AG Mortgage Investment Trust, Inc. (“MITT,” "we," the “Company”
or "our") (NYSE:MITT) today reported financial results for the
quarter-ended March 31, 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.
FIRST QUARTER 2019 FINANCIAL HIGHLIGHTS
- $0.84 of Net Income/(Loss) per diluted
common share(1)
- $0.45 of Core Earnings per diluted
common share(1)
- Includes $(0.01) retrospective
adjustment
- 4.4% Economic Return on Equity for the
quarter, 17.6% annualized(2)
- $17.44 Book value per share(1) as of
March 31, 2019
- $17.56 Undepreciated Book Value per
share(1) as of March 31, 2019 versus $17.30 as of
December 31, 2018
- Undepreciated Book Value increased
$0.26 or 1.5% from the prior quarter primarily due to:
- $0.07 or 0.4% due to our investments in
Agency RMBS and associated derivatives
- Agency spreads stabilized in the first
quarter, despite a decline in yields and a brief uptick in implied
volatility
- $0.33 or 1.9% due to our Credit
Investments
- CRT and Legacy RMBS spreads tightened
during the quarter alongside broader market rallies
- $(0.05) or (0.3)% due to core earnings
below the $0.50 dividend and $(0.09) or (0.5)% due to dilution from
share issuance
- Issued approximately 4 million shares
of common stock at a weighted average price of $16.71 for net
proceeds of approximately $66 million through underwritten public
equity offering and ATM program
Q4 2018 Q1 2019 Summary of Operating
Results: GAAP Net Income/(Loss) Available to Common
Stockholders $ (41.6 )mm $ 25.8 mm GAAP Net
Income/(Loss) Available to Common Stockholders, per diluted common
share(1) $ (1.45 ) $ 0.84
Non-GAAP Results: Core
Earnings* $ 13.6 mm $ 13.6 mm Core Earnings, per diluted common
share(1) $ 0.47 $ 0.45
*A reconciliation of estimated net income/(loss) per diluted
common share to estimated core earnings per diluted common share
for the periods stated above, along with an explanation of this
non-GAAP financial measure, is provided at the end of this press
release.
MANAGEMENT REMARKS
"We are pleased with MITT's performance during the first
quarter, as MITT generated an economic return of 4.4% and completed
an overnight common equity offering, raising approximately $57
million of net proceeds," said Chief Executive Officer David
Roberts. "During the quarter, MITT continued to leverage the
expertise and experience of the Angelo Gordon platform to source
assets. Alongside other Angelo Gordon funds, we purchased Non-QM
pools and sourced two new commercial real estate loans."
"After a volatile fourth quarter, the financial markets
recovered and investor sentiment improved during the first
quarter," said Chief Investment Officer T.J. Durkin. "During the
quarter, the Federal Reserve pivoted from its more hawkish message
by pausing its interest rate tightening campaign, which removed
fear of materially higher rates from the market. Against this
backdrop, spreads for credit sectors tightened and Agency MBS
spreads stabilized during the quarter. Going forward,
we remain focused on opportunistically increasing exposure to
sectors we believe have the best risk-adjusted return
profiles."
INVESTMENT HIGHLIGHTS
- $4.1 billion investment portfolio as of
March 31, 2019 as compared to the $3.6 billion investment
portfolio as of December 31, 2018(3) (4)
- Increase in portfolio size primarily
due to the purchase of Agency RMBS and To-be-announced securities
("TBA") as well as certain commercial and residential
investments
- 2.1% Net Interest Margin (“NIM”) as of
March 31, 2019(5)
- 4.7x “At Risk” Leverage as of
March 31, 2019(6)
- 4.3% constant prepayment rate ("CPR")
on the Agency RMBS investment portfolio for the first
quarter(7)
- Duration gap was approximately 0.95
years as of March 31, 2019(8)
FIRST QUARTER ACTIVITY
($ in millions)
Description Purchased
(Sold/Payoff) Net Activity 30 Year Fixed Rate $
536.0
$ (229.3 ) $ 306.7 Inverse Interest Only — (2.3 ) (2.3 ) Fixed Rate
30 Year TBA 672.1 (546.0 ) 126.1
Total Agency RMBS 1,208.1 (777.6 )
430.5 Prime 17.0 (28.7 ) (11.7 ) Alt-A/Subprime —
(4.3 ) (4.3 ) Credit Risk Transfer 62.1 (9.0 ) 53.1
Re/Non-Performing Loans 19.7 — 19.7 New Origination Loans
34.8 — 34.8
Total Residential
Investments 133.6 (42.0 ) 91.6
CMBS 29.0 (20.3 ) 8.7 Commercial Real Estate Loans
21.8 (10.4 ) 11.4
Total Commercial
Investments 50.8 (30.7
) 20.1 Total ABS —
(1.3 ) (1.3 )
Total Q1 Activity $ 1,392.5 $
(851.6 ) $ 540.9
Note: The chart above is based on trade date.
