MITT - Earnings call transcript Q1 2021 | AG Mortgage Investment Trust, Inc.

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Operator

Welcome to the AG Mortgage Investment Trust First Quarter 2021 Earnings Call. My name is Erin [ph] and I'll be your operator for today's call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] I'll now turn the call over to Jenny Neslin. begin. may you Jenny,

Jenny Neslin

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

including results today's call call that SEC differ may from please headings subject outlined we note the statements discussion statements, information may forward-looking made you statements forward-looking disclosure Except to SEC update, events in review, are forward-looking obligated begin, intend factors statement cautionary to ended risks December during any new forward-looking the or contain materially in filings, certain and XX, result as information, our or do and today's to law, are statements. to for of are not year actual or statements. the which and as our by management's future REIT these a recently encourage Any Before the regarding statements, The discussed analysis. regarding risk including most otherwise. XXXX. uncertainties contained under we our revise We in company's forward-looking required filed and whether XX-K form not filings,

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

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

David Roberts

heard. outside industry. served on Jenny morning, appointed She brings General a as Jenny her Jenny. experience and Gordon from recently you of [ph] to just was everyone, happy She and have for welcome team. joined in-house public to as and Neslin us. to extremely has whom governance I'd companies and you, like you commit Angelo number thank Good our Thank joining are both our counsel and valuable oversight, reporting we company legal in our Counsel.

experience on call. term our further our Our execute our maintaining our us have of earnings with long infrastructure whole we combination stated and more our because adequate we remains non-agency because in MITT's seen believe and of of long and drive value strengths value. experience strategy the accelerate shareholders loan Company Smith later plan, in expertise strategy. call only To now join are will detail differentiated with T.J. and for as President. book Nick mortgage and Home emphasis our heard hear who as increase Nick whole Durkin, work company's and focused on to closely strategy, on you'll specifically, space. a Officer. T.J. play that to is We unique, increasing our you've Arc the is from differentiated, later call. to will term, we whole power our loans subset to you investment our Chief REITs to We are the with Nick help discuss Nick will which on loans, skills, over we the but our not this company's can the work to while our in delighted us Investment in significant previously key liquidity A execute plan component plan residential have that

quarter to $X.XX end, financial adjusted compared Now common increase of turning March book value per to That's $X.XX of XXXX. per share share to quarter or an per I that share report $X.XX our of December performance. XX%. to our share increased as first as pleased XX, am per

excludes mortgage this company the a performance our our common CMBS, an increase our continued therefore book In value value stock strong per company's primarily increased our declared dividend stock. on adjusted As quarter $X.XX in dividend reminder, reinstated the in whole common costs $X.XX as the share of asset preferred is The our GAAP off by fourth per Home. share. as as and well rise and of book the lower momentum, our our value. from was the the affiliate we an value quarter, the preferred than issuance book a residential quarter-over-quarter on for stock first Arc driven Building and capitalized of loans

course payments addition, quarter dividend the normal our have first we returned with stock March preferred dividend XX. on paid to on In

I'm Now, Durkin the for turn T.J. to over operational to cover our pleased call quarter. the to highlights

T.J. Durkin

morning, and David, everyone. good you, Thank

of exchange we in discount of quarter, at the approximately million preferred During shares to our slight executed capital opportunity for redeeming a another XXX,XXX strengthen base common shares stock. stock by accretive X.X

residential million pools. approximately We during that a loans proceeds utilized issuance and during at average of price We weighted program ATM classes million successfully per non-QM of net also both common the capital of quarter share. $XX agency stock whole $X.XX through raise quarter to X.X asset reinvested our the the shares including into of

first quarter Turning presentation the present portfolio we update. our Page to on X,

previously call, last above real our slightly on year-end our prices sold earnings commercial we remaining two of our loans whole marks. quarter's As at mentioned estate four

