MITT - Earnings call 3 2023 | AG Mortgage Investment Trust, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the AG Mortgage Trust Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I'd now like to turn the call over to Jenny Neslin, General Counsel for the company. ahead. go Please

Jenny Neslin

CEO afternoon, Financial XXXX Good With welcome the Anthony Durkin, to on Chief Smith, Thank Officer; Investment Call everyone, for quarter and our T.J. are Earnings call our Trust. President; AG third Nick the our Chief you. Rossiello, today and and Officer. Mortgage me Investment

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

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

website, reference presentation was To QX and our earnings also the XXXX www.agmit.com earnings this our click on presentation, slide posted will page. the morning. to turn the on for that to the link We view the website presentation home

to like us for the I'd With to T.J. over and today. thank that, turn to call, the you welcome joining call Again,

Thomas Durkin

Good you, afternoon, Thank Jenny. everyone.

income for and with performed the a quarter continued quarter be third happy but The and markets, to a Mid mortgage for fixed what busy was team. I'm both extremely challenging one how

I the we even quarters, share modest before a transaction just book per few did factoring value of $XX.XX, with again over quarter $XX drop per $X.X driving share have as million, end. book team think $X.XX protecting an great from as onetime past in value to value a book in the adjusted job to of in expenses of of adjusted June $XX.XX

MIT dividend. and the paid the generated $X.XX $X.XX AD During quarter, its of

onetime more com, We a well are while walk reporting $X.XX as the detail. transaction through will Anthony in of expenses as which valuation

of earning have we reflects beginning As our hedging investment our off the in EAD leaded in of quarter-over-quarter our itself higher power, combination NIM comp. strategies to as and evidence portfolio as strategy, discussed of well prior fundamentals our a improvement improving

During to from quarter, almost lowered quarter. completing the end X And X.Xx of leverage the X.Xx. economic securitizations, have $XXX liquidity third we our disciplined ample million to remained which

higher ROEs amongst disruption with on and are the stated believe that effects continue based opportunities the balance environment present given to we to sheets. of regional last beginning see competition we As some bank I the themselves an lingering quarter, retreating, just

merger. WMC Finally, to adjust the

We are happy to today the report in our merger. shareholders was successful both approving

quarter. with continue the successfully the them to unanimously during transaction, and a completing is WMC still to of The approval. WMC towards work the to recommend merger. WMC required in is be aware, you obtaining as close will adjourned continues transaction shareholders' to still that lack fourth and of may process quorum its Meanwhile, we meeting The stockholders expected approve due Board shareholder the

as the Arc and Arc leader very Home's help with Home's become improve new positions Homes improving its with as what through phase in future quarter our have CEO. through of volumes of to recent X background taken lies incoming NIM Arc non-agency as strategic for on with along its believe material the fourth believe Brian's our product I profitability the capital XXXX, industry now Arc The Now the to and focus excited profitability addition than President merger steer home efficiencies the for we and complete experience, With ahead. next Home growth. mortgage into Dillon changes, and team is development, of actions gain Brian management markets, we of extensive WMC head will decades is we sale more the during him diverse which ideal space to

to I'll Nick detail. and now our activities investment turn to more it our in discuss over call

Nicholas Smith

Thanks, T.J.

the merger represent WMC mortgage during was considering benefit securitizations relative a with results quarter, value our the X.X%. expenses basis. significant on Having associated approximately the a X executed the most down reported NIM's loan and Before transaction already, outperformance of book

past more better resilient residential the spreads quarters, to comparatively modest While This were counterparts, performance. presented RMBS. as Agency with quarter such liquid challenges leverage combined credit relative the in resulted third as its similar economic

pivoting lowest sold quarter, nearly billion decreased while funds target we attractive years with leverage in of classes. approximately X.Xx, Along homes $X.XX our Agency and residential third this of across capital X our we selling economic a strategy out RMBS loans the asset credit-sensitive cost exposure. During the legacy and activity, we significant portion non-AMC certain This secured X activity deploy transactions in also to XXXX. after for over securitization loans, in generating to

the have current market we that the In size quarter's aerial conditions. based [ expected on emphasized we remarks, risk ] previous would prepared and aggregation

well is buildup volatility significant the easing, with massive Country's Rich market unwinding of quantitative it and the uncertainty risk. bond along in given expect political elevated public off to we remain debts, quarters, economic recent highs of Although

we Given modest this focused levels remaining manage uncertainty, to to leverage the on credit. -- sheet balance of while continue

credit quarter's fundamentals residential relative creating resilient, a outperformance. for While remained backdrop technicals mortgage and this

home to origination low box control. combat sales highs in X- housing volumes, are items multi-decade We widen mortgage rates. and on with focused to even affordability, have along existing we our not as face will we Instead, we in thought lows and credit can X-decade

