Q3 2023 Ready Capital Corporation Earnings Call
Yeah.
Yes.
Speaker 1: Greetings and welcome to the Ready Capital Third Quarter 2013 D3 earnings call.
Greetings and welcome to the ready capital third quarter 2023 earnings call.
Speaker 1: At this time, all participants are in a listen-only mode. A Christian and non-sustational father to formal presentation.
At this time all participants are in a listen only mode.
A question and answer session will follow a formal presentation.
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I would now like to turn the conference.
He's the Chief Finance Officer Andrew.
Please go ahead thank.
Speaker 2: Thank you, operator, and good morning to those of you on the call. Some of our comments today will be forward looking statements within the meaning of the federal securities laws. Such statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Therefore, you should exercise caution in interpreting and relying on this.
Thank you operator, and good morning to those of you on the call. Some of our comments today will be forward looking statements within the meaning of the federal Securities laws.
These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect therefore, you should exercise caution in interpreting and relying on them.
Speaker 2: We refer you to our FEC filings for a more detailed discussion of the risks that can impact our future operating results and financial conditions.
We refer you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition during.
Speaker 2: During the call, we will discuss our non- GAAP measures , which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation, or as a substitute for our financial results.
During the call we will discuss our non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our third quarter 2023.
Speaker 2: in accordance with GAP. A reconciliation of these measures to the most directly comparable GAP measure is available in our third quarter, 2023, earnings release, and our supplemental information, which can be found in the investor's section of the Ready Capital website.
<unk> earnings release, and our supplemental information, which can be found in the investors section of the ready capital website.
Speaker 2: In addition to Tom and myself on today's call, we are also joined by Adam Zasmer, Ready Capitalist Chief Credit Officer.
In addition to Tom and myself on today's call. We are also joined by Adam <unk> thousand are ready Capital's Chief credit Officer.
Speaker 2: I will now turn it over to Chief Executive Officer Tom Kapat.
I'll now turn it over to Chief Executive Officer, Tom capacity.
Speaker 2: Thanks Andrew, and thank you all for joining the call today. The third quarter results reflect the strength of ready capital of core business and short-term earnings pressure from the ongoing integration of our merger with Throgmars.
Thanks, Andrew and thank you all for joining the call today, the third quarter results reflect the strength of ready Capital's core business in short term earnings pressure from the ongoing integration of our merger with broad Mark.
Speaker 2: Our strong relative credit metrics increase liquidity and lower leverage position the company to grow earnings to target levels against the headwind of the unfolding recession in the CRE sector.
Our strong relative credit metrics increased liquidity and lower leverage position the company to grow earnings target levels against the headwind.
The recession in the CRE sector.
Speaker 2: The integration of broad market's progress is successfully in terms of both financial and product integration. First, portfolio repayments and liquidation.
The integration of.
Broad market is progressing successfully in terms of both financial and product integration.
First portfolio repayments at liquidations since the merger closed 13% of the portfolio totaling $121 million is not a paid off.
Speaker 3: Since the merger closed, 13% of the portfolio totaling $121 million is out of pay-off or has been sold at above our base.
Been sold at or above our basis.
Speaker 3: As of September 30, the remaining 853 million portfolio of loans in RIO has blended levered yield at 6%.
September 30, the remaining 853 million portfolio of loans and Oreo the blended levered yield of 6%.
Speaker 3: Resulting in a portfolio yield drag of approximately 110 basis.
Resulting in a portfolio yield drag of approximately 110 basis points. Currently we had scheduled liquidations of 100 million through year end with run off with the remainder by the fourth quarter of 'twenty 'twenty four.
Speaker 3: Currently, we have scheduled liquidations of 100 million through year end with one off of the remainder by the fourth quarter of 2024. Second, leverage and liquidity. The transaction reduced ready-cap total leverage from 5.1 X to 3.4 X versus a target 4.0 X.
Leverage and liquidity.
