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AG Mortgage Investment Trust, Inc. Reports Full Year and Fourth Quarter 2019 Results

NEW YORK–(BUSINESS WIRE)–AG Mortgage Investment Trust, Inc. (“MITT,” “we,” the “Company,” or “our”) (NYSE: MITT) today reported financial results for the year and quarter-ended December 31, 2019. AG Mortgage Investment Trust, Inc. is a hybrid mortgage REIT that opportunistically invests in and manages a diversified risk-adjusted portfolio of Agency RMBS and Credit Investments, which include Residential Investments and Commercial Investments.

FULL YEAR AND FOURTH QUARTER 2019 FINANCIAL HIGHLIGHTS

  • Full Year 2019:

    • $2.39 of Net Income/(Loss) per diluted common share(1)
    • $1.70 of Core Earnings per diluted common share(1)

      • Includes $(0.05) retrospective adjustment
    • $1.90 dividend per common share(1)
    • 13.4% Economic Return on Equity for the year(a)
    • Participated in 3 rated Non-QM securitizations alongside other Angelo Gordon funds, which termed out repo financing into lower cost, fixed rate, non-recourse long-term financing, returning $57.6 million of equity to MITT
    • Completed a rated RPL securitization in August which termed out repo financing into lower cost, fixed rate, non-recourse long-term financing, returning $11.1 million of equity to MITT
    • Capital raises:

      • Issued approximately 4 million shares of common stock in Q1 2019 at a weighted average price of $16.71 for net proceeds of approximately $66 million through underwritten public equity offering and ATM program
      • Completed preferred stock offering on September 17, 2019 of our 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, raising net proceeds of $111.2 million
  • Fourth Quarter 2019:

    • $0.90 of Net Income/(Loss) per diluted common share(1)
    • $0.52 of Core Earnings per diluted common share(1)

      • Includes $0.05 positive impact from the payoff of a prime security
      • Includes $0.02 retrospective adjustment
    • 5.2% Economic Return on Equity for the quarter(a)
    • $17.61 Book Value per share(1) as of December 31, 2019, versus $17.16 as of September 30, 2019

      • Book Value increased $0.45 or 2.6% from the prior quarter primarily due to:

        • $0.52 or 3.0% due to investments in Agency RMBS, Residential Loans(b), mortgage servicing exposure and associated derivatives

          • Agency RMBS spreads tightened sharply versus benchmarks as headwinds from the prior two quarters turned to tailwinds
        • $(0.15) or (0.8)% due to Credit Investments

          • CMBS spreads generally widened during the quarter as a result of heavy supply into year-end
        • $0.08(c) or 0.4% due to Core Earnings above the $0.45 dividend

(a) The Economic Return on Equity for the year represents the change in book value per share from December 31, 2018 to December 31, 2019, plus the dividends declared over that period, divided by book value per share as of December 31, 2018. The Economic Return on Equity for the quarter represents the change in book value per share from September 30, 2019 to December 31, 2019, plus the common dividends declared over that period, divided by book value per share as of September 30, 2019.

(b) Residential Loans includes Re/Non-Performing Loans, Non-QM Loans and Land Related Financing.

(c) Includes $0.01 or 0.1% due to equity based compensation.

 

 

Q3 2019

 

Q4 2019

 

FY 2019

Summary of Operating Results:

 

 

 

 

 

 

GAAP Net Income/(Loss) Available to Common Stockholders

 

$

6.3

mm

 

$

29.4

mm

 

$

76.8

mm

GAAP Net Income/(Loss) Available to Common Stockholders, per

diluted common share (1)

 

$

0.19

 

 

$

0.90

 

 

$

2.39

 

 

 

 

 

 

 

 

Non-GAAP Results:

 

 

 

 

 

 

Core Earnings*

 

$

13.0

mm

 

$

16.9

mm

 

$

54.9

mm

Core Earnings, per diluted common share(1)

 

$

0.40

 

 

$

0.52

 

 

$

1.70

 

*A reconciliation of net income/(loss) per diluted common share to Core Earnings per diluted common share for the three and twelve months ended December 31, 2019, along with an explanation of this non-GAAP financial measure, is provided at the end of this press release.

