Q1 2020 Earnings Call

Ladies and gentlemen, thank you for standing by welcome to the kind of Merit investment Corporation first quarter 2020 earnings call.

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And you pick up your headset to allow for optimal sound quality. It's now my pleasure to turn the floor over to Emilie more of Investor Relations. Please go ahead.

Thank you Holly and thank you everyone for participating in primary first quarter earnings conference call.

Before we begin I'd like to review the Safe Harbor statement.

During this call you will be making forward looking statements, which are predictions projections or other statements about future events.

These statements are based on current expectations and assumptions that are subject to risks and uncertainties, which are outlined in the risk factor section in our most recent annual and quarterly FCC filings.

Actual events and results may differ materially from these forward looking statements.

We encourage you to read the forward looking statements disclaimer in our earnings release in addition to our quarterly and annual filings.

During the call today, you May also discuss non-GAAP financial measures.

Please refer to our LTC filings and earnings supplement for a reconciliation to the most comparable GAAP measures.

Additionally, the contents of this conference call may contain time sensitive information that is accurate only as of the data this earnings call.

We do not undertake and specifically disclaim any obligation to update or revise this information.

I will now turn the conference over to our President and Chief Executive Officer, Matthew Lambiase. Please go ahead.

Welcome to the first quarter earnings call for cover investment Corp. Joining me on the call. This morning is mohit marria or CIO.

Collagen our CFO charter your long ago, our chief operating officer in VIX, although the head of our capital markets.

Well make some brief comments then open up the call for questions.

I'd like to start by saying that all the employees are primarily are healthy and working remotely from home.

We implemented our contingency worked in early March and have not experience any significant technology issues.

We all hope at you and your families they say suncoke as well.

And then what the March to cope with 19 pandemic created an environment of fear and extreme uncertainty, resulting in near catastrophic conditions for the fixed income markets.

Many investors felt that the government mandated lockdowns would likely bring an economic recession and they sold their credit investments, while reinvesting it to safer risk off assets, such as T bills U.S. Treasury notes and cash.

Credit focused bonds ones. They t. ups saw record outflows, forcing fund managers to sell their holdings. It doesn't work, it's creating heightened volatility and market dislocations.

All sectors of the fixed income market apart from U.S. treasuries experienced sharp downward price movement.

Some investors who use leverage is part of this drugs is we're also forced to sell assets I'd be attempted to meet margin calls from the repo lenders.

Market conditions witnessed in March of 2020 were very similar.

Experienced in the 2000 and crisis your price movements were swift and accrued over a much shorter timeframe.

The Federal reserve was quickly respond and on March 15th Sunday night, they announce many initiatives to come back to worsening economic conditions.

Well funds rate was cut to zero percent.

New purchase plans for treasuries and agency mortgage backed securities were implemented and funding programs like the Tal and commercial people facility revived from the 2008 Federal Reserve playbook.

The Feds actions were largely hope will bring in order to many areas of fixed income markets, including agency mortgage backed securities.

Liquidity programs for residential credit Securities were not offered by the Federal reserve and they continue to trade in the challenge fashion in the secondary markets.

Like the Fed Congress also did its part by passing the carriers are what do you tend to help individuals most directly impacted by the Cobiz 19 pandemic.

[laughter] U.S. economies definitely different today than where it was part of the corporate banking crisis.

Brooks looked out of U.S. economy has swiftly created some of the worst economic problems since the great depression.

And this past six weeks 30 million people have applied for unemployment buses. The sharp contrast to the 3% to 4% unemployment rate that we had and stuff.

Many U.S. homeowners have decided to take advantage of newly created mortgage forbearance programs.

In the near term the government initiatives, coupled with mortgage for Berets will soften the immediately flow to the U.S. economy.

But these may have lasting negative impacts on the housing and mortgage market should they persist for an extended period.

Over the past several years covers picking a number of balance sheet initiatives that helped it in this difficult period to protect our book value.

To meet all the merger close from a ripple lenders and to pay our dividends.

Our agency mortgage backed Portugal mortgage back securities portfolio has always sort of do purposes.

