Exantas Capital Corp. (XAN) 8-K Earnings Release

New York, NY, March 5, 2019 - Exantas Capital Corp. (NYSE: XAN) ("XAN" or the "Company") reports results for the three months and year ended December 31, 2018.

Significant Items and Highlights

•

GAAP net income allocable to common shares of $0.23 per common share-diluted for the three months ended December 31, 2018.

•

Core Earnings were $0.21 per common share-diluted and Core Earnings, adjusted were $0.24 per common share-diluted for the three months ended December 31, 2018 (see Schedule I).

•

Management anticipates the Company will declare a cash dividend of $0.20 per share on its common stock for the first quarter of 2019, which would be a 14% increase over the fourth quarter of 2018 dividend of $0.175 per share and a 300% increase over the first quarter of 2018 dividend of $0.05 per share.

•

XAN originated and acquired $1.1 billion of new commercial real estate ("CRE") loans and commercial mortgage-backed securities ("CMBS") during the year ended December 31, 2018.

•

XAN originated $274.9 million and $861.6 million of new CRE loans during the three months and year ended December 31, 2018, respectively (see Schedule IV).

•

XAN has monetized $436.6 million of the investments that were included in management's previously communicated strategic plan (the "Plan") (see Schedule III). This includes $18.3 million and $72.6 million of proceeds generated during the three months and year ended December 31, 2018, respectively.

•

Book value was $14.02 per common share at December 31, 2018 as compared to $14.23 per common share at September 30, 2018.

•

Economic book value, which adjusts for the face redemption amounts of the Company's outstanding preferred stock and convertible senior notes, was $13.54 at December 31, 2018 (see Schedule V).

Three Months and Year Ended December 31, 2018 Results

•

GAAP net income allocable to common shares was $7.4 million, or $0.23 per share-diluted, and $7.0 million, or $0.22 per share-diluted, for the three months and year ended December 31, 2018, respectively, as compared to a GAAP net loss allocable to common shares of $12.1 million, or $(0.39) per share-diluted, and GAAP net income allocable to common shares of $5.7 million, or $0.18 per share-diluted, for the three months and year ended December 31, 2017, respectively.

•

Core Earnings were $6.5 million, or $0.21 per common share-diluted, for the three months ended December 31, 2018 and $7.5 million, or $0.24 per common share-diluted, after a $934,000, or $0.03 per common share-diluted, adjustment for the impairment of a legacy CMBS investment. Core Earnings were $9.4 million, or $0.30 per common share-diluted, for the year ended December 31, 2018 and $22.3 million, or $0.71 per common share-diluted, after adjustments for (i) a realized loss on the sale of a previously impaired, 2013 vintage CRE loan, (ii) non-recurring charges related to the redemption of the Company's 8.25% Series B Cumulative Redeemable Preferred Stock ("Series B Preferred Stock"), (iii) the settlement of a securities litigation and (iv) the impairment of a legacy CMBS investment (see Schedule I).

•

GAAP net income allocable to common shares for the three months and year ended December 31, 2018 includes $1.4 million, or $0.05 per share-diluted, on the recovery of an impaired corporate credit loan in two dormant collateralized loan obligations, which are non-core activities.

Additional Items

Commercial Real Estate

•

Substantially all of XAN's CRE loan portfolio comprised floating rate senior whole loans of $1.5 billion at December 31, 2018.

•

XAN's CRE floating rate whole loan portfolio had a weighted average spread of 3.95% and 4.71% over the one-month London Interbank Offered Rate ("LIBOR") of 2.50% and 1.56% at December 31, 2018 and 2017, respectively.

