Q3 2020 Arbor Realty Trust Inc Earnings Call
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Good morning, ladies and gentlemen, and welcome to <unk> third quarter Arbor Realty Trust earnings Conference call.
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I would now like to turn the call over to your speaker today, Paul Elenio Chief Financial Officer.
Please begin sir.
Okay. Thank you and good morning, everyone and welcome to the quarterly earnings call for Arbor Realty Trust. This morning, we'll discuss the results for the quarter ended September Thirtyth 2020.
With me on the call today is Ivan Kaufman, our President and Chief Executive Officer before we begin I need to inform you that statements made in this earnings call may be deemed forward looking statements that are subject to risks and uncertainties, including information about possible or assumed future results of our business financial condition liquidity results of operations plans and objectives.
These statements are based on our beliefs assumptions and expectations of our future performance taking into account. The information currently available to us factors that could cause actual results to differ materially from arbors equity stake expectations. In these forward looking statements are detailed in our FCC reports listeners are cautioned not to place undue reliance on these forward looking state.
Me, which speak only as of today Arbor undertakes no obligation to publicly update or revise these forward looking statements to reflect events or circumstances after today or the occurrences of unanticipated events.
I'll turn the call over to Arbors, President and CEO Ivan Kaufman.
Thank you Paul and thanks to everyone for joining us on todays call.
We hope that you and your family was safe and healthy we all realize the difficulties and complexities that our country and the entire world continue to deal with the effects of coated and so we appreciate your participation during these challenging times as.
As we've discussed on our last few calls, we're very well positioned to succeed in the current economic climate, we built a viable operating platform <unk> focusing on the right asset class with very stable liability structure strong equivalent liquidity, an active balance sheet and a GRC agency business.
And many diversified income streams that generate strong strong core earnings and dividends in every market cycle.
We have also developed the business model provides many diversified opportunities for growth, which clue clearly puts us in a class by ourselves and it has allowed us to be a top performer commercial mortgage rate in the space.
We had another record quarter without third quarter results, reflecting the continued commitment and successful execution of our business strategy and a diverse platform we've developed.
Our continued momentum and truly remarkable third quarter results have once again allowed us to increase our dividend to 32 cents a share this.
This is our second consecutive quarterly dividend dividend increase [laughter], reflecting a 7% increase so far this year.
Represents a payout ratio of around 70% compared to an industry average of 90% to 95%.
As Paul will discuss in more detail our core earnings for the third quarter was 50 cents per share, which is an incredible accomplishment and a true testament to the value of our franchise and a many diverse income streams. We have created we continue to continue to realize significant benefits from many areas of our diverse platform, including.
Substantial growth and not just the agency platform that continues to produce strong margins and increased servicing fees continue.
Continued growth and significant benefits from the size and scale of our balance sheet business substantial income from our residential business strong performance of our multifamily focused portfolios with very few delinquencies at extremely low forbearances and a reduction and reductions in our overhead and general and administrative.
<unk> expenses.
And these re recurring benefits combined with our projected originations strong pipeline and credit quality of our portfolio puts us in a unique position to be able to continue to produce significant core earnings going forward and we propylene position to excel in this environment.
The strong core dividends. This strong core earnings outlook has allowed us to once again increase our dividend, which now reflects an 11% yield based on yesterday's closing stock price prior to the pandemic, we were trading at a much lower dividend yield of around 8%, which if applied to our current dividend would result in a stock.
<unk> of $16 a share.
And again, we believe based on our resiliency and strong performance that we should be trading above those levels and we feel this is a great opportunity for shareholders to realize substantial value appreciation.
We continue to experience significant growth in our GFC agency platform, we originated a one and a half billion GNC agency loans in the third quarter and 3.6 billion for the first nine months of this year, which is up a prospect 11% from last year's comparable period.
Pipeline is also at an all time high and as a result, we expect to produce a very strong originations volume in the fourth quarter and likely grow our agency production by as much as 20% to 30% over last years numbers, while maintaining very strong gain on sale margins.
