REIT offloads non-agency loans, eyes home equity opportunities
AG Mortgage Investment Trust (MITT) has reported financial performance for the second quarter as it concentrates its securitization efforts on the agency-eligible market while divesting non-agency loans.
The New York-based real estate investment trust posted a net income of $3.9 million and adjusted revenue of $16.4 million for the quarter. However, it also reported a GAAP net loss of $700,000 or $0.02 per share. Adjusted for non-recurring costs, Earnings were $0.21 per share.
MITT generated $99.8 million in revenue during the period, with an adjusted revenue of $16.4 million.
The company’s economic return for the quarter was essentially break-even, reflecting limited profitability amid challenging market conditions. Unrealized mark-to-market losses on its investment portfolio impacted overall financial results, with leverage slightly elevated at 2.5 times, which could pose risks if market conditions deteriorate.
Despite these challenges, AG Mortgage increased its dividend by 5.6% to $0.19 per share, indicating confidence in its financial stability. The company’s loan portfolio showed strong credit performance, with a low delinquency rate of approximately 1%.
AG Mortgage ended the quarter with $180 million in liquidity, providing a solid buffer for future investments and obligations. Additionally, the company’s inclusion in the Russell 2000 index is expected to enhance its visibility and liquidity in the market.
AG Mortgage chief executive TJ Durkin expressed confidence in the company’s core business strategy and the benefits of the recent Western Asset Mortgage Capital (WMC) acquisition.
“Our second quarter financial results show the continued execution of our core business strategy and the compelling benefits of our recent WMC acquisition,” Durkin said. “Notably, as a result of our successfully executed $65 million follow-on senior unsecured notes offering in May, we efficiently addressed the September WMC convertible notes maturity with a more advantageous debt structure and ended the quarter by gaining entry in the Russell 3000® Index.”
The company’s investment portfolio grew to $6.9 billion from $6.2 billion in the previous quarter, with a focus on acquiring agency-eligible loans. AG Mortgage also executed strategic sales of non-agency RMBS and co-sponsored a rated securitization.
“In the non-QM space, we continue to see the lowest cost of capital being no longer levered credit buyers,” Nick Smith, chief investment officer of AG Mortgage, said in MITT’s earnings call. “We believe it’s prudent to deploy capital in higher-returning opportunities, including agency-eligible positions.”
Smith added that AG Mortgage is also exploring opportunities in the home equity space.
Despite the challenges faced in the second quarter, AG Mortgage maintains a strong liquidity position with $180 million in cash and a low delinquency rate of approximately 1%.
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