Exhibit 99.1
Hunt Companies Finance Trust Reports Third Quarter 2018 Financial Results
NEW YORK, Nov. 14, 2018 /PRNewswire/ -- Hunt Companies Finance Trust, Inc. (NYSE: HCFT) ("we", "HCFT" or "the Company") today announced its financial results for the third quarter ended September 30, 2018. For the third quarter, the Company reported GAAP net income attributable to common shareholders of $3.5 million, or $0.15 per share, a comprehensive gain of $3.5 million, or $0.15 per share, and core earnings (1) of $2.5 million, or $0.10 per share. The Company also reported a net book value of $4.85 per share at September 30, 2018.
"The third quarter of 2018 reflects positively on the execution of our new strategic direction of focusing on floating-rate commercial loans. During the quarter, the Company closed Hunt CRE 2018-FL2, Ltd., a $285 million commercial real estate Collateralized Loan Obligation, which financed 20 first lien floating-rate commercial real estate mortgage assets acquired from Hunt Finance Company, LLC, an affiliate of the Company's Manager. With this transaction completed, as of September 30, 2018 our portfolio was 98% comprised of floating-rate commercial real estate mortgage loans," noted CEO James Flynn. Mr. Flynn continued, "While the Company continues to evaluate opportunities to monetize the 2% of our portfolio comprised of legacy Multi-family MBS and Residential MSRs, we have already significantly simplified the balance sheet and have reduced our total leverage to 3.5x as of September 30, 2018, from 16.9x as of December 31, 2017. Our operating performance is responding positively, as comprehensive income per share has improved every quarter since Hunt took over as manager in the first quarter of 2018."
| (1) | Core Earnings is a non-GAAP measure. Please refer to the reconciliation of the most comparable GAAP measure below. |
Investment Portfolio and Capital Allocation
The following table summarizes certain characteristics of our investment portfolio and the related allocation of our equity capital on a non-GAAP combined basis as of September 30, 2018:
| For the period ended September 30, 2018 | Multi-Family MBS(1)(2) | Commercial Mortgage Loans | MSRs | Unrestricted Cash(3) | Total | |||||||||||||||
| Market Value | 5,331,931 | 544,586,537 | 4,209,124 | 9,912,051 | 564,039,643 | |||||||||||||||
| Collateralized loan obligations | - | (503,487,121 | ) | - | - | (503,487,121 | ) | |||||||||||||
| Other(4) | 4,071 | 17,920,855 | - | (4,109,446 | ) | 13,815,480 | ||||||||||||||
| Restricted Cash and Due to Broker | - | 77,694,264 | - | - | 77,694,264 | |||||||||||||||
| Equity Allocated | 5,336,002 | 136,714,535 | 4,209,124 | 5,802,605 | 152,062,266 | |||||||||||||||
| (1) | Information with respect to Multi-Family MBS and the resulting total is presented on a non-GAAP basis. On a GAAP basis, which excludes the impact of consolidation of the FREMF 2012-KF01 Trust, the fair value of our investments in Multi-Family MBS is eliminated on consolidation. |
| (2) | Includes the fair value of our net investments in the FREMF 2012-KF01 Trust. |
| (3) | Includes cash and cash equivalents. |
| (4) | Includes principal receivable, interest receivable, prepaid and other assets, interest payable, dividend payable and accrued expenses and other liabilities. |
Dividends
The Company previously announced that, with effect from the third quarter of 2018, it would switch from paying dividends on its common stock on a monthly basis to a quarterly basis. Accordingly, the Company announced on September 10, 2018, its third quarter common stock dividend of $0.06 per share of common stock, payable on October 15, 2018 to stockholders of record on September 28, 2018.