And this unprecedented environment, our GRC agency platform continues to offer a premium value as it requires limited capital and generate significant long dated predictable income streams and produces significant annual cash flow. Additionally, our 22.6 billion GRC agencies servicing portfolio.
Which we have grown 12.5% already this year is mostly prepayment protected and generates over $100 million, a year and growing and re occurring cash flow. This.
This is an addition to the strong gain on sale margins, we continue to generate origination.
Origination platform, which combined with new and increased servicing revenues will continue to contribute greatly to our core earnings and dividends.
From a liquidity perspective, we are very pleased to report that we have current cash and liquidity position of approximately $500 million, which not only provides us with adequate liquidity to navigate the current market conditions, but also gives us an offensive capital to take advantage of accretive lending opportunities.
This has allowed us to replace our run off and can it continue to grow our balance sheet loan book with high quality multifamily bridge loans that generate attractive levered returns and create a substantial pipeline of future GST agency originations volume and long dated servicing revenues.
We are very pleased with the high quality balance sheet. We have created that is also financed with the appropriate liability structures. Our balance sheet loan book has grown to $5.1 billion and his finance for 3.8 billion to 3.4 billion of debt pay.
Possibly 2.5 billion or 75% of that debt is non recourse non mark to markets yellows and approximately 900 million is financed through warehouse to repurchase facilities that is secured by 1.2 billion in assets with eight different banks that we have longstanding relationships with additionally, the majority.
Already of the loans being financed in these bank lines are also rated and CLL eligible greatly mitigating the risk of financing these loans to short term facilities. It.
It is also very important to highlight that over 90% of our book, our senior bridge loans and more importantly, 80% of our portfolio is multifamily assets, which has been the most resilient asset class in all cycles and continues to significantly outperform all other asset classes and this recession as well.
Additionally, we've had tremendous performance multifamily portfolio with well over 99% collections and no loan modifications with great concessions to date.
And most of the loans in our portfolio contained interest reserves and will replenishment obligations by by our borrowers, giving us the ability to effectively manage our portfolio through this dislocation.
As a reminder, we have very little exposure to the asset classes that affected the most by this recession, such as retail and hospitality total.
Total exposure to these asset classes at approximately $175 million or approximately 3% of our portfolio. We also believe we have adequately reserved for these assets and do not feel at this point that any material further impairment will be necessary, which gives us confidence that our adjusted book value of nine.
Sales of 74 cents accurately reflects the current impact of the recession.
We also continue to see very positive trends related to our GRC agency business collections, which we believe reflects the strength of our borrowers and the quality of our GLC agency portfolio. We only have a handful of delinquent loans outstanding and extremely low forbearance numbers not portfolio through October loans in full <unk>.
Parents represent less than 8.4% of our 16 and they have billion Fannie may balk at around 6% of our 5 billion Freddie Mac loan book, which is unchanged since July and we've had very few request for forbearance in the last several months and as a result of these extremely low forbearance numbers, we have recovered almost all of the seven.
Hundred thousand of servicing advances that we had outstanding last quarter and currently we have less than 20000 on recovered servicing advances.
In summary, we are extremely pleased to have built such a versatile operating platform that is multifamily centric with many significant diversified income streams that continue to produce strong core earnings and dividends in all cycles.
We are also well positioned to succeed in the current economic climate and are excited about the many opportunities we see to continue to grow our franchise core earnings and dividends going forward. We believe this puts us in a class by ourselves and performance track record speaks for themselves.
And we believe that an investment in our company today at these levels would provide a tremendous long term return and our primary focus remains on continuing to maximize shareholder value.
I will now turn the call over to Paul to take you through the financial results.
Thank you Ivan as our press release. This morning indicated we had another exceptional quarter producing core earnings of $67 million or 50 cents per share. These results have translated into record high ROI lease of approximately 22% for the third quarter and 19% for the first nine months of the year as I've been touched on we continue to.
