Ares Commercial Real Estate (ACRE) Q2 2024 earnings summary

Executive summary

• Reported GAAP net loss of $6.1 million ($0.11 per share) and distributable loss of $6.6 million ($0.12 per share) for Q2 2024, with distributable earnings excluding realized losses at $0.18 per share.

• Appointed Tae-Sik Yoon as COO and Jeff Gonzales as CFO, effective August 30, 2024.

• Book value per share was $10.68 (or $13.22 excluding CECL reserve) as of June 30, 2024.

• Declared a $0.25 per share regular cash dividend for Q3 2024.

• Revenue and net interest margin declined year-over-year due to lower interest income and higher non-accrual loans.

Financial highlights

• Outstanding principal balance of loan portfolio was $2.0 billion, with 99% in senior loans.

• Net interest margin for Q2 2024 was $13.4 million, down from $25.0 million in Q2 2023.

• CECL reserve at quarter end was $139 million (7% of loans held for investment).

• Cash and available facility capacity totaled $121 million at quarter end.

• Total assets as of June 30, 2024, were $2.07 billion, with equity of $582.3 million.

Outlook and guidance

• Earnings expected to remain uneven and below potential as underperforming loans are resolved.

• Management expects recent actions and leadership changes to position the company for future portfolio growth and higher earnings.

• Dividend policy will be evaluated quarterly due to market variability and earnings uncertainty.

• Management expects primary sources of cash to be sufficient for operating and investing activities for at least the next 12 months.