Core Insights - Ares Commercial Real Estate Corporation (ACRE) is a mortgage REIT that has reported its Q3 earnings, indicating progress in addressing distressed loans, although significant work remains to be done [1] Company Summary - ACRE has made strides in turning around its distressed loans, but challenges persist, suggesting a need for continued focus on loan management and recovery strategies [1] Investment Analysis - The analysis is based on value investing principles, emphasizing an owner's mindset and a long-term investment horizon, which may appeal to investors looking for stability in the mortgage REIT sector [1]

Financial Data and Key Metrics Changes - For Q3 2025, the company reported net income of $0.53 per share compared to a loss of $0.29 in Q2 2025 [5] - Book value increased to $7.33 as of September 30 from $7.21 on June 30 [5] - Total return for Q3 was 6.7%, a significant improvement from negative 4.7% in Q2 [5] - Average portfolio balance rose to $7.7 billion in Q3 from $6.9 billion in Q2 [5] - Liquidity improved to 57.1% at September 30, up from 54% at June 30 [5] Business Line Data and Key Metrics Changes - The average coupon of the portfolio increased from 5.45% to 5.53% [30] - Effective yield rose from 5.38% to 5.51% [30] - Net interest spread expanded from 2.43% to 2.59% [30] - 20% of the portfolio is now backed by credit-impaired borrowers, with significant exposure to Florida and New York pools [30] Market Data and Key Metrics Changes - The Treasury curve steepened slightly during the quarter, reflecting market expectations of Federal Reserve rate cuts due to labor market deterioration [7][9] - The current coupon mortgage spread to the 10-year Treasury halved from 200 basis points in May 2023 to 100 basis points [11] - The mortgage market remains attractive, with strong demand despite tight credit spreads [10] Company Strategy and Development Direction - The company maintains a conservative leverage posture while focusing on high coupon specified pools to enhance income stability [30][43] - The strategy includes a heavy tilt towards call-protected specified pools to insulate against adverse payment behavior [30] - The company is positioned to benefit from potential Federal Reserve rate cuts and the anticipated end of quantitative tightening [44] Management's Comments on Operating Environment and Future Outlook - Management noted a potential crossroads for the economy, with labor market weakness prompting possible Federal Reserve rate cuts, while also observing resilience in consumer spending and government stimulus [45][46] - The company expects to adjust hedges to lock in lower funding costs and prepare for potential rate hikes following expected cuts [47] Other Important Information - The company raised $152 million in equity capital during the quarter, which was fully deployed into high-quality specified pools [28][41] - The weighted average price of the portfolio was over $101, indicating a premium position [72] Q&A Session Summary Question: Any macro factors that might change overall risk positioning? - Management indicated that if the Federal Reserve continues to cut rates, they might consider increasing leverage to benefit from the low-rate environment [50][52] Question: View on payouts upside potential with refi momentum? - Management noted that payouts have increased sharply recently, but they do not expect to return to the high levels seen in 2020 or 2021 [54][55] Question: Scenarios for dollar roll specialness returning? - Management expressed skepticism about the return of dollar roll specialness, citing the Federal Reserve's focus on buying Treasuries and bills rather than mortgages [61] Question: Supply and availability for longer-dated repo? - Management mentioned that spreads for longer-dated repo are currently too wide, but they are opportunistically looking to lock in favorable terms [63][64] Question: Percentage of portfolio covered with call protection? - Almost 100% of the portfolio has some form of call protection, which is expected to mitigate risks in a declining rate environment [71]

STOCKHOLDER PRESENTATION Q3 OCTOBER 21, 2025 THE PREMIER AGENCY RESIDENTIAL MORTGAGE REIT © 2025 AGNC Investment Corp. All Rights Reserved. 2025 IMPORTANT NOTICES Safe harbor statement under the private securities litigation reform act of 1995 This presentation contains statements that, to the extent they are not recitations of historical fact, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). All such forward-looking state ...