Transaction reduced ready cap total leverage from 5.1 acts to three point Forex versus a target four point Alex.
Speaker 3: Although this target is lower than our historical leverage of 5.0X, the ability to raise debt capital for reinvestment will be a large driver of earnings accretion going forward. Today we have financed 45% of the acquired assets via two new facility yielding proceeds of $360 million, which were primarily used to meet existing debt maturities, including the payout of our $115 million convertible note and of $133 million of security repo.
This target is lower than our historical leverage of five I'll ask the ability to raise debt capital reinvestment will be a large driver of earnings accretion going forward to date, we have financed 45% of the acquired assets via two new facilities, yielding proceeds of $360 million, which were primarily used to meet existing debt maturities.
Including the payoff of our $115 million convertible notes and up a $133 million of securities repo.
Speaker 3: In addition to de-risking the balance sheet, we expect go-forward incremental dollars to be used for investing purposes at cyclical high 15 to 20 percent ROEs.
In addition to Derisking the balance sheet, we expect go forward incremental dollars to be used for investing purposes at cyclical high 15% to 20% of our lease.
Third cost synergies.
Speaker 3: The benefit of scale is the ability to operate the business at a lower operating expense ratio. Through September 30th, we have cut 60% of the existing Broadmark fixed expense base, resulting in a 200 basis point reduction to our OPEX ratio, with additional expense reductions of $4 million executed since quarter end.
The benefit of scale the ability to operate the business at a lower operating expense ratio through September 30th we cut 60% of the existing broad my fixed expense base, resulting in a 200 basis point reduction to our opex ratio with additional expense reduction to 4 million executing since quarter end.
Speaker 3: Finally, in October , we launched our rebrand of the Broadmark product, a small-balance construction and residential finance program featuring loans from $5 to $20 million, including development and construction financing for multifamily, build-to-rent, and lot development for residential developers. These new products complement the existing construction lending program, which provides capital solutions for projects up to $75 million, capitalized primarily by multifamily and industrial.
Finally in October we launched a rebrand of the broad mark product, a small balance construction and residential finance program featuring loans from $5 million to $20 million, including development and construction financing for multifamily Delta rent and lot development residential developers these new products complement the existing construction lending probe.
Brand, which provides capital solutions for projects up to $75 million collateralized, primarily by multifamily and industrial.
Speaker 3: We expect full creation of these items by the latter half of next year with a gradual ramp and earnings to or above our historical 10% target. In the quarter, while stress-seary market conditions pressured both transaction volumes and existing portfolio, ready capital's origination business remained active and portfolio credit metrics are helpful.
We expect full accretion of these items by the latter half of next year with a gradual ramp in earnings to or above our historical 10% target.
In the quarter, while stress CRE market conditions pressured both transaction volumes and existing portfolios ready capital's origination business remained active and portfolio credit metrics are healthy.
Speaker 3: fearing loan origination total of $4.63 million in the quarter, comprising Freddie Mac volume, which includes both our tax exempt affordable and small-bound multi-family channels, a $370,000,000 and bridge volume of $90,000,000, 90% multi-family.
CRE loan originations totaled $463 million in the quarter, comprising Freddie Mac volume, which includes both our tax exempt affordable on small balance multifamily channels are $374 million and bridge volume up 90 million, 90% multifamily.
Speaker 3: Profitability reflects cyclical highs with Freddie Gaet on Thail Margin averaging 100 basis points and retained yields of 18% on bridge lung.
Profitability reflects cyclical highs with Freddie gain on sale margin, averaging 100 basis points and retained yields of 18% on bridge lending.
Speaker 3: Well, we expect tight-series at market conditions to persist for the balance of 23 and into 24. We note ready capital of multi-channel, multi-product offering provides a competitive advantage, particularly in the acquisition of Distress Bank portfolio sourced by our external manager, Waterfall.
While we expect type theory that market conditions to persist for the balance of 'twenty three and into 'twenty. Four we know ready capital's multichannel multi product offering provides a competitive advantage, particularly in the acquisition of distressed bank portfolios sourced by our external manager waterfall.