The following table summarizes XAN's CRE loan activities and fundings of previous commitments for the three months and years ended December 31, 2018 and 2017 (in millions, except percentages):

	Three Months Ended December 31, 2018			Year Ended December 31, 2018			Three Months Ended December 31, 2017			Year Ended December 31, 2017
New CRE loan commitments	$	274.9		$	842.4		$	229.0		$	600.3
New CRE preferred equity investment		—			19.2			—			—
Total CRE loan commitments and investments		274.9			861.6			229.0			600.3
Sale, payoffs and paydowns ⁽¹⁾⁽²⁾		(203.1	)		(575.6	)		(185.7	)		(559.5	)
Previous commitments funded		13.3			51.4			4.0			31.6
New unfunded loan commitments		(30.5	)		(81.0	)		(24.6	)		(71.4	)
Net CRE loans funded	$	54.6		$	256.4		$	22.7		$	1.0

Weighted average one-month LIBOR floor on new originations⁽³⁾		2.09	%		1.86	%		1.20	%		0.97	%
Weighted average spread above one-month LIBOR⁽³⁾		3.06	%		3.39	%		4.26	%		4.41	%
Weighted average unlevered yield, including amortization of origination fees		5.72	%		5.84	%		5.79	%		5.71	%

(1)	CRE loan payoffs and extensions resulted in exit and extension fees of $1.0 million and $3.0 million during the three months and year ended December 31, 2018, respectively, and $949,000 and $3.0 million during the three months and year ended December 31, 2017, respectively.

(2)	Activity excludes legacy CRE loans.

(3)	Applicable to new floating rate CRE whole loans funded.

Commercial Mortgage-Backed Securities

•

XAN's CMBS portfolio had a carrying value of $419.0 million and a weighted average coupon of 4.76% at December 31, 2018.

The following table summarizes XAN's CMBS activities, at face value, for the three months and years ended December 31, 2018 and 2017 (in millions, except percentages):

	Three Months Ended December 31, 2018			Year Ended December 31, 2018			Three Months Ended December 31, 2017			Year Ended December 31, 2017
CMBS acquisitions	$	83.2		$	252.3		$	77.7		$	212.0
Sales		(4.9	)		(14.9	)		(2.4	)		(7.4	)
Principal paydowns		(6.7	)		(20.9	)		(23.0	)		(53.8	)
CMBS acquisitions, net	$	71.6		$	216.5		$	52.3		$	150.8

Weighted average coupon at the respective year end		4.71	%		4.57	%		4.78	%		4.19	%

Commercial Real Estate Asset Impairment

•

XAN recorded an other-than-temporary impairment charge of $934,000 during the three months and year ended December 31, 2018 on one CMBS position with an amortized cost of $934,000, acquired in 2007, resulting from a collateral shortfall in the securitization.

Liquidity

•

At February 28, 2019, XAN's available liquidity consisted of two primary sources:

•

unrestricted cash and cash equivalents of $71.7 million; and

•

approximately $96.0 million of liquidity from available financing of unlevered CRE loans and CMBS.

Common Stock Book Value, Economic Book Value and Total Stockholders' Equity

The following table rolls forward XAN's common stock book value from September 30, 2018 to December 31, 2018 and reconciles common stock book value to economic book value, a non-GAAP measure, at December 31, 2018 (see Schedule V) (in thousands, except per share data and amounts in footnotes):

	Total Amount			Per Share Amount
Common stock book value at September 30, 2018 ⁽¹⁾	$	444,389		$	14.23
Net income allocable to common shares		7,367			0.24
Change in other comprehensive income:
Available-for-sale securities ⁽²⁾		(6,219	)		(0.20	)
Derivatives⁽²⁾		(2,467	)		(0.08	)
Common stock dividends		(5,467	)		(0.18	)
Common stock dividends on unvested shares		(74	)		—
Impact to equity of share-based compensation		334			0.01
Total net decrease		(6,526	)		(0.21	)
Common stock book value at December 31, 2018 ⁽¹⁾⁽³⁾		437,863			14.02

Reconciling items in arriving at economic book value at December 31, 2018:
Non-cash convertible senior notes' unamortized discounts:
4.50% Convertible Senior Notes		(10,833	)		(0.35	)
8.00% Convertible Senior Notes		(148	)		—
Series C Preferred Stock redemption value in excess of carrying value		(4,045	)		(0.13	)
Economic book value at December 31, 2018	$	422,837		$	13.54

(1)

Per share calculations exclude unvested restricted stock, as disclosed on the consolidated balance sheets, of 422,671 and 422,592 shares at December 31, 2018 and September 30, 2018, respectively. The denominators for the calculations are 31,234,828 at December 31, 2018 and September 30, 2018, respectively.

