Q3 2023 AG Mortgage Investment Trust Inc Earnings Call

Speaker 1: You

Yeah.

Good day, and thank you for standing by.

Speaker 2: Welcome to the A.G. Mortgage Trust 3rd Quarter 2023 Earnings Conference Call.

Welcome to the AG mortgage Trust third quarter 2023 earnings Conference call.

Speaker 2: At this time, operatives are in a listen only mode.

At this time all participants are in a listen only mode.

Speaker 2: After management's remarks, there will be a question and answer session.

After management's remarks, there will be a question and answer session.

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Speaker 2: I'd now like to turn the call over to Jenny Neslett, General Counsel for the company. Please go ahead.

I'd now like to turn the call over to Jerry That's what general counsel for the company. Please go ahead.

Speaker 3: Thank you. Good afternoon, everyone, and welcome to the third quarter of 2023 earnings call for AG Mortgage Investment Trust. With me on the call today, our TJ Durkin, our CEO and President, Nick Smith, our Chief Investment Officer, and Anthony Rocello, our Chief Financial Officer. Before we begin, please note that the information discussed in today's call may contain forward-looking states.

Thank you good afternoon, everyone and welcome to the third quarter 2023 earnings call for AG mortgage investment Trust.

With me on the call today are TJ Durkin, our CEO and President Nick Smith, our Chief investment Officer, and Anthony Rusty yellow, our Chief Financial Officer.

Before we get to begin please note that the information discussed on today's call may contain forward looking statements.

Speaker 3: Any forward-looking statements made during today's call are subject to risk, certain risks, and uncertainties which are outlined in our SEC filings, including under the heading cautionary statement regarding forward-looking statements, risk factors, and management's discussion and analysis.

Any forward looking statements made during today's call are subject to risks.

Risks and uncertainties, which are outlined in our SEC filings, including under the headings cautionary statement regarding forward looking statements risk factors and management's discussion and analysis.

Speaker 3: The company's actual results may differ materially from these statements. We encourage you to read the disclosure regarding forward-looking statements contained in our SEC filings, including our most recently filed Form 10-K for the year ended December 31st, 2022.

The company's actual results may differ materially from these statements. We encourage you to read the disclosure regarding forward looking statements contained in our SEC filings, including our most recently filed Form 10-K for the year ended December 31 2022.

Speaker 3: Our quarterly report on Form 10-Q for the quarter ended June 30, 2023, and our subsequent reports filed from time to time with the FDA.

Our quarterly report on Form 10-Q for the quarter ended June 30th 2023, and our subsequent reports filed from time to time with the SEC.

Speaker 3: Except as required by law, we are not obligated and do not intend to update or to review or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Except as required by law, we are not obligated and do not intend to update or to review or revise any forward looking statements, whether as a result of new information future events or otherwise.

Speaker 3: During the call today, we will refer to certain non-GAAPS national measures. Please refer to our SEC filing for reconciliation to the most comparable GAAP measures .

During the call today, we will refer to certain non-GAAP financial measures. Please refer to our SEC filings for reconciliations to the most comparable GAAP measures. We will also reference the earnings presentation that was posted to our website. This morning to view the slide presentation turn to our website Www Dot AG.

Speaker 3: We will also reference the earnings presentation that was posted to our website this morning. To view the slide presentation, turn to our website, www.agmit.com, and click on the link for the Q3 2023 earnings presentation on the home page. Again, welcome to the call, and thank you for joining us today. With that, I'd like to turn the call over to TJ. Thank you.

<unk> dot com and click on the link for the Q3 2023 earnings presentation on the homepage and again welcome to the call and thank you for joining us today with that I'd like to turn the call over to T. J.

Thank you Jenny and good afternoon, everyone.

Speaker 4: The third quarter continued to be a challenging one for both fixed income and mortgage markets. But I'm extremely happy with how mid-performed and what was a busy

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

Speaker 4: I think it's aimed at a great job of protecting book value again as we have over the past.

I think the team did a great job of protecting protecting book value again, as we have over the past few quarters with a modest drop in adjusted book value of just 14 cents from $11 52 per share in June.

Speaker 4: with a modest drop in adjusted book value of just $0.14 from $11.00.

