TPG Mortgage Investment Trust, Inc.

Please stand by. Your program is about to begin. Good day and thank you for standing by. Welcome to the AG Mortgage Investment Trust Incorporated fourth quarter 2023 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. In order to ask a question during the session, please press the star key followed by the number one 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 Nestlen, General Counsel for the company. Please go ahead.

Thank you. Good morning, everyone, and welcome to the full year and fourth quarter 2023 earnings call for AG Mortgage Investment Trust. With me on the call today are T.J. Durkin, our CEO and President, Nick Smith, our Chief Investment Officer, and Anthony Rossiello, 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 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 10-K for the year ended December 31, 2022, our quarterly report on Form 10-Q for the quarter ended June 30, 2023, 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 or 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 reconciliations to the most comparable GAAP measures. We will also reference the earnings presentation that was posted to our website this morning. To review the slide presentation, turn to our website, www.agmit.com, and click on the link for the Q4 2023 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. I'm very excited to be able to finally discuss with the market the successful acquisition of WMC this past December and the future prospects for MIT going forward. While we believe the WMC acquisition is another substantial step in further positioning MIT as a premier beer play residential mortgage rate, We all know there is still plenty of work to do as we continue to deliver on strong earnings off the investment portfolio while seeking ways to continue enhancing scale and G&A efficiencies. Now, turning to page five, before we review the fourth quarter and full year 2023 financials, we thought we'd take a step back to review the scope of the transformation that's already occurred since year end 2020 when we first set out to shift to a pure play residential mortgage rate. You can see here the equity allocation over time as we successfully exited non-core asset classes without any drag to earnings, and while demonstrating the ability to scale into the deploying capital within our target asset class by acquiring over $7.3 billion of strong credit quality residential mortgage loans during this timeframe, with over one-third of them being sourced from our captive mortgage originator, ARK Homes. We actively and prudently executed our securitization strategy, having issued 16 deals into the market, further bolstering our GCAT shelf's recognition for both consistency and credit quality, which our institutional bondholders value. The disciplined approach to risk management via securitization and de-risking of recourse leverage has not only lowered our economic risk during this timeframe, but also reallocated a significant portion of our equity to higher yield and securitized assets, which is what we set out to do. Building on this successful track record, we will employ the same strategy to the newly onboarded WMC portfolio, and we have already begun that process, which we will get into in more detail. Moving to page six, we provide a quick recap of the WMC acquisition, with the highlights being an almost 50% increase in mid-market cap, which should add to our share's trading volume and liquidity. We'd also like to highlight the strong support from our external manager, TPG Angelo Gordon, through three key metrics. Cash contribution of $5.7 million from our manager to WMC shareholders to help secure the deal, resulting in $1.3 million in future reimbursable expense offsets. And lastly, an additional $2.4 million in management fee waivers beginning in the fourth quarter of 2023. The transaction creates significant long-term annual expense savings to the tune of $527 million per annum, and we believe this deal will be accretive to 2024 earnings. Moving to page seven, we provide a walkthrough on book value to show the effects of the WMC transactions. If MIT were to have remained a standalone company, we would have seen book value actually improve during the year from $11.39 to $11.51, as you can see on the left side of the page. On the right side of the page, we break out the various components of the WMC transaction which affect book value. You may recall the transaction was structured based on a fixed exchange ratio using June 30th valuations. As we close the books for year-end, we did see some valuation deltas on certain WMC assets since the June 30th fixed exchange ratio date and our closing December 31st marks of approximately $0.44. Transaction expenses, which made up the majority of the impact, approximated $0.39 on the WMC side, which includes their manager termination payment, and $0.20 of transaction expenses from the MIT side. The remaining $0.02 decline represents net losses contributed by WMC from the acquisition date through year-end offset by the incremental dividend declared associated with the shares issued to acquire WMC, resulting in our final 2023 book value of $10.46 per share. On page 8, we'll move away from the transaction to address mid-fiscal year performance. As previously stated, we ended the year with a book value of $10.46 and an adjusted book value of $10.20 per share. We have over $528 million of total equity and $112 million of liquidity, resulting in an economic leverage of 1.5 terms. Since year end, our liquidity increased as a result of our inaugural bond issuance, which I'll touch on later, and our economic leverage ratio has declined as we executed a securitization in January, further reducing our warehouse exposure. On page nine, when looking back at MIPS activities across 2023, we have consistently executed on our stated business plan by acquiring 1.2 billion of loans, not including the portfolio acquired from WMC, and in turn, securitizing $1 billion of loans during 2023 across three distinct securizations. Throughout the year, we generated 53 million of net interest income, which drove our 39 cents of EAD per share for the year. We believe it's also worth noting that all one-time transaction expenses are now behind us as we head into 2024. And when thinking about the current dividend run rate, we will now have the full benefits of the G&A scale we achieved via the acquisition for the upcoming year. Moving to page 10 during the quarter, MIT closed the WMC acquisition, effectively raising $81 million of equity for the combined entity. It generated 17 cents of EAD and paid its 18-cent dividend. We are reporting gap net income of $1.35 per share this quarter, which includes a one-time $30 million bargain purchase price gain. While we closed WMC late in the quarter, we have already been successful in taking action. We took advantage of strong credit markets in December and opportunistically sold $20 million of non-agency bonds acquired via WMC at gains and also had one $12.3 million CRE loan pay off at par subsequent to the close, generating over $32 million of cash proceeds in total. Additionally, in subsequent quarter end, we were able to execute a capital raise of BBB-rated unsecured notes or baby bonds in January, raising almost $35 million of gross proceeds. And further, we're able to use a portion of this capital in repurchasing over $7 million of the legacy WMC converts at a slight discount in the open market. We believe these actions put us well ahead of schedule in addressing September 15th maturity for the WMC convertible notes we assumed. And lastly, we see January book value up approximately 2% to 3% from year end. Before I pass it to Nick, I want to reiterate the mid team is very proud of what we accomplished during 2023 and year to date so far. and we believe we are taking all the right steps to making MIT a more scaled and profitable investment vehicle for shareholders to access the residential mortgage ecosystem. We have fully acknowledged the work is not done, but we have demonstrated we have the right strategy, skills, and resources to achieve our goals. We will continue to build on this momentum to create a long-term, more profitable MIT going forward. I'll now turn it over to Nick to discuss our investment activities and our home in more detail.