- Deployed proceeds from the capital
raise into Agency RMBS and TBA
- Purchased several Non-QM pools
alongside other Angelo Gordon funds
- Purchased a pool of primarily RPL
mortgage loans
- Sourced two new CRE loans alongside
other Angelo Gordon funds
SINGLE-FAMILY RENTAL PORTFOLIO UPDATE
- Operational improvements helped to
increase occupancy from 87.9% in the fourth quarter to 93.7% in the
first quarter
- Conrex quickly leased vacant homes
while adhering to the enhanced tenant underwriting that had been
implemented in prior quarters
- While there were increased expenses
related to the high volume of turnover during the quarter, the
increase in occupancy improved the Operating Margin from 43.8% in
the fourth quarter to 46.3% in the first quarter
- Conrex has strategically re-organized
staffing to manage the identified pipeline of lease expirations in
the coming months
- Conrex continues to focus on tenant
communications and the tenant experience to retain tenants as well
as achieve rent growth
12/31/2018 3/31/2019 Gross Carrying
Value(a) $ 141.0 $ 141.7 Accumulated Depreciation and
Amortization(a)
(2.3 ) (3.8
) Net Carrying Value(a) $ 138.7 $ 137.9 Occupancy 87.9
% 93.7 % Average Square Footage(b) 1,436 1,463 Average Monthly
Rental Income per Home(b)(c) $ 1,020 $ 1,020 Operating Margin(11)
43.8 % 46.3 %
(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
KEY STATISTICS
($ in millions) March 31, 2019
Investment portfolio(3) (4) $ 4,089.9 Financing
arrangements, net(4) 3,392.4 Total financing(6) 3,463.1
Stockholders’ equity 731.6 GAAP Leverage 4.3x “At Risk” Leverage(6)
4.7x Yield on investment portfolio(9) 5.2 % Cost of
funds(10) 3.1 % Net interest margin(5) 2.1 % Other operating
expenses (corporate)(12) 1.5 % Book value, per share(1) $
17.44 Undepreciated Book Value, per share(1) $ 17.56 Undistributed
taxable income, per share(1) (13) $ 1.29 Dividend, per share(1) $
0.50
Note: Funding cost and NIM shown include the costs of our
interest rate hedges. Funding cost and NIM excluding the cost of
our interest rate hedges would be 3.3% and 1.9%, respectively.
INVESTMENT PORTFOLIO
The following summarizes the Company’s investment portfolio as
of March 31, 2019(3) (4):
($ in millions)
AmortizedCost
NetCarryingValue
Percent
ofNetCarryingValue
AllocatedEquity(15)
Percent ofEquity
LeverageRatio*
Agency RMBS $ 2,406.0 $ 2,439.5 59.6 % $ 271.6 37.1 % 8.2x
Residential Investments 1,045.3 1,100.3 26.9 % 285.5 39.0 % 3.0x
Commercial Investments 371.0 392.0 9.6 % 126.2 17.3 % 2.1x ABS 20.5
20.2 0.5 % 10.6 1.4 % 0.9x Single-Family Rental Properties
137.9 137.9 3.4 % 37.7 5.2 % 2.7x Total
$ 3,980.7 $ 4,089.9 100.0
% $ 731.6 100.0 % 4.7x
*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 $0.8
million of Agency RMBS, $238.8 million of Residential Investments
and $5.3 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 $(0.01)
retrospective adjustment per diluted common share, excluding
interest-only securities and TBAs. Since the cost basis of the
Company’s Agency RMBS securities, excluding interest-only
securities and TBAs, exceeds the underlying principal balance by
2.8% as of March 31, 2019, slower actual or projected
prepayments can have a meaningful positive impact, while faster
actual or projected prepayments can have a meaningful negative
impact, on the Company’s asset yields.
