AG Mortgage Investment Trust (MITT) 6 May 222022 Q1 Earnings call transcript

Good morning. And welcome to the AG Mortgage Investment Trust First Quarter 2022 Earnings Conference Call. My name is Brandon, and I’ll be your operator for today. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. reminder, is a recorded. As Instructions] this being conference [Operator to the I turn over Jenny will now call Neslin. you Jenny, And may be good.

Thank welcome our Officer; our to CEO; T.J. call morning, Chief are David everyone. Investment quarter call our Chairman on Good Financial Investment Chief earnings and our me Mortgage for you, XXXX Rossiello, AG President; today and With the Durkin, Anthony Roberts, the Officer. Brandon. first Trust. And Nick Smith,

differ today’s that call note are contain the certain please call begin, headings Factors in encourage We from statements to SEC including and today’s may statements. these read company’s discussed Discussion during risks we you are forward-looking Any Before our Regarding may outlined in Forward-Looking which The Cautionary forward-looking and under information materially to Management’s Statements, and made uncertainties, Risk subject the statements. Analysis. filings results our filed Statement ended events result obligated including new XXXX, time-to-time disclosure contained filings, by revise forward-looking reports filed not or SEC. our regarding with year the SEC a we for whether are to from the not recently in otherwise. most or December our any do Except XX-K as subsequent as to statements required forward-looking and the XX, review intend future law, or information, and statements, Form update of actual

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

Investor call I’d thank David. the joining on for today. posted you and to First Again, view our slide our the that, the website, and We to will Home the welcome section. that the the on to Presentation this website Presentation presentation, With also over Page reference link turn for To morning. us XXXX in to presentation call click like to Quarter the Earnings earnings turn was the www.agmit.com

interest to move rise I of first Thank our were said pure-play lead of per main everybody. credit will to the you, this to smooth we that were had we of transition programs and Despite losses. can contend channels. the in of and comments, become have But a we quarter a my $X.XX move continued rapid fact mark-to-market In proud was pace. of increase doubling that of quarter pricing that be tail spreads originated due rates have a the originating and to rapidly lost When the reason yet to new able inventory the Jenny, indeed XXXX, with of when GAAP robust newly in at that achieved loans the morning and share we we to Much That a and first spreads, to residential fourth spreads. rollout continue to near have originated credit on rates. adjust quarter quickly we origination to considerable widened, In we hedge and loans. We loans earnings. new rates a is REIT. good largely against securitized spreads and widening

our of the arena. Non-Agency some competitors seen have retreat we well, As from origination

to our Despite Arc of attracting for maintained per a first our quarter continued improved we an Home dividend affiliate mortgage build of environment human share. Finally, advantage it’s taking talent. has loss, capital, out $X.XX

tightening. relevant April should not do forward see our period. basis repeated. I of over note policy we that in In to movement cease to believe business view quarter a Our our be begun by multi-quarter spreads earnings a dividend widen spreads continue will the first that on and to be guided to will some we’ve going

issuing and securitizations April. quarter, we we another continued in momentum the our deal During three executed

One origination transition to as can. as securitization we from the make seamless to primary of our objectives is

to liquidity benefit efficiency. higher ample to up going quarter our This strategy company’s serves overall an this on continue All securitization more to experiencing growth with in forward. is yields. the capacity industry the the us, not return this in improve markets to was increased asset with ended at While propel freeing should factor We volume, equities decline execute origination negative.

be our believe long-term the of will now T.J. We results Durkin, strong as strategy to the continue believers year on. able President. goes be turn to capable so and our to over in call we growth as better earnings also I’ll delivering we report

Good David. Thanks, everyone. morning,

the quarter, and in on Non-Agency first acquiring We settling be market eligible during and million of an continue to active over participant $XXX Agency the loans.

approximately also of $XXX the net quarter million. reduced RMBS through our during exposure sales We Agency

our more We to only be that their in past Home later the the not us derisk programs. move rate with continued at quarter. cover we during but the year, But by the will Arc’s not from the taking set lines, very this and briefly acquisition fact out historical share our players a us market their three as warehouse interest since securitizations executed originators as and pipelines many away Non-QM call. affected of had and Nick adversely opportunity to warehouse some proud liquidity detail point challenging take all. are I many success risk quarter, in transactions simply hedging step Arc were our These about gave presented disciplined continue quick to additional of dislocation advantage to of the beginning very

page seven. to Turning

comes As of this mortgage interest will sought to much market increase rates. which activity segments resources the velocity with record are the interest operational to after activity accelerates, from necessary sell-off, with This rates to securitization that needs it provide sensitive and other Much us velocity our increase. capacity, both more our our quarters the of of brought capacity purchase past purchases.