In accordance with the terms of the 8.75% Cumulative Redeemable Preferred Stock ("Series A Preferred Stock") of the Company, the board of directors also declared monthly cash dividend rates for the fourth quarter of 2018 of $0.1823 per share of Series A Preferred Stock:
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Fourth Quarter 2018 Series A Preferred Stock Dividends
| Month | Dividend | Record Date | Payment Date | |||||
| October 2018 | $ | 0.1823 | October 15, 2018 | October 26, 2018 | ||||
| November 2018 | $ | 0.1823 | November 15, 2018 | November 27, 2018 | ||||
| December 2018 | $ | 0.1823 | December 17, 2018 | December 27, 2018 | ||||
Conference Call and Webcast Information
The Company will also host a conference call on Thursday, November 15, 2018, at 9:30 AM ET to provide a business update and discuss the financial results in the Third Quarter 2018 Report. The conference call may be accessed by dialing +1 (201) 689-8890, or US, Canada toll free (877) 485-3103 with passcode 13685029, or by live webcast, on a listen-only basis, which can be accessed through the URL:
https://event.webcasts.com/starthere.jsp?ei=1220155&tp_key=d6105655d8
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Financial Information
| FIVE OAKS INVESTMENT CORP. AND SUBSIDIARIES | |||
| Consolidated Balance Sheets | |||
| 09/30/2018 | 12/31/2017 | |||||||
| ASSETS | (unaudited) | |||||||
| Cash and cash equivalents | $ | 9,912,051 | $ | 34,347,339 | ||||
| Restricted cash | 77,694,265 | 11,275,263 | ||||||
| Available-for-sale securities, at fair value (includes pledged securities of $0 and $1,295,225,428 for June 30, 2018 and December 31, 2017, respectively) | - | 1,290,825,648.00 | ||||||
| Commercial mortgage loans, held-for-investment, at amortized cost | 544,586,537 | - | ||||||
| Multi-family loans held in securitization trusts, at fair value | 24,787,988 | 1,130,874,274 | ||||||
| Residential loans held in securitization trusts, at fair value | - | 119,756,455 | ||||||
| Mortgage servicing rights, at fair value | 4,209,124 | 2,963,861 | ||||||
| Deferred offering costs | 122,233 | 179,382 | ||||||
| Accrued interest receivable | 2,542,868 | 8,852,036 | ||||||
| Investment related receivable | 16,242,900 | 7,461,128 | ||||||
| Derivative assets, at fair value | - | 5,349,613 | ||||||
| Other assets | 713,762 | 656,117 | ||||||
| Total assets | $ | 680,811,728 | $ | 2,612,541,116 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| LIABILITIES: | ||||||||
| Repurchase agreements: | ||||||||
| Available-for-sale securities | $ | - | $ | 1,234,522,000 | ||||
| Collateralized loan obligations net of discount of $2,716,862 and deferred financing cost of $3,977,017 for September 30, 2018) | 503,487,121 | - | ||||||
| Multi-family securitized debt obligations | 19,462,838 | 1,109,204,743 | ||||||
| Residential securitized debt obligations | - | 114,418,318 | ||||||
| Accrued interest payable | 854,060 | 6,194,464 | ||||||
| Dividends payable | 1,450,609 | 39,132 | ||||||
| Deferred income | 397,203 | 222,518 | ||||||
| Due to broker | - | 1,123,463 | ||||||
| Fees and expenses payable to Manager | 3,001,338 | 752,000 | ||||||
| Other accounts payable and accrued expenses | 96,293 | 273,201 | ||||||
| Total liabilities | $ | 528,749,462 | $ | 2,466,749,839 | ||||
| COMMITMENTS AND CONTINGENCIES (NOTE 15) | ||||||||
| STOCKHOLDERS' EQUITY: | ||||||||
| Preferred Stock: par value $0.01 per share; 50,000,000 shares authorized, 8.75% Series A cumulative redeemable, $25 liquidation preference, 1,610,000 and 1,610,000 issued and outstanding at September 30, 2018 and December 31, 2017, respectively | 37,156,972 | 37,156,972 | ||||||
| Common Stock: par value $0.01 per share; 450,000,000 shares authorized, 23,687,664 and 22,143,758 shares issued and outstanding, at September 30, 2018 and December 31, 2017, respectively | 236,787 | 221,393 | ||||||
| Additional paid-in capital | 231,296,687 | 224,048,169 | ||||||
| Accumulated other comprehensive income (loss) | - | (12,617,794 | ) | |||||
