Q4 2025 TPG Mortgage Investment Trust Inc Earnings Call

Welcome to the TPG mortgage investment Trust incorporated fourth quarter, 2025, and full year 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.

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

Thank you.

Everyone and welcome to the full year and fourth quarter 2025 earnings call for TPG mortgage investments.

With me on the call today are TJ durkin.

Next Smith, our Chief investment Officer, and Anthony <unk>, our Chief Financial Officer.

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.

Our most recently filed Form 10-K for the year ended December 31, 2024, and our subsequent reports filed from time to time with the SEC.

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

During the call today, we will refer to certain non-GAAP financial measures.

Please refer to our SEC filings for our reconciliations to 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 <unk> dot TPG dot com and click on the link for the Q4 2020 back 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 T. J.

Thank you Jenny I am pleased to report, our fourth quarter and full year financials, which show our continued execution of our core business strategy and industry, leading results for the second year in a row.

To deliver these strong outcomes in this amidst a challenging macroeconomic backdrop proving the company has a more differentiated strategy than the average REIT.

Highlighting <unk> financial performance during the fourth quarter, we saw book value remained stable increasing from $10 46 to $10 48.

And we produced an <unk> of 25.

Covering our most recently declared dividend of <unk> 23.

When including our newly declared 20% dividend, we produced a healthy economic return on equity of two 4% for the quarter.

Although it's too early to comment on our process.

For February book value was approximately flat for the month of January.

Taking a step back and looking at the year as a whole I believe it's hard to argue with the results driven by the hard work of the mid teen.

We remain steadfast to our disciplined programmatic securitization strategy issuing 10 times through out the year, allowing us to keep our economic leverage low versus our peers. Just one six turns to end the year.

For the full year 2025, we were able to increase our quarterly dividend three times by a total of over 21% and delivered a six 5% economic return on equity.

Most important midst total return to shareholders, including dividends and stock price appreciation.

Today is a standout 42%.

Meaning the market is starting to understand both mid story and future potential.

We were able to raise our dividend due to executing on a few key action items, which we have been transparent to the market about dating back almost two years since the close of the WMC acquisition.

First was optimizing legacy WMC financings, which we did by refinancing the 11, 5% structured repo in July and unlocking $55 million of equity proceeds to be reinvested in our core securitization strategy.

Equally as important is to continue to return to profitability that arc home, where it was a challenge to have this year and we're excited about where the company is heading in 2026.

We've also maintained good discipline on G&A and cost controls with which Anthony will touch on later.

Lastly, we have been able to deliver all the positive results, while still carrying a legacy WMC CRE loans on nonaccrual status as we work with the lender groups towards successful disposition of the assets.

We have approximately $28 million of equity remaining in these assets, which when we invested will only further bolster its earning power.

As I reflect on those key themes that drove 2025 success and turn to page 2026, let me be clear on the team's objectives.

First resolve the legacy WMC CRE loans in the first half of the year and quickly reinvest into our core higher Roe strategies.

Secondly.

Work with arc Home's management team to continue and build upon the earnings momentum we were able to achieve in the second half of 2025.

Third drive further earnings power and capital rotation through focusing on our legacy deals which become callable in 2026.

Now before I turn the call over to Nick to go into more details I would reiterate that we have consistently executed on our stated objectives and believe we are clearly line of sight into a more powerful Ro <unk> and AAD as we look ahead into 2026.

While I recognize there are some headwinds in being a smaller company I think those are outweighed by the meaningful impact our stated objectives have on driving earnings for our common shareholders.

For all those reasons I am looking forward to another great year permit as we remain committed to our growth initiatives and creating greater value for our shareholders I'll now turn the call over to Nick.

Thanks T J the company had an extremely active fourth quarter and a milestone year. In 2025, we have made significant progress rotating equity into our core strategies growing the investment portfolio and scaling profitability of our portfolio company arc home.

These steps have allowed us to increase our dividend by 21% this year.

Nine 5% this quarter supported by a clear growth in earnings power.

Getting into specifics.

Starting with rotation and investment growth.

For the full year 2025, we grew our investment portfolio, 27% compared to 2024, ending the year at $8 5 billion.

This growth was driven by over $3 billion in total loan purchases throughout the year.

In the fourth quarter alone, we securitize over $1 3 billion of residential mortgage loans across three transactions. Our strategy remains focused on rotating capital out of legacy WMC residential and commercial exposures into higher yielding home equity and agency eligible strategies.

This disciplined rotation was a primary driver of our earnings growth.

Moving onto our securitization activities.

We executed a total of 10 Securitizations in 2025, representing $4 2 billion in total we are becoming programmatic issuer in the home equity space Securitizing, $2 4 billion across five transactions this year.

