MITT - Earnings call transcript Q1 2018 | AG Mortgage Investment Trust, I

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Operator

Welcome to the AG Mortgage Investment Trust's First Quarter 2018 Earnings Call. My name is Christine and I will be your 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. Please note that this conference is being recorded. the to turn of Werbel, now Relations. Investor will call Karen over Head I

begin. may You

Karen Werbel

first and Christine us to Investment recent conference joining everyone. for call results Trust's development. Mortgage AG Thanks review morning today's good We XXXX and quarter appreciate you

Harbor in business affecting others begin, meaning our Harbor changes of nature. Before the of Securities conference Reform them. of or conference trends to XXXX in and materially by may protection Act. rates disclaim factors intended statements the their I'd assumptions to be the Statements. May curve beyond government business are forward-looking the Safe regarding changes X, company's statements contains XXXX. those the provided subject to slide Act Reform corresponding obligation our [ph] statements and All Private and actual presentation are slide Statements results like All from forward-looking as statements today, and impact made Today's update to by review investment and interest we our regarding Safe prepayments, strategy, and call The differ within and to market such the and Litigation regulations these are forward-looking due any call programs in of projected control. this we its included yield presentation risks,

the which to release been X-K, on like SEC. Roberts. And have turn call reconciliations, for the this and to posted website measures earnings call. David certain I this At will non-GAAP press to over would with We refer please refer on to filed the time, and are our

David Roberts

our highlights you results with today. quarter I'd Thank like you everyone. XXXX good Karen to first share some and of morning

notable $X.XX for per the items quarter three Our core like to earnings highlight. I'd with share was

retrospective a benefited from core $X.XX per share adjustment. First;

pay and benefited product $X.XX end. from a been quarter share from offs subsequent have core commercial impact one-time per a positive loan to Second;

costs. was in rise to hedge received above increase that $X.XX three benefited This beyond short-term our do the so. REITs driven we per and by next was increase the this will persists various quarter core share technicals as funding We approximately also repo our unusual not or part That months supply- dynamic anticipate within dynamic of demand Third, the swap due was of LIBOR that the market. book. by

a widening the During sector. a for XXth the the we rates row. decreased dividend quarter agency first to due value interest share share prior quarter, in per common $X.XXX the declared quarter of rise in per from in modest spread Book the primarily and X.X% regular

as should bad the to would at continue leverage, see return widen as supportive fundamentals exposure to We favorable response influence. we in our an risk book RMBS in to flexibility the agency The to our agencies reduced a further agency maintain spreads return us risk opportunistically attractive reward profile, in sector increase with much allow evaluation sector and sector profiles.

that, emphasize of whole our rights sourced to call servicing card plan These purchases purchasing as over book. team mortgage Gordon During pools done included diligent Angelo, assets strengths Gordon I'll credit our pool the T.J. Angelo, which ABS focused and we other RPL of two the sourcing internally were the continue ABS to extensive of as part to platform. funds note. loans. the pools Durkin. turn assets played extensive RMBS the loans, and quarter, of as non-QM to that on of We kinds Excess credit these strengths With well the alongside credit of two

T.J. Durkin

low Federal mortgage increased rate remains its basis unemployment points continue rates holdings of Agency the full [ph] of the to by be continues spreads of the a David. end. to curve to interest end the quarter, the points in first the tapering stability, and was you, to by Progress and across employment continued the made The by of versus feds interest mandate robust respect as supply. rose buying, and moving to higher over its by monthly basis Good dual quarter. mortgages meeting supported quarter well In six to XX the XX agency X%. response rate paid manageable raised March yield [ph]. agency than everyone. Thank there volatility curtailing the Throughout Federal Reserve the its volatility and balance feds, curve widened yield uptick marginally morning, RMBS Feds with and front the Funds below and five points swap reduce began XX with debts purchase basis reinvestment price

this While to other liquid we spread outlook of year. may fundamental value given We mortgages reduced remains concerns further volatility relative course manageable for the volatility think and rate compared the spread agencies prepayment over favorable experience favorable some products.