Speaker 3: The current CRE pipeline across all CRE products totals $740 million with $690 million committed.
Current CRE pipeline across all CRE products totaled $740 million with 690 million committed.
Speaker 3: With current Siri trading discount, pretending book value erosion from higher seasonal reserves, particularly in office, ready capital strong relative credit metrics stand out. In measuring credit risk in our Siri portfolio, it's important to bifurcate the portfolio in the core direct lending, and those acquired the Emergers or Loan Pool acquisition often purchased distressed at significant price discount.
With current theory trading discount pretending book value erosion from higher seasonal reserves, particularly in office ready capital's strong relative credit metrics stand out.
In measuring credit risk in our CRE portfolio, it's important to bifurcate the portfolio in the core direct lending and those acquired via mergers or a loan pool acquisition, often purchase distressed at significant price discounts.
Speaker 3: In our originated seary portfolio, representing 82% and 8.2 billion, our credit metrics continue to upperform the seary peer group.
And our originated CRE portfolio, representing 82%.
And $8 2 billion, our credit metrics continue to outperform the peer group.
Speaker 3: First, 60-day plus delinquencies remain low at 2.9%, with most delinquencies concentrated in a modest 5% allocation to office.
First 60 day, plus delinquencies remained low at two 9% with most delinquencies concentrated in a modest 5% allocation to office.
Speaker 3: Affeds with risk scores of 4-5 also remain flat at 6%.
That's with risk scores of four or five also remained flat at 6%.
Speaker 3: Second, 80% of the portfolio is concentrated in the middle market multifamily where record single-family affordability issues skew the buy versus rent metric, creating demand and low under 5% vacancy rate.
80% of the portfolio was concentrated in the middle market multifamily were record single family affordability issues skew the buy versus rent metrics, creating demand and low under 5% vacancy rates.
Speaker 3: However, with rising multifamily cap rates of 50 basis points year-to-date to 5.8% for Green Street and negative absorption in select markets pressuring rental growth, multifamily prices are down approximately 20% from the peak with another 5% expected, which compares to 40% to 50% for office.
Ever with rising multifamily cap rates are 50 basis points year to date to five 8% for Green Street and negative absorption in select markets pressuring rental growth.
Family prices are down approximately 20% from the B with another 5% expected, which compares to 40% to 50% for office.
Speaker 3: Although our portfolio is not immune from these market pressures, we do believe it benefits from our 2021 pivot to more conservative underwriting, including 0 to 5% rent growth, low underwritten stabilized LTVs, and an avoidance of negative absorption markets.
Although our portfolio was not immune from these market pressures, we do believe it benefits from our 2020, one pivot to more conservative underwriting, including zero to 5% rent growth low underwriting stabilized ltvs and an avoidance of negative absorption markets. For example, using our proprietary geo tier scoring model our exposure to the worst multi.
Speaker 3: For example, using our proprietary geoteer scoring model, our exposure to the worst multifamily markets that experience mid to high single-digit year-to-date rent decline, Austin, Atlanta, and San Francisco, is only 6% of our total portfolio.
Family markets that experienced mid to high single digits year to date rent declines Austin, Atlanta, and San Francisco is only 6% of our total portfolio.
Speaker 3: The net result in our current market-to-market LTV is under 100%.
The net result, our current mark to market LTV is under 100%.
Speaker 3: Third, the maturity ladder. Only 2% and 29% of our multifamily bridge assets mature over the next three and 12 months, respectively, with the majority of maturities occurring later in 24 and into 25. Although this provides some protection from immediate takeout risk, the under 100% mark-to-market portfolio loan-to-value and sponsor counterparty liquidity are significant mitigants to negative leverage, affording flexibility in loan extensions and modifications.
Third the maturity ladder, only 2% and 29% of our multifamily bridge assets mature over the next three and 12 months, respectively with the majority of maturities occurring later in 'twenty four and into 25. Although this provides some protection from immediate take out risk the under 100% mark to market portfolio loan to value.
