AG Mortgage Investment Trust, Inc. Reports Third Quarter 2018 Results

NEW YORK–(BUSINESS WIRE)–AG Mortgage Investment Trust, Inc. (“MITT” or the “Company”) (NYSE:
MITT) today reported financial results for the quarter-ended
September 30, 2018. AG Mortgage Investment Trust, Inc. is a hybrid
mortgage REIT that opportunistically invests in a diversified
risk-adjusted portfolio of Agency RMBS, Credit Investments, which
include our Residential Investments, Commercial Investments, ABS
Investments, and Single-Family Rental Properties.

THIRD QUARTER FINANCIAL HIGHLIGHTS

  • $0.70 of Net Income/(Loss) per diluted common share(1)
  • $0.59 of Core Earnings per diluted common share(1)

    • Includes $0.03 positive impact from payoffs of certain prime
      securities
    • Includes $0.01 retrospective adjustment
  • 3.6% economic return on equity for the quarter, 14.4% annualized(2)
  • $19.16 book value per share(1) as of September 30, 2018,
    inclusive of our current quarter $0.50 common dividend

    • Book value increased $0.18 or 0.9% from the prior quarter
      primarily due to:

      • $0.36 or 1.9% due to our Credit Investments

        • CRT and CMBS securities saw broad-based tightening during
          the quarter, while Legacy RMBS spreads remained at tight
          levels
      • $(0.26) or (1.4)% due to our investments in Agency RMBS and
        associated derivative hedges

        • Agency RMBS spreads widened modestly during the quarter
          due to increased interest rates and market technicals
      • $0.09 or 0.5% due to core earnings above the $0.50 dividend
  • Issued approximately 512,000 shares of common stock for net proceeds
    of $9.5 million through ATM Program
    Q3 2018     Q2 2018
Summary of Operating Results:
GAAP Net Income/(Loss) Available to Common Stockholders $ 20.0 mm $ 4.8 mm
GAAP Net Income/(Loss) Available to Common Stockholders, per diluted
common share (1)
$ 0.70 $ 0.17
 
Non-GAAP-Results:
Core Earnings* $ 16.7 mm $ 15.4 mm
Core Earnings, per diluted common share(1) $ 0.59 $ 0.55

* For a reconciliation of GAAP Net Income/(Loss) to Core Earnings,
refer to the Reconciliation of Core Earnings at the end of this press
release.

MANAGEMENT REMARKS

“During the third quarter, MITT successfully closed the acquisition of a
stabilized portfolio of single-family rental properties, adding a
complementary product channel to our existing strategies and leveraging
the resources of the Angelo Gordon platform,” said Chief Executive
Officer, David Roberts. “Our partner in this transaction, Conrex, has a
deep understanding of the SFR market, and we are confident that they
will help us maximize this portfolio’s performance as the property
manager. We are looking forward to continuing to expand into the SFR
space.”

“Mortgage credit sectors performed well during the third quarter, as
credit spreads remained tight and benefited from a steady supply demand
dynamic,” said Chief Investment Officer, T.J. Durkin. “Agency MBS
spreads were modestly wider during the quarter as benchmark rates rose
in response to a more robust consensus outlook for the economy. During
the quarter, we saw an opportunity to deploy capital into SFR
properties, commercial real estate loans, and Non-QM pools, and we
continue to focus on opportunistically increasing exposure to sectors we
believe have the best return profiles.”

INVESTMENT HIGHLIGHTS

  • $3.7 billion investment portfolio as of September 30, 2018 as compared
    to the $3.6 billion investment portfolio as of June 30, 2018(3)
    (4)

    • Increase in portfolio size primarily due to the acquisition of the
      Single-Family Rental portfolio (SFR) and the purchase of
      commercial real estate loans
  • 2.5% Net Interest Margin (“NIM”) as of September 30, 2018(5)

    • Net Interest Margin declined primarily due to the increase in cost
      of funds related to a 25 bps increase in the federal funds rate in
      September and the addition of the SFR portfolio
  • 4.3x “At Risk” Leverage as of September 30, 2018(6)
  • 6.0% constant prepayment rate (“CPR”) on the Agency RMBS investment
    portfolio for the third quarter(7)
  • Duration gap was approximately 1.12 years as of September 30, 2018(8)

THIRD QUARTER ACTIVITY

 

($ in millions)

 