Speaker 4: share in June to $11.38 before factoring in one-time transaction related expenses of $7.6 million, driving adjusted book value to an even $11 per share as...

Ian to $11.38.

Before factoring in one time transaction related expenses of $7 6 million driving adjusted book value to and even $11 per share as of quarter end.

Speaker 4: During the quarter of mid-generated 10 cents of EAD and paid its 18 cents, did it?

During the quarter Mitt generated 10 tenths of a D and peanuts 18 cent dividend.

Speaker 4: We are reporting a $0.33 loss, again, mainly driven by one-time transaction expenses, as well as a valuation adjustment on our column.

We are reporting a 33.

Ross again, mainly driven by one time transaction expenses as well as the valuation adjustment on our call, which Anthony will walk through in more detail.

Speaker 4: As we've discussed in prior calls, our prudent and disciplined securitization strategy is beginning to evidence itself in our earnest power.

As we've discussed in prior calls our prudent and disciplined securitization strategy is beginning to evidence itself in our earnings power.

Speaker 4: The EAD improvement quarter over quarter reflects a combination of higher NIM off of our investment portfolio and related hedging strategy, as well as improving fundamentals of our CONG.

AAD improvement quarter over quarter reflects a combination of higher NIM off of our investment portfolio and related hedging strategy as well as improving fundamentals in our call.

Speaker 4: During the third quarter, we remain disciplined completing PUS securizations, which lowered our economic leverage to 1.2 times from 1.6 times. And have ample liquidity of almost a-

During the third quarter, we remain disciplined completing two securitizations, which lowered our economic leverage to one two times from one six times.

We have ample liquidity of almost 119 million to end the quarter.

Yeah.

Speaker 4: As I stated last quarter, we continue to see an environment with higher ROEs based on some competition retreating and opportunities that we believe are just beginning to present themselves given the lingering effects of the disruption of mobility.

As I stated last quarter, we continue to see an environment with higher Roe's based on some competition retreating.

And opportunities that we believe are just beginning to present themselves given the lingering effects.

Other disruption amongst the regional bank balance sheets.

Speaker 4: Finally, to address the WMC merger, we are happy to report our shareholders, though today was successful in improving the merger.

Finally to address the WMC merger, we are happy to report our shareholders vote today was successful in improving the merger.

Speaker 4: Meanwhile, as you may be aware, WMC adjourned a chairholder's meeting due to a lack of quorum and is still in process of obtaining the required chairholder approved.

Meanwhile, as you maybe aware WMC adjourned its shareholders' meeting due to a lack of quorum and it's still in process of obtaining the required shareholder approval.

Speaker 4: The WMC board continues to unanimously recommend that WMC stockholders approve the transaction and we will continue to work with them towards successfully completing the merger. The transaction is still expected to close.

The W. M. Seaboard continues to unanimously recommend that WMC stockholders approved the transaction and we will continue to work with them towards successfully completing the merger.

The transaction is still expected to close during the fourth quarter.

Speaker 4: Now, as we head into the fourth quarter in 2024, I believe we have taken material actions to help improve the profitability of MIT for the future through the strategic merger with WMC to gain scale efficiency.

Now as we head into the fourth quarter and 2024, I believe we have taken material actions to help improve the profitability of met for the future through the strategic merger with WMC to gas to gain scale efficiencies along with our focus on improving arc home's volumes and profitability through management changes.

Speaker 4: Along with our focus on improving our comb's volumes and profitability through management change.

Speaker 4: which we believe is now complete with ARK Home's recent addition of Brian Devlin as its new incoming president and will become ARK's home seed.

Which we believe is now complete with arc Home's. Recent addition of Brian Devlin as its new incoming president and will become arc home's CEO.

Speaker 4: with more than two decades of diverse mortgage industry experience. Ryan's extensive background in product development, capital markets.

With more than two decades of diverse mortgage industry experience bryans extensive background in product development capital markets.

Speaker 4: and the non-agency space positions him as the ideal leader to steer ARK Home during its next phase of growth. The ARK Home team is very excited for what lies ahead.

