TPG Mortgage Investment Trust, Inc.

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Please stand by, your meeting is about to begin. Good day and thank you for standing by. Welcome to the TPG Mortgage Investment Trust Incorporated fourth quarter 2025 in 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 Neslin, General Counsel for the company. Please go ahead.

Thank you. Good morning, everyone, and welcome to the full year and fourth quarter 2025 earnings call for TPG 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 filing including our most recently filed Form 10-K for the year ended December 31st, 2024, and our subsequent reports filed from time to time with the FCC. 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 view this slide presentation, turn to our website, www.mitt.tpg.com, and click on the link for the Q4 2025 earnings presentation on the home page. 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 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. We were able to deliver these strong outcomes amidst a challenging macroeconomic backdrop, proving the company has a more differentiated strategy than the average REIT. Highlighting MIT's financial performance, during the fourth quarter, we saw book value remain stable, increasing from $10.46 to $10.48, and we produced an EAD of $0.25, covering our most recently declared dividend of $0.23. When including our newly declared $0.23 dividend, we produced a healthy economic return on equity of 2.4% for the quarter. Although it's too early to comment on our process for February, book value is 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 MIT team. We've remained steadfast to our disciplined programmatic securitization strategy, issuing 10 times throughout the year, allowing us to keep our economic leverage low versus our peers at just 1.6 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 deliver a 6.5% economic return on equity. Most important, MIT's total return to shareholders, including dividends and stock price appreciation, through 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 the continued return of profitability at ArcHome, where it was a tale of two halves this year, and we are excited about where the company is heading in 2026. We've also maintained good discipline on G&A and cost controls, which Anthony will touch on later. Lastly, we have been able to deliver all the positive results while still carrying the legacy WMC CRE loans on non-accrual status as we work with the lender groups towards successful dispositions of the assets. We have approximately $28 million of equity remaining in these assets, which when reinvested will only further bolster MIT's earning power. As I reflect on those key themes that drove 2025's success and turn the page to 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 our homes 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 have clear line of sight into more powerful ROEs and EAD as we look ahead into 2026. While I recognize there are some headwinds in being a smaller cap 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 for MIT 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, TJ. The company had an extremely active fourth quarter in a milestone year in 2025. We have made significant progress in rotating equity into our core strategies, growing the investment portfolio, and scaling profitability of our portfolio company, Arcom. These steps have allowed us to increase our dividend by over 21% this year and 9.5% 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 securitized 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 on to our securitization activities. We executed a total of 10 securitizations in 2025, representing $4.2 billion in total. We have become a programmatic issuer in the home equity space, securitizing $2.4 billion across five transactions this year. In Q4, we remained highly active, securitizing $1.3 billion. This included partnering with top mortgage originators on two 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 at just 1.6. 2025 highlights the rapid success of our expansion into home equity space since late 2024. Today, our home equity portfolio includes $1.1 billion of loans and $107 million of non-ANC RMBS, representing 35% of our total equity allocation, which includes approximately $70 million of HELOCs we currently hold unlevered. Moving on from financing and investment activity to our home. We are reiterating our commitment to this business as we begin to see our strategic investment payoffs. During 2025, Arcom remained focused on growing origination volumes and improving profitability, resulting in what we describe as a tale of two halves. While the company overcame a turbulent April marked by tariff-rated volatility, it reached a clear inflection point in the second quarter when it achieved break-even 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. Following this, the company achieved record lock volumes with 34% year-over-year growth. This growth was primarily driven by a 42% increase in non-QM mortgage fundings versus Q4 of 2024, or an increase of over 79% year-over-year. In total, Arcom originated over $3.4 billion for the year 2025. The strong earnings at Arcom, driven by steady gain on sale margins and high lock volumes, have positively contributed to our earnings available for distribution. As Arcom continues to execute its plan, its contribution to EAD 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 marking Arcom's strongest month since returning to profitability, generating monthly earnings in excess of $1 million. We believe this growth is sustainable as Arcom continues to gain share in this increasingly attractive corner of the mortgage market and non-agency originators expand their share of the aggregate mortgage market. Touching upon our call rights and future strategies. As alluded to in our previous remarks, we see significant embedded value in our 2022 and 2023 vintage issuances. In Q4, we acted on this by exercising the optional redemption of a 2022 vintage non-QM securitization with $316 million in UPV, subsequently selling approximately $277 million of collaboration. Looking forward to 2026, we intend to remain aggressive in 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 EAD upside in rotating approximately $35 million of equity this year. This time last year, we spoke in depth about the MIT Advantage. The past year's results are evidence of this advantage playing out, and we believe it is as relevant today as it was then. To summarize this advantage briefly, the MIT advantage is driven by extensive capabilities of its manager, TPG, which provides MIT with unparalleled access to capital, sourcing, and expertise within the residential mortgage finance sector. This provides MIT an edge through its vast network of relationships with investment banks and non-bank originators, alongside the support of over four dozen specialized professionals and a state-of-the-art data science and technology department. Furthermore, TPG provides dedicated resources like Red Creek, a custom-built asset manager, along with expert support for portfolio companies like Arcoma. All this allows MIT to be 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 MIT 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 company's higher returning strategies, along with the tailwinds at ARK Home and its focused market, non-QM. Anthony, over to you.

