MITT - Earnings call transcript Q2 2018 | AG Mortgage Investment Trust, I

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Operator

Good morning and welcome to the AG Mortgage Investment Trust Second Quarter 2018 Earnings Call. My name is Brandon and I will 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. [Operator Instructions] Please note that this conference is being recorded. turn to now Werbel. will I it Karen over And

You may begin.

Karen Werbel

second morning Good review you Trust and everyone. joining Brandon. developments. AG XXXX recent us Investment to appreciate call We Thanks results conference for Mortgage quarter today’s

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

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

David Roberts

represented quarter increased results highlights increased I’d for over prior of everyone. per our dividend. with second common XXXX from morning quarter’s the you good our to like and that We of Karen share quarter you the $X.XX X.X% share dividends today. some XXXX second Thank

of we was per rise receive, share to three month share. by due $X.XX that for This Our Core which LIBOR in in costs. our benefit hedge was repo of benefit quarter per of swap benefited the the funding to core compares QX book earnings XXXX. our increase as $X.XX the part approximately $X.XX a above

last July increase forward. related these per increased interest X.X% duration As to Book quarter, in of and residential value we gap. primarily performance anticipate TBA. positive credit share whole widening persist in going acquisitions. from magnitudes mortgage versus said time, in a this specified securitization to loans do modest approximately value Spread at value and Book the will our derivatives decreased dynamic rates of the an we and prior due not Acquisition pools due to given month of our X% expenses the under rise portfolio.

interquarter comment we book second Although, provide it appropriate on decline, in to given value. book was we generally value moves do case, of quarter's the this rough a sense in value book not felt current

on opportunistically see the response evaluations influence maintain our widen agency leverage exposure in us favorable supportive agency agencies risk return spreads to a We to increase to as a further continue fundamentals flexibility sector. the with allow and sector Should in would our fed the reward reduce profile. book agency RMBS to we sectors,

has being specialized advantages that legacy mix continue the and enjoys emphasize part credit from of investment over is Angelo areas rotate As The to Gordon portfolio platform housing platform overall like NPL require the of that credit XX Durkin Gordon and Andy away family. Gordon Solomon, I’d Angelo structured securities and and to professionals. the into by we structured T.J. expertise. greater MITT part Angelo co-managed credit credit from and

led management reputation wide leader old has investment billion in XXX strong and the is both robust Angelo that a assets on significantly and resources range has in deal experience been opportunities. credit. the XX-year firm wealth $XX investing Angelo credit in real of approximately and of and long attractive the Gordon overall structured has under decade, housing group accordingly leader evolve. as professional. estate and MITT diverse a credit of past and in markets The with a flow For and recognized of benefits a a in to over the firm Wall and a the Street of Gordon, from particularly firm’s has both been group transactions, specializes

both we available opportunities capabilities As to TJ management due-diligence in-house the to many turn fortunate exciting to I expertise MITT With that the discuss more have require over it. and greater call will experience will of asset Durkin. are which credit pursuing and is T.J.

T.J. Durkin

for pay agency holdings running XXXX the for industry the while demand forecasts poses Meanwhile, quarter is XXXX XXXX Good the finished David. trend and and Cuts, continued and the The points of and remained policy factors swap some Inflation reduced continues further to federal in Tax XX regulation, pace supply improved transitory by morning, June a underpinned second at agency you, a slower volatility to funds at as Agency is rate showing than above has rate monetary offset. Fed its holdings to by market MBS In economy labor reduction headwind. to levels curtailing grow a flat the by slower muted. that marginally interest basis close remains XXXX reduce of still pace manageable continued the was its X% of from everyone. accommodative but was at than tighter the Fed's Thank its improvement. target defense have subdued providing curve, sector multi and raised downs. response reinvestment of versus most origination Net MBS meeting to MBS faded. robust,

mezzanine deals spread There also underwritten large credit several tranches, market the earnings the out proceeds are The back as of the credit positive factors, by loans quarter the the market one The sector. and legacy to and or XX% often tights quarter We as maintained gave quarter, industry return at steady quarter pools end of quarter in was of which in advance. legacy and market the different these investors of mixed these just of mortgage with continued throughout CMBS Angelo volume to this these all XXXX to attractive are than the flatten. often handful continue preplaced of last. to bar performance performance be with curve is as better the across spreads deals second a deals were continued rate quality participants spreads season slow the note, start or the versus subordinated one asset, to somewhat the CRT which are in Gordon and markets RMBS reinvest During collateral. participants time near deal find up continues into lower market the during tranches access more levels favor assumptions. single are buyers this comparatively in year Also single shown indications monthly

Focusing on our quarterly we presentation, second earnings our of outlined Slide X quarter activity.