Benefit from several positive aspects of our diverse business model, including significant growth in our agency platform Weibo. It wasn't a large portion of our balance sheet loan book substantial income from a residential banking joint venture and reductions in our overhead and general administrative expenses and these benefits clearly demonstrate the value of our operating platform and then the.
First of all of our income streams and more importantly gives us great confidence in our ability to continue to generate strong core earnings and dividends.
As we mentioned earlier, we had another phenomenal quarter from our residential banking business. As a result of the continued historic low interest rate environment. We recorded 32 million of pre tax income from this investment in the third quarter, which contributed approximately 15 cents a share on a tax effective basis to our core earnings for the third quarter. The income from this investment further emphasizes the device.
First of all of our income streams and act as a natural hedge against declining interest rates, specifically earnings on our escrow balances and we believe this investment will continue to contribute meaningfully to our corning's going forward and we are expecting the fourth quarter result to be less than the last two quarters largely due to seasonal nature of the business.
Our adjusted book value at September Thirtyth was approximately $9.74, adding back roughly $70 million of noncash general seasonal reserves on a tax effective basis. This is a 3.5% from approximately $9.40 last quarter largely due to the significant core earnings we generated in the third quarter and as Ivan mentioned earlier, we are not.
We're expecting any material additional write downs at this point, giving us confidence in our adjusted book value.
Looking at our results from our GRC agency business in the third quarter, we generated 17 million of core earnings and approximately one and a half billion in originations and 1.2 billion in loan sales the margin on our third quarter GRC agency loan sales were up to 1.63% compared to 1.46% for the second quarter, mainly due to.
The strong stronger margins on our Fannie Mae business and a higher mix of FHLB loans during the quarter, which is a higher margin business.
As Ivan mentioned, we also have a very robust pipeline and we expect to produce very strong origination volumes for the balance of the year.
And then in the third quarter, we recorded $42 million of mortgage servicing rights income related to $1.5 billion of committed loans, representing an average MSR rate of around 2.77%, which was up slightly from 2.69% rate for the second quarter.
Our servicing portfolio grew 4.5% this quarter to 22.6 billion at September Thirtyth would have weighted average servicing fee of 44.8 basis points and an estimated remaining life of nine years. This portfolio will continue to generate a predictable annuity of income going forward of around $101 million gross annually.
Which is up approximately 14 million on an annual basis from the same time last year.
Additionally, prepayment fees related to certain loans that have yield maintenance provisions was 2 million for the third quarter compared to $3 million for the second quarter.
And our balance sheet lending operation, we grew our portfolio of 5.1 billion in the third quarter on 292 million of new originations.
5.1 billion investment portfolio had an all in yield of 5.93% at September thirtyth compared to 6.10% at June Thirtyth, mainly due to higher rates on run off as compared to new and originations during the quarter and from the impact of nonperforming loans. The average balance in our core investments was up to 5 billion this quarter from $4.8 billion.
Last quarter, mainly due to the full effect of our second quarter growth.
The average yield on these investments was 5.98% for the third quarter compared to 6.16% for the second quarter, mainly due to more acceleration of fees from really run off in the second quarter, hi, higher interest rates on run off as compared to originations and from the impact of nonperforming loans.
The total debt on our core assets was approximately four and a half billion at September thirtyth when all in debt cost of approximately 3.9% compared to a debt cost of around 3.14% at June thirtyth.
The average balance in our debt facilities was up slightly to approximately 4.6 billion for the third quarter from $4.5 billion for the second quarter, mostly due to financing the growth in our portfolio and the average cost of funds in our debt facilities decreased to approximately 3.06% for the third quarter compared to 3.26% for the second half.
Quarter due to a decrease in the average LIBOR rates during the third quarter as well.
Overall net interest spreads on our core assets increased slightly to 2.92% this quarter compared to 2.90% last quarter and all and our overall spot net interest spread was down to 2.4% at September thirtyth compared to 2.96% at June Thirtyth.