MANAGEMENT REMARKS

“During 2019, MITT completed two capital raises and utilized its ATM program which in total resulted in net proceeds of approximately $177 million,” said Chief Executive Officer, David Roberts. “In both cases, we initially deployed the capital into Agency MBS with subsequent rotation into residential and commercial credit investments. We believe these credit investments reflect the benefit MITT offers its shareholders by being part of the broader Angelo Gordon platform.”

“After several challenging quarters for the Agency MBS and rate markets, those headwinds faded and some even turned to tailwinds during the fourth quarter,” said Chief Investment Officer, T.J. Durkin. “We were also active in the securitization space. In November, MITT, alongside other Angelo Gordon funds, completed its third rated Non-QM securitization as well as a non-rated securitization of primarily RPLs after exercising call rights. Both securitizations provide MITT with termed-out and materially cheaper cost of funds in comparison to our warehouse lines and previous securitizations.”

INVESTMENT HIGHLIGHTS

  • $4.4 billion Investment Portfolio with a 4.1x Economic Leverage Ratio as of December 31, 2019 as compared to $4.8 billion and 4.7x, respectively, as of September 30, 2019(2)(3)(4)

    • Rotated out of Agency RMBS into Credit Investments
  • 2.5% Net Interest Margin (“NIM”) as of December 31, 2019(5), an increase of approximately 40bps quarter over quarter primarily due to a 25 bps decrease in the federal funds rate in October
  • 11.2% constant prepayment rate (“CPR”) on the Agency RMBS investment portfolio for the fourth quarter(6)
  • Duration gap was approximately 1.17 years as of December 31, 2019(7)

    • Duration gap is presented pro-forma for potential purchases of Re/Non-Performing Loans and Non-QM Loans that are in the diligence process, as the hedges related to these potential purchases have already been added to the portfolio. The duration gap exclusive of these potential purchases would have been 0.67.

FOURTH QUARTER ACTIVITY

Agency Activity

  • Rotated out of approximately $530 million of Agency RMBS, reducing the Agency RMBS allocated equity percentage to 34.8% and the fair value percentage to 52.8%

Residential Activity

  • Completed a securitization of primarily re-performing loans alongside other Angelo Gordon funds by exercising call rights on approximately $237 million of UPB

    • MITT maintained exposure to the securitization through an interest in the subordinated tranches
  • Purchased a pool of primarily non-performing loans for approximately $48 million
  • Continued to purchase Non-QM pools alongside other Angelo Gordon funds and participated in a rated Non-QM securitization alongside other Angelo Gordon funds in November, which termed out repo financing into lower cost, fixed rate, non-recourse long-term financing, returning approximately $18 million of equity to MITT

    • MITT maintained exposure to the securitization through an interest in the subordinated tranches

Commercial Activity

  • Net purchases of approximately $138 million of CMBS, Freddie Mac K-Series and Commercial loans, increasing the equity percentage allocated to Commercial Investments to 22.8% and the fair value percentage to 13.4%

Single-Family Rental Properties Activity

  • Sold our portfolio of single-family rental properties to a third party for approximately $137 million, the results of which have been reflected as discontinued operations

KEY STATISTICS

($ in millions)

 

December 31, 2019

Investment portfolio(2) (3)

 

$4,417.2

Financing arrangements(3)

 

3,490.9

Total Economic Leverage(4)

 

3,486.1

Stockholders’ equity

 

849.0

GAAP Leverage Ratio

 

4.1x

Economic Leverage Ratio(4)

 

4.1x

 

 

 

Yield on investment portfolio(8)

 

4.8%

Cost of funds(9)

 

2.3%

Net interest margin(5)

 

2.5%

Other operating expenses(10)

 

1.5%

Book value, per share(1)

 

$17.61

Undistributed taxable income, per share(1) (11)

 

$1.10

Dividend, per share(1)

 

$0.45

Note: Cost of funds and NIM shown include the costs or benefits of our interest rate hedges. Cost of funds and NIM as of December 31, 2019 excluding the cost or benefit of our interest rate hedges would be 2.5% and 2.3%, respectively.