(2)	Through February 2019, XAN recognized an increase in other comprehensive income of $5.2 million, or $0.17 per common share, on available-for-sale securities and derivatives.

(3)	Common stock book value is calculated as total stockholders' equity of $553.8 million less preferred stock equity of $116.0 million at December 31, 2018.

The following table presents the economic book value per common share for the periods then ended:

		At December 31, 2018				At September 30, 2018				At June 30, 2018				At March 31, 2018				At December 31, 2017
Economic book value		$	13.54			$	13.72			$	13.56			$	13.36			$	13.63

Total stockholders' equity at December 31, 2018, which measures equity before accounting for non-controlling interests, was $553.8 million, of which $116.0 million was attributable to preferred stock. Total stockholders' equity at December 31, 2017 was $671.5 million, of which $223.8 million was attributable to preferred stock.

Investment Portfolio

The following table summarizes the amortized cost and net carrying amount of XAN's investment portfolio at December 31, 2018, classified by asset type (in thousands, except percentages and amounts in footnotes):

At December 31, 2018	Amortized Cost		Net Carrying Amount		Percent of Portfolio			Weighted Average Coupon
Core Assets:
CRE whole loans ⁽¹⁾⁽²⁾	$	1,517,598	$	1,516,196		76.27	%	6.34%
CRE mezzanine loan and preferred equity investment ⁽²⁾		24,255		24,255		1.22	%	11.21%
CMBS, fixed rate⁽³⁾		121,487		119,739		6.02	%	4.12%
CMBS, floating rate⁽³⁾		301,132		299,259		15.06	%	5.11%
Total Core Assets		1,964,472		1,959,449		98.57	%
Non-Core Assets:
Structured notes⁽⁴⁾		1,000		—		—	%	N/A ⁽⁷⁾
Direct financing leases⁽⁴⁾		801		66		—	%	N/A ⁽⁷⁾
Legacy CRE loans ⁽⁵⁾⁽⁶⁾		33,181		28,516		1.43	%	1.67%
Total Non-Core Assets		34,982		28,582		1.43	%

Total Core and Non-Core Assets	$	1,999,454	$	1,988,031		100.00	%

(1)	Net carrying amount includes an allowance for loan losses of $1.4 million at December 31, 2018.

(2)	Classified as CRE loans on the consolidated balance sheets.

(3)	Classified as investment securities available-for-sale on the consolidated balance sheets.

(4)	Classified as other assets on the consolidated balance sheets.

(5)

At June 30, 2018, two legacy CRE loans with total amortized costs and net carrying amounts of $28.3 million were reclassified to CRE loans on the consolidated balance sheet as we intend to hold these loans to maturity. In December 2018, one reclassified legacy CRE loan with an amortized cost and carrying amount of $16.8 million paid off at par.

(6)	Net carrying amount includes a lower of cost or market value adjustment at December 31, 2018.

(7)	There are no stated rates associated with these investments.

Supplemental Information

The following schedules of reconciliations and supplemental information at December 31, 2018 are included at the end of this release:

•

Schedule I - Reconciliation of GAAP Net Income (Loss) to Core Earnings;

•

Schedule II - Summary of Securitization Performance Statistics;

•

Schedule III - Strategic Plan Update;

•

Schedule IV - CRE Loan Activities;

•

Schedule V - Economic Book Value Per Share; and

•

Schedule VI - Supplemental Information.

About Exantas Capital Corp.

Exantas Capital Corp. is a real estate investment trust that is primarily focused on originating, holding and managing commercial mortgage loans and commercial real estate-related debt investments.

The Company is externally managed by Exantas Capital Manager Inc. (the "Manager"), which is an indirect wholly-owned subsidiary of C-III Capital Partners LLC, a leading commercial real estate investment management and services company engaged in a broad range of activities.