And the non agency space positions him the ideal leader to steer arc home during its next phase of growth. The arc home team is very excited for what lies ahead.

Speaker 4: I'm now turning it over to Nick to discuss our investment activities in our common.

I'll now turn it over to Nick to discuss our investment activities can arc home in more detail.

Speaker 5: Thanks, TJ. Before considering transaction expenses associated with the WMC.

Thanks T J before considering transaction expenses associated with the WPZ merger and the two loan securitizations executed during the quarter our book value was down approximately one 2%.

Speaker 5: the two loan securizations executed during the quarter, our book value was down approximately 1.2% — and the benefit of most mortgage

The benefit of most mortgage reached 14 already.

Speaker 5: Minced results represent a significant health performance on a relative basis.

These results represent a significant outperformance on a relative basis.

Speaker 5: All the third quarter presented similar challenges as pass quarters. Residential credit spreads were resilient relative to their more liquid counterparts, such as agency R&BF.

The third quarter presented similar challenges as passports residential credit spreads were resilient relative to their more liquid counterparts, such as agency MBS.

Speaker 5: This combined with its modif economic leverage resulted in comparatively better performance.

This combined with its modest economic leverage resulted in comparatively better performance.

Speaker 5: During the third quarter, we scrutinized nearly three quarters of a billion dollars of residential columns across two transactions and attractive costs of funds while selling out a significant significant portion for agency RBS exposure.

During the third quarter, we securitized nearly three quarters of $1 billion of residential whole loans across two transactions at attractive cost of funds by selling out of a significant portion of our agency RBS exposure.

Speaker 5: Along with this activity, we also sold certain non-AMC loans and legacy credit-sensitive loans, generating capital we can deploy in our target asset class.

Along with this activity. We also sold certain non agency loans and legacy credit sensitive loans generating capital, we can deploy in our target asset classes.

Speaker 5: This activity decreased economic leverage to approximately 1.2 times, the lowest in over two years after pivoting to our securitization strategy in 2021.

This activity decreased economic leverage to approximately one two times the lowest in over two years after 15 to our securitization strategy 2021.

Speaker 5: previous quarters prepare remarks. We have emphasized that we would appropriately size the aggregation risk based on current and expected market conditions.

The previous quarter's prepared remarks, we have emphasized that we would appropriately size the aggregation risk based upon current and expected market conditions.

Speaker 5: Although bond market volatility is well off the highs of recent quarters, we expect it to remain elevated given the massive buildup in rich countries' public debts, the unwinding of quantitative easing, along with significant economic uncertainty and geopolitical risk.

Although bond market volatility as well off high as of recent quarters, we expect it to remain elevated given the massive build up of rich countries public tests, the unwinding of quantitative easing along with significant economic uncertainty and geopolitical risk.

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

Speaker 5: continue to manage the balance sheet to modest levels of leverage or remain focused on credit.

Speaker 5: While residential mortgage credit fundamentals and technicals remained resilient, creating a backdrop for this quarter's relative outperformance.

Well residential mortgage credit fundamentals and technicals remained resilient, creating the backdrop for this quarters relative outperformance, we have not and will not widen our credit box combat low origination volumes, even as we face three to four decade lows in existing home sales and housing affordability, along with multi decade high.

Speaker 5: We have not and will not widen our credit box to combat low origination volumes, even as we face three to four decade lows in existing homes.

Speaker 5: and housing affordability, along with multi-decade highs in mortgage rates.

Rise in mortgage rates.

Instead, we are focused on items, we can control.

Speaker 5: third quarter funding volumes at our home of approximately $530 million, or 225% of the federal budget.

Third quarter funding volumes at arc home, approximately $530 million or 225% of the first quarter as volumes.

Speaker 5: When normalizing this versus aggregate mortgage originations reported by the MBA, this represents an approximately 67 percent increase in market share relative to the overall market.

When normalizing this versus aggregate mortgage originations as reported by the MBA misrepresent in approximately 67% increase in market share relative to the overall market.

Speaker 5: These gains have been made largely like taking market share from other wholesale non-AIDS seat-focused originators, along with significant growth in other channels as large and medium-sized retail originators have adopted non-AIDS seat products to offset agency production decline.

