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Portfolio Manager Gregory Borenstein stated that a revival in new CLO issuance is uncertain and depends on the arbitrage between asset and liability spreads, noting the recent market has favored resets and refinancings. He explained that equity tranches carry more risk from tariff-induced dispersion as they are first-loss positions, while mezzanine debt is better insulated from a small number of credit events. CEO Laurence Penn provided the updated NAV estimate for July 31, 2025, as $6.16 per share, plus or minus three cents.

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Portfolio Manager Greg Borenstein noted that a rebound in new CLO issuance is uncertain and depends on whether the arbitrage between asset and liability spreads becomes more attractive. He clarified that CLO equity carries more risk from tariffs as a first-loss position, making mezzanine debt more insulated from smaller, tail-risk credit events. CEO Larry Penn provided the updated July 31 NAV estimate of approximately $6.16 per share.

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Portfolio Manager Gregory Borenstein stated that a rebound in new CLO issuance is uncertain and depends on the arbitrage between loan assets and debt liabilities becoming more attractive. Regarding risk, he explained that CLO equity has more exposure to tariff-driven dispersion as the first-loss tranche, whereas mezzanine positions are better insulated from a small number of credit losses. CEO Laurence Penn provided the updated NAV estimate for July 31, 2025, as $6.16 per share.

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Portfolio Manager Gregory Borenstein stated that a rebound in new CLO issuance depends on the arbitrage becoming more attractive, potentially through monetary easing, but the market is currently focused on resets and refis. He confirmed that tariff uncertainty creates dispersion, posing a greater risk to first-loss equity tranches than to more senior mezzanine positions. CEO Laurence Penn provided the updated NAV estimate for July 31, 2025, which was in a range around $6.16 per share.

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Gregory Borenstein, Portfolio Manager, stated that new CLO issuance is difficult to predict and is dependent on the arbitrage between asset and liability spreads, with the market currently focused more on resets and refis. He clarified that CLO equity carries more risk from tariffs as a first-loss position, whereas mezzanine tranches are better insulated from a small number of credit losses. CEO Laurence Penn provided the updated July 31 NAV estimate of approximately $6.16 per share.

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Gregory Borenstein, Portfolio Manager, stated that a reversal in CLO issuance trends is hard to predict and depends on the new issue arbitrage becoming more attractive. He clarified that CLO equity carries more risk from tariffs as a first-loss tranche, while mezzanine positions are better insulated from a small number of credit losses. Laurence Penn, CEO, provided the July 31 NAV estimate, which was a range around $6.16 per share.

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Head of Corporate Credit Gregory Borenstein stated that he expects strong CLO issuance to continue, driven by demand for floating-rate products and favorable economics for resets. Regarding the timeline, he said they would be patient and selective, focusing on new issue CLO equity. CEO Laurence Penn added that based on the Q3 deployment of $60 million, a full rotation of capital could be achieved in a quarter or less, making a 90-day target 'very reasonable' post-vote.

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President & COO Patrick Swindle explained that preemptive investments and planning since late 2024 have resulted in smooth and efficient activations at facilities like California City and South Texas. He noted there was nothing new to report on the PayCo facility. Swindle confirmed the Farmville acquisition closed on July 1, and its approximately $40 million in annual revenue would begin contributing immediately, with about $20 million expected in the second half of 2025.

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President and CEO Damon T. Hininger estimated that margins could reach approximately 23% to 23.5% in the low-80s occupancy range, noting this is about 150-200 basis points lower than previous estimates due to the South Texas facility closure. He added that margins could increase by another couple hundred basis points in the mid-to-upper 80s. Hininger also confirmed that direct contracting would make it easier for the USMS to utilize their services. CFO David Garfinkle added the caveat that activating new facilities involves start-up costs that would initially impact margins before stabilizing.

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President & CIO Bryan Wulfsohn detailed that longer-duration rental loans are often sold to manage spread risk, while shorter-term transitional loans are typically securitized. He stated that the decision to sell delinquent loans versus pursuing a workout is a balanced one, made on a loan-by-loan basis depending on which path offers the most attractive outcome. CEO Craig Knutson added that lower rates would likely boost origination volume for the 30-year rental product.

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Executive VP & CFO, Eric Martin, explained that the first quarter's expense ratio was unusually high and the current Q2 level of approximately 35% is a good run rate for the next few quarters, aided by leverage on fixed costs from growth. EVP & Chief Operating Officer, Julie Stephenson, added that while they cannot predict future reserve development, they are hopeful that the positive trends seen will continue.

