BETHESDA, Md., Oct. 26, 2011 /PRNewswire/ -- American Capital
Mortgage Investment Corp. (“MTGE” or the “Company”) (Nasdaq: MTGE)
today reported net income for the period from the closing of its
initial public offering ("IPO") on August 9,
2011 through September 30,
2011 (the "stub period") of $2.5
million, or $0.25 per share,
and net book value of $19.96 per
share.
FINANCIAL HIGHLIGHTS
- Successfully completed IPO and concurrent private placement in
August 2011, raising $200 million of equity
- Net income of $2.5 million, or
$0.25 per share
- $0.23 per share, excluding
$0.02 per share of other investment
related net gains
- Net income includes all unrealized gains and losses on
investment and hedging portfolios, due to fair value option
election and no hedge accounting
- $0.17 per share of taxable
income
- $0.20 per share dividend
declared
- $19.96 net book value per share
as of September 30, 2011
OTHER THIRD QUARTER HIGHLIGHTS
- $1.7 billion investment portfolio
value as of September 30, 2011
- 7.8x leverage as of September 30,
2011(1)
- 4.7x average leverage for the stub period
- 4.0% constant prepayment rate (“CPR”) for the stub period(2)
- 5.7% CPR for the month of October
2011(3)
- 10% average projected life CPR as of September 30, 2011 which incorporates estimates
of faster future prepayments given rate declines and a flatter
curve
- 2.13% annualized net interest rate spread for the stub period
- 2.41% net interest spread as of September 30, 2011
“American Capital Mortgage results are impressive considering
the volatile market conditions that existed during its IPO and the
funding of its initial investments,” commented Malon Wilkus, Chairman and Chief Executive
Officer. “American Capital Mortgage is an actively managed
hybrid REIT that will seek the best risk adjusted returns across
the spectrum of mortgages and its initial portfolio construction is
an example of that strategy. We are executing on this strategy with
an investment team led by Gary Kain,
President and Co-Chief Investment Officer. We have enhanced
this team with an experienced non-agency investment manager,
Jeff Winkler, Senior Vice President
and Co-Chief Investment Officer, who is impressive in his own
right. We believe that MTGE can become the success in the hybrid
REIT space that American Capital Agency Corp. (Nasdaq: AGNC) has
been in the agency space.”
“We are pleased to announce the first quarterly results for
MTGE. Despite going public in the middle of an extremely volatile
quarter, MTGE achieved a number of significant accomplishments,”
commented Gary Kain. “These
include fully investing our capital, assembling a very strong
agency investment portfolio, which is well positioned to navigate
through this challenging prepayment environment, and patiently
beginning to build out some higher yielding non-agency investments.
Additionally, MTGE was able to maintain its net book value
despite an environment characterized by significant prepayment
uncertainty, increasing interest rate spreads and risk premiums and
a softening outlook for mortgage credit. As we look forward,
we feel the Company is in a strong position to generate attractive
risk-adjusted returns.”
“With book value preservation in mind, and given the volatility
and liquidity conditions in the credit markets, we have been
cautious on non-agency investments,” commented Jeff Winkler, Senior Vice President and Co-Chief
Investment Officer. “We expect to patiently develop this
portfolio as compelling opportunities arise.”
INVESTMENT PORTFOLIO
As of September 30, 2011, the
Company’s investment portfolio totaled $1.7
billion of agency and non-agency securities, at fair value,
comprised of $1.6 billion of
fixed-rate agency securities and $59
million of non-agency securities. As of September 30, 2011, the Company’s investment
portfolio was comprised of 56% 15-year fixed-rate agency
securities, 3% 20-year fixed rate agency securities, 37% 30-year
fixed-rate agency securities and 4% non-agency securities.(4)
ASSET YIELDS, COST OF FUNDS AND NET INTEREST RATE
SPREAD
During the stub period, the annualized weighted average yield on
the Company’s average earning assets was 2.86% and its annualized
average cost of funds was 0.73%,(5) which resulted in a net
interest rate spread of 2.13%. As of September 30, 2011, the weighted average yield on
the Company’s earning assets was 3.06% and its weighted average
cost of funds was 0.65%.(6) This resulted in a net interest
rate spread of 2.41% as of September 30,
2011.
