AG Mortgage Investment Trust, Inc. ("MITT," "we," the "Company"
or "our") (NYSE: MITT) today reported financial results for the
quarter-ended March 31, 2020. 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.
FIRST QUARTER 2020 FINANCIAL SNAPSHOT
- $(14.98) of Net Income/(Loss) per diluted common share(1)
- $2.63 Book Value per share(1) as of March 31, 2020 versus
$17.61 as of December 31, 2019
- $1.6 billion Investment Portfolio with a 3.3x Economic Leverage
Ratio as of March 31, 2020 as compared to the $4.4 billion and
4.1x, respectively, as of December 31, 2019(2)(3)(4)
- $1.2 billion of financing arrangements as of March 31, 2020(a)
as compared to the $3.5 billion as of December 31, 2019(a)
- Duration gap was approximately 2.63 years as of March 31,
2020(5)
- We are not disclosing Core Earnings, a non-GAAP financial
measure, for the first quarter of 2020, as we determined that this
measure, as we have historically calculated it, would not
appropriately capture the materially negative economic impact of
the COVID-19 pandemic on our business, liquidity, results of
operations, financial condition, and ability to make distributions
to our stockholders. As financial markets stabilize, we will
evaluate whether core earnings or other non-GAAP financial measures
would help both management and investors evaluate our operating
performance for future periods.
(a) Financing arrangements are shown gross of $44.3 million and
$11.6 million of cash posted as collateral to our financing
counterparties at March 31, 2020 and December 31, 2019,
respectively, and do not include securitized debt of $197.2 million
and $224.3 million at March 31, 2020 and December 31, 2019,
respectively.
IMPACT OF COVID-19 PANDEMIC
- Beginning in mid-March, the global pandemic associated with
COVID-19 and related economic conditions caused financial and
mortgage-related asset markets to come under extreme duress,
resulting in credit spread widening, a sharp decrease in interest
rates and unprecedented illiquidity in repurchase agreement
financing and MBS markets. The illiquidity was exacerbated by
inadequate demand for MBS among primary dealers due to balance
sheet constraints.
- These events, in turn, resulted in falling prices of our assets
and increased margin calls from our repurchase agreement
counterparties. In order to satisfy the margin calls, the Company
sold a significant portion of its investments resulting in a
material adverse impact on book value, earnings and financial
position.
- The change in book value from December 31, 2019 to March 31,
2020 is comprised of:
- Realized and unrealized losses of $(2.91) per share(1) on our
Agency portfolio
- Realized and unrealized losses of $(8.15) per share(1) on our
Residential portfolio
- Realized and unrealized losses of $(4.34) per share(1) on our
Commercial portfolio
- Other income of $0.42 per share(1)
- Book Value per share(1) as of April 30, 2020 was estimated to
be in the range of $1.80 to $1.90
- In an effort to manage the Company's portfolio through this
unprecedented turmoil in the financial markets and improve
liquidity, the Company executed the following measures:
- In March of 2020, we sold our entire 30 year fixed rate Agency
MBS Portfolio
- In March of 2020, unwound entire interest rate swap
portfolio
- Since March 23, 2020, sold residential and commercial mortgage
assets generating proceeds of approximately $1 billion, comprised
of approximately $725 million of residential investments, $250
million of commercial investments and $45 million of Agency MBS
collateralized mortgage obligations
- Based on current circumstances it is our intention to suspend
quarterly dividends on common and preferred stock for the
foreseeable future in order to conserve capital and improve our
liquidity position
- Manager made subordinated loans totaling $20 million to the
Company
- Manager deferred payment of management fees and expense
reimbursements through September 30, 2020
- Entered into multiple forbearance agreements with financing
counterparties beginning on April 10th; exited forbearance on June
10th having satisfied all outstanding margin calls
- Through asset sales, reduced exposure to various counterparties
and brought the number of counterparties with debt outstanding down
from 30 as of December 31, 2019 to 18 as of March 31, 2020 and 6 as
of May 31, 2020
- As of May 31, 2020:
- Investment portfolio of approximately $1 billion(a)(b),
consisting of 78% residential investments(c) and 22% commercial
investments
- Debt obligations of approximately $710 million(d)(e), net of
approximately $25 million of cash posted as collateral to its
financing counterparties, of which approximately $280 million(e)
are recourse repurchase obligations, approximately $410 million(e)
are non-recourse debt obligations and approximately $20 million are
subordinated debt obligations
- Cash and cash equivalents of approximately $45 million
(a) Based on our preliminary analysis, $1 billion investment
portfolio includes approximately $340 million of assets held
through investments in debt and equity of affiliates, consisting of
approximately 99% residential investments and less than 1% agency
derivatives. (b) Investment portfolio does not include the
Company's $20 million net investment in Arc Home. (c) For purposes
of the presentation of the May 31, 2020 portfolio, a 1% interest in
agency derivatives has been shown together with residential
investments. (d) Debt obligations include all financing
arrangements, securitized debt and subordinated debt. (e) $280
million of recourse repurchase obligations includes approximately
$40 million of recourse repurchase obligations held through
investments in debt and equity of affiliates, net of cash posted as
collateral. $410 million of non-recourse debt obligations includes
approximately $220 million of non-recourse debt obligations held
through investments in debt and equity of affiliates, net of cash
posted as collateral.