And sponsor counterparty liquidity are significant mitigates, the negative leverage affording flexibility and loan extensions and modifications for.
Speaker 3: For example, extensions typically feature sponsor equity contributions or repurposing of unneeded CapEx to interest reserves.
For example, extensive typically feature sponsor equity contributions or repurposing of unneeded capex to interest reserves.
Speaker 3: Further, our Solution Capital Program provides Unitron Senior our preferred equity financing for refinancing our best sponsors and projects.
Further our solution capital program provides unit tranche senior or preferred equity financing for refinancing our best sponsors and projects.
Speaker 3: Ready Capital's historic expertise in NPL management and current liquidity from the Broadmark acquisition position us well to avoid foreclosures and losses on REF.
Ready Capital's historic expertise in NPL management, and current liquidity from the broad Mark acquisition position us well to avoid foreclosures and losses on Oreo.
Speaker 3: In our acquired portfolio, where we frequently purchase impaired loans, 60-day plus delinquencies are unsurprisingly elevated at 17%.
In our acquired portfolio, where we frequently purchase impaired loans 60 day, plus delinquencies are unsurprisingly elevated at 17%.
Speaker 3: The basis for which we purchased these assets accounts for the impairment at the time of purchase and should not be an indication of further principal loss.
The basis for which we purchased these assets accounts for the impairment at the time of purchase and should not be an indication that further principal loss.
Speaker 3: Now, an update on our small business lending segment, a high ROE business unique to the commercial mortgage REIT peer group.
Now an update on our small business lending segment, a high ROE business unique to the commercial mortgage REIT peer group.
Speaker 3: To review, Ready Capital is one of 17 non-bank lenders under the Small Business Administration 7A program. In the quarter, we originated 129 million 7A loans comprising 63% large and 37% small loans, a 6% quarter-over-quarter increase with premiums averaging 8.3%.
To review ready capital is one of 17 nonbank lenders under the small business administration seven eight program in the quarter, we originated 129 million and seven day loans, comprising 63% large and 37% small loans, 6% quarter over quarter increase with premiums averaging eight 3%.
Speaker 3: Ready Capital remains the largest non-bank and fourth-largest overall 7A lender.
Ready capital remains the largest non bank and fourth largest overall seven a lender.
Speaker 3: with a three-year target to double volume to $1 billion, which would bring us to roughly 3% market share.
With a three year target to double volume, two 1 billion, which would bring us to roughly 3% market share.
Speaker 3: In terms of 7A credit, despite the rise in prime to 850 basis points, 60-day plus delinquencies in the 7A portfolio remain extremely low at 1%, well below the 6% GFC peak.
In terms of seven eight credit despite the rise in prime to 850 basis points 60 day, plus delinquencies in the seven to eight portfolio remain extremely low at 1% well below the 6% GSC peaks.
Speaker 3: The earnings book value impact of defaults in this segment are limited due to both the small equity allocation, less than 5%, and the high ROE of the business, which can sustain higher defaults and losses.
The earnings book value impact of defaults in this segment are limited due to both the small equity allocation less than 5% and the high are we the business, which can sustain higher defaults and losses.
Speaker 3: In our residential mortgage business, core returns remain pressured due to lower transaction volume and margin compression. As previously discussed, we've been exploring strategic options for the platform given the market and our core focus on CRE lending. We expect to move out of this segment over the next few quarters with proceeds reinvested in our core channel.
In our residential mortgage business core returns remain pressured due to lower transaction volume and margin compression.
Previously discussed we have been exploring strategic options for the platform given the market and our core focus on CRE lending, we expect to move out of this segment over the next few quarters with proceeds reinvested in our core channels.