| Cumulative distributions to stockholders | (112,438,915 | ) | (104,650,235 | ) | ||||
| Accumulated earnings (deficit) | (4,189,265 | ) | 1,632,772 | |||||
| Total stockholders' equity | 152,062,266 | 145,791,277 | ||||||
| Total liabilities and stockholders' equity | $ | 680,811,728 | $ | 2,612,541,116 | ||||
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| FIVE OAKS INVESTMENT CORP. AND SUBSIDIARIES | |||||||
| Condensed Consolidated Statements of Operations | |||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Revenues: | (unaudited) | (unaudited) | (unaudited) | (unaudited) | ||||||||||||
| Interest income: | ||||||||||||||||
| Available-for-sale securities | $ | - | $ | 7,827,281 | $ | 10,748,966 | $ | 21,308,582 | ||||||||
| Residential mortgage loans held-for-sale | - | 12,082 | - | 69,416 | ||||||||||||
| Commercial mortgage loans held-for-investment | 9,365,400 | - | 15,259,400 | - | ||||||||||||
| Multi-family loans held in securitization trusts | 336,824 | 13,473,913 | 20,540,942 | 40,992,241 | ||||||||||||
| Residential loans held in securitization trusts | - | 1,249,966 | 2,102,352 | 3,903,924 | ||||||||||||
| Cash and cash equivalents | 17,024 | 63,264 | 134,002 | 138,745 | ||||||||||||
| Interest expense: | ||||||||||||||||
| Repurchase agreements - available-for-sale securities | - | (4,118,639 | ) | (7,637,242 | ) | (9,087,956 | ) | |||||||||
| Collateralized loan obligations | (4,366,632 | ) | - | (7,255,799 | ) | - | ||||||||||
| Multi-family securitized debt obligations | (237,980 | ) | (12,766,808 | ) | (19,404,532 | ) | (38,866,888 | ) | ||||||||
| Residential securitized debt obligations | - | (995,293 | ) | (1,685,971 | ) | (3,100,616 | ) | |||||||||
| Net interest income | 5,114,636 | 4,745,766 | 12,802,118 | 15,357,448 | ||||||||||||
| Other income: | ||||||||||||||||
| Realized gain (loss) on sale of investments, net | (13,617 | ) | (5,148,445 | ) | (33,358,905 | ) | (14,616,997 | ) | ||||||||
| Change in unrealized gain (loss) on fair value option securities | - | - | - | 9,448,270 | ||||||||||||
| Realized gain (loss) on derivative contracts, net | - | (1,636,725 | ) | 25,984,870 | 2,049,400 | |||||||||||
| Change in unrealized gain (loss) on derivative contracts, net | - | 307,263 | (5,349,613 | ) | (8,583,100 | ) | ||||||||||
| Realized gain (loss) on mortgage loans held-for-sale, net | - | (221,197 | ) | - | (221,620 | ) | ||||||||||
| Change in unrealized gain (loss) on mortgage loans held-for-sale | - | 28,794 | - | 17,727 | ||||||||||||
| Change in unrealized gain (loss) on mortgage servicing rights | 103,512 | (102,945 | ) | 1,245,264 | (457,720 | ) | ||||||||||
| Change in unrealized gain (loss) on multi-family loans held in securitization trusts | 957,549 | 694,730 | (5,861,373 | ) | 2,797,566 | |||||||||||
| Change in unrealized gain (loss) on residential loans held in securitization trusts | - | (155,252 | ) | 5,650,199 | (773,674 | ) | ||||||||||
| Other interest expense | - | - | - | (152,322 | ) | |||||||||||
| Servicing income | 285,745 | 276,211 | 702,127 | 721,468 | ||||||||||||
| Other income | 27,942 | 8,369 | 88,434 | 33,275 | ||||||||||||
| Total other income (loss) | 1,361,131 | (5,949,197 | ) | (10,898,997 | ) | (9,737,727 | ) | |||||||||
| Expenses: | ||||||||||||||||
| Management fee | 586,926 | 573,412 | 1,767,252 | 1,670,804 | ||||||||||||
| General and administrative expenses | 796,600 | 1,288,978 | 3,148,945 | 4,120,807 | ||||||||||||
| Operating expenses reimbursable to Manager | 548,132 | 915,452 | 1,865,057 | 3,086,304 | ||||||||||||
| Other operating expenses | 136,400 | 225,502 | 742,059 | 770,189 | ||||||||||||
| Compensation expense | 54,683 | 49,562 | 201,845 | 155,384 | ||||||||||||
| Total expenses | 2,122,741 | 3,052,906 | 7,725,158 | 9,803,488 | ||||||||||||
| Net income (loss) | 4,353,026 | (4,256,337 | ) | (5,822,037 | ) | (4,183,767 | ) | |||||||||
| Dividends to preferred stockholders | (880,509 | ) | (880,509 | ) | (2,631,744 | ) | (2,631,744 | ) | ||||||||