These gains have been made largely like taking market share from other wholesale non agency focus originators along with significant growth in other channels as large and medium sized retail originators have adopted non EZ products to offset agency production declines.

Speaker 5: Although we expect origination margins to remain compressed, we do expect modest gains in the coming quarter.

Although we expect origination margins remain compressed we do expect modest gains in the coming quarters.

Speaker 5: These gains, along with continued growth, puts our comb on a path to become profitable in the coming quarters. We acknowledge this is behind schedule, but it's worth noting that the original projections were estimated based upon more favorable economic backdrop than has been realized.

These gains along with continued growth puts arc home on a path to become profitable in the coming quarters. We acknowledged this is behind schedule and it's worth noting that the original projections were estimated based upon more favorable economic backdrop that has been realized.

Moving onto our portfolio.

Speaker 5: Earlier in our prepared remarks, we reiterated our commitment to maintaining prudent underwriting standards, even as many competitors have not.

Earlier in our prepared remarks, we reiterated our commitment to maintaining prudent underwriting standards, even as many competitors have not.

Speaker 5: We believe that because of this discipline, mis-existing exposure continues to significantly outperform the original.

We believe that because of this discipline missed existing exposure continues to significantly outperform the original underwriting.

Speaker 5: As you can see on page 9, the delinquency of the aggregate exposure of the securitized and non-securitized portfolio is only approximately 1%.

As you can see on page nine the delinquency of the aggregate exposure to securitize. It non securitized portfolio is only approximately 1%.

This strong credit performance combined with ample liquidity for reinvestment and attractive yields and obtaining term debt prior to the move to significantly higher rates is the foundation on which the earnings power of the company is built on.

Speaker 5: to combine with ample liquidity for reinvestment and distracted yields and obtaining term debt prior to the move to significantly higher rates is a foundation on which the earnings power of the company is built on.

I will now turn the call over to Anthony.

Thank you Nick and good afternoon.

Speaker 6: The notable themes of MITS 3rd quarter include stable book value performance, improvement in EAD, and increase in purchase and securization activity while also transacting strategic sales of certain assets.

The notable themes amidst third quarter includes stable book value performance improvement in the E D.

An increase in purchase and securitization activity, while also transacting strategic sales of certain assets.

Speaker 6: and our continued progress towards closing our merger with WMC.

And our continued progress towards closing our merger with W. M C.

Speaker 6: During the third quarter, the company recorded book value of $11.37 per share and adjusted book value of $11 per share.

During the third quarter. The company recorded book value of $11 37 per share and adjusted book value of $11 per share.

Speaker 6: This represents a decrease of 4.5% from prior court.

This represents a decrease of four 5% from prior quarter.

Speaker 6: However, the decline in book value this quarter was primarily driven by transaction-related expenses.

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

Speaker 6: During the quarter, Mittenkurt 4.9 million of expenses related to the pending merger with WMC.

During the quarter Mitt incurred $4 9 million of expenses related to the pending merger with WMC.

Speaker 6: along with 2.7 million of up-prone expenses recorded in connection with two securitization.

Along with $2 7 million of upfront expenses recorded in connection with two securitizations.

Speaker 6: In aggregate, these transaction expenses accounted for approximately 3.3% of the book value decline.

In aggregate these transaction expenses accounted for approximately three 3% of the book value decline.

Speaker 6: On the income statement side, we recognize the gap net loss available to common shareholders of approximately $6.8 million or $0.33 per fully diluted share, which again is largely driven by the $7.6 million or $0.38 of transaction related losses.

On the income statement side, we recognized a GAAP net loss available to common shareholders of approximately $6 8 million or <unk> 33 per fully diluted share, which again is largely driven by the $7 6 million or <unk> 38 cents or transaction related expenses.

Speaker 6: When evaluating our performance, exclusive of the impact of transaction-related expenses.

When evaluating our performance exclusive of the impact of transaction related expenses.

Speaker 6: We experience continued improvement in earnings available for distribution.

We experienced continued improvement in earnings available for distribution and.

Speaker 6: And Mark to Market losses on our investment portfolio were largely offset by gains on our?? forced to secure the debt and sido.