Primarily as a source of spread income and secondarily as a source of liquidity rather than selling or higher yielding legacy assets.

This quarter, we sold our agency pass through securities to pay down debt and further de leverage overall portfolio.

We ended the first quarter 2.2 times recourse leverage dealt 35 person from your end.

Over the past decade, we purchased or acquired approximately 14 billion dollar portfolio legacy non agency securities and season low loan balance mortgages.

This portfolio was funded for securitization as well as reasonable leverage, but it has not been immune to downward price movements.

Worked diligently to protect this portfolio, which has historically been a consistent driver of earnings for our company and makes card members portfolio differentiated in the mortgage riet industry.

We remain hopeful that at some point in the future the placing of these assets were birds.

To its fundamental value rather than the illiquid pricing. We're currently experience.

Are we starting of the economy should be a good first up in the process.

Which we believe could lead to an a price improvement in credit spreads at a recapturing our lost book value experienced in the quarter.

In the last two months, we've been busy executing transactions or a liability side of our balance sheet.

In March caliber executed two mortgage securitizations totaling $883 million.

We've arranged over $800 million of longer term repo somebody's for credit assets and we understood.

340 $374 million of convertible debt.

Which further diversifies our liability in capital structure.

While pricing has never ideal in a crisis, where your heart and to be able to access to capital work.

Looking forward, it's hard to how the clear view on how the U.S. economy is going to perform as it starts back up.

We are in unchartered waters with regard to the high unemployment and severe changes and social habits.

We would love to believe that we'll be back to a V shaped recovery, but it's most likely going to pick longer it'd be difficult to get back to where we were in February.

The mortgage and housing market outlook will also be challenging in the very near term.

Mortgage forbearance, it's a high degree of uncertainty to mortgage credit will be cautious until we have more clarity on the forbearance duration and the coatings in our portfolio.

[laughter] given all these complexities earnings for the next few quarters were difficult to predict until the economic conditions clarified.

We remain focused on maintaining liquidity, extending or financing terms and keeping our credit portfolio intact.

We are navigating through a very turbulent period.

Well, we are very hopeful that the U.S. economy will cover and the mortgage market will return to more normal putting when the economy restarts and people get back to work.

And with that I'll turn it over to multi.

Thank you Matt.

The first quarter of 2020, it was an extremely volatile period and the U.S. fixed income market.

The 10 year Treasury note began the year at 1.92% and fell 125 basis points.

The first quarter with a yield of 8.67%.

The first or cut its overnight lending weight by 150 basis points over a two week period [laughter] parts of its response to the covert 19 pandemic.

The large drop in interest rates sharp increase in rate volatility and investor flight to quality.

The large imbalance of funds across most fixed income products.

Investors to utilize leverage were forced to sell their security.

Prices to meet margin calls on existing repo transactions.

Primero is not immune.

And the first quarter, we utilized the combination of cash balances and security an outright sales or agency assets as part of our overall liquidity management strategy.

Can I have successfully met all Marty today.

How much credit funding strategy is multifaceted.

The primary objective has been and continues to be utilizing securitization to create long term funding for credit assets.

At the end of the first quarter, we had nearly $8.5 billion of securitized debt outstanding.

Secondarily, we use repo financing on our retained assets legacy non agency securities and loans.

We typically use longer people maturity dates been financing these assets, which enables more effective counterparty and portfolio management.

[noise] and post quarter end, we added two new long term credit financing facilities totaling $800 million.

These facilities contain attractive features including a significant reduction of daily Mark to market rest on our credit assets.

We successfully continued our loan securitization strategy this quarter and in March we price to deal with fees and re performing loans from our warehouse.

[noise] M. Two that's funny dash are one at 391 million underlying loans, where the weighted average coupon of 5% and a weighted average loan age of offered and 58 much.

The average loan size it'd be all once they get a nation with 123000 and then it at an average FICO score of 613.

We sold 312 million senior securities, where they 2.35% cost of debt.

Hi, My retained March 2023 calendar call option on the are one securitization.

In addition.