Thank you, Nick, and good morning, everyone. MIT finished 2025 with strong momentum, maintaining book value stability, and raising our quarterly dividend for the third time this year by over 21% to 23 cents per share. During the quarter, we sponsored three securitizations and continued deploying capital into our home equity portfolio. This investment activity, coupled with sustained strength and origination volumes at ArcHome, 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 0.2% during the fourth quarter to $10.48 per share. Including our 23-cent dividend, we generated a 2.4% economic return for our shareholders. Gap net income available to common shareholders was $8 million, or $0.25 per share, primarily driven by EAD 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 EAD of $0.25 per share, up from $0.23 in the prior quarter, and fully supporting our newly increased dividend. Our investment portfolio continued to produce strong results, with net interest income increasing by 4% this quarter. This growth is 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 cents, which exceeded 45 cents of operating expenses and preferred dividends to generate net earnings of 23 cents per share. To round out EAD, ARC Home contributed an additional 2 cents per share, supported by continued strength in origination volumes. For the full year 2025, EAD of 86 cents per share covered our annual dividends of 85 cents. On a year-over-year basis, EAD increased by 17% to $26.3 million, driven by a 6% increase in net interest and hedge income, alongside a meaningful turnaround in Arc Home. Specifically, Arc Home contributed $1.9 million to EAD 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 or cost recovery status into residential investments during 2026. Lastly, we ended the quarter with total liquidity of approximately $109 million, 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 now like to open the call for questions. Operator?

Thank you. If you'd like to ask a question, press star 1 on your keypad. To leave the queue at any time, press star 2. Once again, that is star one to ask a question, and we'll pause for just a moment to allow everyone a chance to join the queue. 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 25 and also 15. early 26 but can you give a little more detail on what you're 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 our home generated 1 million in ead 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 um

of ARK. Commenting on the volumes, they continue to gain market share. There has been tailwinds from a margin standpoint insofar as, you know, you have a steepening yield curve and tighter credit steds and more liquidity. So, you know, as a niche originator in a space where there's a lot of demand, margins have been healthy, and we've been able to pass that on to our our lending partners, our origination partners, and that is really driving future growth. You know, hopefully looking forward, you know, as the company continues to scale, we can take in more margin. But volumes have been, you know, continuing to increase sequentially month over month, quarter over quarter as the company grows.

Perfect. Appreciate the color there. And then, Can you discuss where you're most interested in investing incremental capital today? Just looking at slide nine and the pie chart as of 4Q, just home equity, non-QM, agency eligible, which areas are you most interested in adding? And then are there any areas or pockets within those or other areas that you're more cautious or stepping back at all?

Yeah, so the focus has been home equity, you know, We started this in earnest, you know, a year-plus ago. The performance has continued to be very good relative to other asset classes out there from sort of a delinquency standpoint, which speaks to just it being a very up-in-credit borrower. We have not seen any degradation of that relative to other sort of segments. Similarly, we've been very focused on agency-eligible credits. That continues to be, you know, an outstanding performer relative to other segments in the non-AAC space. So, you know, our expectation is that we'll continue that thematically 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'm hoping you could touch on, it seems like spreads and securitized financing markets have tightened a lot. Can you just talk about, you know, kind of how or why that hasn't resulted in, you know, kind of increases in book value? And then also, you know, is that, you know, kind of a key factor in the attractiveness of the ability to call legacy deals?

Yeah, so maybe taking, well, first of all, good morning, Doug. Maybe taking each of those in their components. The calls definitely benefit from lower nominal yield and tighter and flatter credit curve, which is, you know, given where we are locally, that, you know, looks more and more attractive from a loan execution standpoint and a potential relever standpoint. You know, regarding book value, there has been some drag on IOs from call it, you know, some of the acquisitions in the past, so residuals as faster speeds into the slightly lower nominal yields and much tighter credit spreads. If you think about when some of this book was originated, you're talking about credit spreads that were, you know, and loan spreads or nominal loan spreads that were, you know, 100 wire than today.