And mark to market losses on our investment portfolio were largely offset by gains on our securitized debt and interest rate swaps.

Speaker 6: Our book value performance is also reflective of a reduction in the fair value of our investment in our home. As we reduce the valuation multiple from 0.94 book to 0.89 of books.

Our book value performance is also reflective of a reduction in the fair value of our investment in arc home as we reduce the valuation multiple from 0.94 book 2.89 of book.

Speaker 6: This reduction resulted in an unrealized mark-to-market loss of 1.9 million to mid, or a decline in book value of approximately 1%.

This reduction resulted in an unrealized mark to market loss of $1 9 million to met or decline in book value of approximately 1%.

Speaker 6: Our investment portfolio increased 5% quarter to 4.7 billion driven by loan purchases of approximately 700 million.

Our investment portfolio increased 5% quarter over quarter to $4 7 billion driven by loan purchases of approximately $700 million.

Speaker 6: We were also active in the securities market this quarter, securitizing approximately 725 million.

We were also active in the securitization market this quarter securitizing, approximately $725 million of MPV.

Speaker 6: In addition, we sold approximately 149 million of agency RBS, 74 million of non-agency loans, and 69 million of legacy re-performing loans which return capital for reinvest.

In addition, we sold approximately $149 million of agency arm B S 74 million of non agency loans and $69 million of legacy re performing loans, which returned capital for reinvestment.

Speaker 6: As a result of these securitizations and asset sales, our financing profile also improved with 87% of our financing funded through securitization at a weighted average cost of 4.7%.

As a result of the securitization and asset sales our financing profile also improved with 87% of our financing funded through securitization at a weighted average cost of four 7%.

Speaker 6: Our economic leverage ratio at quarter end was 1.2 turns of which 0.9 turns related to our credit portfolio and 0.3 to our agency RMBS portfolio.

Our economic leverage ratio at quarter end was one two turns of which 0.9 turns related to our credit portfolio and 0.3 to our agency <unk> portfolio.

Speaker 6: In addition, we ended the quarter with approximately $1.9 billion of borrowing capacity to support continued growth in our portfolio.

In addition, we ended the quarter with approximately $1 9 billion of borrowing capacity to support continued growth in our portfolio.

Speaker 6: We generated earnings available for distribution or EAD of 10 cents per share for the third quarter.

We generated earnings available for distribution or E. D of 10 cents per share for the third quarter.

Speaker 6: Net interest income, inclusive of interest earned on our hedge portfolio, was 74 cents per share, which is one cent higher from prior.

Net interest income inclusive of interest earned on our hedge portfolio with 74 cents per share, which is one set higher from prior quarter.

Speaker 6: Net interest income exceeded operating expenses and our preferred dividends generating earnings of 17 cents per share.

Net interest income exceeded operating expenses and our preferred dividends generating earnings of <unk> 17 per share.

Speaker 6: This was offset by a loss of $0.07 contributed from ARK Home, however, ARK Home's contribution to EAD improved by $0.02 quarter over quarter when excluding the impact of gains recorded by ARK on loans sold to MIPS.

This was offset by a loss of seven cents contributor from arc home. However, arc home's contribution E. A D improved by two cents quarter over quarter, when excluding the impact of gains recorded by arc on loans sold to MIT.

Speaker 6: Lastly, as of September 30th, our total liquidity approximated 119 million of cash, and we continue to deploy this capital into our target assets post-quartered.

Lastly, as of September 30th.

Our total liquidity approximated $119 million of cash and we continue to deploy this capital into our target assets post quarter end.

Speaker 6: This concludes our prepared remarks and we now like to open the call for questions.

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

Thank you.

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Speaker 2: And our first question will come from Trevor Cranston with JMP Securities. Your line is open.

And our first question will come from Trevor Cranston with JMP Securities. Your line is open.

Okay. Thanks.

Speaker 7: You guys talk a little bit about the yield and return profile of the loans that you strategically sold during the quarter. And then as a second part of the question, as you're looking at new investments, can you talk about?

You guys talked a little bit about the the yield and return profile of the build.

Loans that you strategically sold during the quarter.

And then as a second part of the question.

As youre looking at new investments.

