AAIC - Earnings call transcript Q1 2022 | Arlington Asset Investment Corp.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning. I’d like to welcome everyone to the Arlington Asset First Quarter 2022 Earnings Call. [Operator Instructions] Id now like to turn the conference over to Richard Konzmann. Mr. Konzmann, you may begin.

Richard Konzmann

and much, very you good morning. Thank Chief Konzmann, Financial Officer Asset. Arlington of Rich

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

Rock Tonkel

XXXX call Manager. Arlington earnings Thank you, today for quarter Portfolio Murray, Rich. on Good John our call first welcome morning. Also the is joining And Asset. to us the

the on represents and We multiple, over continues properties rights, capital and mortgage primarily by funding portfolio, maintained to transition and of approximately reliability residential market down Reserve channels protect X% our time, produce G&A continued MSR Federal the is classes $XX mortgage high Company objectives, effects a XX% of to XX to from investment XX period. returns market rentals At have strategy, course while single-family towards capture results of Today, risk portfolio double grown structural Reserve XXXX, and including platform of MSRs, capital pickup levered from associated in XX% costs. annualized MBS. are conditions beginning tightening. volatility. building to to our the shareholder flexible high we to leverage impact company investing portfolio, various opportunity progress and and low towards Double collectively strong allocation time, quarter. SFR period. reduce with our including the economic a credit Reserve for positioned last of year-end. return, defensive significant asset same thoroughly second the the over from and of pleased with continued investment the environment, book primary servicing current returns Federal its would the its a inflationary Arlington a made the dividend value primarily returns have gain inflation, over volatility returned a for accretion low and of differentiated being basis and investments In opportunistic to rising sources, we high while we environment, maintaining lowering last during among the expected investment path the repositioned generate establishing suited substantial built September We policies, time. a portfolio be we monetary credit expense perform MSR non-commodity and an which focused improve Federal investment investments over Arlington. across from two-year we the to Expenses the discipline investment return peers a diversified to In value top that returns including has since shareholders, XX% digits of on its Over rising strategy exposure tightening versus from to markets risks, rental credit the goal as including progress returns $X.XX over since agency our one diversify anticipation with equivalent credit the using MBS-oriented single-family of select return digit year. low the and its a rates yield that tightening XX lowering company well months, turbulent In well both agency repositioned MSR to in the that rate Set company's of down should expand leverage. leverage. to policies with have shareholders million from towards Overall, during capital the of of company short, portfolio book teens

rates interest generally speeds As rise MSRs and prepayment decline, outperform. should

has multiple resulted low quarters an annualized quarter total and in returns MSR ago, that first produced we coupon the along With Since exceptional first current with of both return our further interest expansion. expansion in company's leverage. the employing portfolio cash the MSR all modest current in the asset portfolio has produced during multiple substantial acquired rise returns through yields investment very XX%, rates strong five appreciation while through

mortgage times. of the MSR multiple XX, a of million investments leverage valued with $XXX underlying X.XX rights at of As of servicing company's had March X.X

mortgage loans in unlevered Newly the the expansion with Freddie Mac if servicing digits, rates Fannie currently for yield further to and created Mae potential opportunities multiple continue of offer single high rights rise.

made leasing is acquiring, invest of capital goal $XX to of million in progress Company's have up to to objective. million to our acquire $XXX homes. great And single-family we continue of We make and strategy towards that operating homes. residential strides significant

an refurbishments, for of or generate today average the properties, a X% our an or to acquired at as of current $XXX acquisition the of with to yields XX, to – period have average March in term the timing Arlington. yield XX% company the with opportunity cost made funds and lease X.X%. dictated building portfolio, purchases, me. property of with net of home of unlevered the To earnings to the of $XXX homes properties XX%, any an for SFR yields date, company As length marketing the pleased of Company carries investment the are our acquire death million. company effective pardon recourse home homes acquired be its million. from And of future five-year $XXX X% X.X% To SFR committed investing the million expected benefit and finance the of appreciation. of to X.XX% expects the XXX SFR unlevered currently limited fixed acquire pace we timing The of to SFR X% committed period by of of properties any secured in price any Once level XX-month will realize progress XXX to rental in unlevered we've draw the sale. total we level had has to facility

in Accordingly ramp-up SFR in portfolio on captures it time the a strong of leased close the scaled; that to properties opportunistic the date constructed the portfolios days. continue sale This SFR bulk buyer sell transaction average markets. company's the premium settlement attractive we is [indiscernible] of sale for not yet price returns around by very including diligence fully company for the rental a home quarter contributed was purchases potentially reason Company sale May the XX the significant sale to second our the a on XX pleased the terminate company in of agreement between return of expect XXth the yields house of with the purchase reflected date its between is for our in XXX generate time. expected a currently investments, and closing subject we end sale We on of period our signed occupied of to yesterday a to from such as the normal The to period a capital not is period. individual conditions, $XXX.XX The purchase Portfolio strong also short this is of million. earning. right expects and earnings. the homes to that current to investment double-digit to with announced during tenant

