AG Mortgage Investment Trust, Inc. Reports Second Quarter Results

AG Mortgage Investment Trust, Inc. Reports Second Quarter Results

NEW YORK--(BUSINESS WIRE)-- AG Mortgage Investment Trust, Inc. ("MITT" or the "Company") (NYS: MITT) today reported financial results for the quarter ended June 30, 2013. AG Mortgage Investment Trust, Inc. is an actively managed REIT that opportunistically invests in a diversified risk-adjusted portfolio of Agency RMBS, Non-Agency RMBS, ABS, CMBS, commercial loans and other real estate related assets. A reconciliation of core earnings to net income appears at the end of this press release.

SECOND QUARTER 2013 FINANCIAL HIGHLIGHTS


See footnotes at the end of this press release

  • Net loss of $(2.66) per common share (6)

  • Core Earnings of $0.83 per share

  • $0.80 per share common dividend declared

  • $1.78 per common share of undistributed taxable income (1) (13)

  • $19.77 net book value per share as of June 30, 2013 (1), net of the second quarter dividend

INVESTMENT HIGHLIGHTS

  • $4.5 billion investment portfolio value as of June 30, 2013 (2) (4)

    • 68.2% Agency RMBS investment portfolio

    • 31.8% credit investment portfolio, comprised of Non-Agency RMBS, ABS, CMBS, and commercial loan assets

  • 1.96% net interest margin as of June 30, 2013 (3)

  • 5.40x leverage as of June 30, 2013 (2) (7)

  • Added approximately $1 billion notional of swaps during the quarter

    • Swap ratio at quarter end of 134% of Agency RMBS repo notional, or 95% of total repo notional (8)

  • 8.1% constant prepayment rate ("CPR") for the second quarter on the Agency RMBS investment portfolio (5)

    • 9.6% CPR for the month of June

"MITT was not immune to the consequences of the challenging market environment during the second quarter," said David Roberts, Chief Executive Officer. "Based on the heightened volatility in interest rates and in Agency MBS spreads, we responded, and expect to continue to respond, with measures we believe will help maximize long-term franchise value for our shareholders."

KEY STATISTICS (2)

Weighted Average at
June 30, 2013

Weighted Average for
the Quarter Ended
June 30, 2013

Investment portfolio

$

4,523,846,041

$

5,084,149,375

Repurchase agreements

$

4,226,403,356

$

4,423,460,112

Stockholders' equity

$

722,110,625

$

808,708,921

Leverage ratio (7)

5.40x

5.47x

Swap ratio - Total repo (8)

95%

64%

Swap ratio - Agency repo (8)

134%

89%

Yield on investment portfolio (9)

3.80%

3.84%

Cost of funds (10)

1.84%

1.46%

Net interest margin (3)

1.96%

2.38%

Management fees (11)

1.56%

1.39%

Other operating expenses (12)

1.49%

1.33%

Book value, per share (1)

$

19.77

Dividend, per share

$

0.80

INVESTMENT PORTFOLIO

The following summarizes the Company's investment portfolio as of June 30, 2013 (2):

Weighted Average

Current Face

Premium (Discount)

Amortized Cost

Fair Value

Coupon*

Yield

Agency RMBS:

15-Year Fixed Rate

$

514,575,981

$

15,682,629

$

530,258,610

$

532,293,365

3.16

%

2.50

%

20-Year Fixed Rate

296,875,147

13,800,140

310,675,287

303,320,182

3.28

%

2.58

%

30-Year Fixed Rate

1,998,841,682

77,870,676

2,076,712,358

2,040,093,622

3.62

%

2.92

%

ARM

32,816,318

1,541,770

34,358,088

33,214,840

2.96

%

2.44

%

Interest Only

973,733,259

(794,535,946

)

179,197,313

177,837,123

5.10

%

6.58

%

Credit Investments:

Non-Agency RMBS

1,347,360,002

(171,294,388

)

1,176,065,614

1,191,158,261

4.34

%

5.45

%

ABS

100,004,252

-

100,004,252

97,916,107

3.78

%

3.88

%

CMBS

119,539,310

(7,964,638

)

111,574,672

110,431,221

5.03

%

5.90

%

Interest Only

214,609,130

(206,735,771

)

7,873,359

7,581,320

0.62

%

5.80

%

Commercial Loan

30,000,000

122,936

30,122,936

30,000,000

9.00

%

9.87

%

Total

$

5,628,355,081

$

(1,071,512,592

)

$

4,556,842,489

$

4,523,846,041

3.94

%

3.80

%

* Equity residual investments and principal only securities with a zero coupon rate are excluded from this calculation.