We secured a tight see I am 2020 dash are too, which had a 492 million underlying loans with a weighted average coupon of 3.79%.

And a weighted average loan age of 161 month.

The average loan size NDR to deal with 219000 and had an average FICO of 690.

We sold 352 million senior securities, where they 2.55% cost of debt.

In response to the significant drop in interest rates increased price volatility and if people margin calls this quarter, we sold our entire portfolio of 5.7 billion residential agency pastors.

These patterns for the most liquid and Louis yielding assets in our portfolio and I've always been part of our strategy to meet our liquidity needs.

We also terminated all our agency hedge position comprised of you a treasury note features and 4.1 billion notional balance on interest rate swaps.

The agency CMBS portfolio, which has taken us many years to accumulate was retained.

After the quarter rent this portfolio totaled 2.5 billion.

We continue to like the spread income generated by this portfolio and the superior convexity profile of Ginnie Mae project loans relative to residential agency pass through.

These securities finance well in the repo market and have similar rates on haircuts its traditional agency pass through.

The unique characteristics explicit prepayment lockout and penalties are valuable security crazy as interest rates fall.

After quarter when spreads on agency CMBS begin to tighten when the fed began purchasing these assets as part of their quantitative easing program.

[noise] claim activity this quarter has significantly reduced the company's risk exposure I sure as measured by recourse leverage.

We ended the quarter at 2.2 times recourse leverage down from 3.4 times at yearend and 3.8 times at the end of third quarter of 2019.

Represents a 35% reduction or recourse leverage over the last three months and 42% over the past six much.

It is important to note due to current market conditions.

Our high yield credit assets, which are the largest component of our portfolio have been marked down in book value.

I've been mark down in value, which has contributed to cameras lower book value this quarter.

Our ability to retain this portfolio enables the opportunity just to <unk>.

Finally for security value increases over time as economy restarts and the country works its way through the current pandemic.

I think going forward to the current economic crisis, we remain cautiously optimistic.

We will continue to space that can you put maturities and peak longer tenor for credit repo.

And as we get more visibility into the housing and mortgage economics, resulting from the crisis, we will seek to deploy cash into new investment opportunities as we have for the past decade.

Well that kinda color Bob.

Actual results.

Thanks, Mike I'll review Kinda merits financial highlights for the first quarter.

Book value at the end of the first quarter was $12.45 per share.

Our GAAP net loss for the first quarter was 389 million or $2 late per share.

On a core basis net income for the first quarter was 106 million or 57 cents per share.

Economic net interest income for the first quarter was 151 million.

For the first quarter the yield on average interest, earning assets was 5.3%.

Average cost of funds was 3% at our net interest spread was 2.3%.

Total leverage for the first quarter was 4.7 to one while recourse leverage ended the quarter at 2.2 to one.

Expenses for the first quarter, excluding servicing fees and transaction expenses.

Were 18.6 million consistent with last quarter.

Given the current market environment, we wanted to provide additional information about liquidity.

We currently have approximately 650 million in cash and unencumbered assets.

This is after we paid both our preferred and common stock dividends.

Idling 111 million.

Also in April we closed a public convertible bond offering that raised 374 million.

We believe it's important to have ample liquidity in this market and we're happy that the capital markets. We're open for us to achieve this goal.

We'll continue to monitor liquidity and assess opportunities to increase liquidity and balance.

Supporting our current portfolio and finding new opportunities in the market.

That concludes our remarks, and we'll now open the call for questions.

Thank you as a reminder, if he would like to ask a question. Please press Star then one on your telephone keypad again star one for questions would do ask that you limit yourself to one question and one follow up question going to allow all callers.

I suppose that question.

And our first question is going to come from the line of Doug Parker with credit Suisse.

Thanks can you just talk about you know kind of I guess, just how you're thinking about liquidity you know kind of as you mentioned.

Oh.

No acted as that kind of liquidity buffer just you know how do you think about kind of with the absence of the agency RMBS portfolio, you know what the right level of liquidity. The whole today is in the current environment and kind of balancing that with the opportunity to deploy capital.

