BETHESDA, Md., May 3, 2017
/PRNewswire/ -- MTGE Investment Corp. ("MTGE" or the "Company")
(Nasdaq: MTGE) today announced financial results for the quarter
ended March 31, 2017.
FIRST QUARTER 2017 FINANCIAL HIGHLIGHTS
- $0.82 net income per common
share
-
- Includes all realized and unrealized gains and losses on
investment and hedging portfolios
- $0.49 net spread and dollar roll
income per common share, excluding estimated "catch-up" premium
amortization, compared to $0.50 per
common share for the previous quarter (1)
-
- Includes $0.16 per common share
of estimated dollar roll income associated with the Company's
$1.4 billion average net long
position in forward purchases and sales of agency mortgage-backed
securities ("MBS") in the "to-be-announced" ("TBA") market
- Excludes $(0.01) per common share
of estimated "catch-up" premium amortization expense due to change
in projected constant prepayment rate ("CPR") estimates
- Excludes $0.03 per common share
of cash contribution from healthcare investments, before
depreciation of real estate assets
- Excludes $(0.05) per common share
of net servicing loss
- $0.45 dividend per common
share
- $19.54 net book value per common
share as of March 31, 2017
-
- Increased $0.37 per common share,
or 1.9%, from $19.17 as of
December 31, 2016
- 4.3% economic return on common equity for the quarter
-
- Comprised of $0.45 dividend and
$0.37 increase in net book value per
common share
ADDITIONAL FIRST QUARTER 2017 HIGHLIGHTS
- $6.1 billion investment portfolio
as of March 31, 2017
-
- $3.0 billion agency
securities
- $2.1 billion net long TBA
- $0.9 billion non-agency
securities
- $0.1 billion healthcare real
estate investments
- 5.9x "at risk" leverage on agency and non-agency securities as
of March 31, 2017, compared to 4.8x as of December 31, 2016
-
- 3.6x excluding net long TBA mortgage position as of
March 31, 2017
- 8.5% projected life CPR for agency securities as of
March 31, 2017
-
- 9.2% agency securities CPR for the quarter
- 2.05% annualized net interest rate spread and dollar roll
income for the quarter, excluding estimated "catch-up" premium
amortization
-
- Excludes 5 bps of "catch-up" premium amortization expense
- A decrease from 2.13% for the prior quarter, excluding 34 bps
of "catch-up" premium amortization benefit
MANAGEMENT REMARKS
"In sharp contrast to the volatility experienced following the
U.S. presidential election, fixed income markets were relatively
stable in the first quarter of 2017," commented Gary Kain, the Company's Chief Executive
Officer, President and Chief Investment Officer. "Investors
continued to favor higher risk assets during the quarter, as
evidenced by the strong performance of U.S. equities and the
further tightening in spreads associated with a wide range of
credit-sensitive fixed income assets, including credit risk
transfer and legacy non-agency securities. Against this
favorable backdrop, MTGE generated strong economic returns for the
quarter.
"The performance of agency MBS, however, was negatively impacted
by growing concerns related to the potential tapering of the
Federal Reserve's reinvestment program. Based upon the spread
widening that occurred over the last several quarters, we believe
current agency MBS valuations largely reflect the market's
consensus expectation that the Federal Reserve will gradually taper
its purchases of agency MBS beginning sometime in late 2017 or
early 2018. Additionally, the funding picture for
agency MBS continues to improve, which, when combined with wider
spreads and reduced interest rate volatility, improves the
projected returns for new investments.
"While the strong performance of legacy non-agency securities
and CRT benefited our net asset value during the quarter, projected
returns in this space have correspondingly declined despite very
favorable housing fundamentals. As such, we have allocated
incremental capital to agency MBS and healthcare investments,
reduced our capital allocated to non-agency securities, and
disposed of our remaining MSR. We expect our senior living
and healthcare assets to benefit from positive underlying
fundamentals, as well as long term, fixed rate GSE and HUD
financing."
"We are very pleased with our performance this quarter, as the
actions that we have taken over the last several quarters are
beginning to benefit shareholders," said Peter Federico,
Executive Vice President and Chief Financial Officer. "For the
quarter, MTGE generated a very strong economic return of 4.3% on
common equity, comprised of a 1.9% improvement in our net asset
value and our $0.45 per share common
dividend, which we increased from $0.40 last quarter as a result of our positive
view of MTGE's earnings profile."
NET BOOK VALUE
As of March 31, 2017, the Company's net book value per
common share was $19.54, an increase
of $0.37 per common share, or 1.9%
from its December 31, 2016 net book
value per common share of $19.17. The
increase in the Company's net book value per common share was
primarily due to net fair value gains on non-agency securities
during the quarter.
INVESTMENT PORTFOLIO
As of March 31, 2017, the Company's investment portfolio
included $3.0 billion of agency MBS,
$2.1 billion of net long TBA
positions, $0.9 billion of non-agency
securities and $0.1 billion of
healthcare real estate investments.
As of March 31, 2017, the Company's fixed rate agency
investments were comprised of $0.5
billion 15 year MBS, $0.1
billion 20 year MBS, $2.3
billion 30 year MBS, $0.2
billion net long 15 year TBA securities and $1.8 billion net long 30 year TBA
securities. As of March 31, 2017, 15 year fixed rate
investments represented 14% of the Company's agency investment
portfolio, a decrease from 21% as of December 31, 2016, and 30 year fixed rate
investments represented 81% of the Company's agency portfolio, an
increase from 72% as of December 31,
2016.
As of March 31, 2017, the Company's net long TBA mortgage
portfolio had a fair value and cost basis of approximately
$2.1 billion, with a net carrying
value of $11.0 million reported in
derivative assets/(liabilities) on the Company's consolidated
balance sheet. The Company accounts for TBA securities as
derivative instruments and recognizes dollar roll income and other
realized and unrealized gains and losses on TBA securities in other
gains (losses), net on the Company's consolidated statements of
operations.