INVESTMENT PORTFOLIO

The following summarizes the Company’s investment portfolio as of December 31, 2019(2) (3):

($ in millions)

 

Fair Value

 

Percent of

Fair Value

 

Allocated

Equity(13)

 

Percent of

Equity

 

Economic

Leverage

Ratio(a)(4)

 

Q4 2019 Net

Purchases/(Sales)(b)

Agency RMBS

 

$2,333.6

 

52.8%

 

$295.3

 

34.8%

 

7.1x

 

$(530.4)

Residential Investments

 

1,493.9

 

33.8%

 

359.9

 

42.4%

 

2.7x

 

149.1

Commercial Investments

 

589.7

 

13.4%

 

193.8

 

22.8%

 

2.1x

 

137.8

Total

 

$4,417.2

 

100.0%

 

$849.0

 

100.0%

 

4.1x

 

$(243.5)

(a) The Economic Leverage Ratio on Agency RMBS includes any net payables or receivables on TBA. The Economic Leverage Ratio by type of investment is calculated by dividing the investment type’s total recourse financing arrangements by its allocated equity.(13) The Economic Leverage Ratio excludes any non-recourse financing arrangements, including securitized debt.

(b) In addition to the amounts listed, we sold out of our ABS Investments for $(12.9) million.

Note: The chart above includes fair value of $0.6 million of Agency RMBS, $358.5 million of Residential Investments and $14.1 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 securities are amortized or accreted into interest income over the estimated life of such securities, using the effective yield method. For the three months ended December 31, 2019, the Company recorded a $0.02 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 2.8% as of December 31, 2019, 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 44 counterparties, under which it had debt outstanding with 30 counterparties as of December 31, 2019. Our weighted average days to maturity is 92 days and our weighted average original days to maturity is 196 days. The Company’s financing arrangements as of December 31, 2019 are summarized below:

($ in millions)

 

 

 

 

 

 

 

 

 

 

Agency

 

Credit

 

Total

Maturing Within:*

 

Balance

 

WA Funding

Cost

 

Balance

 

WA Funding

Cost

 

Balance

 

WA Funding

Cost

30 Days or Less

 

$

1,011.2

 

 

2.1%

 

$

587.3

 

2.9

%

 

$

1,598.5

 

2.4

%

31-60 Days

 

1,098.1

 

 

2.0%

 

470.6

 

3.3

%

 

1,568.7

 

2.4

%

61-90 Days

 

 

 

—%

 

71.8

 

3.0

%

 

71.8

 

3.0

%

91-180 Days

 

 

 

—%

 

20.4

 

3.8

%

 

20.4

 

3.8

%

Greater than 180 Days

 

 

 

—%

 

231.5

 

3.9

%

 

231.5

 

3.9

%

Total / Weighted Avg

 

$

2,109.3

 

 

2.0%

 

$

1,381.6

 

3.2

%

 

$

3,490.9

 

2.5

%

* Amounts in table do not include securitized debt of $224.3 million.