Well. Thank you for the question I think we're at a pretty good spot with liquidity at the moment, a with both cash and I'm on a Levered securities I think it's it's a take kind of a day by day thing with US right now at the moment, we're looking at opportunities in the loan space, we're looking at Oh.

A lot of stuff in the market the market is dislocated, but you know it's about trying to make sure you have locked down financing and trying to make sure that you understand what kind of the priced luxuries of the assets could be going forward. So you know I look at this is we've just come out of a very chaotic period.

Good and and everything is starting to settle down now and I think you know we look at it we feel pretty good about our cash positions and our and our liquidity at the moment and and I think it's a day by day process for us.

I really think about a best best opportunities in the market to start deploying capital I think though the loan space is still dislocated. There's a lot of overhang. There. We think there's a lot of opportunity. It's just now for us thinking about how we can start executing securitizations in this marketplace and that's been spent a lot of flying.

With investors in our Securitizations a lot of time talking to a different capital providers in that space. If you would get that market up and going again and I think it's going to happen. It's just a it's just a matter when now and again you know we're coming out of this very chaotic market and everything is a day by day process.

And Doug just just to add onto what Matt said in addition to the cash unencumbered assets. We have currently as of the end of April we still have a core agency CMBS portfolio, that's over $2 billion and with the fed also buying agency CMBS and as a form of liquidity for us in the event Oh there.

For the disruption in the market.

Great and the Matt just a follow up on your comment about you know kind of locked down financing and securitization what would that be looking to kind of securitized you know some of the yes, it's it or credit assets that are currently funded by by repo or would that be for for kind of new assets and I guess.

So are you thinking about you know I think it's a little bit of both I think.

It's actually a couple of things I think to get a deal done a you would probably want to.

Do what what would you can get done so I take a it's a very it's an interesting markets in the sense that you know we don't have a lot of clarity on.

Senior buyers and what they want to buy I think maybe doing or one of the deals that we have.

Callable deal or something like that would make most sounds better sense upfront.

Yeah, we would we've been looking at packages of loans that are available for sale in the market right now and I think there's a lot of I think very attractive assets out there. It's just trying to figure out the exit securitization for them. So I know yeah.

Again sort of going back to our last earnings call and the focus for 2020, we had over eight deal and 5 billion dollar. So if you PB I'd becomes callable over the calendar year 2020, and our hopes were to sort of tap the capital markets and Relever those structures that took mats point, we are still.

Evaluating that obviously with what happened in March and it's been a nation newish in market sort of being on pause we think once the market stabilizes that window will open up again.

Mentioned on the opening remarks, we did complete two securitizations of loans from our warehouse lines.

In the mid to the crisis both deal closing in March.

<unk> able to successfully cells senior bonds at pretty attractive levels I think in the near term goals may not be available, but we are evaluating how to one pair down the warehouse lines farther by securitizing and term financing those assets. In addition to the Relever strategy that we've employed over the last several years.

Great. Thank you guys for that answer.

Thank you. Our next question will come from the line as Eric Hagen with KBW.

Hey, Thanks, Good morning, guys Tonight, I hope you're doing well you know, what's what's been the rate of borrowers in your portfolio asking for forbearance over the last call it six or six weeks or so and how should we think about the impact of forbearance overall in the portfolio.

Additionally, within the portfolio the loan portfolio can you just give us a breakdown of what the profile is oh what sits in that at this point I know that.

The majority of it it's probably you know seasoned loan dogs loans, but I know that there's some prime jumbo and there's an investor properties can you just give us a breakdown of what's in there. Thanks.

Eric This is night.

You know, we just went to the ample room in cycle and nothing materially was different from what was it Francis March from from a for parents and plan on our portfolio, but we do think that is going to uptick as so the covert pandemic started in middle of March let's say in the stride and when the government announcing those programs.

People buy took more advantage of that in April and me probably expect may so the next to him in cycles will be more telling.

Thank you know given the profile of the portfolio itself. It will track the way the GFC portfolios are performing Fannie Freddie and Jenny.