Let's talk about.

Speaker 7: sort of the supply of loans you're seeing available, and if there's been any sort of additional supply coming in of banks looking to get ahead of regulatory changes.

The supply of loans Youre sealing seeing available and if theres been any sort of additional supply coming out banks looking to go to get ahead of some regulatory changes. Thanks.

Speaker 5: Yes, certainly. Thanks, Trevor. This is Nick. On the loans we sold, as Anthony mentioned, some of the loans we sold were credit-sensitive loans from legacy positions where, you know, the thesis of the original investment had very much played out and the debt was inefficient on our balance sheet. For the loans that are part of our target asset class, there has been sort of...

Certainly thanks, Trevor this is Nick.

On the loans, we sold enhancing Anthony mentioned, what some of the loans. We sold were credit sensitive loans from legacy positions, where the thesis of the original investment and very much played out.

The debt was inefficient and our balance sheet.

For the loans that are part of our target asset class there has been sort of.

Speaker 8: A narrative that others have spoken about as well, they're being strong real money, bits for these, in so far as we can sell assets at levels through where our equity, target equity returns are, we will evaluate that and oftentimes execute on that.

Our narrative that.

Others have spoken about as well.

They're being strong real money.

Bids for these in so far as we can sell assets at levels through where our equity target equity returns are.

We will evaluate that and oftentimes you execute on that.

Speaker 8: With regard to your second question, I believe that's very much an evolving story. Wall Street Journal others have picked up on as recently as today. We are seeing additional opportunities there.

With regard to your second question I believe that's very much an evolving story.

Wall Street Journal, others have picked up on as recently as today.

We are seeing additional opportunities there.

Speaker 8: I think it's in its early stages and we're paying close attention to it. I think some of the folks that have pounded the table saying it's such an amazing opportunity or it may be a little bit ahead of it, but we are expecting that to become more meaningful.

I think it's it's in its early stages and we're paying close attention to it I think some of the folks that are pounding the table, saying thats, such an amazing opportunity or maybe a little bit ahead of them and but we.

We are expecting that to become more meaningful.

Speaker 8: And we continue to see R-O-E's in the mid-to-high teens after deploying, call it a turn, a turn-pless of leverage on our, call it proxially zero to five zero to 10 percent retaining.

Yeah.

Okay, Okay and.

And we continue to see ROE and then call.

Call It mid to high teens Africa point call. It a turn of leverage on are what are called practically zero to five as you were at a 10% retained interests.

Speaker 7: Got it. Okay. On the transactions expenses related to the merger,

Got it okay.

Hum.

On the the transaction expenses.

Related to the merger.

Speaker 7: Are you expecting any additional expenses to flow through in the fourth quarter or was that absolutely a third quarter event?

Are you expecting any additional expenses to flow through and in the fourth quarter or was that.

Solely of a third quarter event.

Speaker 6: Hey Trevor, it's Anthony. Yeah, so the expenses that came through this quarter or the bulk of it on the mid side, we have about another...

Hey, Trevor its Anthony Yeah. So the the expenses that came through this quarter or the bulk of it on the mid side, we have about another.

Speaker 6: 1.1 million that we're expecting to come through in the fourth quarter.

One $1 1 million that were expecting to come through in the fourth quarter.

Speaker 6: And then obviously, when you think about total transaction expenses, there's the determination fee, which is on the other side of the house.

And then obviously.

Obviously, there is you know when you think about total transaction expenses. There is the the termination fee, which is on the other side of the house.

Right.

Okay I appreciate it thank you.

Thank you.

Speaker 9: Our next question will come from Bose George with KBW. Your line is open. Hey, good afternoon. Actually, just kind of a follow-up to that in terms of deploying new capital. I guess you show you've got 118, 19 million of cash. How should we think of the timeline for deploying that and how much of a cash cushion do you want to keep?

Our next question will come from Bose, George with <unk>. Your line is open.

Hey, good afternoon.

Could you just kind of a follow up to that in terms of deploying your capital.

I guess, you say, you've got 118 $19 million of cash how should we think of the timeline for deploying that and how much of a cash cushion.

Do you want to keep.

