AG Mortgage Investment Trust (MITT) 28 Feb 202019 Q4 Earnings call transcript

Good morning and welcome to the AG Mortgage Investment Trust, Fourth Quarter 2019 Earnings Call. My name is Brandon and I’ll be your operator for today. At this time all participants are in a listen-only mode. [Operator Instructions] Please note, this conference is being recorded.

And I will now turn the call over to Raul Moreno.

sir. begin, may You

Good earnings and Investment call Brandon. fourth Trust, to quarter XXXX for morning you, welcome everyone the Inc. Thank AG Mortgage

on uncertainties, contain in SEC begin, conference call statements Factors are we please section certain that our outlined today's information Before filings. risks in to and Risk note made during recent call are statements. forward-looking discussed may subject Any which forward-looking most the today's the

you from The release, the to company's and encourage results filings. statements. actual contained in earnings SEC presentation read materially regarding our these statements differ earnings forward-looking in disclosure our We may in our

the During SEC we our filings certain to for reconciliations non-GAAP most refer measures. financial call to Please GAAP to today measures. refer the will comparable

reference to Again, home to turn QX on joining the us was closed XXXX that today. link market the Earnings also click our the thank after website, To presentation view page. slide posted yesterday. Presentation the welcome for www.agmit.com, and and earnings will you the website our presentation, We on

that, turn over David our CEO, the to I would to Roberts. call With like

Raul morning to everyone. Thanks and good

year. We and by very comment value per Core $X.XX earnings share pleased share financial results provide our fourth on and performance and with the were the quarter are in rose Brian J. for X.X%. quarter. detailed T. per will book MITTs further the for

of investment both set residential of This professionals XX Gordon a continue quarter, in strategy we Estate and Angelo engines commercial. to rotate credit opportunity more range and upon the touched Credit that investments, credit. portfolio consistent During long the wide the with of is who MITTs leveraging term our have Real into

for we our our and completed non-QM. MITT In platform successfully Program other our under important example and activities GCAT Gordon Angelo in Securitization An funds. launched is three securitizations non-QM XXXX

market with we've well the this to to our year. based many expect transactions Our is what we many calendar securitizations. This year platform on GCAT of whole already loan would market our to securitization be known securitizations come already past non-QM first

slide total versus return to July presentation, MITT XXXX, cumulative IPO XXX%. a Both five, index's of to The from FTSE have over mortgage that that our XXX% in the slides return is the in we to We and calculations our of reinvestment end compare our the shareholder period the of of REIT cumulative MITT shows assume index. return XXXX the dividends.

the and We price-to-book a at two also of that yield. have slide related dividend slide, ratio six, metrics looks key

book MITT yield and year-end, group. than dividend of peer As traded had a discount to a steeper our higher at

address forward, platform, execute we strategy well very and the what we this we which AG on credit as our Looking this strategy in to appropriate intend be environment. greater clarity leverage in to good communicating providing through believe to as in a continuing differentiated

I'll to turning of Before part and remarks my be end to I'm by our call over both Gordon team. the saying proud MITT that T.J., very Angelo

of $X.XX return Thank reported and XXXX you, eight earnings of we net highlights. On producing of We our XX.X%. presentation share, on everyone. an walk through per while of income core per slide Good fiscal equity our economic $X.XX David. morning year share

During free the year. issuing by throughout Non-QM course the launched deals of securitization we year, rated our the program

historical this Additionally rated our footprint unrated summer, our from we away deal first just year issued three expanding securitization RPL further structures. our step-up

XXXX. thereafter are preferred raise the with first equity able to the very markets million to we we our follow-up we're a years, seven raising, February time in access capital on XXXX capital and $XXX pleased able capital September, of finally raising net in And for were total in in

during and some the the investment markets, and fourth as the headwinds several fourth to those Agency portfolio well performed rate XX, the After slide MBS tailwinds to for quarter. Turning quarter. faded challenging in David mentioned even quarters turned

modest return declining more valuations investors curve an such funding longer rates, interest net ourselves. a further helped product. reserve cut margins A boost third implied tighten federal in volatility RMBS where to create other as environment yield for resulting Agency could along helped levered and steeper markets A with rise normalized and rate term the spread

discounted Our dividend. $X.XX than in After off in came due $X.XX, per the core covering $X.XX for retrospective accounting share, $X.XX to earlier quarter a rate including earnings core run our expected, our current were a adjustment. impact positive one-time paying at a security

the of color call outstanding contribution the which I certain threshold, core one with more the exercise XX% clean falls original positive balance time of typically up deal securities wanted this have to respect to can Non the rights balance. mortgage backed to provide $X.XX the below holder quarter. calls, some agency when a

typically paying at the calls off result in par. These debt

As to Legacy continue non-agency performance, exercised. to continue interest strong incentivize markets call and rights be season, collateral securitization these bonds rates low to healthy

