TPG Mortgage Investment Trust Inc 9.500% Senior Notes due 2029 Q2 FY2025 earnings call

• Increased common dividend by 5% to $0.21 per share. • Withstood market volatility in April due to less financial leverage and smart leverage strategies. • Experienced a one-time drop in EAD from commercial loans maturing. • Refinanced expensive structured repo from WMC acquisition, reducing cost of capital and freeing up cash. • Acquired additional 21.4% of Arc Home, with minimal dilution and expected earnings accretion in 2026. • Completed securitizations and closed residential mortgage warehouse facilities during the quarter.

In the second quarter, the company's book value declined by 2.4% to $10.39 per share from $10.65. Net interest income from residential investments was down due to commercial loans maturing and being placed on nonaccrual. The investment portfolio grew to $7.3 billion. The company acquired an additional 21.4% of Arc Home, with minimal dilution to book value. Arc Home's contribution to EAD was breakeven in the quarter. Revenue contribution details: The impact of commercial loan maturities and securitization activities affected EAD, while the acquisition of Arc Home stake is expected to drive earnings accretion.

• Expect securitizations to continue in the third quarter. • Arc Home is expected to contribute meaningfully to earnings in 2026 as it executes its business plan. • Refinancing of debt is expected to lift go-forward EAD. • Anticipate redeploying proceeds from refinancing into home equity securitization partnerships.

• Volatility in the broader markets, such as the Liberation week in April, can impact performance. • Commercial loans maturing and being placed on nonaccrual pose uncertainty regarding resolution. • Restrictions in the registration rights agreement for Arc Home shares may limit selling before year-end.

Q: Congrats on the additional Arc Home ownership. Can you talk about long-term plans there? Is it over time owning the whole company? Who owns the remaining portion today? And then can you just dig into a little bit of the accretion potential in earnings as you look over the near and long term?

A: Other funds managed by TPG AG own the balance. Assuming Arc's trajectory holds, it will go from breakeven to more profitable, with positive earnings contribution in late 2025 and earnest in 2026.

Q: Can you talk about securitization demand from investors, specifically around the Liberation Day?

A: Post Liberation day, markets returned quickly, issuances were well received, and spreads have behaved well.

Q: Can you talk about the onetime book that you were able to acquire your additional stake? How you got to that price?

A: The MITT Board engaged KBW for a fairness opinion, and the Board approved the transaction.

Q: Now as you have a larger ownership stake, do you envision changing hold strategy for originations?

A: From an operating perspective, the management team at Arc is business as usual, no change in strategy.

Q: Can you give more detail on those commercial loans? What changed that led them to be put on nonaccrual?

A: The borrower on the hospitality loans is working through an asset disposition plan, and we expect a productive solution by year-end.

Q: Can you comment on your comfort level with the $89 million of liquidity?

A: We're comfortable with current cash positioning and have enhanced financing methods, likely to stay in a certain range.

Q: Can you comment on the economics of refinancing the repo and legacy WMC?

A: Refinancing reduced costs by over 500 basis points, generated $40 million additional cash, and capital was redeployed in Q3.

Q: What is your view on home prices? Any geographies to avoid or underwriting standards tightening?

A: View is in line with consensus, some market weakness but still modest; no change in underwriting standards as adjustments for weaker markets are already in place.

Q: Does pipeline hedging and volatility in April impact EAD at Arc Home?

A: Yes, it flowed through EAD, with a loss of $130,000 in the quarter but offset by positive earnings in May and June.

Q: Can you say what the return on capital was that you expect from the closed-end seconds from redeploying $40 million? And were those loans originated by Arc Home or third party?

A: Loans originated by third parties, expect returns in the mid- to high teens.

Q: Can you give a snapshot of leverage and capital structure at Arc Home?

A: No long-term debt, approximately $70 million of equity with cash and loans on warehouse.