Speaker 8: On the cash cushion side, we closely monitor reserves based upon our internal risk models. On the cash deployment side, you know,

On the cash cushion side.

We closely monitor.

Reserves based upon our our internal risk models.

On the cash deployment side.

Speaker 8: That leaves us probably, call it 40-ish million to spend where we're looking today relative to that reserve. But that reserve obviously moves over time relative to the reposition of assets. So I wouldn't say that that's a hard number. Certainly that can evolve over time as we rotate the portfolio.

That leaves us probably call it fortyish million to spend where we're looking today relative to that that reserve, but that reserve obviously moves over time relative to the repositioning of assets. So you know I wouldn't I wouldn't say that that's a hard number certainly that can.

Of all overtime as we rotate the portfolio.

Oh, so just.

Speaker 9: So just because 40 million is what's available to invest or after the cash cushions.

Okay.

The 40 million is the is what's available to invest or after the cash cushion.

Speaker 8: Yeah, versus approximately where we size risk reserves today. That being said, over time, risk reserves can move around and we can rotate the portfolio.

Yeah first versus approximately where we sign size risk reserves today that being said overtime risk reserves, Ken can move around and we can rotate the portfolio.

Speaker 9: Okay, and so if we, you know, if we take that and deploy that to the, you know, to the ROE that you've got there, the 17% And then sort of run your expense ratio through there. I mean, you feel like it's, you guys can get to a double digit return, you know, with the scale. I guess you'll have some benefit when, you know, from Western in terms of taking the cost based on, but So where do you kind of, you know, after all that's kind of in the numbers, do you get to a double digit ROE?

Okay.

So if we if we take that and deploy that to the U S.

ROE that you've got there the 17%.

And then sort of run your expense ratio through there I mean do you feel like you guys can get to a double digit return with the scale I guess, you'll have some benefit when you know from western in terms of taking the cost base down, but so where do you kind of after all that is kind of in the numbers do you get to a double digit Roe.

Speaker 4: Yeah, so, suppose I think the way we're breaking it up pre-merger is, I think the investment portfolio...

Yeah sure so because I think the way, we're breaking it out pre pre merger.

Is I think the investment portfolio.

Speaker 4: with the associated hedges is getting to that double digit return. Our COMES ROE, if you bifurcated the balance sheet or the equity, has been the drag. And so that's why I think the investment portfolio, if you look back over the last...

The associated hedges is getting to that double digit return arc homes ROE if you bifurcated.

The balance sheet or the equity has been the drag and so that's why you know I think the the investment portfolio. If you look back over the last.

Speaker 4: call it, you know, four to eight quarters, I think, has done really well considering the market conditions. And I think we've really got that part of the business humming. I think we've been focused over the last few quarters on...

Call. It you know four.

Four to eight quarters I think is.

<unk> done really well considering the market conditions and I think I think we've really got that part of the business humming I think where we've been focused over the last few quarters on.

Speaker 4: you know, really, you know, helping drive RLE's in that R-com part of the equity pie, if you will. And then on a forward-looking basis, pro forma, you know, if the deal were to consmate as expected.

You know really helping drive ROE is in that arc home part of the equity a pie. If you will and then on a forward looking basis pro forma you know if the deal were to consummate that was expected.

Speaker 4: You know, we do get significant G&A savings, which we gave you a preview in that supplement we published a month or two ago that's out there to give you a little bit more of a drill that on the G&A savings. So, you know, the investment portfolio is doing good, I think. We need to get our chromarways up, and then we're gonna get G&A savings pro-fuel.

We do get significant G&A savings, which we gave you a preview and that supplement we published you know a month or two ago.

It's out there to give you a little bit more of a draw down on the G&A savings. So you know the investment portfolio is doing good I think we need to get <unk> up and then we're gonna get G&A savings pro forma post closing of the deal.

Speaker 9: Okay, great. And then just one more on leverage. Where should we see kind of a normalized leverage, especially with the agency in the mix? How should we kind of think about that number?

Okay, Great and then just one more on leverage.

Where should we see kind of normalized leverage, especially with the agency in the mix.

How should we kind of think about that number.