As of March 31, 2017, the Company's agency fixed rate
assets, inclusive of the net long TBA position, had a weighted
average coupon of 3.56%, up from 3.47% at December 31, 2016, comprised of the following
weighted average coupons:
- 3.11% for 15 year securities;
- 3.29% for 20 year securities; and
- 3.65% for 30 year securities.
As of March 31, 2017, the Company's $0.9 billion non-agency portfolio was comprised
of approximately 34% Alt-A, 32% credit risk transfer, 15% prime,
11% option ARM, 6% subprime and 2% commercial mortgage backed
securities ("CMBS").
CONSTANT PREPAYMENT RATES
The CPR for the Company's agency portfolio during the first
quarter of 2017 was 9.2%, down from 12.8% during the fourth
quarter. The weighted average projected CPR for the remaining
life of the Company's agency securities held as of March 31,
2017 was 8.5%, compared to 8.1% as of December 31, 2016.
The Company amortizes and accretes premiums and discounts
associated with purchases of agency securities into interest income
over the estimated life of such securities based on actual and
projected CPRs using the effective yield method. As such,
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 agency asset
yields.
The weighted average cost basis of the Company's agency
securities was 105.2% of par and the unamortized agency net premium
was $149.4 million as of
March 31, 2017. The amortization of premiums (net of any
accretion of discounts) on the agency portfolio for the quarter was
$(5.5) million, which includes
"catch-up" premium amortization expense of $(0.6) million due to changes in the Company's
projected CPR estimates for securities acquired prior to the first
quarter. This compares to net premium amortization cost for the
prior quarter of $(1.1) million
including a "catch-up" premium amortization benefit of $4.3 million.
NON-AGENCY ACCRETION INCOME
The weighted average cost basis of the Company's non-agency
portfolio was 84.7% of par as of March 31, 2017.
Accretion income on the non-agency portfolio for the quarter was
$6.8 million. The total net
discount remaining was $158.8 million
as of March 31, 2017, with $91.4
million designated as credit reserves.
ASSET YIELDS, COST OF FUNDS AND NET INTEREST RATE
SPREAD
The Company's average annualized net interest rate spread on its
balance sheet and dollar roll funded securities for the first
quarter was 2.00% compared to 2.47% in the fourth quarter.
Excluding estimated "catch-up" premium amortization due to changes
in projected CPR, the Company's average annualized net interest
rate spread was 2.05% for the first quarter, compared to 2.13% in
the fourth quarter.
The Company's average agency and non-agency securities asset
yield excluding TBAs was 3.56% for the first quarter, compared to
3.90% for the fourth quarter and 3.60% as of March 31, 2017,
down 10 bps from 3.70% as of December 31,
2016.
The Company's average cost of funds was 1.67% for the first
quarter, compared to 1.41% for the fourth quarter. The
Company's average cost of funds includes the cost of repurchase
agreements, Federal Home Loan Bank ("FHLB") advances and effective
interest rate swaps (including those used to hedge the Company's
dollar roll funded assets) measured against the Company's daily
weighted average repurchase agreement and FHLB advance balances
outstanding. The Company's average cost of funds as of
March 31, 2017 was 1.55%, compared to 1.62% as of December 31, 2016.
The Company recognized $0.49 per
common share of net spread and dollar roll income excluding
"catch-up" premium amortization (a non-GAAP financial measure) for
the first quarter, compared to $0.50
for the prior quarter. Net spread and dollar roll income for
the first quarter included $0.16 per
common share of dollar roll income, compared to $0.14 for the prior quarter. A
reconciliation of the Company's net interest income to net spread
and dollar roll income and additional information regarding the
Company's use of non-GAAP measures are included later in this
release.
LEVERAGE
The Company uses repurchase agreements to fund purchases of
agency and non-agency securities. Including TBA securities, the
Company's "at risk" leverage ratio for agency and non-agency
securities was 5.9x as of March 31, 2017 and averaged 5.1x
during the first quarter.
The $3.2 billion borrowed under
repurchase agreements as of March 31, 2017 had remaining
maturities consisting of:
- $2.1 billion of one month or
less;
- $0.5 billion between one and two
months;
- $0.3 billion between two and
three months;
- $0.1 billion between three and
twelve months; and
- $0.3 billion greater than twelve
months.
As of March 31, 2017, the Company's agency and non-agency
repurchase agreements had an average of 104 days remaining to
maturity, down from 125 days as of December
31, 2016.
The Company's FHLB advances matured in February 2017, coinciding with the termination of
the Company's captive insurance subsidiary's FHLB membership.
HEDGING ACTIVITIES
As of March 31, 2017, 84% of the Company's combined funding
and net TBA balance was hedged through a combination of interest
rate swaps, interest rate swaptions and U.S. Treasury securities,
down 2% from December 31, 2016.
The Company's interest rate swap positions as of March 31,
2017 totaled $3.0 billion in notional
amount, with a weighted average fixed pay rate of 1.37%, a weighted
average receive rate of 1.06% and a weighted average maturity of
3.1 years. The Company enters into interest rate swaps with
longer maturities with the intention of protecting its net book
value and longer term earnings potential.
The Company utilizes interest rate swaptions to mitigate the
Company's exposure to larger, more rapid increases in interest
rates. As of March 31, 2017, the Company held payer
swaption contracts with a total notional amount of $150.0 million and a weighted average expiration
of 2.6 years. These swaptions have an underlying weighted
average interest rate swap term of 5.5 years and a weighted average
pay rate of 3.14% as of March 31, 2017.
The Company held a $(1.3) billion
net short position in U.S. Treasury securities as of March 31,
2017.
SERVICING
During the first quarter, our servicing subsidiary Residential
Credit Solutions ("RCS") sold its remaining MSR and recorded
$2.6 million in servicing revenues
and $5.0 million in servicing
expense, which included $1.1 million
in realization of cash flows on MSR and $0.6
million in expense related to the MSR sale transaction.