for is as players are away mortgage we large in the market believe We have opportunities from conventional already and looking just from originations beginning. benefited this, the this

the investments made have organic to we year We our in growth. over expect drive loan the infrastructure past

has portion termed via portfolio mark-to-market the financing securitization warehouse securitization. our exposure out relative that As been our shrink, to continue to grows, to will

trend started. has page, see in As you on can the already exhibit this this

NIM, this the given highlight to of quarter, cost of important increasing our velocity our much because part, think interest normally of a metrics want point yield we’re the loan but this and securitized large We on in cost portfolio. the is funds quarter-to-quarter, I fund time rate it’s to company’s going securitization I movement don’t spend up Lastly, out on aggregate notional.

fixed cost the is X.X% backdrop, cost higher Given of funds. months than six rate was in funds our reflected rate ago it’s it the and of today

reflect doesn’t notably Now, the yield on given X.X% yields forward, historical don’t earnings current fair values. are our our of these and going profile today’s basis cost based capture

factors quality, will level of assuming the today et and credit forward. new So to to being equal, for acquiring cetera, earnings when fair higher are we other higher investments values, drive expect Nick. core into I’ll our financing, this turn which help over going at yields we now the investments, NIMs asset current all call translate

and morning, good T.J., everyone. Thanks,

page eight. Turning to

liquidity activity. can have generated ample support which expect you we see growth, here, strategy, As we including further from our be cash to to loan securitization by financing supported

continues this the we captive correspondent which and this originator to expect have organic continue year. growth. broker to securitizations through add its and throughout Year-to-date, four relationships pace Our channels, executed support will

ancillary of XX% income include to XX%, We not are returns which targeting currently any from post-securitization our originator. does

in target financing. consideration along prior takes with home Although, it near range wide ROEs corresponding our than term quarters, this loans market in into current is decade wider the the has volatility, from a spreads resulted which

nine. page Turning to

portfolio on current Looking portfolio chart REIT left, over top at tracked strategy, of allocated the yields The the with cost chart funds. pure-play which our investments. has the the our outlines residential corresponding has bottom of residential equity mix now mortgage XX% to along

area. as basis fee yields basis with dramatically Over have Today rates the credit at points. to risk XX of basis mid-to-high the the capital quarter, XX approximately we over the yields widening XXX see have stack points in financing asset the with low-to-mid term increased moved X%, debt in top spreads points, X%

rates the in past lower higher spreads few maturity is earliest negotiated facilities quarters, Over in advanced lines. The warehouse of we November. these our and

default improve period. end, on over higher lines Although, the quarter of Subsequent lower funds settled our the million. returns yield loans of during gestation pipeline time cost shorten $XXX our intend million we a approximately of we to our will with warehouse substantially, on and $XXX debt to

in our approximately $XXX eligible securitization completed a successfully with balance second million. Agency of also Non-Owner Occupied We April

page to XX. Turning

awareness like, of to a its pulled on at a originators profiles providers asset Arc’s activity provide other already to our profile brand for client market on credit a Here product to seen that we as time quarter offerings and the clients. continues have in which of portfolio and interest tight we end, purchases, characteristics volatility and well opportunity anticipate our include loan perform portfolios The outline future created the the recent an as We’ve us pickup creating maintain to pipeline. back. while will in able capital result being commitment aforementioned liquidity has we

to Turning XX. page

our platform. go loans Anthony? which million chart, back half billion $X much in Anthony QX, Arc, pulled brokers lock the left brand of of approximately by over increased approximately volumes acquisitions. of awareness, now quarter, billion purchased forecasting as our representing is of helps see increased can for competitors significantly. detail. you new Arc will XX% Non-Agency to correspondence the $X.X of driven attract As results the in more MITT year, in the to on originations in this back financial bottom over our from this $X been with quarter

Thank you, Nick, and good morning, everyone.

