Executive Summary

Q2 2024 delivered GAAP net income allocable to common of $1.653M ($0.21 diluted EPS) on total revenues of $20.936M, with EAD per share rising to $0.51; liquidity ended the quarter at $98.4M and book value per share was $27.20 .
Sequentially, revenues improved vs Q1 ($18.768M), EPS increased from $0.07 to $0.21, and EAD per share expanded from $0.16 to $0.51; YoY, revenues declined vs Q2 2023 ($23.622M) while EPS rose from $0.10 to $0.21 .
Credit quality indicators mixed: 94% of CRE loans current and multifamily concentration at ~79%, while weighted average risk rating ticked to 2.7 from 2.6 and CECL reserve ratio rose to ~2.04% .
Management emphasized portfolio discipline and shareholder value via EAD growth and buybacks; CEO highlighted continued pursuit of loan opportunities and protection of shareholder value . No formal guidance was issued; preferred dividends were declared during Q2 (Series C: $0.5390625; Series D: $0.4921875) .

What Went Well and What Went Wrong

What Went Well

EAD per share improved to $0.51, supported by add-backs including non-cash items and real estate depreciation, indicating stronger distributable earnings capacity .
Liquidity increased to $98.4M, and book value per share held at $27.20, reflecting capital stability and accretive capital management .
Portfolio performance remained resilient: 94% of CRE loans current on payments; multifamily exposure at ~79% provides defensive positioning in the loan book .

Quote: “The ACRES team has shown great skill and dedication in managing our investment portfolio with precision and foresight… ensuring the protection and enhancement of shareholder value remains paramount.” – Mark Fogel, President & CEO .

What Went Wrong

YoY revenue softness: Q2 revenues fell to $20.936M from $23.622M in Q2 2023, and net interest income compressed YoY ($10.755M vs $14.706M) amid higher funding costs and portfolio paydowns .
CECL reserve ratio increased to ~2.04%, with the weighted average risk rating moving to 2.7 from 2.6, reflecting continued sector volatility and credit migration .
Office exposure remains a notable segment (13.7% of CRE loans by property type), a category with broader market headwinds; risk-rated 4–5 loans represent a meaningful portion of the portfolio at quarter-end .

Financial Results

Sequential Comparison (Q1 2024 → Q2 2024)

Metric	Q1 2024	Q2 2024
Revenues ($USD Millions)	$18.768	$20.936
Net Interest Income ($USD Millions)	$11.360	$10.755
Net Income Allocable to Common ($USD Millions)	$0.556	$1.653
Diluted EPS ($USD)	$0.07	$0.21
EAD per Share - Diluted ($USD)	$0.16	$0.51
Book Value per Share ($USD)	$27.25	$27.20
Total Liquidity ($USD Millions)	$92.1	$98.4

Year-over-Year Comparison (Q2 2023 → Q2 2024)

Metric	Q2 2023	Q2 2024
Revenues ($USD Millions)	$23.622	$20.936
Net Interest Income ($USD Millions)	$14.706	$10.755
Net Income Allocable to Common ($USD Millions)	$0.817	$1.653
Diluted EPS ($USD)	$0.10	$0.21

Revenue Components (Sequential)

Component ($USD Millions)	Q1 2024	Q2 2024
Interest Income	$42.611	$41.066
Interest Expense	$(31.251)	$(30.311)
Net Interest Income	$11.360	$10.755
Real Estate Income	$7.371	$10.143
Other Revenue	$0.037	$0.038

KPIs and Portfolio Metrics

KPI	Q1 2024	Q2 2024
% CRE Loan Portfolio Current on Payments	92%	94%
Multifamily % of CRE Loan Portfolio	79.1%	79.4%
Weighted Avg Risk Rating (par)	2.6	2.7
CECL Reserve % of Par	1.89%	2.04%
Weighted Avg Spread (1M BR +)	3.78%	3.75%
Weighted Avg LTV	77%	77%
Loans (count)	66	64
CRE Whole Loans at Par ($USD Billions)	$1.775	$1.7
Net CRE Loan Repayments ($USD Millions)	$69.4	$61.9

Non-GAAP EAD Reconciliation (Selected Items, Q2 2024):

Non-cash equity comp: $0.814M; CECL provision: $1.337M; Real estate depreciation & amortization: $1.247M; Net income from non-core assets: $(1.053)M; EAD allocable to common: $3.998M ($0.51 per diluted share) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Company Guidance (Revenue/EPS/Margins)	Q3/Q4 2024	None provided	None provided	Maintained – No formal guidance
Preferred Dividend – Series C	Q2 2024 payable Jul 30	—	$0.5390625 per share	Declared
Preferred Dividend – Series D	Q2 2024 payable Jul 30	—	$0.4921875 per share	Declared
Share Repurchase Program Remaining Capacity	As of Jun 30, 2024	$5.6M at Mar 31	$4.1M at Jun 30	Maintained program; capacity lower after repurchases