As of June 30, 2013, the weighted average yield on the Company's investment portfolio was 3.80% and its weighted average cost of funds was 1.84%. This resulted in a net interest margin of 1.96% as of June 30, 2013. (3)

The Company had net realized losses of $(76.6) million, or $(2.73) per share, during the quarter ended June 30, 2013. Of this amount, $(66.1) million, or $(2.36) per share, was from Agency RMBS, $(4.0) million, or $(0.14) per share, was from credit investments, and $(6.5) million, or $(0.23) per share, was from the net settlement of interest rate swaps. Of these amounts, $(43.3) million, or $(1.54) per share, was from the recognition of other-than-temporary impairment recorded on certain securities sold subsequent to quarter end.

The CPR for the Agency RMBS investment portfolio was 8.1% for the second quarter, and 9.6% for the month of June 2013. (5)

The weighted average cost basis of the Agency RMBS investment portfolio, excluding interest-only securities, was 103.8% as of June 30, 2013. The amortization of premiums (net of any accretion of discounts) on these securities for the second quarter of 2013 was $3.2 million, or $(0.12) per share. The unamortized net Agency RMBS premium as of June 30, 2013 was $108.9 million.

Premiums and discounts associated with purchases of the Company's securities are amortized or accreted into interest income over the estimated life of such securities, using the effective yield method. The Company recorded a $1.6 million, or $0.06 per share retrospective adjustment due to the change in projected cash flows on its bonds. Since the cost basis of the Company's Agency RMBS securities, excluding interest-only securities, exceeds the underlying principal balance by 3.8% as of June 30, 2013, 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.

We have also entered into "to-be-announced" ("TBA") positions to facilitate the future purchase or sale of Agency RMBS. Under the terms of these TBAs, the Company agrees to purchase or sell, for future receipt or delivery, Agency RMBS with certain principal and interest specifications and certain types of underlying collateral, but the particular Agency RMBS to be received or delivered are not identified until shortly before (generally two days) the TBA settlement date. At June 30, 2013, we had $150.0 million net notional amount of TBA positions with net weighted average purchase and sale prices of 102.0% and 101.5%, respectively. As of June 30, 2013, our TBA portfolio had a net weighted average settlement date of July 17, 2013. We have recorded derivative assets and liabilities of $2.2 million and $4.5 million, respectively, reflecting TBA positions outstanding at June 30, 2013.

LEVERAGE AND HEDGING ACTIVITIES

The investment portfolio is financed with repurchase agreements as of June 30, 2013 as summarized below:

Repurchase Agreements
Maturing Within:

Balance

Weighted
Average Rate

Weighted
Average Maturity

30 Days or Less

$

2,465,385,846

0.95

%

14.2

31-60 Days

1,056,008,000

0.50

%

43.5

61-90 Days

232,580,000

0.60

%

76.5

Greater than 90 Days

472,429,510

0.92

%

226.8

Total / Weighted Average

$

4,226,403,356

0.82

%

48.7

The Company has entered into repurchase agreements with 30 counterparties. We continue to rebalance our exposures to counterparties, add new counterparties and extend original maturities. The weighted average original maturity increased from 87 days as of March 31, 2013, after adjusting for the Wells Fargo Bank, National Association repurchase agreement facility renewed subsequent to first quarter-end, to 94 days as of June 30, 2013.

We have entered into interest rate swap agreements to hedge our portfolio. During the quarter, we added approximately $1 billion notional of interest rate swaps, which increased our swap ratio from 63% at March 31, 2013 to 95% at June 30, 2013 of total repo notional, and 83% at March 31, 2013 to 134% at June 30, 2013 of Agency RMBS repo notional. The Company's swaps as of June 30, 2013 are summarized as follows:

Interest Rate Swaps

Maturity

Notional Amount

Weighted Average
Pay Rate

Weighted
Average Receive
Rate**

Weighted
Average Years to
Maturity

2015

$

261,700,000

0.93

%

0.27

%

1.88

2016

397,500,000

*

1.02

%

0.30

%

2.87

2017

445,000,000

1.03

%

0.28

%

4.18

2018

1,153,370,000

1.33

%

0.28

%

4.89

2019

375,000,000

1.41

%

0.28

%

6.03

2020

783,200,000

1.75

%

0.27

%

6.83

2022

50,000,000

1.69

%

0.27

%

9.18

2023

296,000,000

2.48

%

0.27

%

9.94

Total/Wtd Avg

$

3,761,770,000

1.43

%

0.28

%

5.36

* This figure includes a forward starting swap with a total notional of $30.0 million and a start date of July 2, 2013. Weighted average rates shown are inclusive of rates corresponding to the terms of the swap as if the swap were effective as of June 30, 2013.

** Approximately 2% of our receive float interest rate swap notionals reset monthly based on one-month LIBOR and 98% of our receive float interest rate swap notionals reset 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 net premiums paid on investments, (iii) the timing and amount of deductions related to stock-based compensation, and (iv) taxes. As of June 30, 2013, the Company had undistributed taxable income of approximately $1.78 per share (13), including the effects of dividends.

