MITT Q3 2023 Updates By Scott Kennedy

Introduction section by Colorado Wealth Management Fund.

Article section by Scott Kennedy.

Bringing More of Scott’s Work to Our Website

The REIT Forum is a service produced by Michael Vanloon (better known as Colorado Wealth Management Fund) and Scott Kennedy. After intense consideration, I decided to launch our service through Substack. Since then, we’ve seen great success. Substack enables us to give readers real-time alerts with entire articles delivered directly to their inboxes.

You’re probably used to seeing the “from” field saying: “ColoradoWealthManagementFund from The REIT Forum”.

In some of our future e-mails, it may say:

“Scott Kennedy from The REIT Forum”.

That will simply mean we’ve updated the backend of the website for Scott Kennedy to directly post his articles.

I want to make browsing our work as simple as possible for readers. This will be another step in that direction.

For the moment, I’ll be posting Scott’s work. The following articles are a direct copy and paste from Scott. While we get the back end set up, there is a delay in getting the articles posted. Rest assured that it should be solved soon.

Finding Our Positions

I posted a subscriber-exclusive article with links to our Google Sheets. You can always access our positions there. Scott’s positions are updated each week. CWMF’s positions are usually updated on the same day as the trade.

Disclosures

Related to the stocks in this article:

CWMF is long: RITM-D, GPMT-A, DX-C, EFC-A, MFA-C, RITM-C, EFC-B, PMT-C, PMT-B, CIM-B, AGNCP, CIM-D, RITM, SLRC, MFA, GPMT, RC.

Scott Kennedy is long: RITM, RC, SLRC, GPMT, ARCC, TSLX, FSK, MFA, RITM-D, MITT-B, MITT-C, GAINL, RCB, ECCC, ECCW.

The rest of this post is from Scott Kennedy.

Summary

• This 18th earnings assessment article reviews MITT’s BV and core earnings performance during Q3 2023.

• This article also discusses how MITT’s quarterly change in BV and core earnings “matched up” to expectations. Earnings remain a key driver to stock performance.

• MITT’s BV matched my/our expectations while its core earnings was a minor-modest underperformance.

• Even with the slight disappointment on less enhanced quarterly core earnings/EAD growth versus expectations, another good quarter for MITT on BV (versus a majority of sub-sector peers) and core earnings/EAD.

• As such, MITT received a 3%recommendation range “upgrade”.  Nochange in MITT’s risk rating though (remains at a 4.5).  MITT is currently deemed notably undervalued(STRONG BUY).

Introduction:

Hi subscribers. For new members, my name is Scott Kennedy and currently I fully cover 20 mortgage real estate investment trust (mREIT) and 15 business development company (“BDC”) common stocks within this Investing Group regarding research/data, subscriber questions, weekly projected book values/net asset values (BV/NAV), and common stock recommendation ranges. Colorado (“CO”) Wealth Management handles the mREIT preferred stocks and he and his team handles all other applicable REIT sectors outside the mREIT sector. CO also provides some mREIT common stock and BDC articles from time-to-time which are more of an “overview/introduction” discussion; typically based either on my or our combined research/data. This also includes some macroeconomic trends and data. My name is always attached to all Investing Group articles I personally wrote so there is no confusion for subscribers.

This REIT Forum article is part of a series of articles over a span of 6-7 weeks which will analyze my previously projected BV/NAV and core earnings (or core earnings equivalent)/net investment income (“NII”) figures and compare these metrics to each mREIT’s and BDC’s actual reported results, respectively. For readers who are familiar with my public mREIT and/or BDC articles, these types of articles are beneficial to readers who desire to pursue a more active investing strategy and/or want more “real time” thoughts/analysis.

I hope my services/contributions ultimately help enhance a subscriber’s total investment returns or minimize their total investment losses within the mREIT and BDC sectors. At the very least, I hope subscribers will gain more insight into the mREIT and BDC sectors by reading my/our exclusive REIT Forum articles.

1) MITT’s BV and Core Earnings Q3 2023 Performance (Projected Versus Actual Results):

On 11/7/2023, AG Mortgage Investment Trust Inc. (MITT) reported the company’s earnings results for the third quarter of 2023. Table 1 below provides MITT’s BV and earnings summary.

Table 1 – MITT Q3 2023 BV and Earnings Summary

Source: Taken Directly from the REIT Forum’s © Analytical Spreadsheets/Data

Hi subscribers. I was able to review MITT's Q3 2023 earnings results. MITT reported an adjusted BV (which matches all other sector peer’s BV regarding methodology) as of 9/30/2023 of $11.00 per common share (4.5% decrease). In comparison, I projected a MITT BV as of 9/30/2023 of $10.90 per common share (5.4% decrease). I consider this nearly an exact match (at or within a 1.0% variance) and was well within my $10.45 - $11.35 per common share range. As a refresher, MITT typically has reported above average “swings” in both BV and core earnings (in both directions) over the past couple of years. However, as anticipated, this did not happen this particular quarter. Still, let us fully reconcile MTT’s quarterly BV fluctuation.

First, amidst a continued less turbulent securitization market (when compared to last year-early this year; especially for recent higher coupon mortgage-related products), MITT was able to continue to complete loan securitizations. Through the “packaging” of said loans, MITT was able to create 2 new debt securitizations during the quarter with a “non-mark-to-market”/non-fair market value (“FMV”) feature (also non-recourse in nature) which is advantageous when market pricing for the underlying collateral/assets is volatile (no margin calls based on FMV changes). In addition, considering the fairly recent GAAP accounting preferential allowance/change regarding measurement of liabilities at FMV as opposed to amortized cost basis (not getting into that entire discussion again here; see prior chat notes), MITT has more recently been able to largely “mitigate” any residential whole loan/investment valuation (losses)/gains with net unrealized gain/(losses) from the company’s debt securitizations (basically an opposite/mitigation effect when compared to the asset side of the balance sheet).