MANAGEMENT REMARKS
David Roberts, Chief Executive Officer, commented, "The initial
stages of the COVID crisis in March disrupted the markets in every
aspect of MITT’s portfolio. As a result of this disruption, MITT
began to receive a rising tide of margin calls. We met the calls
for as long as we prudently could, using a portion of our cash
reserves and selling those assets we believed were the least-worst
to sell, most notably our portfolio of Agency RMBS. At a certain
point, however, the margin calls became overwhelming. Accordingly,
we announced that we would not meet margin calls and would seek a
forbearance agreement from our repo lenders. As detailed in our
many 8-K filings, we negotiated three forbearance agreements. We
are pleased to announce that we exited forbearance two days ago and
reinstated bilateral agreements with all our current lenders."
"Immediately prior to and during the two month period of our
forbearance, we sold the majority of our assets, paid off the
related financing, and consolidated our remaining repo arrangements
down to six lenders," Roberts added. "In downsizing our portfolio,
mostly during a time of severe dislocation in our markets, MITT
took substantial losses. The Company began the year with a common
equity book value of $17.61 per share. As we reported in our 8-K
filed on May 7th, we estimated that our common book value per share
as of April 30th was in a range from $1.80-$1.90 per share, a
decline of almost 90%. The majority of those losses have been
realized through sales. Based on our preliminary internal analysis,
we estimate that book value as of May 31 was in a range not
substantially higher than it was at April 30. Going forward, we
anticipate continuing to raise liquidity and reducing debt through
selected asset sales. Based on current conditions for our company,
we do not anticipate paying dividends on either our common or
preferred stock for the foreseeable future."
KEY STATISTICS
($ in millions)
March 31, 2020
Investment portfolio(2) (3)
$1,621.1
Financing arrangements(3)
1,231.2
Total Economic Leverage(4)
1,175.5
Stockholders’ equity
358.7
GAAP Leverage Ratio
3.1x
Economic Leverage Ratio(4)
3.3x
Book value, per share(1)
$2.63
INVESTMENT PORTFOLIO
The following summarizes the Company’s investment portfolio as
of March 31, 2020(3)(4):
($ in millions)
Fair Value
Percent of Fair Value
Allocated Equity(7)
Percent of Equity
Agency RMBS
$37.6
2.3%
$18.0
5.0%
Residential Investments
1,285.0
79.3%
244.9
68.3%
Commercial Investments
298.5
18.4%
95.8
26.7%
Total
$1,621.1
100.0%
$358.7
100.0%
Note: The chart above includes fair value of $0.5 million of
Agency RMBS, $331.1 million of Residential Investments and $10.8
million of Commercial Investments that are included in the
“Investments in debt and equity of affiliates” line item on our
consolidated balance sheet.
DIVIDEND
On February 14, 2020, the Company's board of directors declared
first 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 March 17, 2020 to
stockholders of record as of February 28, 2020.
On March 27, 2020, the Company announced that its Board of
Directors approved a suspension of the Company's quarterly
dividends on its common stock, 8.25% Series A Cumulative Redeemable
Preferred Stock, 8.00% Series B Cumulative Redeemable Preferred
Stock, and 8.000% Series C Fixed-to-Floating Rate Cumulative
Redeemable Preferred Stock, beginning with the common dividends
that normally would have been declared in March 2020 and the
preferred dividend that would have been declared in May 2020, in
order to conserve capital and preserve liquidity. As noted above,
based on current circumstances it is our intention to suspend
quarterly dividends on common and preferred stock for the
foreseeable future.
