AG Mortgage Investment Trust Inc (MITT) Q1 2025 Earnings Call Highlights: Navigating Market ...

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Wed, May 7, 2025, 1:08 AM 4 min read

Book Value: Increased by $0.01 from $10.64 to $10.65 per share.
Dividend: Increased by 5.3% to $0.20 per share.
Economic Return on Equity: 2% for the quarter.
GAAP Net Income: $6.2 million or $0.21 per share.
Net Interest Income: Increased by $1 million or 5% from the prior quarter.
Earnings Available for Distribution (EAD): $0.20 per share, up from $0.18 in the prior quarter.
Investment Portfolio Growth: Increased by 6.2% to $7.1 billion.
Home Equity Loans: Portfolio increased to $228 million by quarter end.
Economic Leverage Ratio: 1.6x at quarter end.
Total Liquidity: Approximately $133 million, including $116 million of cash.

Warning! GuruFocus has detected 4 Warning Signs with MITT.

Release Date: May 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

AG Mortgage Investment Trust Inc (NYSE:MITT) reported a stable book value with a slight increase of 0.1% to $10.65 per share.
The company achieved a 2% economic return on equity for shareholders, supported by a newly increased dividend of $0.20 per share.
MITT maintained a strong liquidity position, ending the quarter with approximately $133 million in total liquidity.
The company successfully executed two securitization deals during the quarter, demonstrating active participation in the securitization market.
Arc Home, MITT's originator, showed strong performance with a 50% year-over-year increase in lock volumes and improved gain on sale margins.

Negative Points

Market volatility in March and April led to a widening of spreads on retained securities, resulting in an estimated 3% decrease in book value through April.
There was an uptick in delinquencies in certain cohorts of recent mortgage originations, indicating potential weaknesses in some housing markets.
Despite positive performance, the company faced $1.1 million in transaction expenses related to securitization activities.
The securitization markets experienced temporary closures during early April due to broader market volatility, impacting market conditions.
MITT's economic leverage ratio increased modestly, which, while below peer averages, indicates a cautious approach to leverage management.

Q & A Highlights

Q: You have one of the legacy commercial mortgage loans that's set to mature this month. Can you provide an update on that and how much capital it would free up for investing? A: T. Durkin, CEO, explained that one of the legacy loans from the WMC acquisition is maturing this month. They expect it to enter a pre-negotiated forbearance, with a positive outcome anticipated shortly and a full payoff likely within 2025. This would free up about $16 million of equity capital.

Q: How do you think about your current capacity to continue funding new loan acquisitions like the $50 million of Home Equity that you did in April? A: Nicholas Smith, CIO, stated that they have a good amount of runway over the next two to three quarters to rotate capital and increase leverage in the Home Equity space, aided by the rolling off of inefficient financings from the WMC acquisition.

Q: Can you talk about the health of the securitization markets over the last several months, especially amid the recent volatility? A: T. Durkin, CEO, noted that despite broader equity turbulence in March, the markets performed well. Although they effectively closed during early April's volatility, they reopened by the end of the month. Spreads are wider, but capital markets are fully open.

Q: Can you expand on your views of the home equity market and its attractiveness, especially if the rate outlook changes? A: Nicholas Smith, CIO, expressed confidence in the home equity market, noting its early stages of development and resilience to rate changes. They expect continued growth in originations and see it as a durable place for capital commitment.

Q: Can you discuss volume trends in the second quarter for Arc Home and the impact of spread widening in the securitization markets? A: Nicholas Smith, CIO, mentioned that while the overall market may be down, Arc Home is somewhat insulated due to its market position. Gain on sale margins are expected to normalize or improve, and they remain optimistic about the buying season.

Q: Is there a level of originations needed within Arc to maintain profitability for the rest of the year? A: Nicholas Smith, CIO, indicated that they are focused on growing the top line to exceed breakeven levels. Current origination volumes are sufficient for breakeven, but further growth is needed for increased profitability.

Q: How do you respond to volatility in mortgage spreads, and do you see it as an opportunity to add risk and leverage? A: T. Durkin, CEO, explained that the early April volatility was more macro-focused, and they avoided tactical trades in agency spaces. There was little forced selling in non-agency products, and they view it as business as usual now.

Q: On the securitized non-QM loans, how should we think about the economic spread being earned in that portfolio? A: T. Durkin, CEO, suggested looking at the return on equity (ROE) as a reflection of the market ROE, rather than focusing solely on the yield to cost basis.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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