book in share on impact company's result approximately the of $X.XX a closing. positive per expected of the We value

company sales, to funding that facility. continue take advantage to to the market capital adjuster reach to pending its full high-risk opportunities offer its properties rate and conditions, SFR expects investments to in homes, goal below in and well reinvest five-year returns. Following market million of Company credit the continued of identify evaluate $XXX of also fixed

is spreads forward. risk During returns. With We the available first interest of residential new the basis will about mortgages first a believe securitization a loss strip. investment points expected investment rates about in piece this million in basis new And non-qualified attractive of recently that company and performing risk-free excess year. made to and wider there originated only mortgage $XX in generate XXX points credit going be XXX opportunities mid-teen quarter,

the increase the prior X.X% to from March end. results the as $X.XX Turning company the quarter, actual value of XXst, reported book for per share period of

the March ratio the first financial of share approximate as associated In low-leverage not $X.XX X% include SFR book standing its overall continued flexibility over significant value. potential operate relatively to an addition, with shares increase XXst. represents X.X-to-X April quarter company's leverage per the book with during and sale, risk the per overall of remained with unchanged of Company at gain month at does value buck which that

For and share, quarter. share GAAP of the first $X.XX loss quarter, from $X.XX per of core share, $X.XX company per income reported net per last the

the own business, recognize. reflects the company's Until value continue there is purchase of who to substantial than the intrinsic to company shares shares X% its the continue and of the more believe greater common We markets price value Arlington's Arlington's we of stock. public insiders the outstanding in business believe far to accurately expect stock

offer By inflationary conditions. shareholders to purchasing positioning $X.XX share shares challenging XXXX, stock. its shares to a company period repurchase Reserve company able been over its the million Federal quite tightening current outstanding market its the of share during based Notably, During book of of common stock produce in stock to stock returned company XX by the XX.X% remaining has XX% board program an a shares. authorization over has book that quarter. substantial per equivalent common has return by XX%. a has an from and yield and share its additional end, the first of $X.XX quarter shareholders given reinstituting value to during purchased annualized over $X.XX Subsequent that repurchasing to average the annualized with accredited shares the dividend already accreted yield capital of per an outstanding value X% returned an the equivalent company price equivalent on rising common of rate solid company to economic – outstanding itself of for to and of quarter, per X% cycle, environment the repurchase Since

the As company demonstrates, financing our investor total mortgage our then to the lowest the among recent months, economic a let's XX being Top index. index quarters year. they presentation clearly volatility outperformed the has in compared of returns home and The return months, including both last over while and last in XX six performer economic experiencing see, and over the also last read – peers quarterly

monetary return that available. us tightening Looking historically they leverage opportunities. opportunities market course, the and positions may investment with We as high well low its structure policy as our forward, believe conditions full become on diversified impact portfolio capture present we investors runs to believe

returns investment now strong in over you. Operator, strategy, that will recognize platform We Arlington's returns diversified book will for company's like market about deliver the questions. shareholders value open call Thank that believe and would ongoing and time. I capital that strong growth differentiated conviction have can substantial the to value generate we of and the

Operator

you. Doug We take first Thank [Operator Instructions] question our Credit from with Suisse. will Harter

John Kilichowski

around is John a first kind I the in mix, get the Kilichowski so quarter of of just Doug. far and Hi, I color capital like for allocation MSR particularly sort question, this how would that's and to guess on little trending?

Rock Tonkel

question, Thanks for John. the

But comfortable. XX%, feel MSR considerably that when approaching we that level inclined of didn't As we like a number. I last I quarter allocation move the felt was to capital think like we that sort be really we would above was were said

on and So in I we'd the I fair MSRs we're to remain to say to in would XX% little a But zip sort in limit higher probably think capital MSR. that's on code the movements we it like allocating the think asset. XX%, to neighborhood that for think right expect we it's that about feel of overall expect I would the valuation based allocation of maybe

John Kilichowski

see being we're that – SFR Got point right should talking that we we about to mark, where that? portfolio; you expect not $XXX yourself At my at think it. what do, $XXX next a keep around trying just kind opportunistic them to do mark just sales me, try sort Thank of or reach you. once question to million that looking how the you. start size understand forward And of at see to certain these SFR you going phase excuse to for million about

Rock Tonkel

any. expect assuming sort the of double-digits. as the of you you in the appreciation even said and on Current plus we comfortably see cash gets portfolio SFR we presentation modest dividend, we double-digits returns comfortably script, the in if the stabilized levered fully the the appreciation Well in digits in to on to expect returns a sort basis high very single as

unique that to us that a a opportunity of like we those given had essentially that, this returns. effect had premium bulk of assets feel front built one-by-one-by-one return loading the circumstance years particular several in a significant to of portfolio receive on profile So we

in expect so mark plus into time we reinvest from to expect $XXX would bit that returns that returns we've and in But currents the to SFR to to delivered portfolio million expect be point consistent of the we once total after that forward. the And double-digits the of portfolio is capital ongoing we those little stabilization properties. that for receiving that reaches and point high-single-digits a returns what that be described with would at returns,

John Kilichowski

very Thank you much. Okay.

