Core Insights - The article discusses the performance and valuation of various mortgage REITs, particularly focusing on Ready Capital (RC), AGNC Investment (AGNC), Dynex Capital (DX), and Orchid Island Capital (ORC) [3][4][5][8]. Ready Capital (RC) - Ready Capital has underperformed in recent years due to declining asset values and non-performing loans, leading to write-downs that have affected investor confidence [3]. - Despite the challenges, the management's decision to mark down poor-performing assets is seen as a positive step, as it may lead to a more accurate reflection of the company's value [3]. - RC has a high dividend yield of 14.1%, which is attractive compared to its book value yield of 9.2%, indicating a solid amount of book value available for investment [4]. AGNC Investment (AGNC) - AGNC is trading at a premium of approximately 1.14 times its book value, which is considered high and potentially detrimental for long-term shareholders [5]. - The article suggests that AGNC should take advantage of its high valuation by issuing equity, which could enhance long-term returns [5]. - AGNC's dividend yield is 14.8%, but the high price-to-book ratio raises concerns about the sustainability of this yield [7]. Dynex Capital (DX) - DX trades at about 95% of its book value, and while it is projected to experience a dip in book value, it is still viewed as a better investment compared to AGNC [5][6]. - The current market perception of DX is negative due to its reported earnings, which are impacted by historical amortized cost accounting and hedging strategies [5]. - The article highlights a significant price-to-book ratio gap between AGNC and DX, suggesting inefficiencies in the market [5]. Orchid Island Capital (ORC) - ORC is compared unfavorably to DX, with DX having a better historical performance and internal management structure [5][6]. - The article implies that investors should prefer DX over ORC, despite ORC's higher dividend yield, due to DX's superior management and performance history [5][9]. Preferred Shares - The article notes that preferred shares may offer better long-term investment opportunities compared to common shares in the mortgage REIT sector [7]. - Preferred shares of AGNC have outperformed common shares, particularly during market downturns, indicating their potential as a more stable investment [7].

Core Viewpoint - The article discusses the investment potential of PennyMac Mortgage Trust's preferred shares, PMT-A and PMT-B, highlighting their current yields and the implications of a legal situation that may affect their classification and dividend rates [1][6]. Investment Strategy - The company has been actively purchasing PMT-B shares, acquiring a total of 5,155 shares for approximately $118,379, representing about 7.76% of the total portfolio [2]. - The purchases were executed in multiple transactions to avoid signaling a large buy order to the market, and all shares were placed in a tax-advantaged account [2]. Legal Context - On August 25, 2023, PennyMac asserted that the LIBOR Act would change the nature of their preferred shares from fixed-to-floating to fixed-to-fixed, which was later contested by the company [3]. - Following the announcement, share prices for PMT-A and PMT-B fell, prompting the company to begin building a position at $22.26, anticipating that the shares should float [3][4]. Valuation Insights - The stripped yield for PMT-A and PMT-B is currently around 8.6% and 8.43%, respectively, but could rise to approximately 12.11% and 12.23% if management is compelled to honor the floating rate [1][6]. - The company believes that if PMT is forced to honor the contract, the floating yield could be around 12.7%, which would likely lead to the shares being called [6]. Market Dynamics - PMT-B has been trading at a discount, between 94.7% and 95.6% of the target buy-under price, indicating a favorable risk/return profile for investors who believe the shares will eventually float [6]. - The disparity in market pricing suggests that many investors currently do not believe the rate will float, presenting a potential opportunity for those with a different outlook [9]. Future Outlook - The company anticipates that as awareness of the lawsuit grows, share prices may trend upwards as investors reassess the likelihood of the shares remaining at a fixed-rate dividend [9]. - The potential for further price dips could provide additional buying opportunities, although a significant investment has already been made [9].