FINANCING AND HEDGING ACTIVITIES
The Company, either directly or through its equity method
investments in affiliates, had financing arrangements with 44
counterparties, under which it had debt outstanding with 32
counterparties as of March 31, 2019. Our weighted average days
to maturity is 140 days and our weighted average original days to
maturity is 222 days. The Company's financing arrangements as of
March 31, 2019 are summarized below:
($ in millions) Agency
Credit SFR** Maturing Within:*
AmountOutstanding
WA FundingCost
AmountOutstanding
WA FundingCost
AmountOutstanding
WA FundingCost
Overnight $ 68.5 2.9 % $ — — % $ — — % 30 Days or Less 1,065.9 2.7
% 562.5 3.6 % — — % 31-60 Days 502.9 2.7 % 110.8 4.0 % — — % 61-90
Days 527.2 2.7 % 75.6 4.2 % — — % 91-180 Days — — % 25.0 4.7 % — —
% Greater than 180 Days — — % 351.9 4.7 % 102.1
4.8 % Total / Weighted Avg
$ 2,164.5
2.7 % $ 1,125.8 4.0 %
$ 102.1 4.8 %
*Amounts in table above do not include securitized debt of $10.5
million.**Includes $0.9 million of deferred financing costs.
The Company’s interest rate swaps as of March 31, 2019 are
summarized as follows:
($ in millions) Maturity
Notional Amount
WA Pay-FixedRate
WA Receive-Variable
Rate*
WA Years toMaturity
2020 $ 105.0 1.5 % 2.7 %
0.9
2021 58.5 3.0 % 2.7 % 2.5 2022 635.0 2.0 % 2.3 % 3.2 2023 154.0 3.1
% 2.7 % 4.4 2024 280.0 2.2 % 2.7 % 5.2 2025 20.0 2.8 % 2.7 % 5.8
2026 195.0 2.4 % 2.7 % 7.2 2027 194.0 2.3 % 2.7 % 8.3 2028 25.0
2.5 % 2.8 % 8.8 Total/Wtd Avg $ 1,666.5 2.2 % 2.6 %
4.7
* 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
March 31, 2019, the Company had estimated undistributed
taxable income of approximately $1.29 per share.(1) (13)
DIVIDEND
On March 15, 2019, the Company’s board of directors
declared a first quarter dividend of $0.50 per share of common
stock that was paid on April 30, 2019 to stockholders of
record as of March 29, 2019.
On February 15, 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 March 18, 2019 to stockholders of record as of
February 28, 2019.
STOCKHOLDER CALL
The Company invites stockholders, prospective stockholders and
analysts to participate in MITT’s first quarter earnings conference
call on May 3, 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
7359519.
A presentation will accompany the conference call and will be
available on the Company’s website at www.agmit.com. Select the Q1
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 June 2, 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 7359519.