HEALTHCARE REAL ESTATE INVESTMENTS
The Company's wholly owned subsidiary, Capital Healthcare
Investments, LLC ("CHI"), held real estate assets of $121 million, financed with $86 million of secured notes payable with a
weighted average interest rate of 3.72% as of March 31,
2017. During the first quarter, CHI acquired $27 million in additional real estate assets and
recorded lease and rental revenues of $3.3
million and expenses of $2.1
million, before $0.6 million
of depreciation of real estate assets.
The Company's real estate assets are accounted for at historical
cost, net of accumulated depreciation, as applicable.
OTHER GAINS (LOSSES), NET
The Company has elected to record all agency and non-agency
securities at fair value with all changes in fair value recorded in
current GAAP earnings as other gains (losses). In addition,
the Company has not designated any derivatives as hedges for GAAP
accounting purposes and therefore all changes in the fair value of
derivatives are recorded in current GAAP earnings as other gains
(losses).
During the first quarter, the Company recorded $22.1 million in other gains (losses), net, or
$0.48 per common share. Other
gains (losses), net, for the quarter are comprised of:
- $12.5 million of net realized
gain on agency and non-agency securities;
- $(0.1) million of net unrealized
loss on agency securities;
- $13.0 million of net unrealized
gain on non-agency securities;
- $(2.7) million of net realized
loss on periodic settlements of interest rate swaps;
- $2.2 million of net realized gain
on other derivatives and securities; and
- $(2.8) million of net unrealized
loss on other derivatives and securities.
FIRST QUARTER 2017 DIVIDEND DECLARATION
On March 16, 2017, the Board of
Directors of the Company declared a first quarter dividend on its
common stock of $0.45 per share,
which was paid on April 27, 2017 to
common stockholders of record as of March
31, 2017. Since its August
2011 initial public offering, the Company has declared and
paid a total of $602.1 million in
common stock dividends, or $14.10 per
common share.
On March 16, 2017, the Board of
Directors of the Company declared a first quarter dividend on its
8.125% Series A Cumulative Redeemable Preferred Stock ("Series A
Preferred Stock") of $0.5078125 per
share. The dividend was paid on April 17,
2017 to preferred stockholders of record as of April 1, 2017. Since the May 2014 Series A Preferred Stock offering, the
Company has declared and paid a total of $12.8 million in Series A Preferred Stock
dividends, or $5.8849875 per
share.
FINANCIAL STATEMENTS, OPERATING PERFORMANCE AND PORTFOLIO
STATISTICS
The following tables include certain measures of operating
performance, such as net spread income and estimated taxable
income, which are non-GAAP financial measures. Please refer
to "Use of Non-GAAP Financial Information" later in this release
for further discussion of non-GAAP measures.
MTGE INVESTMENT
CORP.
|
CONSOLIDATED
BALANCE SHEETS
|
(in thousands,
except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March
31, 2017
|
|
December
31, 2016
|
|
September
30, 2016
|
|
June
30, 2016
|
|
March
31, 2016
|
|
|
(unaudited)
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
Agency securities, at
fair value
|
|
$
2,997,725
|
|
$
2,803,168
|
|
$
2,952,851
|
|
$
3,460,643
|
|
$
3,298,466
|
Non-agency securities,
at fair value
|
|
948,495
|
|
1,134,469
|
|
1,285,266
|
|
1,261,640
|
|
1,254,709
|
U.S. Treasury
securities, at fair value
|
|
-
|
|
20,209
|
|
4,995
|
|
33,525
|
|
-
|
Land
|
|
7,374
|
|
5,646
|
|
4,383
|
|
4,383
|
|
-
|
Buildings, furniture,
fixtures and equipment, net of
accumulated
depreciation
|
|
105,915
|
|
81,780
|
|
59,492
|
|
59,931
|
|
-
|
Cash and cash
equivalents
|
|
130,084
|
|
123,640
|
|
122,872
|
|
109,149
|
|
130,750
|
Restricted
cash
|
|
34,442
|
|
13,005
|
|
44,608
|
|
97,385
|
|
85,503
|
Interest
receivable
|
|
10,593
|
|
9,767
|
|
10,006
|
|
10,534
|
|
11,038
|
Derivative assets, at
fair value
|
|
15,995
|
|
29,048
|
|
6,583
|
|
9,624
|
|
5,073
|
Receivable for
securities sold
|
|
5,748
|
|
-
|
|
158,024
|
|
-
|
|
4,595
|
Receivable under
reverse repurchase agreements
|
|
1,335,057
|
|
487,469
|
|
166,542
|
|
51,156
|
|
14,615
|
Mortgage servicing
rights, at fair value
|
|
-
|
|
49,776
|
|
50,535
|
|
53,321
|
|
59,930
|
Other
assets
|
|
27,754
|
|
39,178
|
|
42,656
|
|
41,942
|
|
45,464
|
Total
assets
|
|
$
5,619,182
|
|
$
4,797,155
|
|
$
4,908,813
|
|
$
5,193,233
|
|
$
4,910,143
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Repurchase
agreements
|
|
$
3,185,134
|
|
$
2,970,816
|
|
$
3,284,942
|
|
$
3,302,343
|
|
$
3,571,059
|
Federal Home Loan Bank
advances
|
|
-
|
|
273,700
|
|
273,700
|
|
273,700
|
|
273,700
|
Notes
payable
|
|
86,208
|
|
66,527
|
|
49,221
|
|
49,300
|
|
-
|
Payable for securities
purchased
|
|
21,837
|
|
-
|
|
76,006
|
|
442,943
|
|
18,085
|
Derivative
liabilities, at fair value
|
|
6,678
|
|
27,820
|
|
23,414
|
|
83,751
|
|
78,001
|
Dividend
payable
|
|
21,726
|
|
19,436
|
|
19,436
|
|
19,436
|
|
19,421
|
Obligation to return
securities borrowed under
reverse
repurchase agreements, at fair value
|
|
1,321,843
|
|
474,935
|
|
166,327
|
|
51,128
|
|
-
|
Accounts payable and
other accrued liabilities
|
|
25,613
|
|
30,876
|
|
19,129
|
|
23,610
|
|
24,272
|
Total
liabilities
|
|
4,669,039
|
|
3,864,110
|
|
3,912,175
|
|
4,246,211
|
|
3,984,538
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
Redeemable preferred
stock - aggregate
liquidation preference
of $55,000
|
|
53,039
|
|
53,039
|
|
53,039
|
|
53,039
|
|
53,039
|
Common stock, $0.01
par value; 300,000 shares
authorized, 45,798,
45,798, 45,798, 45,798, and 45,759
issued and
outstanding, respectively
|
|
458
|
|
458
|
|
458
|
|
458
|
|
458
|
Additional paid-in
capital
|
|
1,122,527
|
|
1,122,493
|
|
1,122,459
|
|
1,122,425
|
|
1,122,026
|
Retained
deficit
|
|
(226,187)
|
|
(243,260)
|
|
(179,640)
|
|
(229,222)
|
|
(249,918)
|
Total
MTGE Investment Corp.