Train credit of whole from of continue allocation increase we increased the million. power Slide X, quarter, portfolio can through loan portfolio $XXX table, we you billion, $X.X residential investments. prudently and $X.X bottom approximately Across see agency the the while mainly liquidity. During the agency to the equity billion $XXX and you to approximately of earnings maintaining of among to purchases see MBS of adequate commercial the purchases can size the investments, million non-QM

to excess in the over represent portfolio of of keep loans, deploying now we During made we which continue the MBS the NIM shifting as into pipeline our XX% the and portfolio quarter, liquid agency portfolio loans. to build into continued progress residential residential liquidity

of disciplined real We during than performance our being quarter. while and MBS you can selecting and have due exited increased agency CRE Subsequent two less warehouse On point, prudently our for further book pools. we Slide mentioned to the there's our securities, within with and value continues overall is first acquisitions. upside asset to a remaining owners At prices. investment continue to activity. with quarter further quarter assets you we on completed On down our hold of lines securitizations the the end, two to Slide Slide see other subsequent Freddie CMBS to with the estate not portfolio see create we loan We our are our or better related borrower this X, our credit and these to able strong exposure other Moving and sales securities sell in to left borrowing which in loans size with to to capacity CRE Along securitization non-QM X. funds, Angelo this market remaining remaining. K purchasing this can manage securities. commercial commercial exposure the shrink also X% along on on be all an single X, three CMBS when exposure exit sales spec end, took we believe multifamily prepayment single and CMBS markets passive to earlier Gordon to advantage quarter book we'll given continue

XX. quarter. origination We performance Turning affiliate first the of to highlight our licensed Slide again during want the mortgage to strong Arc Home,

re-entry non-agency XX. term. in the strong continued Home quarter additional Arc reference We narrow and at mortgage volumes team cash the Arc's the the sale of receive and We due business agency near product you chart in talents the window. on post-COVID And correspondent on both space to quarter, originators as how within clearly provided as both the Arc to the refi product detail agency in Arc's by to we stated wholesale non-QM and to on the interest Home the GSE volume gain to overall markets, implementation here fundings into over the I'll was of recognition in Slide During margins brand of with margin take end, medium re-enter wave this calls, and Arc in awareness sector, can margins believe represented into and and earnings another begins channel, non-QM the since. the first funding continue out strong to advantage post-quarter previous one in agency have for channels. we some rates banking see build increasing affecting delivery point forms percentage seen this early on of the certain for

by owned a and as Gordon the managed funds. reminder Home [ph], Just XX% of is approximately other Angelo Arc remainder

be concert balance the progress the we our asset So we're last on focused wrapping for Home, balance simplifying from both and be well-positioned over with with to year mix Arc maintaining lot our of take up, whole while a a and residential pleased me loans the in made the growing growth earnings there's We liquidity. MITT mortgage agency will of. within think ecosystem, power mortgages to happening prudent which origination sheet advantage for

team With that, the Nick. very As us on of execute Smith strategy to to MITT. I to call I'm help have I'll the ahead, a look on our Nick as excited CIO over turn

Nick Smith

whole side MITT recently you on backdrop a decades. for morning, period for non-AMC residential running in two the and in market joining most residential After for and decades the set [ph] nearly Recently, career will and most regulatory, at happier in origination space team. for the the changes capacities I the new loan Securities, trading exciting dynamic very with coincides be have the BoFA business couldn't different thank RMBS Good introduction. everyone, what likely sale working management non-agency structural the and environment finance. My mortgage be investing

non-agency highs, As grapple remains a originators by with pressure capacity historic at and to quick into anticipate we market. margin the origination community return begins

our anticipation mentioned T.J. in in and presence space. the been have in we non-QM re-entering early expanding As of this,

surprised return, by the they pleasantly CFPB. will released the As by be new QM they rules

embrace allow We rules associated in the and expect to to decades' gains streamline reducing to underwriting, costs. past originations, manufacturing simultaneously risks technological these new the originators while

