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Management focused on a balanced approach of value-driven decision-making and operating excellence to strengthen the return profile and long-term durability of the portfolio.

Performance was supported by healthy net interest income and stable operating expenses, though results were partially offset by unrealized mark-to-market valuation decreases in the securitized loan portfolio.

Strategic actions included the monetization of delevered legacy retained bonds from the AOMT 2020-3 securitization, with proceeds reinvested into newly originated loans with higher modeled yields.

The company successfully negotiated a 35-basis point spread reduction on its largest warehouse financing facility, which is expected to improve future earnings power.

Capital was deployed into the repurchase of $15 million in common stock from a pre-IPO investor at return levels management characterized as accretive.

Management emphasized a shift toward using securitization as a strategic funding tool to reduce financing uncertainty rather than a volume-driven objective.

Credit performance remained a key differentiator, with portfolio-wide 90-day plus delinquencies at approximately 2.8%, reflecting a disciplined underwriting approach and proactive migration up the credit spectrum.

Management expects to maintain a consistent securitization pace of approximately one transaction per quarter, or four per year, to support long-term earnings.

The company anticipates a second HELOC securitization is likely before the end of 2026, with a potential second non-QM securitization targeted for late Q3 or early Q4.

Operating expenses are expected to remain at current levels as the company continues to focus on maintaining an efficient expense structure.

Management models returns based on historical average prepayment speeds of 20% to 30%, noting that mortgage rates would need to fall meaningfully to significantly impact current portfolio returns.

Strategic priorities for the second half of the year include selective loan purchases, maintaining conservative leverage, and preserving liquidity to respond to changing market conditions.

GAAP net income of $3.4 million was impacted by $3.6 million in unrealized losses from the securitized and residential loan portfolios and $2.4 million in derivative losses.

Recourse debt-to-equity ratio stood at 2.3x at quarter-end but decreased to approximately 1x following post-quarter securitization activities.

Management flagged housing affordability as a potential headwind for origination volume as interest rates remain elevated.

The company noted increased competition in the non-QM space from insurance companies, necessitating continued discipline in credit selection.

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Management views HELOCs as a 10% to 15% allocation of the overall portfolio, remaining predominantly focused on non-QM loans.

The company is targeting a conservative 65% combined loan-to-value ratio for HELOC underwriting to mitigate risks at peak housing prices.

Current returns during the warehouse phase are approximately 13% to 14%.

Upon securitization, management expects returns to increase to a range of 15% to 20%, depending on execution spreads.

Management observed some weak points in competitor underwriting programs but stated they avoid those specific high-risk segments.

Broad consumer credit outside of housing is showing signs of weakness, particularly for consumers who have not benefited from equity market gains.

Despite lower collateral coupons in recent deals, management still expects high-teens returns as newly purchased loans now carry coupons in the mid-7% range.

The securitization market remains healthy with tight spreads and high buyer activity despite broader interest rate volatility.