Financial Data and Key Metrics Changes - Distributable earnings for Q2 2025 were reported at $0.31 per share, at the high end of the guidance range [5][18] - Total commitments across first mortgage loans stood at $665 million, with a weighted average coupon of SOFR plus 3.64% and an all-in yield of 8.37% [6][15] - The quarterly dividend was reduced to $0.28 per share, reflecting a 20% decrease from the previous level [7][17] Business Line Data and Key Metrics Changes - The company originated two new first mortgage loans totaling $46 million during the quarter [6] - All loans in the portfolio remained current on debt service, with a weighted average risk rating of 2.9, unchanged from the previous quarter [6][17] - The company anticipates positive year-over-year portfolio growth, expecting to end 2025 with approximately $700 million in outstanding commitments [9][18] Market Data and Key Metrics Changes - Transaction activity slowed due to tariff announcements and global trade negotiations, causing uncertainty in the market [11] - Despite macro headwinds, the company averaged over $1 billion in monthly loan registrations, indicating strong demand for flexible, floating-rate debt solutions [11][12] - Competition among lenders remains elevated, particularly in the multifamily sector, with demand for securitized products supporting the debt markets [12][13] Company Strategy and Development Direction - The company is focused on smaller, middle-market transactions to earn more attractive yields by providing creative financing terms [13] - The strategy includes being selective in capital deployment, particularly in sectors where the company has a competitive advantage, such as industrial and medical office sectors [13] - The company is currently in diligence on a $34 million loan for a mixed-use retail and medical office property, indicating ongoing investment activity [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current environment, emphasizing strong sponsor relationships and liquidity [10][15] - The company expects to see two to three additional loans totaling approximately $100 million repaid in the latter half of the year [9] - Management anticipates that if the Fed cuts interest rates, there will be a meaningful increase in acquisition activity [13][39] Other Important Information - The CECL reserve increased to 150 basis points of total loan commitments, reflecting macroeconomic factors and loan extensions [15] - The company has no collateral-dependent loans or loans with specific reserves, indicating a strong credit performance [15][17] Q&A Session Summary Question: Expected year-end portfolio size and originations - Management indicated an expected year-end portfolio size of around $700 million, with originations for the second half potentially exceeding $200 million, dependent on repayments [20][21] Question: Stability of the new dividend level - Management expressed confidence that the new dividend level of $0.28 per share is sustainable for at least the next twelve months, contingent on loan repayments [24][25] Question: Attractive opportunities and competitive environment - Management noted significant activity in the multifamily and industrial sectors, with many borrowers needing additional time to optimize properties before refinancing or selling [27][28] Question: Leverage expectations for the second half of the year - Management expects leverage to remain consistent at 1.6 times debt to equity until office loans recycle out of the system [33] Question: NIM compression factors - Management explained that NIM compression is primarily driven by aggressive pricing in the multifamily sector, influenced by the CRE CLO market [34][35] Question: Impact of potential Fed cuts on NIM - Management indicated that Fed cuts would likely lower overall borrowing costs and stimulate transaction activity in the market [38][39]

Financial Data and Key Metrics Changes - In Q2 2025, the company generated distributable earnings of $30.9 million or $0.23 per share, achieving a return on equity of 7.7% with adjusted leverage of 1.6 times [4][11] - The company achieved investment grade ratings from Moody's and Fitch, marking a significant milestone in its history [4][11] - The company had $1 billion in liquidity as of June 30, 2025, including an undrawn $850 million unsecured revolving credit facility [6][12] Business Line Data and Key Metrics Changes - The securities portfolio totaled $2 billion, up 82% from the end of the previous year, with a weighted average yield of 5.9% [16] - The loan portfolio stood at $1.6 billion with a weighted average yield of approximately 9%, and five loans on nonaccrual totaling $162.3 million [15][16] - The real estate portfolio generated $15.1 million in net operating income during Q2 2025, primarily consisting of net lease properties with long-term leases [8][16] Market Data and Key Metrics Changes - The company successfully issued a $500 million five-year investment grade unsecured bond at a fixed rate of 5.5%, which was oversubscribed by 5.5 times [5][11] - The company noted that the cost of debt capital has begun to decrease due to its investment grade status, with spreads tightening on new bond issuances [9][18] Company Strategy and Development Direction - The company aims to increase its stock price and position itself as the only current investment grade mortgage REIT in the country, focusing on a senior secured investment strategy [19][20] - The company plans to maintain a conservative balance sheet while deploying capital into new higher-yielding investments [10][22] - The management emphasized a focus on capital preservation and attractive dividend payments, with intentions to grow dividends in the future [21][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong liquidity and a disciplined approach to credit as key factors for capitalizing on investment opportunities [23] - The company anticipates continued tightening of credit spreads and a favorable market environment for investment-grade issuers [18][23] Other Important Information - The company repurchased $6.6 million of common stock during the quarter, with $93.4 million remaining under its stock repurchase program [14] - The company has a CECL reserve of $52 million, which is deemed adequate to cover potential losses in the loan portfolio [15] Q&A Session Summary Question: Thoughts on the securities portfolio and selling activity - Management indicated that the securities portfolio is performing well, and they are selectively selling as they transition from securities to loans [25][27] Question: Convertibility of the loan pipeline into the book - Management noted a dip in loan origination volume but indicated that they have already written more loans in the third quarter than in the entire second quarter [29][30] Question: Impact of investment grade rating on investment opportunities - Management stated that the investment grade rating has made investments more profitable but does not change their core investment strategy [36][37] Question: Expectations for net portfolio growth in the second half of the year - Management expects to write approximately $1 billion in loans by year-end, with a focus on acquisition loans as the market stabilizes [68][73]

Portfolio Overview - The loan investment portfolio totals $3.4 billion[6] - The weighted average all-in yield is 8.22%[6] - The weighted average credit spread is 3.66%[6] - 99.7% of the portfolio consists of floating rate loans[6] - The weighted average LTV (Loan-to-Value) is 66.1%[6] Liquidity and Capitalization - Available liquidity stands at $457.6 million[6] - 91.0% of financing is non-mark-to-market[6] - The debt-to-equity ratio is 2.2x[6] Dividend and Earnings - The common stock dividend declared for 1Q25 is $0.24 per share[6] - GAAP income per diluted share for 1Q25 is $0.12[6] - Distributable earnings per diluted share for 1Q25 is $0.24[6]