AG Mortgage Investment Trust, Inc. ("MITT," "we," the "Company"
or "our") (NYSE: MITT) today reported financial results for the
quarter ended March 31, 2021.
Q1 2021 PERFORMANCE AND HIGHLIGHTS
Financial Performance
- $4.92 Book Value per share and $4.76 Adjusted Book Value per
share as of March 31, 2021, as compared to $4.13 and $3.94 as of
December 31, 2020, respectively(1)(2)
- Adjusted Book Value subtracts the full liquidation preference
of our preferred stock from total equity, which does not reflect
underwriting discounts and offering expenses incurred at issuance
that impact our Book Value
- Adjusted Book Value per share increased $0.82, or 20.8%,
primarily due to mark-to-market gains on our Residential and
Commercial portfolios, as well as income generated at Arc Home
- Quarterly Economic Return of 22.3%(3)
- $0.91 of Net Income per diluted common share for Q1 2021, as
compared to $1.16 for Q4 2020(1)
- Includes retrospective adjustment of $0.01 per share in Q1 2021
related to our agency portfolio
- $0.08 of Core Earnings per share for Q1 2021, as compared to
$0.22 for Q4 2020(1)
- Q4 2020 Core Earnings per share was elevated by record
origination volumes produced by Arc Home coupled with elevated gain
on sale margins experienced throughout the industry
First Quarter Activity
- Continued to reposition our investment portfolio, increasing
our concentration of residential investments through the
acquisition of Non-QM Loans and Agency RMBS
- Declared dividends of $0.06 per common share in March 2021
- Declared and paid $5.0 million of preferred dividends during
the quarter
- Exchanged 0.5 million shares of preferred stock, at a slight
discount to par, for 2.8 million shares of common stock in a
private exchange offer
- Utilized ATM program to raise approximately $10.0 million in
net proceeds through the issuance of approximately 2.2 million
shares of common stock at a weighted average price of $4.53 per
share
MANAGEMENT REMARKS
"We are pleased with the performance we achieved during the
quarter while executing on our strategic goals," said David
Roberts, Chief Executive Officer. "We delivered an economic return
of approximately 22% during the first quarter which was reflective
of our increased common dividend of $0.06 per share. Our increase
in adjusted book value was driven by a rise in the value of our
residential whole loan and CMBS portfolios as well as continued
strong performance from Arc Home."
"We increased the size of our investment portfolio to $1.9
billion mainly through purchases of Non-QM Loans and Agency RMBS.
We also took advantage of strong credit markets to sell commercial
and Non-Agency securities, continuing our progress of shifting the
portfolio into residential whole loans," said T.J. Durkin,
President. Mr. Durkin also added, "During the quarter, we executed
another accretive opportunity to strengthen our capital base by
completing a preferred stock exchange offer and also utilized our
ATM program to raise approximately $10 million through the issuance
of common stock."
"Recent regulatory, structural and market changes have set the
backdrop for what will likely be the most dynamic period for
investing in the new origination non-agency residential space in
decades," said Chief Investment Officer, Nicholas Smith. "As a
result of these changes coupled with mortgage credit availability
at levels last seen almost a decade ago, we are confident that we
will be able to prudently grow our Non-Agency loan portfolio by
delivering our origination partners attractive product
offerings."
Q1 2021 PORTFOLIO AND FINANCING UPDATE
Investment Portfolio
- $1.9 billion Investment Portfolio(4)(5) and 2.6x Economic
Leverage Ratio(6) as of March 31, 2021, as compared to $1.4 billion
and 1.5x, respectively, as of December 31, 2020
- Increased our Non-QM Loan and Agency RMBS portfolios through
net purchases of $208.5 million and $443.6 million,
respectively
- Sold two Commercial Loans and several CMBS and Non-Agency RMBS
to support growth in our residential portfolios
Financing
- $1.2 billion of MTM recourse financing and $422.9 million of
non-MTM non-recourse financing as of March 31, 2021, as compared to
$580.1 million and $466.3 million, respectively, as of December 31,
2020(a)
- At March 31, 2021, MITT had total liquidity of $51.6 million of
cash, as compared to total liquidity of $54.2 million as of
December 31, 2020
- Repaid $10 million secured note and accrued interest to our
Manager upon maturity on March 31, 2021
(a) As of March 31, 2021, total financing of $1.6 billion
includes financing arrangements of $1.2 billion, collateralized by
various asset types in our investment portfolio, and securitized
debt of $344.4 million, collateralized by Re/Non-Performing Loans.