stockholders'
equity
|
|
949,837
|
|
932,730
|
|
996,316
|
|
946,700
|
|
925,605
|
Noncontrolling
interests
|
|
306
|
|
315
|
|
322
|
|
322
|
|
-
|
Total
stockholders' equity
|
|
950,143
|
|
933,045
|
|
996,638
|
|
947,022
|
|
925,605
|
Total
liabilities and stockholders' equity
|
|
$
5,619,182
|
|
$
4,797,155
|
|
$
4,908,813
|
|
$
5,193,233
|
|
$
4,910,143
|
|
|
|
|
|
|
|
|
|
|
|
Net book value per
common share
|
|
$
19.54
|
|
$
19.17
|
|
$
20.55
|
|
$
19.47
|
|
$
19.03
|
|
|
|
|
|
|
|
|
|
|
|
MTGE INVESTMENT
CORP.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in thousands,
except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
March
31, 2017
|
|
December
31, 2016
|
|
September
30, 2016
|
|
June
30, 2016
|
|
March
31, 2016
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
|
Agency
securities
|
|
$
17,901
|
|
$
23,094
|
|
$
19,028
|
|
$
18,303
|
|
$
17,373
|
Non-agency
securities
|
|
15,696
|
|
16,261
|
|
16,410
|
|
16,986
|
|
19,734
|
Other
|
|
160
|
|
98
|
|
153
|
|
165
|
|
165
|
Interest
expense
|
|
(10,165)
|
|
(10,144)
|
|
(10,082)
|
|
(9,576)
|
|
(9,780)
|
Net
interest income
|
|
23,592
|
|
29,309
|
|
25,509
|
|
25,878
|
|
27,492
|
Servicing:
|
|
|
|
|
|
|
|
|
|
|
Servicing
income
|
|
2,558
|
|
3,589
|
|
3,904
|
|
4,166
|
|
9,649
|
Servicing
expense
|
|
(4,985)
|
|
(4,750)
|
|
(6,394)
|
|
(9,949)
|
|
(17,905)
|
Net
servicing loss
|
|
(2,427)
|
|
(1,161)
|
|
(2,490)
|
|
(5,783)
|
|
(8,256)
|
Healthcare:
|
|
|
|
|
|
|
|
|
|
|
Healthcare real estate
income
|
|
3,315
|
|
2,721
|
|
2,424
|
|
914
|
|
-
|
Healthcare real estate
expense
|
|
(2,653)
|
|
(2,223)
|
|
(2,074)
|
|
(1,103)
|
|
-
|
Net
healthcare income (loss)
|
|
662
|
|
498
|
|
350
|
|
(189)
|
|
-
|
Other gains
(losses), net:
|
|
|
|
|
|
|
|
|
|
|
Realized gain (loss)
on agency securities, net
|
|
(212)
|
|
(5,226)
|
|
5,913
|
|
2,668
|
|
420
|
Realized gain (loss)
on non-agency securities, net
|
|
12,714
|
|
3,182
|
|
756
|
|
3,644
|
|
(1,635)
|
Realized loss on
periodic settlements of interest rate swaps, net
|
|
(2,660)
|
|
(1,935)
|
|
(2,041)
|
|
(2,531)
|
|
(3,830)
|
Realized gain (loss)
on other derivatives and securities, net
|
|
2,167
|
|
(9,930)
|
|
(40,483)
|
|
(9,724)
|
|
(36,572)
|
Unrealized gain (loss)
on agency securities, net
|
|
(115)
|
|
(84,460)
|
|
(5,228)
|
|
25,098
|
|
49,880
|
Unrealized gain (loss)
on non-agency securities, net
|
|
13,014
|
|
2,555
|
|
33,462
|
|
15,854
|
|
(11,324)
|
Unrealized gain (loss)
on other derivatives and securities, net
|
|
(2,839)
|
|
30,396
|
|
58,563
|
|
(3,290)
|
|
(22,280)
|
Gain (loss) on
mortgage servicing rights
|
|
-
|
|
2,007
|
|
62
|
|
(3,788)
|
|
(9,027)
|
Impairment of
intangible assets
|
|
-
|
|
(5,000)
|
|
-
|
|
-
|
|
-
|
Total
other gains (losses), net
|
|
22,069
|
|
(68,411)
|
|
51,004
|
|
27,931
|
|
(34,368)
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Management
fees
|
|
3,376
|
|
3,510
|
|
3,525
|
|
3,659
|
|
3,815
|
General and
administrative expenses
|
|
1,719
|
|
1,651
|
|
1,794
|
|
3,771
|
|
2,042
|
Total
expenses
|
|
5,095
|
|
5,161
|
|
5,319
|
|
7,430
|
|
5,857
|
Income (loss)
before tax
|
|
38,801
|
|
(44,926)
|
|
69,054
|
|
40,407
|
|
(20,989)
|
Benefit from
(provision for) excise and income tax, net
|
|
-
|
|
745
|
|
(31)
|
|
(281)
|
|
(308)
|
Net income
(loss)
|
|
38,801
|
|
(44,181)
|
|
69,023
|
|
40,126
|
|
(21,297)
|
Dividend on preferred
stock
|
|
(1,117)
|
|
(1,117)
|
|
(1,117)
|
|
(1,117)
|
|
(1,117)
|
Net (income) loss
attributable to noncontrolling interests
|
|
(2)
|
|
(3)
|
|
(5)
|
|
6
|
|
-
|
Net income (loss)
available to common stockholders
|
|
$
37,682
|
|
$
(45,301)
|
|
$
67,901
|
|
$
39,015
|
|
$
(22,414)
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
per common share - basic and diluted
|
|
$
0.82
|
|
$
(0.99)
|
|
$
1.48
|
|
$
0.85
|
|
$
(0.48)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
|
45,798
|
|
45,798
|
|
45,798
|
|
45,777
|
|
46,651
|
Weighted average
number of common shares outstanding - diluted
|
|
45,806
|
|
45,803
|
|
45,801
|
|
45,778
|
|
46,666
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per
common share
|
|
$
0.45
|
|
$
0.40
|
|
$
0.40
|
|
$
0.40
|
|
$
0.40
|
|
|
|
|
|
|
|
|
|
|
|
MTGE INVESTMENT
CORP.