Speaker 10: Yeah, I wouldn't think of having a lot of agency in the mix. So I think the way we're looking at it really depends on where we are in that aggregation period. So post-securetization as a Nick just hit on, I think you can kind of run that risk retention, if you will, or the routine subordinates at about one turn. And then again, depending where we are, in ramping on the low and side, that'll be...

Yeah.

Wouldn't think of having a lot of agency in the mix.

So I think the way we're looking at.

It really depends on where we are in that in that aggregation period. So post securitization as Nick just hit on I think you can kind of run that risk retention, if you will or the routines subordinates at about one turn.

And then again, depending on where we are in ramping on the loan side that'll be.

Speaker 9: That will be the arithmetic to look at the overall corporate leverage. So. Okay. Okay. Great. Thanks.

That'll be the arithmetic just look at the overall corporate leverage so.

Okay, great. Thanks.

Okay. Thank you.

Speaker 2: As a reminder, that is star one to ask a question.

As a reminder, that is star one to ask a question.

Speaker 2: And our next question will come from Matthew Erner with Jones Trading. Your line is open.

And our next question will come from Matthew <unk> with Jones trading your line is open.

Speaker 11: Hey, guys. Thanks for taking the question. So walk volume was real strong in the third quarter. Do you guys have any expectations, just given the seasonality, what we should expect in terms of securitizations going forward through the winter?

Hey, guys. Thanks for taking the question. So lock volume was real strong in the third quarter.

You guys have any expectations just given the seasonality of what we should expect in terms of securitizations going forward through the winter.

Yes good.

Speaker 8: Good afternoon. So when we think about, you know, block volumes in this environment, more and more and more seasonality is a component of that. We like to think that interest rates have had their full impact on volumes, and that's been widely reported by the NBA and others.

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

Speaker 8: So when you extrapolate that, you know, the expectation is receisality standpoint, we're probably...

So when you extrapolate that you know the expectation is from a seasonality standpoint, we're probably flat.

Speaker 8: you know, black bodies will decrease, commiserate with the industry as a whole. That means that we have a healthy pipeline for deals, you know, going into the end of the year and early next year.

Black volumes will decrease commiserate with the industry as a whole that being said we have a healthy pipeline for for deals going into ended the year and in early next year.

Speaker 10: Great, thanks. And then just as it fall up to that, could you guys comment on the dividend for the fourth quarter, you know, the 8 cent interim there? And then, you know, actually think about that for 2024. Is it going to be a full reevaluation or just the assumption that it's going back to 18 cents after the deal closes? Thanks. Yeah. Yeah, I mean, I think our EAD continues like quarter of a quarter to kind of grow into that. And then we'll look at the impact of the GNAs for you.

Great. Thanks, and then just as a follow up to that can you guys comment on the dividend for the fourth quarter.

Each cent interim there and then how should we think about that for 2024 is it going to be a full reevaluation or choose the assumption that it's going back to 18 sense. After the deal closes.

Yeah, I mean, I think I think our AAD continues like quarter over quarter or two to kind of grow into that and then.

Well look at the impact of the G&A savings.

The 'twenty 'twenty, four or so will be evaluated over time, but.

Yeah, we're seeing progress in terms of.

Speaker 10: the portfolio shifting more and more into that, you know, post-securitization leverage or financing. And I think that's what's driving the EAD, you know, up towards 18 versus going the other way due to, you know, delevering like you might be seeing in the agency reach, et cetera.

The portfolio shifting more and more into that post securitization leverage or financing and I think that's what's driving that.

Up towards 18 versus going the other way do you do.

Deleveraging like you might be seeing in the agency reach et cetera.

Yeah.

Alright, thank you.

Speaker 2: There are no further questions to make you at this time. So I'd like to turn the floor back over to our speakers for any additional or closing remarks.

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

Yeah.

Speaker 3: Thank you to everyone for joining us for your questions. We very much appreciate it. Look forward to speaking with you again in the near.

Thank you to everyone for joining us and for your questions. We very much appreciate it look forward to speaking with you again in a year.

Okay.

Speaker 2: Thank you everyone. This does conclude today's call, and we appreciate your participation. You may disconnect at any time.

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

You may disconnect at any time.

Yeah.

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