So as I said as we get more numbers. We can report those on the Q2 earnings call, but nothing materially different as it stands today.

Again, the vast majority of the portfolio is season re performing it has over 100 plus months of seasoning. It's a mid six under FICO and the effective black on the portfolio is just under 7%.

The investor at some of the new originating origination stuff that we've done over the last several years isn't much smaller portion of the <unk>. The company. It it's not even consolidate our balance sheet. So it's not part of any of the numbers reported there.

As far as performance on the newly originated stuff goes again nothing materially different from the performance that we've seen a through April and like I said I think we we will see how may and June play out that's when we expect a larger uptick and people sort of choosing the forbearance and deferral path.

Got it okay, great. Thank you very much for that and then you know how should we think about the rate of just principal pay downs in cash flow generally in the portfolio and what the assets are able to throw off as far as cash flow with without the agency portfolio now in other words, yeah, there's sort of an actual cash flow and liquidity back.

So you can strike by having an agency portfolio and I know that you know a lot of de up the assets in the portfolio at this point or.

Subordinate nature and structured so how should we just think about.

The ability to to reduce leverage if you will with naturally with cash flow.

Based on what the portfolio looks like today.

Thanks.

I mean as far as the.

The way the for pulling restructured I mean, we your point have limited principle.

Reinvestment risk given most worth the credits are locked up.

So from a performance standpoint, and interest collections again going through the airport remains cycle, we didn't notice anything different in our collection, even other retained portfolio as far as Delevering goes the structure is themselves. So they mentioned, we have $8.5 billion unsecured debt outstanding which is entitled to receive.

All the principal paydowns coming in on our re remics as well as a loan portfolio.

And that's that's how we're going to get the Delevering event that number will go down Oh pay down on the retain positions that we have that have delivered over time.

Any oliver pencil coming in both quarters gradually decrease.

The portfolio leverage.

What we've also noticed post.

Event that took place at mid late March is the leverage in the system is overall lower to as haircuts from report providers have also gone up. So I think that's also going to reduce the levers that you want those tasks.

It's a good amount of recourse leverage available to you at least in the near term.

Got it and then just following up on some comments in my opening remarks, what percentage of the book value impact in the first quarter was realized versus unrealized losses.

Remarks thanks.

Yes, it was mostly a unrealized we did sell a lot of our non agency portfolio or obviously, we didn't it's only loans that.

What about an unrealized loss on those we didn't sell awesome agency and you'll see this one.

The financials come out tomorrow, but the agencies that we did so we actually had realized gains on those because they had purchased them a few years ago at lower levels.

Even given the disruption in the market pull those.

Realized gains so that.

We didn't the only thing material on a unrealized loss.

And then if anything I don't know I don't remember any but and that's not really is our hope is that you know the you we thought and we still think that since the end of March early April was a interest the crazy period in the marketplace and you don't want to sell your assets and realized losses, especially the assets that we took so much time gathering.

Securitized and we think are great assets to have so you know.

I think at some point and it's in the future that these asset prices are going to come back and we want to ride the book value back up and I think that's that's why or why we didn't realize it where we got why do we didn't sell into though the liquidity void in at the end of March.

Got it thank you very much and say well appreciate it.

Yes.

And our next question is going to come from the line of Trevor Cranston JMP Securities.

Hi, Thanks.

You touched on this a little bit but I was wondering if you could provide some additional color on you know the terms you were able to get on the the longer term Rico, you're able to add in April and maybe just some general commentary sort of on on what her cuts in rates look like today.

Versus maybe January and February.

And kind of what you're seeing in the landscape in terms of your how many counterparties are out there there's been.

Significant production.

And be in people, who are willing to lend against the loans or credit skouries. Thanks.

Hey, Trevor Allspark backward with the latter part of your question.

Financing counterparties.

We had over 20, plus counterparties ever financing harassed that says we came into 2020.

Passengers those counterparties will still finance.

But smaller some of the guy that refinancing us and the reason we had such a diverse group was because of the agency financing needs. We had as Weve pair down the agency position, we've reduced the overall number of counterparties them you're exposed to.