securities During quarter was somewhat the mixed. and backed the performance market, first mortgage in asset of credit spread

The sector. retail year-to-date the RMBS calm the to strong the while continue yield and rate interest displaying Irma, an with tighten broader the both market spreads US in and Within a With economy. widened as continued demand rate move so with noise Spreads reflecting to investors for around reach significant technical market tightening was base for strength a lower improvement of coupled the securities the demand risk and then early Triple to prior with to relatively but supply the securities sector. CRT averse due invested the volatility volatility rating more in strong volatile buyers net pre-crisis Harvey sector. CMBS laid the despite fundamentals. flattens rate for significant widened the bifurcated on remained persistently investor increased hurricanes largely buyer more reflects uptick new and tightened credit rates, scene as in and opportunistic AAA CMBS, cost. Although lasting to curve ongoing respect quarter, in were levels

each the mandates. to continues in monetary of as to fed anticipate We a the policy on interest dual in this tighten continue response rates to its made progress modest rise year substantial

not medium feds the rates do remains increase rates. material in fund of narrowed regarding and between rates gap anticipate has the for positioning we pricing the market forecast defensive because the and the interest market interest rates However, feds

Focusing our We book activity. on outlined $XX of of quarterly in agency a credit quarter the investments increasing presentation. the book equity first and actively We X amount both Slide earnings our net manage categories total by million.

another we on two quarter the mortgage side, fund and the residential During pools Gordon MITT agency conventional purchased of Angelo, on loans primarily from government credit stripped excess and added alongside the side reperforming loans. MSR

ABS MITT Angelo, Additionally, MITT pools funds. Gordon also on securitization. revolving a purchased two other note alongside purchased a non-QM credit

capitalizing realized during spreads to sold we of quarter. legacy tight securities in ahead K issue CRT from some RMBS on Freddie of pressure the exposures were openly offs and credit new books on During which relatively on the and securities there sales We gains supply quarter spreads. securities pay put shed the anticipated sales

of $X.X agency comprised credit was for fair Gordon $X.X opportunities was of portfolio well and X, quarter finding we in approximately investments, the On platform. we've terms for obtained $X.X market issue to In the billion. billion the The value which we're the fair aggregate laid the approximately as which lesser billion our known book was value Angelo, new composition out our the both of investment of value Slide portfolio book niche as in the credit quarter.

in current generally by for highlight XX% XX, and funds see type. excluding prepayment constant XX, book whole quarter into rotation and our you'll portfolio benefiting break the exposure adding of ABS floating C on a in our because quarter rate. Slide Risk of portfolio on we'd inspect The the and The the like are recent on for investment agency directly out outperform are agency Slide product we of XX residential on of was The our loans of of securities investments that market. when portfolio residential credit CRT [ph] our the universe discipline agency agency rate of collateral. out the our to investments overall the from selectiveness nature decline fed relative commercial to On Focusing pre-payment and X.X% the overall our XX% [ph] size first and our credit this deeds investments to our in quarter. a result increases rate XX% the [ph], during was for the

The Moving X.XX years to quarterly duration therefore [ph]. earnings shorter overall the agency and the of out duration higher contribution years we this quarter. confident of the X.XX minimal modestly XX, gap to of offset our lay coupon and in quarter to by presentation, increase agency versus prior MBS volumes Slide was X.X our portfolio ahead held portfolio pools duration extension which duration shift some

declining portfolio duration of whole quarter de our of with in throughout swaps increased as interest a our the rate portion our sensitive overall marginally the hedge added while book the X.X resulted minimis This quarter. purchased gap increased we newly most the duration During years investments. gap loan to

we confident into were that book look positioned investors was As value. we MITT to to returns protecting deliver attractive while our XXXX, well

construction purposeful and of or With we capital future agency take liquid results. we deploy other that in Brian the through over liquid the review financial to we less that sectors that ample and attractive in Angelo, flexibility turn have our volatility and find of more of arise Gordon to credit our in presented residential in I'll any as larger spaces increase portfolio platform. may advantage commercial the to opportunities into the opportunities Given spread mortgages seek larger investments us such call into investments to