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Executive VP & CFO Eric Martin explained that the Q2 expense ratio of around 35% is a normal run rate, following an unusually high Q1, and that growth will provide leverage on fixed costs. EVP & Chief Operating Officer Julie Stephenson added that while they are hopeful positive reserve trends will continue, the company is not in a position to predict second-half outcomes.

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Executive VP & CFO, Eric Martin, explained that the current expense ratio around 35% is a normal run rate for the upcoming quarters, following an unusually high first quarter. He noted that continued growth will provide leverage on fixed costs. Regarding reserve development, EVP & Chief Operating Officer, Julie Stephenson, stated that while current trends are favorable, the company is not in a position to predict outcomes for the second half of the year.

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CFO Frank Saracino attributed the margin change to the foreclosure of the San Jose hotel, which increased both property income and expenses. CEO Mike Mazzei clarified that they were actually disappointed with Q2 origination volume and do not believe they outperformed peers, citing the challenge of borrowers seeking cash-neutral refinancings, though he remains optimistic for the second half of the year.

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CEO Mike Mazzei explained that borrowers have a strong need to refinance existing debt, so inquiry remains high. The main headwind, he noted, is that borrowers are reluctant to inject new equity to complete a refinancing. He acknowledged a potential dip in Q2 originations due to market volatility but confirmed the pipeline is active. Mazzei also stated that the company consistently targets a 12% ROE on new originations.

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CFO Frank Saracino attributed the CECL reserve increase to updated inputs on specific risk rank 4 and 5 loans, not broad market deterioration. CEO Mike Mazzei addressed the San Jose Hotel, stating he was pleased with the dismissal of the borrower's bankruptcy attempt, which is a positive step for a lender. He declined to comment further on the specific resolution strategy due to the ongoing process but reiterated its importance as it constitutes one-third of the watch-list.

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CEO Michael Mazzei stated the company is comfortable with its current CECL level and expects a Texas multifamily loan to move to REO by next quarter. He noted that about 60% of the watch list is actionable, with the San Jose hotel loan in foreclosure. Regarding the dividend, Mazzei explained that while they covered it this quarter on a cash basis, there is a chance of "leakage" over the next 12 months depending on the pace of capital deployment. He affirmed the current dividend policy is stable for the foreseeable future.

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President & CIO Thomas Lorenzini clarified that reaching the $700 million target depends on the timing of loan repayments, with a baseline of approximately $90 million in new originations plus more if repayments occur. CFO & Treasurer Matthew Brown and Lorenzini both affirmed confidence in the new dividend's sustainability for at least 12 months, noting that if repayments slow, the higher-yielding legacy loans remaining on the books would support earnings. Vice President Jared Lewis added that while the multifamily and industrial sectors are competitive, Seven Hills finds attractive yields in smaller, middle-market transactions and niche sectors like medical office.

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President & CIO Thomas Lorenzini explained that achieving the $700 million portfolio target is dependent on the pace of loan repayments, noting that slower repayments would mean lower origination needs but would also support the dividend with higher-yielding legacy loans. CFO & Treasurer Matthew Brown affirmed confidence in the new dividend's sustainability for at least 12 months. Vice President Jared Lewis identified multifamily and industrial as active sectors, acknowledging intense competition and stating that Seven Hills focuses on smaller, middle-market deals and niche sectors like medical office to achieve attractive risk-adjusted returns through flexible financing.

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Jared Lewis, Vice President, stated that lenders remain supportive and borrowing costs have been held steady, with new underwriting targeting the SOFR plus 2% range. Thomas Lorenzini, President and Chief Investment Officer, confirmed that the company is not altering its underwriting approach, emphasizing a commitment to credit discipline over pursuing market share.

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Thomas Lorenzini, President and Chief Investment Officer, detailed the status of four upcoming office loan maturities, noting that two are being extended, one is expected to be refinanced by the borrower, and another borrower has indicated they will extend. Regarding the use of cash, Lorenzini stated that while they have discussed purchasing securities, the current pipeline is significant enough that they prefer to hold the capital to fund new loans.

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William Greenberg, President & CEO, stated that the origination effort remains small due to low refinance eligibility, and they are balancing cost against opportunity by using loan officers for second liens to maintain capacity. Regarding the litigation, he reiterated the prepared remarks, stating that a trial date has not been set and that he could not provide further details at this time but would update the market when possible.

