AAIC - Earnings call transcript Q4 2021 | Arlington Asset Investment Corp.

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Operator

Good morning. I'd like to welcome everyone to the Arlington Asset Fourth Quarter and Full Year 2021 Earnings Call. Please be aware that each of your lines is in a listen-only mode. After the company's remarks, we will open the floor for questions. [Operator Instructions] I would now like to turn the conference over to Richard Konzmann. Mr. begin. may you Konzmann,

Richard Konzmann

much. at this Arlington very Chief Richard Financial Officer Asset. Good you is morning, Konzmann, Thank

evaluating Before circumstances. result are and materially we the or begin SEC and cause any risk, constitute to conditions, by remind actual might forward-looking this strategies, on Company's other morning's subject call, should that would in business or a and possible with from or understand expectations assumptions, concerning over the events are and other these from the the report the which company I guidance are statements time-to-time, statements are on remarks. turn future change, future Tonkel a stated factors. Form expectations, that which that financial or on SEC to when forward-looking documents company and business and described to present statements call uncertainty Rock from annual number and are market uncertainties of for read and everyone filed available performance, XX-K like of and These other to any would periods or beliefs, management's subject his you as current statement. to the based from risks factors, now differ forward-looking risks, I These material risks expectations, results to like

Rock Tonkel

long-term. non-commodity that that XXXX call Manager. has Arlington diversify progress successfully earnings new risk and mortgage improve residential channels has single goal Thank reliability you, today and for quarter position opportunities. returns Portfolio pleased capital company for Murray, servicing Rich. on strong Good high John establishing that - historical our and properties mortgage multiple time. past its is towards agency value into both strategy rights, growth The its and year complements with call fourth The welcome morning investments Also return of rental and family the company established the is joining allocated investment credit and new made shareholder investment Asset. investment silos selective should the Having company to the us over over the the over

the into rising to to and monetary and capital tightening Federal from be of shareholder protect goal primary impact continues our was the fourth plentiful rates low and maintaining, policies Going liquidity. quarter, inflation, Reserve leverage while

preservation investment we the core employing tightening. incremental for lowering portfolio growth During Federal MBS operating traded versus long-term year XX% by capital allocation, has MSR agency quarter, its attractive agency company's mortgage and Reserve The levered the grown of to being entry unexpected the the time, as inflationary capital capital while XX. in and at all while December the defensive of collectively short-term points the multiple to income the basis well That current modest investments of and single its the that perform over with environment, credit fourth continued risk. total company has course high cash resulted potential same in expand exchange from potential for investment MBS MSRs accompanying family company rate rising and should a At its allocation rentals in towards through along year-to-date asset appreciation leverage. year-to-date return very of single-digit has expansion, yields, a portfolio produced that XX%, opportunistic

X.X of mortgage of investments rights just servicing times. of underlying X.XX As $XXX of leverage company's at year-end, MSR with the million multiple valued have a

home its expansion further recently of unlevered supply homes. residential financing to demand potential make market and supported single the attractive healthy flexible long-term opportunity residential servicing the offers family leasing single Mae company favorable in strategy created returns of potential structures investors. U.S. significant institutional with rise. rights The opportunities if, investment and attractive announced continued single-digits with or progress for offer believes loans terms multiple the family Fannie Freddie and company continue rates operating by Newly acquiring, currently The to dynamics, mortgage financing in high Mac a yield in

the to and properties for of we benefit the residential limited not in as new time, dynamic on price housing homes appreciation high home family will based in demographic growth. meet homes trends. continue single expect rental environment, U.S. expected demand the believe residential single some from favorable We should likely a supply in of And investments income family growing inflationary rental

XXX acquired has or for of XX, December As acquire million. $XX homes committed the company to

