Company Overview

We are a real estate finance company that specializes in short-term loans secured by mortgages on real estate. We have been publicly traded since 2017. As a real estate investment trust (REIT), we distribute at least 90% of our taxable income annually to shareholders.

First Quarter Performance and Outlook

Metric	Q1 2024	Change from Q1 2023
Revenue	$17.2 million	Increase of 17.0%
Net Income	$3.6 million	Decrease of 13.0%
Earnings Per Share	$0.08	Decrease of $0.02

• Revenue increased due to higher interest rates charged on loans
• Net income decreased due to higher operating expenses, especially provision for potential loan losses
• Interest expenses expected to keep rising in 2024 as debt is refinanced at higher rates
• Optimistic about loan demand and profitability amid real estate market turmoil

Challenges Ahead

• Rising interest rates increase borrowing costs
• Geopolitical conflicts cause market volatility and cybersecurity risks
• Growing competition from non-bank lenders funded by private capital
• Declining commercial real estate values could compromise loan collateral
• Higher expenses from debt load and upcoming debt maturities
• $95.5 million of construction loans have future funding obligations

Response to Challenges

• Maintain prudent leverage ratio of 60% debt / 40% equity
• Increased loan yields to 12.7%, up from 11.69% last year
• Public company status provides access to capital
  
• Various credit facilities provide liquidity ($200 million from Churchill)
• Shift to larger commercial loans with experienced sponsors

Financing Overview

Our strategy is to use debt financing to grow the loan portfolio while protecting shareholder returns. We have an investment-grade debt rating but no specific leverage limit.

At March 31, 2024, total debt outstanding was $377.6 million. We have various facilities providing financing:

• $200 million Churchill facility at 9.4% rate
• $27.3 million Wells Fargo margin loan facility
  
• $65 million Needham Bank credit facility at 8.25% rate
• $288.4 million of publicly traded 5-year unsecured notes at 6-8% rates
  

We expect to maintain a debt-to-equity ratio around ⁶⁰⁄₄₀. We aim to reduce borrowing costs and satisfy the REIT requirement to distribute 90% of taxable income.

First Quarter Financial Summary

Item	Q1 2024	Q1 2023	Change
Total Revenue	$17.2 million	$14.7 million	+17.0%
Total Expenses	$12.5 million	$9.6 million	+30.7%
Net Income	$3.6 million	$4.2 million	-13.0%

• Revenue increased due to higher interest rates on loans
• Expenses rose largely due to $1.3 million provision for potential loan losses
• Other factors: higher interest costs, tax expenses, general/administrative costs

Liquidity and Capital Resources

We have sufficient capital resources from cash flows and financing activities to fund operations and meet investing needs over the next 12 months.

• Cash increased by $5.8 million in Q1 to $18.4 million
• Two debt tranches maturing in 2024 will likely be refinanced
  
• REIT requirements mandate distributing 90% of taxable income
  

We intend to pay sustainable quarterly dividends to shareholders while pursuing loan portfolio growth. We will fund long-term needs through unused financing proceeds, operating cash flow, and proceeds from real estate sales.