The Company’s interest rate swaps as of December 31, 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%

 

1.9%

 

0.2

2022

 

837.5

 

1.6%

 

1.9%

 

2.7

2023

 

5.8

 

3.2%

 

1.9%

 

3.8

2024

 

650.0

 

1.5%

 

1.9%

 

4.8

2026

 

180.0

 

1.5%

 

1.9%

 

6.7

2029

 

165.0

 

1.8%

 

1.9%

 

9.9

Total/Wtd Avg

 

$

1,943.3

 

1.6%

 

1.9%

 

4.3

* 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 realized gains and losses on sold investments and certain terminated derivatives, (v) taxes and (vi) methods of depreciation. As of December 31, 2019, the Company had estimated undistributed taxable income of approximately $1.10 per share.(1) (11)

DIVIDEND

On December 13, 2019, the Company’s board of directors declared a fourth quarter dividend of $0.45 per share of common stock that was paid on January 31, 2020 to stockholders of record as of December 31, 2019.

On November 15, 2019, the Company’s board of directors declared fourth quarter dividends of $0.51563 per share on its 8.25% Series A Cumulative Redeemable Preferred Stock, $0.50 per share on its 8.00% Series B Cumulative Redeemable Preferred Stock and $0.50 per share on its 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock. The dividends were paid on December 17, 2019 to stockholders of record as of November 29, 2019.

STOCKHOLDER CALL

The Company invites stockholders, prospective stockholders and analysts to participate in MITT’s fourth quarter earnings conference call on February 28, 2020 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 7555972.

A presentation will accompany the conference call and will be available on the Company’s website at www.agmit.com. Select the Q4 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 March 29, 2020. 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 7555972.

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 and manages a diversified risk-adjusted portfolio of Agency RMBS and Credit Investments, which include Residential Investments and Commercial 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 & CO.

Angelo, Gordon & Co., L.P. is a privately held limited partnership founded in November 1988. The firm currently manages approximately $38 billion as of December 13, 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 fair value of our assets, general economic conditions, conditions in the market for Agency RMBS, Non-Agency RMBS and CMBS securities, Excess MSRs and loans, 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 February 27, 2020. 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)

 

December 31, 2019

 

December 31, 2018

Assets

 

 

 

Real estate securities, at fair value:

 

 

 

Agency – $2,234,921 and $1,934,562 pledged as collateral, respectively

$

2,315,439

 

$

1,988,280

Non-Agency – $682,828 and $605,243 pledged as collateral, respectively

717,470

 

625,350

ABS – $0 and $13,346 pledged as collateral, respectively

 

21,160

CMBS – $413,922 and $248,355 pledged as collateral, respectively

416,923

 

261,385

Residential mortgage loans, at fair value – $171,224 and $99,283 pledged as collateral,

respectively

417,785

 

186,096

Commercial loans, at fair value – $4,674 and $0 pledged as collateral, respectively

158,686

 

98,574

Investments in debt and equity of affiliates

156,311

 

84,892

Excess mortgage servicing rights, at fair value

17,775

 

26,650

Cash and cash equivalents

81,692

 

31,579

Restricted cash

43,677

 

49,806

Other assets

21,905

 

32,619

Assets held for sale – Single-family rental properties, net

154

 

142,535

Total Assets

$

4,347,817

 

$

3,548,926

 

 

 

 

Liabilities

 

 

 

Financing arrangements

$

3,233,468

 

$

2,720,488

Securitized debt, at fair value

224,348

 

10,858

Dividend payable

14,734

 

14,372

Other liabilities

24,675

 

42,096

Liabilities held for sale – Single-family rental properties, net

1,546

 

105,101

Total Liabilities

3,498,771

 

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

8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, 4,600

shares issued and outstanding ($115,000 aggregate liquidation preference)

111,243

 

Common stock, par value $0.01 per share; 450,000 shares of common stock authorized and

32,742 and 28,744 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively

327

 

287

Additional paid-in capital

662,183

 

595,412

Retained earnings/(deficit)

(85,921)

 

(100,902)

Total Stockholders’ Equity

849,046

 

656,011

 

 

 

 

Total Liabilities & Stockholders’ Equity

$

4,347,817

 

$

3,548,926

AG Mortgage Investment Trust, Inc. and Subsidiaries

Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)

