Financial Data and Key Metrics Changes - The company reported distributable earnings of $52.1 million or $0.25 per share, and $62.5 million or $0.30 per share excluding one-time realized losses of $10.5 million from the sale of two REO assets in the second quarter [17] - The total delinquencies decreased to $529 million as of June 30 from $654 million at March 31, with non-performing loans (NPLs) at approximately $472 million compared to $511 million last quarter [19][20] - The average yield on core investments decreased to 7.95% from 8.15% last quarter, primarily due to less back interest collected and additional delinquencies [24] Business Line Data and Key Metrics Changes - In the agency business, the company originated $850 million in loans during the second quarter and $1.5 billion for the first six months, with a strong July resulting in $1 billion in agency loans [11][12] - The single-family rental business generated approximately $230 million in new business in the second quarter, with a strong pipeline and successful conversion of construction loans into bridge loans [13] - The construction lending business closed $265 million in deals in the first six months and an additional $144 million in July, with a strong pipeline of applications [14] Market Data and Key Metrics Changes - The prolonged elevated rate environment has created challenges in the agency originations business, affecting borrowers' ability to transition to fixed-rate loans [7] - The company anticipates that the current year will be challenging due to the significant drag on earnings from REO assets and delinquencies, with expectations for a transitional year [9][15] - The competitive landscape in balance sheet lending remains strong, with a significant appetite for deals and a large amount of capital chasing transactions [10] Company Strategy and Development Direction - The company views 2025 as a transitional year focused on resolving REO assets and delinquencies to build a strong earnings foundation for 2026 [16] - The company aims to leverage its securitization platform to scale up its single-family rental business and gain market share, enhancing competitive advantages [6] - The strategy includes being selective in closing deals, with a focus on maintaining credit quality and structure despite competitive pressures [10] Management's Comments on Operating Environment and Future Outlook - Management noted that the current elevated rate environment has created volatility and uncertainty, making it difficult to predict interest rate movements for the remainder of the year [7] - The company is optimistic about future earnings growth and dividend increases in 2026 if there is a sustained reduction in interest rates [9] - Management emphasized the importance of managing through the loan book effectively despite the challenges posed by the current economic environment [7] Other Important Information - The company successfully completed a high-yield unsecured debt offering, raising $500 million to pay off convertible debt and enhance liquidity [4][5] - The investment portfolio grew to $11.6 billion at June 30, with originations outpacing runoff for the second consecutive quarter [23] - The company recorded an additional $16 million in loan loss reserves in the second quarter, reflecting changes in the outlook on real estate values [22] Q&A Session Summary Question: Drop in net interest income from $75 million to $69 million - Management explained that the drop was due to increased delinquencies and less back interest collected on delinquent loans, with reversals impacting the figures [28][29] Question: Future REO levels and potential peak - Management indicated that they are aggressively managing non-performing loans and expect to see a peak in REO levels, with a focus on transitioning assets quickly [31][32] Question: Increased lending spreads and capital markets activity - Management noted that lower interest rates create opportunities for distressed deals, leading to increased interest in their REO and sub-performing loan books [37][38] Question: Losses related to REO this quarter - Management confirmed that losses were primarily from one property that was foreclosed and sold quickly, with another asset marked close to its value [50][51] Question: PIK interest on the balance sheet - Management confirmed that PIK interest is being capitalized in loan balances, with $95 million of PIK on the balance sheet as of June 30 [56][58] Question: Absorption of vacancy and property strategy - Management discussed that their portfolio is primarily in workforce housing, which is seeing steady growth in occupancy, and they are focused on repositioning underperforming assets [62][63] Question: Capital expenditures for portfolio repositioning - Management estimated that capital expenditures for repositioning assets would be in the range of $25 million to $50 million over time [70]

Financial Data and Key Metrics Changes - The company reported distributable earnings of $52.1 million or $0.25 per share, and $62.5 million or $0.30 per share excluding one-time realized losses of $10.5 million from the sale of two REO assets in the second quarter [18] - The total delinquencies decreased to $529 million as of June 30 from $654 million at March 31, with non-performing loans (NPLs) at approximately $472 million compared to $511 million last quarter [20][21] - The average yield on core investments decreased to 7.95% from 8.15% last quarter, primarily due to less back interest collected and additional delinquencies [25] Business Line Data and Key Metrics Changes - In the agency business, the company originated $850 million in loans during the second quarter and $1.5 billion for the first six months, with a strong July resulting in $1 billion in agency loans [12][24] - The single-family rental business saw approximately $230 million in new business during the second quarter, with a strong pipeline for future growth [13][14] - The construction lending business closed $265 million in the first six months and an additional $144 million in July, with a strong pipeline of applications [15] Market Data and Key Metrics Changes - The prolonged elevated rate environment has created challenges in the agency originations business, affecting borrowers' ability to transition to fixed-rate loans [8] - The company anticipates that