Operator

Trevor We'll JMP take from with our question Securities. next Cranston

Rock Tonkel

Good morning.

Trevor Cranston

about lower how MSRs potentially you mortgage you remaining if in rates given have morning. Can coupon upside could the particular Hi, thanks. in much Good see increased? And how talk you or guys at MSRs the strategies gains coupon into of the some have even considered Thanks. on either reallocating looked or coupon different side? realizing credit more potentially on low and current into much

Rock Tonkel

like things: there, capital Not is a multiples in somewhere do two, a we constantly movement return Great doing high But think evaluating, in response And true. number One, that movement. five historically Number is has expect probably versus great Trevor. a feel rough competing valuation not that's said on we, to cap the some two, sort that so I there of that felt I think five six still I where more some question last question, there would one. about Two similar probably the valuations. there's quarter like we feel we was like We're I as of think been but we risk opportunities we're movement us still you deal would say be available. to our invested.

and I and do of that day risk basis we opportunities this out and ourselves couple the today. overall a surprised year to I relocation one, as those hundred allocation the of question, the pike mission in expectations naturally ask this if fair be surprised. So our we ask higher to its the higher typing wouldn't XXX, mission, fed think spread they down return it's risk may see up MSR have that historic or versus points I some possibility with sort coming current and of shouldn't reduction People say MSRs rates every of that view potential general the free completes then – see be assets

insightful continue So high as with It's actively of in We'll alternative can assets allocations. less return returns portfolio, leverage. to in try our day, think pursuit capital to attractive and in are other it's focus we deliver all I the what commoditized, one, low view our with on us allocations as every the to do that are MSRs and an question. that of we're we we single reviewing assets

Trevor Cranston

have sale capital going a receiving will roughly it And into the SFR on long it. the strategy? sort Do the that sense guys how proceeds then redeploy of portfolio. be take got of to you're to on you you Okay, the back

Rock Tonkel

be the Well, that feel we a if year re-ramp by calendar, in able should the late less process year. the there that more look think at moves like quickly But right, in and we to a you periods little when quickly. little are portfolio I

in feel have back of that. I couple full next that We the ability scale to have should the ramp our like think we should quarters. we to

Trevor Cranston

Thank great. Okay, you.

Operator

[Operator We'll Ladenburg next Christopher question take from Instructions] Nolan Thalmann. with our

Christopher Nolan

given Hey the the portfolio in should in we guys. Rock, sale bump third was the unprofitable? on profitability SFR, SFR quarter, given Hey a the expect

Rock Tonkel

recognize, couple the basis sale described, SFR to scale will would the gain we'll as that from receive reinvest We so Chris. our that, just ramping our Number sale. a Well on back fully responses of fully we of I've ramp the plus on into premium the sort a into we expect, portfolio. one, basis the – from the would

in growth we able just capital. ago. considerably proceeds, hand, other would be deploy that growth that returns to and is they And to than months attractive gain more in the have four to today On current those been expect capital would are the

so capital And quarter think able But benefit and would would to not that that like feel realize be we sure we forward. much should an deploy prudently. in I of I it have of the have going quarters, I'm think the second during earnings reinvestment be in but the in that double an would forward solid it expected impact quarter, to of the returns. digit gain impact this

Christopher Nolan

ramp on follow-up a you buybacks from have levels and this that take buybacks of would gain the already As gone? up just strong already the any the

Rock Tonkel

which quarters. between spoken are day were the and allocation have in we the stock, trades higher focus when of buyback. And we value prior On clear in buy price stock will historically that been they I've behalf the today, pursue today behalf an of shareholders. buyback, $X our about than opportunities, with of that's to on our ability the as and continue that $X.XX, our said in capital the given past, pretty the We've and of script is the view at, for book the return to the every shareholders opportunity

would say our what So in execution even on to expect given is, capital gain execute from we hand, been people we've this other been of be freed that capital think portfolio in return have we clear very do we've surprised expect in being what we've buyback that's executed expect on I that. through simply level, mid-teens – clear, mid-teens the the I opportunity. forward, and for don't substantial at said addition script what be expectation up And reinvest that digits, ability parts of continue to time growth of clear this the different and quarter to other redeployment quarters. future to reinvested we'll double And the the a to and SFR redeployed provide would portfolio. to in the on we return, which some in going solid over that earnings should

Christopher Nolan

Great. Thank you,

Operator

Mr. are time. Tonkel. more no There this questions at

John Murray

Okay.

Rock Tonkel

you Well, much. thank very

speak We happy to you would to you like to as Appreciate do Thank very what if much. are that's you it. well. afterward

Operator

That concludes your participation. today's Thank you teleconference. for

may You now disconnect.

Arlington Asset Investment (AAIC) 13 May 222022 Q1 Earnings call transcript