underwriting to better the risk addition efficiencies, risk. new with the rules credit align retention In actual requirements these

exactly financial capital will better lower versus deployment returning the required be align deliver returns. securities requirements Said longer deliver these market prudently requirements believe is credit of since will ago, terms be almost as no efficiencies. be Although some anticipated, will uncertainty With strongly adjusted credit what to these at the product maximize attractive as last levels around adapting anticipated returns. capital offerings product If offerings there we seen with our will able additional to actual risk, new qualify of leverage structural we the leverage decade returns a can to we differently, expanded deliver more QM, credits availability sell risk risk retention to mortgage to are managed market.

stock This increased purchase Additionally, by further on announced enough, second homes Department to will GSE profile GSEs. and the us liquidity not the FHFA Treasury loans the recently while acquisitions mortgage characteristics. respective higher agreement single each properties, of agreement commits these risk an mortgage limits If these optimize loans return with changes as and family horizon. risk and throughout secured allow encouraging in well credits investments investment with preferred amended were introducing to as the reform, multiple the

investors the of these been originators nature previously, these labels disruptive towards believe recent are Despite securitization leveling of benefit. these and and field private potential loans ultimately, group's capital. for policies, playing that reservations the about subsets consumers we private trade good Although label private included, will have steps changes

grant We able management record management origination mortgage with is to Arc of offerings. that our originations ability partners Homes grow our service by in-house be and vertically-integrated provider. loan services, originator, attractive loan asset will sets our apart our with are to sourcing Alongside portfolio delivering confident from product track non-agency Home an peers. organically asset Arc of to assets proven prudently our us we affiliated The combined grow many access

be already sourcing from Gordon and on for here investment close many spreads. While an with over many conditions move easy our coming financial on career Angelo at yields simultaneously credit the are and of historic place forward loan you progress may over volumes with and to and team other capabilities market from decision. our Anthony, we non-agency turn a quarters. to markets I'll and T.J. MITT current proprietary excited to The look to knowing assets, benefiting the in attractive near to performance. struggle along risk-free while decade, overview expect it Again, updating for continued this board made an I'm you grow

Anthony Rossiello

good Thank you, everybody. Nick, and morning,

driven During non-QM million per the reported across several improvement approximately and Arc by we and REIT $X agency portfolios. net or Earnings of asset portfolios, income stockholders interest appreciation within our expanded margin held a within yields, XX% both to equity interest $X.XX credit million, RMBC investments, result fully first share. on well the which commercial from taxable a quarter, in agency financing our net residential and were investment rates is of Home, $XX reduced diluted method including as positive as improved Net of available asset earnings common factors margin subsidiary. non-QM and as

will current were to also able much agency value reconciliation by share, through our the $X.XX On quarter interest common book you a exchange issuing within We which rate quarter. the quarter entered per related the mitigate offset This also as well economic the our provided through dividend increased during stock preferred in common $XX the Slide hedges million. to the net during during portfolio increases proceeds of of stock our put preferred raised as RMBS XX, program we reflects see and quarter risk we by place. into increase and which from ATM common transaction earnings the approximated declared first

on based common per less total is of stock. of value the share discussed which liquidation disclosed on preferred computed our preference adjusted equity, entire previous calls, our As we book earnings also $X.XX,

representative $X.XX the Turning quarter disclose income When recognized earnings share, core GAAP earnings. core first record that which a earnings elevated to included contribute you Despite quarter Home is to see the decline common mark-to-market continued where business margins, portfolio, while market on to share. conditions not earnings origination $X.XX origination fourth experienced the earnings gain core per to reconciliation its also sale is the Slide XX, of during of response of common on we compared Home earnings for we core in of will through per core normalizing achieved and its the to recognizing and XXXX. Arc in Arc MSR gains to core net

with And subsequent call end, CMBS we open additional which paying we prepared quarter the transacted note concludes quarter reinvestment. sales manager Lastly, liquidity remaining now we total down million, of our $XX our to This million. and we with the secured outstanding ended a for the $XX.X is like after would had that generated for to non-QM questions. remarks. also securitization And liquidity Operator? for