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Robert Cauley, Chairman, President & CEO, stated that future capital raises depend on the stock price, ideally at or above book value. He estimated current ROEs are 16-16.5%, with potential to reach 18%. Regarding premium risk, he noted their view is for rates to remain higher for longer and that they focus on lower pay-up pools. Hunter Haas, CFO & CIO, added that their specified pools have unique stories mitigating risk and are balanced by discount coupon holdings. Cauley concluded by stating the quarter-to-date book value was down approximately 3 cents per share.

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Executive Robert Cauley clarified that the company unwound longer-duration assets, primarily discounts, which required unwinding only two swaps. He then provided a quarter-to-date book value estimate of $7.28 per share as of the previous night, representing an 8.3% decline. Cauley also detailed the total return for the quarter-to-date, which was -6.8% after accounting for the dividend accrual.

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Executive Robert Cauley responded that a hawkish turn would likely trigger a spike in volatility and a sell-off in long-end rates, which is generally detrimental for mortgages in the short term. He noted that Orchid is positioned for this 'bear steepening' risk with its barbell strategy of hedging shorter-duration, higher-coupon assets with longer-duration instruments. While a flight-to-quality would be painful initially, a settled, steeper curve environment would ultimately present a very attractive investment opportunity.

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Executive Robert Cauley stated the up-in-coupon bias reflects an asymmetric outlook where rates are more likely to rise than fall significantly. Executive George Haas added that lower coupons are retained for their positive performance in a potential rally. Haas explained the hedge ratio change was a tactical fine-tuning, not a core strategy shift, and that they expect volatility to remain elevated due to economic data uncertainty and the upcoming election.

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Chief Investment Officer Brian Norris explained that wider spreads on higher coupons cushion prepayment risk, and the firm's focus on specified pools offers protection. He stated they are comfortable with the current, slightly lower leverage level, as attractive ROEs cover the dividend without needing to add risk amidst policy uncertainty.

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Brian Norris, CIO, stated that while spreads are attractive and consistent with previous widening episodes, the team is more conservative on leverage now due to the risk of delayed monetary policy adjustments. Regarding specified pools, he explained the rotation is driven by several factors: low loan balance pools are fully priced, credit-constrained borrowers may prepay slower in an economic slowdown, and it helps maintain a lower payout profile as they rotate into higher coupon securities.

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CIO Brian Norris confirmed that to the extent exposure to rate volatility declines due to the CMBS allocation, it could allow for increased leverage. CEO John M. Anzalone added that Agency CMBS has similar borrowing costs and haircuts to agency mortgages, so it does not negatively impact leverage from a financing perspective.

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David Spector, CEO & Chairman, responded that there is little discussion about GSE reform in Washington D.C. and that a return of the lender CRT program is unlikely. He emphasized that the company's non-agency securitization program creates comparable, high-return investments and has helped revitalize the private label market, which he described as the most robust in over 18 years. He confirmed execution beats agency levels but did not provide specific spread details.

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CEO David Spector responded that there is little discussion in Washington D.C. about GSE reform and he does not see lender CRT returning soon. He highlighted the non-agency securitization program as a strong alternative for creating comparable investments with mid-teen returns. While declining to provide specific execution spreads, Spector emphasized that the execution beats agency levels materially and described the current private label market as the most robust in over 18 years.

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Chairman & CEO David Spector stated he is pleased with the current capital allocation, emphasizing the importance of growing the credit-sensitive strategy via securitizations while also replenishing the interest rate-sensitive portfolio to avoid runoff. EVP & CFO Daniel Perotti projected an increase in correspondent activity in late April and May as locked loans fund, while noting the overall market remains centered on a volatile, rate-dependent $2 trillion origination forecast.

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Executive Daniel Perotti explained that a de-inverting yield curve enhances earnings power in interest rate-sensitive strategies, pushing the run rate towards the $0.40 per share level, which supports the company's stable dividend narrative. Executive David Spector added that there is a significant opportunity to increase investment in credit-sensitive assets, particularly through private label securitizations of investor and second home loans, which PMT is actively pursuing.

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Peter Federico, President, CEO & CIO, stated that while a new, wider trading range for MBS spreads has been established, he believes spreads are at the high end of that range. He noted that the 'do no harm' approach to GSE reform has removed a key risk. Regarding investments, he highlighted that 81% of the portfolio has prepayment protection and that AGNC favors higher coupon specified pools over TBAs due to a lack of funding advantage in the latter.

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CEO James Flynn responded that dividend capacity is more closely tied to loan payoffs than originations and expressed confidence in Lument's ability to source new assets as needed. He described the pipeline as having attractive new construction and lease-up opportunities, a slowdown in bridge-to-bridge deals, and future opportunities from maturing loans requiring new sponsorship.