As of December 31, 2020, total financing of $1.0 billion includes
financing arrangements of $680.8 million, collateralized by various
asset types in our investment portfolio; securitized debt of $355.2
million, collateralized by Re/Non-Performing Loans; and a secured
loan from the Manager of $10.4 million.(5)
INVESTMENT PORTFOLIO
The following summarizes the Company’s investment portfolio as
of March 31, 2021(4)(5):
($ in millions)
Fair Value
Percent of Fair Value
Allocated Equity(7)
Percent of Equity
Residential Investments(a)
$
876.8
46.2
%
$
281.9
61.9
%
Agency RMBS(a)
918.8
48.4
%
111.0
24.4
%
Commercial Investments
104.0
5.4
%
62.4
13.7
%
Total
$
1,899.6
100.0
%
$
455.3
100.0
%
(a) As of March 31, 2021, the table above includes fair value of
$217.4 million of Residential Investments and $0.4 million of
Agency RMBS that are included in the “Investments in debt and
equity of affiliates” line item on our consolidated balance sheet.
These Residential Investments include $149.0 million of Non-QM
Loans, $45.7 million of Re/Non-Performing Loans, and $22.7 million
of Land Related Financing.
Investment Portfolio Highlights
- Continued focus on repositioning our portfolio through
investing in residential whole loans
- Current quarter increase in Residential Investments,
specifically in Non-QM Loans facilitated through Arc Home's
origination growth in the product offering as well as acquisitions
from third party originators
- Increased our Non-QM portfolio to represent 18.9% of our
Investment Portfolio at quarter end, up from 11.0% as of December
31, 2020
- Approximately $0.3 billion of Non-QM Loans aggregated for
future securitizations as of March 31, 2021, while continuing to
grow this population subsequent to quarter end
Residential Investments Activity
- Purchased $208.5 million of Non-QM Loans, $59.2 million of
which were purchased from Arc Home
- Sold several Prime, Non-U.S. RMBS, and Credit Risk Transfer
positions for proceeds of $23.2 million
Commercial Investments Activity
- Sold two commercial loans for gross proceeds of $74.3 million,
releasing unfunded commitments of approximately $28.8 million as of
December 31, 2020
- Sold various Single/Asset-Single/Borrower, Conduit and Freddie
Mac-K Series positions for proceeds of $17.2 million
- Reduced our Commercial Investments portfolio as a percentage of
our Investment Portfolio to 5.4% as of March 31, 2021 from 13.1% as
of December 31, 2020
Transactions Subsequent to Quarter End
- Purchased $154.2 million of Non-QM Loans, $47.3 million of
which were purchased from Arc Home
- We amended or entered into financing arrangements to increase
our maximum uncommitted borrowing capacity to finance Non-QM Loans
to $800 million
- Participated in a rated Non-QM securitization alongside other
Angelo Gordon funds, which termed out repo financing into lower
cost, fixed rate, long-term financing related to Non-QM loans with
a fair value of $171.4 million
- Maintained exposure to the securitization through an interest
in the subordinated tranches
- Sold remaining Freddie Mac K-Series positions for total
proceeds of $16.8 million
ARC HOME UPDATE
- MITT, alongside other Angelo Gordon funds, owns Arc Home,(8) a
licensed mortgage originator. MITT indirectly owns approximately
44.6% of Arc Home
- Arc Home re-entered the Non-QM market in July of 2020 and has
since focused its efforts on growth within this product offering
- Non-QM originations grew to $187.9 million in Q1 2021
- Increased composition of funding dollars to 15.6% in Q1 2021,
as compared to 6.5% in Q4 2020
- Arc Home generated pre-tax net income of $18.1 million in the
first quarter
- Resulted in net income of $6.3 million for MITT
- The table below provides a summary of Arc Home's comparative
performance:
2019 FY
2020 FY
Q4 2020
Q1 2021
Origination Volume
Lock Dollars $B(a)
$ 2.2
$
5.3
$
1.4
$
1.4
Funding Dollars $B
$ 1.6
$
3.8
$
1.2
$
1.2
Funding by Channel(b)
Retail/Direct
