TPG Mortgage Investment Trust, Inc. Q3 FY2024 earnings call

• Book value increased from $10.37 to $10.58, with a 3.9% economic return on equity for the quarter. - Earned $15.8 million net interest income, $0.40 earnings per share, and $0.17 EAD per share. - Reduced leverage to 1.5 turns, retired the WMC convertible note, and sold Agency MBS to offset cash drag. - Issued $750 million of agency eligible nonowner-occupied securitizations. - Acquired $150 million of home equity loans and committed to purchase $200 million more. - Book value will be reported solely adjusted for liquidation preference going forward, with a 2% increase to $10.58 per share.

Book value moved from $10.37 to $10.58 as of September 30. The company earned $15.8 million of net interest income, $0.40 of earnings per share, and $0.17 of EAD per share for the quarter. Leverage was reduced to 1.5 turns during the quarter. Approximately $100 million of investment grade unsecured bonds were issued, and the $86 million WMC convertible note was retired. Two agency eligible nonowner-occupied securitizations totaling approximately $750 million were issued. Approximately $150 million of home equity loans were acquired, with a commitment to purchase another $200 million.

• Too early to estimate October book value. - Plan to continue allocating capital to home equity loans and securitization activities, considering market competition and other factors. - Expect ROEs in the 20s for the home equity loans segment.

• Interest rate volatility impacting prepayment speeds and EAD. - Increased competition in the securitization space from insurance companies and others. - Housing supply and affordability challenges affecting the market.

Q: Bose George inquired about the home equity opportunity and drivers of earnings.

A: Nick Smith stated that a high portion of equity allocation is expected in the home equity sector, and there is room to increase ROEs as assets mature.

Q: Brad Capuzzi asked about the dividend and implications of elections.

A: T.J. Durkin mentioned it's a transitionary period, with capital rotation towards higher ROE opportunities and Arc Home trending towards breakeven.

Q: Doug Harter asked about the impact of prepay assumptions and home equity securitization.

A: Anthony Rossiello said prepay assumptions were the majority driver, and Nick Smith said securitization is likely with sizes ranging from $275 million to $500 million.

Q: Jason Weaver asked about home equity sourcing and cash liquidity.

A: Nick Smith said sourcing is from non-banks and the company is comfortable with $120 million in cash liquidity.

Q: Eric Hagen asked about non-QM valuation and recession risk.

A: T.J. Durkin stated the backlog benefited from home appreciation with no concerns about recession-led loss spikes; Nick Smith referred to Page 8 regarding portfolio delinquency.