Q3 2025 AG Mortgage Investment Trust Inc Earnings Call

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Good day, and thank you for standing by, welcome to the AG Mortgage Investment. Trust Inc, third quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After Management's remarks, there will be a question and answer session in order to ask a question during the session. Please press the star key followed by the number 1 on your telephone, please be advised that today's conference is being recorded if you require any further assistance, please press star, then zero. I'd now like to turn the call over to Jenny. Neslin general counsel for the company. Please go ahead.

Thank you. Good morning everyone. And welcome to the third quarter 2025 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 russolo our Chief Financial Officer

Before we begin, please note that the information discussed in today's call may contain forward-looking statements any forward-looking statements made during today's call are subject to certain 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.

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 10K for the year. Ended December, 31st 2024, and our subsequent reports filed from time to time with the FCC except is required by law. We are not obligated and do not intend to update or to revise or review, any forward-looking statements, whether as a result of new information, future events or otherwise,

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.agm.com and click on the link for the Q3 2025 earnings presentation on the homepage. 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, Jenny pleased to report. Mitch's third quarter results in which the company had 1 of its most active and successful quarters in recent memory.

During the third third quarter, we were able to increase our book value from $10.39 to 1046 inclusive of our previously announced strategic acquisition of an additional 214% 4% of our comb through the issuance of approximately 2 million shares, creating a 1-time dilution event of 1.8%. While also fully supporting our 21 cent dividend,

The company continues to provide stability and Book, value performance navigating both challenging markets and executing on growth initiatives like the 1. I just mentioned

We continue to believe, growing the company's size and flow is in the long term best interests of its shareholders.

Moving on to earnings, we increased our EAD to 23 cents per share, driven by strong earnings from our core Investment Portfolio.

In this first quarter with our larger ownership percentage of our home. We are happy to report it contributed 3 cents towards EAD as the business continues to execute on its growth and profitability objectives.

Lastly, it is important to note. We are able to deliver this growth in EAD despite turning off the approval of our Legacy WMC, CRA loans,

This year as we work through the monetization process.

So, as we look forward, the ability to rotate this Equity Capital currently invested in the CRA loans, into our residential security strategy combined, with r-com's profits should enable us to unlock. Even more earnings power from our portfolio, in the coming quarters.

I'll now turn the call over to Nick.

Thanks TJ. The company had an extremely active quarter.

We have made significant progress in rotting in equity into course. Strategies growing the Investment Portfolio de-risking and optimizing and accelerating growth at our portfolio company. Our home along with other significant steps forward.

Getting into specifics.

Starting with rotation.

We monetize close to 55 million market value of Legacy WMC. Securitized non-qm positions after restructuring these Holdings and unwinding expensive and under Advanced debt that came with the WMC acquisition.

I will speak more about this later.

In additional 11 million of equity came. Back from a legacy, wmc's cmbs position that paid off at par

An aggregate, the company freed up nearly 66% of equity for redeployment.

With this capital, we significantly increase the investment portfolio by over 20% this quarter.

We acquired over 1.7 billion of Residential Mortgage Loans.

Approximately 900 million was allocated to agency eligible, investor loans and over 800 million to home equity loans, including both closed and seconds and helocs.

Most of these Acquisitions were immediately financed into 4. Separate securitizations.

We'd like to point out that this significant growth was achieved without incurring risk to the company throughout size gestation periods or Warehouse financing exposure.

Likewise the company's leverage increased modestly from 1.3 to 1.7 turns quarter of a quarter which we see as more normal levels.

Moving on to the company's financing activity.

As alluded to earlier and mentioned briefly in our previous quarters, prepared remarks. We refinanced high-cost inefficient, debt, backed by retained interests in WMC issued non-ac securitizations.

This refinancing freed up $55 million of equity to redeploy and materially lowered the cost of capital while significantly increasing the market value advance.

This quarter's EAD was boosted by approximately 3 Cents by this refinance financing, which normalizes to 4 to 5 cents for a full quarter looking forward.

Moving on from financing to our home.

Simultaneously with the announcement of last quarter's earnings, we acquired additional 21.4% ownership of our comb.

We are happy to report earnings of over 2 million, this quarter, which contributes approximately 1.2 million to MIT the highest since the end of 2021.

In September they achieved record Rock block volumes.

We believe this growth and profitability is sustainable, as a non-ac market continues to increase its share.

Call rights.

Prior to quarter end, we initiated the sale of the underlying collateral to a third party in connection with the termination of a transaction issued in 2022.

We see significant value in call rights from transactions issued in 2022 and 2023.

We expect the termination of this transaction along with others, in the future to return, Capital, that can be opportunistically redeployed into our core higher returning investment strategies.

Over to you, Anthony.