For more information, please visit XAN's website at www.exantas.com or contact investor relations at IR@exantas.com.

Safe Harbor Statement

Statements made in this release may include forward-looking statements, which involve substantial risks and uncertainties. XAN's actual results, performance or achievements could differ materially from those expressed or implied in this release. The risks and uncertainties associated with forward-looking statements contained in this release include those related to:

•

fluctuations in interest rates and related hedging activities;

•

the availability of debt and equity capital to acquire and finance investments;

•

defaults or bankruptcies by borrowers on XAN's loans or on loans underlying its investments;

•

adverse market trends that have affected and may continue to affect the value of real estate and other assets underlying XAN's investments;

•

increases in financing or administrative costs; and

•

general business and economic conditions that have in the past impaired and may in the future impair the credit quality of borrowers and XAN's ability to originate loans.

For further information concerning these and other risks pertaining to the forward-looking statements contained in this release, and to the general risks to which XAN is subject, see Item 1A, "Risk Factors," included in its most recent Annual Report on Form 10-K and the risks expressed in its other public filings with the Securities and Exchange Commission.

XAN cautions you not to place undue reliance on any forward-looking statements contained in this release, which speak only as of the date of this release. All subsequent written and oral forward-looking statements attributable to XAN or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this release. Except to the extent required by applicable law or regulation, XAN undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.

Furthermore, certain non-GAAP financial measures are discussed in this release. XAN's presentation of this information is not intended to be considered in isolation of or as a substitute for the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP are set forth in Schedule I of this release and can be accessed through XAN's filings with the SEC at www.sec.gov.

The remainder of this release contains XAN's unaudited (2018) and audited (2017) consolidated balance sheets, unaudited (fourth quarter ended 2018 and 2017 and year ended 2018) and audited (year ended 2017) consolidated statements of operations, a reconciliation of GAAP net income (loss) to Core Earnings, a summary of securitization performance statistics, an update on XAN's strategic plan, a summary of XAN's CRE loan activities, a reconciliation of XAN's common stock book value to its economic book value and supplemental information regarding XAN's CRE loan portfolio and loans held for sale.

EXANTAS CAPITAL CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	December 31,
	2018			2017
	(unaudited)
ASSETS⁽¹⁾
Cash and cash equivalents	$	82,816		$	181,490
Restricted cash		12,658			22,874
Accrued interest receivable		8,198			6,859
CRE loans, net of allowances of $1,401 and $5,328		1,551,967			1,284,822
Investment securities available-for-sale		418,998			211,737
Principal paydowns receivable		32,083			76,129
Investments in unconsolidated entities		1,548			12,051
Derivatives, at fair value		985			602
Other assets		4,015			7,793
Assets held for sale (amounts include $17,000 and $61,841 of legacy CRE loans held for sale in continuing operations)		17,645			107,718
Total assets	$	2,130,913		$	1,912,075
LIABILITIES⁽²⁾
Accounts payable and other liabilities	$	7,550		$	5,153
Management fee payable		938			1,035
Accrued interest payable		4,224			4,387
Borrowings		1,554,223			1,163,485
Distributions payable		7,265			5,581
Preferred stock redemption liability		—			50,000
Derivatives, at fair value		1,043			76
Accrued tax liability		31			540
Liabilities held for sale		1,820			10,342
Total liabilities		1,577,094			1,240,599
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.001: 10,000,000 shares authorized 8.25% Series B Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share; 0 and 4,613,596 shares issued and outstanding		—			5
Preferred stock, par value $0.001: 10,000,000 shares authorized 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share; 4,800,000 and 4,800,000 shares issued and outstanding		5			5
Common stock, par value $0.001: 125,000,000 shares authorized; 31,657,499 and 31,429,892 shares issued and outstanding (including 422,671 and 483,073 unvested restricted shares)		32			31
Additional paid-in capital		1,082,677			1,187,911
Accumulated other comprehensive (loss) income		(3,057	)		1,297
Distributions in excess of earnings		(525,838	)		(517,773	)
Total stockholders' equity		553,819			671,476
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	2,130,913		$	1,912,075

