Q3 2020 New York Mortgage Trust Inc Earnings Call
[music].
Good morning, ladies and gentlemen, and thank you for standing by welcome to the New York Mortgage Trust third quarter 2020 results Conference call.
During todays presentation, all parties will be in a listen only mode. Following.
Following the presentation the conference will be open for questions.
If you have a question. Please press star followed by the one on your Touchtone phone if he would like to withdraw your question. Please press the pound key.
If you are using speaker equipment, we do ask that you. Please lift the handset before making your selection. This conference is being recorded on Friday November six 2020.
A press release and supplemental financial presentation, with New York Mortgage Trust third quarter 2020 results was released yesterday.
Both the press release and supplemental financial presentation are available on the company's website at Www <unk> in why Im Trust Dot com.
Additionally, we are hosting a live webcast of today's call, which you can access in the events and presentations section of the company's website.
At this time management would like for me to inform you that certain statements made during the conference call, which are not historical maybe deemed forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, although.
Although New York Man It I'm, sorry, Although New York mortgage trust belief and expectations reflected in any forward looking statements are based on reasonable assumptions. It can give no assurance that its expectations will be attained factors and risks that could cause actual results to differ.
Materially from expectations are detailed in Yesterdays press release and from time to time in the Companys filings with the Securities and Exchange Commission.
Now at this time I would like to introduce Steve Mumma, Chairman and CEO, Steve. Please go ahead.
Thank you operator, good morning, everyone and thanks for being on the call Jason Serrano, our president will be speaking to our investment portfolio strategy today, and Chris scenario, our CFO will be speaking more to you in more detail about our third quarter results.
We won't be speaking to our supplemental financial presentation that was released yesterday after the market closed and is available on our website.
Following our presentation, we will open up for questions.
The company delivered another solid quarter generating 24 cents per GAAP earnings per share and 30 cents comprehending.
Comprehensive earnings per share for the quarter companies look revenue increased to $4.58, an increase of approximately 5% from the previous quarter and 18% for the quarter ending March 31.
Including our third quarter common stock dividend of 75 cents per common share the company posted a total economic return of 7% for the period.
On the balance inside the company continued to strengthen its financial position during the quarter.
Putting a residential loan securitization and the non mark to market residential loan repurchase agreement with a new counterparty.
Further reducing our mark to market financing exposure to $626 million at quarter end, a decrease of $330 million from June thirtyth.
In October the company completed the second secured loan securitization, reducing our mark to market financing by an additional $236 million.
But it continues to focus on financing solutions that minimize mark to market or margin calls on our liquidity.
Company finished the quarter with over $600 million in cash as we continue to believe that the volatility around the election and the ongoing COVID-19 pandemic will present compelling investment opportunities during the fourth quarter and into the early part of next year.
On slide six we recap where the company ended on September 32020.
Our investment portfolio totaled $2.8 million down approximately $283 million from the previous quarter alter our total market capitalization was $1.4 million unchanged from the previous quarter are.
Our GAAP stockholders equity totaled $2.3 billion currently allocated a 59% and single family credit and 25% and multifamily credit.
The remaining 16% is largely comprised of available cash for future investments.
We continue to be diligent investors in the third quarter, focusing more on financial stability, then perceive market opportunities.
We have 57 professionals unchanged from the previous quarter and still working from home. We continue to monitor the COVID-19 situation in determining when and how we will return to our office locations in the meantime, we continue to run our business effectively for me from remote locations with minimal disruptions.
On slide seven we have some more third quarter key developments as I said, our book value ended the quarter at $4.58 per share, which was an increase of 5.3% for the previous quarter. We declared a common stock dividend of 7.5% 7.5 cents per share, which was an increase of 2.5 cents per share from the.
Second quarter.
We continue to focus on improving our balance sheet strength every quarter was $650 million in cash paying down all securities repurchase agreement subject to mark to market exposure, completing a $365 million residential securitization in July and reducing our mark to market financing exposure by over $300 million ending the quarter at 602.
$26 million.
In October we completed a second residential securitization for $364 million further reducing our mark to market the financing exposure to $390 million.
Our financial snapshot.