20.7 %
32.0%
27.0%
24.7%
Wholesale
34.1 %
35.9%
38.7%
50.2%
Correspondent
45.2 %
32.0%
34.3%
25.1%
Funding by Product(b)
Conventional
62.7 %
79.8%
78.6%
73.7%
Government
34.5 %
15.4%
13.9%
7.9%
Jumbo
1.5 %
0.7%
1.0%
2.8%
Non-QM
1.3%
4.1%
6.5%
15.6%
Gain on Sale Margin
145bps
310bps
353bps
255bps
(a) Represents loans yet to be funded whereby the borrower has
entered into an interest rate lock agreement (b) Represents the
weighted average calculated based on quarterly funding dollars
RESIDENTIAL WHOLE LOAN OPPORTUNITIES
Non-Agency Residential Mortgage Origination Tailwinds
- Expect to see growth in most segments of the New Origination
Non-Agency mortgage space including Non-QM, Prime Jumbo, Expanded
Prime, Jumbo Prime High LTV along with conventional (GSE Eligible)
products
- Over the next few years, annual issuances can grow up to
$150-200 billion as compared to the historical market that had
struggled to surpass $50 billion since the Financial Crisis
- Growth will be driven by a combination of market, regulatory,
and structural changes:
- Recent amendments to the Preferred Stock Purchase Agreements
for Fannie Mae and Freddie Mac, inclusive of a 7% cap on second
homes and investor properties, and the expiring GSE QM ("Qualified
Mortgage") Patch will create opportunity for private capital
- CFPB amendment of the Ability to Repay framework replaced with
a spread to APR over Average Prime Offer Rate for determining QM
Safe Harbor and QM Rebuttable Presumption is expected to expand
origination volumes as institutions re-evaluate associated risks
and underwriting costs
- Margin compression combined with historic capacity and
regulatory relief will drive originators who previously
de-emphasized or discontinued Non-Agency production to re-enter the
market as well as bring new competitors into the space
Market and Economic Outlook
- Attractive risk adjusted returns with prudent expansion of
underwriting
- The MBA Mortgage Credit Availability Index is currently at
levels last seen in 2013
- Favorable gestation financing and securitization markets
- Increased production driven by the new regulatory framework
- Decreased risk, costs, and timelines associated with
origination
- Increased capital efficiency
- Fundamentals remain favorable for the housing market and the
consumer
Our Strategic Plan
- Streamline MITT’s business model to focus on residential whole
loan investments, ultimately positioning the company as a pure play
residential credit company
- Simplified asset mix with a focus on strong credit fundamentals
when deploying capital into newly originated Non-Agency whole loan
opportunities
- Reduced leverage risk due to emphasis on securitization
financing which provides non-MTM non-recourse financing at lower
cost of funds
- Utilize Agency RMBS for our investment company act exemption
and liquidity purposes while also generating attractive
returns
Competitive Advantage
- MITT is uniquely positioned to capitalize on this opportunity
given the depth of the current investment team which has a proven
record of sourcing whole loans
- Red Creek, an affiliate of Angelo Gordon, allows MITT to
streamline asset management services over its investment
portfolio
- Arc Home, a vertically integrated mortgage origination
affiliate, provides the ability to organically grow origination and
product offerings
KEY STATISTICS
($ in millions, except per share
data)
March 31, 2021
Investment portfolio(4)
$
1,899.6
Financing arrangements(5)
1,246.2
Total Economic Leverage(6)
1,161.6
Stockholders’ equity
455.3
GAAP Leverage Ratio
3.2x
Economic Leverage Ratio(6)
2.6x
Book value, per share(1)(2)
$
4.92
Adjusted Book value, per share(1)(2)
$
4.76
Dividend, per share(1)
$
0.06
Duration gap (in years)(9)
0.46
DIVIDEND
On February 16, 2021, 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, $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, 2021 to
stockholders of record as of February 26, 2021.