EXANTAS CAPITAL CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS - (Continued)

(in thousands, except share and per share data)

	December 31,
	2018		2017
	(unaudited)
(1) Assets of consolidated variable interest entities ("VIEs'') included in total assets above:
Restricted cash	$	6,189	$	20,846
Accrued interest receivable		3,548		3,347
CRE loans, pledged as collateral and net of allowances of $763 and $1,330		700,223		603,110
Principal paydowns receivable		31,914		72,207
Other assets		157		86
Total assets of consolidated VIEs	$	742,031	$	699,596
(2) Liabilities of consolidated VIEs included in total liabilities above:
Accounts payable and other liabilities	$	75	$	96
Accrued interest payable		709		592
Borrowings		501,045		416,655
Total liabilities of consolidated VIEs	$	501,829	$	417,343

EXANTAS CAPITAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMTENTS OF OPERATIONS

(in thousands, except share and per share data)

	For the Three Months Ended						For the Year Ended
	December 31,						December 31,
	2018			2017			2018			2017
	(unaudited)			(unaudited)			(unaudited)
REVENUES
Interest income:
CRE loans	$	29,486		$	22,941		$	103,800		$	88,268
Securities		5,722			3,203			18,600			8,501
Other		118			85			379			2,549
Total interest income		35,326			26,229			122,779			99,318
Interest expense		19,751			15,203			67,616			57,657
Net interest income		15,575			11,026			55,163			41,661
Other revenue		38			26			120			2,048
Total revenues		15,613			11,052			55,283			43,709
OPERATING EXPENSES
Management fees		2,812			2,875			11,250			13,117
Equity compensation		334			321			2,717			2,738
General and administrative		2,723			4,066			10,666			15,846
Depreciation and amortization		9			13			77			139
Impairment losses		934			—			934			177
(Recovery of) provision for loan and lease losses, net		(335	)		1,254			(1,595	)		1,772
Total operating expenses		6,477			8,529			24,049			33,789
		9,136			2,523			31,234			9,920
OTHER INCOME (EXPENSE)
Equity in (losses) earnings of unconsolidated entities		(14	)		(1,745	)		217			39,545
Net realized and unrealized gain on investment securities available-for-sale and loans and derivatives		70			2,715			639			18,334
Net realized and unrealized gain (loss) on investment securities, trading		—			16			53			(954	)
Fair value adjustments on financial assets held for sale		(932	)		(1,889	)		(7,176	)		(1,831	)
Loss on extinguishment of debt		—			—			—			(10,365	)
Other income (expense)		1,422			25			1,996			(579	)
Total other income (expense)		546			(878	)		(4,271	)		44,150
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES		9,682			1,645			26,963			54,070
Income tax benefit (expense)		312			(675	)		343			(6,613	)
NET INCOME FROM CONTINUING OPERATIONS		9,994			970			27,306			47,457
NET (LOSS) INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX		(40	)		(3,284	)		121			(14,116	)
NET INCOME (LOSS)		9,954			(2,314	)		27,427			33,341
Net income allocated to preferred shares		(2,587	)		(6,014	)		(12,972	)		(24,057	)
Consideration paid in excess of carrying value of preferred shares		—			(3,803	)		(7,482	)		(3,803	)
Net loss allocable to non-controlling interest, net of taxes		—			—			—			196
NET INCOME (LOSS) ALLOCABLE TO COMMON SHARES	$	7,367		$	(12,131	)	$	6,973		$	5,677

EXANTAS CAPITAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMTENTS OF OPERATIONS - (Continued)

(in thousands, except share and per share data)