In Q4.

We remained highly active securitizing, one 3 billion. This included partnering with top mortgage originators to home equity securitizations totaling $960 million, where we retained $55 million of securities.

We achieved this growth while maintaining a disciplined leverage profile with our economic leverage standing that just one six.

2025 highlights the rapid success of our expansion into home equity space since late 2024 today.

Today, our home equity portfolio includes $1 1 billion of loans and $107 million of non agency MBS, representing 35% of our total equity allocation, which includes approximately $70 million of helix. We currently hold unlevered.

Moving on from financing and investment activity to arc home.

We are reiterating our commitment to this business as we begin to see our strategy strategic investment pay off during 2025 arc home remained focus on growing origination volumes and improving profitability, resulting in what we describe as a tale of two apps.

While the company overcame a turbulent April marked by tariff related volatility it reached a clear inflection point in the second quarter when achieved breakeven earnings.

This set the stage for a very consistent second half of the year, where the platform generated a 10% annualized Roe.

Our confidence in the business was further signaled by our acquisition of an additional 21, 4% ownership interest in August.

Knowing this the company achieved record lock volumes with 34% year over year growth.

This growth was primarily driven by 42% increase in non QM mortgage fundings versus Q4 of 2024 or an increase of over 79% year over year and total arkoma originated over $3 4 billion for the year 2025.

The strong earnings that arc home.

Given by steady gain on sale margins and high lock volumes have positively contributed to our earnings available for distribution.

As our cone continues to execute its plan its contribution to <unk> should rise and with our increased ownership. This will be an important driver of future earnings.

We are encouraged by the start of 2026 with January marketing arc home's strongest month since returning to profitability generating monthly earnings in excess of $1 million we.

We believe this growth is sustainable as our com continues to gain share in this increasingly attractive corner of the mortgage market and non agency origination expand their share of the aggregate mortgage market.

Touching upon our call rights and future strategy.

As alluded to in our previous remarks, we see significant embedded value in our 2022 and 2023 vintages issuances in Q4, we acted on this by exercising actual redemption of a 2022 vintage non QM securitization with $316 million in UBB.

Subsequently selling approximately $277 million of cloud.

Looking forward to 2026, we intend to remain aggressive exercising call rights on in the money Securitizations to return capital that can be opportunistically redeployed in our core higher returning investment strategies.

We see significant.

Upside in rotating approximately $35 million of equity this year.

This time last year, we spoke in depth about the advantage.

The past year's results are evidence of this advantaged playing out and we believe it is as relevant today as it was then.

To summarize this advantaged briefly.

<unk> advantage is driven by extensive capabilities of its manager TPG, which provides me with unparalleled access to capital sourcing and expertise within the residential mortgage finance sector.

This provides an edge through its vast network of relationships with investment banks and non bank originators alongside the support of over 4000 specialized professionals.

A state of the art data science and Technology Department.

Furthermore, TPG provide dedicated resources like Red Creek, a custom built asset manager along with expert support for portfolio companies like our coal.

All of this allowed mitt to uniquely agile effectively rotating capital across various sectors, including but not limited to non QM home equity and agency eligible credits to name a few.

Allowing <unk> to deliver superior risk adjusted returns compared to traditional mortgage Reits.

Before passing the call over to Anthony I'll summarize by saying, we enter 2026 with strong momentum and earnings growth. This growth will be fueled by exiting legacy residential and commercial holdings executing call rights and rotating this capital into the Companys higher returning strategies, along with the tailwind that arc home and its focused market.

Non QM.

Anthony over to you.

Thank you Nick and good morning, everyone.

<unk> finished 2025 with strong momentum maintaining book value stability.

Raising our quarterly dividend for the third time this year by over 21% to <unk> 23 per share.

During the quarter, we sponsored three Securitizations and continue deploying capital into our home equity portfolio.

This investment activity, coupled with sustained strength in origination volumes at arc home delivered a strong economic return and earnings available for distribution that exceeded our increased dividend level.

Moving to our financial results book value increased by 2% during the fourth quarter to $10 48 per share.

Including our 20 <unk> dividend, we generated a two 4% economic return for our shareholders.

GAAP net income available to common shareholders was $8 million for 25 cents per share primarily driven by AAD as net unrealized gains on our investment portfolio were partially offset by transaction related expenses, which are mainly associated with securitization activity.

During the fourth quarter, we recognized a 25 per share up from 23 cents in the prior quarter and fully supporting our newly increased dividend.

Our investment portfolio continues to produce strong results with net interest income increasing by 4% this quarter.

This growth was driven by our ongoing rotation of capital into higher earning target assets and a full quarter of benefit from the legacy WMC debt refinancing completed in Q3.