Group 1 - Mortgage REITs offer better returns than standard REITs but often involve high leverage, complicating the assessment of their portfolio strength [1]

Core Insights - The U.S. stock market appears calm with the VIX at around 16, but significant uncertainties remain [1][2] - Ongoing U.S. government shutdown risks and recent Federal Reserve interest rate cuts create a complex market environment [2] - Risk-averse investors may prefer ETFs over individual stocks to mitigate potential losses from company-specific issues [3][4] ETF Advantages - ETFs provide instant diversification, spreading risk across multiple stocks, which helps moderate volatility [5] - They combine diversification with liquidity and transparency, allowing for quick adjustments to market conditions [5] - Sector-specific ETFs enable cautious investors to engage in market gains while limiting exposure to individual company risks [6] Attractive Sectors for Q4 - The Technology sector remains appealing for capital appreciation despite challenges from high interest rates [7] - The Utilities sector offers stability and reliable dividends, making it a classic defensive investment [8] - Financial stocks may benefit from rate cuts, potentially enhancing lending activity and net interest margins [8] Top ETFs to Consider - **Technology Select Sector SPDR ETF (XLK)**: Focuses on tech industries with top holdings in Nvidia (14.86%), Microsoft (12.57%), and Apple (12.33%); gained 22.4% year-to-date [10][11] - **Utilities Select Sector SPDR ETF (XLU)**: Includes electric and water utilities with top holdings in NextEra Energy (11.58%) and The Southern Company (7.77%); surged 16.4% year-to-date [12][13] - **Financial Select Sector SPDR ETF (XLF)**: Covers financial services with top holdings in Berkshire Hathaway (11.92%), JP Morgan Chase (11.21%), and Visa (7.50%); increased 10.5% year-to-date [14]

Group 1 - The article highlights a new preferred stock from Annaly Capital Management, specifically the 8.875% fixed-rate Series J (NLY.PR.J) [1] - Mortgage REIT preferreds are emphasized as an important sector for income investors due to their high yield potential [1] - The article suggests exploring various investment tools and portfolios designed for yield and risk management in the mortgage REIT sector [1]

Group 1 - Redwood Trust Inc (NYSE: RWT) has a business model that allows it to achieve high returns while minimizing balance sheet risks [1] - The stock is currently trading at 0.7 times price-to-book (P/B) ratio, indicating potential undervaluation [1]