X.X% from we the of the marketing to to and XX.X% purchases, level be pleased - lease X% property net committed of of $XXX level XX five-year in any Overall, of acquired to The of are period a and to dictated of with $XXX the term we to current properties opportunity the yields SFR to realize rental we To expects yields with company of million average benefits X.XX% length fixed at recourse invest of unlevered million generate in SFR unlevered committed the As period. debt of will net its an home the yield of properties, for we've attractive company X.X%. investments the an made capital million at facility and acquire draw limited home investing months has progress company any to to SFR of expected least timing of today, Arlington. either average $XX pace approximately SFR net secured building by properties. total finance cost funds the has to million. the price plus our or have - of The homes with its in refurbishments the $XXX our earnings a levered X% properties portfolio company appreciation. Today, XXX acquire make

an in the the XX company's also realize are a is time, period may the tenant reflected during house its which time in company initial encouraged book appreciation value portfolio SFR to between by capital none is SFR of in the of its fully its is purchase is has believe opportunity value currently as including assets at reflected over company investments earnings. our earnings. the basis carried residential ramp that continues adjusted a by company SFR evaluate The the generate on of home the that not Accordingly, of scaled, also opportunities date expect high We average these of returns XX cost settlement We date is identify risk is days. today, between and portfolio depreciated to that period, double-digit for non-agency occupied going of expects the solar that company's in properties. MBS. historical million the yet Once contributed us the panel and The and company loans, returns, the and residential not committed to credit potential capital forward. to to $XX current securitizations offer

and the the per the company $X.XX share remained an X.X% company's from for value as results value during actual the believe prior per additional to unchanged quarter reported there December book January, XX, of end. the the GAAP of X.X month of relatively from quarter, significant book its share increase Furthermore, net has a Turning in X.X% we operate grew overall income net and operating as share. company to overall fourth at share, quarter, of company $X.XX reported $X.XX XX. with of February. the continued December the ratio and The per standing And core income of for per with leverage low X financial at-risk to leverage flexibility,

discount shares company to trading its With to book value, repurchase aggressively stock its common at significant the continues the a of company stock.

authorization stock that we has its prospects repurchases. rentals low the encouraged common of share its and family fourth X.X% return During taken to necessary. outstanding stock of its The and shareholders company steps X.X company's non-commodity XX% core increase value. positive and if very MBS authorization stock its stock its purchased repurchased company or $X.XX shares its outstanding the accreted The already of investments, return to toward rights, reinstituting, has is of credit current with an leverage is nearly servicing outstanding company shares. complementing book XX shares and Overall, company portfolio book to to objective stock, the operating $X.XX to Board repurchase shares the of repurchase are The Since levels, liquidity. optimistic single shares X% high its flexibility has of Subsequent quarter, mortgage company long-term opportunistic progress program goals high At per through in to common agency Board to-date per its with a million its substantial its made stock through current capital common stock over forward. and transition of aggressive investment the sheet the company going million while in to prepared about year-end, channels in XXXX. has intends from common nearly balance the price by additional of repurchased and share remaining accreted toward value. common its

untapped from is be indicated, power there the I As earnings yet we to existing believe portfolio. generated

investments evaluate beyond our value. we our for scope growth with platforms to further our attractive asset paths add which believe non-commodity shareholder criteria can characteristics, We the over potential opportunities additional for that that for there current continue And to fit are time, existing return silos, programmatic capital of base.

to company stock compared will long-term use repurchasing of value to those shareholders. support the As always, distributions the their or potential evaluate benefits opportunities creation capital and the we of to other

stock to the the that optimistic return deliver shareholders, financial to open now attractive the long-term investment through call strategy questions. company current to accretive returns current can Operator, prices. repurchases for at are stock I'd today's while diversified the We flexibility to shareholders capital company's maintains like

Operator

you. Instructions] [Operator Thank

Harter will question Credit first with Our come from Suisse. Doug

Doug Harter

Thanks, Rock.

follow-up continue little investments Board be made how thinking returns Obviously, But potential just as buybacks. last in buying new you Just to on more and of you that to you've guess, are the see you given about I versus to the bit versus that? you know, one you stock. do the you the comments back the discount, be, aggressive weigh, you kind a mentioned, how you wanted know, weigh of do as been, more thought aggressive the on