Lastly, the average leverage ratio in our core lending assets, including the trust preferred and perpetual preferred stock as equity was down slightly to 86% in the third quarter from 87% in the second quarter and our overall debt to equity ratios on a spot basis came down as well the 3.0 to 3.0 to one at September Thirtyth from 3.1.
To one at June Thirtyth, excluding general seasonal reserves.
That completes our prepared remarks for this morning, and I'll now turn it back to the operator to take any questions. You may have at this time operator.
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Steve Delaney with J.P. Securities. Please go ahead your line is open.
Thank you.
Good morning, gentlemen, and once again, congratulations on an excellent quarter I think I I think I'd say that every quarter, but oh it it's you've made it hard not to.
I'd like to start sure Ivan I'd like to start Paul with the the gain on sale margin on.
On the agency book 163 versus 132, I heard your comments and we know fannies better than Friday, and FHLB is better than anything but I'm looking at the table on the first page of the press release, I don't and I don't see a big shift towards Fannie and FHLB anything material. So is there anything else.
Little more subtle in that 163 I'm looking at a model for the last two years and you know 141 50, something like that 132 might have been lower than normal, but you know is 163 I mean do you think thats a sustainable level just little more color about that please because its important number sure Steve its.
Also one of the things I said in my commentary is you really have to compare to 163 to 146 from last quarter, because although we put up 132 last quarter, we had the private label securitization in there. So if you back out the private label securitization you're at 146 versus 163 is still a meaningfully move a meaningful move as you.
As you mentioned from 146 of which is around where we've been running to 163 this quarter and you're right. There wasn't really much of a shift in the Fannie Freddie business, but it has to do with loan sales not loan originations as you know we book our gain on sale on loan sales. So while there wasn't really much of a move and FHA originations, which have been strong.
There was a bigger move in FHLB loan sales because of the timing of when loan sell versus originate. So we had significantly more FHLB loan sales this quarter than last quarter, which carry a higher margin and on the Fannie business. We did sell it just had a higher margin and maybe I can comment a little bit on the on what's going on in the market but.
We did have some deals and it matters on the size of the deal. It matters you know there's a lot of different factors that go into the margin, but the margin has been very robust on the Fannie product as well.
[noise], yeah aren't that little helpful. Steve I'm sure I better color on that I think we had a healthy margin, we probably had no super big loans, which generally carry a smaller margin right and we might have been the I have a little bit of benefit that during that initial dislocation.
Period, you know kind of in the summer a little before the summer that we continue to operate very effectively and perhaps you know we're in a better position than most and had a healthier pipeline and we had a little less competition in that period of time, just because many people will like many other competitors were more like DRAM.
Headlights situation and it gave us an ability to get a little step ahead of everybody, but you know from my own purposes, a pipeline is extraordinarily strong probably the highest its ever been and as we've indicated in the comments were expecting an even stronger fourth.
Fourth quarter than what we've had so I think we'll be able to maintain the margins that we customarily have and hopefully we'll be able to do a little bit better.
Okay. Thank you and Ive been could you talk about a little bit about the re five dynamic for agency multifamily borrowers now we all know what's going on in <unk> and residential single family you see it at Cardinal we see it in these resi mortgage ipos that are coming to market and it's just gang busters thought, but obviously your.
Loans have like lockouts and they have yield maintenance is there a scenario, where you can work with borrowers and get them, a lower coupon refine a lower coupon and still collect some yield maintenance for yourself. So you you end up with a win win situation with your existing servicing book sure well there are a couple of components first of all.
FHLB does have that product and a they do have a modification product and.
Okay, they'll you'll see an uptick on that in general.
And that'll occur on the on the Fannie Mae loan book, if if people do exit a little earlier, we do get a pickup on on somebody yield maintenance and increases our revenue going forward.