|
RECONCILIATIONS OF
GAAP NET INTEREST INCOME TO NET SPREAD AND DOLLAR ROLL INCOME
(1)
|
(in thousands,
except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
March
31, 2017
|
|
December
31, 2016
|
|
September
30, 2016
|
|
June
30, 2016
|
|
March
31, 2016
|
Interest
income:
|
|
|
|
|
|
|
|
|
|
|
Agency
securities
|
|
$
17,901
|
|
$
23,094
|
|
$
19,028
|
|
$
18,303
|
|
$
17,373
|
Non-agency
securities and other
|
|
15,856
|
|
16,359
|
|
16,563
|
|
17,151
|
|
19,899
|
Interest
expense
|
|
(10,165)
|
|
(10,144)
|
|
(10,082)
|
|
(9,576)
|
|
(9,780)
|
Net
interest income
|
|
23,592
|
|
29,309
|
|
25,509
|
|
25,878
|
|
27,492
|
Dividends from
REIT equity securities
|
|
-
|
|
-
|
|
-
|
|
-
|
|
244
|
Realized loss
on periodic settlements of
interest rate
swaps, net
|
|
(2,660)
|
|
(1,935)
|
|
(2,041)
|
|
(2,531)
|
|
(3,830)
|
Dollar roll
income
|
|
7,271
|
|
6,185
|
|
4,231
|
|
2,560
|
|
136
|
Adjusted
net interest and dollar roll income
|
|
28,203
|
|
33,559
|
|
27,699
|
|
25,907
|
|
24,042
|
Operating
expenses (2)
|
|
(5,095)
|
|
(5,161)
|
|
(5,319)
|
|
(7,430)
|
|
(5,857)
|
Less:
non-recurring costs
|
|
-
|
|
-
|
|
-
|
|
1,745
|
|
-
|
Net
spread and dollar roll income
|
|
23,108
|
|
28,398
|
|
22,380
|
|
20,222
|
|
18,185
|
Dividend on
preferred stock
|
|
(1,117)
|
|
(1,117)
|
|
(1,117)
|
|
(1,117)
|
|
(1,117)
|
Net
spread and dollar roll income available to
common
stockholders
|
|
21,991
|
|
27,281
|
|
21,263
|
|
19,105
|
|
17,068
|
Estimated
"catch-up" premium amortization cost
(benefit) due
to change in CPR forecast
|
|
645
|
|
(4,349)
|
|
674
|
|
2,067
|
|
3,532
|
Net
spread and dollar roll income, excluding
"catch-up"
premium amortization, available
to
common stockholders
|
|
$
22,636
|
|
$
22,932
|
|
$
21,937
|
|
$
21,172
|
|
$
20,600
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
|
45,798
|
|
45,798
|
|
45,798
|
|
45,777
|
|
46,651
|
Weighted average
number of common shares outstanding - diluted
|
|
45,806
|
|
45,803
|
|
45,801
|
|
45,778
|
|
46,666
|
|
|
|
|
|
|
|
|
|
|
|
Net
spread and dollar roll income per
common share-
basic and diluted
|
|
$
0.48
|
|
$
0.60
|
|
$
0.46
|
|
$
0.42
|
|
$
0.37
|
Net
spread and dollar roll income, excluding
"catch up"
amortization per common share-
basic
and diluted
|
|
$
0.49
|
|
$
0.50
|
|
$
0.48
|
|
$
0.46
|
|
$
0.44
|
|
|
|
|
|
|
|
|
|
|
|
MTGE INVESTMENT
CORP.
