MITT - Earnings call transcript Q3 2024 | AG Mortgage Investment Trust, Inc.

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Operator

Good day, and thank you for standing by. Welcome to the AG Mortgage Investment Trust, Inc.

Third Quarter 2024 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.

Jenny Neslin

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

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

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

Again, to the on QX that reference on for presentation today. With thank website, over was click view website joining presentation to www.agmit.com and like to the earnings turn our the I'd T.J. home to the slide XXXX link morning. also to call, the the call earnings for the We that, you turn will To posted welcome us this presentation, page. our and

Thomas Durkin

X.X% value $XX.XX saw quarter, economic to of the financial from execution it XX, our and October we an Walking Jenny. third our too business $X.XX you, pleased a higher being I'm to for core of the September MITT's paying position while move our give dividend producing which of with financials, of estimate as book to shows Thank value. book healthy quarter strategy. $XX.XX equity on report return continued through early

realized $XX.X loan largely During quarter, of occurred interest assumptions and reverse we non-agency been driven and per portfolio rally that conservative net model emphasis that earned of the future we may share. level of and for of portfolio be the reduced to to terms quarter. turns the million in EAD back leverage balance income, has during October, large the sheet, our by quarter. of the not this X.X prepayments the prepayment share rate given both given $X.XX per is these quarter These in of EAD regards yet of on the have loan EAD. With rates $X.XX The our speeds increased during occurred earnings

had to MBS securitizations, approximately the nonowner-occupied totaling accounting into eligible ended X with Which ample quarter also million date we agency As convertible as cash offset $XXX Agency of investment million. in now holdings XX, this fully the on temporary liquidity for came drag previously year approximately convertible deleveraging, sold note this WMC $XXX down unsecured September which earlier retired. maturity. After bonds the we million MITT $XX issued discussed, approximately issuing active of million. note heading grade of quarter $XXX anticipation another is maturity we of

in the this sourcing Home the are mortgage some and originators ARC largest We both country. from collateral of

position strengthened compelling further issuance this quarter's are we where our in even space prime jumbo This this seeing outperform market-leading credit year.

equity space. home the is about excited are we area Another

consumers, normally product preserving growing we in fixed this will call. Wrapping we for becoming the believe very go innings equity stay like solve the amounts are politics, few later to further their brief in we make given As see up, U.S. their no pontificate but the bullet affordability on. Unfortunately, borrowers supply early from XX-year comments. facing detail a politicians day, while Housing silver look of topics I'll election its remain into Nick We low affordability macro certainly to constraints rate all the and more hot home and tap or mainstream to that away mortgage. nation. supply and

fact. With exposed side, mortgage we are prices resilient credit to believe tight we and On the home performance, around the macro, positive than rate. market displayed book rate volatility book coalescing value by as interest believe for average is the this fundamentally mortgage this MITT's less and regards positive to is quarter's credit MITT

steeper yield Nick. a strong landing MITT of positively curve wait can all Fed results in believe economic handles how we soft we as flat turn power, to earnings sloped this see deliver supportive While curve the over environment be now to the the would call scenario. I'll still

Nicholas Smith

Thank you.

background capital described, future about more just approximately we T.J detail issued eligible on As totaling provide quarter, I thinking we will active deployment. by more are had and which unpack million. securitizations $XXX X backed how in loans, agency an investor We

largest more end this year. the Recently, of this and before X expect other REITs transactions or have already the entered space space. they issue issuer to announced the currently are We intend have to in or that X

likely so primary over are for commit While the attractive, capital is agree reasons it X will shift. less this we quarters. There next this few sector to we

execution. mortgage windows loan Freddie's cash conduits, increasingly MBS and through are Fannie often referred to First, their bidding whole as

and while more noting similar has seen function basis continue said, securitized rights, third-party agency-eligible increasingly insurance is this and and from stretching. It is origination MITT but of relative that watch space. more prime we jumbo worth enhancement credit Second, less X on And to losses X.Xx corresponding investor put transactions. credit this MITT's commit accordingly. of We and channels credit none probably retained a than average loans a new this positions major of jumbo. protection factors, doubled have companies non-agency are MITT's on prime the had without others investor differently, book being vintage deals. agencies prime and is To percentage convexity than to saying rate jumbo magnitude. That more in has the investor jumbo sector. Said investor goes agency-eligible necessarily rated non-AC in context, this expected lastly, for to superior more and is book mortgage delinquencies servicing increased And delinquent the we'll far competition these capital comparably than Agency valuations other closely prime