So you won't see that as much on the Fannie book as you do on the FHLB book and our FHLB, Okay, it's not that big but on a Fannie Mae book, we saw a little bit last time, maybe Paul can comment on that we haven't seen that start to occur yet, but it's OK obstacle. It's possible that there may be a little bit of an uptick on that side yeah.
So Steve that's right items right, we haven't really seen as being meaningful yet, but some commentary we had 490 million a run off in the servicing portfolio. We put on a billion five a new originations. So that's really nice growth.
Of the 490, we did recapture 40% of that that run off through new originations and I think what's meaningful as well is the balance sheet business continues to feed the agency business and that's one of our key strategies and up to 206 million that ran off interest in this in the third quarter on the balance sheet, but we were able to recapture sixth.
5% of that through agency products. So it's really building really feeding that servicing book very very nicely and one other point I think we should continue to emphasize is that that servicing portfolio continues to grow at a healthy clip and it's not just about the gain on sale that were booking which is which is significant but it's about.
That annuity and out servicing life is over nine years at this point, mostly prepayment protected and as Ivan said in his commentary in a mine as well, it's generating over $100 million gross annually in servicing fees. So if we can continue to build that portfolio through our own originations through refining some of our balance sheet runoff and other raw.
On off that other people have we're going to continue to create a substantial annuity going forward.
Yeah, just a little color on that as well, where we're seeing the longer duration product. So there were a lot of five year loans are floating rate loans that were done over the last couple of years I'm now we're seeing more of a shift to 10 and 12 years of duration of our income stream is going to be even longer than it was historically and then.
Six of 10, and 12 year politically a greater percentage into.
Interesting, yes, well that makes sense given that youve, where the yield curve is well listen. Thank you both for the for the color and good job.
Thanks, Steve.
Thank you we will take our next question from Jade Rahmani with KBW. Please go ahead.
Thank you very much.
Can you comment on the credit performance and if you're seeing any both.
Both pockets of resilience in the portfolio or any any sectors of risk multifamily has been quite a quite a puzzle. This cycle I think initially in the March April timeframe, a lot of people thought you know rank collections with decline they'd be move outs to to.
The single family and that would cause you know.
That would cause some credit issues in the multifamily space. So far we haven't really seen that we've seen some of the large apartment holders in dense urban areas be impacted but the overall space is proving very resilient. So just wondering if you could comment on that.
I mean, clearly the the rent collections, a remarkably amazing, they're rolling off slightly rather than significantly.
And the areas that are most vulnerable of course, all the urban areas, specifically New York City.
Specifically market rate apartments in New York City.
And all the areas like San Francisco.
Those that are vulnerable areas.
However, we haven't seen it you know.
Go through in terms of people, making their payments on as borrowers or you know, making their payments as renters.
I think were all anxiously waiting to see what happens with the stimulus Bill I think the stimulus bill helped quite a bit initially it's it's it's gone away everybody thought when it went away there'd be an impact the impact we haven't seen however, if there is some softness in the market I think the baseline of where we are as a firm.
Yeah, we have a lot of room, I mean, even if things fall off a little bit we have an extraordinary amount of room before.
Our our loans get impacted so we feel really comfortable specific with our portfolio on our balance sheet.
We have a lot of structure in our loans, which really allows out alone should perform not just based on the assets that based on the bars as well. So we feel relatively comfortable but I think if you're looking at stress points in the market I would look at the class eight I would look up the lease that lease up situations and I would look in the urban areas, where these class a buildings.
And not being released and there are a lot of concessions, we as a firm don't have a lot of exposure to that and you know we feel fairly comfortable but if I was in the market that's what I'd be concerned about.
And why do you think that the Freddie forbearance rates have been much higher you mentioned, 6% versus Fannie 3.4%. So.
So.
They have different policies and a lot of the forbearance is on the smaller loans I do want to point out that we are on the lowest of the spectrum for both agencies.
I think the forbearance numbers for Friday is over 10, we're well below that.
