MITT - Earnings call transcript Q4 2021 | AG Mortgage Investment Trust, Inc.

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Operator

Welcome to the AG Mortgage Investment Trust Fourth Quarter 2021 Earnings Call. My name is John and I'll 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. [Operator Instructions] Please note, the conference is being recorded. the to turn Neslin. now I'll call Jenny over And

Jenny Neslin

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

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

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

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

David Roberts

for AG you, achieved and to we leader many We Thank liquidity, are continue to focus with the residential and But ways. the our Jenny. most XXXX infrastructure have to XXXX in year play pure this Trust a Investment REIT. a credit a Mortgage year be begin the origination growing in successful talent importantly, to residential mortgage transition was securitization. proud and

capital believe to We XXXX part subsequent to have will will we and latter this believe for in execute us. evaluate that the the increased strategy acceleration the of XXXX. market securitizations was ability The ourselves That event equity our most capital this for and million. foreseeable and through fuel how important of rapid of we in effect increased shareholders. raise earnings notable lead our growth of evaluate time, XXXX our $XX this approximately in will and how time, A it we dividends the into demonstrated our Over originations is future. is our

from to the more seize we we equity higher support of raise, solidly structure increase from the the at in our the equity to strengthen also the face we would us volatility the year, a preferred We growth, were markets. opportunities to price necessary through take to dividend equity our for did. progress, continued much in not I this raised on out common long-term down to XX% have unfolding equity position, capitalization capitalized some stock also our value are to we but raised total to course, been said, a year-end capital the well percentage capital book been making of more equity at that point common preferred earnings, to at XXXX, current believe have and start in combination goals. year-end. the significant the and only the exchanges from of in a achieve than far That equity, we would XX% of company Of that able earnings view our pleased capital of of positions have consider the

As well The The current rate against aware, book of line the are of seen cost near-term. XXXX our spreads have we widening are we is all all volatility nearly well financial the protected in has and markets. start will credit interest bottom in been rises.

affiliate both capitalize Home, with to at us same mortgage that on. given is opportunities, already MITT and However, increased which our providing started volatility Arc liquidity have robust our we

will basis. we dividend our on policy, by view guided of of terms earnings In continue to be go-forward our a

highlighted to be have we our and earnings earnings last guide go-forward calls, our GAAP dividend given in we in model, a policy. few evaluating consider business the core business As meaningful our than more current

stock Finally, we what for growth that credit is us we significant are yet well given has opportunity. aware the market not our believe

existing new and We the will both of make shareholders. to strive levers

that stakes. call followed see have members I will team, and have T.J. you own over that, up future we, to this pass With management sizeable will filings, you with the now ownership ownership our in backed If belief our of confidence the

T.J. Durkin

during David, everybody. generated of core Putting paying remarks. while XXXX, out along common dividends. good specific opening some morning, of and numbers MITT David's $X.XX of you, earnings per earnings, with GAAP Thank to $X.XX share $X.XX

from -- billion, power. by During leverage approximately X.Xx we portfolio X.Xx ratio per value to increasing XX% $XX.XX to to economic year share. the from per $X.X share book grew from share from our the per $XX.XX last to $X.X $XX.XX billion from adjusted our earnings We grew year, from enhance

Nick, We into diving and of were non-agency Turning in non-QM billion we strong We Arc market current our over And results $XXX ended million November, advantage its raise who quarter affiliate year approximately pass execution quarter. quarter. $X.X deeper a but liquidity, to the approximately which loans, take two originations with of bit $XXX to within value our performance. million of of now I'll fourth further completing the with position the finally, will non-agency channel during have in strong a volatility. did Arc securitizations on while hit provide of result detail the to mortgage puts X as us purchasing active the Page Home's the capital a the during activity. one-time and to continues in a take to call company's book Home

Nick Smith

T.J. Thanks,

Turning to Page X.

XXXX Here, our XXXX we activity summarize our purchase year-to-date along throughout in with pipeline. current purchases

pace acquired the our we loans, XXXX, over year. During increasing Non-Agency approximately billion of steadily $X.X of course the purchase

we approximately $XXX build additional of XXXX. $XXX pools this securitization. to We have well-positioned off continue to and corresponding with With offering the year-to-date for pipeline, fasci pipeline, given also in loans liquidity, momentum financing portfolio over equity deployed in successfully of of assets purchased and November million our current million [ph] are the available

have in And our GSE XXXX, securitizations, executed Non-Owner During securitizations. already first completed Occupied collateral deal. we including five two XXXX

quarter We securitizations expect to two XXXX. to continue a throughout this three pace of

