AG Mortgage Investment Trust (MITT) 19 Feb 212020 Q4 Earnings call transcript

Welcome to AG Mortgage Investment Trust's Fourth Quarter 2020 Earnings Call. My name is Sylvia, and I'll be operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] Please note that this conference is being recorded. the to turn Moore. now will call Christopher over I Mr. Moore, begin. you may

Investment Welcome Good earnings fourth Mortgage Sylvia. you, to call morning, AG XXXX Thank year everyone. the full quarter for Trust. and

may risk under that regarding are the We of we forward-looking read may review and or forward-looking Company's results SEC outlined factors otherwise. to certain call new in differ Any statements. SEC risks by you please result materially forward-looking forward-looking today's in obligated including any or contained Before revise statements during subject are statements. from filings. regarding information intend whether our contain actual made encourage and and begin, disclosure we the forward-looking is discussion in or as as statement not a required these information, law, analysis. today's discussed update and statements, the to headings our statement, events call Except cautionary note to management's to uncertainties, future statements filings, which The not do

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

morning. Again, page. that CEO, presentation, that, and Roberts and reference will earnings call, our We the the David thank joining quarter to website over the on to like fourth the XXXX link I'd posted With welcome turn on turn us - for presentation today. home the earnings A click view presentation the to our you to call this to also our www.agmit.com To slide was website, for the

morning Good much, very you to everybody. Chris. Thank

while adequate as as value. well increasing be earnings Our goals increasing Company's liquidity the long-term for maintaining book power to continue MITT

of non-QM emphasize XX. common value our our of to in the $X.XX key share residential loans and We I of GAAP as Home direction, strategic as of part book to am per given adjusted continue year-end to expertise report Arc and in investment that the space. experience pleased September compared significance a our our as $X.XX increased to whole

value of and adjusted than is per an value. as the asset, stock lower about preferred share issuance $X.XX costs Our therefore, book GAAP excludes capitalized book our

in increase we share. from Arc CMBs for estimated and As of well, our that The and our value loans in XX value our was have positive company, value as January primarily Home. was affiliate, and a adjusted a month book to is $X.XX whole range the our as quarter-over-quarter our per $X.XX book book January value of our of January as mortgage driven our by in rise residential performance strong well in continued in the

on XX. Chief on Company's quarter, payable preferred the our announced will accrued of in dividend stock. With our with November, fourth on Officer, unpaid preferred common normal reinstated to March approved dividends in course turn December, In the to the the I call dividend on we payments quarter and over As we payment our we returned also the Durkin. first have Board the TJ Investment and the stock stock dividend that,

everyone. morning, good and David, you, Thank

X.X separate the and stock executed of of we million by quarter, base capital stock cash $X preferred opportunities our accretive of exchange shares common X.X redeeming million During in on million for strengthen two to in shares transactions.

whole capital agreements purchase loans year-end slightly entered estate at approximately both $XX reinvested We of We of sold to into the common whole through raise four agency utilized and we remaining of two Subsequent $X.X to our issuance pools loans. million of also ATM into million year-end, our of proceeds our to net program commercial prices marks. real whole above non-QM stock. shares XXX,XXX that

on present for January snapshot and update the of fourth presentation our the month X, we portfolio end. to Turning portfolio Page quarter

billion to portfolio's mainly economic leverage to $X.XX increased we turns quarter, approximately through million, portfolio increasing purchases leverage. of agency the turns of $X.X fourth X.X X.X $XXX the the billion, During from size of from while the

$X.XX effects to our non-QM economic further all range. with And first transactions have deploy The and continue have of January ratio again, improved these putting estimated capital XXXX effect leverage value as as David adjusted $X.XX of the value We this in and activity Jan together, the billion of in portfolio previously X.X into as agency to the this quarter $X.X XXXX our grown we in book book turns has per of mentioned, a loans. to XX. share whole all of corresponding XX of mortgages year-to-date,

to during XXXX. want net origination Again, Arc of overall mortgage and we Home growth achieved of Home, performance Slide year-over-year volume our income to XXX% licensed Turning million of year. Arc the highlight the for generated strong affiliate X. $XX origination in

fourth another in to the quarter, quarter the the at Arc mortgage tailwinds sector advantage with strong During take both the channels. banking team continued the volume and within of agency margins in