| Net income (loss) attributable to common stockholders | $ | 3,472,517 | $ | (5,136,846 | ) | $ | (8,453,781 | ) | $ | (6,815,511 | ) | |||||
| Earnings (loss) per share: | ||||||||||||||||
| Net income (loss) attributable to common stockholders (basic and diluted) | $ | 3,472,517 | $ | (5,136,846 | ) | $ | (8,453,781 | ) | $ | (6,815,511 | ) | |||||
| Weighted average number of shares of common stock outstanding | 23,687,273 | 22,139,258 | 23,588,688 | 19,342,188 | ||||||||||||
| Basic and diluted income (loss) per share | $ | 0.15 | $ | (0.23 | ) | $ | (0.36 | ) | $ | (0.35 | ) | |||||
| Dividends declared per weighted average share of common stock | $ | 0.06 | $ | 0.15 | $ | 0.22 | $ | 0.45 | ||||||||
Non-GAAP Financial Measures
For financial statement reporting purposes, GAAP requires us to consolidate the assets and liabilities of the FREMF 2012-KF01 Trust. However, our maximum exposure to loss from consolidation of the trusts is limited to the fair value of our net investment therein. We therefore have also presented certain information as of September 30, 2018, and June 30, 2018, that includes our net investments in the consolidated trust. This information as well as core earnings, economic return and comparative expenses constitute non-GAAP financial measures within the meaning of Item 10(e) of Regulation S-K, as promulgated by the SEC. While we believe the non-GAAP information included in this press release provides supplemental information to assist investors in analyzing our remaining agency multifamily MBS position and Non-Agency RMBS, and to assist investors in comparing our results with other peer issuers, these measures are not in accordance with GAAP, and they should not be considered a substitute for, or superior to, our financial information calculated in accordance with GAAP. Our GAAP financial results and the reconciliations from these results should be carefully evaluated.
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| GAAP to Core Earnings Reconciliation | Three months Ended | Three months Ended | ||||||
| September 30, 2018 | June 30, 2018 | |||||||
| Reconciliation of GAAP to non-GAAP Information | ||||||||
| Net Income (loss) attributable to common shareholders | $ | 3,472,517 | $ | (22,360,401 | ) | |||
| Adjustments for non-core earnings | ||||||||
| Realized (Gain) Loss on sale of investments, net | $ | 13,617 | $ | 30,497,281 | ||||
| Realized (Gain) Loss on derivative contracts, net | $ | - | $ | (23,192,076 | ) | |||
| Unrealized (Gain) Loss on derivative contracts, net | $ | - | $ | 18,132,701 | ||||
| Unrealized (Gain) Loss on mortgage servicing rights | $ | (103,512 | ) | $ | (1,084,063 | ) | ||
| Unrealized (Gain) Loss on multi-family loans held in securitization trusts | $ | (957,549 | ) | $ | 5,463,148 | |||
| Unrealized (Gain) Loss on residentail loans held in securitization trusts | $ | - | $ | (5,905,602 | ) | |||
| Subtotal | $ | (1,047,444 | ) | $ | 23,911,389 | |||
| Other Adjustments | ||||||||
| Recognized compensation expense related to restricted common stock | $ | 8,733 | $ | 4,857 | ||||
| Adjustment for consolidated securities | $ | 39,551 | $ | 493,498 | ||||
| Adjustment for one-time charges | $ | - | $ | - | ||||
| Subtotal | $ | 48,284 | $ | 498,355 | ||||
| Core Earnings | $ | 2,473,357 | $ | 2,049,343 | ||||
| Weighted average shares outstanding - Basic and Diluted | 23,687,273 | 23,683,164 | ||||||
| Core Earnings per weighted share outstanding - Basic and Diluted | $ | 0.10 | $ | 0.09 | ||||
Additional Information
As of September 30, 2018, we have determined that we were the primary beneficiary of one Multi-Family MBS securitization trust, FREMF 2012-KF01 Trust. As a result, we are required to consolidate the trusts' underlying multi-family loans together with their liabilities, income and expenses in our consolidated financial statements. We have elected the fair value option on the assets and liabilities held within the trust, which requires that changes in valuation in the assets and liabilities of this trust be reflected in our consolidated statements of operations.