On March 22, 2021, the Company’s board of directors declared a
first quarter dividend of $0.06 per share of common stock that was
paid on April 30, 2021 to stockholders of record as of April 1,
2021.
STOCKHOLDER CALL
The Company invites stockholders, prospective stockholders and
analysts to participate in MITT’s first quarter earnings conference
call on May 6, 2021 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 9351 300.
A presentation will accompany the conference call and will be
available under "Presentations" in the "Investor Relations" section
on the Company’s website at www.agmit.com. Select the Q1 2021
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
May 7, 2021 through June 5, 2021. To access the replay, please go
to
https://onlinexperiences.com/Launch/QReg/ShowUUID=C3DE81FB-CB7B-4D82-A386-4CBA2049853E&LangLocaleID=1033.
The replay passcode is 50153340.
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 a diversified risk-adjusted
portfolio of Credit Investments and Agency RMBS. Its Credit
Investments 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. (“Angelo Gordon”) is a privately
held limited partnership founded in November 1988. The firm
currently manages approximately $43 billion 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 associated offices elsewhere in the
U.S., Europe, and Asia. For more information, visit www.angelogordon.com.
FORWARD LOOKING STATEMENTS
This press release includes "forward-looking statements" within
the meaning of the safe harbor provisions of the United States
Private Securities Litigation Reform Act of 1995 related to
dividends, book value, our investments, our business and investment
strategy, investment returns, return on equity, liquidity,
financing, taxes, our assets, our interest rate sensitivity, and
our views on certain macroeconomic trends and conditions, among
others. Forward-looking statements are based on estimates,
projections, beliefs and assumptions of management of our Company
at the time of such statements and are not guarantees of future
performance. Forward-looking statements involve risks and
uncertainties in predicting future results and conditions. Actual
results could differ materially from those projected in these
forward-looking statements due to a variety of factors, including,
without limitation, the uncertainty and economic impact of the
COVID-19 pandemic and of responsive measures implemented by various
governmental authorities, businesses and other third parties; our
ability to continue executing on our strategic goals, including our
ability to continue increasing the size of our investment portfolio
and shifting into residential whole loans; our ability to prudently
grow our Non-Agency loan portfolio by delivering origination
partners attractive product offerings or otherwise; whether growth
in the new origination Non-Agency mortgage space will occur as
anticipated or at all; whether market, regulatory and structural
changes will result in the market opportunities we expect or at
all, and whether we will be able to capitalize on such
opportunities in the manner we anticipate; our levels of leverage,
including our levels of non-recourse financing; changes in our
business and investment strategy; our ability to predict and
control costs; changes in interest rates and the fair value of our
assets, including negative changes resulting in margin calls
relating to the financing of our assets; changes in the yield
curve; the timing and amount of stock issuances pursuant to our ATM
program or otherwise; changes in prepayment rates on the loans we
own or that underlie our investment securities; increased rates of
default or delinquencies and/or decreased recovery rates on our
assets; the availability of and competition for our target
investments; our ability to obtain and maintain financing
arrangements on terms favorable to us or at all; changes in general
economic conditions in our industry and in the finance and real
estate markets, including the impact on the value of our assets;
conditions in the market for Residential Investments, Agency RMBS,
and Commercial Investments; 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; how COVID-19 may affect us, our
operations and personnel; the forbearance program included in the
Coronavirus Aid, Relief, and Economic Security Act; our ability to
make distributions to our stockholders in the future; our ability
to maintain our qualification as a REIT for federal tax purposes;
and our ability to qualify for an exemption from registration under
the Investment Company Act of 1940, as amended. Additional
information concerning these and other risk factors are contained
in our filings with the Securities and Exchange Commission ("SEC"),
including those described in Part I – Item 1A. “Risk Factors” of
our Annual Report on Form 10-K for the fiscal year ended December
31, 2020, as such factors may be updated from time to time our
period filings with the SEC. Copies are available free of charge on
the SEC's website, http://www.sec.gov/. All forward looking
statements in this press release speak only as of the date of this
press release. We undertake no duty to update any forward-looking
statements to reflect any change in our expectations or any change
in events, conditions or circumstances on which any such statement
is based.