STOCKHOLDER CALL
The Company invites stockholders, prospective stockholders and
analysts to participate in MITT’s first quarter earnings conference
call on June 12, 2020 at 8:30 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 9204165.
A presentation will accompany the conference call and will be
available on the Company’s website at www.agmit.com. Select the Q1
2020 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 promptly following the conclusion of the call on
June 12, 2020, through July 12, 2020. To access the replay, please
go to
https://onlinexperiences.com/Launch/QReg/ShowUUID=C5BBC201-5E03-4521-B0D8-E946051AC000&LangLocaleID=1033.
The replay passcode is 49770105.
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
Angelo, Gordon & Co., L.P. is a privately held limited
partnership founded in November 1988. The firm manages
approximately $35 billion as of March 31, 2020 with a primary focus
on credit and real estate strategies. Angelo Gordon has over 550
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 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 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 on the loans we own that
underlie our investment securities, increases in default rates or
delinquencies and/or decreased recovery rates on our assets, our
ability to make distributions to our stockholders in the future,
our ability to maintain our qualification as a REIT for federal tax
purposes, our ability to maintain our exemption from registration
under the Investment Company Act of 1940, as amended, the
availability and terms of financing, changes in the fair value of
our assets, including negative changes resulting in margin calls
relating to the financing of our assets, changes in general
economic 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 Agency RMBS, Non-Agency RMBS and CMBS
securities, Excess MSRs and loans, conditions in the real estate
market, legislative and regulatory actions by the U.S. Department
of the Treasury, the Federal Reserve and other agencies and
instrumentalities in response to the economic effects of the
COVID-19 pandemic that could adversely affect the business of the
Company, the forbearance program included in the Coronavirus Aid,
Relief, and Economic Security Act (the "CARES Act") and the ongoing
spread and economic effects of the novel coronavirus (COVID-19).
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, including its quarterly report on Form
10-Q for the three months ended March 31, 2020. Copies are
available free of charge on the SEC's website, http://www.sec.gov/.
All information in this press release is as of June 12, 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.
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 investment
portfolio, economic leverage ratio, which are calculated by
including or excluding depreciation and amortization,
unconsolidated investments in affiliates, TBAs, and U.S.
Treasuries, 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
financials, 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 from these results should
be carefully evaluated.
AG Mortgage Investment Trust,
Inc. and Subsidiaries Consolidated Balance Sheets (Unaudited) (in
thousands, except per share data)
March 31, 2020
December 31, 2019
Assets
Real estate securities, at fair value:
Agency - $23,132 and $2,234,921 pledged as
collateral, respectively
$
23,132
$
2,315,439
Non-Agency - $165,605 and $682,828 pledged
as collateral, respectively
186,797
717,470
CMBS - $126,042 and $413,922 pledged as
collateral, respectively
129,626
416,923
Residential mortgage loans, at fair value
- $140,633 and $171,224 pledged as collateral, respectively
766,960
417,785
Commercial loans, at fair value - $3,720
and $4,674 pledged as collateral, respectively
158,051
158,686
Investments in debt and equity of
affiliates
119,212
156,311
Excess mortgage servicing rights, at fair
value
14,066
17,775
Cash and cash equivalents
92,299
81,692
Restricted cash
41,400
43,677
Other assets - $12,658 and $0 pledged as
collateral, respectively
27,093
21,905
Assets held for sale - Single-family
rental properties, net
—
154
Total Assets
$
1,558,636
$
4,347,817
Liabilities
Financing arrangements
$
969,857
$
3,233,468
Securitized debt, at fair value
197,182
224,348
Dividend payable
—
14,734
Other liabilities
32,266
24,675
Liabilities held for sale - Single-family
rental properties, net
666
1,546
Total Liabilities
1,199,971
3,498,771
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
111,243
Common stock, par value $0.01 per share;
450,000 shares of common stock authorized and 32,749 and 32,742
shares issued and outstanding at March 31, 2020 and December 31,
2019, respectively
327
327
Additional paid-in capital
662,486
662,183
Retained earnings/(deficit)