Rock Tonkel

Well, noted, buyers the those I we've been been personally buyers aggressive levels. aggressive closely. think both We've would Doug, that that to expect and I about would and at we you price every as naturally we've and observe these continue buyers. be day, And we been corporately, buyers, stock continue think

and versus that's there's sorts ongoing liquidity and G&A and the So calculation relates of scale of few and level things. to the those - a capital there things. organization stock to that the It's of the a obviously,

we've massive stock on us pretty changing the really flexibility burden But that's buyers in wind company. I without G&A gives down of able even us that think we've been I'm years. to equation. enormous that in not flexibility the there's left last over a an that tide. bit and the a more pretty against back and couple our been expenses and amount inflationary of this boost bring been giving And fortunate significantly a sure in the

them. we and we for earnings, so, constantly I evaluating. I like the the that occurred appreciation opportunity that that And of can in that's be that have from levels. find others we're both, to need high feel of able that team from SFRs, But hopeful keep with these would MSRs, stock portfolio to only would current level the day. leave we generate be use buy that we utilized distribution Clearly that does structure all of be shareholders us capital amount think like and X.X substantial the the the do invest in still capital capital additionally pardon at with we and we that continue existing flexibility And feel earnings would returns And potentially to that of these long-term the months, going that stock that that prices, is return level in this to overall is we to the would we additional add me. extracted we add in repurchases power, existing every coming or be in can very over leverage potentially generate to potentially a and occur, both, like, balance feel would assets, more be we at at portfolio that buyback. the we continue between are times our - to there. adjudicating like low and silos of potentially aggressive expect silos have capital to capital can think to interests, and a that, the opportunities as from with into the yet can but we the pursuit a we or balance, non-commodity best add capital, we Remember, appreciated extract that find not that earnings of power to for

Doug Harter

of a and cap cost necessary about, of won't are valuation to be liquidity, the didn't of is the the there of you equity the size of, Got if of just it. you market how you And the - know, to minimum to just kind on or the kind follow-up kind could stock feel of that stock much change? kind thinking company buyback, business. And continue efficiency maintain, the didn't you how

Rock Tonkel

far, benefit continue equity that in of value of that on that present those buying that, the it asset what those do that that stock. value full versus long-term you we others silos. of continue has others add, stock. we very heard assets, Well, at context these so one-time, assessing these that you've to as their well pursuit hand, are. at extent is just we the And we what the will are us reinvesting the value standpoint And - Where part as created, scale, then looking two current value that of that, and to about. and from can into the the the can the nature with the value, silos returns above - returns the returns from buy of franchise be kinds pretty led returns the one see to that may but in identify to looking extraordinary maybe We're the believe to the the our silos the on is with current the current significant existing book capital we're attached of returns against generate of

Doug Harter

Rock. Thank the you. answer, appreciate I

Rock Tonkel

pursuit as the lands. more exactly value, focusing of on the stock market a know, the look you that of final at than that, we priority cap And where of

Doug Harter

Understood, thank you.

Rock Tonkel

From a I mean. scale perspective,

Operator

Thank you.

next Jason Our with question Stewart from comes JonesTrading.

Jason Stewart

given, current low evaluation? I'd talk Rock, bit to least top maybe end Good volatility question. about morning. how view, underlying are you at a a - that on hear around the mean, in the relatively could my thoughts given valuation there. I Thanks for in your and you MSR. you where of mortgage rates your be low taking the curious what for move is the expectation of little is sort terms rate think still it's know, struck

Rock Tonkel

Jason. a it's Well, question, great

pricing I actually market actually multiples. MSRs you context interesting quite evolved, am encouraged. even the that type our threes now think as has it's know, MSR fours for to I evolving to coupon from five - toward

directions, return that And meaningfully, resilience moving might rates We therefore basis One on a volatility perspective. thought are times to as fact, in interest that encouraged but a move to downgrade show pretty, to from had particularly be our appear the by that be that true have from perspective. continue might model the escalated. assets as that downright resilient that they of relative improved in have both scenario towards have multiple valuations - these pretty we today rate they so the not does appreciated five a even find quite in that

move the there downside price terms price before but any, XX other that of say down positive than feel that think marginal. which we reward some that I know, start view dynamic. at and I like don't to point to XX rate that down isn't I wouldn't got to see in - points we be we feel to some volatility, think XX a of bps as that's we and XX seeing we like, we've feel basis you movement meaningful see that's, risk you of is

say at additional that. would - sort six, that multiple multiple shy on a multiple, As here. there's our imply be you might potential not get I of to might the from something somewhere, six But least an basis turn modeling or a towards upside, that think to of like, would upside know,

X.X. around was X.X or I think our valuation latest

And so test. obviously, imply, so point you And of addition. a that additional or that's pretty multiple meaningful, know, right would

You meaningful know, a appreciation. or additional pretty point on X.X is X.X

downgrade feel sort So, predicting that And know, just a hand, of like, we're that not other - you sensitivity resilient. upward We boundary the will like on we that feel quite seems the an is happen. boundary.