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CEO James Flynn acknowledged that post-election uncertainty has caused some sponsors to pause, but he does not foresee a major slowdown comparable to early 2023, citing a still-positive economic outlook. Managing Director Zachary Halpern added that deal activity has picked up significantly since recent rate cuts, with a strong pipeline expected to close in December and into Q1.

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CEO Dave Donahue clarified that the government had retracted the Fort Bliss procurement but affirmed GEO is positioned to support various capacity needs, including at its own idle facilities, which are all under active discussion with federal partners. CFO Mark Suchinski stated that share repurchases are a key goal after supporting client growth and reducing debt. He suggested the company would evaluate buybacks more meaningfully in the second half of 2025, with it becoming a 'very serious conversation in '26,' potentially accelerated by the Oklahoma asset sale.

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Executive Chairman George Zoley responded that the company would be careful and thoughtful before expanding facilities. He noted that GEO might first re-evaluate its existing 85,000-bed portfolio across all clients (federal, state, and local) and potentially redirect contracts to meet prioritized federal needs before committing to new construction.

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CIO Nick Smith provided details on the securitization, noting advance rates of approximately 95% on the retained non-investment grade tranches with funding costs around 200 basis points over the index. He also confirmed that Arc Home is currently operating at volumes sufficient for breakeven and that the focus is now on top-line growth to drive further profitability.

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CIO Nicholas Smith explained that while it's still early, sourcing comes from a wide range of entrants, and he expects the vast majority to come from nonbanks going forward. Regarding liquidity, Smith stated that the team feels comfortable with the current level of approximately $120 million and noted there is room to draw it down to enhance the firm's leverage profile.

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CEO David Finkelstein stated that the marginal dollar is currently being allocated to the Agency sector due to wider spreads and attractive returns, while MSR growth remains opportunistic. Co-CIO Michael Fania detailed the successful inaugural HELOC securitization, noting it priced accretively and attracted new floating-rate investors to the platform, demonstrating liquidity for the asset class.

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CEO David Finkelstein stated that the marginal dollar is currently being allocated to the Agency sector due to wider spreads, while MSR growth remains opportunistic. Co-CIO Michael Fania detailed the success of the inaugural HELOC securitization, noting it priced tightly and attracted new floating-rate investors to the platform, providing an accretive source of term funding.

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Chief Investment Officer Terrence Connelly acknowledged the significant ROE opportunity and stated that diversification across the coupon stack and into Agency CMBS helps manage volatility. Co-CEO and President Smriti Popenoe clarified that the recent leverage increase from 7.4x to 7.8x was entirely due to a book value decline, not new capital deployment.

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Co-CEO Smriti Popenoe responded that the portfolio is constructed to perform well in steep yield curve scenarios, as detailed in their earnings presentation (Slide 24). She noted that the mortgage market generally benefits from a steeper curve due to the opportunity to earn carry, and that the team has been actively locking in attractive forward financing costs.

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CEO Christopher Abate clarified that while full GSE reform is distant, near-term advocacy focuses on curbing GSE mission creep, which would benefit Redwood's existing business. CFO Brooke Carillo explained that the Q4 G&A decline was due to lower performance-based compensation and that future expense levels will be closely tied to the profitable growth of the operating businesses.

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CFO Brooke Carillo confirmed the leverage increase was a point-in-time metric and has since declined to ~2.2x following significant Q4 loan distribution. CEO Christopher Abate added that the seller base remains broadly diversified with no over-concentration, and the company continues to gain traction with bank partners, whose need for Redwood's services increases in a higher rate environment.

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CEO Scott Ulm confirmed that recent capital deployments have successfully achieved the targeted 18-19% ROE. He then identified several key risks for spread widening, including geopolitical events, headline risk from potential GSE reform, ongoing fiscal policy issues, Treasury supply, and the evolving inflation narrative.

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CEO Michael Nierenberg explained that the current dividend policy, a Board decision, favors retaining capital for reinvestment at mid-teens returns to drive long-term value. Newrez President Baron Silverstein added that the company maintains significant operational headroom and flexibility, partly through offshoring, to manage volume fluctuations.

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CEO Michael Nierenberg explained that while he is frustrated with the stock price, the Board's current view is to retain capital for reinvestment in mid-teens return opportunities to drive long-term value, rather than raising the dividend. Newrez President Baron Silverstein added that the origination platform has significant operational headroom and flexibility, supported by offshoring, to manage shifts in market volume.

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