less the
liquidation preference of our cumulative redeemable preferred stock
($228.0 million) as the numerator. (2) The economic return on
equity represents the change in adjusted book value per share
during the period, plus the common dividends declared over the
period, divided by adjusted book value per share from the prior
period. (3) Diluted per share figures are calculated using diluted
weighted average outstanding shares in accordance with GAAP. (4)
The Investment Portfolio at period end consists of the net carrying
value of our Residential Investments, Agency RMBS, and, where
applicable, any long positions in TBAs, including mortgage loans
and securities owned through investments in affiliates, exclusive
of AG Arc LLC. Our Residential Investments and Agency RMBS are held
at fair value. Refer to footnote 5 for more information on the GAAP
accounting for certain items included in our Investment Portfolio.
(5) 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" 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) mortgage loans and securities owned
through investments in affiliates that are accounted for under GAAP
using the equity method and, where applicable, (ii) long positions
in TBAs, which are accounted for as derivatives under GAAP. This
presentation excludes investments through AG Arc LLC unless
otherwise noted. (6) The Economic Leverage Ratio is calculated by
dividing total Economic Leverage, including any net TBA position,
by our GAAP stockholders’ equity at quarter end. Total Economic
Leverage at quarter end includes recourse financing arrangements
recorded within "Investments in debt and equity of affiliates"
exclusive of any financing utilized through AG Arc LLC, plus the
payable on all unsettled buys less the financing on all unsettled
sells and any net TBA position (at cost). Total Economic Leverage
excludes any non-recourse financing arrangements. Non-recourse
financing arrangements include securitized debt, as well as
financing on certain Non-QM Loans. Our obligation to repay our
non-recourse financing arrangements is limited to the value of the
pledged collateral thereunder and does not create a general claim
against us as an entity. (7) Net interest margin is calculated by
subtracting the weighted average cost of funds from the weighted
average yield for our Investment Portfolio, which excludes cash
held. (8) The cost of funds at quarter-end is calculated as the sum
of (i) the weighted average funding costs on recourse financing
arrangements outstanding at quarter end, (ii) the weighted average
funding costs on non-recourse financing arrangements outstanding at
quarter end, and (iii) the weighted average of the net pay or
receive rate on our interest rate swaps outstanding at quarter end.
The cost of funds at quarter-end are weighted by the outstanding
financing arrangements at quarter-end, including any non-recourse
financing arrangements. (9) We allocate our equity by investment
using the fair value of our Investment Portfolio, less any
associated leverage, inclusive of any long TBA position (at cost).
We allocate all non-Investment Portfolio related assets and
liabilities to our Investment Portfolio categories based on the
characteristics of such assets and liabilities in order to sum to
stockholders' equity per the consolidated balance sheets. Our
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. (10) We invest in Arc Home LLC through AG Arc LLC,
one of our equity method investees. Our investment in AG Arc LLC is
$39.7 million as of December 31, 2022, representing a 44.6%
ownership interest.
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version on businesswire.com: https://www.businesswire.com/news/home/20230223005387/en/
AG Mortgage Investment Trust, Inc. Investor Relations
(212) 692-2110 ir@agmit.com
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