Jason Stewart

get if is a portfolio, floor? as an you like, view MSR sort what that's on do have for turnover mind, Right, estimate your of helpful. And the just of don't natural you

Rock Tonkel

the high I'd say it's in single-digits. neighborhood of

Jason Stewart

Got that's and you switch…? Thank it, okay for that, then helpful.

Rock Tonkel

But digits it - to below like it's that maybe like you gets feels know high a nine, like that something it Maybe eight seven XX. feels single right, good like to feels level.

Jason Stewart

the you. all then sense them right, you're growing thinking the Maybe of Thank that Got so about for best that's of focused they're thinking opportunity on helpful. on. And it in SFR, a terms capital way where deployment is? that you're business, geographies you're

Rock Tonkel

interesting That's questions.

along South, the Our the Southwest. from portfolio to strong of South of is sort Southeast the near sort the

Texas. farthest our sort market Western of think is I

our So SFR, small. down of South our portfolio of, around we're concentration. of sort that's to scope Charlotte, the overall Dallas - is from over the sort works relatively we portfolio, In our

boundless So encouraged, we've opportunity we've put and of been been and We've for of portfolio, by yields. of room encouraged got very rent quality the very there. sort in that quality collections the level the able to homes,

that. so pleased viewed core markets, that types There's most a more And far so, right, with in those the diversity are we're little expensive. markets very the as the - are of

that yield now, very and in But get You're some going X.XX. in other markets, would encouraging to little of Those is forward. for little mid whereas substantial you're higher going and going driving to a and more occurring be out fours, are to as of bit going are the to - those yield. there markets growth aren't pay low rent and get a growth fours, income yields population yields going quite X, expect run closer that are maybe to we more, X.XX, core, less those you

structure, markets. the houses of sort are refurbishment. pretty, our properties of relatively XX X.XX, we truly over on returns. and to going in healthy new. very very portfolio, - maybe, require yields course, that kinds benefit - the XXs five-year is market, depend depending The in fixed finance markets. double-digit the in XX, level asset years We old, that are in the double-digit given can this double-digit don't our we yield of They're lot expect like a market. appreciation, maybe that generates ones. in X.XX, nature but even pretty I'd of healthy which the another, underlying yields the They the one say forward, and X.X SFR appreciation character maybe of the across core generate complementary time, they're And exceptional we are They of the would type yet of on modest pretty ability class meaningful a of inside having feel healthy a those level there's of, completely very homes, would rate with that appreciation, so the quality So returns common unlevered a against or from

Jason Stewart

Right thank that's you, helpful.

Operator

Thank you.

Our next Christopher from Ladenburg question with Thalmann. comes Nolan

Rock Tonkel

Chris. Hi

Christopher Nolan

portfolio SFR what please? the guys, Hey the return - the quarter in was on

John Murray

in that rent need So do a remember not house settle to very it, in there's from of up because the Chris XX the lease the time to around to quarter, period. usually kind you time or these ramp we marketing the because an had it for average the of paying is was we And portfolios. about house, as tenant, a refurbishments, meaningful think any days, to the XX property we

at you be lag that up fully until as of of pretty So $XXX a, as invested to you committed homes, ramp And it negligible quarter. to I few the we for portfolio. a know, meaning ramp to buy the was small capital portfolio, about period there's the we quarter, you million going ramped, continue know, - $XXX,XXX fully up $XX loss it's a think for know, its of million

Christopher Nolan

record are partner Great. you own your then And it? properties, these the of does owner guys or for

John Murray

it. own We

name. the the So title are our homes the -- yes, in of

Christopher Nolan

in decides of that as sort you show loan? have pay landlord through So take non-accrual a case would you not who a the courts, renter to that the and rent tenant up

John Murray

rent doesn't a, receivable. yes, a reserve tenant borrower pay we'd have non-accrual against it's receivable. then loan you a it, so if But rent put who or the not it's No on we doesn't - a or a

Rock Tonkel

In fact, yet that haven't before we future experienced in periods.