Slide on page nine covers key portfolio metrics on a quarter over quarter comparison.
Our net interest margin for the quarter was 2.18% a decrease of 25 basis points from the previous quarter. This decrease was largely due to the increase in financing costs associated with our securitization completed in July the cost of debt was approximately 4%, but significantly reduces our exposure to margin goals. It should be noted that our second securities.
Sales and completed in October was almost 100 basis points lowering costs as the market continues to tighten significantly through October.
Our total portfolio of $2.8 million decreased by approximately $300 million from the previous quarter.
The portfolio asset yield average for the period was 5.51% an increase of 26 basis points over the previous quarter.
Portfolio is comprised of $2.2 billion as single family credit investments and $550 million in multifamily credit investments, we had average outstanding portfolio financings, including Securitizations of approximately $1 billion at an average cost of 3.33% during the quarter, an increase of 51 basis points from the prior.
Our quarter.
Our leverage ratios continue to decrease during the quarter with overall leverage a 0.4 times and portfolio leverage at 0.3 times as previously mentioned in October we completed our second securitization further reducing our mark to market financing exposure.
As we grow our portfolio in the future, we will focus on financing opportunities that limit mark to market risk by utilizing securitizations are unsecured borrowing opportunity.
Christy narrow our CFO will now go over the quarterly financial results in more detail Christine.
Thank you Steve Good morning, everyone and thank you again for being on the call and discussing the financial results for the quarter I will be using some of the information from the quarterly comparative financial information section included in slide 21 to 28 of the supplemental presentation.
Slide 10 summarizes our activity in the third quarter, we purchase residential loans for approximately $93 million and closed on 19 million of multifamily preferred equity investments also during the quarter, we sold non agency RMBS and CMBS for proceeds of $370 million, we will continue.
To Opportunistically sell non agency RMBS and CMBS securities in our portfolio as we believe loans in either residential or multifamily give us better risk adjusted returns at this time.
We had net and net income of $91 million and comprehensive income of 114 million attributable to our common stockholders. Our book value ended at 458, a 5% increase from the previous quarter.
Slide 11 details our financial results, where we had net interest income of $25.5 million a $3 million decrease from the previous quarter. This decrease is due to the reduction of non agency RMBS and CMBS securities in our portfolio due to sale activity and higher borrowing costs.
Associated with securitization transactions completed during the second and third quarters we.
We had non interest income of 90.5 million, mostly from net unrealized gains of $81.2 million.
The credit markets continue to improve in the third quarter, which translated to improved pricing across most of our asset classes. We.
We also generated other income of $10.4 million prime.
Primarily from income earned by investments in entities that focus on residential properties and loans.
We had total DNA expenses of 10, and a half million a decrease of 1.3 million from the previous quarter. The decrease can be primarily attributed to stock compensation awarded to our directors during the second quarter and fully expense in the second quarter, we had operating expenses of $2.9 million.
An increase of 8.6 million from the second quarter due to increased investing activity. We would expect these expenses to continue to increase in the coming quarters as we ramp up our investing activities and residential loans indirect multifamily.
The graph on slide 11 illustrates the change in our value from December 31, 2019, our book value increased 5% during the quarter and 18% from the end of the first quarter, we estimate that over $100 million of unrealized losses are potentially recoverable as the economy and markets stabilize.
Jason will now go to go over the market and strategy update Jason.
Thank you good morning, everybody.
On page 13, I'll be starting by you that talking through our.
Cash position and going into our portfolio.
In a defensive posture, we ended third quarter with a cash balance of $650 million by focusing the monetization of our securitized bond portfolio monetizing gains after rolling back from the significant markets off in Q1, we further added 64 million to historically high cash balance for the company through the first two weeks of October we are taking a decisive approach.
Coach in this market environment, we are aligned to benefit from near term volatility with our market to move quickly with confidence and without reliance on third party funding sources, such as repurchase agreements.
We believe a more attractive entry point for our casualty available in the near term, allowing us to generate high returns. While also protecting book value our portfolio leverage continued to decline in the third quarter.
And.
This occurred for two reasons first we are allocating capital to strategies, where propetro leverage is not required to meet our return targets.