Thank you, Nick, and good morning.

The third quarter was a pivotal 1 for MIT.

We rotated a significant amount of capital from Legacy WMC assets, boosting our earnings power.

Executed for securitizations acquired, an additional 21.4% interest in our home.

And delivered EAD in excess of our dividend.

During the quarter Book value Rose 7% to $10.46 per share.

Including our dividend of 21 cents per share. We generated a 2.7% economic return for our shareholders.

It's worth noting that our book value grew. Even after accounting for 1.8% dilution from the shares issued for the additional Arkham interest, which underscores the strong performance of our Investment Portfolio.

Cabinet income available to common shareholders was $14.6 million, or 47 cents per share.

Strong asset appreciation, driven by spread, tightening on Residential Mortgage Loans, and non- agency. Rmbs offset the dilution from our home and unrealized losses on Commercial Investments.

Residential Investments continue to drive earnings with net interest income, increasing by 1.7 million or 9%, from prior quarter resulting from refinancing high cost Legacy WMC debt and rotating a significant portion of capital into higher yielding assets.

EAD increased to 23 cents per share from 18 in Q2.

Net interest income, including interest from our Hedges with 67 cents per share.

And exceeded our operating expenses income taxes, and preferred dividends of 47 cents resulting in net, earnings of 20 cents per share.

In addition to EAD growth from our Investment Portfolio. Our comb contributed 3 cents per share to EAD supported by continued growth and originations and margins.

We grew our Investment, Portfolio by 21%, to 8.8 billion through securitization activity.

And continue to operate with a low level of economic leverage at 1.7 turns.

During the quarter, we purchased and simultaneously, securitized 764 million of agency eligible, loans, and 647 million of closed and second liens.

And purchase an additional 122 million to continue. Growing that portfolio.

Since expanding into home equity, in the fourth quarter of 2024.

Our Investment Portfolio includes 1 billion of loans and 52 million of non- agency. RBS, collateralized by home equity loans. Now representing 30% of our Equity, allocation

As mentioned earlier, we acquired an additional 21.4% interest in our home for 16 million.

Bringing our ownership to 66%.

This investment was completed through the issuance of 2 million shares of restricted common stock. And, as discussed last quarter, we'll continue to be reported as an equity method investment, at fair value,

Lastly, we ended the quarter with total liquidity of approximately 104 million.

Consisting of 59 million in cash 44 million of committed financing available on unlevered home equity loans and 1 million of unencumbered agency, rmbs.

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

Certainly at this time, if you would like to ask a question, please press the star, then 1 on your telephone keypad, you met with your question at any time by pressing star then 2 again. It is star then 1 to ask a question.

Take our first question from Doug Harter with UBS. Your line is open.

Uh, thanks. Um

Hoping Nick hoping you could expand a little bit more about the call rights. Um, either kind of the amount of capital that could be free to up or how you think about the return, differential on the Call Deals versus uh, you know, freshly deployed capital.

Certainly so near-term. We see call it 15 to 30 million of equity. That can be redeployed.

More of an intermediate term call that, you know, 3 to 4 quarters, that could be 50 plus million.

And efficient spreads were relatively wide wide. Um, so given sort of where interest rates have retraced along with credit spreads. You know, we see a good amount of upside, um, to be able to unlock that and redeploy, um, the equity. Obviously, we could, we could just refinance those. Um, but I think our, our current, you know, given sort of how those those loans are performed. Well, um, there's a good chance that, you know, we'll we'll look to recycle that Equity via the the sale of loans but are open to other Alternatives. But either way a creative uh versus how we currently hold those positions.

Great. Um, and then can you give us an update on the uh on the CRA loans that done on approval? You know, uh what's their status potential for timing um, of resolution?

Yeah sure. So the the hospitality loans um, are still progressing towards, you know, our original resolution plan at this point. We think it's

realistic to have that Capital return in the first half of 2026. Um, so that's just kind of going through the original motions. I think the retail property actually just hit its maturity date this quarter. And so, we're in the early stage of say, of working through the options there on that note, I would say Doug it's important that that note is actually still cash flowing um, from the underlying property. So um,

Um, I think we have some more options there as well.

Thank you. Just remind us the amount of capital that could come back on on the hospitality as well.

Uh, what's 30 million on the total? Um,

I think it's about 23 on the hospitality.

And then 7 and a half on the, on the retail.

Great. Appreciate it. Thank you.

And we will move next to Crispen love with Piper Sandler. Your line is open.

Thank you. Uh, good morning, everyone. Um, first, can you just talk a little about securitization? Just how the receptivity has been? You did 4 in the quarter. Um, and just as you look forward, what do you think a a normal Cadence could be on a a citation side?