has This capital exciting new borrow mortgage into, equity lot that Moving and years, purchase $XXX quarter, press. a improvement that in we it growing segment of fund home segment This of for have among loans other committed and on attractive to looking home to and Equity to million. of residential loans attracted properties In approximately market MITT Home the to homeowners debt to consolidation we're equity loans. to another against began an point acquired the third opportunity the their million rapidly $XXX uses. over provides have accumulated many

past to mortgages, for much XX are the U.S. made X.X% first have with client borrowers of sub Over rate is that today's to wealthiest significant use mortgage. Most by only subside the prevailing acquisition and X% lower years, XX-year a home fixed that low potentially in X% lien COVID borrowers homeowners this interested stimulus than era larger. today, the equity of dominated was well-qualified capital banks up rates. equity households. for their cost demand the lending With contrast, segment In

we historic the to combined $XXX which be and to of as appreciation expect trillion, billion this drivers estimate much $X lending segment. result annual long-dated originations We the financing, demand $XXX to cheap price addressable home primary this in with as believe loan equity home of in be billion. We total market should

average over We of credit an see we this the XXs. the a be technologies, believe These the used is have a that target current is benefits the mid-XXXs While XXs scores the and principles years. extended long-term EAD collateral to the well-qualified asset in and characteristics accretive leveraging expertise coming and been and and enjoy worth over in We offers of expect the is years. in this banking, and opportunity, this It with to same exciting and new being worth combined the it have opportunity an investment quarters MITT's will ROEs the segment mid-to-high to are teams loans borrowers that also portfolio. management early mover. highlighting average loan-to-value and emphasizing strong mortgage

to September. Arc profitable Turning In Home. was conjunction with in trends, Arc industry Home

in move a recent retracement to cautious. is remains reason a room for with right be this direction, is of lot given And the along seasonality, there While there in the improvement. rates,

path rates, the Arc growth continues the equity significant lending. team on executive Home scale, of the One While products cannot to providing and for leadership home of area innovative potential control efficiency to in market. lies Arc focus

Anthony. to Turning the over call

Anthony Rossiello

you, and morning. Thank Nick, good

value our rates X.X% economic remain assumed earnings, quarter, book third note, the expanded we by paid quarter adjusted of producing quarter mark-to-market equity through set gains book RMBS loan primarily our impact the quarterly and approximately plan we've value, portfolios that the per considering loans and reporting hedge without the securitized report The $X.XX value the in a going stock. active liquidation with point agency-eligible acquiring this home its shareholders adjusted preference. Book from benchmark GAAP simplify this of MITT X% forward, liquidation return loans, dividend. tightening book securitizing our to given value and to for increased And non-Agency quarter. this has preferred product the off grew on $XX.XX and in strong credit experienced convertible notes into solely value been spread share, increase and was when preference WMC. One to decline our the in driven disclosed by for historically on both and our our book During

share. recorded portfolio Home, earnings for move. contributed approximately is projected on decreased As on offset per speeds derived And share. prior in T.J. residential which effective $X.XX flows a our loan or our from given Arc $X.XX, $XX.X income of our to due to exceeded mentioned income, third prepayment interest generating and earlier, net quarter-over-quarter. dividends of our preferred income cash GAAP $X.XX reminder, operating quarter. as We interest expenses the assumed Net income million loss increase as $X.XX shareholders rate from continued net earned we based of generated interest This hedge on we projecting improve a a interest by share an $X.XX EAD which and yields from to the common available per $X.XX, portfolio record quarter inclusive per result, of was of

acquiring decreased by active to residential investment approximately $XX and $X.X RMBS. million of slightly We billion. non-Agency X.X% portfolio remain approximately $XXX of million Our loans mortgage

was Agency sale RMBS the of and growth by million $XXX offset this million of However, $XXX loans. of

at turns, turns June. X.X ratio economic end was which Our in leverage quarter X.X from declined

was portfolio bond excess the we in the connection quarter, short-term This invested convertible off last in turn. from September into a in discussed Agency by at cash paying X As on year leverage our WMC maturity, our liquidated with issuances RMBS notes basis. earlier decreasing

mortgage In leverage addition, our exposure programmatic prudently quarter the we've $XXX million to ending residential continued outstanding. of our securitization financing loans through with warehouse on only manage

consisting ended $XX and approximately remarks, cash now of the we call liquidity million of we our RMBS. This Lastly, with of of open for and concludes $XXX questions. prepared million $XXX the like agency quarter total to million unencumbered Operator?