More on this in minute with our proprietary sourcing channels. We are focused on 10% return on asset opportunities plus.
Plus that is hard to replicate by the market secondly, as an issuer the term securitization market today provides significant value with senior financing borrowing cost at all time lows.
We placed two securitizations after the second quarter.
And look to expand on this with new deals in different loan sectors in the beginning of next year with a 7% economic return in third quarter against 0.2 times Profertil leverage we provide exceptional risk adjusted returns to our shareholders. We are positioned well for future earnings growth.
On page 14.
With $650 million of cash at the end of the third quarter and 574 million of Undrawn available loan financing, we have over $1 billion of investments investments to deploy.
While this dry powder significant so what are the opportunities were seeing in the market.
We reviewed over $6 billion of assets in the third quarter, but advanced on only 6% of these opportunities.
Extraordinary low rate environment part of the market has come back to utilizing short term repo to bridge target returns. This fact, coupled with deteriorating bar performance on the balance sheet of smaller bank portfolios. We believe patients with our capital will be rewarded with more options in the near term but.
By simply putting 50% of our dry powder to work and 10% return on investments, we can increase our quarterly earnings by five cents per.
Per share.
We are excited about this opportunity to deliver even stronger earnings in the near term with our single family multifamily strategies.
On page 15, starting with single family.
Where we have 59% of our portfolio positioned we feel really good about our book, which was optimize over the past few months, our our RPL strategy launched by rehabilitating distressed loans continues to see stable payment profiles with our underlying borrowers the combination of lower ltvs with elevated coupons is hard to replicate.
Great.
In this in this market.
And in performing loans, we are seeing the most compelling opportunities today with either high coupon residential bridge loans or in newly originated loans underperforming guidelines sourced at significant discounts to par from loan originators.
As of yesterday's close you saw the 30 year fixed rate coupon of two point, 70% well below our current residential mortgage coupons on our balance sheet. While performance continues to improve we are excited about the opportunity to monetize the price discount of these loans held on our balance sheet by assisting bars to lower mortgage rate refinances lastly on our call.
I discussed.
How we exited most of our non QM securitization bond holdings I thought it would be helpful to discuss our current position today.
While we've been active in our last two quarters as a buyer of security type.
Ties bonds was not been active excuse me our our remaining holdings, mostly acquired in 2018 in 2019 have significant downside protection contain wider spreads than today's market issuance.
At today's tight spreads we are better issuer than a buyer of securitized debt and we will look to continue for opportunities to sell and reinvest that cash into port loan portfolios, including multifamily debt more on this in a minute.
On page 16.
Performance of our portfolio has absolutely outperformed our expectations.
At the end of 930, we had just 2% of our entire residential loan portfolio under a koby 19 assistance plan that level for our distressed loans noted as the RPL sector and table to the right is shocking allow.
The significant equity borrowers are sitting on our portfolio created very strong alignment to stay current.
This can be further witness our distressed loan transition rates shown in the bottom right graph today, we have nearly two times more performing loans delinquencies for purchase date.
That's after a 7% of our portfolio as pre paid off at par.
Since purchased it our loan prices have rallied back from the lows experienced the end of Q1 as borrowers continue to stay current as discussed earlier, we recently securitize 729 million principal balance of loans in our sales strategy.
And our last deal we play senior debt at a market low 2.875% on the fixed senior rate bond after.
After locking in its execution, we see over a 12% return on our equity cash flows. We also structurally non mark to market warehouse line for new loan investments. This is intended to bridge our performing loan strategies were rated securitization takeout. Our redeployment efforts is focused on new investments in single family bridge sector more affectionately named fixed.
Fix and flip loans.
The underlying the underwriting the space station market improvement in 2019 from from 2019 under reduce competition in this space.
We have onboarded three originators in the quarter, we have five plus originators in our pipelines and we're we're watching the loan pipelines grow into the fourth quarter into next year.
We also expect to be more active in multifamily, which I'd like to switch our focus to.
Turning to page 17.
Much like single family, we transition away from the security markets. In this case, Freddie Mac K series bonds in equity instead focused on our per party loan proprietary loan origination channels to grow our balance sheet. These assets have demonstrated stability our portfolio.