Speaker 3: Looking forward, while there will be near-term pressure, the company is well-positioned to increase earnings and expand investment activity longer-term. First, reversal of portfolio drag and nemicretion from reinvestment of excess liquidity and balance sheet re-leveraging post the broadmark transaction into cyclically high ROEs in both our direct lending and acquisition silos of over 15% versus 12% pre the first quarter of 22.
Looking forward, while there will be near term pressure the company is well positioned to increase earnings and expand investment activity longer term.
First reversal of portfolio drag and NIM accretion from reinvestment of excess liquidity and balance sheet re leveraging post the broad mark transaction into cyclically high or are we in both our direct lending and acquisition silos of over 15% versus 12% pre the first quarter 'twenty to <unk>.
Speaker 3: Second, our liquidity remains elevated with $182 million of cash and $1.8 billion of unencumbered assets.
Our liquidity remains elevated with $182 million of cash and $1 8 billion of unencumbered assets.
Speaker 3: Finally, our conservative debt profile with total and recourse leverage of 3.4x and 0.9x, respectively. This collectively provides significant protection for market volatility, as well as the ability to raise incremental debt capital to drive investment activity. With that, I'll turn it over to Amber.
Finally, our conservative debt profile with total and recourse leverage of three four accident zero point Nymex, respectively. This collectively provide significant protection from market volatility as well as the ability to raise incremental debt capital to drive investment activity with that I'll turn it over to Andrew.
Speaker 2: Thanks. Quarterly gap in distributable earnings per common share were $0.25 and $0.28 respectively. Distributable earnings of $52.2 million equate to an 8% return on average stockholders' equity.
Thanks, Tom quarterly GAAP and distributable earnings per common share was <unk> 25, and 28 cents, respectively distributable earnings of $52 2 million equates to an 8% return on average stockholders equity.
Speaker 2: Pressure on core earnings related to the Broadmark transaction was approximately 220 basis points and driven by reduction in portfolio yield due to a higher percentage of non-accrual assets and the deleveraging of the balance
Pressure on core earnings related to the broad Mark transaction was approximately 220 basis points driven by a reduction in portfolio yield due to a higher percentage of nonaccrual asset.
And the deleveraging of the balance sheet.
Speaker 2: Interest income increased $17.7 million to $250.6 million due to the inclusion of the Broadmark portfolio for a full quarter and a 25 basis point increase in the weighted average coupon in the portfolio to 9%.
Interest income increased $17 7 million to $250 6 million due to the inclusion of the broad market portfolio for a full quarter and a 25 basis point increase in the weighted average coupon in the portfolio to 9%.
Speaker 2: Interest expense increased $19.1 million to $191.6 million related to both an increase in debt balances from the financing of Broadmark assets and slightly higher funding costs which averaged 7.5%.
Interest expense increased $19 1 million to 191 6 million related to both an increase in debt balances from the financing of broad mark assets and slightly higher funding costs, which averaged seven 5%.
Speaker 2: The leveraged yield in the portfolio declined to 10.9% as Broadmark's 7% portfolio yield weighed on the average.
The levered yield in the portfolio declined to 10, 9%.
His broad March 7% portfolio yield weighed on the average.
Speaker 2: We expect levered yields to increase to historical levels as we cycle out of the loans acquired and into new production.
We expect levered yields to increase to historical levels as we cycle out of the loans acquired and into new production.
Speaker 2: The provision for loan losses totaled a recovery of $12.2 million and was entirely attributable to movements in the general allowance underperforming loan book. We did not see any material movement in expected losses on our impaired or nonaccrual assets.
The provision for loan losses totaled a recovery of $12 2 million and was entirely attributable to movements in the general allowance underperforming loan book.
We did not see any material movement in expected losses on our impaired or nonaccrual asset.
Speaker 2: Realized gains decreased 9.5 million quarter-over-quarter primarily due to lower amounts realized in the settlement of derivative.
Realized gains decreased $9 5 million quarter over quarter, primarily due to lower amounts realized and the settlement of derivatives.