of we book our per XX, share. reconciliation Turning to slide value provide a common

driven declined value approximately X.X% widening asset rate $X.XX credit from investment GAAP a the as $XX losses to and of net or diluted on share. book environment million During the of loss Overall, our was approximately a by available and spread across classes. first rising recognizing fully shareholders common quarter, unrealized portfolio, result loss the resulting net interest realized by per

interest prior residential investments, market continued portfolio. a growth, resulting we million interest this also our current price from growth XX% in resulting and $XX increased the a increase expense. loan first In we quarter, connection quarter, Aside income volatility, our in record higher on portfolio, hedge swap from with volatility the net the of during from rate the our the

slide transaction increased during a GAAP net as earnings. discussed. reconciliation to QX, the a earnings, given provide recognize Lastly, of of of we higher components core summary as up related disclose we of pace expenses income core previously securitizations well making our level the On XX,

and recognize per interest by $X.XX approximately $X we Overall, core income in During million. earnings loss of the a hedge expenses share. quarter, exceeded our operating net

a well earnings, is Home sale core This the loss from sold as Home’s Arc earnings. MSR having in to mark-to-mark to gains, contributed gains investment excluded because our despite quarter. Arc $X.X of a are loans However, profitable on MITT million core as

a using the Arc value provide loans in one sale are a multiple XX, they Home. excluded to Home investment from to our investment unrealized earnings, details further reminder, contributing as although slide $XX we recognized of MITT to core gains gains which are As On from our statement related the on our Arc Currently, earnings. we approximately approximates book. of GAAP times million, income in

of Home’s $XX MSR portfolio, Homes REIT driven to held subsidiary. taxable from Arc another it quarter, lower a its our value generated unlevered. on gains XXst mark-to-market March million. margins investment of $X portfolio business highlight tax fair virtually approximately And gain net rate reduced rising portion is which $X the income the the environment, operating as remains Home is million, offset Arc in earnings Arc by point volumes, and was sale after-tax During by on million MSR to a as generated expense, due income of and Mix is within

during XXst. After up update at March XX. our up as from quarter, completing XXst. provide securitized our XX% the Turning on debt total of an We financing, slide financing to securitizations makes December of three XX% profile

trend focused and strategy. remain our in an this deal pace on securitization continue increasing additional sponsored we expect to We April as of

which and we concludes continued on as now and of the $XXX post million quarter million with of would Operator? call support was capacity capacity will $X.X borrowing throughout as have unlevered RMBS, of This the of well remarks questions. ended cash, open liquidity quarter million million, our end. growth portfolio billion to which for like and inclusive sold prepared the currently XXXX. settled in lines in liquidity of $XX level This Agency investment our we our approximately Lastly, was additional and warehouse total $XX $XX

Thank have Doug you. from Suisse go [Operator Harter. ahead. Instructions] Please And Credit we

securitizations. on see where on the loans prior Thanks. remind warehouse Nick, expected what us kind returns lines? on was you and the you the mentioned of just ROE XX% to as the you XX% they’re range Can

Of course.

pretty So to XX%, time. the had for which, been long tracks a probably, previously, XX% stated we’d guys of period quoting

call On warehouse it, the see, still lines, very double-digit low we ROEs.

one have We is script, mentioned in negotiating decent a maternity of those, from had on better November. bit and benefit in earliest terms our the as

is the securitization, of how higher to the loans And cost spread funds on them from mean, return that this the you impact it. Got guess, transition I that today? securitization I newly for that, as purchased widening loans. warehouse does

Yeah.

Of course.

more takes So really, looking. into forward that that that is consideration so

been So then first to for we’ve part the -- it’s quarter. quarter the where new it, the acquiring into loans, vast call of

obviously, mark-to-market -- that still Now, the loans subsequent losses RO -- -- losses, those range. securitization the ROEs given on that looking in mark-to-market are from backwards spread the widening, at -- the ROT the post

sense. sure I just That it. slide make Got makes And then to XX. understand

Arc Home So MSR a be gain, for the out for the the stripped small $X.X gains? quarter. the million negative you MSR $X.X the would that So million made if kind Does that include of quarter?

correct. That’s

quarter for that out that’s look being essentially you MSR backed the mark the slide, If $X.X during MITT. at is the that million

basis profitability both basis, as kind go obviously, world then through kind also of has and we XXXX, of operating of kind how kind I on originators? the for true it. on Got do a a about think changed core of and you the guess,

Yeah. what I think, products. highlight mean, we’re the share our I continue earlier to the towards is, transition slide origination Agency on of we to trying

materially challenging, Agency they to going soon. margins are obviously, anytime aren’t better So, probably get

invest product operational good as efficiency. will the be we the you if we that’ll and credit more hope And pipeline, in, so getting for in,

as trying but holistic look perspective bit MITT. Arc reversals, of into core would Home’s say, and an through versus give the profitability it a to I are of the at you what’s to you is maybe accounting think trying earnings, traditional, a if I trying to, up convoluted vertically Anthony like, it, core will we’re definition we walk from

So back that’s detail on to why to give bit a out what’s really we’re trying ground. have more little what happening on versus the we

Makes sense. Thank you.