No explicit forward guidance was issued; earnings materials focused on portfolio metrics, liquidity, credit reserves, and EAD .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2023)	Previous Mentions (Q1 2024)	Current Period (Q2 2024)	Trend
Credit migration & CECL	WA risk rating rose to 2.7; CECL allowance $28.8M driven by elevated rates and macro conditions	CECL ratio ~1.89%; WA risk rating 2.6	CECL ratio ~2.04%; WA risk rating 2.7	Slight deterioration in risk metrics vs Q1; reserves higher
Liquidity & leverage	Liquidity $108M; leverage ~3.8x	Liquidity $92.1M; leverage ~3.7x	Liquidity $98.4M; leverage ~3.6x	Liquidity improved QoQ; leverage modestly lower
Interest rate caps & borrower behavior	Early borrower engagement to replace caps; generally positive borrower actions	Caps maturity profile disclosed; emphasis on match financing	86% of par with caps/reserves; positive NII sensitivity to rising BR	Ongoing management; sensitivity trending favorable
Capital allocation (buybacks vs dividend)	ROE-focused; opportunistic buybacks; dividend timing TBD	EAD target roughly equating to 10% dividend at book value (objective)	Book value $27.20; buyback capacity $4.1M remaining; no common dividend disclosure	Focus on EAD and buybacks continues
Portfolio composition	Multifamily ~79%; office ~13–14%; 70 loans at YE	Multifamily ~79%; 66 loans; LTV ~77%	Multifamily ~79%; 64 loans; LTV ~77%	Stable mix; loan count down on repayments

Note: Q2 2024 call transcript access via internal document tool was unavailable; key themes aligned with earnings presentation and prior calls .

Management Commentary

Prepared remarks (press release): “Our ongoing commitment is to seek out new loan opportunities while ensuring the protection and enhancement of shareholder value remains paramount.” – Mark Fogel, President & CEO .
Capital allocation philosophy: “We’re really ROE focused… at the levels that we were repurchasing in the fourth quarter, you can do the math that we’re significantly above that 15% ROE number… timing of a dividend [not provided].” – Andrew Fentress, Chairman (context from prior call) .
Operating posture: Focus on asset management, monetizing non-core real estate investments to recycle capital into the loan book and grow EAD/book value (prior call framing) .

Q&A Highlights

Credit migration: Management noted watch-list migration tied more to short-term property cash flow than expected principal loss; one “5” rated asset resolved with full principal recovery in Q1 .
Monetization pipeline: Visibility on two real estate investments for potential monetization, with timing uncertain; proceeds intended to be recycled into the loan book .
Capital returns: Emphasis on ROE when weighing buybacks vs dividends; target EAD capacity that can support a competitive common dividend at book value over time .
Interest rate caps: Borrowers broadly replacing caps; alternative structures (interest reserves) discussed; equity sponsors remain committed .

Note: Q2 2024 call transcript could not be read via the document tool due to a retrieval error; external transcript sources exist (e.g., Seeking Alpha, MarketScreener) but were not ingested here for quoting specifics .

Estimates Context

S&P Global consensus estimates for Q2 2024 were unavailable today due to provider limits; accordingly, actuals vs estimates comparisons cannot be made. We attempted to fetch EPS, revenue, and EBITDA consensus for Q2 2024 but received a daily request limit error (no consensus data retrieved). Where estimates are needed for modeling, consider refreshing S&P Global access or alternative data sources [GetEstimates error].

Key Takeaways for Investors

EAD and liquidity strengthened QoQ (EAD/share $0.51; liquidity $98.4M), supporting the medium-term path toward reinstating a competitive common dividend once EAD capacity aligns with management’s targets .
Credit metrics show prudent reserving amid CRE volatility (CECL ratio ~2.04%; WA risk rating 2.7), while 94% of loans remain current and multifamily concentration (~79%) anchors portfolio stability .
Net interest income compressed YoY given higher interest expense and portfolio repayments, but NII sensitivity to rising benchmark rates is now positive, providing a potential tailwind if rates rise further .
Capital allocation remains ROE-driven; buybacks have been accretive to book value, and remaining program capacity (~$4.1M) offers optionality alongside loan originations .
Near-term trading: Focus on updates to CECL/reserve trajectory, loan repayments vs originations, and monetization of real estate investments—all catalysts that can move EAD and book value .
Medium-term thesis: As capital markets normalize and asset-level transactions progress, recycling capital into the loan book and maintaining match-financed structures should support EAD growth and eventual dividend initiation aligned with management’s framework .

Additional Q2 2024 Press Releases and Events

Q2 earnings release and call schedule (Conference ID NUWEQ2; call on Aug 1, 2024 at 10:00 am ET) .
Preferred dividends declared during Q2 (Series C and Series D) .

ACRES Commercial Realty Corp. (ACR)·Q2 2024 Earnings Summary