Core Insights - The article discusses the recent performance and investment potential of Chimera Investment Corporation's baby bond (CIMN), highlighting its yield to maturity and market conditions [2][5][10]. Group 1: Investment Overview - CIMN has a yield to maturity of 9.95% and is currently priced at $24.50, with an annual dividend rate of $2.25 [4][5]. - The bond has a next callable date of May 15, 2026, with a yield to call of 10.7% [4][5]. - The liquidity of CIMN has been described as weak, which may affect the ability to initiate large positions [5]. Group 2: Comparison with Preferred Shares - CIM-D, a preferred share of Chimera, is trading at $24.85 with a floating yield of approximately 11.37% [6]. - The spread between CIM-D and CIMN is only about 1.4%, leading to a preference for CIMN due to its lower risk and reasonable valuation [6][8]. - The article suggests that the potential for interest rate cuts in the coming year may favor the baby bond over the preferred shares [6][8]. Group 3: Market Dynamics - CIMN's price has recently increased to $25.24, resulting in a decline in its yield to maturity to about 9.21% [13]. - The article notes that the preferred shares may experience price adjustments around their ex-dividend dates, which could impact trading strategies [7][10]. - The author is considering swapping positions between CIM-D and CIMN based on valuation and yield dynamics [10].

Core Insights - The article draws a parallel between the Oakland Athletics' innovative approach to team building under Billy Beane and the investment strategy of focusing on consistent income generation rather than chasing high-profile investments [2][9] Company Overview - Ares Commercial Real Estate Corporation (NYSE: ACRE) is a REIT that focuses on originating loans tied to commercial real estate and maintaining a diversified portfolio of such loans [3] - ACRE is currently yielding 15.3% [3] Recent Performance - Q4 2023 was challenging for ACRE, marked by numerous defaults, a significant reduction in cash flow, and capital tied up in non-performing assets, leading to a dividend cut and a decline in book value [4] - In contrast, Q1 2024 showed improvement, with distributable earnings rising to $0.22 from $0.20 in Q4 2023, and a dividend of $0.25 declared for Q2 [5] Financial Metrics - ACRE's leverage remains stable at 1.9x debt/equity, indicating that the negative impacts are more of a short-term earnings issue rather than a long-term threat to the balance sheet [4] - The company reduced non-accrual loans from $425 million to $292 million, a 32% reduction in one quarter [6] Credit Loss Reserves - ACRE has eight loans rated 4 or 5, which contribute significantly to its Current Expected Credit Loss (CECL) reserve [7] - Specific CECL declined by $42 million in Q1 due to realized losses, while general CECL increased by $20 million due to economic conditions [8] Future Outlook - ACRE's book value before CECL is expected to decline in Q2 due to anticipated losses, while the outlook for book value after CECL will depend on macroeconomic conditions [8] - Management aims to leverage up and negotiate with lenders to access capital for expansion while managing distressed loans [8] - By year-end, ACRE is expected to stabilize its book value and exceed current dividend levels in distributable earnings [8]

Core Viewpoint - Ares Commercial Real Estate Corporation is experiencing significant challenges with its distributable earnings due to nonaccrual issues in its office and multi-family loan portfolio, leading to a substantial increase in credit loss provisions and a dividend cut [2][10][16]. Financial Performance - In Q1 2024, Ares Commercial Real Estate reported negative distributable earnings of $0.62 per share, failing to cover its reduced dividend payout of $0.25 per share [10][11]. - The trust's portfolio was valued at $2.0 billion, consisting of 44 loans, with 8 loans classified as high risk [4][6]. - The total credit loss reserve at the end of Q1 2024 was $141 million, with 61% related to office exposure [6]. Dividend and Stock Valuation - The company reduced its dividend payout by 24% in Q1 2024, which was anticipated by the market, resulting in a stock price that did not react significantly to the earnings drop [2][12]. - Ares Commercial Real Estate's stock is currently trading at a 38% discount to book value, which may attract passive income investors seeking high yields [12][16]. Credit Losses and Non-Accruals - The trust increased its credit loss reserve by $22.3 million in Q1 2024, primarily due to issues in its office loan portfolio, leading to a negative earnings impact of $0.41 per share [6][10]. - Non-accruals amounted to $292 million at the end of Q1 2024, reflecting a 31% decline quarter-over-quarter [8]. Investment Outlook - Despite the challenges, the current discount to book value and the realigned dividend payout may present opportunities for high-risk tolerance investors [12][16]. - The proactive measures taken by the trust to address non-accruals, including selling loans at a loss, could help mitigate future risks [8][10].