Description

    Purchased     Sold/Payoff     Net Activity
30 Year Fixed Rate $479.4 $(428.3) $51.1
Inverse Interest Only 11.1 (0.7) 10.4
Fixed Rate 30 Year TBA 497.8 (588.8) (91.0)
Total Agency RMBS 988.3 (1,017.8) (29.5)
Prime (69.9) (69.9)
Alt-A/Subprime (6.9) (6.9)
Credit Risk Transfer 5.9 5.9
RPL/NPL Securities (5.5) (5.5)
Re/Non-Performing Loans (4.0) (4.0)
New Origination Loans 31.5 31.5
Total Residential Investments 37.4 (86.3) (48.9)
Freddie Mac K-Series 2.6 2.6
CMBS Interest Only (0.7) (0.7)
Commercial Loans 51.4 51.4
Total Commercial Investments 54.0 (0.7) 53.3
Total Single-Family Rental Properties 140.6 140.6
Total Q3 Activity $1,220.3 $(1,104.8) $115.5

Note: The chart above is based on trade date.

  • Acquired portfolio of single-family rental properties
  • Purchased two commercial real estate loans
  • Purchased several Non-QM pools alongside other Angelo Gordon funds
  • Sold and received payoffs of prime securities

SINGLE-FAMILY RENTAL TRANSACTION

During the third quarter, the Company acquired a stabilized portfolio of
1,225 Single-Family Rental properties located predominantly in the
Southeast U.S. from funds affiliated with Connorex-Lucinda, LLC
(“Conrex”). As part of the completed transaction, MITT entered into a
Property Management Services Agreement with Conrex whereby Conrex will
continue to provide property management services with respect to the
properties. MITT acquired the portfolio for approximately $140 million.
In conjunction with the transaction, the Company financed the portfolio
with approximately $37 million of cash on hand and approximately $103
million of 5-year, fixed rate debt.

 
SFR Portfolio Statistics as of September 30, 2018
Gross Carrying Value*     $ 140.6
Accumulated Depreciation and Amortization* (0.5 )
Net Carrying Value* $ 140.1
Total Number of Homes 1,255
Occupancy

89.3

%

Average Square Footage 1,460
Average Monthly Rental Income per Home $

1,007

Net Operating Margin 57.3 %
*$ in millions
 

KEY STATISTICS

 

($ in millions)

    September 30, 2018
 
Investment portfolio(3) (4) $3,660.4
Financing arrangements(4) 3,015.5
Total financing(6)

3,061.7

Stockholders’ equity 711.9
 
GAAP Leverage 4.0x
“At Risk” Leverage(6) 4.3x
Yield on investment portfolio(9) 5.2%
Cost of funds(10) 2.7%
Net interest margin(5) 2.5%
 
Management fees(11) 1.3%
Other operating expenses(12) 2.0%
 
Book value, per share(1) $19.16
Undistributed taxable income, per share(1) (13) 1.58
Dividend, per share(1) 0.50
 

INVESTMENT PORTFOLIO

 

The following summarizes the Company’s investment portfolio as of
September 30, 2018(3) (4):

                           
($ in millions) Amortized Cost     Net Carrying Value     Allocated Equity(15)     WA Yield(9)     Funding Cost*     Net Interest Margin*     Leverage Ratio**
Agency RMBS $ 2,163.6 $ 2,136.8 $ 285.5 3.9% 2.3% 1.6% 6.7x
Residential Investments 904.2 962.2 251.3 6.7% 3.6% 3.1% 3.0x
Commercial Investments 368.9 383.8 117.2 7.9% 3.7% 4.2% 2.3x
ABS 37.3 37.5 19.4 9.4% 3.6% 5.8% 1.0x
Single-Family Rental Properties 140.1 140.1 38.5 6.1% 4.8% 1.3% 2.7x
Total $ 3,614.1 $ 3,660.4 $ 711.9 5.2% 2.7% 2.5% 4.3x

*Funding cost and Net Interest Margin shown in each investment category
line exclude the costs of our interest rate hedges, however these costs
are included in the total funding cost and total Net Interest Margin
values. The total funding cost and total Net Interest Margin values
excluding the cost of our interest rate hedges would be 2.8% and 2.4%,
respectively.

**The leverage ratio on Agency RMBS includes any net receivables on TBA.
The leverage ratio by type of investment is calculated based on
allocated equity.

Note: The chart above includes fair value of $0.9 million of Agency
RMBS, $159.6 million of Residential Investments and $3.1 million of
Commercial Investments that are included in the “Investments in debt and
equity of affiliates” line item on our consolidated balance sheet. These
items, inclusive of our investment in AG Arc LLC (14) and
other items, net to $79.7 million which is included in the “Investments
in debt and equity of affiliates” line item on our GAAP Balance Sheet.

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 $0.2 million or $0.01 per diluted share (1)
retrospective adjustment, 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 2.4% as of September 30, 2018, slower actual and projected
prepayments can have a meaningful positive impact, while faster actual
or projected prepayments can have a meaningful negative impact, on the
Company’s asset yields.