fourth begins non-QM quarter. wholesale the will near Arc as earnings quarter an refi percentage originators agency correspondent Home was and first business We see recede for represented non-agency second our believe the medium one in reenter increasing non-QM of the on you Home the COVID. this to Arc's the brand And to markets fundings in awareness recognition and to how wave post stated term. Arc build product we this call, of can early strong As the reentry into clearly over

of funds. have products approximately of Gordon a Arc owns we owned reference. And detail Arc overall as MITT and funding sale on Home's just Home and channel, other by the is additional XX% reminder, Angelo provided margin managed Here, gain for remainder on by volumes

pleased So made with sheet regards in quarter year and the portfolio. the fourth this of with to both and during the January we balance the progress we are conclusion,

to to Anthony review both to be on concert and of from focused agency a I'll in mortgages maintaining simplifying prudent results. residential financial our With the the the that, power while call for are Company loans Home Arc We whole growing the earnings growth liquidity. with turn over balance

good Thank morning, TJ, and you, everybody.

$XX to million investment $XX approximately per of of diluted subsidiary. the net During held asset which Earnings $X.XX taxable fully the Home, appreciation earnings credit investments from in income as million stockholders our REIT driven common we equity were in is our method in share. as or well by available fourth Arc quarter, reported

see book our the share, and dividends October, of impact on current in quarter. earnings value per we Slide you'll the preferred quarter during fourth during the reinstated of by the As combined reflects reconciliation increased GAAP preferred quarter. common common a increase XX, exchanges $X.XX which stock offset provided transacted the This our and

proceeds utilized million. ATM In program issue approximating our we common $X.X for net stock addition, to

of equity less the disclosed which value based the liquidation computed computed total this $X.XX, stock. earlier, noted David our book value preference supplement adjusted share, stock is introducing on value is carrying we to As also GAAP which preferred on sheet. per our entire metric book using of preferred common of balance per share We're

preference we book previously believe adjusted also of transparency disclosed will liquidation liquidation our disclosing we of the preferred into provide common value impact on equity. the stock, Although preference

XX. Slide to Turning

stabilized As earnings share. reinstated Company reconciliation and income common disclosed has core the the the common we earnings quarter, $X.XX the preferred we've both recognizing of now fourth for of dividends, and per net to core GAAP

business, determined we During as our disclose operations, the this distributions to our financial liquidity, year, earnings, or not appropriately results first the capture ability stockholders. did quarters measure of to condition we our three did not of make core

million, of of and total Lastly, with the liquidity consisting million $XX $X we securities. agency of $XX million cash of ended unencumbered quarter

concludes Our questions. prepared reinvestment. subsequent call liquidity quarter to a the our for With available commercial additional position this which now estate end of real Operator? remarks, to an continued to that, generated for result the as sales, strengthen million loan we'd like and $XX open

you. Thank

We will question-and-answer now [Operator session. begin Harter question Instructions] Doug Credit Suisse. comes And our the first from from

kind to talk could gets you expected loans, of talk into how think think kind of Angelo you relative about market just to And just bit of pace I deployment non-QM more capital sizing about Hoping a as the potential? Gordon MITT that continues this funds other the we allocation guess, little develop? about how

Yes, sure, Doug.

of come seeing So we're competition the There's pretty market out active there, obviously back we're in both. terms volume. think in I but

won going acquisition looking and that are counterparties. over team with channel competitive with agreements other auctions with, the on that expand basis here bilateral we the bilateral have flow we're think is on, a some time already originators working actively I bulk to more and that more

of have on, in of terms we all sort process allocation just approved trades, Angela compliance the detail. to more a think, you has allocation, K non-QM, through I a walk I for we not mean, in manager have, Board In but happy the -- and our the that's details

indifferent nothing investments doing. we're there's versus the other about So, of any non-QM

just to of besides about could And you assets -- you kind Sure. kind those if kind need what guess and financing securitization financing? you're how consider I of sites what of would talk

Yes.

currently. being warehouses to around we think traditional critical to get speaking, what as those to we deem once out using, So million any that threshold. aiming able would the say, we're $XXX of I we in mass I we're of generally target be of securitization, cost which terms fixed And loans to amortize term

from Bose Our George comes KBW. from question next

on, How should about Actually, first value. further that? we just is book recovery question room for think on