along highlight equity course X, our current portfolio the yields capital By the allocated over was cost we left, portfolio's XX% roughly slide investments. to of Moving repositioning In year-end, This asset to of loans. into outlines XXXX and as residential our the Page funds. rotated with of lower corresponding we the Non-Agency

approximately Loans. XXXX, million These of Non-Occupied $XXX As we $XXX million have Non-Occupied and additional with an eligible Loans. eligible GSE Non-QM mentioned, GSE securitization purchased securitization Issued of are in first rated year-to-date of new Page one we X, loans. of billion origination of RMBS. sold we million Non-Agency acquired XXXX, provide partners, and our a loans. $X origination $XXX Agency On no-QM summary of

while remainder VR along with can be the table see these you termed non-mark-to-market, equity is the Approximately strong debt, aggregation on securitizations. the have acquisitions programmatic is lines characteristics. on credit non-recourse right, financed will As other significant million with through warehouse financed $XXX that

acquired securitized of Loans, in of beginning or acquisitions at XXXX. many remainder the end million also QX of the $XXX of approximately be beginning GSE eligible while the alongside of January, We will the Non-Occupied QX were additional which from securitized

to on Page Moving XX.

of $XX.X XXXX, earnings, of the contributed MITT's Home During during earnings million generated year. Arc to which pre-tax million $X

MSR the value of during fourth portfolio market $XX to quarter, growth fair its on Arc. earnings itself current also first Non-Agency During given which the million Homes quarter Arc rising differentiate well be a continues rate on continue and XXXX, additional our current has we can gains of and XX, utilization approximately given facilities. its Page were Arc's Originations. for Home the Arc MSR driven discussion by lending of liquidity mark-to-market to the through Arc's MSR continued perform existing environment. portfolio, used low On

originations Over up originations, from the XXXX Non-Agency year, total Arc past billion from $X.X less volumes XXXX. billion This is its its XXXX. in grown XX% in has $X.X an to to in increase of X% coupled with than approximately

products. more our Non-Agency expand and it As its financial Anthony? we will conventional compression footprint, Arc in margin Anthony, will in offset continues detail. government go over now expect results to

Anthony Rossiello

and Nick, morning, everyone. good you, Thank

on our update to We of Slide XX. profile XX. an December provide Turning financing as

Non-QM we securitizations business, During on million obtaining our focused non-mark-to-market securitization two of $XXX approximately remain financing. UPB, the quarter, completing non-recourse

of was financing XX% through approximately debt. year-end, our of securitized As

in fourth enabling acquire We securitization our to as reconciliation our expect two assets, this transactions, we billion through transactions XX% February. from activity we On financing both approximately our to portfolio borrowing financing. approximately raised we capacity generated periods. quarter-to-date book represented a November grew with increase capacity capacity on previously quarter of Non-Agency Loans. allocation from Loans facility share to previous our as an This stock $X.X uncommitted we fueled And increase The our the and one fourth per continue year-to-date facility Slide and existing This the for quarter. from offering Nick from of completed non-core warehouse Non-Agency liquidity additional XXXX as capital securitized cash of plan, purchases. to new of entered XX, existing mentioned, our lines warehouse common along provide growth finance us quarter-over-quarter, and to on sales alone into common acquisition total rotate value the

driven a largely in strategy. held earnings bonds, certain million, non-core and where fourth accretion shareholders certain subsidiary. year. performance earnings $X.XX per non-core portfolio discounts, million preferred on our earnings taxable we value by from XX%, earnings, equity These held diluted which was income you gains and net as in reposition share. XX% share sale fully primarily XXXX, quarter Non-QM our interest common income XX, value share of common Non-Agency earnings can Core quarter, which in a was and during core gains primarily During driven on by asset the sales Home, to a of hedges. fourth investments GAAP per improved the disclose QX. well on deferred driven as from during $X.X sale earnings result earnings to see included related net at contributed negative mark-to-market the credit offset during realized inclusive stock on our appreciation as profitable per $X.XX of available Non-Agency method and a $X.XX the for RPL/NPL on quarter, Net RPL/NPL income. we $X.XX reconciliation to received our common our investment, our per commercial loan part by of borrower XXXX, XX%, Mark-to-market the core is or the as by resolution of $XX year was November or third a was fourth certain Slide net in loans legacy diluted last investments REIT income dividends loans gains share. as on GAAP recognized On year-to-date of fully grew the book on of investments, payoffs for stockholders the of net of offering result to approximately Arc quarter available focus a the by decreased common Book approximated GAAP approximately or declared

fourth we're limited not recorded These it core by $X.XX for Home were GAAP As and gain that recognizing unrealized does sale a the in statement, and earnings mortgage gains include our reminder, And the of for of to $X.XX on XXXX. the income us. is residential connection contributing year portion item with Arc our to loans line the gains earnings quarter. during

inclusive approximately and liquidity was of of million we agency million ended with the total million, of of which $XXX Lastly, cash unlevered $XX $XX RMBS. quarter