Operator

with [Operator KBW. Instructions] do We Bose have from our question George first

Your open. is line

Bose George

the the first kind the incremental the of guys. run you on just to returns loan Good And Hey, capital work, was model? should sort putting how you're curious then Actually, side. of whole especially where morning. question for see we ROEs business on just about think rate

T.J. Durkin

Bose, Yes. Hi, T.J. it's

on breaking think probably very, risk. hedging low see down, rate out I the when we I double-digit ROEs we're very it side, think the agency

in side, it's as transition loan think to the On rotating of kind the think run still portfolio about once think it be the the post-securitization. a in I that sort capital in more able of forecast then we'll mode of will you. we're quarters, better lower place whole closer where And consistent to the to the the I rate run it to to think ROEs you we you're be, think kind I we rate a get mid-teen and I be few of probably want

quite So I we're we're close. there yet, think not getting but

Bose George

that outlook, But more? the should Okay, slows volume a Home, more agency think we of picks a before as of from think it's market it that [indiscernible] when at we of about up there's sort agency's and there the makes market potentially hand-off the Arc a then up. sort QM really earnings there's little And seems actually sense. market ramps to just like

T.J. Durkin

Arc so Home. business maintain agency at intend to Yes, we our

two, At historically we're volumes are still the credit are margins one, wider think margins. coming have we typically down; are time, coming that and But same fact that in fully cognizant the down. business. of just I products speaking,

some probably I industry's volumes. and volume we the with given obviously so to and we And But even space a the within mortgage sort relationship share somewhat that grow tailwind. agencies of subject continue the on to non-agency hope out that more proprietary there, the will market as headwinds to look have we earnings' gain of we're

Bose George

Sure.

thanks Well, lot. great. a Okay,

Operator

comes next from your Cranston And question with Securities. JMP Trevor

Your line open. is

Trevor Cranston

questions Hey. Thanks. couple Arc A Home. more on

guys to nicely non-QM Arc sort how on much up a originate thoughts side, there. any volumes few obviously they Home think basis able next the of and share the On to the over for you your in started pick might targets Do you non-QM on space be quarterly quarters?

T.J. Durkin

pretty people, should technology and good to Arc say, Home, I Obviously, we're capital, rate space. run in volumes. getting invest to that equity continues

rates be to You see Page rate less, hopefully, refinancing. run can as fairly will on consistent nine and cyclical and crossing XX, digits that it's a

hope produce some to, the of isn't a would expand month to having and to offering, as I add continue excess Arc be to Nick product volumes. default, able million think then that So, able will by going also be Home we him to products board on complementary the $XXX forward. hopefully to And in mix alluded currently further

Trevor Cranston

book, have market wondering low exceptionally to like and of relative they've guys the [ph] it, agency on on achieved think been pool low on just pools part coming prepaid that fees? the on portfolio, prepaid And was you I is kind and digit return spec guess you've more such fees and second of more how mentioned you Or that a you okay. of a TBAs detail sort double to side? Are your in on question investing the just the is currently opportunity. if agency look of the dollar return could from type guys relative peers. provide the your I some low you I Got rolls? And

T.J. Durkin

foreign of format. TBA a pools in that -- We're cash of on and-a-half's spec fair of concentrations, to for going you we're terms two's think balance, up value. a That probably spec which profile more as in convexity will. types not coupon, Page we're has by maybe pools the loan And a have XX, Yes, breakout but GEO again, give size spec obviously yield, billion so we're the sort of versus two return different the or about to very trade, March X And pools [ph], you'd a we of expect of in paper, if to in again, be New spec and positioned York, little what $XXX selective. a we you be million investor coupon, roll pools. really in I or of The lower us or invested profile. pools That's of etcetera. participating allows of bit being