And specifically being such a small balance oriented I think friday's policies were little little bit more liberal and Ah Fannie Mae's policies were more letters, let's see if you need help lets see if you'd be affected and they gave us as a service or the ability to really make the evaluation.
As to whether the bars were affected and then apply good business judgment, whether they needed help or not where as Freddie was a more.
Waving it in I think they've all said that philosophy, a little bit and I think you're seeing a lot more forbearance. So funny Mac small balance business and I think once again on the small balanced business. We are as you know one of the leading role.
Educators in that space.
Very active in that space know how to manage it extremely well so even there were seeing probably half of the fall down says that the rest of the industry is saying.
Okay and you know.
I think that the multifamily space has definitely experienced sort of a refi wave not as pronounced as in the single family space, where now those mortgages on prepayment protected. So there is lot more volatility in single family, but generally how do you think about the sustainability of the agency volumes right. Now is there any portion of this uptick.
That you expect to abate in coming quarters.
I think it's going to be a very very consistent origination scenario theres interest rates you have to keep in mind that the nice part about the patients business. We're in as loans are generally five seven and 10 year loans and they run off accordingly, and there's always a new wave of loans that are running off so.
So as loans come out of there a prepayment period, there's a whole new wave of loans that are eligible and that these interest rates, you're going to see a consistent level of production.
The key is going to be are the assets performing because generally the refinanced loans you need for the agencies, 90% occupancy.
Occupancy economic occupancy so the pandemic if it continues and if there was some softness in some of the areas may impact the ability to refinance some of the loans, but that's specifically more geared towards the urban areas like New York and San Francisco and other metro areas that are suffering from.
People not moving in but we expect there to be a continued flow and we expect business to be very very active all the way through 2021 and forward.
Thank you very much do you want to touch on the single family rental initiative I know that's been a space or you've been actively investing in and it seems that the arbor platform, particularly on the technology side could be useful in procuring some of that business because I know some lenders have struggled to get scale in that space and seem something that would really claim.
Two harbors wheelhouse here.
Yeah, we we love that space as we've previously indicated there are a couple aspects to that space or the one space that we think we're going to be the leading provider of financing and is the the bill.
Build to rent communities I think we have close to 10.
Projects under application, which would probably put us is the number one lender in that space.
And we're developing a huge reputation so there's a construction component to it which were well equipped for both on a technology and a process side and then once those loans become built those projects become bill we end up putting a bridge on it and then after the bridge, we end up putting a permanent loan on it hopefully for the agencies if they qualify.
So we love that business, we're putting a lot of effort a lot of technology into that space.
On the side of the business is providing financing for people who are buying scattered sites and that's a very active part of our business and we expect that to grow. So we've dedicated a lot of time to it a lot of energy and a lot of technology and I think we're going to really see the benefit in <unk> and maybe in the fourth quarter of this year that's.
Certainly going to carry through very strongly into next year.
Thanks for taking the questions.
Hey, Jay.
We will move next week Steven laws with Raymond James. Please go ahead. Your line is open.
Hi, good morning.
Ivan you commented.
On the strong volumes you expect to continue in Q4 is this 141 5 billion a quarter a good run rate or how do you what kind of visibility do you have into the the number this moving into 2021 and you know any seasonality, we should think about around a around the volume.
So I think Paul gave a little on the comment about our volumes were up around 11% year to date and he expects us to be up approximately 20, and maybe as much as 30% for the year. So that indicates you that we're going to have even a stronger fourth quarter and on membership.
Be much stronger you could do the math and understand that a volume's going to be very very strong to get the overall numbers up to that percent a pipeline is the strongest level, it's ever been and we're closing a more than we've ever done historically, but the best news for us.
So as that as we're closing so many loans our pipeline still staying with the same level. So in the current environment. You know, we're very very optimistic and we just hope it continues and the numbers are just extraordinarily strong for US right now in the pipeline is strong and the good news too on the technology base.