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 Core Earnings,
investment portfolio, financing arrangements, and economic leverage
ratio, which are calculated by including or excluding
unconsolidated investments in affiliates or, with respect to our
equity allocation calculation, by allocating all non-investment
portfolio related assets and liabilities to our investment
portfolio categories based on the characteristics of such assets
and liabilities, as described in the footnotes to this press
release. Our management team believes that this non-GAAP financial
information, when considered with our GAAP 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 of the non-GAAP financial measures included in
this press release to the most directly comparable financial
measures prepared in accordance with GAAP should be carefully
evaluated.
AG Mortgage Investment Trust,
Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
(in thousands, except per
share data)
March 31, 2021
December 31, 2020
Assets
Real estate securities, at fair value:
Agency - $915,423 and $460,949 pledged as
collateral, respectively
$
915,423
$
518,352
Non-Agency - $14,751 and $28,653 pledged
as collateral, respectively
16,371
38,406
CMBS - $29,439 and $42,669 pledged as
collateral, respectively
45,838
56,788
Residential mortgage loans, at fair value
- $257,844 and $46,571 pledged as collateral, respectively
642,959
435,441
Commercial loans, at fair value
58,209
111,549
Commercial loans held for sale, at fair
value
—
13,959
Investments in debt and equity of
affiliates
160,323
150,667
Excess mortgage servicing rights, at fair
value
3,000
3,158
Cash and cash equivalents
51,637
47,926
Restricted cash
39,918
14,392
Other assets
8,922
9,407
Total Assets
$
1,942,600
$
1,400,045
Liabilities
Financing arrangements
$
1,132,200
$
564,047
Securitized debt, at fair value
344,429
355,159
Payable on unsettled trades
—
51,136
Dividend payable
2,791
1,243
Other liabilities
7,875
18,755
Total Liabilities
1,487,295
990,340
Commitments and Contingencies
Stockholders’ Equity
Preferred stock - $0.01 par value; 50,000
shares authorized:
8.25% Series A Cumulative Redeemable
Preferred Stock; 1,663 and 1,817 shares issued and outstanding at
March 31, 2021 and December 31, 2020, respectively ($41,580 and
$45,413 aggregate liquidation preference, respectively)
40,110
43,808
8.00% Series B Cumulative Redeemable
Preferred Stock; 3,814 and 4,165 shares issued and outstanding at
March 31, 2021 and December 31, 2020, respectively ($95,353 and
$104,118 aggregate liquidation preference, respectively)
92,279
100,762
8.000% Series C Fixed-to-Floating Rate
Cumulative Redeemable Preferred Stock, 3,883 shares issued and
outstanding at March 31, 2021 and December 31, 2020 ($97,079
aggregate liquidation preference)
93,908
93,908
Common stock, par value $0.01 per share;
450,000 shares of common stock authorized and 46,503 and 41,434
shares issued and outstanding at March 31, 2021 and December 31,
2020, respectively
465
414
Additional paid-in capital
710,746
688,871
Retained earnings/(deficit)
(482,203
)
(518,058
)
Total Stockholders’ Equity
455,305
409,705
Total Liabilities & Stockholders’
Equity
$
1,942,600
$
1,400,045
AG Mortgage Investment Trust,
Inc. and Subsidiaries
Consolidated Statements of
Operations (Unaudited)
(in thousands, except per
share data)
Three Months Ended
March 31, 2021
March 31, 2020
Net Interest Income
Interest income
$
12,119
$
40,268
Interest expense
4,061
19,971
Total Net Interest Income
8,058
20,297
Other Income/(Loss)
Net realized gain/(loss)
(4,038
)
(151,143
)
Net interest component of interest rate
swaps
(741
)
923
Unrealized gain/(loss) on real estate
securities and loans, net
(6,658
)
(313,897
)
Unrealized gain/(loss) on derivative and
other instruments, net
26,507
5,686
Foreign currency gain/(loss), net
14
1,649
Other income
23
3
Total Other Income/(Loss)
15,107
(456,779
)
Expenses