The weighted average projected CPR for the remaining life of all
of the Company’s investments held as of September 30, 2011 was 10%. The actual CPR
for the Company’s portfolio during the stub period was 4.0%. The
most recent CPR published in October
2011 for the Company’s portfolio settled as of September 30, 2011 was 5.7%.
The weighted average cost basis of the agency investment
portfolio was 106.2% as of September 30,
2011. The amortization of premiums (net of any accretion of
discounts) on agency securities for the stub period was
$1.3 million, or $0.13 per share. The unamortized net agency
premium as of September 30, 2011 was
$95 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. Since the cost basis of the Company’s agency
securities exceeds the underlying principal balance by 6.2% as of
September 30, 2011, 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.
LEVERAGE AND HEDGING ACTIVITIES
As of September 30, 2011, the
Company’s $1.7 billion investment
portfolio was financed with $1.5
billion of repurchase agreements(7) and $200 million of equity capital, resulting in a
leverage ratio of 7.3x. When adjusted for the net payable for
securities not yet settled, the leverage ratio was 7.8x as of
September 30, 2011. The average
leverage during the stub period was 4.7x, which is calculated as
the daily weighted average repurchase agreement balance outstanding
divided by the average month-ended shareholders’ equity for the
stub period.
Of the $1.5 billion borrowed under
repurchase agreements as of September 30,
2011, $728 million had
original maturities of 1 month or less, $234
million had original maturities between 1 and 2 months,
$363 million had original maturities
between 2 and 3 months, $121 million
had original maturities between 3 and 4 months and the remaining
$15 million had maturities greater
than 4 months. As of September 30,
2011, the Company had repurchase agreements with 22
financial institutions. Less than 6% of the Company’s equity at
risk was with any one counterparty as of September 30, 2011, with the top five
counterparties representing less than 19% of the Company’s equity
at risk.
The Company’s interest rate swap positions as of September 30, 2011 totaled $825 million in notional amount (including a
$25 million forward starting swap,
starting in November 2011) at an
average fixed pay rate of 0.97%, a weighted average receive rate of
0.30% and a weighted average maturity of 4.0 years. The
Company enters into interest rate swaps with longer maturities with
the intention of protecting its book value and long term earnings
potential.
As of September 30, 2011, 56% of
the Company’s repurchase agreement balance was hedged through
interest rate swap agreements. If net unsettled purchases and sales
of securities are incorporated, this percentage decreases to 53%.
OTHER INCOME (LOSS), NET
During the quarter, the Company recorded $(0.3) million in other income (loss), or
$(0.03) per share. Other income
(loss) is comprised primarily of $(3.4)
million of net realized losses on derivatives and
$(0.6) million in realized loss on
periodic interest settlements of interest rate swaps, partially
offset by $2.5 million of net
realized gains on sales of agency securities and $1.1 million of net unrealized gains on
securities and derivatives that are marked-to-market in current
income.
Gains and losses (realized and unrealized) on derivatives
include the Company’s interest rate swaps and short or long
positions in “to-be-announced” mortgage securities (“TBA’s”) and
treasury securities, which the Company uses to reduce its exposure
to interest rates.
The Company has elected to record all investments at fair value
with all changes in fair value recorded in current GAAP earnings as
other income (loss). In addition, the Company has not
designated any derivatives as hedges for GAAP accounting purposes
and therefore all changes in fair value are recorded in current
GAAP earnings as other income (loss).
TAXABLE INCOME
Taxable income for the stub period was $0.17 per share. The primary difference between
tax and GAAP net income is unrealized gains and losses associated
with investment and derivative portfolios marked-to-market in
current income for GAAP purposes but excluded from taxable income
until realized or settled and temporary differences related to
amortization of net premiums paid on investments.
NET BOOK VALUE
As of September 30, 2011, the
Company’s net book value per share was $19.96, or $0.05
per share higher than the net proceeds of $19.91 per share received by the Company from the
completion of its initial public offering and concurrent private
placement in August 2011.
DIVIDEND
On September 13, 2011, the Board
of Directors of the Company declared a stub period dividend of
$0.20 per share payable on
October 27, 2011, to stockholders of
record as of September 23, 2011.
After adjusting for the accrued dividend, the Company had
approximately $0.3 million of
dividends declared in excess of taxable income as of September 30, 2011.