Basis, and personnel base, which we're able to handle this volume and these increases with about the same staff, maybe even less than we had last year.
Okay.
Great and and Paul Sankey about the MSR margin I know you touched on the gain on sale and Steve's question, but MSR has been I don't know if elevated right word higher the last two quarters given the longer duration. It looks like you mentioned 10 to 12 years.
Earlier no is is this higher gain on sale or sorry, higher MSR margin something we should see continue or how do you think about that as we move forward.
Steve its a great question and it has been elevated the last few quarters and it's a combination of a few factors. One that you mentioned and I mentioned, we're seeing more 10 12 year product than we ever have before so the longer duration of that servicing fee, obviously add to a premium value to it, especially being prepayment protected the lockout for longer and the second aspect is.
As the industry as a whole and we've seen a real benefit from this is our servicing fees on our new Fannie Mae loans have been very very strong we've been getting 60 70 basis points I knew Fannie Mae loans that we put on as servicing how long will that continue will be dependent on many factors, but clearly that combination of higher servicing fees.
And longer duration locked out assets has grown this MSR right and I do think in the near term that is sustainable Emmis our rate at this point.
Great appreciate the color there switching over to the balance sheet portfolio.
Can you talk about capacity to grow from here are we really going to continue to see a.
No reinvestment of repayments I don't have the numbers right in front of me, but I think it was a slight positive I think 120 million, maybe a growth, but can you talk about the capacity to grow the on balance sheet portfolio and what you're seeing there will be a new investment opportunities.
So the market is fairly competitive right now even more than I thought and we've been able to.
Maintaining.
Our level and grow a little bit because.
As we indicated on the prior earnings calls when it was dislocated we were still originating when most people were out of the business. So we were able to build a little bit of a pipeline and.
And now things are remaining competitive.
We have a little bit of advantage because we have a liability structures in place that we put in place for let's say a low so we have competitive funding, which gives us an edge, we will maintain a balance sheet in my view and try and grow a little bit.
It all depends on how much run off that data.
Cars, but our outlook is that we should be able to maintain and grow it a little bit food food through the fourth quarter.
Great I appreciate taking my questions. This morning.
Thanks, David.
Yes, I reminder, if you would like Cascade question. Please press the star and the one I had touched on so well.
Thank you.
Yeah.
I think I see Charlie in the queue.
We'll move next with Charlie with JP Morgan. Please go ahead. Your line is open.
Hi, Good morning, guys. Thanks for taking the questions. Most have been covered already but I was wondering if you could give an update on and really your outlook for LTL and the private securitization market I mean, with the agency business still growing nicely and you know as you.
You mentioned the pipeline looking pretty good heading into year end of next year. How do you guys think about the trajectory of that segment over the next year or so.
I think it's going to be very slow I think the spread between where the agencies are aware the A.P.L. execution is too wide right now to generate significant volumes.
They're awesome products that fit well into it but we think it's going to be very slow going.
Right now you know agency originations on a gross coupon or somewhere between a 275 and say three thread through 310 and on the A.P.L. side, you're at least 50, maybe 75 basis points wider of that.
So we don't see that as a as something that we're going to be able to do in large scale and next securitization. If we were going to do and probably be for either you know in that three to 400.
A million dollar market would probably take us based on what we're seeing.
Another three to four months to aggregate that kinda collateral. So its a slow go right now the benefits based on where things right.
Appreciate the color. Thanks.
It appears that we have no further questions at this time I would now like to turn the program back to Ivan Kaufman CEO for any closing remarks.
All right well, thanks again for your participation, it's been a record and outstanding quarter and the Great News is there's more to come very optimistic about our pipeline.
Balance sheet, not performance and looking forward to a great fourth quarter and the conclusion of a fantastic year and some very very difficult of a very difficult time, so everybody stay healthy and stay tuned I have a great day bye bye.
[noise] conclude todays program. Thank you for your participation.
You may disconnect at anytime.
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