Portfolio equity to multifamily strategy is now 25% as exceeding the top right corner opportunities to directly Len to multifamily sponsors fitting our middle market property characteristics is a valuable revenue source for our company.
Multifamily loan originations noted as preferred equity in mezzanine loan sub sector. In this table has an excellent track record with a zero losses incurred since the strategy was rolled out over eight years ago with consistent double digit Unlevered returns, we are well positioned to further expand our effort in this market with with property sponsor relationship.
It's built over 10 years lastly on the station side, we further look to monetize our holdings of case series, which are currently valued about a six point discount to par on our balance sheet, we see additional tightening with these very stable bond cash flows and near term.
On page 18.
As an update to our performance. We currently enjoy a 1.43 times DSE, our multiple on our multi our mezz and profit positions as you can see in the.
In the table below.
We have built out.
Our technology to monitor that but the underlying.
Property cash flows.
And also has built in low low LTV protection, which is why 99% of our portfolio is currently is current as of 930.
As seen in the bottom right table our state by state distribution is mostly located in the south and southeast part of the United States.
We're seeing strong demand with rental rate increases in most of our markets currently undergoing seismic demographic changes, mostly from north east regions of the United States population migration is truly remarkable to observe where we continue to see rental shortages in up in many of our markets that we lend to.
Within an 11.5% average coupon and upfront origination fees earned the risk adjust return is excellent, especially in this low rate environment.
This exposure further differentiates us differentiates us from our peers, providing a niche strategy that is very hard to replicate we are absolutely focused on adding this exposure and have increased our pipelines in Q4 expected experienced strong growth in 2021.
Thanks.
On page 19, we focus on generating total risk adjust returns by investing ounces low relative risk metrics, we have with a high cash balance we are well positioned to exploit any volatility in this market with our low leverage.
We have efficient and flexible.
Our capability to entering this market and going through both just not just single play but multifamily markets.
That have provided excellent value to our shareholders.
In the fourth quarter, we continue to monetize realized unrealized gains in our securities we're targeting short duration investments with.
Anywhere from one to kind of four year durations.
And we are focused on our asset management strategies in proactively being able to keep our borrowers current also looking to refinance loans in the performing loan strategy and residential as well as monitoring and asset managing our our mezzanine loan book and multifamily.
With that.
I'll pass back to Steve. Thank you thanks, Jason.
As you can see we spend a lot of time, focusing on structure and structuring and strengthening the balance sheet of the company and we believe there is going to be tremendous opportunity as we go forward into the fourth quarter in early next year.
So we look forward to getting to that so operator, if you'd like to open up questions now for the people on the call. Thank you.
Operator.
Yes, Sir.
Your first filling it up for questions.
And if you would like to ask a question at this time simply press Star then the number one on your telephone keypad.
If you would like to withdraw your question. Please press the pound key.
We'll pause for one moment just to compile the Q and they lost there.
And sorry. Your first question comes from Doug Harter at Credit Suisse.
Thanks can you talk about how you're balancing.
Kind of the the patients for for the investment returns that you think will be coming.
You know versus kind of using some of that excess.
Capital liquidity today told to buyback stock given the discount to book that you've heard that.
Yes, sure I mean, we look we look at this all the time, Doug and as the read is so expensive to raise capital and so difficult to raise capital in many cycles that you go through we've been very successful in ways that a tremendous amount of capital in 18 and 19 in the first part of 20, and we really when we look at.
The alternative of buying back stock, which clearly helps the book value on a onetime hit in the period when you buy it back but the earnings give up that we believe is out there for the future is not is not in place where we think it makes sense to go out and buy back stock at this point, we do look at it we think where our pipeline is building we wanted.
We get through the election, where about through the election, we want to get a sense of where we are the policies are going to be as it relates to the stuff that we invest in an impact that will have but we do think that we still dealing with a very large percentage of unemployed people in this country.
An unknown than where stimulus is going to be and when it's going to occur.
And we want to be prepared in the event. There is another downturn in the economy like we saw in in March and so we will continue to be very conservative and were comfortable in and being diligent in timing and getting our investments. We still believe that we have significant unrealized losses to recover which will continue to build the earnings we believe our core.