if there is a sustained reduction in interest rates, it will positively impact origination volumes and earnings [10] Company Strategy and Development Direction - The company views 2025 as a transitional year focused on resolving REO assets and delinquencies, aiming to build a strong earnings foundation for 2026 [16][17] - The company is committed to being selective in its lending practices, closing $100 million in the second quarter and $215 million in July, with a target of $1.5 billion to $2 billion in bridge loan production for 2025 [11] - The company is expanding its securitization platform to increase leverage and efficiency in the single-family rental business, enhancing competitive advantage [6][14] Management's Comments on Operating Environment and Future Outlook - Management noted that the current market environment is characterized by volatility and uncertainty, particularly regarding interest rates, which complicates predictions for the remainder of the year [8] - The company is optimistic about future growth, especially if interest rates decrease, which would facilitate increased origination volumes and improved earnings [10][81] Other Important Information - The company successfully completed a high-yield unsecured debt offering, raising $500 million to pay off convertible debt and enhance liquidity [4][5] - The investment portfolio grew to $11.6 billion at June 30, with an all-in yield of 7.86% [24] Q&A Session Summary Question: Drop in net interest income from $75 million to $69 million - Management explained that the drop was due to increased delinquencies and less back interest collected on delinquent loans, along with reversals on certain loans [30][31] Question: Future peak of REO assets - Management indicated that they expect REO assets to peak around $400 million to $600 million, with a focus on accelerating the resolution of non-performing loans [33][34] Question: Interest from outside parties in REO and sub-performing loan books - Management confirmed that there is significant interest in distressed deals, with multiple bidders for such assets, particularly as interest rates decline [40][41] Question: Capital expenditures for repositioning assets - Management estimated that capital expenditures for repositioning assets would be between $25 million to $50 million over the next six to twelve months [70][72] Question: Agency originations dynamics between Fannie and Freddie - Management noted that both agencies have competitive advantages, with Fannie Mae traditionally being more active, but Freddie Mac has been stepping up recently [75][76]

Financial Data and Key Metrics Changes - The company reported distributable earnings of $81.6 million or $0.40 per share for Q4 2024, and $1.74 for the full year, translating to a return on equity (ROE) of approximately 14% [40] - The forecast for distributable earnings in 2025 has been adjusted to a range of $0.30 to $0.35 per quarter due to changes in the macroeconomic climate [41][12] - The company experienced elevated legal and consulting fees due to short-sell reports, estimated to impact earnings by approximately $0.03 to $0.05 per share going forward [42] Business Line Data and Key Metrics Changes - The company modified $4.7 billion of loans over the last two years, with $4.1 billion modified in 2024 alone, indicating a strong focus on loan modifications [15][16] - The agency business had a strong Q4 with $1.35 billion in new originations, closing the year with $4.3 billion in GSP agent fee volume [28][29] - The single-family rental business saw $1.7 billion in new loans in 2024, significantly above the previous year's production [32] Market Data and Key Metrics Changes - The company noted a 100 basis point decrease in SOFR, which has reduced earnings on cash and escrow balances [11][58] - Total delinquencies decreased by 13% to approximately $819 million as of December 31, down from $945 million at the end of Q3 [46] - The average yield on core investments decreased to 8.52% from 9.04% due to a reduction in SOFR [60] Company Strategy and Development Direction - The company is focused on repositioning REO assets and expects to significantly grow the NOI from these assets over the next 12 to 24 months [23][24] - A capital-light agency platform is a critical part of the company's strategy, allowing for significant long-dated income streams [26] - The company plans to originate between $1.5 billion to $2 billion in bridge loans in 2025, enhancing returns and efficiency [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the challenging interest rate environment, noting that they are well-capitalized and have a cushion between earnings and dividends [8][9] - The outlook suggests that elevated rates will persist, creating headwinds for agency origination volumes [10] - Management is optimistic about the potential for future earnings growth if interest rates decline [24][37] Other Important Information - The company has grown its book value by 26% over the last five years, contrasting with a 25% erosion in net asset values among peers [15][55] - The company has successfully transitioned new sponsors to manage assets, which is expected to create more predictable future income streams [17][19] Q&A Session Summary Question: Dividend expectations for 2025 - Management appreciates the clarity provided regarding dividend expectations, indicating that the market is better prepared for this information now rather than later [66] Question: Institutional money and distressed bridge loans - Management noted that there is institutional capital available for distressed assets, but the market is currently experiencing a pause due to rising interest rates [68][70] Question: Performance of modified loans - Management indicated that the majority of modified loans are performing well, with a focus on ensuring sponsors bring in additional capital [82][86] Question: Servicing escrow balances - Management explained that the reduction in earnings from escrows and cash is due to lower SOFR rates and decreased cash balances, projecting earnings of $80 million to $85 million going forward [90][92] Question: Confidence in book value and potential buybacks - Management expressed confidence in the book value, stating that while there may be minor adjustments, they believe they have adequately reserved for potential losses [115][123]