Operator

come question Bose [Operator will with from Instructions] KBW. Our George first

Bose George

of to ask but in allocation? could equity just That attractive, terms currently home wanted do is your you about meaningful think how I opportunity. it very the be equity

Nicholas Smith

and our equity rotation when future would forward, in of of this asset, the to think a given be portion high going about we attractiveness think deployment we expect underlying any the I sector. allocation

quarters I As this doing of that But earlier in will call, things the sort the dominate of think expect been the be I we've and to past. thematically, some will we next something that do years. the on mentioned

Bose George

up of of just then XX, should prepays dividend, in then closer sort ROEs And those taking the buckets? that quarter-to-date go earnings I guess, your some the like terms well. when look some drivers your can at And individual Great. in buckets Okay. to benefit, you up noted I as returns of slower of of the Slide in the

you the returns can about forward. So talk going just

Nicholas Smith

Yes.

look the certain so and So sort from certainly the these fairly aggregate we additional relative additional and leverage economic to equity there's as leverage, our of it's higher. Obviously, ROEs room how a particularly you plays drive leverage out assets expect out peers. credit redeploy to taken take that if return modest, to at standpoint, mature,

a -- increase certainly I line into component plays there's to So home that's ROEs. I well. And item equity the it also as for that think loans, you see think of room

Operator

from will Brad Our next Sandler. question Capuzzi with Piper come

Bradley Capuzzi

to quarter, need I covering commentary. your EAD. which look dipped Obviously, was as on appreciate rate all wanted address this at you and on with convert. speak positioned outlook to the to get when thoughts see the your you what expected Can the you the just operating bit current to the dividend a earnings thoughts you I dividend? continue

Thomas Durkin

Yes.

it referencing, through when think with but probably positive it just probably flips would I towards love the I at And that million is in of they debt on but of think kind moving transitionary building capital EAD the before Page moved present we're hope right obviously, there's the the $XX about other million XX period, break a into per the obviously, XX, the were this we So breakeven kind talked trending and that's I share, direction. Obviously, we'd we and obviously look pipeline. ROE of then some think of raising to opportunities and that the sort higher repayments, going of of we terms capital to contributor. we've that into look we we dividend been that we to headwind Arc has be out $XX rotate themselves, in Page Home it faster,

So ROE. get those that remain the Nick be some XX% kind are mentioned numbers, even should drivers along dividend, to of we into a That the probably consistent profitability, of would intermediate when that of on term. turned we us the out would you capital what kind for you flip X round of lines think which something the

Bradley Capuzzi

elections on it I I implications then thinking the could but cetera. for is color rate moves, discussed remarks, And can how just appreciate et housing wondering about MITT, see the the prepared the and we if in you volatility, potential implications team there. expand was know was

about on near Just it thinking and both you're how curious positioning and immediate.

Thomas Durkin

listen, out listen, next is terms in type the have more I volatility mean, we and over I for portfolio We I have don't near-term X. of it -- securitization of rates termed we're leverage. of lot could credit a isn't ton mean, Most in leverage. Yes. of of like terms a affect that volatility, see the a There whipsaw or -- of could really lot week products.

the capital for think and tailwinds election, I do sort from are retrenchment away would to speaking, but bank just say, with and generally election, finance of origination think, nonbank continued, regulatory, the I I think I the engines. nothing more specialty

So sort wins I election that motion the will don't think whoever of change direction. of

Operator

Doug from Harter question Our with next UBS. will come

Douglas Harter

size could quarter? current I assumption of was Anthony, impact the the you prepay hoping the in

Anthony Rossiello

the I I $X.XX don't have think an the was just about would quarter-over-quarter exact number off driver say when you down it Pan, of majority but from to $X.XX.

Douglas Harter

financing as Okay. the And the I opportunity as think how think need you kind securitization? financing? do you that do about the execute a that, of so, appreciate about and to take that. for equity of view kind And if you out then you securitization size home likely

Nicholas Smith

Yes.

alternative But between. ranged call the right it, So million we've probably average securitization are ways have that to also predominantly in typically, in space. it, $XXX attractive. to million, are executing There appropriate sizes $XXX been on finance the

Douglas Harter

then people seconds. looking Great. kind some at in within And space, are the of closed home equity

equity looking ways that and are are to tap interest how about what at into play the or appreciation? Kind home attractive Some you equity? of help to are thinking consumers

Nicholas Smith

Yes.

maybe home HELOCs, addressing the answers not your playing appreciation. the either specifically or So lending what traditional second equity doing. end we're question. type more We're if being in, saying products closed to we're that have That's

Operator

with Weaver Jason will from question Jones next Our come Trading.

