AG Mortgage Investment Trust (MITT) 5 Nov 24 2024 Q3 Earnings call transcript

In the latest earnings call for AG Mortgage Investment Trust (MITT), management provided insight into the company's financial performance and strategic initiatives, highlighting a focus on core business strategy execution, credit outperformance, and the growing potential of home equity loans.

Financial Performance and Core Strategy Execution

Jenny Neslin, General Counsel for AG Mortgage Investment Trust, began the call by emphasizing the importance of forward-looking statements and the risks they entail. This was followed by a review of MITT's third quarter financials, which showed a higher book value and a healthy economic return on equity. The company reported $15.8 million of net interest income and $0.17 of EAD per share, driven by increased prepayment speeds due to the large rate rally in the quarter. However, the actualization of these prepayments remains uncertain, and the balance sheet reduction to 1.5 turns was a positive sign.

CEO T.J. Durkin further emphasized the company's financial position, highlighting the successful issuance of investment-grade unsecured bonds and the subsequent liquidity of approximately $120 million. MITT's active quarter in issuing agency-eligible nonowner-occupied securitizations, totaling approximately $750 million, further strengthened its market-leading position in the compelling space.

Expansion into Home Equity Loans

Another area of excitement for MITT is the home equity space. As borrowers look to tap their growing home equity amounts while preserving their low 30-year fixed rate mortgages, MITT sees itself in the early stages of this product becoming more mainstream for U.S. consumers. The company has already acquired approximately $150 million of home equity loans and committed to purchasing another $200 million. This segment's potential for growth is significant, especially considering the cheap and long-dated financing combined with historic home price appreciation.

Strategic Shifts and Competition

Nicholas Smith, Chief Investment Officer, spoke about the active quarter in issuing securitizations backed by agency-eligible investor loans. MITT's position as the largest issuer in this space is a testament to its success. However, the company plans to commit less capital to this sector in the coming quarters due to increased competition from other REITs and mortgage servicing rights. Despite this shift, MITT's home equity investor book has less delinquencies and superior convexity compared to prime jumbo deals.

Macro and Political Considerations

Durkin briefly addressed macro and political topics, acknowledging housing supply and affordability as hot issues. Despite the challenges, he remains optimistic about MITT's credit book performance and the market's recognition of the company's resilience to interest rate volatility.

Conclusion

AG Mortgage Investment Trust's Q3 2024 earnings call highlighted the company's financial performance, strategic shifts, and promising growth opportunities, particularly in the home equity space. MITT's leadership position in the mortgage investment industry, coupled with its strategic moves and financial health, position it well for future success. The company's ability to navigate the competitive landscape and capitalize on emerging opportunities will be key factors to watch in the coming quarters.