Brian Sigman

the X.X% quarter to or give prior stockholder few due March highlight quarter million the diluted quarter. portfolio to prior earnings Overall our to decrease was available adjustment in per better net million income of of was last in retrospective There the we retrospective statistics. At minimis adjustment our common in per $X.XX first sense To our portfolio per $XX.XX agency the David $X.XX quarter. a value reasons amortization the or previously share $X.XX $X.X I'd from share more T.J. a $X.X Thanks of billion first a book mentioned. versus or for you XX, was versus like premium $X.XX quarter the $XX.X a share. $XX.X reported current due quarter fully or Core de $X.XX first million

was As increased yield a of yield in X.XX% of offset Page due at presentation asset portfolio total March from X.X%. an of X funds margin Net by our quarter commercial subsequent to prior to the versus had to spread offset interest in of which repo in increase in by due increase interest XX rate of to raised the federal LIBOR. X.XX% described comprised due off tightening in interest net cost the on this funds of XX an primarily was an funds of points partially pay The cost end. was the and primarily increase basis a quarter loan in March increase margin

of those first credit of XX plentiful funding XX unlevered hopeful new parties. of see quarter of $X March rate had $XXX financing XX, to The had agency ill do in not any increase financing and liquidity our In entrants securities in $XX we $XX both IO and cash, million million the of the financing and end, in counter effects unlevered the million to of securities. space. we we parties As [ph]. be general, from this cash investments comprised and the continues market agency million was of agency [ph] quarter At

after received pay the of loan. the the down principal proceeds quarter addition, unlevered In from million $XX we commercial of

our we our continue sure open that concludes and quarterly our with end, call to we're questions. income compliance we evaluate was make at requirement. and on like estimated basis, prepared to distribution for the quarter now $X.XX undistributed That would Additionally a remarks taxable to

Operator

and question Please first Doug go Credit Harter of is Suisse. from our [Operator Instructions] ahead.

Doug Harter

all back in might and kind second the of was you benefit quantify to just the prior you increase to of quantify of sort help couple some a to long LIBOR I faster way in it it little and goes over whether your next as bit quarter quarters. just how - expectations from the last the levels could hoping that the

Unidentified Company Representative

to Mike floating were be Thanks swaps book when floating our do our reset, rates [indiscernible]. in quantify, We our the sort repo swap of in depends really QX. book accretive Doug, when given that expect to this It's said QX of earnings it rolls. on rates is we it difficult to

of - quarter. in to to situation that or to by more time. QX, expect stable - any some saw I some the fourth it's couple This whether we paper lock whether in [ph] repatriated. would [indiscernible] some it a project say there short-term really funding given given for historically We period from in history. it technical the at market have benefit driven pennies it's been crisis structural hard technical's more of and the it's whether being - that's be be least And have it's maybe very the reduced we'll the is really factors relationship monies difficult there's that same demand as had whether - commercial has

or So that since we a good then spreads hurt is really project it seven March and to have continued were basis no portion. really reason normal We a yesterday. back, through saw will be its late to peak anticipate back reverted more see won't the eight about believe by time. that to the some to difficult reversion at back It We this relationship. points in

but next a whole I think really not it that much of to dynamic persisting really the to trying to quarter will really that beyond. like, going trying benefit as that the that from, just a why sort what further not projecting look on is view market tailwind to out is is we're say which counting figure than lot

Doug Harter

some Thank quarter. just loans, you this you. then the And on bought of whole the

talk that you that's persists. like that saw [indiscernible] could returns whether you If the and about there opportunity likely,

T.J. Durkin

Sure.

upper seeing we're anticipating versus I more larger and space. of that smaller competitive we're ROEs in in some to think are digits. some double pools bids the the the think the levered ourselves RPL of we're opportunity I be finding ones low-to-mid and Generally NPL

Doug Harter

All right. Thank you.