(1) Leverage calculated as the sum of total repurchase
agreements and net payable for unsettled purchases and sales of
securities divided by total stockholders’ equity as of September 30, 2011. If the Company
purchases investment securities and finances the purchase with a
repurchase agreement with the same counterparty that are
entered into simultaneously or in contemplation of each other, the
purchase commitment and repurchase agreement are recorded net for
GAAP purposes on the financial statements as a derivative (“Linked
Transaction”). The repurchase agreement balance included in
the Company’s leverage ratio includes repurchase agreement
financing recorded as Linked Transactions totaling $26 million as of September 30, 2011.
(2) Weighted average monthly annualized CPR published during
September 2011 for securities settled
as of August 31, 2011
(3) Weighted average actual annualized CPR published in
October 2011 for securities settled
as of September 30, 2011
(4) $33 million of non-agency
securities were recorded net as Linked Transactions on the
financial statements.
(5) The average cost of funds includes the impact of periodic
interest settlements on the Company’s interest rate swaps.
(6) Cost of funds as of September 30,
2011 includes the impact of swaps in effect as of
September 30, 2011 of $800 million. Average cost of funds
includes the impact of periodic interest settlements on the
Company’s interest rate swaps.
(7) Including $26 million related
to Linked Transactions.
Financial highlights for the stub period are as follows:
AMERICAN
CAPITAL MORTGAGE INVESTMENT CORP.
|
|
CONSOLIDATED
BALANCE SHEET
|
|
(in
thousands)
|
|
|
|
|
|
|
|
September
30, 2011
|
|
|
|
(unaudited)
|
|
Assets:
|
|
|
|
Agency securities, at
fair value
|
|
$
1,621,717
|
|
Non-agency securities, at
fair value
|
|
25,918
|
|
Linked transactions, at
fair value, net
|
|
6,935
|
|
Cash and cash
equivalents
|
|
61,396
|
|
Restricted
cash
|
|
11,241
|
|
Interest
receivable
|
|
5,223
|
|
Derivative assets, at
fair value
|
|
1,515
|
|
Receivable for agency
securities sold
|
|
110,127
|
|
Receivable under
repurchase agreements
|
|
25,875
|
|
Other assets
|
|
635
|
|
Total assets
|
|
$
1,870,582
|
|
|
|
|
|
Liabilities:
|
|
|
|
Repurchase
agreements
|
|
$
1,434,527
|
|
Payable for agency
securities purchased
|
|
206,607
|
|
Derivative liabilities,
at fair value
|
|
658
|
|
Dividend
payable
|
|
2,001
|
|
Obligation to return
securities borrowed, at fair value
|
|
25,443
|
|
Accounts payable and
other accrued liabilities
|
|
1,596
|
|
Total
liabilities
|
|
1,670,832
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
Preferred stock, $0.01
par value; 50,000 shares authorized,
0 shares
issued and outstanding, respectively
|
|
-
|
|
Common stock, $0.01 par
value; 300,000 shares authorized,
10,006
issued and outstanding
|
|
100
|
|
Additional paid-in
capital
|
|
199,185
|
|
Retained
earnings
|
|
465
|
|
Total stockholders'
equity
|
|
199,750
|
|
Total liabilities and
stockholders' equity
|
|
$
1,870,582
|
|
|
|
|
AMERICAN
CAPITAL MORTGAGE INVESTMENT CORP.
|
|
CONSOLIDATED
STATEMENT OF OPERATIONS
|
|
(unaudited)
|
|
(in
thousands, except per share data)
|
|
|
|
|
|
For the
period from
August 9, 2011
through
September 30,
2011
|
|
|
|
|
|
Interest income:
|
|
|
|
Interest
income
|
|
|
|
Agency securities
|
|
$
4,039
|
|
Non-agency securities
|
|
65
|
|
Other
|
|
24
|
|
Interest
expense
|
|
(383)
|
|
Net interest income
|
|
3,745
|
|
|
|
|
|
Other income (loss),
net:
|
|
|
|
Realized gain on
securities, net
|
|
2,462
|
|
Realized loss on
derivatives, net
|
|
(3,412)
|
|
Realized loss on periodic
settlements of interest rate swaps, net
|
|
(577)
|
|
Unrealized gain on agency
securities, net
|
|
1,970
|
|
Unrealized loss on
non-agency securities, net
|
|
(747)
|
|
Unrealized gain on
derivatives, net
|
|
819
|
|
Unrealized
loss and net interest income on linked transactions, net
(1)
|
|
(813)
|
|
Total other loss, net
|
|
(297)
|
|
|
|
|
|
Expenses:
|
|
|
|
Management
fees
|
|
431
|
|
General and
administrative expenses
|
|
550
|
|
Total expenses
|
|
981
|
|
|
|
|
|
Net income
|
|
$
2,467
|
|
|
|
|
|
Net income per common share -
basic and diluted
|
|
$
0.25
|
|
|
|
|
|
Weighted average number of
common shares outstanding - basic and diluted
|
|
10,006
|
|
|
|
|
|
Dividends declared per common
share
|
|
$
0.20
|
|
|
|
|
AMERICAN
CAPITAL MORTGAGE INVESTMENT CORP.