Got it. And I guess that has impacted, I guess, the liability side as much as kind of your residual piece, just trying to understand why the benefit doesn't occur to your residual piece.

So the credit spread benefit insofar as it could potentially favorably impact the execution on the calls at a future date. But The faster speeds means that there will be less collateral on call at that point, which, you know, is offsetting. Does that make sense?

Yes, that makes perfect sense. Thanks for the explanation.

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 equity you can free up through the exercise of call rights this year. Can you maybe give us a little more kind of detail on how you guys are thinking about the pace of executing call rights over the course of the year and maybe the few expected to do in the first quarter? Thanks.

Yeah, perfectly. So in the prepared remarks, we mentioned that there were two transactions we were focused on which free up call it 35-ish million of equity. You know, we think that those are focused deals. A lot of that will come through, you know, sort of in this quarter. And then the rest will come through in subsequent quarters, whether it be Q2 or Q3.

Got it. Okay. That helps. And then... Looking at page 12 in the slide deck, I think there's a new line item there. I was curious if you could help us understand which is the unlevered home equity loans. Just curious what those are.

So they're exactly what it sounds like. Loans that we hold unlevered as a cash substitute against loans 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 KBW. Your line is now open.

Hey, guys. Good morning. Actually, when we think about the accretion from the WMC, you know, as that capital rolls off, Should we just, you know, look at that, the $50-odd million and use kind of a mid-teens ROE? Or is there any sort of, like, impairment risk as that runs off? Or essentially, should we just slot the mid-teens return as that capital is freed up?

So, on the CRE loans, I suppose?

Yeah, on the legacy.

So we have 28 million of equity, right? We still have very modest financing on those loans. And so I think to your point, yeah, we're basically showing you kind of a minus six ROE there by paying that financing and they're on non-accrual. So I think converting them you know, to whether it's 15% or 20% ROE is, you know, we think is worth approximately 20 cents on an annualized basis as we're able to rotate that 28 million in full.

Okay, great. Thanks. And then actually switching over to ARK, can you just talk about the competitive dynamics in the non-QM space? Obviously, the demand is very high, but, you know, we see more suppliers, companies come in as well. So just can you talk about that balance?

Yeah, that's a great question. We talk about this a lot. So both the sort of increased visibility and increased competition is both a headwind and tailwind. You know, as a primarily wholesale lender, our comb leverages the broker community. As more and more brokers get familiarity with this product, we see the pie growing. So as the pie grows because, you know, these products are meeting most needs where they would traditionally meet, it's making the access to that customer easier, which is growing the pie. We don't see any supply issues. you know, we still think it's a modest portion of the overall aggregate or the aggregate mortgage market. As as the supply has continued to increase, it has been well absorbed by both the loan securitization as well as, you know, like company or insurance companies balance sheets. So hopefully that answers your question.

Yeah, that's great. Thank you.

Thank you. And once again, At this time, if you would like to ask a question, please press star and 1 on your keypad now. We'll move on now to Matthew Erdner with Jones Trading. Your line is open. Thank you.

Hey, good morning, guys. Thanks for taking the question. I'd like to kind of turn to securitizations and, you know, the ROEs 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, you know, kind of the expected pace that you guys are going to have throughout the first half of the year.

Yeah, so... breaking those in their components. Some of that, the pace will be dependent upon the 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, you know, 10 to 20 million throughout the year. There's the commercial TJ just alluded to. And then there's the calls of $35 million to equity. So in aggregate, you know, we have a decent amount of dry powder this year. all of which we can you know rotate at meaningfully higher roes um you know i think generically to address the roes um i think a lot of our competitors and maybe you know some of the more mainstream um more commoditized products are quoting roes called in the you know Low mid-teens, mid-teens. Our ROEs on securitizations, we believe we are clocking in a decent amount higher than that, call it anywhere from 5% to 10%, given sort of the unique way we're attaching to the marketplace.

Right. That makes sense. So kind of in line with historically where you guys have been at. That's right. Awesome. Thank you.

Thank you. At this time, there are no further questions in queue. I will now turn the meeting back over to our host for any closing comments.

Thank you to everyone for joining us this morning and for your questions. We appreciate it, as always, and look forward 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.