Financial Data and Key Metrics Changes - The company reported a positive economic return of 2.6% for the quarter, consisting of a $0.34 dividend and a modest $0.11 decline in book value to $8.81 [7][22] - The estimated book value per common share as of April 30 is between $7.74 and $8.06, reflecting a decline in April due to market volatility [8][21] - The leverage ratio was reduced from 7.1x to the mid-6s during the quarter, indicating a cautious approach in response to market conditions [21][23] Business Line Data and Key Metrics Changes - The agency RMBS portfolio increased by 9.5% quarter over quarter, with investments focused on higher coupon securities [17] - The company rotated its allocations from lower coupons to higher coupons, capitalizing on attractive valuations [18] - Agency CMBS exposure remained at approximately 15% of the total investment portfolio, with new purchases yielding low double-digit ROEs [19] Market Data and Key Metrics Changes - U.S. Treasury yields declined by 20 to 40 basis points across the yield curve during the first quarter, driven by concerns over economic growth [10][11] - The Fed funds futures market is now pricing in deeper cuts, with expectations for the target rate to be reduced three to four times in 2025 [12] - Agency mortgages underperformed treasuries in April due to increased interest rate volatility and market sell-offs [21][23] Company Strategy and Development Direction - The company remains focused on higher coupon Agency RMBS, anticipating improved demand as interest rate volatility declines [18][23] - The strategy includes increasing allocations to specified pools with predictable prepayment characteristics, particularly in a slowing economic environment [18] - The company is cautious about agency mortgages in the near term but maintains a favorable long-term outlook due to expected improvements in investor demand [8][23] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about tightening financial conditions and the potential impact of U.S. trade policies on economic growth [5][6] - The outlook remains cautious due to elevated interest rate volatility and policy uncertainty, but there is optimism for a steeper yield curve and improved demand in the long term [23] - Management highlighted the importance of maintaining liquidity to navigate potential market stress while capitalizing on investment opportunities as conditions improve [23] Other Important Information - The company noted that prepayment speeds remained low due to limited purchase and refinancing activity, but a decline in mortgage rates is expected to increase prepayment speeds in the coming months [6][7] - The funding market for the company's assets has been stable, with repo spreads remaining attractive [14] Q&A Session Summary Question: Discussion on leverage management during volatile periods - Management indicated that leverage was reduced by about 0.5 turns in April due to increased uncertainty regarding monetary and fiscal policy [26][28] Question: Comments on returns and spreads - Management noted that levered ROEs are in the low 20s on higher coupons, indicating attractive spreads [30] Question: Changes to the hedge portfolio - The hedge ratio was increased in response to uncertainty about near-term monetary policy, maintaining a mix of swaps and treasuries [34] Question: Impact of portfolio size on dividend levels - Management confirmed that the recent dividend reduction is still comfortably covered by current earnings [36] Question: Opportunity set in agency compared to previous peaks - Management expressed that the current opportunity in mortgages is attractive, but there is caution due to potential inflation and its impact on monetary policy [40][41] Question: Relative value of loan balance pools - Management discussed the rotation from low loan balance pools to more credit-constrained pools, driven by economic uncertainty and pricing dynamics [42][44] Question: Forward rate outlook and hedge portfolio development - Management emphasized a conservative approach to hedging and leverage, given the uncertainty in interest rate cuts [50][52] Question: Opportunities in commercial credit - Management stated that they are currently not looking to add credit exposure and have sold remaining credit investments, focusing solely on agency assets [61][62]

Financial Data and Key Metrics Changes - The company reported a GAAP net loss applicable to common stockholders of $9.3 million or $0.29 per diluted share for Q1 2025 [6][16] - Book value per common share decreased to $3.58 from $3.82 at the end of Q4 2024 [7][17] - NAV declined approximately $7.5 million or 3.2% relative to December 31 [7] Business Line Data and Key Metrics Changes - The MSR portfolio had an unpaid principal balance (UPB) of $17 billion and a market value of approximately $227 million, representing about 44% of equity capital [10] - The RMBS portfolio accounted for approximately 39% of equity capital, with a weighted average three-month CPR of 5.8% [10][12] - EAD attributable to common stockholders was $5.4 million or $0.17 per share, benefiting from dollar roll income [16] Market Data and Key Metrics Changes - Interest rates ended the quarter at 4.25%, approximately 30 basis points lower quarter over quarter [5] - Prepayment speeds for the MSR portfolio averaged approximately 4.1%, down modestly from the previous quarter [11] - RMBS portfolio's net interest spread was 3.55%, higher than the prior quarter [12] Company Strategy and Development Direction - The company plans to deploy capital into Agency RMBS and select MSRs while maintaining strong liquidity and prudent leverage [8] - The management is closely monitoring the macro environment and tariff situation to stress the portfolio for various scenarios [8] - The company aims to improve its expense ratio and capital structure over time by managing operating expenses [8] Management's Comments on Operating Environment and Future Outlook - Management expressed that rates will continue to be highly reactive to global political agendas and domestic economic data [6] - The uncertainty in the market has led the company to position its portfolio more neutrally to withstand daily volatility [6] - Future EAD is expected to trend lower due to the maturation of a significant hedge that previously contributed to EAD [16][53] Other Important Information - The company completed its first full quarter as an integrated, internally managed mortgage REIT [7] - Operating expenses for the quarter were $3.8 million, reflecting a decline due to the elimination of the management fee [17] - The Board declared a dividend of $0.15 per common share for Q1 2025, paid in cash on April 30 [18] Q&A Session Summary Question: What would it take for the company to allocate more to the RMBS portfolio? - Management indicated that all reinvestment income has been directed towards MBS, and significant changes would require selling a portion of the MSR [20][24] Question: Is there any movement in GSE reform affecting capital allocation? - Management stated it is too early to tell, and the market has not fully priced in the potential changes regarding GSE reform [25][29] Question: Can you provide a book value update for Q2? - The company reported a NAV down about 3.7% in April, leading to a 7% book value per share before any dividends [36] Question: How much of the EAD in Q1 was due to the roll-off of expenses associated with internalization? - Approximately $0.02 of EAD in Q1 was attributed to internalization and G&A savings [51] Question: What are the general thoughts on MSR pricing and supply post the Rocket Cooper deal? - Management noted that volumes have been lower and there have not been substantial changes in pricing dynamics in the market [50] Question: Are there opportunities in spec pools within the builder buy-down space? - Management has seen builder buy-downs but has not focused on them for the portfolio, preferring to keep pay-ups modest [44]