Management fee to affiliate
1,654
2,149
Other operating expenses
3,983
930
Restructuring related expenses
—
1,500
Excise tax
—
(815
)
Servicing fees
615
579
Total Expenses
6,252
4,343
Income/(loss) before equity in
earnings/(loss) from affiliates
16,913
(440,825
)
Equity in earnings/(loss) from
affiliates
26,336
(44,192
)
Net Income/(Loss)
43,249
(485,017
)
Gain on Exchange Offers, net
358
—
Dividends on preferred stock
(4,924
)
(5,667
)
Net Income/(Loss) Available to Common
Stockholders
$
38,683
$
(490,684
)
Earnings/(Loss) Per Share -
Basic
Total Earnings/(Loss) Per Share of Common
Stock
$
0.91
$
(14.98
)
Earnings/(Loss) Per Share -
Diluted
Total Earnings/(Loss) Per Share of Common
Stock
$
0.91
$
(14.98
)
Weighted Average Number of Shares of
Common Stock Outstanding
Basic
42,348
32,749
Diluted
42,348
32,749
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, inclusive of our investment in
AG Arc, and (b) net realized gains/(losses) on the sale or
termination of such instruments, (ii) any transaction related
expenses incurred in connection with the acquisition or disposition
of our investments, (iii) 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) realized and unrealized changes in the fair value of Arc
Home's net mortgage servicing rights and the derivatives intended
to offset changes in the fair value of those net mortgage servicing
rights, (v) deferred taxes recognized at our taxable REIT
subsidiaries, if any, (vi) any foreign currency gain/(loss)
relating to monetary assets and liabilities, (vii) income from
discontinued operations, and (viii) any gains/(losses) associated
with exchange transactions on our common and preferred stock. Items
(i) through (viii) above include any amount related to those items
held in affiliated entities. Management considers the transaction
related expenses referenced in (ii) above to be similar to realized
losses incurred at the acquisition or disposition of an asset and
does not view them as being part of its core operations. Management
views the exclusion described in (iv) above to be consistent with
how it calculates Core Earnings on the remainder of its portfolio.
Management excludes all deferred taxes because it believes deferred
taxes are not representative of current operations. As defined,
Core Earnings include the net interest income and other income
earned on our 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.
A reconciliation of GAAP Net Income/(loss) available to common
stockholders to Core Earnings for the three months ended March 31,
2021 and March 31, 2020 is set forth below (in thousands, except
per share data):
Three Months Ended
March 31, 2021
March 31, 2020
Net Income/(loss) available to common
stockholders
$
38,683
$
(490,684
)
Add (Deduct):
Net realized (gain)/loss
4,038
151,143
Unrealized (gain)/loss on real estate
securities and loans, net
6,658
313,897
Unrealized (gain)/loss on derivative and
other instruments, net
(26,507
)
(5,686
)
Equity in (earnings)/loss from
affiliates
(26,336
)
44,192
Net interest income and expenses from
equity method investments(a)
7,322
1,233
Transaction related expenses and deal
related performance fees
(12
)
(3,412
)
Foreign currency (gain)/loss, net
(14
)
(1,649
)
(Gains) from Exchange Offer, net
(358
)
—
Drop income
—
322
Core Earnings(b)
$
3,474
$
9,356
Core Earnings, per Diluted Share(b)
$
0.08
$
0.29
(a) For the three months ended March 31, 2021 and March 31,
2020, $2.6 million or $0.06 per share and $(4.6 million) or $(0.14)
per share, respectively, of realized and unrealized changes in the
fair value of Arc Home's net mortgage servicing rights and
corresponding derivatives net of taxes were excluded from Core
Earnings per diluted share. (b) The three months ended March 31,
2021 included a cumulative retrospective adjustment of $0.5 million
or $0.01 per diluted share on the premium amortization for
investments accounted for under ASC 320-10.