|
|
KEY
PORTFOLIO CHARACTERISTICS*
|
|
(unaudited)
|
|
(in
thousands, except per share data)
|
|
|
|
|
|
|
|
For the
period from
August 9, 2011
through
September 30,
2011
|
|
|
|
|
|
|
|
|
|
Average agency
securities, at cost
|
|
$
991,237
|
|
Average non-agency
securities, at cost (2)
|
|
$
28,020
|
|
Average total
assets, at fair value
|
|
$
1,227,849
|
|
Average repurchase
agreements (3)
|
|
$
942,335
|
|
Average
stockholders' equity
|
|
$
199,229
|
|
|
|
|
|
Agency securities,
at fair value - as of period end
|
|
$
1,621,717
|
|
Non-agency
securities, at fair value - as of period end
|
|
$
25,918
|
|
Linked
transactions net, at fair value - as of period end
|
|
$
6,935
|
|
|
|
|
|
Average coupon
(4)
|
|
4.01%
|
|
Average asset
yield (5)
|
|
2.86%
|
|
Average cost of
funds (6)
|
|
0.73%
|
|
Average net
interest rate spread (7)
|
|
2.13%
|
|
|
|
|
|
Average actual CPR
for the period
|
|
4.0%
|
|
Average forecasted
CPR as of period end
|
|
10.0%
|
|
|
|
|
|
Leverage
(average during the
period) (8)
|
|
4.7:1
|
|
Leverage
(as of period
end) (9)
|
|
7.8:1
|
|
|
|
|
|
Expenses % of
average assets (10)
|
|
0.55%
|
|
Expenses % of
average stockholders' equity (11)
|
|
3.39%
|
|
|
|
|
|
Net asset value
per common share as of period end (12)
|
|
$
19.96
|
|
Dividends declared
per common share
|
|
$
0.20
|
|
Net return on
average stockholders' equity (13)
|
|
8.5%
|
|
|
|
|
*Average numbers for the stub period are weighted based on days
from August 9, 2011 (commencement of
operations) through September 30,
2011. All percentages are annualized.
(1) Includes $1.0 million in
unrealized losses, net of $0.2
million of net interest income
(2) Average non-agency securities, at cost, for the stub
period include approximately $20.2
million that will be classified as linked transactions on
the balance sheet.
(3) Average repurchase agreements include approximately
$15.0 million of repurchase agreement
borrowings that will be classified as linked transactions on the
balance sheet.
(4) Weighted average coupon for the period was calculated
by dividing the Company's total coupon (or cash) interest income on
securities by the Company's daily weighted average securities
held.
(5) Weighted average asset yield for the period was
calculated by dividing the Company's total interest income on
securities, less amortization of premiums and discounts, by the
Company's daily weighted average securities held.
(6) Weighted average cost of funds for the period was calculated
by dividing the Company's total interest expense (including
periodic settlements of interest rate swaps), by the Company's
daily weighted average repurchase agreements for the period.
(7) Net interest rate spread for the period was calculated
by subtracting the Company's weighted average cost of funds
(including interest rate swaps) from the Company's weighted average
asset yield.
(8) Leverage during the period was calculated by dividing
the Company's daily weighted average repurchase agreements
(including those related to Linked Transactions), for the period by
the Company's average month-ended stockholders' equity for the
period.
(9) Leverage at period end was calculated by dividing the
sum of the amount outstanding under the Company's repurchase
agreements (including those related to Linked Transactions) and net
receivable / payable for unsettled agency securities by the
Company's total stockholders' equity at period end.
(10) Expenses as a percentage of average total assets was
calculated by dividing the Company's total expenses by the
Company's average total assets for the period.