Earnings are around seven to 10 cents right now and we believe that we can continue as Jason mentioned in part of his presentation and as we start to reinvest that capital that will grow anywhere from two and a half to 10 cents over the next.
Couple of quarters. So, we're we're very comfortable where we sit today.
Okay. Thank you.
Sure.
And your next question comes from the line of Christopher Nolan of Landenburg Thalmann.
Hey, guys congratulations.
Congratulations on a nice quarter.
I guess.
The dry powder correct.
Correct Thats five deploying after that would be five cents added per quarter.
That's right.
And.
I mean is it thanks.
The news that's going to be deployment in the first half of 2021, I know, it's opportunistic and middle of balls in the air but Where's your thinking in terms of.
Good.
No.
I think when you say the first half we would we would right now as we see our opportunities starting to build.
I would anticipate our investment pipeline growing substantially.
Towards the end of the fourth quarter into the first quarter.
We would.
Again this is based on what happens in the economy or whatever how the election unfolds, but our anticipation would be we would be getting close towards fully invested as we get through the end of the first quarter into the second.
Got you and then the $100 million and potentially recoverable unrealized losses.
Given the tightening credit spreads and so forth.
What do you think the timing for something like that could be.
You know we did a securitization in October that was 100 basis points tighter than our securitization in July and certainly at very tight levels much tighter than where our bonds and loans were marked at 930, So again, given where the market is and given a supply demand imbalance it would appear that.
Spreads, which continue to tighten.
And those particular asset classes.
Great and then just a follow up on the dividend question from Doug.
Yes.
On a GAAP basis on a comprehensive basis here well out, earning the dividend comfortably.
But does it make sense to increase the dividend when your stock is trading at such a discount.
Your thoughts about the dividend I mean should we sort of think about incremental.
Step increases.
Performance of the company returns.
Yes look we certainly have enough cash and liquidity to to support a higher dividend. We always are looking at what we need to distribute from a taxable standpoint, what we think makes sense to distribute.
From a shareholder standpoint, we reinstated five cents grew with the second half and to your point, we want to get back to a level that our shareholders have been used to and so over time, we'll we'll continue to look to grow the dividend, but at this point I don't think we're really in a position to specifically state at what rate or level, but I would anticipate it going upwards.
In the future.
Great. That's it for me thank you.
Thanks, Chris.
And your next question comes from the line of Steven malls from Raymond James.
Hi, good morning.
Turning the page I hate to ask a third question on the dividend, but can you give us an update on where re taxable income stands as I understand it losses on securities or Florida zero. It can offset ordinary in Tom's, meaning are you guys said.
Satisfying a distribution requirement are there considerations that will need to go into that about about future dividends or spillover in palm or where do you stand through nine months on a re taxable income basis.
No I mean, we're fine where we stand to re taxable basis.
It clearly we focus you know, we certainly don't want to pay any type of excise tax from that meeting or distribution minimum distribution requirements. So that is that there is a consideration when we're looking at setting our dividend policy, but we and we do have some realized losses and you are correct you can offset that against ordinary income, but you know some of our business takes place in Trs is which is to.
Taxable. So there is not a dividend distribution requirement there that allows us to retain some income. So there is a combination of factors that occur in the company and that we're comfortable with and we are in compliance in our our our night and concerned about not being able to meet something you're doing some kind of special dividend in the fourth quarter at this point right.
I appreciate that color Steve.
Switching to Securitizations in a couple of minutes late so apologize covered but she did one in Q3, one subsequent to quarter end can you talk about.
Is it possible to compare the deals if assets are somewhat similar how is demand improving how is pricing improving do you see those those trends continuing or do you think the securitization market is is kind of back to a level, where its going to plateau for a bit can you give us some color on what you're seeing on that side of the market.
Yes, the market has obviously tightened up quite a bit.
Even approaching pre code level securitization spreads.
So we were able take advantage of that in the in the middle of October.
At the 2.875% coupon that I mentioned, but.
Since then the.
Senior bonds have plenty of demand in the market. There is there is also a dearth of new supply the non QM.
Channels have had dried up.
You bet, so you're not seeing a lot of it.