XXX% market. Arc the of When $XXX represents in approximately first of versus agency at other mortgage overall retail XX% or million volumes. quarter adopted funding gains to originations largely have an market and market have been along aggregate made medium-sized wholesale These as this by share relative other quarter's MBA, Home declines. to approximately significant originators, taking in volumes the focused normalizing large products this, increase Third originators mode non-agency by offset reported production from the growth share with channels

coming gains, along to our it's that do These the on with noting we margins has coming profitable origination compressed, in based growth a behind acknowledge with expect more backdrop but worth the continued were expect rejections we We been Although remain this realized. the upon favorable schedule, to home is quarters. that estimated become modest path economic gains quarters. in

remarks, not. this our our in reiterated We to significantly underwriting. prepared because prudent continues to believe Earlier that commitment on Moving maintaining discipline, original outperform even existing portfolio. exposure of competitors standards to we underwriting our many have as the

you X%. company significantly and which prior and is of debt is combined for term to X, ample As rates performance, the earnings securitized the to strong attractive built move the of approximately reinvestment on. This exposure foundation the aggregate delinquency liquidity on with on credit to the only nonsecuritized power and portfolio higher Page yields is can obtaining see the

call Anthony. over turn now I will to the

Anthony Rossiello

assets Thank MITT's strategic an value you, include our The performance, also quarter of securitization Nick. merger third stable continued improvement and notable sales EAD, afternoon. purchase in towards Good transacting our themes and of certain in closing progress book WMC. while increase with activity

book company value a $XX.XX share represents prior the of per During adjusted and recorded quarter. the decrease per value share. quarter, third from of X.X% $XX This of book

book driven expenses. by was primarily However, quarter the value transaction-related decline this in

million connection During related merger $X.X the the X.X% with $X.X transaction expenses WMC X expenses with for aggregate, recorded In these to of value of with quarter, securitizations. pending MITT accounted in of the incurred approximately million upfront book decline. along expenses

recognized diluted driven or shareholders or $X.X On is million by loss common of of net which per to again largely a available side, we income $X.XX expenses. the $X.X share, fully approximately GAAP transaction-related million $X.XX statement

When our swaps. mark-to-market in distribution. continued gains the and our largely by debt offset of experienced expenses, for improvement we on were available securitized And transaction-related interest rate exclusive portfolio evaluating our impact performance investment on losses of earnings

Our in Arc $X.X approximately also investment of performance reflective to book as Home MITT X.XX is reduction the to decline fair million in value loss of X%. our valuation of reduced of book value a multiple of This unrealized or the resulted reduction of mark-to-market we in book value in an a book. X.XX from

EV markets approximately increased ]. purchases $X.X $XXX of portfolio securitizing driven investment approximately billion, securitization this to X% active million. loan in Our $XXX million by [ of We were quarter, also quarter-over-quarter the

In of million approximately which and non-agency million legacy reperforming million addition, of we loans Agency sold of capital returned $XX $XXX loans, $XX for reinvestment. RMBS,

securitizations asset weighted cost of and sales, at result also funded financing of As a a our our improved of securitization X.X%. with XX% average through financing these profile

X.X Our Agency economic RMBS our credit our of related at which end X.X turns X.X was and turns, ratio to to leverage portfolio quarter portfolio.

ended approximately portfolio. growth capacity in continued to In quarter billion our support addition, with the we $X.X borrowing of

by $X.XX per available EAD, on inclusive income, our or share generated interest the portfolio is was share interest distribution which of quarter. We of $X.XX per Net for hedge for operating of dividends, earned earnings third expenses $X.XX share. prior Arc from preferred income was higher offset $X.XX $X.XX per earnings a loss of interest exceeded This quarter. from contributor Home. Net and generating our

quarter-over-quarter by MITT. loans recorded to Home's impact EAD improved Arc the $X.XX excluding Home's by However, sold when contribution Arc to gains of

and to quarter deploy XX, our cash, into Lastly, of assets September liquidity as continue target approximated million this we end. $XXX of capital total post our

to for and our concludes we remarks, call prepared like questions. the open now This

Operator

JMP from [Operator will question our Securities. Instructions] first Cranston Trevor with come And

Trevor Cranston

of second if about the Can the profile loans loans you sort you're new of additional available as And then during of of and ahead the yield to return you a bit get supply investments, and of the little at as sold you looking regulatory of looking changes? talk part strategically about there's in supply a can talk any been coming that guys you're sort of banks quarter? question, the seeing

Nicholas Smith

Trevor. is This certainly. Nick. Yes, Thanks,

of in sheet. On very The sold the we some much positions as played we have inefficient were loans investment out. thesis legacy from the sold, the mentioned, original was the loans of balance where our debt loans on credit-sensitive Anthony

our real of has part insofar that For we these of can that. And money on asset well of are our are, will that sort sell equity there being through target bids spoken equity execute levels have about the oftentimes, others as class, narrative as returns been that. at target we a evaluate loans for where assets there strong

believe on others have your as and Wall Journal much to regard up very second that's today. I picked Street recently With question, story. evolving an as

additional seeing are We opportunities there.

attention close it. paying think it's we're to in early I its stages, and

think of little amazing I such have say that an call the to bit. a that we expecting folks more to continue XX% opportunity interest. that to call teens call turn some meaningful. we table mid- it, of maybe the see or ROEs X%, pounded it, become are in to But approximately X% ahead the, it, a bit after turns X% to point, And lever our, on a retained high