A reconciliation of our net capital investment in multi-family investments to our financial statements as of September 30, 2018, is set forth below:
| Multi-Family Loans held in Securitization Trusts, at fair value(1) | $ | 24,898,204 | ||
| Multi-Family Securitized Debt Obligations (non-recourse)(2) | $ | (19,566,273 | ) | |
| Net Carrying Value | $ | 5,331,931 | ||
| Cash and Other | $ | 4,071 | ||
| Net Capital in Multi-Family | $ | 5,336,002 |
| (1) | Includes interest receivable |
| (2) | Includes interest payable |
Hunt Companies Finance Trust
Hunt Companies Finance Trust is a real estate investment trust ("REIT") focused with its subsidiaries on investing in, financing and managing transitional multi-family and commercial real estate loans, securities backed by multi-family mortgage loans or multi-family mortgage-backed securities ("Multi-Family MBS"), and other mortgage related investment including mortgage servicing rights. The Company's objective is to deliver attractive cash flow returns over time to its investors.
Hunt Companies Finance Trust is externally managed and advised by Hunt Investment Management, LLC For additional information about Hunt Investment Management, LLC, please see its form ADV and brochure (Part 2A of Form ADV) available at https://www.adviserinfo.sec.gov.
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Additional Information and Where to Find It
Investors, security holders and other interested persons may find additional information regarding the Company at the SEC's Internet site at http://www.sec.gov/ or the Company website www.huntcompaniesfinancetrust.com or by directing requests to: Hunt Companies Finance Trust, 230 Park Avenue, 19th Floor, New York, NY 10169, Attention: Investor Relations.
Forward-Looking Statements
Certain statements included in this press release and any related webcast / conference call, may constitute forward-looking statements intended to qualify for the safe harbor contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act, as amended. Forward-looking statements are subject to risks and uncertainties. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives. You can identify forward-looking statements by use of words such as "believe," "expect," "anticipate," "estimate," "plan," "continue," "intend," "should," "may," "will," "seek," "would," "could," or similar expressions or other comparable terms, or by discussions of strategy, plans or intentions. Statements regarding the following subjects, among others, may be forward-looking: the return on equity; the yield on investments; the ability to borrow to finance assets; and risks associated with investing in real estate assets, including changes in business conditions and the general economy. Forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us on the date of this press release. Actual results may differ from expectations, estimates and projections. Readers are cautioned not to place undue reliance on forward-looking statements in this press release and/or any related webcast / conference call and should consider carefully the factors described in Part I, Item IA "Risk Factors" in our annual report on Form 10-K/A for the year ended December 31, 2017, and the risk factor described in Part II, Item 1A "Risk Factors" in our quarterly report on Form 10-Q/A for the fiscal quarter ended June 30, 2018, as such factors may be updated from time to time in our periodic filings with the Securities and Exchange Commission ("SEC"), when evaluating these forward-looking statements. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond our control. Additional information concerning these and other risk factors are contained in our 2017 10-K/A which is available on the Securities and Exchange Commission's website at www.sec.gov. Except as required by applicable law, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
CONTACT: Evan N. Abrams, Senior Vice President, Hunt Companies Finance Trust, (212) 588 2166
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