Core Viewpoint - Ares Commercial Real Estate (ACRE) has underperformed the market, with a stock decline of 7.9% compared to a 27% increase in the S&P 500 over the past year, raising concerns about its credit metrics and loan portfolio [2][3][30] Company Overview - ACRE is a Real Estate Investment Trust (REIT) that focuses on sourcing and investing in senior, directly-originated, short-term commercial loans, typically ranging from $10 million to $250 million with terms of 3 to 5 years [5][8] Investment Strategy - ACRE benefits from being managed by Ares Capital Management, which has nearly $400 billion in assets under management, including a $49 billion real estate group that aids in sourcing and managing ACRE's loans [8][11] Credit Losses - ACRE's credit metrics have deteriorated, with a provision for credit losses of $0.38 per share in Q1 2023, an 8.6% increase from the previous quarter and a significant rise from $0.01 per share in Q1 2022 [11][14] - The company had to take an additional $70.8 million in credit loss provisions in 2023, indicating ongoing issues with its loan portfolio, particularly in office real estate [14][19] Loan Portfolio Concerns - ACRE's loan book has decreased to $2.0 billion as of Q1 2024, with total CECL reserves rising to $141 million, representing 7% of all loans held [19][20] - A significant portion of CECL reserves is allocated to office real estate, which has been adversely affected by high vacancy rates due to work-from-home policies [19][26] Market Conditions - The commercial real estate market is facing challenges, with office vacancies at all-time highs and many properties selling for a fraction of their previous valuations, leading to increased defaults and short-sales [25][26] - Notable examples include significant losses on properties in major cities, indicating a broader trend affecting lenders like ACRE [26] Dividend and Valuation - ACRE has cut its dividend by 24% to conserve capital, which may deter investors attracted by its previously high yield [27] - The stock is currently trading at $6.91 per share, representing a price-to-book value of 0.62, suggesting that investors are skeptical about the adequacy of ACRE's provisions [28][30]

Ares Commercial Real Estate Corporation (NYSE:ACRE) Q1 2024 Earnings Conference Call May 9, 2024 9:00 AM ET Company Participants John Stilmar - Managing Director, Investor Relations Bryan Donohoe - CEO Tae-Sik Yoon - CFO Conference Call Participants Doug Harter - UBS Jason Sabshon - KBW Stephen Laws - Raymond James Steven Delaney - Citizens JMP Richard Shane - JPMorgan Operator Good morning and welcome to the Ares Commercial Real Estate Corporation's First Quarter Earnings Conference Call. [Operator Instruc ...