Speaker 2: Core realized gains from the sale of loans in our SBA and Freddie Mac business were slightly lower due to a decrease in sale activity and lower 7-8 premiums, which averaged 8.3% in the quarter.
Our realized gains from the sale of loans in our SBA and Freddie Mac business were slightly lower due to a decrease in sale activity and lower 708 premiums, which averaged eight 3% in the quarter.
Speaker 2: On-realized gains of 18 million were driven by a $2.6 million increase in a residential mortgage servicing rights, and the reversal of the 13 million of unrealized losses previously recognized on CNBS loans that were transferred from available for sale to health firm that same.
Unrealized gains of 18 million were driven by a $2 $6 million increase in our residential mortgage servicing rights and the reversal of a $13 million of unrealized losses previously recognized on C. N. B S bonds that were transferred from available for sale to held for investment. These.
Speaker 2: These reversals were partially offset by the inclusion of new loan loss provision.
These reversals were partially offset by the inclusion of new loan loss provision.
Speaker 2: The operating expense ratio of the business declined 130 basis points to 5.7%. Included in the op-x this quarter, we're several one-time items, including a $2 million non-tash impairment related to a mosaic audio, increased professional fees related to the processing of employee retention credit revenue, and 2.6 million of servicing advances payable upon the refinancing of our four-series CLO.
The operating expense ratio of the business declined 130 basis points to five 7%.
And in the Opex this quarter were several onetime items, including a $2 million noncash impairment related to a mosaic Rd out increased professional fees related to the processing of employee retention credit revenue.
And $2.6 million of servicing advances payable upon the refinancing of our four series CLO.
Speaker 2: On the balance sheet, book value is $14.42 compared to $14.52 on June 30th.
On the balance sheet book value was $14.42 compared to $14 52 on June 30th.
Speaker 2: The change is due to an adjustment of the bargain purchase gain related to the Broadmark transaction related to the valuation and pending liquidation of three assets.
Change is due to an adjustment of the bargain purchase gain related to that broad mark transaction related to the valuation and pending liquidation of three assets.
Speaker 2: Leverage continues to be at historic lows with recourse leverage at 0.9 times and total leverage at 3.4 times.
Leverage continues to be at historic lows with recourse leverage at <unk> nine times and total leverage at three four times.
Speaker 2: In the capital markets, we closed our third securitization of SBA 7A loans. The $186 million deal had a 71% advance rate with sold bonds having a cost of silver plus 325 basis points. With that, we will open the line for questions.
In the capital markets, we closed our third securitization of SBA seven loans.
Hundred $86 million deal had a 71% advance rate was sold bonds have any cost of silver plus 325 basis points.
With that we will open the line for questions.
Thank you very much.
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Speaker 1: Our first question is from Sarah Bacham of ETIG. Please come ahead.
Our first question is from Sarah Bochum of P. T. I G. Please go ahead.
Speaker 4: Hey everyone, thanks for taking the question. So it was another quarter of strong volumes for the SBA segment. I was curious if you could talk a bit more about the competitive set in that market and your outlook for growth in that portfolio over the coming few quarters.
Hey, everyone. Thanks for taking my question. So it was another quarter of strong volumes for the SBA segment. I was curious if you could talk a bit more about the competitive set in that market and your outlook for growth in that portfolio over the coming few quarters.
Speaker 3: You know, just to refresh, it's our thanks for joining today. The SBA 7A program.
Yes.
Just to refresh it and thanks for joining today.
The SBA seven program.
Speaker 3: basically for banks and that there's a handful of non-banks. Most recently the government allowed the approval of three new ones.
It's basically for banks.
And then there's a handful of non banks. Most recently the government allowed the approval of three new ones.
Speaker 3: most of which are community development associations, smaller missions.
Most of which are community development Association smaller mission, driven lenders, but the the market as a whole runs at about 25% to $30 billion of originations.
Speaker 3: But the market as a whole runs about 25 to 30 billion of originations.
And.
Speaker 3: Reddycap has emerged as the largest non-bank and the fourth largest lunder.