Please ahead. From Jason Jones go have Trading we Stewart.

Good morning. Thanks. Hi.

at the on it up the quarter-to-quarter? if $XX following about does I’m that doing MSR, right, was Just Arc mean Arc million math marked

Yes. Jason, was -- quarter-to-quarter That about Arc $XX million

$XX million.

the us give you multiple on can that? And Okay.

as of Multiple is [ph] XX March XXst?

And Okay. you Do you apologize. I missed you. Thank I have book Great. else, a in if can give? someone it I give and think, quarter-to-date XQ, then, didn’t value you it,

given on, just April, but quarter-to-date. since an we’re in exact Jason, don’t number, process -- the early have marginally going we think and we’re our for we down volatility Yeah. what’s

buyer Okay. two there to pulling in you opportunities, to on opportunities up given think that. then be want based an And assets opportunistic/I don’t preserve of concept a I to of XQ One trying adjusted call you for it liquidity and then volatility to liquidity. I minute, is, guess in volatility? And are and way going when that of just the that about the the part back think but of get you leverage were for forward there parts the is, sort spreads, about you that distress, second XQ have volatility?

Yeah.

sort that coupon. So we of to that, current towards given were positioning believe did ourselves have the assets opportunities I acquire that, attractive. we’ve gravitated sell-off to still

orphaned markets, the in that less be debt is coupons there’s just view Our liquid. will potentiality, that

than forward So, backwards. we rather to continue look

our decade. is, the back, our think, more and others thing I we’ve there what at volumes call to the, that and drive consider actually pull for, said in general we historic past able spreads or probably three been view that So there times nice presentation, really that’s wides I near as

is that distressed is, the to Thanks, side are there from at acquisition the or origination Nick. non-liquid to wanted I pivot acquire side to pools, sellers? securities discounts from opportunity an sorted

had think, through distress the and more is we and success slow can sort already pace, already and back think very our acquiring I distress is past obviously, -- quite out The but actual expectation of is I who change, bulk there than event there’s are rumors there honestly, so. should of in stuff to recently people now, pulled the back. that channel of widening occurred probably, the at that sort a continue, going pull have

enough. Got it. Fair Thanks. out. I’ll jump

From KBW go we Please ahead. Bose have George.

Bose. for Smith actually Mike is guys. This Hey, on

Just some the one how trended that’s in April. and on color the changes, securitization provide on volatility market

volatility? if then reflect see changes Just loan inventory older any wondering if to that the cleared of most and to prices has you

Yeah.

we sort and back were opportunity. when So I it, -- year, think, then, call half we in January, the February, prices, really gapped wider of started the the loan they stubborn, things that’s and somewhat earlier I of think, seeing

on it what really while, going the debt a for So didn’t was in track markets. necessarily

of debt. the called stack, Now, than of IG if that anything, XX side, past see to the saw backdrop very some it’s That given relief off on what the two points the tighter sort -- recently, the you low assets flipped pretty basis can what part you the depending stack. change been, capital three other said, can points, sell We quickly. buy from to selling of attractive where can levels the call we where volatility, at in anywhere being upon part of wides it, we’re weeks, of XX weeks sort basis substantially did

we’re So, it weaker. and us a bit if of markets, a while it that overdone if was was the feels anything little issuing anything markets we’re debt, tightening, -- where like actually little sort bit around broader

So, that little overdone. into things I little being maybe plays think a a --

strategic you -- share shares? just can wondering thinking Just of And Okay. book there helpful the price you’re the that color. value about anything bridging how you’re That’s more, can between just Great. if considering, talk and you maybe the then just gap given valuation one is the through

do outstanding and drive and Roberts. to growth. Hi. share always growth, repurchase earnings It’s David opportunities is that at a we’re have We looking program dividend therefore,

improving our arrow quiver terms of shareholder in value. it’s So an definitely in

Great. the taking questions. Thanks for

we this at time. no questions further have And

look again weekend. quarter. and it to questions. you. Have for forward for you Thank you, Thank appreciate with great everyone, next joining and us a your We speaking

today’s and This conference. ladies concludes joining. for you, gentlemen. Thank Thank you

disconnect. now may You