	For the Three Months Ended					For the Year Ended
	December 31,					December 31,
	2018		2017			2018		2017
	(unaudited)		(unaudited)			(unaudited)
NET INCOME (LOSS) PER COMMON SHARE - BASIC:
CONTINUING OPERATIONS	$	0.24	$	(0.28	)	$	0.22	$	0.64
DISCONTINUED OPERATIONS		—		(0.11	)		—		(0.46	)
TOTAL NET INCOME (LOSS) PER COMMON SHARE - BASIC	$	0.24	$	(0.39	)	$	0.22	$	0.18
NET INCOME (LOSS) PER COMMON SHARE - DILUTED:
CONTINUING OPERATIONS	$	0.23	$	(0.28	)	$	0.22	$	0.64
DISCONTINUED OPERATIONS		—		(0.11	)		—		(0.46	)
TOTAL NET INCOME (LOSS) PER COMMON SHARE - DILUTED	$	0.23	$	(0.39	)	$	0.22	$	0.18
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC		31,234,840		30,914,269			31,198,319		30,836,400
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED		31,545,173		30,914,269			31,383,102		31,075,787

SCHEDULE I

EXANTAS CAPITAL CORP. AND SUBSIDIARIES

RECONCILIATION OF GAAP NET INCOME (LOSS) TO CORE EARNINGS

(unaudited)

XAN uses Core Earnings as a non-GAAP financial measure to evaluate its operating performance.

Core Earnings exclude the effects of certain transactions and GAAP adjustments that XAN believes are not indicative of its current CRE loan portfolio and other CRE-related investments and operations. Core Earnings exclude income (loss) from all non-core assets, such as commercial finance, middle market lending, residential mortgage lending, certain legacy CRE loans and other non-CRE assets designated as assets held for sale at the initial measurement date.⁽¹⁾

Core Earnings, for reporting purposes, is defined as GAAP net income (loss) allocable to common shareholders, excluding (i) non-cash equity compensation expense, (ii) unrealized gains and losses, (iii) non-cash provisions for loan losses, (iv) non-cash impairments on securities, (v) non-cash amortization of discounts or premiums associated with borrowings, (vi) net income or loss from a limited partnership interest owned at the initial measurement date, (vii) net income or loss from non-core assets,⁽²⁾⁽³⁾ (viii) real estate depreciation and amortization, (ix) foreign currency gains or losses and (x) income or loss from discontinued operations. Core Earnings may also be adjusted periodically to exclude certain one-time events pursuant to changes in GAAP and certain non-cash items.

Although pursuant to the Third Amended and Restated Management Agreement XAN calculates incentive compensation using Core Earnings excluding incentive fees payable to the Manager, XAN includes incentive fees payable to the Manager in Core Earnings for reporting purposes.

Core Earnings does not represent net income or cash generated from operating activities and should not be considered as an alternative to GAAP net income or as a measure of liquidity under GAAP. XAN's methodology for calculating Core Earnings may differ from methodologies used by other companies to calculate similar supplemental performance measures, and, accordingly, its reported Core Earnings may not be comparable to similar performance measures used by other companies.

The following table provides a reconciliation from GAAP net income (loss) allocable to common shares to Core Earnings allocable to common shares and Core Earnings allocable to common shares, adjusted for the periods presented (in thousands, except per share data and amounts in footnotes):

	For the Three Months Ended						For the Year Ended
	December 31,						December 31,
	2018			2017			2018			2017
Net income (loss) allocable to common shares - GAAP	$	7,367		$	(12,131	)	$	6,973		$	5,677
Adjustment for realized gains on CRE assets ⁽⁴⁾		(70	)		—			(520	)		—
Net income (loss) allocable to common shares - GAAP, adjusted		7,297			(12,131	)		6,453			5,677

Reconciling items from continuing operations:
Non-cash equity compensation expense		334			321			2,717			2,738
Non-cash (recovery of) provision for CRE loan losses		(335	)		1,254			(1,427	)		1,502
Litigation settlement expense ⁽⁵⁾		—			667			(2,167	)		2,167
Non-cash amortization of discounts or premiums associated with borrowings		780			780			3,169			4,058
Net loss from limited partnership interest owned at the initial measurement date ⁽¹⁾		—			—			—

Exantas Capital Corp. (XAN) SEC Filing 8-K Material Event for the period ending Tuesday, March 5, 2019

SEC Filings

XAN Valuations

XAN Annual Reports

XAN Quarterly Reports

XAN Corporate News