(11) Expenses as a percentage of average stockholders'
equity was calculated by dividing the Company's total expenses by
the Company's average month-ended stockholders' equity.
(12) Net book value per share was calculated by dividing
the Company's total stockholders' equity by the Company's number of
shares outstanding.
(13) Annualized net return on average stockholders' equity
for the period was calculated by dividing the Company's net income
by the Company's average month-ended stockholders' equity on an
annualized basis.
STOCKHOLDER CALL
The Company invites stockholders, prospective stockholders and
analysts to attend the MTGE stockholder call on October 27, 2011 at 11:00
am ET. The stockholder call can be accessed through a live
webcast, free of charge, at http://www.MTGE.com or by dialing (877)
569-8701 (U.S. domestic) or (574) 941-7382 (international). Please
provide the operator with the conference ID number 16829626. If you
do not plan on asking a question on the call and have access to the
internet, please take advantage of the webcast.
A slide presentation will accompany the call and will be
available at http://www.MTGE.com/. Select the Q3 2011 Earnings
Presentation link to download and print the presentation in advance
of the shareholder call.
An archived audio of the shareholder call combined with the
slide presentation will be made available on our website after the
call on October 27. In addition,
there will be a phone recording available from 4:00 pm ET October
27 until 11:59 pm ET
November 10. If you are interested in
hearing the recording of the presentation, please dial (855)
859-2056 (U.S. domestic) or (404) 537-3406 (international). The
conference ID number is 16829626.
For further information or questions, please contact our
Investor Relations Department at (301) 968-9220 or IR@MTGE.com.
ABOUT AMERICAN CAPITAL MORTGAGE INVESTMENT CORP.
American Capital Mortgage Investment Corp. is a real estate
investment trust ("REIT") formed in August
2011 that invests in and manages a leveraged portfolio of
agency mortgage investments, non-agency mortgage investments and
other mortgage-related investments. The Company is externally
managed and advised by American Capital MTGE Management, LLC, an
affiliate of American Capital, Ltd. ("American Capital"). For
further information please refer to http://www.MTGE.com/.
ABOUT AMERICAN CAPITAL
American Capital is a publicly traded private equity firm and
global asset manager. American Capital, both directly and through
its asset management business, originates, underwrites and manages
investments in middle market private equity, leveraged finance,
real estate and structured products. Founded in 1986, American
Capital has $52 billion in assets
under management and seven offices in the U.S. and Europe. American Capital and its affiliates
will consider investment opportunities from $10 million to $300 million. For further
information, please refer to http://www.americancapital.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.
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 and non-agency securities and mortgage related
investments, and legislative and regulatory changes that could
adversely affect the business of the Company. Certain 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,
this release includes non-GAAP financial information, including our
taxable income and certain financial metrics derived based on
taxable income, which management uses in its internal analysis of
results, and believes may be informative to investors. Taxable
income is pre-tax income calculated in accordance with the
requirements of the Internal Revenue Code rather than GAAP. Taxable
income differs from GAAP income because of both temporary and
permanent differences in income and expense recognition. Examples
include temporary differences for unrealized gains and losses on
derivative instruments and investment securities recognized in
income for GAAP but excluded from taxable income until realized or
settled, differences in the CPR used to amortize premiums or
accrete discounts as well as treatment of start-up organizational
costs and stock-based compensation. Furthermore, taxable income can
include certain estimated information and is subject to potential
adjustments up to the time of filing of the appropriate tax
returns, which occurs after the end of the calendar year of the
Company. The Company believes that these non-GAAP financial
measures provide information useful to investors because taxable
income is directly related to the amount of dividends the Company
is required to distribute in order to maintain its REIT tax
qualification status. The Company also believes that providing
investors with our taxable income and certain financial metrics
derived based on such taxable income, in addition to the related
GAAP measures, gives investors greater transparency to the
information used by management in its financial and operational
decision-making. However, because taxable income is an incomplete
measure of the Company's financial performance and involves
differences from net income computed in accordance with GAAP,
taxable income should be considered as supplementary to, and not as
a substitute for, the Company's net income computed in accordance
with GAAP as a measure of the Company's financial performance. In
addition, because not all companies use identical calculations, our
presentation of our estimated taxable income may not be comparable
to other similarly-titled measures of other companies.
CONTACT:
Investors - (301) 968-9300
Media - (301) 968-9400
SOURCE American Capital Mortgage Investment Corp.