$X.XX The experience value mortgages in previously I think potentially mentioned, that So the in economic to while type in for in quarter return more than tightening CMBS from sector we and increase. it's our with future. $X.XX I drove an not A fourth would widening quarter's the activity dividend, the accounting modest agency above $X.XX of in offset portfolio during characterize as quarter, resulted book increase of our perspective spread coupled X.X%. value, earnings the core do this an of this unreasonable book this one-time

few on additional to details a fourth slides activity. like our in I'd our presentation. Slide includes quarter highlight XX

call, September elevated last our was as on result we a stated agency As of exposure capital temporarily raise. preferred our quarter's

quarter the residential and and rotated non-QM Throughout both we fourth whole into RPLs. loans, NPL seasoned

million settled agreement to not yet is on sheet. and therefore into entered we year-end subsequent reflected balance re-performing of our on clean December which loans, in purchase $XXX approximately Additionally a

our about Finally, $XXX we quarter. to million credit, purchasing allocation net investments the commercial during of increased

MITT from rated we points our BB of AAA in to Angelo third along are funds of in swaps. Turning space. over XXX at funds We to a with securitization average basis active capital other weighted able in its lock the through spread a cost Gordon were markets securitization non-QM completed November. activity, duration

As our of via GCAT last volumes, current a based stated call, on we on loans being quarterly origination non-QM program. envision loan quarter's the we issuer

along MITT in Additionally rights unpaid funds of by million Gordon exercising securitization non-rated completed a principal $XXX of RPL’s balance. on with Angelo approximately call November, other

We rate to and are advance comparison our and a Both provide XX% plus basis funds floating fixed warehouse of able to LIBOR increase X.XX%, MITT cheaper previous of from cost cost our on points from funds par to securitizations and of securitizations. in with XXX lines our materially lower to XX%. to a rate termed-out rate

Portfolio. investment this portfolio current the find for our and we an it carrying term of the in we outcome transaction value. is opportunities this to gain immaterial completed We from attractive November resulted both agreement we power on to and purchase entered continue call, sale sell in earnings as realized best commercial and had residential in space. a Lastly, last announced believe Single-Family quarter's long credit Rental our We the

our to Slide residential XX and was aggregate billion quarter portfolio the lays $X.X $X.X for composed portfolio value allocation XX% continue credit. this our our we from the over time for to the page chart commercial credit, allocation composition the the out quarter rotation The investment we continue at XX% the to billion agency approximately quarter. XX% and mortgage expect expand residential as decreased bottom portfolio of credit fair The agency, strategy. of at of and bar into displays end form

out by agency our type. XX, to we current Turning slide portfolio break product

As credit we preferred agencies initially previously into mentioned, capital rotated September into from equity deployed the our rates investments.

Our allows of MBS us portfolio prepayment variety environments. for disciplined asset a selection Agency process the to position

issue, XX% to our hold in of new high close to with We pools, continue MBS Agency coupon quality lower pools. specified the remainder in

the year agency XX.X As Fannie versus Mae the universe. prepayment book result, a the for XX rate quarter, constant our fourth CPR overall for CPR XX.X was for

portfolio to MBS outperform of of universe to prepayment our expect fees. continue We overall the terms in Agency

to As increase previously we at XX to loans reduce slide to market exposure securities on our exposure non-Agency see can RMBS residential and continue current levels. you mentioned, our

and for to which turning space, had you unusual XX, markets, we and particularly portfolio high slide in the particularly commercial volume this the limited product. the primary market active a in quarter secondary Quickly K–B our investments Freddie see is can sourced demand trading piece both as on given we

related of million real-estate in commitments approximately $XX in remaining commitment. construction loans, resulting quarter million approximately our Additionally equity $X during equity we commercial existing the funded existing to