Overall net interest income inclusive of interest earned on our hedge portfolio was 68.

Which exceeded 45 of operating expenses and preferred dividends to generate net earnings of 23 per share.

Around our E D arc home contributed an additional <unk> <unk> per share supported by continued strength in origination volumes.

For the full year 2025, <unk> of <unk> 86 per share covered our annual dividends of 85.

On a year over year basis increased by 17% to $26 3 million driven by 6% increase in net interest in hedge income alongside a meaningful turnaround in our home.

Specifically archon contributed $1 9 million to AAD in 2025, all of which was recognized in the second half of the year as compared to a loss of $3 $3 million in 2024.

This was further supported by non investment related expenses remaining flat year over year, highlighting a large portion of our expense load being fixed.

Lastly income earned from our strategic capital deployment throughout 2025 was well in excess of the added investment related expenses.

Looking ahead, our earnings power will be further enhanced as we execute our call strategy and redeploy capital from legacy WMC commercial loans currently on non accrual of cost recovery status into residential investments during 2026.

Lastly, we ended the quarter with total liquidity of approximately $109 million <unk>.

Consisting of $58 million in cash $50 million of committed financing available on Unlevered home equity loans and $1 million of unencumbered agency RBS.

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

Operator.

Thank you if you'd like to ask a question press star one on your keypad.

To lead the queue at any time press star two.

Once again that is star one to ask a question we'll.

Pause for just a moment to allow everyone a chance to join the queue.

Okay.

Thank you.

We'll take our first question from Crispin Love with Piper Sandler. Your line is open. Please go ahead.

Thank you and good morning, everyone.

First on arc home originations increased in the fourth quarter and you called out momentum in the second half of 'twenty five and also early 'twenty six.

Give a little more detail on what youre seeing so far in the first quarter as it pertains to our home volumes and gain on sale margins relative to the fourth quarter and then I just want to make sure I heard you right did you say arc home generated $1 million in AAV in January or was that something different.

That was that was their individual profit profitability.

So you have to you have to take into consideration our homes ownership of.

Of arc.

Continent commented on the volumes.

They continue to gain market share.

There has been.

Tailwind from a margin standpoint, and so far as you know we have a CBD yield curve and tighter credit spreads and more liquidity.

So as a niche originator in our space.

Where theres a lot of demand margins have been healthy and we'd be able to pass that onto our.

Our lending partners origination partners and that is really driving future growth hopefully looking forward as.

As the company continues to scale, we can take in more margin.

But volumes have been.

<unk> increased.

Sequentially.

Month over month quarter over quarter its economy grows.

I appreciate it.

Yeah.

Can you discuss where you're most.

Okay.

Just looking at slide nine and the Pie chart.

As of June <unk>.

<unk>.

Home equity non QM agency eligible which areas are you most interested in adding and then are there any areas of pockets within those or other areas that you're more cautious or stepping back at all.

So the focus has been home equity.

We started this in earnest.

A year plus ago.

The performance has continued to be very very good relative to other asset classes out there from sort of a delinquency standpoint, which speaks to just have been very up and credit borrower.

We have not seen any degradation of that relative to other other other sort of segments.

<unk>, we've been very focused on agency eligible credits.

That continues to be in.

Outstanding performer relative.

So the other segments in the non agency space, So our expectations that we'll be we'll continue that.

<unk>.

Through this year.

And likely into the next.

Great. Thank you and I appreciate taking my questions.

Thank you, we'll now move on to Doug Harter of UBS. Your line is open.

Thanks, and good morning.

I was hoping you could touch on it seems like.

And since your tongue.

Mark and Tom have tightened.

Titan along can you just talk about.

Kind of all.

Why Hasnt resulted in you know kind of increases in book value and then also.

<unk>.

What kind of a key factor in the attractiveness of the ability to call them legacy deals.

Yes so.

Maybe taking well first of all good morning, Doug maybe taking each of those in their components D. The calls.

Definitely benefit from lower nominal yields and tighter in a flatter credit curve.

<unk>, which is given where we are locally.

That.

It looks more and more attractive.

From a loan execution standpoint, and a potential re lever standpoint.

<unk> book value there has been some drag on iOS from call it.

Some of the acquisitions in the past so residuals is faster speeds into the slightly lower.

Nominal yields and much tighter credit spreads if you think about when some of this book was originated Youre talking about credit spreads that were in.

Among spreads predominantly loan spreads that were 100 buyer than today.

Got it and I guess the.

It has impacted I guess the liability side as much as kind of your residual piece just trying to understand one of.

One of them.

But if it doesn't occur to them kind of your residual.