Just naturally because we didn't need them from for financing those assets, but those counterparties still exist and are available to land in the event. We were to go back into an ad agencies.

On the credit side same thing anybody that was financing us continues to finance us.

As Rob just mentioned, we haven't really sold any assets or on the credit side.

[music] effect that and we've had sort of rules that have come up in March and post March.

I have rolled without without any issues I get that people have adjusted.

The cost to that financing and the haircuts associated with it but but the financing is still there.

As we mentioned in her opening remarks, we have.

Have taken on it.

Gross add longer tenors on our repo to mitigate some of the mark to market risk Weve entered into two different transactions currently totaling 800 plus million dollars and the tenor of those assets range anywhere between 12 to 24 month.

We always sort of kept our credit assets focus on longer tenor a we've done in the past to your three year trades and we're locking some of that up again, given the uncertainty that we see coming in the coming months as it relates to forbearance isn't deferrals.

And the cost of that financing is subject to what type of assets being financed and the tenor but as I've mentioned, they don't generically financing costs have gone up just just for the cost of balance sheet.

Okay that helps thank you.

Then you talked about some opportunities potentially in the loan space for investment until the sounds a little bit unclear.

Exactly when you might be able to capitalize on some of that.

Can talk about how you're how are you sort of balancing looking at opportunities such as those versus or other things like like just barn your own stock Burke. Thanks.

Sure So as Matt mentioned, obviously, the security side, which was.

And just survey in mid late March has come back pretty significantly in some of the spread tightening that's happened in April I think where there's still opportunity as a loan space.

And as you can recall from.

Q4 earnings call. There was been a lot of talk about non QM loans, and having partnerships and having a flow agreement and as we've mentioned in the past we never liked the convexity profile in the returns never really worked for us.

Now with where pricing is it looks a lot more attractive there was an overhang of supply.

The technical side has also favorable with all the different originators sort of halting originations on that product as a result of some of the comments were evaluating but until we sort of get a clearer picture on their for variances in deferral shake out you're going to just cautiously watch and.

Also looking at where the new issue market it to be able to securitize. These assets that have term financing well sort of finally lead to sort of deployment of capital.

As we debate between buying stock forces assets again I mean.

We will we will.

Even if those opportunities in relation to the returns available.

Okay. Thank you for the comments.

Thank you. Our next question will come from the line as Matthew Howlett Amira.

Like I said, thanks for taking my question just.

On that question that you bought back are you looking by making the percentage transition debt I'm, assuming that's come down in price and if we were has come down.

Yes, I as far as a secured debt goes.

Obviously, you like other spread products that did widen as wallet March.

Buying that I said, we would didnt think was a good use of capital for us.

It's otherwise we would only reason would buy enough to extinguish that to be able to re lever at a more opportune time, but that would take capital away and that's right now and sort of cash is king and with some of the uncertainty around for grants are we didn't think there wasn't best use of capital but.

Again as.

The market stabilize and if that's still available we will sort of evaluate.

What we need a clear picture on sort of the exit strategy on where that would be if he were to re lever.

Our next question will come from the line every Stephen laws with Raymond James.

Hi, good morning.

[laughter] following up on some some similar questions, but you know you you raised a little bit of money through the offering to improve liquidity position. We've had some recovery in the the unrealized losses, which I imagine has resulted in Oh, you know collateral being unlock to you guys. You pledged previously to meet margin calls.

As a suit so as things stabilize your liquidity is improving and completely understand the concerns on.

New loans, when you've got limited options on the financing side So Ah.

You know.

How do you think about buying back debt maybe versus stock. Additionally, you know are there other things you would look to do given where we are a in this cycle I mean would you consider stepping in and buying.

You know securities maybe that are below AAA, but still investment grade that don't really seem to have a market at the right return for newly originated loans.

And maybe talk about what some alternative investments might be and how you look at debt repurchases versus equity.

Sure I'll start on the security side.

And you know the focus from from investment team you have to look at sort of the Beth investment option relative to the risk and return profile low until they just mentioned earlier.

[noise] create the largest opportunity, especially.