FINANCING AND HEDGING ACTIVITIES

The Company, either directly or through its equity method investments in
affiliates, had financing arrangements with 41 counterparties, under
which it had debt outstanding with 31 counterparties as of September 30,
2018. Our weighted average days to maturity is 122 days and our weighted
average original days to maturity is 162 days. The Company’s financing
arrangements as of September 30, 2018 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 $ 126.4 2.4% $ $  
30 Days or Less 1,758.9 2.3% 594.5 3.3%
31-60 Days 2.8 2.8% 133.4 3.6%
61-90 Days 47.7 3.5%
91-180 Days 44.4 4.7%
Greater than 180 Days   205.4   4.3%

102.0

    4.8%
Total / Weighted Avg $ 1,888.0 2.3% $ 1,025.5 3.6% $ 102.0 4.8%

*Amounts in table above do not include securitized debt of $11.5 million.

**Includes $1 million of deferred financing costs.

       

The Company’s interest rate swaps as of September 30, 2018 are
summarized as follows:

 

($ in millions)

 
Maturity Notional Amount WA Pay-Fixed Rate WA Receive-Variable Rate* WA Years to Maturity
2019 $ 50.0 1.3% 2.3% 1.1
2020 250.0 1.6% 2.3% 1.5
2021 27.0 2.9% 2.3% 2.9
2022 653.0 1.9% 2.3% 3.8
2023 219.0 3.0% 2.4% 4.7
2024 230.0 2.1% 2.3% 5.7
2025 125.0 2.9% 2.4% 6.6
2026 75.0 2.1% 2.3% 8.1
2027 264.0 2.4% 2.3% 8.9
2028 250.0 3.0% 2.3% 9.7
Total/Wtd Avg $ 2,143.0 2.2% 2.3% 5.4

* 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. As of
September 30, 2018, the Company had estimated undistributed taxable
income of approximately $1.58 per share. (1) (13)

DIVIDEND

On September 14, 2018, the Company’s board of directors declared a third
quarter dividend of $0.50 per share of common stock that was paid on
October 31, 2018 to stockholders of record as of September 28, 2018.

On August 16, 2018, 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 September 17, 2018 to
stockholders of record as of August 31, 2018.

STOCKHOLDER CALL

The Company invites stockholders, prospective stockholders and analysts
to participate in MITT’s third quarter earnings conference call on
November 8, 2018 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 6547353.

A presentation will accompany the conference call and will be available
on the Company’s website at www.agmit.com.
Select the Q3 2018 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 December 8, 2018. 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 6547353.

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

ABOUT AG MORTGAGE INVESTMENT TRUST, INC.

AG Mortgage Investment Trust, Inc. is a real estate investment trust
that invests in, acquires and manages a diversified portfolio of
residential and commercial mortgage assets, other real estate-related
securities, financial assets and real estate. 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 & CO.

Angelo, Gordon & Co., L.P. is a privately held limited partnership
founded in November 1988. The firm currently manages approximately $32
billion with a primary focus on credit and real estate strategies.
Angelo Gordon has over 450 employees, including more than 170 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 and our investment and portfolio strategy,
investment returns, return on equity, liquidity and financing, taxes,
our assets, our interest rate sensitivity, and our views on certain
macroeconomic trends, 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,
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 and loans, our
ability to integrate newly acquired rental assets into the 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 November 7, 2018. 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)

 
September 30, 2018 December 31, 2017
Assets
Real estate securities, at fair value:
Agency – $1,728,405 and $2,126,135 pledged as collateral,
respectively
$ 2,031,715 $ 2,247,161
Non-Agency – $693,696 and $976,072 pledged as collateral,
respectively
714,855 1,004,256
ABS – $24,383 and $30,833 pledged as collateral, respectively 37,544 40,958
CMBS – $272,907 and $211,180 pledged as collateral, respectively 286,049 220,169
Residential mortgage loans, at fair value 87,600 18,890
Commercial loans, at fair value 94,618 57,521
Single-family rental properties, net 140,059
Investments in debt and equity of affiliates 79,698 99,696
Excess mortgage servicing rights, at fair value 28,625 5,084
Cash and cash equivalents 30,341 15,200
Restricted cash 45,921 37,615
Interest receivable 12,823 12,607
Receivable on unsettled trades – $274,677 and $0 pledged as
collateral, respectively
285,041
Receivable under reverse repurchase agreements 5,750 24,671
Derivative assets, at fair value 4,887 2,127
Other assets 4,737 2,490
Due from broker 4,526     850  
Total Assets $ 3,894,789   $ 3,789,295  
 