Financial Statements and Reporting - The unaudited consolidated interim financial statements are prepared in accordance with GAAP and reflect all necessary adjustments for fair presentation[28]. - The Company evaluates available-for-sale debt securities for other than temporary impairment on a quarterly basis[48]. - Debt issuance costs are capitalized and amortized over the term of the respective debt instrument[50]. - Derivative financial instruments are classified as either other assets or other liabilities at fair value in the Company's consolidated balance sheets[52]. - The effective portion of unrealized gains or losses on cash flow hedges is recorded in Other Comprehensive Income (OCI)[54]. - The Company’s investments in loans held for investment are accounted for at amortized cost, with the difference between carrying amount and outstanding principal consisting of unamortized purchase discounts and deferred loan fees[66]. - The Company did not incur any expense for U.S. federal excise tax in Q1 2024, while it incurred $100 thousand in Q1 2023[129]. - The Company did not incur any incentive fees for the three months ended March 31, 2024, and 2023[145]. Loan Portfolio and Performance - The Company monitors its loans held for investment portfolio through borrower review, economic review, property review, and market review[37]. - Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more[38]. - As of March 31, 2024, the Company's portfolio included 44 loans held for investment with an outstanding principal of approximately $2.0 billion, down from $2.1 billion as of December 31, 2023[62]. - The Company funded approximately $13.0 million of outstanding principal and received repayments of $78.4 million during the three months ended March 31, 2024[62]. - The weighted average unleveraged effective yield for the total loans held for investment portfolio was 7.9% as of March 31, 2024[58]. - The Company had seven loans on non-accrual status with a carrying value of $266.5 million as of March 31, 2024, a decrease from nine loans valued at $399.3 million as of December 31, 2023[74]. - The CECL Reserve for loans held for investment was $140.9 million, representing 658 basis points of the total loans held for investment commitment balance of $2.1 billion[79]. - The Company recognized a realized loss of $1.7 million on a senior mortgage loan and $43.1 million on another senior mortgage loan during the three months ended March 31, 2024, due to discounted payoffs[73]. - The Company’s CECL Reserve decreased from $159.9 million at December 31, 2023, to $139.8 million at March 31, 2024, reflecting a provision for current expected credit losses of $20.1 million[82]. - The outstanding balance of the Financing Agreements as of March 31, 2024, is $885.3 million, with total commitments of $1,535.0 million[100]. - The Company recognized a realized loss of $43.1 million on a senior mortgage loan with an outstanding principal of $56.9 million due to a short sale[183]. - Realized losses on loans for Q1 2024 totaled $45.7 million, compared to $5.6 million in Q1 2023, indicating a substantial increase in loan defaults[203][220]. Revenue and Expenses - Total revenue for Q1 2024 was $18.7 million, a decrease of 29.8% from $26.5 million in Q1 2023[203]. - Total expenses increased to $8.6 million in Q1 2024 from $6.2 million in Q1 2023, representing a 38.4% rise[206]. - The net interest margin for the three months ended March 31, 2024, was $15.2 million, down from $26.5 million in the same period of 2023[202]. - General and administrative expenses rose to $2.1 million in Q1 2024 from $1.7 million in Q1 2023, driven by increased stock-based compensation[209]. - Revenue from real estate owned for Q1 2024 was $3.5 million, with no revenue reported in Q1 2023[204]. Macroeconomic Conditions - Current macroeconomic conditions, including high inflation and interest rates, may adversely impact the Company's business and operations[30]. - Macroeconomic conditions may impair the company's ability to access financing and capital markets[225]. Dividends and Stockholder Returns - The company declared a cash dividend of $0.25 per share for the three months ended March 31, 2024, totaling $13,802,000, compared to a dividend of $0.35 per share totaling $19,345,000 for the same period in 2023, indicating a decrease of 28.6% in total dividends[153][156]. - The board of directors declared a regular cash dividend of $0.25 per common share for the second quarter of 2024, payable on July 16, 2024[196]. Financing and Debt - The Company has a current expected credit loss (CECL) reserve for funded loan commitments, which is recorded within the current expected credit loss reserve in the consolidated balance sheets[84]. - The Company incurred net depreciation and amortization expense of $786 thousand for the three months ended March 31, 2024[92]. - The Company has a $180.0 million revolving master repurchase facility with MetLife, maturing on August 13, 2024, with a non-utilization fee of $74 thousand for Q1 2024[106]. - The Secured Term Loan amounts to $150.0 million, with a maturity date of November 12, 2026, and an effective interest rate of 4.6% for Q1 2024[111][112]. - The Company amended the Secured Term Loan, reducing the outstanding principal from $150 million to $140 million by paying down $10 million[200]. Real Estate and Asset Management - The Company recognized rental revenue from its mixed-use property, which was acquired in September 2023, primarily from operating leases[55]. - Revenue from real estate owned includes revenue associated with the operations of a mixed-use property, contributing to the overall revenue stream[56]. - The Company acquired a mixed-use property in Florida through foreclosure, with a fair value of $84.3 million, which was previously collateralized by an $82.9 million senior mortgage loan[89]. - The Company did not recognize any impairment charges for real estate owned as of March 31, 2024[91]. - The Company’s real estate owned, acquired through foreclosure, is evaluated for impairment quarterly, with fair value determined using Level 3 inputs[138]. Related Party Transactions - For the three months ended March 31, 2024, the company incurred total related party costs of $3,944,000, compared to $3,762,000 for the same period in 2023, representing an increase of 4.8%[151].

Exhibit 99.1 ARES COMMERCIAL REAL ESTATE CORPORATION REPORTS FIRST QUARTER 2024 RESULTS First quarter GAAP net income (loss) of $(12.3) million or $(0.23) per diluted common share and Distributable Earnings (Loss)(1) of $(33.5) million or $(0.62) per diluted common share - Subsequent to three months ended March 31, 2024 - Declared second quarter 2024 dividend of $0.25 per common share NEW YORK—(BUSINESS WIRE)—Ares Commercial Real Estate Corporation (the “Company”) (NYSE:ACRE), a specialty finance company en ...

Ares Commercial Real Estate (ACRE) is expected to deliver a year-over-year decline in earnings on lower revenues when it reports results for the quarter ended March 2024. This widely-known consensus outlook gives a good sense of the company's earnings picture, but how the actual results compare to these estimates is a powerful factor that could impact its near-term stock price.The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released ...