Hang that exists there and the need for capital to be deployed but as you just mentioned putting aside the AAA part of the capital structure. Some of the double A's single use a triple B the investment grade stack has lagged and the credit curve overall is significantly steeper than it was at the start of the year given the.

Reach for assets or so, but we think again if those opportunities on those assets exist we would.

Leverage is available you can potentially add those assets.

Our thought as to the fed effectively buying all other spread product outside or non agency credit relative value standpoint, those assets will look cheap and should create a good total return opportunity by some spread tightening as other investors sort of reach for yield as well. So again, we will continue to evaluate that.

I like that loan.

Present, an opportunity just waiting to higher or pinch around where the securitization next it wouldn't be a wi.

Have some ideas on what thing you can exit that and sort of backing into where that would equate to a loan pricing I think there's still a little bit of wood to chop.

They are based on where people want to sell worse is where the bid would be so we can continue to evaluate that opportunity and when you say buying back debt.

I don't know if you mean that off of the Securitizations, we issued in the past or.

Well, both either but your corporate data were or I mean, your preferred or or or or or debt off your.

Securitizations I think we did see some of that [laughter], sorry, I think I think the way we're looking at things right. Now is that a we're number one priority here is a we'd like to get a securitization model back up I think you know we need to have a securitization exits for assets what are the things that we had on our balance sheet that we can call and re lever.

Or this or new assets to put on and it's a and that's what we've been spending quite a bit in time looking at that market figuring out ways that we can figure to restart it and I think I'd be very beneficial for liquidity on our balance sheet. Once we get that figure it out I think the other thing that we've been working on and very diligently on.

I'm, just trying to figure out longer or.

Longer term financing for the credit assets on our balance sheet and I think that's you know.

Again, another one of these ongoing discussions and getting those things locked out I think once we get those two pieces of the puzzle in place we can sit back and really look around the landscape and decide.

Whether we want to start buying back the stopping the preferred sir.

For a and do those things, but but we have we need then we need to get a little bit farther away from the event and get to things a little bit more settled or with regard to financing and with regard to the securitization markets and I think on a positive note I think there were.

Things are starting to percolate, so we're getting traction.

Thanks.

You know.

We were seeing positive things happen. So we're we're cautious.

Optimum.

Great appreciate the comments thank you.

Thank you I last question for the day will come from the line of Lee Cooperman with Omega family.

[laughter]. Thank you.

Well clearly you guys had been very surprised by development.

You used the term twice for this call it being cautiously optimistic.

I would assume that the 30 cents dividend, which you declare the gets in connection with this offering you did with something you felt which sustainable or should we no surprises and things unfold, but as you would dissipate.

You know the I think the a the market is very Ah I I still think it's it's a little difficult to really figure out I've never seen lot of the things that we're seeing in this marketplace I've never seen the unemployment rate.

And the number of unemployed people going up as far as it has I've never seen a mortgage forbearance programs coming into play that's just stuff that we have never ever seen before I could tell you that you know when we when we started the first quarter and when we started to second quarter, we're totally different worlds.

And with regard to the economy and projections and thinking about the business and and you know I just I just don't think it's a prudent thing or any manager in this environment or is to say that they have a clear focus of what's going on in the future and you know what we want to pay the highest.

Dividend possible. We're all shareholders are but you know I think.

You know we're.

We're just ER the visibility currently in the market with our business and I think a lot other businesses.

It's just it's just it's just not it's not like what it was a month ago or two months ago. You know, it's it's a it's a very complicated and I think you know, we're we're being very cautious here.

Optimistic, but but being very cautious.

Good luck stay healthy.

Thank you nicely.

Thank you I would now like turn the conference over to Matt Lambiase for closing comments.

That's it I want to thank everybody for joining the call today. We appreciate your support Oh, I certainly want to say a shout out to all of our employees at the primary you've worked brilliantly from home and Ah stay safe they they've done a great job and we look forward to speaking to you again with the with the second quarter results later in the.

Yeah.

Thank you [laughter] that well conclude today's conference call. We appreciate your participation you may now disconnect.

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