|
RECONCILIATIONS OF
GAAP NET INCOME TO ESTIMATED TAXABLE INCOME
(1)
|
(in thousands,
except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
March
31, 2017
|
|
December
31, 2016
|
|
September
30, 2016
|
|
June
30, 2016
|
|
March
31, 2016
|
Net income
(loss)
|
|
$
38,801
|
|
$
(44,181)
|
|
$
69,023
|
|
$
40,126
|
|
$
(21,297)
|
Estimated book to
tax differences:
|
|
|
|
|
|
|
|
|
|
|
Unrealized
(gains) and losses, net
|
|
|
|
|
|
|
|
|
|
|
Agency
securities
|
|
115
|
|
84,460
|
|
5,228
|
|
(25,098)
|
|
(49,880)
|
Non-agency
securities
|
|
(13,014)
|
|
(2,555)
|
|
(33,462)
|
|
(15,854)
|
|
11,324
|
Derivatives
and other securities
|
|
2,839
|
|
(32,403)
|
|
(58,625)
|
|
7,078
|
|
31,307
|
Amortization /
accretion
|
|
(1,174)
|
|
(5,011)
|
|
(173)
|
|
67
|
|
1,244
|
Capital losses
(gains), net (3)
|
|
13,716
|
|
(46)
|
|
(8,415)
|
|
(12,015)
|
|
11,868
|
Other realized
losses (gains), net
|
|
(37,324)
|
|
5,292
|
|
37,097
|
|
12,776
|
|
24,147
|
Taxable REIT
subsidiary loss and other
|
|
2,427
|
|
5,201
|
|
2,516
|
|
6,070
|
|
8,565
|
Total book to tax
difference
|
|
(32,415)
|
|
54,938
|
|
(55,834)
|
|
(26,976)
|
|
38,575
|
Estimated taxable
income
|
|
6,386
|
|
10,757
|
|
13,189
|
|
13,150
|
|
17,278
|
Dividend on
preferred stock
|
|
(1,117)
|
|
(1,117)
|
|
(1,117)
|
|
(1,117)
|
|
(1,117)
|
Estimated taxable
income available to common stockholders
|
|
$
5,269
|
|
$
9,640
|
|
$
12,072
|
|
$
12,033
|
|
$
16,161
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding - basic
|
|
45,798
|
|
45,798
|
|
45,798
|
|
45,777
|
|
46,651
|
Weighted average
number of common shares outstanding - diluted
|
|
45,806
|
|
45,803
|
|
45,801
|
|
45,778
|
|
46,666
|
|
|
|
|
|
|
|
|
|
|
|
Net estimated
taxable income per common share - basic and diluted
|
|
$
0.12
|
|
$
0.21
|
|
$
0.26
|
|
$
0.26
|
|
$
0.35
|
Estimated
cumulative undistributed REIT taxable income per common
share
|
|
$
(0.82)
|
|
$
(0.48)
|
|
$
(0.29)
|
|
$
(0.16)
|
|
$
(0.02)
|
|
|
|
|
|
|
|
|
|
|
|
Beginning cumulative
non-deductible capital losses
|
|
$
118,347
|
|
$
118,393
|
|
$
126,808
|
|
$
138,823
|
|
$
126,955
|
Current period net
capital loss (gain)
|
|
13,716
|
|
(46)
|
|
(8,415)
|
|
(12,015)
|
|
11,868
|
Ending cumulative
non-deductible capital losses
|
|
$
132,063
|
|
$
118,347
|
|
$
118,393
|
|
$
126,808
|
|
$
138,823
|
Ending cumulative
non-deductible capital losses per common share
|
|
$
2.88
|
|
$
2.58
|
|
$
2.59
|
|
$
2.77
|
|
$
3.03
|
|
|
|
|
|
|
|
|
|
|
|
MTGE INVESTMENT
CORP.
|
KEY PORTFOLIO
STATISTICS (1)(4)
|
(in thousands,
except per share data)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
March
31, 2017
|
|
December
31, 2016
|
|
September
30, 2016
|
|
June
30, 2016
|
|
March
31, 2016
|
Ending agency
securities, at fair value
|
|
$
2,997,725
|
|
$
2,803,168
|
|
$
2,952,851
|
|
$
3,460,643
|
|
$
3,298,466
|
Ending agency
securities, at cost
|
|
$
3,031,237
|
|
$
2,836,564
|
|
$
2,901,788
|
|
$
3,404,351
|
|
$
3,267,272
|
Ending agency
securities, at par
|
|
$
2,881,851
|
|
$
2,703,884
|
|
$
2,754,915
|
|
$
3,239,547
|
|
$
3,108,935
|
Average agency
securities, at cost
|
|
$
2,762,718
|
|
$
2,855,389
|
|
$
3,043,411
|
|
$
3,055,384
|
|
$
3,162,358
|
Average agency
securities, at par
|
|
$
2,629,607
|
|
$
2,712,249
|
|
$
2,891,174
|
|
$
2,909,043
|
|
$
3,006,552
|
|
|
|
|
|
|
|
|
|
|
|
Ending non-agency
securities, at fair value
|
|
$
948,495
|
|
$
1,134,469
|
|
$
1,285,266
|
|
$
1,261,640
|
|
$
1,254,709
|
Ending non-agency
securities, at cost
|
|
$
880,376
|
|
$
1,079,363
|
|
$
1,232,716
|
|
$
1,242,552
|
|
$
1,251,474
|
Ending non-agency
securities, at par
|
|
$
1,039,185
|
|
$
1,265,040
|
|
$
1,431,032
|
|
$
1,436,821
|
|
$
1,452,195
|
Average non-agency
securities, at cost
|
|
$
1,009,041
|
|
$
1,179,225
|
|
$
1,249,631
|
|
$
1,245,787
|
|
$
1,395,485
|
Average non-agency
securities, at par
|
|
$
1,187,097
|
|
$
1,372,229
|
|
$
1,448,546
|
|
$
1,442,535
|
|
$
1,604,823
|
|
|
|
|
|
|
|
|
|
|
|
Net TBA portfolio -
as of period end, at fair value
|
|
$
2,081,093
|
|
$
900,316
|
|
$
1,209,459
|
|
$
295,332
|
|
$
200,324
|
Net TBA portfolio -
as of period end, at cost
|
|
$
2,070,072
|
|
$
918,805
|
|
$
1,205,003
|
|
$
287,515
|
|
$
197,430
|
Average net TBA
portfolio, at cost
|
|
$
1,366,814
|
|
$
1,104,722
|
|
$
704,098
|
|
$
459,956