Trevor Cranston

it. Got

expenses Okay. fourth the merger, related transaction the to quarter the event? solely quarter? expenses in flow to was a you And third are additional on that Or expecting through any

Anthony Rossiello

so of expenses it. Trevor, this bulk through the Yes, are that it's Andy. came the quarter

termination transaction On the we're then total [ about come when -- the expenses, obviously, ]. which million there's there's through have to another the in think And fourth that you quarter. showhouse the $X.X is about on other mid side, fee, we expecting

Operator

question from come with KBW. Bose George will Our next

Bose George

of just of [ you do cash that? we got for think you've the you How million, how a timeline follow-up cash. deploying a guess to about $XXX $XXX cushion in to that keep? should terms capital. I new I deploying ] much showed want got million And of

Nicholas Smith

our monitor upon closely On risk models. internal cash we side, the cushion reserves based

repositioning over the leaves deployment it, relative today reserve to us the that that million looking obviously probably, where side, XX-ish assets. to of cash time On reserve, moves relative to we're that spend call but

as we I that say wouldn't time the number, portfolio. evolve a that's rotate that, can certainly hard So over

Bose George

million after cash the is to is $XX or of available invest because the just So what's -- cushion?

Nicholas Smith

can where rotate approximately said, reserves being versus Yes. size portfolio. can risk over time, and we reserves move we That the today. risk around

Bose George

Okay.

then a do there, that's scale? when And that through you the you with feel the base get if can I there. in you some kind do I of from Western of and -- -- guess got in ROE? return numbers, we where take of the do mean ratio after double-digit benefit all, you'll of sort XX%, down. ROE the terms you've -- that your have so run and cost to you But to kind deploy so taking a guys get like expense that the to double-digit

Thomas Durkin

Yes.

hedges we're breaking to think So getting investment Bose, with up the that portfolio return. think the premerger is I way it associated is the I double-digit

Our the the or has comp's ROE, you drag. bifurcated sheet equity balance been if the

over And I X why think part the And think so back investment really call has quarters, I market the the I think, of humming. to look got really considering last, that that's if it, you X we've conditions. the done business portfolio, well

to we're the think a there month equity forma, on over significant I give G&A few Arc really a savings. which X were pie, on we we a will. a we've And little drill helping the if in gave that's more published on bit -- ROEs in that you you basis, ago preview pro you Home savings, as out the quarters supplementally if of a been or drive focused G&A then than last the consummate to get forward-looking part expected, that deal of do

forma portfolio closing investment and need going savings get then the doing we're ROEs pro the G&A post to good, So Home I deal. get is up Arc think. to We

Bose George

and on Okay. kind of kind should agency think one see leverage, we the just that a normalized about with especially we then Great. number? And should leverage, of mix? more How when the

Thomas Durkin

a wouldn't think of lot having agency mix. I in the Yes. of

where really So aggregation I way think that looking the are depends at, in we're it on period. we

the of routine overall you as X the retention, at run will the at we leverage. on, again, So depending in you subordinates are And or turn. arithmetic Nick loan can hit the then that corporate if about securitization, will, I post on ramping where risk on to that just kind look think be side,

So...

Operator

[Operator question will next Instructions] with Matthew from Our come Erdner JonesTrading.

Matthew Erdner

was terms have just in So any in third of volume through what the the expectations securitizations going we Do expect strong you the quarter. seasonality of walk real should given guys forward winter?

Nicholas Smith

Yes.

volumes more had seasonality We their have about block the by that. So and in impact this component and and is when environment, that think more been reported of to rates like we think a MBA and full that's more would others. volumes, on widely interest

of year. we're early extrapolate going standpoint, when for with year as and probably So that, industry into the is a expectation commensurate volumes That have the from the you a seasonality said, back we deals a we decrease whole. pipeline will end the healthy next

Matthew Erdner

could the to as that should the fourth just to then it's And Great. the that, for XXXX? $X.XX arm that deal comment that a guys just on a there? for going it $X.XX the follow-up then back dividend quarter, to full reevaluation? you And going how Or be about we closes? after Is assumption think

Nicholas Smith

savings impact into EAD grow Yes. G&A I mean look quarter-over-quarter kind our of the that. like think then And of continues I at the to into we'll XXXX.

driving be be to et will that's 'XX due you and versus what's EAD other delevering progress the the shifting of agency going it But think or time. financing. seeing more towards So the And like evaluated portfolio the way we're more might seeing over that in in cetera. REITs, leverage post-securitization into I terms up

Operator

turn further like time. There additional no back this closing for to queue or floor in are I'd the questions remarks. our the at speakers over any to

Jenny Neslin

Thank new you everyone your joining very forward the to year. questions. you much in appreciate to for with it. again for speaking Look We us

Operator

and we appreciate call, does today's Thank you, This everyone. conclude your participation.

at disconnect any time. may You

AG Mortgage Investment Trust (MITT) 7 Nov 232023 Q3 Earnings call transcript