Financial Data and Key Metrics Changes - The book value at December 31 was $14.47 per common share, down from $14.93 on September 30, resulting in a flat quarterly economic return [6][17] - The company incurred a comprehensive loss of $1.6 million or $0.03 per weighted average common share in Q4 [18] - Net interest expense decreased by $7.4 million in Q4 due to lower RMBS borrowing balances [18] - The economic return for the full year of 2024 was 7.0 percent [17] Business Line Data and Key Metrics Changes - Net servicing income was $168 million, slightly down from Q3 due to lower float income [19] - The servicing assets showed a gain of $82.5 million in Q4 after a loss of $133.4 million in Q3 [20] - The weighted average note rate in the MSR portfolio was 3.46%, with mortgage rates around 7% [11] Market Data and Key Metrics Changes - The 10-year treasury yield increased by 79 basis points to finish at 4.57% [7] - The 2-year treasury yield increased by 60 basis points to 4.24% [7] - The overall prepayment rates for 30-year agency RMBS rose to 6.9% CPR, reflecting a lagged effect from lower rates in Q3 [30] Company Strategy and Development Direction - The company is focused on a hedged MSR-centric strategy to generate stable cash flows [14] - A direct-to-consumer origination platform was launched to maintain the servicing portfolio through recapture of underlying mortgage loans [11] - The company aims to expand its second lien loan offerings to borrowers [13] Management's Comments on Operating Environment and Future Outlook - Management expects mortgage rates to remain above 6% in the intermediate term, which may keep housing activity muted [9] - The company believes that its MSR portfolio will benefit from the success of servicing and originations [11] - Management expressed optimism about the stability of returns and the potential for attractive levered returns in 2025 and beyond [35] Other Important Information - The company serviced $212 billion UPB of MSR across 861,000 loans, with $58 billion UPB serviced for third-party clients [10] - The economic debt to equity ratio decreased slightly to 6.5 times [26] - The MSR portfolio was valued at $202 billion UPB at December 31, reflecting a slight increase in price multiple to 5.9 times [31][32] Q&A Session Summary Question: How has the book performed so far in the quarter? - Management indicated that total return is estimated to be up between 1.5% to 2% as of the previous night [38] Question: How does the lower leverage level impact earnings power? - Management stated that overall debt to economic ratio is just one measure and that the mix of assets supports stable returns [39][40] Question: What is the outlook for Agency MBS spreads this year? - Management expressed a positive outlook for mortgage spreads, noting a more controlled response since November [46][49] Question: Any thoughts on potential GSE reform? - Management indicated they do not have more information than the market regarding GSE reform and its implications [54] Question: Can you discuss the differences between EAD and static return range? - Management explained that the static return is a mark-to-market basis, while EAD reflects the purchase price and can create timing distortions [60][62] Question: Are there new financing counterparties for the MSR portfolio? - Management noted that the depth of the market for MSR financing continues to grow with new entrants [70][71] Question: How have costs changed in response to rate cuts? - Management stated that financing costs have decreased as the Fed has cut rates, impacting both MSR and RMBS sides [73]