Bose. sure, Yes,

room. say, is the the think space within and I whole probably be I as as loan I mean, commercial value mid-first there's majority recovered. both well would some there, sitting the here securities. side, here unrealized assets The to residential quarter, think have I on vast going CMBS largely of, the book and

to rate we over the earnings of how of increase you do So, of just the okay, And the just terms actually of leverage? this in And earnings there's switching business? existing also power Can just run about portfolio. power? earnings room great. to then about the Just think talk whether

the increased quarter-over-quarter sure. sort think year-end. Yes, prudently with modest we're we're displaying versus growing quarter-to-date I and leverage I that of mean portfolio

the room prudently, continue of obviously increased that into portfolio. would there's increasing we're the earnings power. run do to which we'll owning, assets to that leverage I to think the grow down certainly flow think at look in looking We terms

mean, we to expect I would to I continue that. think do So

leverage. just to David, the of add -- it's prudence part nature the is of that And that, obviously, that

overall the view do of securitizations, we So, as leverage mentioned, leverage TJ opportunity strategy. to securitized part as obviously creating that prudent

you off. cut to Sorry

And the up on just return. to follow

the kind together to that were that, would on should a it. we sort much a low higher quarter just in Because have about this than obviously, that -- as we how of So is piece ROE model earnings sort core of I'm -- think it trying of terms book so your value? of double-digit

Yes.

sector in portfolio, obviously XXXX. know we and Obviously, to don't not those portfolio the and think we a is be the how expect the of ROEs to same just then at I increase on how 'XX. about. the We into down that generational but expect it's come all would mortgage model. hard fast, banking We experienced much the via we capital are growing side other to leverage invested that And within time, repeat XXXX. talked increasing the

it's in going think would versus from today, exactly probably power but to February mean, to I model, think XXXX how XXXX. the shift hard you So, generally is I that's earnings

from Trevor Our next Cranston from question JMP comes Securities.

A so seeing question, non-QM more agency a forward? agency think about can acquire returns the sounds on can core Thanks. a about agency as agency talk the part more are of Or focus non-QM portfolio in place loans you Should As where so going space. question the we more deploy part is now investments? the liquidity, like space? you're the the that second that to core It real you investments. of right a approaching on the on the investments so pending guys as you

Yes.

to backwards, X:X look of market with working were we're the I sort type we probably standard the maybe ratio, in a hedging at leverage XX. think around So it at we're if way agency

the a focused earnings focusing are on agencies. whole with think we of want portfolio, loan I our -- kind business as into to and our operating manage side. plan We the liquidity do power yes,

want also conscious [indiscernible] to our test. be We of

three And accomplishing, probably would so those I it's say, things.

from Eric Hagen And BTIG. is the from next question

with and several can Whether mortgage portfolio? question, preferred financed being you of on a the room just get in pieces funds comfortable your in re-performing balance loans I to call similar sheet are love thoughts provide and REITs structure, on on liquidity feel how such your and the cost you're some of second detail whether seen looking of move advance and non-performing you We've rate capital the make that to happen? the that their potentially on. And would the piece at

REITs the certain repeat of just question, are hear first you Can I didn't verb? said -- part the you your

Yes.

pieces room about of asking Sorry structure Yes. similar I'm calling like that. guys and you REITs move? capital feel mortgage sheet about you on the balance to have preferred liquidity their your a make whether and

looking at at capital the and of looking of to the is be also Company. scale what best the going our always We're use right

I no those those account, issue. say take plans preferred we'll taking there call So, two that our into to current are can -- two

terms majority through in book, And financed mean, I currently. that then NPL the securitization of is that's -- of the

what's the nonperforming And in Okay. versus breakdown portfolio? of that re-performing

have me, can We of don't front back in definitely to I on that. you Eric. that get

adjusted Okay. capital about the And value book -- then potentially accretion, do number book, level and issuance? adjusted number of guys raising capital on as to the curious or the using how more versus execute guys the think GAAP you you a are level you GAAP

Yes.

their think had of show, up some in quarters, show we other how over some investor prefers their put think, on of that just some the in, I I way response we've book to to the REITs couple in line past reporting, more calls are value. with

and to It REITs how investors telling it. show were The numbers to some trying REITs it's us flatten we we're other like the felt majority the been way, in of So doing the a in were and different it. both. doing of trying we've we're some reporting between ways,

we realistic. and thought Yes, accurate, I more as it well. should was I mean say, more

We questions. further have no

weekend. to Wish everyone and Well, very joining great we a look forward good day the very you quarter. the thank Terrific. report giving a much after and you much. first you for call, a Thank

ladies conference. participating. today's This Thank for concludes Thank you, you and gentlemen.

now disconnect. may You