$XXX Operator? approximating This XXXX. our questions. consistent, concludes now in relatively portfolio was throughout which like open continued to And we will would liquidity support for prepared our investment our remarks. million, XX, January of our the As growth call

Operator

Thank question first from you. Harter from Instructions] Suisse. is Doug [Operator Our Credit

John Kilichowski

Hi. having Thank is Doug. much Kilichowski on for so This for you me. John

risk them could you're sort Or just do risk loans size buckets And you when before of these of question the putting until securitize? First kind could securitize the of aggregating that you're us? what's risk? quantify ready how sort you're size the to for different you you timeline and of into there you

David Roberts

is, regard a capacity market that The from to resource QE a news good returned standpoint. certainly. Yes, of off, as lot begins in to the roll is

times, extent down to securitization. loans the the that's when we're from get they will, expectation, going to COVID what if hit their XX our where closer sort days, find of days to XX So, to XX turd to you the our of case, XXX like more to that into when way warehouses

that's sort the So there. of positive

John Kilichowski

Okay, great. loans, on second the or And is where kind how see new And new you. that -- question, of Thank to spread then widening the impacted it going? loan, the you do returns?

David Roberts

Yes, couple so if earlier current at we anything able binding that's to source space today, expectations or that, past the were But the in fully spread with that we weeks, that's David be attractive Obviously, hadn't and the a our anything, spot. higher. into to sort be assets book, secondary. spread volumes actually of yields, remarks, of present loan year, in as bright the the anything there's if the seeing X into should continue over mentioned, more but if prepared to we seen widening

John Kilichowski

and Okay, home And great. Thank opportunities? of then just high LLPA balance is second the question, the impacting how last FHFA on you.

David Roberts

PSPA I little welcome the of Maybe the LLPA opportunity. sort think bit given earlier Yes, rollback of increases. the of We unexpected, very year. interesting some any in a the that's amendments,

think meaningful. I will be those very

X, of on started that have implemented focused from given of sheet originate origination was month hands. -- into cohorts it has it locks even ago, it already the for capitals call fact are makes sense private a as to flowing We And participate. where balance that, basically April

ourselves I for think markets a the lot and that'll space. participants in the loan being an of opportunity continue other in

John Kilichowski

time. for Great. Thank you your

Operator

Our next question is from Bose George KBW. from

Bose George

slightly just mean, ask core portfolio? first, earnings you was quarter wanted see Good negative. core I do number the this the to rate from Actually, how morning. run the

normalized we kind Just you ROE about think see from a as of us and what there help do just get how here.

Anthony Rossiello

Yes, Bose, I that. can take

you're best about think before try on can seeing the QX, come QX, continue balance included, think not presentation you see it expect to on grow the purchases Slide and the current $X.XX. the Arc which the statement and we in transition up not come would do in to slide fourth X, QX did really side, did settle that way through as portion quarter, where and and we I you when sheet that's we the And ramp us So, really to include the a we side. And the from -- QX was the this and we've in say onward and isolate see income to in about really -- earnings quarter. yet the we've on earn. of talked what really we completed where see core through begin that purchases about earnings earnings

Bose George

And we after the double-digit kind just should basis? of in ROEs, number I of a terms normalized sort mean, on a net think of of

David Roberts

securitization, Post yes.

Bose George

slide roughly sort book of out quarter, the then last kind actually the flat? looking if And book deal, impact value of strip the the value was of at great. Okay, just you

David Roberts

Yes, the the dividends. flat to GAAP to up due earnings outweighing slightly

Bose George

to value? And any quarter-to-date Okay. this just update then changes just book on

David Roberts

January Yes, book so quarter-to-date XX, approximately X% value. down through for

Bose George

Thanks. Okay, great.

Operator

Our next from JMP is from question Securities. Herbert Cranston

Herbert Cranston

Hey, thanks. morning. Good

Just on another question Arc.

into on originator margin an quarter. basis of the we interpret I that operating business. in from continued pressure mean quite guys that in prepared to guys been seems you believe seen offset the mentioned some expect bit Arc of we've that can think there's Should remain profitable an the expanded margin you a that you first It the XXXX? calls, the origination throughout that like footprint other to compression comments,

sort year? and of profitability what Arc the terms guys I you was operating for seen curious, outlook is in this that Thanks. as So, of well have

Nick Smith

Thanks, This is Herbert. Nick.

industry. obviously sort So, of has of and on and the likely our sort the margin will is the going telegraphed compression, no transitioning there's across be to from hiding of more to Non-Agency been it -- footprint, well which more

if given an comes both us and gives since off all-time think, extent resources that profitability. become available anything, to the I as it our opportunity Arc counter anything, if volumes cyclical, and that repositioning expand XXXX, employment of really to is highs,

So, we're optimistic.