 

Three Months Ended

December 31, 2019

 

Three Months Ended

December 31, 2018

 

Year Ended

December 31, 2019

Net Interest Income

 

 

 

 

 

Interest income

$

48,534

 

$

41,403

 

$

171,660

Interest expense

23,097

 

20,490

 

90,108

Total Net Interest Income

25,437

 

20,913

 

81,552

 

 

 

 

 

 

Other Income/(Loss)

 

 

 

 

 

Net realized gain/(loss)

13,403

 

(2,347)

 

(50,822)

Net interest component of interest rate swaps

1,976

 

623

 

7,736

Unrealized gain/(loss) on real estate securities and loans, net

(17,812)

 

15,092

 

83,832

Unrealized gain/(loss) on derivative and other instruments, net

17,355

 

(61,998)

 

(312)

Foreign currency gain/(loss), net

(3,179)

 

 

(2,512)

Other income

342

 

216

 

1,182

Total Other Income/(Loss)

12,085

 

(48,414)

 

39,104

 

 

 

 

 

 

Expenses

 

 

 

 

 

Management fee to affiliate

2,734

 

2,334

 

9,825

Other operating expenses

4,988

 

4,716

 

18,638

Equity based compensation to affiliate

74

 

28

 

349

Excise tax

67

 

375

 

531

Servicing fees

416

 

201

 

1,619

Total Expenses

8,279

 

7,654

 

30,962

 

 

 

 

 

 

Income/(loss) before equity in earnings/(loss) from affiliates

29,243

 

(35,155)

 

89,694

 

 

 

 

 

 

Equity in earnings/(loss) from affiliates

6,929

 

(1,430)

 

7,644

Net Income/(Loss) from Continuing Operations

36,172

 

(36,585)

 

97,338

Net Income/(Loss) from Discontinued Operations

(1,132)

 

(1,639)

 

(4,416)

Net Income/(Loss)

35,040

 

(38,224)

 

92,922

 

 

 

 

 

 

Dividends on preferred stock (1)

5,667

 

3,367

 

16,122

 

 

 

 

 

 

Net Income/(Loss) Available to Common Stockholders

$

29,373

 

$

(41,591)

 

$

76,800

 

 

 

 

 

 

Earnings/(Loss) Per Share – Basic

 

 

 

 

 

Continuing Operations

$

0.93

 

$

(1.39)

 

$

2.52

Discontinued Operations

(0.03)

 

(0.06)

 

(0.13)

Total Earnings/(Loss) Per Share of Common Stock

$

0.90

 

$

(1.45)

 

$

2.39

 

 

 

 

 

 

Earnings/(Loss) Per Share – Diluted

 

 

 

 

 

Continuing Operations

$

0.93

 

$

(1.39)

 

$

2.52

Discontinued Operations

(0.03)

 

(0.06)

 

(0.13)

Total Earnings/(Loss) Per Share of Common Stock

$

0.90

 

$

(1.45)

 

$

2.39

Weighted Average Number of Shares of Common Stock Outstanding

 

 

 

 

 

Basic

32,742

 

28,744

 

32,192

Diluted

32,759

 

28,744

 

32,203

(1) The three months and year ended December 31, 2019 include cumulative and undeclared dividends of $0.4 million on the Company’s 8.000% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock as of December 31, 2019.

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) (a) unrealized gains/(losses) on real estate securities, loans, derivatives and other investments, (b) net realized gains/(losses) on the sale or termination of such instruments, and (c) any OTTI, (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, 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), (iv) 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, (v) beginning with Q3 2019, concurrent with a change in our business, any foreign currency gains/(losses) relating to monetary assets and liabilities, and (vi) beginning with Q4 2019 and applied retrospectively, concurrent with a change in our business, income from discontinued operations.

Contacts

AG Mortgage Investment Trust, Inc.

Investor Relations

(212) 692-2110

ir@agmit.com

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