MITP

• The company had one of its most active and successful quarters, increasing book value from $10.39 to $10.46. - Monetized close to $55 million market value of legacy WMC securitized non-QM positions and $11 million from a legacy WMC's CMBS position, freeing up nearly $66 million of equity. - Significantly increased the investment portfolio by over 20%, acquiring over $1.7 billion of residential mortgage loans, with $900 million in agency-eligible investor loans and $800 million in home equity loans. - Refinanced high-cost legacy WMC debt, lowering cost of capital and boosting EAD. - Arc Home achieved record HELOC volumes and contributed over $2 million in earnings, with MITT receiving approximately $1.2 million. - Initiated sale of underlying collateral from a 2022 transaction, expecting return of capital for redeployment.

• Expect securitization cadence to be around 1 to 2 per quarter going forward. - Rotating equity into core strategies and redeploying freed-up capital is expected to unlock more earnings power. - Arc Home's performance is expected to continue contributing positively to EAD, with potential for growth in future quarters.

The company's book value increased from $10.39 to $10.46 in the third quarter. EAD was $0.23 per share, driven by strong earnings from the core investment portfolio. Arc Home contributed $0.03 towards EAD. Residential investments saw net interest income increase by $1.7 million or 9% from the prior quarter. The investment portfolio grew by 21% to $8.8 billion through securitization activity. Arc Home's earnings were over $2 million, contributing approximately $1.2 million to MITT. Residential investments, including agency-eligible investor loans and home equity loans, were significant parts of the portfolio growth. Revenue contribution: Arc Home's profits contributed to EAD, and residential investments drove net interest income growth.

• Risks related to market conditions affecting the performance of investment portfolios. - Credit performance risks, though the company's portfolio has outperformed in various segments. - Impact of interest rate changes on prepay speeds and expected returns on retained investments.

Q: Hoping you could expand a little bit more about the call rights, either kind of the amount of capital that could be freed up or how you think about the return differential on the called deals versus freshly deployed capital?

A: Certainly. So near term, we see, call it, $15 million to $30 million of equity that can be redeployed, more of an intermediate term, call it, 3 to 4 quarters, that could be $50-plus million. If you think about sort of 2022 and '23, the capital markets were fairly inefficient, spreads were relatively wide. So given sort of where interest rates have retraced along with credit spreads, we see a good amount of upside to be able to unlock that and redeploy. The equity, obviously, we could just refinance those. But I think our current -- given sort of how those loans have performed well, there's a good chance that we'll look to recycle that equity via the sale of loans, but are open to other alternatives, but either way accretive versus how we currently hold those positions.

Q: Can you give us an update on the CRE loans, the nonaccrual, what's their status potential for timing of resolution?

A: Yes, sure. So the hospitality loans are still progressing towards our original resolution plan. At this point, we think it's realistic to have that capital return in the first half of 2026. 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, working through the options there. On that note, I would say, Doug, it's important. That note is actually still cash flowing from the underlying properties. So I think we have some more options there as well.

Q: Can you just talk a little bit about securitizations, just how the receptivity has been, you did 4 in the quarter. And just as you look forward, what do you think a normal cadence could be on the securitization side?

A: Yes. The expectation going forward is probably not as many as we did this quarter, but it's probably more like 1 to 2 a quarter. The securitization markets themselves are healthy. If anything, we've sort of transitioned into positive net supply. And if anything, the inflows across different investment type vehicles, companies have been robust and have met that supply. We are off of sort of the beginning of the year's tights at the top of the capital stack, but at the bottom of the capital stack is a good amount tighter. We see issuance as a relatively healthy period.

Q: Just given the timing of the purchase of the Arc, the incremental piece, did you guys get the full quarter of that this quarter? Or is there sort of a catch-up on that as well?

A: No, the transaction was executed on August 1. So it's really only 2 months of that EAD that you see coming through. So to the extent performance continues, it will have a pickup in out quarters.

Q: Can you give us an update on book value quarter-to-date?

A: Yes. Bose, just given where we are in the process, we don't have an update for you today.

Q: Can you just give us an update on kind of where you guys see the ROE and economics on doing new securitizations given the spread tightening we saw during the third quarter and how it compares to kind of where things were earlier in the year?

A: So broadly where you can place debt versus the tightening still shakes out to largely similar equity returns. Obviously, that matters on what part of the capital stack you're attaching to and the amount of leverage you take. Given our current leverage profile and the assets that we're trafficking in, we still see comfortably equity returns with modest leverage in the mid- to high teens.

Q: With the rally we've seen in mortgage rates, have you guys seen any kind of notable increase in prepay speeds on either the non-QM or the agency eligible part of the portfolio? And does that have any sort of meaningful impact on the expected returns on those retained investments?

A: Yes. So we have seen some uptick in prepayments, albeit modest and albeit relatively early on. From a return standpoint, we feel like the portfolio was well balanced between sort of the derivative portions and then the credit portions and don't expect book value to be materially impacted by large pickups in 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, which provides a good amount of stability even into a rate rally.