to end $XX.X as in million which approximately of to securitization of capital residential of retention risk refinanced out returning securitization. in additionally, in $X.X a interest agency On billion the the the our loans through side, equity subordinated of the investment maintain June, million other book which as X, July. We the to in fair sales $X.X was quarter the tranches billion. pay-off comprised primarily million exposure $X.X ownership of pool back. investing primarily participated approximately Gordon of quarter, portfolio of On which re-performing we’ve the our at the vertical weak portfolio composition securitization loan $X.X which And $XX.X the equity all was whole term equity, in aggregate credit to of for funds net value reinvested mortgage purchase commercial Slide billion and commercial was mortgage of for of book well performing net Angelo loans investments laid the portion returned was credit

on the universe of Slide the portfolio agency recent like highlight credit floating nine, of whole our for prepayment loans On ABS fed are to portfolio investments agency prepayments and the X.X% excluding when quarter, nature slide fees type. investments size overall second commercial XX% the of adding agency because we are rate agency by our credit the for to rate and our the breakout expect our of discipline residential to of exposure and and on the we’d book relative the collateral. XX, of the of funds XX% and our that from XX you’ll was team risk outperform in benefiting overall and rate. constant market increase portfolio, a generally our see directly selectiveness The product for agency investment our Focusing in

in decreased to the Moving of quarterly lay modestly we our X.XX quarter versus ahead quarter. X.XX years years out which this the of presentation, Slide to earnings the gap prior duration XX, portfolio

large As advantage pipeline the well we platform. positioned believe favorable ahead, Angelo we and to the fee of at is opportunities at returns take look Gordon MITT our source of

continue ways We capital estate real manufactured into season to assets asset our single and classes loans, as family originated rental to MSRs, and such newly other whole credit CRE explore and related residential target debt, CMBS, deploy including housing.

relative or assets holding depending with the provide over MBS value high that, to MITT we within agency I we conditions. turn financial With Brian core review can on will which see call market Our decrease results. different our to space, increase the a liquid quality

Brian Sigman

per prior to XX.X share or $X.XX fully per and $X.XX common net million stockholder the share. diluted Core prior the million a payoff. the second the for quarter earnings share the adjustments T.J. loan $X.XX of $X.XX quarter. income X.X second retrospective Overall $X.XX commercial in Thanks quarter, was from reported or per quarter or included XX.X $X.XX versus in a In million available we

we whole within of current operating that those large transaction I’d affiliate highlight of the item, the pools equity you of that in XXX,XXX like loans excluded the XXX,XXX The other a statistics. of sense our to X.X of Given expenses from was portfolio, in a flows had and billion were purchase line pool core upfront reconducts in through one securitization X.X funds. our of costs earnings. the better million X.X from other second AG and give of million To more given quarter, earnings comprised few recent that expenses of

by interest of offset interest on funds X.XX%. was had federal XX a comprised prior relatively the spread in fund an just unchanged tightening partially from June of deal funds offset an increase X.XX%. the was total quarter. Net The As page of X.XX% in cost presentation, described X LIBOR. June rate This increase to of of primarily margin portfolio repo our in margin net of due by remained at asset basis of a of costs XXth versus

rate the cash continues we do second effects the in any As funding In had June to the loan cash million them. in of be financing we XX market our parties of comprised million plentiful XXth, million unlevered from ill quarter agency to XX space. whole XX of with of financing XXX securities and the see quarter investments increase and both of we agency credit liquidity financing entrants At not of end, general in new had CMOs. and XX and

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

Operator

you. Thank

Credit We Please will ahead. now go Suisse, question-and-answer from And session. Instructions] Harter. Douglas we begin have the [Operator

Douglas Harter

the if about kind If still and of remarks, exactly How sort changed about little loan more that you you where much talk strategy today? just are and of your pricing they’re attractive during detail the kind if could whole the seeing mentioned of of in some the prepared quarter TJ. just opportunities activities the a

T.J. Durkin

been out hasn’t we’ve to probably million range. we’re in that have Sure. I where there, size round in mean, focusing targeting the smaller middle been think numbers changed that the I $XXX pools

the coverage of transaction I think and multibillion have that pools sizes. traded dollar larger lot value the we're been just of in has there a better on smaller finding some

potentially I’ll the different money So, driven of have larger think yields. dramatically and hasn’t of opportunity attracted say the an versus ones size, of some changed in that types return profile I

Douglas Harter

it out deal Can to behind the that as detail once sequentially to appeared have give might serve might kind you going Great. quarter more what just you - And been expenses of then that? Brian, this fell a expense. what little

Brian Sigman

X-X, Sure. flat about quarter, were by couple of expense of we’ve run-rate running actually past roughly, in methods at ongoing for The terms corporate been per the pretty X-X is quarters.

and so about we was think are upper Those XXX,XXX that said think when get I expenses you and million you two item you left I line lines like X-X from came about of actually cost. those actually transaction items, operating have into of run-rate. X.Xish X.X other XXX,XXX only that X-X, that

earnings XXX,XXX line into the baked and is equity items. The actually other

So delta of the higher. the X.X, would transaction away operating NIM And to G&A terms but that and in item continue which the that be forward other so going expect X.X. will items equity be roughly earnings we of brunt line would that highlight from line XXX,XXX to about and

Douglas Harter

helpful. Thank Brian. Very you,

Brian Sigman

Sure.