Yep. The expectation going forward, forward is probably not as many as we did this quarter but it's probably more of like 1 to 2 or quarter. Um, the markets themselves are healthy. Um, if anything, you know, we've sort of transitioned into

You know, positive net Supply. And if anything, you know the the inflows uh across different investment type type, Vehicles companies have been robust and have met that Supply. We are off of um sort of the beginning of the year's tights at the top of the capital stack, but the bottom of the capital stack is is a good amount tighter. Um, we we we see issuances.

Is a relatively healthy period.

Okay, perfect. And then, um, just if you could just share your thoughts on credit, broadly, and then within mint, they're kind of they're started to become some concerns. I'm from from Banks, albeit some fraud involved some weakness in the consumer but curious on your thoughts on credit and then drilling down into MIT whether it's not qm or other areas, I know the delinquency metrics are are still still fairly low but just uh want to get your sense there.

Are you focusing on like performance or the the fraud issues Christmas performance?

On the performance side. Look, we we've had a differentiated strategy, our book has outperformed both on the agency eligible investor, um, side and non-qm side along with the home equity side. I think it's worth noting. And we've thrown these statistics out in the past, um, that our agency eligible investor book is actually performing better than Prime jumbo um and our 92m continues to outperform you know the broader markets issuance. Um so I think you know there's a credit selection story there. Um you know, we have seen some slight weakness um in other in other people's production. Um, but we feel like that's isolated and you know, I feel like the housing story is is well telegraphed that you know while there is some weakness geographically. It's it's been places where you know supply has mean re mean reverted or gone through sort of 20181921

um but we believe that can is contained and we, you know, feel strongly about our, our our current position and our current portfolio

Great. Uh thank you I appreciate you taking my questions.

And we will go next to Bose George with KBW. Your line is open.

Did you guys get the full quarter of that, um, this quarter, or is there sort of a catch-up on that as well?

The transaction was.

Only 2 months of that. Um,

That EAD that you see coming through. So,

to the, to the extent performance continues to have a pickup in our quarters.

So okay and this your commentary suggested that the EAD there, you know, should be should be flat up up going forward, just giving the trends you've seen there.

That's right.

Okay, great. And then um can you give us an update on Book value? According to date?

Yeah, but I was just giving where we are in the process. Um, we don't have an update for you today.

Oh, wow. Okay, that's fair. And then actually you guys noted that growing, the company is in the best interest of shareholders, which, you know, definitely makes sense. You know, what are some of the options and is it is buying in more of our possibility, can you just, you know, talk about potential options for you guys?

Yeah, I mean, I think I think we're very inquisitive on other types of opportunities to, um, you know, build a, a, a more robust investment platform for the company. So whether that's working with other Originators other platforms. Um, you know, obviously being conscious of, um, dilution Etc. But I think, um, you know, we, we're, we're certainly, uh, open to, um, other ideas.

Um, okay great. Thank you.

As a reminder, it is star then 1 to register for a question. Today, we will move next to Trevor Cranston with JMP. Your line is open.

Hey, thanks. Good morning. Um, can you just give us an update on kind of where you guys see the Roe and um you know, economics on doing new securitizations. Um, you know, given the uh, spread tightening we saw during the third quarter and how how it compares to kind of where things were earlier in the year. Thanks.

so,

Probably where you can place debt versus the tightening still shakes out to largely similar, um, Equity returns and obviously that matters on, you know, what, part of the capital stack, you're attaching to in the amount of Leverage, you take, you know, given our current leverage, uh, profile and the assets that we're tracking trafficking. And we still see comfortable comfortably Equity returns with modest, leverage in the mid to high high teens

Got it. Okay. Um, and then, with the rally, we've seen in mortgage rates. Um, have you guys seen any kind of notable, um, increase in prepaid speeds, on, either the non-qm, or the agency eligible, part of the portfolio? And, uh, does that have any sort of meaningful, um, impact on the expected Returns on those retained Investments?

yeah, so we have seen some uptick in prepayments, albeit, modest, and albeit relatively early on, um,

You know, from a return standpoint, you know, we feel like the portfolio was well, balanced between sort of, you know, the derivative portions and then the credit portions. Um, and and don't expect um, Book value to be materially impacted by large uh large uh pickups.

In uh, prepayments, it is worth noting that there are large portions of the portfolio that even into a pretty meaningful, rally are still wildly out of the money. Um, which provides a good amount of stability, um, even into a rate rally

Okay, that makes sense. Thank you.

And there are no additional questions at this time, I'd like to turn the program back over to Jenny, neslin for any closing remarks.

Thank you everyone for joining us and, uh, very much appreciate your questions. Um, look forward to speaking to you again, next quarter, have a great day.

Thank you for your.

Does conclude today's program.

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