were our MBS shows extension the of of end through gap to X.XX of able to quarter, hedges, XX acquired due the residential third is at years minor With XX to of rate paid three years, weighted a from duration Slide X.X lower X.X% which we down shows some our fixed book. loans lower swap our to the up average our largely Agency newly from and ratio, hedge our restructuring X.X% slide portfolio. respect

platform. credit opportunities of via a ahead, risk we continue return Gordon's a to Looking adjusted Angelo sourced large pipeline see at favorable

of growth of way being and As both investor strategy the and community. year, we’ve on have our conduit a well or now resources course been the aggregation we mentioning are issuer non-QM our well-known invested we throughout debt to creation within into and the the time

origination community forward-looking and they XXXX activities partners, developing banks, devoted to focus traditional mortgage are from result development energy our XXXX in relationships the in as Our well known, as finance ranging strategic the specialty and securitization a as CDFI’s institutions as pipeline or companies. with financial team and of to commonly XXXX

Home, Investment the by just licensed fully a significant Gordon mortgage Angelo New owned MITT may done Arc is What not Team by be yet and apparent funds. with managed in Gordon work other York being originator Angelo

program expect profile into non-agency more returns Gordon's space. look our thereby non-QM help meaningful the our to enhance raise XXXX, and be within and part the securitization fully forward Arc we continue to ecosystem of we for a Angelo origination credit in As Home’s

Before rates year, provide three week. results, over basis effectively wanted priced well basis considered. week, to widened market the the reaction to this move the week, markets this Brian to In this all lower in has this things I is starting the in move March. cuts to review holding commentary now I had in in previous brief Prior despite our coronavirus, the call financial rates agency and therefore to drastic the some interest from the on the in rate rate turn

heavy due the calendar there was Moving volume be to weeks. believe markets, at to a reset today, weaker. the spreads come week, but that best will this few least new the across benchmark information the over deals originally trading is next to very obviously know credit off issued We little witnessed to to stack is tone we've the market market the we based the and

continue to We always as you. Thank capital deploy look opportunities. Brian? to prudently into new

in we of $XX.X or million Thanks fourth $X.XX earnings $XX.X income net million Overall to in share. the million quarter. the $X.XX per quarter quarter negative There prior in diluted a quarter third or per or the $X.XX available were reported versus versus Core adjustment for a fully the fourth common in share adjustment share quarter. $XX $X.XX fourth T.J. stockholders retrospective retrospective was positive the $X.XX per

the recognize as off to previously expected paying we a positive mentioned. of security core result a discounted as Additionally, $X.XX earlier T.J. impact than

XX at net interest previously December As at of Page margin by was margin described increased driven of mostly curve from XX. of offset asset the by of This presentation, September X.X% of on of steepening X.X%. X.X%, T.J. an as The net yield X.X% to funds total comprised our mentioned. in XX cost yield interest was increase

investments. Our X.Xx X.Xx rotated decrease as sales our agency The credit to result economic XX. as capital into primarily was is XX period compared September a we December ratio the leverage during of at at

parties, December credit of the XX the of are remained XX market volatility, repo we stable. and recent financing have financing GC counter markets As Despite XX% investments had them. and with

T.J. unlevered liquidity and treasury whole At securities. million quarter we of year approximately agency of cash with million $XX end elevated in of of $XX $XXX mentioned. and purchasing clean amount pool RPLs, of We liquidity, of pool the anticipation closed of the million comprised had an previously

quarter the this criteria SFR We sale we that for our that of during the met concluded mentioned, portfolio of discontinued disposition completed previously the As portfolio. operations.

results as reclassified liabilities we our for balance As as sheet on such, related and and have periods presented, discontinued related held operations prior sale assets on the current statement. operating income and all for our

from for earnings and core The have excluded presented. periods been current operating prior our also results all

end Additionally, estimated share. at undistributed million $XX our income taxable was or quarter $X.XX per

on this make to evaluate weren’t they compliance requirement. to basis with our distribution continued sure quarterly in REIT We a

now call open remarks, prepared we’d for our to concludes questions. like That the Operator? and

KBW have Thank Please ahead. you. from we Instructions]. go And Eric [Operator Hagen.

I of in corrected things this Hi, the know obviously calm to Do thanks, sort of think do kind capital market kind Thanks week. week. a spreads overhanging of this a uncertainty or happened you spreads in good for just is But now, lot on what’s the right just for have time to down. view but comment wait morning. it or this how I to about your better better environment, that's there's deploying over this given guess think is wait you

separately, that portfolio. And non-QM are cumulative number are two, expect in that another you're originating the but and the of you question types losses what what that

Sure Eric.