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. Our Credit
Investments include our 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 & 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 490 employees, including
more than 190 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
and 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 newly acquired 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 May 2, 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)
March 31, 2019 December 31, 2018
Assets Real estate securities, at fair value: Agency -
$2,240,880 and $1,934,562 pledged as collateral, respectively $
2,287,981 $ 1,988,280 Non-Agency - $640,396 and $605,243
pledged as collateral, respectively 659,340 625,350 ABS - $12,594
and $13,346 pledged as collateral, respectively 20,199 21,160 CMBS
- $266,689 and $248,355 pledged as collateral, respectively 276,403
261,385 Residential mortgage loans, at fair value - $117,830 and
$99,283 pledged as collateral, respectively 202,047 186,096
Commercial loans, at fair value - $2,467 and $- pledged as
collateral, respectively 110,223 98,574 Single-family rental
properties, net 137,886 138,678 Investments in debt and equity of
affiliates 102,099 84,892 Excess mortgage servicing rights, at fair
value 24,301 26,650 Cash and cash equivalents 50,779 31,579
Restricted cash 37,266 52,779 Other assets 98,617 33,503
Total Assets $ 4,007,141 $ 3,548,926
Liabilities Financing arrangements, net $ 3,214,909 $
2,822,505 Securitized debt, at fair value 10,515 10,858 Dividend
payable 16,352 14,372 Other liabilities 33,729 45,180
Total Liabilities 3,275,505 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 32,703 and
28,744 shares issued and outstanding at March 31, 2019 and December
31, 2018, respectively 327 287 Additional paid-in capital 661,561
595,412 Retained earnings/(deficit) (91,466) (100,902 )
Total Stockholders’ Equity 731,636 656,011
Total Liabilities & Stockholders’ Equity $
4,007,141 $ 3,548,926
AG Mortgage Investment Trust, Inc. and
Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share
data)
Three Months EndedMarch 31,
2019
Three Months EndedMarch 31,
2018
Net Interest Income Interest income $ 41,490 $ 39,357
Interest expense 23,341 15,326
Total Net Interest
Income 18,149 24,031
Other
Income/(Loss) Rental income 3,397 — Net realized gain/(loss)
(20,610 ) (11,839 ) Net interest component of interest rate swaps
1,781 (1,470 ) Unrealized gain/(loss) on real estate securities and
loans, net 46,753 (36,155 ) Unrealized gain/(loss) on derivative
and other instruments, net (10,086 ) 37,090 Other income 596
—
Total Other Income/(Loss) 21,831 (12,374 )
Expenses Management fee to affiliate 2,345 2,439
Other operating expenses 3,830 3,223 Equity based compensation to
affiliate 126 51 Excise tax 92 375 Servicing fees 371 62 Property
depreciation and amortization 1,447 — Property operating expenses
1,843 —
Total Expenses 10,054 6,150
Income/(loss) before equity in earnings/(loss)
from affiliates 29,926 5,507 Equity in
earnings/(loss) from affiliates (771 ) 2,740
Net
Income/(Loss) 29,155 8,247 Dividends on
preferred stock 3,367 3,367
Net Income/(Loss)
Available to Common Stockholders $ 25,788 $ 4,880
Earnings/(Loss) Per Share of Common Stock Basic $
0.84 $ 0.17 Diluted $ 0.84 $ 0.17
Weighted Average Number
of Shares of Common Stock Outstanding Basic 30,551 28,196
Diluted 30,581 28,217
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 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
March 31, 2019 and March 31, 2018 is set forth below:
($ in thousands except per share data)
Three Months EndedMarch 31,
2019
Three Months EndedMarch 31,
2018
Net Income/(loss) available to common stockholders $ 25,788
$ 4,880 Add (Deduct): Net realized (gain)/loss 20,610 11,839 Dollar
roll income 357 488 Equity in (earnings)/loss from affiliates 771
(2,740 ) Net interest income and expenses from equity method
investments(a) 1,004 1,698 Transaction related expenses and deal
related performance fees(b)(c) 458 — Property depreciation and
amortization 1,447 — Other Income (147 ) — Unrealized (gain)/loss
on real estate securities and loans, net (46,753 ) 36,155
Unrealized (gain)/loss on derivative and other instruments, net
10,086 (37,090 )
Core Earnings (d) $ 13,621 $ 15,230
Core Earnings, per Diluted Share (d) $ 0.45 $ 0.54
(a) For the three months ended March 31, 2019 and
March 31, 2018, $(2.8) million or $(0.09) per diluted share
and $1.3 million or $0.05 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.(b) For the three months ended March 31, 2018, the
above chart was not adjusted for transaction related expenses of
$0.1 million, as they did not have a material impact on Core
Earnings for the period. Our policy with respect to transaction
related expenses was modified in Q2 2018.(c) For the three months
ended March 31, 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.(d) The three
months ended March 31, 2019 and March 31, 2018 include
cumulative retrospective adjustments of $(0.3) million or $(0.01)
per diluted share and $0.4 million or $0.02 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 December 31, 2018
to March 31, 2019, plus the common dividends declared over
that period, divided by undepreciated book value per share as of
December 31, 2018. 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 employ leverage, the investment
is included in our assets and the leverage 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. 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/20190502005960/en/
Karen Werbel - Investor Relations(212) 692-2110ir@agmit.com
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