Footnotes
(1) Diluted per share figures are calculated using diluted
weighted average outstanding shares in accordance with GAAP. (2) As
of March 31, 2021, book value is calculated using stockholders’
equity less net proceeds of our cumulative redeemable preferred
stock ($226.3 million) as the numerator. As of March 31, 2021,
adjusted book value is calculated using stockholders’ equity less
the liquidation preference of our cumulative redeemable preferred
stock ($234.0 million) as the numerator. (3) The economic return on
equity for the quarter represents the change in adjusted book value
per share from December 31, 2020 to March 31, 2021, plus the common
dividends declared over that period, divided by adjusted book value
per share as of December 31, 2020. (4) The investment portfolio at
period end consists of the net carrying value of our Residential
Investments, Agency RMBS, Commercial Investments, and where
applicable, any long positions in TBAs, including securities and
mortgage loans owned through investments in affiliates, exclusive
of AG Arc LLC. Our Residential Investments, Agency RMBS, and
Commercial Investments are held at fair value. Our Credit
Investments refer to our Residential Investments and Commercial
Investments. Refer to footnote 5 for more information on the GAAP
accounting for certain items included in our investment portfolio.
The percentage of fair value includes any net TBA positions and
securities and mortgage loans owned through investments in
affiliates and is exclusive of AG Arc LLC. (5) Generally, when we
purchase an investment and finance it, the investment is included
in our assets and the financing is reflected in our liabilities on
our consolidated balance sheet as either “Financing arrangements”
or “Securitized debt, at fair value.” Throughout this press release
where we disclose our investment portfolio and the related
financing, we have presented this information inclusive of (i)
securities and mortgage loans owned through investments in
affiliates that are accounted for under GAAP using the equity
method and, where applicable, (ii) long positions in TBAs, which
are accounted for as derivatives under GAAP. The related financing
includes financing of $114.0 million and $116.7 million recorded
within "Investments in debt and equity of affiliates" on the
Company's consolidated balance sheet as of March 31, 2021 and
December 31, 2020, respectively. This presentation excludes
investments through AG Arc LLC unless otherwise noted. (6) The
Economic Leverage Ratio is calculated by dividing total Economic
Leverage, including any net TBA position, by our GAAP stockholders’
equity at quarter-end. Total Economic Leverage at quarter-end
includes recourse financing arrangements recorded within
"Investments in debt and equity of affiliates" exclusive of any
financing utilized through AG Arc LLC, plus the payable on all
unsettled buys less the financing on all unsettled sells and any
net TBA position (at cost). Total Economic Leverage excludes any
non-recourse financing arrangements. Non-recourse financing
arrangements include securitized debt, as well as financing on
certain Non-QM Loans. Our obligation to repay our non-recourse
financing arrangements is limited to the value of the pledged
collateral thereunder and does not create a general claim against
us as an entity. (7) We allocate our equity by investment using the
fair value of our investment portfolio, less any associated
leverage, inclusive of any long TBA position (at cost). We allocate
all non-investment portfolio related assets and liabilities to our
investment portfolio categories based on the characteristics of
such assets and liabilities in order to sum to stockholders' equity
per the consolidated balance sheets. Our equity allocation method
is a non-GAAP methodology and may not be comparable to the
similarly titled measure or concepts of other companies, who may
use different calculations and allocation methodologies. (8) We
invest in Arc Home LLC through AG Arc LLC, one of our equity method
investees. Our investment in AG Arc LLC is $52.1 million as of
March 31, 2021, representing a 44.6% ownership interest. (9) We
estimate duration based on third-party models. Different models and
methodologies can produce different effective duration estimates
for the same securities. Duration includes any net TBA position.
Duration does not include our equity interest in AG Arc LLC.
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version on businesswire.com: https://www.businesswire.com/news/home/20210506005397/en/
AG Mortgage Investment Trust, Inc. Investor Relations (212)
692-2110 ir@agmit.com
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