(576,605
)
(85,921
)
Total Stockholders’ Equity
358,665
849,046
Total Liabilities & Stockholders’
Equity
$
1,558,636
$
4,347,817
AG Mortgage Investment Trust,
Inc. and Subsidiaries Consolidated Statements of Operations
(Unaudited) (in thousands, except per share data)
Three Months Ended
March 31, 2020
March 31, 2019
Net Interest Income
Interest income
$
40,268
$
41,490
Interest expense
19,971
22,094
Total Net Interest Income
20,297
19,396
Other Income/(Loss)
Net realized gain/(loss)
(151,143
)
(20,583
)
Net interest component of interest rate
swaps
923
1,781
Unrealized gain/(loss) on real estate
securities and loans, net
(313,897
)
46,753
Unrealized gain/(loss) on derivative and
other instruments, net
5,686
(10,086
)
Foreign currency gain/(loss), net
1,649
—
Other income
3
414
Total Other Income/(Loss)
(456,779
)
18,279
Expenses
Management fee to affiliate
2,149
2,345
Other operating expenses
2,342
3,781
Equity based compensation to affiliate
88
126
Excise tax
(815
)
92
Servicing fees
579
371
Total Expenses
4,343
6,715
Income/(loss) before equity in
earnings/(loss) from affiliates
(440,825
)
30,960
Equity in earnings/(loss) from
affiliates
(44,192
)
(771
)
Net Income/(Loss) from Continuing
Operations
(485,017
)
30,189
Net Income/(Loss) from Discontinued
Operations
—
(1,034
)
Net Income/(Loss)
(485,017
)
29,155
Dividends on preferred stock
5,667
3,367
Net Income/(Loss) Available to Common
Stockholders
$
(490,684
)
$
25,788
Earnings/(Loss) Per Share -
Basic
Continuing Operations
$
(14.98
)
$
0.87
Discontinued Operations
—
(0.03
)
Total Earnings/(Loss) Per Share of
Common Stock
$
(14.98
)
$
0.84
Earnings/(Loss) Per Share -
Diluted
Continuing Operations
$
(14.98
)
$
0.87
Discontinued Operations
—
(0.03
)
Total Earnings/(Loss) Per Share of
Common Stock
$
(14.98
)
$
0.84
Weighted Average Number of Shares of
Common Stock Outstanding
Basic
32,749
30,551
Diluted
32,749
30,581
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 is calculated using stockholders’ equity
less net proceeds of our 8.25% Series A Cumulative Redeemable
Preferred Stock ($49.9 million), 8.00% Series B Cumulative
Redeemable Preferred Stock ($111.3 million), and 8.000% Series C
Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock
($111.2 million) as the numerator. The liquidation preference for
the Series A, Series B and Series C Preferred Stock is $51.8
million, $115 million and $115 million, respectively. Book value
includes the current quarter dividend, if any. (2) 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, and where applicable, ABS
Investments, including securities and mortgage loans owned through
investments in affiliates, exclusive of AG Arc LLC. Our Agency
RMBS, Residential Investments, Commercial Investments, and where
applicable, ABS Investments, are held at fair value. Our Credit
Investments refer to our Residential Investments, Commercial
Investments, and where applicable, ABS Investments. Refer to
footnote (4) for more information on the GAAP accounting for
certain items included in our investment portfolio. See footnote
(6) for further details on AG Arc LLC. (3) 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)
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. The related financing includes financing of
$261.4 million and $257.4 million through investments in debt and
equity of affiliates as of March 31, 2020 and December 31, 2019,
respectively. 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 (6) for further details on AG Arc LLC. (4)
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 financing arrangements inclusive of 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 and any
net TBA position (at cost). Total Economic Leverage excludes any
fully non-recourse financing arrangements, and any financing
arrangements and unsettled trades on U.S. Treasuries. Non-recourse
financing arrangements include securitized debt of $197.2 million
and $224.3 million as of March 31, 2020 and December 31, 2019,
respectively. 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. (5) 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. (6) The Company
invests in Arc Home LLC through AG Arc LLC, one of its indirect
subsidiaries. (7) The Company allocates its equity by investment
using the fair value of its investment portfolio, less any
associated leverage, inclusive of any long TBA position (at cost).
The Company allocates all non-investment portfolio related assets
and liabilities to its investment portfolio categories based on the
characteristics of such assets and liabilities 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/20200612005113/en/
AG Mortgage Investment Trust, Inc. Investor Relations (212)
692-2110 ir@agmit.com
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