DIVIDEND

On June 6, 2013, the Company's board of directors declared the second quarter dividend of $0.80 per share of common stock that was paid on July 26, 2013 to stockholders of record as of June 18, 2013.

On May 14, 2013, the Company declared a dividend of $0.51563 per share of Series A preferred stock and a quarterly dividend of $0.50 per share of Series B preferred stock. The preferred distributions were paid on June 17, 2013 to stockholders of record as of May 31, 2013.

STOCKHOLDER CALL

The Company invites stockholders, prospective stockholders and analysts to attend MITT's second quarter earnings conference call on August 7, 2013 at 11:00 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 8846814#.

A presentation will accompany the conference call and will be available on the Company's website at www.agmit.com. Select the Q2 2013 Earnings Presentation link to download and print 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 midnight on August 21, 2013. 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 8846814#.

For further information or questions, please contact Lisa Yahr, the Company's Head of Investor Relations, at (212) 692-2282 or lyahr@angelogordon.com.

ABOUT AG MORTGAGE INVESTMENT TRUST, INC.

AG Mortgage Investment Trust, Inc. is a real estate investment trust that invests in, acquires and manages a diversified portfolio of residential mortgage assets, other real estate-related securities and financial assets. 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. was founded in 1988 and has approximately $24 billion under management. Currently, the firm's investment disciplines encompass five principal areas: (i) distressed debt and leveraged loans, (ii) real estate, (iii) mortgage-backed securities and other structured credit, (iv) private equity and special situations and (v) a number of hedge fund strategies. Angelo, Gordon & Co. employs over 280 employees, including more than 100 investment professionals, and is headquartered in New York, with associated offices in Amsterdam, Chicago, Los Angeles, London, Hong Kong, Seoul, Sydney and Tokyo.

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 future dividends, the credit component of our portfolio book valve, deploying capital, the preferred stock offering and repurchase agreements. Forward-looking statements are based on estimates, projections, beliefs and assumptions of management of the Company at the time of such statements and are not guarantees of future performance. Forward-looking statements involve risks and uncertainties in predicting future results and conditions. Actual results could differ materially from those projected in these forward-looking statements due to a variety of factors, including, without limitation, changes in interest rates, changes in the yield curve, changes in prepayment rates, the availability and terms of financing, changes in the market value of our assets, general economic conditions, market conditions, conditions in the market for Agency RMBS, Non-Agency RMBS, ABS and CMBS securities and loans, 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"). Copies are available free of charge on the SEC's website, http://www.sec.gov/. The Company does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to 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)

June 30, 2013

December 31, 2012

Assets

Real estate securities, at fair value:

Agency - $2,895,273,756 and $3,536,876,135 pledged as collateral, respectively

$

3,086,759,132

$

3,785,867,151

Non-Agency - $739,782,694 and $529,455,020 pledged as collateral, respectively

740,789,967

568,858,645

ABS - $97,916,107 and $33,937,097 pledged as collateral, respectively

97,916,107

33,937,097

CMBS - $90,884,600 and $148,307,262 pledged as collateral, respectively

90,884,600

148,365,887

Commercial loans receivable, at fair value

30,000,000

2,500,000

Investment in affiliates

7,101,859

-

Linked transactions, net, at fair value

67,263,212

45,122,824

Cash and cash equivalents

70,511,846

149,594,782

Restricted cash

28,147,932

9,130,000

Interest receivable

15,291,075

14,242,453

Receivable on unsettled trades - $450,112,813 and $0 pledged as collateral, respectively

452,000,649

96,310,999

Derivative assets, at fair value

44,508,487

-

Other assets

93,181

454,069

Due from broker

3,967,179

884,605

Total Assets

$

4,735,235,226

$

4,855,268,512

Liabilities

Repurchase agreements

$

3,821,644,190

$

3,911,419,818

Payable on unsettled trades

124,438,752

84,658,035

Interest payable

3,227,749

3,204,205

Derivative liabilities, at fair value

10,632,030

36,375,947

Dividend payable

22,685,868

18,540,667

Due to affiliates

4,333,723

3,910,065

Accrued expenses

1,316,510

806,853

Taxes payable

3,655,779

1,731,141

Due to broker

21,190,000

-

Total Liabilities

4,013,124,601

4,060,646,731

Stockholders' Equity

Preferred stock - $0.01 par value; 50,000,000 shares authorized:

8.25% Series A Cumulative Redeemable Preferred Stock, 2,070,000 shares issued and outstanding ($51,750,000 aggregate liquidation preference) at June 30, 2013 and December 31, 2012

49,920,772

49,920,772

8.00% Series B Cumulative Redeemable Preferred Stock, 4,600,000 shares issued and outstanding ($115,000,000 aggregate liquidation preference) at June 30, 2013 and December 31, 2012

111,293,233

111,293,233

Common stock, par value $0.01 per share; 450,000,000 shares of common stock authorized and 28,352,835 and 26,961,936 sh