Operator

From KBW, Hagen. ahead. Eric Please we have go

Eric Hagen

what Hi. not TBAs morning. just benefit Thanks. but the margin report, was quarter? the Good from Maybe during seeing I’m Thanks. in the

T.J. Durkin

You mean the dollar role?

Eric Hagen

- the Not just not component? Yeah. component, the the income but margin

T.J. Durkin

Sorry, you what margin? mean by do

Eric Hagen

Well, of components margin? you’re or just disclosing the - that from it that funding mean do included that is just you in In asset your take included income in net the you are asset report. where yield I cost, margin TBAs the - yield is

T.J. Durkin

realized gain much of why losses the add back that it we that’s the from into asset group would give sorry a you in I dollar of role come typically we curve out try the and sense dollar yield net strip have and on of kind as breakout show think and in how to into we kind order to and -- the there? how it in it it’s rolling much, It's order and in the

Eric Hagen

Got it.

during Great, credit all spread there X% July, point can by particular Thank or great. on Thanks. assets some increase that you is to? mostly value driven you. Okay. The book in that positions tightening was

T.J. Durkin

think in our done particularly credit but I benefited July, mean, broadly I has the well CMBS within sector. portfolio

Eric Hagen

maybe just you you update us really origination is just helpful. year-to-date can volume us they Great. CMBS. maybe give an RCOM tell it, Got that on the Okay. quickly have done you. what would then And be can Thank

T.J. Durkin

dramatically from a volume. ago. or We hasn’t still commented increased historically haven’t on It's origination would I year decreased it say

Eric Hagen

And at year I that some what I point. was it if a missed ago? apologize

T.J. Durkin

We commented that. on just have, haven’t we

Eric Hagen

Okay.

T.J. Durkin

to think the I earnings committed REIT. fairly core It’s of the

it's immaterial somewhat So sense. in that

Eric Hagen

is that discuss any you? trends intention to to in then there at pricing looks and time acquire attractive MSR an Okay. how And or this additional it seeing that and market you just can you’re

T.J. Durkin

theme, market. would by probably Yeah, the basis XXX I the in year size a I of to the side, to the portfolio. on say today, the Again, marginally on similar outflow. that will points I mean the we’re from legacy than say, MSR sub-billion it’s would larger dollar tighter in constantly depending tighter maybe XXX the of a say, and space a portfolio notional start conventional this loan the trade

we where So focused say again, would attention. our I that’s

Operator

[Operator Please Trevor Instructions]. from TMP And Securities we have Cranston. go ahead.

Trevor Cranston

able kind little have consideration there’s or be if the primarily it. out was LIBOR, Question commentary you take any can the Thanks. amount would on undistributed with about level. look to any the cover income second of we itself? on it and If earnings made when set if increase new that But taxable at earnings you guys was with dividend from a intention by core have what decision the the you of benefits you you level. covered dividend the basically Because guys new additional quarter the to

T.J. Durkin

latter. based the set based on It’s dividend dividend on don’t really We the undistributed. regular the the

Trevor Cranston

that leverage guys you the spread take prepared just if in the and willing you, having you in about become environment? to you agency portfolio spread leverage more potentially remarks a of about comment you’re high a attractive And this some guys comment in to flexibility Got would be at how point more book Can agency year. the helps. how made on sort thinking then on, attractive increase in the Thanks.

T.J. Durkin

agency portfolio more look on I think than particular. overall the book in it at we leverage the

of mid low on the fours band up or bottom-end of typically the end X in So band. our the, the leverage our on I into high the handle sort been think

would at up to agencies I closed that So say X.X, per quarter a I to think quarter few we we think the certainly room the return widened. have take extent of

book is versus I leverage we we the on equity details. think of and how allocation which think the A.J. other X in But look on shows about I the on some have leverage REIT. show running more we do here terms agency equity in X.X looks like more conservative page some us room there. feel allocation really has at which side And we

Operator

time. We have no further questions at this

Karen Werbel

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

Operator

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

You may now disconnect.

AG Mortgage Investment Trust, I (MITT) 7 Aug 182018 Q2 Earnings call transcript