Quick Earnings Update (1 BDC and 3 mREITs):
1) Overall, $ARCC
reported a good quarter. ARCC's reported NAV as of 3/31/2019 of $17.21 per share was slightly below my projection of $17.30 per share but within my stated $17.05 - $17.55 per share range. As such, a minor underperformance on the valuation change. NAV as of 12/31/2018 was $17.12 per share.
On NII, ARCC reported a NII of $0.472 per share for Q1 2019 which was basically unchanged when compared to $0.477 for Q4 of 2018. This was slightly above my estimate of $0.461 per share but within my stated $0.441 - $0.481 per share range.
's reported BV as of 3/31/2019 of $16.15 per share (1.6% increase) was very close / a very minor underperformance vs. my previously projected $16.20 per share (1.9% increase) and well within my stated range.
CIM's core earnings of $0.57 per common share for Q1 2019 was a $0.01 outperformance when compared to my previously projected $0.56 per common share.
's reported BV as of 3/31/2019 of $16.42 per share (1.1% increase) was very close / a very minor underperformance vs. my previously projected $16.50 per share (1.5% increase) and well within my stated range.
NRZ's core earnings of $0.53 per common share for Q1 2019 was a ($0.02) underperformance when compared to my previously projected $0.55 per common share but still within the low end of my projected range.
's reported BV as of 3/31/2019 of $6.24 per share (3.7% increase) was a modest outperformance vs. my previously projected $5.95 per share (1.2% decrease) and slightly outside my stated range of $5.70 - $6.20 per share.
The modest BV outperformance was due to reasons very similar to AGNC. First, DX quickly deployed newly raised capital into agency RMBS / CMBS. In addition, when a company raises capital, it typically lowers leverage. However, DX increased the company's "at risk" leverage to 8.5x as of 3/31/2019 vs. 8.0x as of 12/31/2018. Simply put, a greater amount of agency MBS equates to a larger valuation gain during Q1 2019.
Second, DX slightly reduced the company's hedging coverage ratio from 110% as of 12/31/2018 to approximately 100% as of 3/31/2019. However, more importantly in my opinion, the company correctly terminated a notable portion of the company's longer-tenor IR swaps and replaced such swaps with shorter-tenor IR swaps. Simply put, lower tenor IR swaps equated to a less severe valuation loss during Q1 2019.
So, very similar to AGNC, both moves by DX during Q1 2019 were beneficial for the company when it comes to BV fluctuations.
DX's core earnings of $0.18 per common share for Q1 2019 was a $0.01 outperformance when compared to my previously projected $0.17 per common share.
I hope this helps with readers' assessments / strategies. If a certain BDC / mREIT has reported today and it's not discussed above, this means I have yet to fully go over their earnings (and will do so in the near future).