The issuance there.
And in other similar market, so supply and demand balance is back to being at about technical positive where.
Pre cobot it was actually becoming more negative more there was more issuance then roll off of on senior paper.
So thats, obviously helped also spreads in the space of stable that are wider than even comparable corporates. So I think you're seeing some.
Some crossover buyers in the space does come in and looking at the bonds.
But since that issuance I'd say senior bonds pretty stable when you're.
Fixed rate senior bond space on especially with latest rally in treasuries.
In the more of the mezzanine sector I think you're seeing more people take a.
Slightly more risk off stance come into election, Weve seen spreads widen out and mezzanine type of bond offerings.
In the market about 25 to 30 basis points.
But I think right now given the supply side of the equation. There is enough demand thats meeting it you're seeing deals continues to be oversubscribed, which is a good trend and showing strength from that side of the equation.
So I see kind of plateauing here.
Senior bonds about staying flat and now with the recent widening of this of the mezzanine bonds I think it pretty much stays at this level into the year.
Outside of some kind of.
Technicals or volatility in the equity markets.
Great excellent color and lastly.
On the security side, you know taking leverage there's no financing in place there.
As of this quarter can you talk about.
What you're seeing on the on Unlevered returns there as you look to be non profits the K deal.
The pieces, you're looking at or what type of return on assets, you're seeing there and what's the ASP outlook longer term will will you go back to putting some leverage on all the securities portfolio or how do you view that.
As we move into six and 12 months from now.
So the.
The current.
We took out new repo warehouse line.
In them in the quarter. This was a non mark to market warehouse line for performing loan opportunities and get your question on securitization were our goal is to take performing loans that were buying in both fix and flip strategies stretching in RPL strategies.
And use that as a bridge to a securitization take out where those financing there is.
Very very efficient.
As it relates to our security portfolios, we are not in the market and don't foresee in the near term.
Buying security positions and looking to use repo or other financing.
Some were financing to bridge the target returns, we do see some mark which is doing that again coming back from work and have Q Q1, where that kind of dissipated and there was lot well, while the technical distressed came from.
We don't like the risk metrics, there, we don't like the the I'll call it.
There is excess liquidity in that market, we have plenty of financing not a lot of bonds.
And that can quickly turn over with.
A.
Volatility in the equity markets as a whole. So we're not looking there were also not focused on a case series bonds down the capital stack on the senior bonds side of the equations, it's too tight in.
Lot of Leverages needed to to earn a decent return a double digit return there.
In the mez part of the capital structure, we have sold out of our bonds at premiums. We saw the bonds are left that we will be looking to sell opportunistically overtime and down in the cap structure and the equity.
That's a strategy where it's at.
789% type a coupon or accretion return you leverage is required to get.
Two into a double digit solidly in double digit area.
And we do not want to bridge short term financing with long term longer duration asset exposure. So for medication, we're not going to be involved in that market, we see better opportunities is to create our own equity.
In our loan channels buying loans, creating an equity with term financing that's matched funding against it as well on the mezzanine loan space in profit in multifamily, we do we don't need financing to earn their target returns in that space given the coupons are and for returns and wasn't 5% range.
So we would not be utilizing financing that space.
Yes, Favre away on the assets that were holding is really coming from the recovery of the prices, we could put financing on them, but with $650 million in cash is no need to win.
We're comfortable as far as our position goes down to just selling these into the marketplace and as Jason said focus on our loan business. Because we just think there is a better risk adjusted return there.
And Patrick will appreciate the comments from both of you Steve Jason have a great day.
Thanks, Steve.
And your next question comes from the line of Jason Stewart from Jones trading.
Hi, Good morning. Thanks for the question, if you pull up and think about liquidity and leverage over the medium to long term given what you've described on the asset side, where do you think that trends too as you as you take it out a little bit more than say two or three quarters.
Yes, certainly look it.
To Jason's point in a previous question. The goal is to generate equity returns on term funded securitizations, where there is really no call risk back to the company and Mark to market risk. So yes to the extent that we have a larger portion of that type of risk on the balance sheet. You can run a much tighter liquidity book that probably represents closer to.
Between eight and 10% of the equity the company.