Operator

Thank you.

question Eric is Please of next ahead. go Hagen Our KBW. from

Eric Hagen

risen quarter My to off sold the first capture quarter, end either run asset have been anything on yields in even of higher rates have or since yields, question or obviously since is you end. you able the

T.J. Durkin

end quarter the the ago. it's been meaningful On since the that say of wouldn't I margin

Eric Hagen

ROEs. getting second what question what there do and financing you some non-QM on but as of mean they're I goal is of those assuming the are on mean My there just mean, kind is the balance assets, until you pool to strategy. are sheet. Thanks. eventually Okay. sitting just securitized I'm are those the I your until on I

Brian Sigman

Sure.

purchase We Gordon. the regular is conjunction in our other have facility, being on with warehouse being. Angelo, The program warrant is

be So we that learn ones we've a with years NPL is have bought see pools that and comfortable on proportion, to typical RPL facility But over net and we returns wouldn't is what obviously certainly But on that as just the but don't much the the - we'd than expect them we that like think, The well. to of get the different securitization we're our warehouse on typically pretty type securitization we've the expect change to. this the stage balance we facility. I goes setup [indiscernible] early sheet to the returns. and the to could rest portfolio

Eric Hagen

Brian. Yes, that's helpful Thanks.

Operator

Thank you.

from is Please question next Our ahead. of Cranston JMP go Securities. Trevor

Trevor Cranston

Question MSR sort on Excess slightly you little issuance older also it's and finding give the you're guys within the if on Can maybe on you opportunity more comment detail unique if or new general that - And the a in MSR's was of in market. quarter. that Thanks. or bought just opportunities more if stuff?

Brian Sigman

see more because they're MSRs I new balance in market. the originators to looking season, We origination. get are the on cash less supply so the they're sheet, on generally retained think more than Sure selling years their two seasoning, typically in so come

the on size [indiscernible]. I on digits unlevered think Fannie, to high space generally in versus Ginnie and unlevered we that see depending pool yield potentially Ginnie double-digit the were on space the transactions very some Freddie single of

Trevor Cranston

Got it.

higher LIBOR there speeds assets there your type on that the comment of a quarter in are some on rates? There I prepaid that, rates the resetting Is off. to retro asset Okay. loan question on or commercial yields, is you X to higher that is was have sort curious rates there. hire an Slide on due was the this increase pay more And guys element the then component. adjustment the of the

Brian Sigman

it's disclose respectively yield fair was the curve absolute typically think directly Yes, agency both to entered it and a moving little I tied think then that's obviously than that just paper of QX. we we in own a is the higher rate I assets given amount monthly the and reset yield floating LIBOR over phase higher themselves to

Trevor Cranston

quantify of Okay, rates? it reselling like coupons how higher can was you to

Brian Sigman

was loan probably off. quantify it commercial to be much pair think how the easier I

it year discount. would a was bought, I We this We had pay loan in at about points. now. from it XX think sizable around a fairly basis off owned

So amortizing we're the period. over

with, we'll as flat and [indiscernible] the I and in as after mentioned into left was due the David yield Our of that came floating changed got kind money couple because up to will so the up. T.J. be truck the which the saying mentioned as assets XXX, worth on days translated recurring higher projections rates at we the going about reset the $X.XX yield mainly a not which quarter, a pick was of income in

Trevor Cranston

Got it.

Thank Okay. you.

Operator

Instructions] have questions. no [Operator further and we

Karen Werbel

to Okay, next everyone. thank you speaking quarter. with We look you forward

Operator

Thank you ladies and you, gentlemen. thank and

AG Mortgage Investment Trust, I (MITT) 6 May 182018 Q1 Earnings call transcript