|
|
$
(24,544)
|
|
|
|
|
|
|
|
|
|
|
|
Average total assets,
at fair value
|
|
$
5,044,712
|
|
$
4,817,780
|
|
$
4,924,603
|
|
$
4,858,429
|
|
$
5,189,108
|
Average agency and
non-agency
repurchase agreements and advances
|
|
$
3,117,397
|
|
$
3,403,590
|
|
$
3,682,233
|
|
$
3,692,354
|
|
$
3,933,580
|
Average stockholders'
equity(5)
|
|
$
946,266
|
|
$
965,970
|
|
$
980,655
|
|
$
948,439
|
|
$
950,181
|
|
|
|
|
|
|
|
|
|
|
|
Average
coupon
|
|
3.38%
|
|
3.35%
|
|
3.34%
|
|
3.34%
|
|
3.31%
|
Average asset
yield
|
|
3.56%
|
|
3.90%
|
|
3.30%
|
|
3.28%
|
|
3.26%
|
Average cost of
funds(6)
|
|
1.67%
|
|
1.41%
|
|
1.30%
|
|
1.31%
|
|
1.39%
|
Average net interest
rate spread
|
|
1.89%
|
|
2.49%
|
|
2.00%
|
|
1.97%
|
|
1.87%
|
Average net interest
rate spread,
including TBA dollar roll(7)
|
|
2.00%
|
|
2.47%
|
|
2.06%
|
|
1.99%
|
|
1.90%
|
Average net interest
rate spread,
including TBA dollar roll, excluding
estimated "catch-up" premium amortization
|
|
2.05%
|
|
2.13%
|
|
2.12%
|
|
2.17%
|
|
2.21%
|
Average coupon as of
period end
|
|
3.54%
|
|
3.35%
|
|
3.31%
|
|
3.32%
|
|
3.33%
|
Average asset yield
as of period end
|
|
3.60%
|
|
3.70%
|
|
3.47%
|
|
3.38%
|
|
3.43%
|
Average cost of funds
as of period end
|
|
1.55%
|
|
1.62%
|
|
1.30%
|
|
1.27%
|
|
1.32%
|
Average net interest
rate spread as of period end
|
|
2.05%
|
|
2.08%
|
|
2.17%
|
|
2.11%
|
|
2.11%
|
|
|
|
|
|
|
|
|
|
|
|
Average actual CPR
for agency securities held during the period
|
|
9.2%
|
|
12.8%
|
|
13.0%
|
|
11.7%
|
|
8.0%
|
Average projected
life CPR for agency securities as of period end
|
|
8.5%
|
|
8.1%
|
|
10.1%
|
|
10.1%
|
|
10.1%
|
|
|
|
|
|
|
|
|
|
|
|
Leverage - average
during the period (8)
|
|
3.5x
|
|
3.8x
|
|
4.0x
|
|
4.2x
|
|
4.4x
|
Leverage - average
during the period, including net TBA position
|
|
5.1x
|
|
5.0x
|
|
4.8x
|
|
4.7x
|
|
4.4x
|
Leverage - as of
period end(9)
|
|
3.6x
|
|
3.7x
|
|
3.7x
|
|
4.5x
|
|
4.4x
|
Leverage - as of
period end, including net TBA position
|
|
5.9x
|
|
4.8x
|
|
5.0x
|
|
4.9x
|
|
4.6x
|
|
|
|
|
|
|
|
|
|
|
|
Expenses % of average
total assets - annualized
|
|
0.4%
|
|
0.4%
|
|
0.4%
|
|
0.6%
|
|
0.5%
|
Expenses % of average
stockholders' equity - annualized
|
|
2.2%
|
|
2.2%
|
|
2.2%
|
|
3.2%
|
|
2.5%
|
Net book value per
common share as of period end
|
|
$
19.54
|
|
$
19.17
|
|
$
20.55
|
|
$
19.47
|
|
$
19.03
|
Dividends declared
per common share
|
|
$
0.45
|
|
$
0.40
|
|
$
0.40
|
|
$
0.40
|
|
$
0.40
|
Economic return
(loss) on common equity - annualized
|
|
17.2%
|
|
(19.2)%
|
|
30.4%
|
|
17.8%
|
|
(4.7)%
|
————————
(1)
Represents a non-GAAP measure. Refer to "Use of Non-GAAP
Financial Information" for additional discussion of non-GAAP
financial measures.
(2) Excludes
expenses related to the Company's investment in RCS and healthcare
real estate.
(3) The
Company's estimated taxable income excludes any net capital gains,
which will be subtracted from the Company's net capital loss
carryforwards from prior periods.
(4) Average
numbers for each period are weighted based on days on the Company's
books and records. All percentages are annualized.
(5) Excluding
the Company's investment in healthcare real estate, the average
stockholder's equity for the first quarter was $882 million.
(6) Average
cost of funds includes periodic settlements of interest rate swaps
and excludes U.S. Treasury repurchase agreements.
(7) Estimated
dollar roll income excludes the impact of other supplemental hedges
and is recognized in gain (loss) on other derivatives and
securities, net.
(8) Leverage
during the period was calculated by dividing the Company's daily
weighted average agency and non-agency financing for the period by
the Company's average month-ended stockholders' equity for the
period less investments in RCS, REIT equity securities and
healthcare real estate investments. Leverage excludes U.S.
Treasury repurchase agreements.
(9) Leverage
at period end was calculated by dividing the sum of the amount
outstanding under the Company's agency and non-agency financing and
the net receivable/payable for unsettled securities at period end
by the Company's stockholders' equity at period end less
investments in RCS, REIT equity securities and healthcare real
estate investments. Leverage excludes U.S. Treasury
repurchase agreements.