Trevor Cranston

it. Got

Okay. And seen then, last some We've question. the space. activity M&A mortgage in originator

them was make just curious Home, like -- way investments of opportunities sort type maybe I looking source Arc Or non-agency are the originators? already there obviously you have at if been last are you focused doing but to any Thanks. of quarters? -- content for loans other guys So, couple you're you've the to in

T.J. Durkin

of calls be I just a relationships take to I sense. stand bankers our loans, developed don't call, a over the We stable consistently so always Home, they inbound small up a obviously competitor. about looking would terms from with the in do years good make think Yes, Arc other in with. past we opportunities we've from that extent we've that conjunction from think been In sourcing few buying to way

demand. would two have to operating as something we're look part opportunity, looking about So, the not but there we it different if pursue to differential of was companies

David Roberts

that range channels. just a team experience add that wide and I Arc Home runs has product Management types Roberts. David the It's of would across

much Arc. something through T.J. as never, it's terms So, we do likely expansion in we it's would say more, but organically more wouldn't that said, of

Trevor Cranston

Okay, sense. comments. Appreciate you. Thank the make

Operator

queue And from we have in another Hagen BTIG. with Eric question

open. is line Your

Eric Hagen

share share different then liquidity you Just on couple of focused the good of How non-QM between Hey, me. unencumbered excess you're non-QM Can you on lots guys? a And buying? are estimate from which side, you types how morning. there. have out cash and you much Can just assets? you there's types

Anthony Rossiello

into securitizations also million a we you the have just other In side. we the had terms we look additional the you would of probably Eric, CMBS think would that non-QM have of that there's from when portfolio exit, the that end And liquidity that generated on on would we the least in million non-QM which sales side. some said, And from of say excess we liquidity we we we have. into think about we generation liquidity, opportunistically the $XX securitization quarter that at subs the about side. probably liquidity, when like that side, commercial I CMBS the also entered to And of an $XX sales couple few a on just on CMBS

Nick Smith

current statements, This market. looking A like product mix of of the depletion, is Nick or DSC to comfortable some from Smith, asset of originators. years looks the forward-looking the a what are addressing of and with has good we're roll out. mix specifically The what sort lot [ph] sort the potentially mix the grown over and product market of amounts small of bank the peer securitizers rest

to recent amendments to something in we Certainly sort see amount for the good the rethink alluded out these we that product not I And working the like. speak. any CFPB earlier, what opportunity that's out count been creating of rolled should returns you where QM as of attractive, a to products rules, would if new As look years. on capital to mix make have we're expands framework worked. do or QM statements wide new requirements products of historically work had with meaning the the what capital not over with just are range returns familiar Certainly, that outside less people of hold past have more few a

Eric Hagen

it. helpful. That's Appreciate Thanks.

Operator

Doug have queue question in from another with Harter Credit We Suisse.

line is Your open.

Joshua Bolton

kind quarters? conventional might as when originations pressured how Curious margin, in and seen Bolton, happened that in this comments, talked more up, expect for the you've picking competition on gets margins guys, the Hey, if competition mortgage space. you that in In coming Thanks. pressure the Joshua Doug. non-QM for that you your your products that about is of on expectations

T.J. Durkin

happen. all to starting I think it's

about in move sort forward of of thinking pulled rate April's people terms this. think I

it's of but of seeing the think in we lab start sort the in in kind really the it's it and I haven't materialize know coming. it coming months. we we'll But seen So market yet,

Joshua Bolton

it. Makes right, appreciate Got that. All sense.

Operator

there And in at more time. no queue this are questions

David Roberts

Okay, forward for well, reporting we and joining look you our much next to quarter. very thank call you to

Operator

you Thank participating. ladies Thank This gentlemen. conference. for you, and concludes today's

now disconnect. You may

AG Mortgage Investment Trust (MITT) 6 May 212021 Q1 Earnings call transcript