So the credit spread spread benefit in so far as it could potentially favorably impact.

Execution on the calls at a future date.

But.

The faster speeds means that there'll be less collateral call at that point, which which is offsetting that.

That makes sense.

Yes, perfect something for the thanks for that.

Thank you, we'll now move on to Trevor Cranston with citizens. Your line is now open.

Okay. Thanks, good morning.

You guys talked about the the.

Equity even for you.

Through the exercise cohorts this year.

Could you, maybe just give us a little more.

Detail on how you guys are thinking about.

The pace of executing core rates over the course of the year.

Thank you.

We expect to do in the first quarter. Thanks.

Yes perfectly so we.

In the prepared remarks, we mentioned that there were two transactions, we were focused on which free up.

Call It <unk>.

35 ish million dollars of equity.

We think that those are focused deals a lot of that will come through.

Sort of in this quarter.

And then the rest will come through in subsequent quarters, whether it would be Q2 or Q3.

Got it okay.

<unk>.

Hum.

Looking at page 12 in the slide deck.

The new line item there I was curious if you could help.

Help us understand where it should be.

The Unlevered home.

Home equity loans.

Just curious so what goes on.

So they're exactly what it sounds like loans that we hold.

Unlevered.

As the cash substitute against.

Favorable financing that is not being utilized.

To help offset some of the cash drag.

Okay that makes sense.

Thank you very much.

Thank you, we'll now move on to Bose George with <unk>. Your line is now open.

Hey, guys good morning.

When you think about the accretion from the WMC.

As the capital rules.

Should we just look at that the 50 odd million and you had kind of a mid teens Roe.

Or is there any sort of like impairment Bruce because everyone's on for essentially two plus a mid teens return that capital to speed up.

So on the CR from CRE loans.

Yeah on the legacy.

So we have yes, we have $28 million of equity right. We still have some we saw very modest financing on those loans and so.

Think you are to your point, yes, we're basically showing you kind of a minus six row there.

There by paying that financing.

And then on non accrual so I think converting them.

Two whether it's 15% or 20% ROE is we think is worth approximately 20 on an annualized basis as we're able to rotate.

At $28 million of tool.

Okay, great. Thanks, and then actually switching over to Ark can you just talk about the competitive dynamics in the non QM space because the demand is very high but we see more supply as companies come in as well. So just could you talk about that balance.

Yes, that's a great question.

Talked about this a lot so.

Is it both the headwinds both the sort of increased visibility and increased competition is both a headwind and tailwind.

As a primarily wholesale lender arc home leverages.

Leverage is the broker community as more and more brokers get familiarity with this product.

We see the pie growing.

So as the pie grows because.

These products are meeting.

Most.

Consumers, the United States, where they would traditionally meat meat.

It's making the access to that customer easier which is growing.

The pie.

We don't see any any supply issues.

We still think it's a modest portion of the overall aggregate for the aggregate mortgage market.

As as the supply has continued to increase its been well absorbed by both the loan securitization as well as.

Like company or insurance companies balance sheets.

So hopefully that answers your question.

Yes, that's correct. Thank you.

Thank you and once again at this time, if you would like to ask a question. Please press star and one on your keypad now.

Yeah.

We'll move on now to Matthew <unk> with Jones trading your line is open.

Hey, good morning, guys. Thanks for taking the question.

Like to kind of turn to the Securitizations and the ROE is that you're seeing in the environment today compared to where they were in the fourth quarter and then as a follow up to that kind of the expected pace that you guys are going to have throughout the first half of the year.

Yeah.

Yes so.

Breaking those their components some of that the pace will be dependent upon equity capital that we get back.

Maybe breaking those in their components, we do think that there's a decent amount of organic equity capital that can be rotated.

Call that.

10 to 20 million throughout the year as the commercial T. J just alluded to.

And then there's the calls of $35 million of equity. So in aggregate, we have a decent amount of dry powder. This year all of which we can.

Rotate it meaningfully higher roe's.

I think generically to address the ROE.

I think a lot of our competitors and maybe some of the more mainstream.

And more commoditized products or floating row called in that.

Low mid teens mid teens.

Our ROE on securitization, we believe we are clocking in a decent amount higher than that.

Call it anywhere from 5% to 10%.

Given sort of a unique way we're attaching the marketplace.

Right that makes sense, so kind of in line with historically, where you guys have been at.

That's right.

Thank you.

Yeah.

Thank you.

At this time there are no further questions in queue.

I'll now turn the meeting back over to our host for any closing comments.

Thank you everyone for joining us this morning and for your question.

It's all in corporate to speaking with you again next quarter.

Have a great day.

Thank you this brings us to the end of today's meeting we appreciate your time and participation you may now disconnect.

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