Herbert Cranston

you. it. Okay, comments. Thank got the Appreciate

Operator

next question from Hagen from BTIG. Eric is Our

Eric Hagen

Good myself. morning. Thanks. Maybe from couple a

first you off securitization the balance needs the with certain sheet then Can a an Arc market. threshold and [indiscernible] to its that responded to a capital originator, exceed it Homes as in question regulatory Fed that that, capacity can bit. little regulatory there has capital widen, And agency sits for the as rolls think threshold? to saying and say more agencies. I should you where you regard Thanks. the Arc above Maybe [indiscernible] hoping spreads that explain be Home

David Roberts

I balance -- we space, Eric, what in much regulatory comment And securitizers play the That's so sheet or don't for even out more comfortable is the of LLPA FHFA terms capital. is on changes opportunity the the balance runoff. But at the that. think exact I of in have so lead would mind. more -- effectively I rolling Yes. earlier not numbers say what's the that sheet the creating, issue off top think through their to of volume that very the an directly much we're not was, for Fed the not non

Eric Hagen

Okay.

that and think them around confront to about and that spreads So, with about you securitization might loans there, talk versus your financing in market? warehouse in there's you if how through securitization, regards can through then you finance turning volatility

David Roberts

Of course.

risk to and securitize assets. We our warehouse still expect prudently de-risk

we can of prevalent widening Although in The all and these sort before and obviously replace alluded what sort at on is, products. the income of that volume. risk dig likes no actually wider across products more spread sort increase risk -- one levels space, and of, the fixed to securitize [indiscernible]

risk is on current create current market, the There painful replace at -- the we that can So, talked about. you and ROEs inventory. so albeit,

Eric Hagen

Thanks right. All a lot.

Operator

from question Jason Trading. Jones from is Next Stewart

Jason Stewart

Thanks. Good morning.

around you the ROE the I market, in if opportunity that pool opportunity in this. think he the market describe moment? than a better bit at you're talked a little the pools? seeing Arc some origination from Is Can buying versus dislocation

David Roberts

certainly So, we probably guys Certainly, just shops than to recently, over where tremendous there's anything in being and versus opportunistic in hadn't stuff still amount where the considerably. past there a bulk assets had Is more optimistic. But do been of Yes. very we January, pay -- doing has opportunity for the organically are organically at year trade close hold, or products create the see basis maybe there Earlier we taken can effect certainly February in if until lag as secondary. attention opportunity, tightened a the today? we there has has net-net trading Arc markets better sure.

Jason Stewart

X.Xx. Okay, fair where then of MSR, MSR Can Arc, it? included marked enough the was estimate you talk sensitivity on my was January is if XQ right, on that that back something to from like your value like it that. at was markup around any looks on or math XX and included And book asset the at the you see about whether

Anthony Rossiello

comment the January Yes, Jason, on impact. I can

there MSR asset So, from during markup on was a million markup is on that portion the $X MITT's Arc January. approximately

Jason Stewart

asset I comments a And of but to sensitivity around based can there? guess January sort on Okay. perspective? into mark, XX any that rate on back it any we generic comments And from that

Anthony Rossiello

sort should sell portfolio off, there sort of expansion, basis coupons same out impact points and the money obviously, albeit, of have additional we the there. are into given those of any be XX, expansion of value the won't -- characteristics characteristics, do well the very high-level disclose to the next those Yes, move XX today,

we mentioned we've obviously, As before, that unlevered. carry

additional sort source will. So, of if of capital, you a

Jason Stewart

Got it.

it. Okay. Thanks a Appreciate lot.

Operator

time. have no we further questions this at And

David Roberts

leave a it thought, are this I of for liquidity the joining a on It's with about we year. us busy and and watch one has you. of fortuitous the morning. as everyone the is us a Thank good rest volatility have lot optimistic David to hope we to talent, Roberts. to is deploy this market, time which And you everyone day. Thanks I conjunction our infrastructure that of with would our for

Operator

concludes That Thank you, you and today's ladies now and Thank for you may disconnect. participating, call. gentlemen.

AG Mortgage Investment Trust (MITT) 24 Feb 222021 Q4 Earnings call transcript