Apollo Commercial Real Estate Finance(ARI) - 2025 Q1 - Quarterly Report

Financial Performance - For the three months ended March 31, 2025, net income available to common stockholders was $22.9 million, compared to a net loss of$107.6 million for the same period in 2024[214]. - The net income before taxes was $26.1 million for the three months ended March 31, 2025, compared to a net loss of$104.4 million for the same period in 2024[222]. - Distributable Earnings for the three months ended March 31, 2025, were $33.2 million, or$0.24 per share, compared to $50.5 million, or$0.35 per share, for the same period in 2024[241]. - Dividends declared for common stock were $0.25 per share for the three months ended March 31, 2025, down from$0.35 per share in the same period of 2024[279]. Revenue and Income Sources - Revenue from real estate owned operations increased by $2.5 million to$26.3 million for the three months ended March 31, 2025, compared to $23.9 million for the same period in 2024[222]. - Interest income from commercial mortgage loans decreased by$39.7 million to $144.0 million for the three months ended March 31, 2025, compared to$183.7 million for the same period in 2024[222]. - Net income related to real estate owned increased by $3.8 million for the three months ended March 31, 2025, compared to the same period in 2024, primarily due to higher occupancy levels at the D.C. hotel and increased net income from the Atlanta Hotel[224]. Expenses and Allowances - Net interest income decreased by$4.0 million to $39.5 million for the three months ended March 31, 2025, primarily due to lower average index rates and a lower average loan balance[216]. - Total operating expenses decreased by$1.6 million to $15.2 million for the three months ended March 31, 2025, compared to$16.8 million for the same period in 2024[222]. - The General CECL Allowance increased by $4.0 million during the three months ended March 31, 2025, driven by a more adverse macroeconomic outlook[218]. - The General CECL Allowance increased by$4.0 million during the three months ended March 31, 2025, driven by a more adverse macroeconomic outlook and loan originations[231]. Loan Portfolio and Commitments - During the three months ended March 31, 2025, the company committed $650.2 million to new loans, with$460.5 million funded at closing[248]. - The company received $93.4 million in loan repayments and sales during the same period[248]. - As of March 31, 2025, the total carrying value of the loan portfolio is$7,687,086, with commercial mortgage loans at $7,285,022 and subordinate loans at$402,064[254][262]. - The total unfunded commitment for the commercial mortgage loan portfolio is $989 million[256]. - As of March 31, 2025, the company had$989.2 million in unfunded loan commitments, with an expectation to fund approximately $592.9 million to existing borrowers in the short term[269]. Debt and Equity - The debt-to-equity ratio increased to 3.5 as of March 31, 2025, compared to 3.2 at December 31, 2024[266]. - The company has current debt obligations totaling$1.3 billion in corporate debt, $5.2 billion in secured debt arrangements, and$348.2 million related to real estate owned[268]. - Total borrowings as of March 31, 2025, amounted to $6.84 billion, an increase from$6.41 billion as of December 31, 2024[273]. - The company has policies in place to manage leverage and may seek to raise additional equity or debt capital for future investments[271]. Asset Management and Risk - The company maintains a strong relationship with borrowers and actively manages assets through continuous performance assessments[260]. - The company focuses on acquiring high credit quality assets to keep credit losses and financing costs low, but remains subject to varying degrees of credit risk[300]. - Interest rate risk is influenced by fiscal and monetary policies, with a hypothetical impact on net interest income estimated for a 50 basis point change in interest rates[302]. - For a 50 basis point increase in interest rates, the total net interest income could increase by $5,370, while a decrease could lead to a reduction of$3,224[302]. - Prepayment risk is managed by including prepayment penalties in loan agreements to mitigate unexpected principal repayments[305]. - Currency risk is mitigated through foreign currency forward contracts that match the net principal and interest of foreign currency loans[308]. Valuation and Financial Reporting - A valuation allowance of $0.7 million was recorded for a commercial mortgage loan held for sale, reflecting a selling price of 99.5%[227]. - The fair value of underlying collateral is sensitive to valuation methodology and key unobservable inputs, impacting the Specific CECL Allowance[296]. - The company prepares financial statements in accordance with GAAP and distributes at least 90% of REIT taxable income to maintain REIT qualification[307].