Mortgage News May 31, 2023
In the first quarter of 2023, AG Mortgage Investment Trust experienced a positive turnaround, achieving a profit of $8.7 million, a significant improvement from the net loss of $14.6 million in the previous quarter.
Despite the challenging market conditions, the company successfully increased its book value per share by 4%, reaching $11.85 and $11.48 on an unadjusted and adjusted basis, respectively. AG Mortgage also maintained a healthy liquidity position of $88 million, as stated by CEO Thomas Durkin.
In the company’s earnings call, he noted that the first quarter of 2023 began on a positive note, reflecting the ongoing market recovery that had been observed since December. The favorable momentum carried on throughout January and February, but in mid-March, the sentiment changed due to the regional bank crisis. Consequently, interest rate volatility resurfaced, causing a significant decline in the front end of the market.
Durkin explained that they have been utilizing their surplus liquidity to buy back their common stock, and in the quarter, they repurchased 923,000 shares at an average price of $5.68, resulting in a 2% increase in value for their shareholders.
He further emphasized that the company’s primary objectives include reducing warehouse risk and maintaining a disciplined approach to securitization issuance throughout the year.
Nicholas Smith, AG Mortgage’s Chief Information Officer, expressed the belief that there may be potential to acquire loan portfolios from regional banks or those in need of liquidity. Smith highlighted that alongside these opportunities, the company has identified appealing investments in various areas, including home equity mortgages, conventional investments in second-home residential mortgages, as well as qualified and non-qualified residential mortgages.
In the first quarter, AG Mortgage’s investment portfolio increased from $4.2 billion in Q4 2022 to $4.5 billion. The company acquired $264.8 million of agency RMBS (residential mortgage-backed securities) and $10.9 million of non-agency RMBS.
During the same period, Arc Home, AG Mortgage’s non-agency loan origination arm, originated $239.1 million of residential mortgage loans. However, Arc Home reported an after-tax net loss of $5.2 million.
Despite the quarter’s results not showing significant improvement compared to the previous one, AG Mortgage’s Chief Information Officer, Smith, stated that the company is entering the next quarter with strong momentum. Factors contributing to this include increased registrations and locks, cost and productivity efficiencies, and new client acquisitions. Smith also expressed expectations of higher gain on sale margins in the coming quarters and emphasized the management team’s focus on controllable factors.
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