I of in of spreads tell I I think would real too terms market, it's to, lack probably of the reset to like guess out, say still just to are I it's think early shaking the I early volume kind mentioned, given trading so tell. too where

thinking term just would be expect spreads thinking kind out of of effects more residential about to credit we the think and probably investments, hotels affected I going what's there. to commercial mortgages, potentially mortgage near on medium about say in

if markets we're risk just pricing how that's are trying see the to thinking about So I and accordingly. that mean

we a if products of somewhat own programs we are variety of to aggregating their to you when of we the well-diversified them know sort In well, and is go each across securitized. or niches a terms pool buying originators, what – have non-QM, we're different you think

So a property, there's verification national, etcetera. investor that’s mix going in a alternative income, of foreign It’s I everything so in terms there. loan type mean from of

you We've etcetera bank been generally the focus know there, out lower statements stayed has today. our really that lower, on away are not verification one so month income month programs from the

given loss anywhere and think on are the – losses profile. in from non-QM depending I So LTV’s single are digits the a cume numbers they

Got it.

again I strong particularly, think it's it’s generally the a then given LTV profile. credit and again, So

seeing are lot a expecting loss. We not cume or of

Right.

single of extrapolating like would digits so your from low is I Okay, imagine kind comments.

yeah. Yeah,

callable Okay, of that this Is is okay. percentage what fair? And portfolio point. then at legacy your non-agency

off that that. have know on don't of we’d top my to I the to you back head, get

of is relatively large percentage it it is kind a Okay, or minor.

would but large let it's think percentage, a I us verify.

Sure.

much comments. very for you the thank Okay,

Cranston. we JMP Please Securities From have ahead. go Trevor

deployment non-QM the loans Hey, seeing pending going over last thanks. guess on Follow-up acquire of currently week where the guys given last in sort continuing what's your I so. question week more comfortable or spreads be and or the capital over on you about are to new be this be could not point think would like you shake and markets where done you and likely at executed, wait securitizations near sort and of wait see would or out with acquire. loans acquire sort to you term securitizations loans of where the

take to lot a step opportunities this back, of a deploy been just capital there hasn't to So, week.

generally starting of of For to the a beginning variety reasons, at from to just volatility. with an Industry week transact the Conference not looking people given the

should probably come, that You understand, know out. spreads. see my volatility deals of get and week, concerned were, that we're again don't non-QM we market on are albeit securitization and try up you about hold at lined we’ll given what you there we potentially originally I next a I few if know think able to put overly that aren’t they the with know from to weigh from think regard loans, wider part comments executed, being – earlier And to

for last that these in want very the know new in loans The is today that are we the of or expectations to environment. be probably maybe newer speeds, I sensitive environment, the and so to would current say look at on some you be rate rate looking originators premiums duration to sensitive we prepayment and we’ll part today's

portfolio have also things to Okay, have this that related down. update made changes makes book can I you provide might how have hedge to And as quarter, moved you come any then on guess or sense. you the rates any the know

volume, up I rate What drastic the I it would to than situation be you rates of of was where down to wouldn't were I anything coming you originators do would trying there the its I hard you keep with the with in mean is I late, and a keep different know normal agency anything declined move wouldn't say this what up for potential know, we already on ordinary. are a we complexity before think seeing Yes, know say that will week. materially given say the lower out book.

lot we're down have move points the with started you I So, XX the hedged I think we’re and to the rate this on agencies prepayments were how what this as way of the not a you seen from we’re coming and already think basis the moved on this know comfortable going pretty into coming see linear positioned and high week. expectations would we where same you're of week –

And missed about I size or guys provided. gotcha. details transaction anything prepared the if any you of think said settled that post quarter guys I in an Okay about else remarks but the I end, missed RPL that you something

could comment on you that If again?

Yeah.

Just on $XXX million we of entered year subsequently that quarter. UPB to a end prior have this settled notional purchase RPLs agreement

you. Thank Okay.

Yep.

thanks. Yep,

[Operator Instructions].

I no at for further back speakers showing turn to I’m the Okay, it will questions moment. our closing remarks.

speaking look to I you everyone. forward quarter. Thanks next with

gentlemen, concludes you Thank you. Thank Ladies today's for joining. and conference. this

You disconnect. may now