As the Mezz business and multifamily is an unlevered business. So it doesn't really with car excess liquidity to manage that business.
So that's why we they were very comfortable looking forward towards our earnings there is a lot of earnings growth potential in our balance sheet right now in the ways that we're putting new investments on a book. So I think if we as a guide probably 8% to 10% and it could be lower depending on the mix of residential securitizations relative to direct line to multifamily.
Okay. That's helpful.
And then on the on the cost of fund side I mean, you've done a lot of work on the liability side of the balance sheet. If you could give a sense of where you think that.
Trends to over the next couple of quarters, given the securitization activity is three Q going to represent a low point or is it up again in Fourq you any color there given the amount of work that you've done would be incredibly helpful.
Yeah look the one thing that's changing rapidly and we're in the process of closing.
We have two warehouse lines that roll in the fourth quarter. So we're in the process of negotiating spreads there, but if you look at our securitization that was done in July and about 4% on the a one bond for underneath and to Jason's point are a one bond in October one or 2.875 financing costs have come down substantially so.
I would anticipate in LIBOR has gone down I would anticipate the 333 average for the third quarter, we have a chance of lowering that because we have a bigger base with a lower cost being added to it. So I think we would see that plant towing and slight hopefully going down slightly if the market continues to go the way its going also add that the.
The mix of Securitizations that were going to sell ourselves too in 2021 will be quite different than in 2020, we're looking at a two different types of securitizations for the first quarter of next year in the rated securitization space with respect RPL loans as our portfolio season, and we have.
More current pay borrowers that are more more season, Payors 12 month Pos.
We can avail ourselves to the to the rates gears Asian market, which will will definitely drive our funding costs on our loan book lower.
As well as.
Looking at.
Bridge loan securitization opportunities as well so the expectation is that the mix of funding will change from non rated deals rated deals, which should drive down our funding costs in 2021.
Great. Thank you.
Again, if he would like to ask a question at this time simply press Star then the number one on your telephone keypad.
And your next question comes from the line of Bose George from KBW.
Hey, good morning.
Could you just repeat what you said about the current core earnings run rate.
And then just the commentary about the benefits.
Yes from the deployment of cash and what you said about the business.
The deployment I think you said into early next year in the first quarter.
Sure, Yes look we look at our core earnings right now to between seven and 10 cents and it's hard to calculate when you look at our financials, because we have a lot of different accounting methodology is going on but when you look at our net margin in components of the other earnings.
Other earnings categories, we think its around seven to 10 cents right now.
And as we look at deploying the capital and in one of the graphs that we put out there to take some talk to at about a 50% deployment at a 10% average asset return, which is lower than what we're actually experiencing today on some of the investments that we have done that generates about an additional five cents per share.
For quarter and earnings growth and so obviously thats a low bar that we're trying to put out there as a representation, but our goal is to do better than that as we go forward in time.
And as we add more securitizations.
Residential securitizations I think you'll start seeing a transition of our core earnings is more definable for you guys as analysts it's been very difficult historically for us because we've had a lot of different components of earnings, but I think as we go forward and look at some of these strategies. We are focusing on today, you will see more core like earnings being developed.
Okay, and then eat in a dollar amount.
Sales of unrealized losses so.
So over time, what was that again.
I'm, sorry repeat that those you're breaking up a little bit what was the up when you talked about unrealized losses that could reverse over time give a dollar amount there was.
Sure. Yes, we said we had we have over $100 million still on securities and loans that we hold in our balance sheet that are still below where they were at March 31st essentially thats, how we look at that and we've seen significant recovery and as we said in our AR securitization that we did in October at noon at new lows in two.
Terms of costs that would infer that prices continue to strengthen into the fourth quarter today.
Okay, Okay, great. Thanks.
Thank you.
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And at this time there are no further questions.
You may continue with any closing remarks, Mr., Steve Mumma.
Thank you operator, thank you everyone for being on the call. We look forward to recapping, our 2020 year in the early part of 2021.
Be safe and healthy and have a happy Thanksgiving thanks, everyone.
Ladies and gentlemen, this does conclude today's conference call. Thank you for participating you may now disconnect.
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