Liabilities
Financing arrangements, net $ 2,913,381

$

3,004,407

Securitized debt, at fair value 11,481 16,478
Obligation to return securities borrowed under reverse repurchase
agreements, at fair value
5,730 24,379
Payable on unsettled trades 212,839 2,419
Interest payable 5,294 5,226
Derivative liabilities, at fair value 1,030 450
Dividend payable 14,369 13,392
Due to affiliates 4,073 4,258
Accrued expenses 5,457 790
Taxes payable 1,299 1,545
Due to broker 7,964     1,692  
Total Liabilities 3,182,917 3,075,036
Commitments and Contingencies (See 10Q for further detail)
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 28,738 and 28,193 shares issued and outstanding
at September 30, 2018 and December 31, 2017, respectively
287 282
Additional paid-in capital 595,310 585,530
Retained earnings/(deficit) (44,939 )   (32,767 )
Total Stockholders’ Equity 711,872     714,259  
   
Total Liabilities & Stockholders’ Equity $ 3,894,789   $ 3,789,295  
 
       

AG Mortgage Investment Trust, Inc. and Subsidiaries

Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)

 
Three Months Ended
September 30, 2018
Three Months Ended
September 30, 2017
Net Interest Income
Interest income $ 39,703 $ 33,592
Interest expense 18,692 11,959
Total Net Interest Income 21,011 21,633
 
Other Income/(Loss)
Net realized gain/(loss) (14,204) 22
Net interest component of interest rate swaps 1,816 (2,147)
Unrealized gain/(loss) on real estate securities and loans, net 700 14,893
Unrealized gain/(loss) on derivative and other instruments, net 6,589 2,423
Rental income 794
Other income 1 2
Total Other Income/(Loss) (4,304) 15,193
 
Expenses
Management fee to affiliate 2,384 2,454
Other operating expenses 3,503 2,603
Equity based compensation to affiliate 66 61
Excise tax 375 375
Servicing fees 148 23
Property depreciation and amortization 494
Property operating and maintenance expenses 232
Property management fee 88
Total Expenses 7,290 5,516
   
Income/(loss) before equity in earnings/(loss) from affiliates 9,417 31,310
 
Equity in earnings/(loss) from affiliates 13,960 4,701
Net Income/(Loss) 23,377 36,011
 
Dividends on preferred stock 3,367 3,367
   
Net Income/(Loss) Available to Common Stockholders $ 20,010 $ 32,644
 
Earnings/(Loss) Per Share of Common Stock
Basic $ 0.70 $ 1.17
Diluted $ 0.70 $ 1.17
 
Weighted Average Number of Shares of Common Stock Outstanding
Basic 28,422 27,841
Diluted 28,438 27,857
 

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
and realized gains/(losses) on the sale or termination of securities,
loans, derivatives and other instruments, (ii) beginning with Q2 2018,
any transaction related expenses incurred in connection with the
acquisition or disposition of our investments, (iii) beginning with Q3
2018, any depreciation or amortization expense related to our SFR
portfolio, and (iv) beginning with Q3 2018, 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). Items (i) through (iv) 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. As defined, Core Earnings
include the net interest income and other income earned on 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 our 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 our GAAP financials, provides supplemental
information useful for investors in evaluating our results of
operations. This metric, in conjunction with related GAAP measures,
provides greater transparency into the information used by our
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 September 30,
2018 and the three months ended September 30, 2017 is set forth below:

       
($ in millions)

Three Months Ended

September 30, 2018

Three Months Ended

September 30, 2017

 
Net Income/(loss) available to common stockholders $ 20.0 $ 32.6
Add (Deduct):
Net realized (gain)/loss 14.2 0.0
Dollar roll income 0.5 1.5
Equity in (earnings)/loss from affiliates (14.0) (4.7)
Net interest income and expenses from equity method investments* 2.6 2.2
Transaction related expenses and deal related performance fees** 0.2

Property depreciation and amortization

0.5
Unrealized (gain)/loss on real estate securities and loans, net (0.7) (14.9)
Unrealized (gain)/loss on derivative and other instruments, net (6.6) (2.4)
Core Earnings $ 16.7 $ 14.3
 
Core Earnings, per Diluted Share $ 0.59 $ 0.51

*For the three months ended September 30, 2018, we recognized $0.3
million or $0.01 per diluted share of net income/(loss) attributed to
our investment in AG Arc.(14) For the three months ended
September 30, 2017, we recognized $0.1 million or $0.00 per diluted
share of net income/(loss) attributed to our investment in AG Arc.

Contacts

AG Mortgage Investment Trust, Inc.
Karen Werbel – Investor
Relations
(212) 692-2110
ir@agmit.com

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