STOCKHOLDER CALL
MTGE will hold a stockholder call and live audio webcast on
May 4, 2017 at 8:30 am ET. Callers who do not plan on asking a
question and have internet access are encouraged to utilize the
free live webcast at www.MTGE.com. Those who plan on participating
in the Q&A or do not have internet available may access the
call by dialing (877) 503-6874 (U.S. domestic) or (412) 902-6600
(international). Please advise the operator you are dialing in for
the MTGE Investment Corp. stockholder call.
A slide presentation will accompany the call and will be
available at www.MTGE.com. Select the Q1 2017 Earnings Presentation
link to download and print the presentation in advance of the
stockholder call.
An archived audio of the stockholder call combined with the
slide presentation will be available on the MTGE website after the
call on May 4, 2017. In addition,
there will be a phone recording available one hour after the live
call on May 4, 2017 through
May 18, 2017. Those who are
interested in hearing the recording of the presentation can access
it by dialing (877) 344-7529 (U.S. domestic) or (412) 317-0088
(international), passcode 10105259.
For further information or questions, please contact Investor
Relations at (301) 968-9220 or IR@MTGE.com.
ABOUT MTGE INVESTMENT CORP.
MTGE Investment Corp. is a real estate investment trust that
invests in and manages a leveraged portfolio of agency mortgage
investments, non-agency mortgage investments and other real
estate-related investments. The Company is externally managed
and advised by MTGE Management, LLC, an affiliate of AGNC
Investment Corp. For further information, please refer to
www.MTGE.com.
FORWARD LOOKING STATEMENTS
This press release contains forward-looking statements.
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 or results. 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
important 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 the Company's assets, the receipt of regulatory
approval or other closing conditions for a transaction, general
economic conditions, market conditions, conditions in the market
for agency and non-agency securities and mortgage related
investments, and legislative and regulatory changes that could
adversely affect the business of the Company. Certain
important factors that could cause actual results to differ
materially from those contained in the forward-looking statements,
are included in the Company's periodic reports filed with the
Securities and Exchange Commission ("SEC"). Copies are
available on the SEC's website, www.sec.gov. The Company
disclaims any obligation to update or revise any forward-looking
statements based on the occurrence of future events, the receipt or
new information, or otherwise.
USE OF NON-GAAP FINANCIAL INFORMATION
In addition to the results presented in accordance with GAAP,
the Company's results of operations discussed in this release
include certain non-GAAP financial information, including "net
spread and dollar roll income," "net spread and dollar roll income,
excluding 'catch-up' premium amortization," "estimated taxable
income" and the related per common share measures and certain
financial metrics derived from such non-GAAP information, such as
"cost of funds" and "net interest rate spread."
"Net spread and dollar roll income" is measured as (i) net
interest income (GAAP measure) adjusted to include other interest
rate swap periodic costs, TBA dollar roll income and dividends on
REIT equity securities (referred to as "adjusted net interest and
dollar roll income") less (ii) total operating expenses (GAAP
measure) adjusted to exclude non-recurring transaction costs. "Net
spread and dollar roll income, excluding "catch-up" premium
amortization," further excludes retrospective "catch-up"
adjustments to premium amortization cost or benefit due to changes
in projected CPR estimates.
By providing users of the Company's financial information with
such measures in addition to the related GAAP measures, the Company
believes users will have greater transparency into the information
used by the Company's management in its financial and operational
decision-making. The Company also believes it is important
for users to consider information related to its current financial
performance without the effects of certain measures that are not
necessarily indicative of its current or expected investment
portfolio performance and operations.
Specifically, in the case of "adjusted net interest and dollar
roll income," the Company believes the inclusion of TBA dollar roll
income is meaningful as TBAs, which are accounted for under GAAP as
derivative instruments with gains and losses recognized in other
gain (loss) in the Company's statement of operations, are
economically equivalent to holding and financing generic agency MBS
using short-term repurchase agreements. Similarly, the Company
believes that the inclusion of periodic interest rate swap
settlements, which are recognized under GAAP in other gain (loss),
is meaningful as interest rate swaps are the primary instrument
used to economically hedge against fluctuations in the Company's
borrowing costs and the inclusion of all periodic interest rate
swap settlement costs is more indicative of the Company's total
cost of funds than interest expense alone. In the case of "net
spread and dollar roll income, excluding 'catch-up' premium
amortization," the Company believes the exclusion of "catch-up"
adjustments to premium amortization cost or benefit is meaningful
as it excludes the cumulative effect from prior reporting periods
due to current changes in future prepayment expectations and,
therefore, exclusion of such cost or benefit is more indicative of
the current and expected earnings potential of the Company's
investment portfolio. The Company also believes the exclusion of
non-recurring costs associated with the American Capital, Ltd.
strategic review process and subsequent acquisition of the
Company's external manager by AGNC Investment Corp. reported in
general and administrative expense under GAAP is meaningful as they
are not representative of ongoing operating costs. In the case of
estimated taxable income, the Company believes it is meaningful
information as it is directly related to the amount of dividends
the Company is required to distribute in order to maintain its REIT
qualification status.
However, because such measures are incomplete measures of the
Company's financial performance and involve differences from
results computed in accordance with GAAP, they should be considered
as supplementary to, and not as a substitute for, results computed
in accordance with GAAP. In addition, because not all companies use
identical calculations, the Company's presentation of such non-GAAP
measures may not be comparable to other similarly-titled measures
of other companies. Furthermore, estimated taxable income can
include certain information that is subject to potential
adjustments up to the time of filing the Company's income tax
returns, which occurs after the end of its fiscal year.
A reconciliation of GAAP net interest income to non-GAAP net
spread and dollar roll income, excluding "catch-up" premium
amortization and a reconciliation of GAAP net income to non-GAAP
estimated taxable income is included in this release.
CONTACT:
|
|
Investors
-
|
(301)
968-9220
|
Media -
|
(301)
968-9215
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/mtge-investment-corp-announces-first-quarter-2017-financial-results-300450917.html
SOURCE MTGE Investment Corp.