Jason Weaver

of can and Not you the more source the possibly where subject, on be Home equity sourcing the talk in to Arc bit could you're but about home future? that belabor on it little product, a a that

Nicholas Smith

certainly. Yes,

the of in and being Fannie relatively still a remarks. times system. we Freddie's underwriting said, is prepared our second paste somewhat stated end closed it's copy automated space That early as So multiple

of very the is we bigger active that closed that growing HELOC everyone to buying grow but we can So and space And think, a more in is range you from source a at everyone who wide little than basically entrance second from space. end space niche, to are in moment. the going

Jason Weaver

it. Got

So banking it's institutions you both would lenders, and pretty say? of mix nonbank even

Nicholas Smith

going nonbanks. this come majority expect, would from to forward, We the of vast be

Jason Weaver

enough. Fair

zone -- how around your million. around unencumbered have feel Okay. I the cash And and liquidity comfort $XXX what you one level current you of curious more. was then is

Nicholas Smith

certainly firm. We profile the feel the sort and of down that our leverage to room comfortable sort around enhance that of level. draw There's enhance of

Operator

Our Cranston will Citizens next question JMP. Trevor with come from

Trevor Cranston

in question sit we actually One on a in Can the Right. their the were portfolio of when of at the us third of the is give would more portfolio how rates that kind quarter. much how the prepaid much you was money projections say impacted you today? where lows versus maybe recent sense of money

Nicholas Smith

Yes.

have to rate I the of specific the don't think answer money of decent the is increasing the of today. I majority the actually I resilience sort portfolio pretty numbers speeds. So that and to speaks rallies vast is of think out that And

Trevor Cranston

And to the Can it. talk and you on once a little of about what have securitization equity invested expect home would structures Got much Okay. how you terms securitized? in bit then pool of the seeing one is you're more equity loans loans.

Nicholas Smith

Yes.

high very securitizations, sort expected leverage non-QM even losses. you for the can a sort take and up than nature proceeds of given the compensating the the credit of that's standpoint be out. Obviously, level, can So or anything, more from efficient if of product

of Obviously, So that But efficient. is dependent. they're out sort relatively asset there. somewhat product to comparable classes other

Operator

[Operator with Instructions] Hagen BTIG. next will Our Eric question come from

Eric Hagen

Okay.

borrower from do credit the there credit capital concerns being of see the discounted narrative recession to maybe do So I intensified the or structure when and a weaker attribute you to much valuation kind versus risk about there? the for rates you non-QM, you price think around around in how interest valuation mean of And performance?

Thomas Durkin

a new going company are talking you book routine or -- talking origination in Eric, you're forward? the about like about When like

Eric Hagen

backlog. more to referring the really but Both,

Thomas Durkin

sell-side from quartile delinquency top has -- mean, if I of terms the benefited we're house, -- not at GCAT in getting backlog shelf the any extent you the I to tactics in home there of Yes. was sort appreciation, their massive of loss equity seeing pipeline mean look selling the is the the terms cetera. performance, sort is sort there's delinquencies, deterioration. of out, of remediation multiple And et borrowers research,

not we're of in sort concerned mean spike seeing or units. not any I by recession losses So about led

Nicholas Smith

LTV. and it X%, Yes. to Page X is where delinquency And sub-XX a I mark-to-market think refer our XX-plus current that we portfolio you shows is

So obviously, stand there's plenty of up. to room for portfolio degradation the for

Trevor Cranston

Yes.

some you scenarios maybe but to scenarios of the guys there to That's Okay. dislocation like upfront think might you even do expense are really Do dilution, you could forward below if there it's where tap How capital at feel attractive, that value, any where returns be guys the of into look from that. look raise here? could helpful. maybe are you about book

Thomas Durkin

I sort noise the the Eric. is I short I market a mean is the despite don't we're think that. fairly of answer I probably, headlines mean lot to looking orderly think No, of in entertain

Operator

And appears turn time, for the to no call queue. in at this questions I remarks. will there it further back closing management are

Jenny Neslin

your us for for quarter. morning We appreciate forward Thank joining everyone, we to you questions. next this everyone. again you, look and it, will with speaking and Thanks,

Operator

the conclude Inc. Mortgage Investment Trust, AG does This

have line Quarter a disconnect Conference Third Call. Earnings time, XXXX day. at wonderful your Please and this

AG Mortgage Investment Trust (MITT) 5 Nov 242024 Q3 Earnings call transcript