Christopher Nolan

AAIC, at please? headcount current the what's then And

John Murray

XX today. as of

Rock Tonkel

Keep mind in that to by the each growth property rent, high. to rental we - is underlying in relates significant. for high, - quite appetite involved Chris, is And as it in extremely in for mind, question. as quite rental were extremely that is access strong. appetite Keep rent rent The renters properties growth markets that all of rent is - know, the

We a So rents with it's may that not pay, who's up a not with but up more, to willing sort of impossible, difficult tenant rate doesn't the on but possible. someone pay basis. these we end up would going replace it's thing to certainly house very where not impossible, it's are them quite or even because end monthly

Christopher Nolan

then of landlord, a you unless to they Rock. municipalities? disadvantage as know, distinct are Sure, take you court tenant landlord, many a And you

Rock Tonkel

Well, very. We're about careful careful the about we're the jurisdictions Chris, we're jurisdiction. pretty very in,

Christopher Nolan

All I'm now operating at company, and please? going we the then for look right, expenses forward, how should

Rock Tonkel

said say, in more two had before, environment I'd challenging. kind we've a but of It's just be fairly years, success I where reducing that's more going to that's As the significant here, difficult. in levels, from those last

expectation. fair a in of So a I at you reasonably want that's know, a successfully I expenses different answer, but is in able would you XX up the maybe, from reduce of which down maybe with number. we've notion year to knocking working to flat, reasonably And probably it knows, a leave that line know, now, I We touch, neighborhood that down. have is the or keep don't say that's something who maybe, something again.

is think is or reasonable. I low flat - up flat or down

Christopher Nolan

Right, thank you.

Operator

you. Thank

Securities. from comes Goberman Mikhail with question next JMP Our

Mikhail Goberman

Hi, good morning.

Rock Tonkel

Mikhail. Hi

Mikhail Goberman

of give breakdown all vis-à-vis volatility, investing how of that you allocating all in remarks, Hi silos current I'm light there, you're you're in? capital wondering, on a of in the these recent you Apologies prepared new hi Rock. and if touched this but your could market

Rock Tonkel

is was there XX Oh say in ramping we're year-end. XX million a yet, today we we said I but the we're not We're year, in that's about we're ramping lot XX yes. MSRs. XX than XX toward not toward million. of million yes, of what SFR about Well, XX% different said as probably would end the

maybe know, that base XX%, you it It significant leverage XX%, and carries portfolio a think carries we call was that. Credit And overall has a the about rest large higher I the XX%-ish, it four, noted because little something and has So naturally, another is probably agency. XX% it balance. not there. in a agency capital like

So allocation. it's of and investor allocation you both the as the capital can and the rest in capital, the presentation, the asset well, see

think Page that's may SFR I the And be investor SFR know, is is I credit agency. XX But isn't, its ultimately, that rest to if ramped, XX. sort something today wrong or of about the - know that. be XX like XX presentation. the you his, is, fully It's you of in about the will XX, sort XX

Mikhail Goberman

the of materially different since So year? end the nothing

Richard Konzmann

ramp growth decline as up a portfolio the - No and agency and we side. SFR corresponding probably in the

Rock Tonkel

think it's ask despite get Yes, has ahead at not And I accurate. say, to agencies, go it's they specific view, and to XX, changed, on that exactly it. comment, there's to guess say XX I least. basis I question have widened our by our cautious view But fact you're mean, trying a the at, points, fair is that Rich's if fair

Our cautious not there changed. has view

more So, these asset and favoring a relatively and conditions. portfolio market muted in leverage with in we our classes opinion are in keeping characteristics other that accordingly, resilient volume

Mikhail Goberman

Great, Appreciate thanks a lot, guys. it.

Rock Tonkel

bet. You

Operator

time. at this questions you, no Thank more are there Mr. Tonkel,

Rock Tonkel

everyone. to time support. your questions appreciate free feel call Thank and and we Okay, you, you. well additional thank Please

Operator

concludes and gentlemen, this teleconference. ladies today's you, Thank

You disconnect. may now

Arlington Asset Investment (AAIC) 3 Mar 222021 Q4 Earnings call transcript