A ready cap.
Has.
Emerged as the largest non bank and the fourth largest lender.
Yeah, we're shooting for a half billion. This year the goal right now the banks just in terms of cancer. Your question. The the banks are definitely retrenching as part of the whole.
Speaker 3: for half billion this year. The goal right now, the banks, just in terms of cancerier question, the banks are definitely retrenching as part of the whole issues around bank deposit liquidity, et cetera. We're seeing a lot of resumes.
Issues around bank deposit liquidity et cetera. So we see we're seeing a lot of resumes in terms of loan officers, which we're capitalizing on.
Speaker 3: of loan officers which we're capitalizing on. And then with respect to the non-banks, there's really not a lot of scalable lenders. So what we're doing, so the two trends are one, we're gonna take market share from banks in many ways by acquiring groups or blocks of loan officers in specific...
And then with respect to the.
The non banks, there's there's really not a lot of scalable lenders, so, but we're doing it. So we're gonna. So the two trends are one we're going to take market share from banks in many ways by by acquiring groups of blocks of loan officers in specific regions that specialize in verticals.
Speaker 3: that specialize in verticals. For example,
For example.
[noise] daycare and and and.
Speaker 3: and tax, tax, your accountants. And so that will be part of our market share growth. The second area is the implementation of our Fintech, I business.
Fantastic tax.
Patents.
And so that will be part of our market share growth the second area.
Is the.
Implementation of our Fintech business, which is basically targeting the smaller.
Speaker 3: targeting the smaller categories, the micro and the...
Categories, the micro and the.
Speaker 3: a small loan segment of the 7A program which will I on credit scoring methodology.
A small loan.
Our segments of the 700 program, which rely on credit, scoring methodologies, which are very much aligned with their their their business, which is on the unsecured lending a non SBA since unsecured lending so they're utilizing that to tech wondering as long long winded way of saying through the expansion of our slope small loan business program into.
Speaker 3: which are very much aligned with their business, which is the unscured lending, non-SBA and unscured lending. So they're utilizing that tech. So it's a long, long way to way of saying, through the expansion of our small loan, I business program into the small loan program, which banks don't really engage in at all. And bank market share weeks, our target is to double volume over the next three years to a billion dollars, which would represent about a three percent.
Small loan program, which banks don't really engaging at not at all and bank market share.
Our target is to double volume over the next three years to $1 billion, which would represent about a 3% market share.
Speaker 4: Okay, great. Thanks. And, you know, you've talked about your targeted growth there, and, you know, you're producing some pretty strong gains on, you know, sales as well. Should we expect those volumes to stay pretty consistent in terms of, you know, sales and the ROEs there?
Okay, great. Thanks, and you know you've talked about your targeted growth and you know you are producing some pretty strong gains on on sales as well should we expect those volumes to stay pretty consistent in terms of you know.
Sales in the ROE is there.
Speaker 3: Yeah, I think you're referring to the gain on sale for the 75% participation in the SBA 7A loan. In the current rate environment with prime up, you're now starting to see a reemergence of the bank liquidity bid. That's the biggest buyer of the 7A loans historically. So premiums, what it averaged this quarter, Andrew.
Yeah, I think you're referring to the gain on sale for the 75% participation in the SBA 700, along those yes, those have and the current rate environment with prime up you're now starting to see a reemergence of the bank liquidity bid.
That's.
The that's the biggest buyer of these seven eight loans historically, so premiums are what what are the average this quarter Andrew.
But around 858 and a half yeah. So that's.
Speaker 3: I'm going to need to have. Eight and a half, yes. The low end during the GFC got as low as, call it, seven. And the high ends are like 15. So we're kind of on the low end. We expect that to trend up as bank liquidity bit improves over the succeeding quarters. More like a 10 to 11, which has been normalized premium rate.
The low end during the G. F C. You've got as low as a call it seven and the high high end are like 15. So we're kind of on the low end and we expect that to trend up as bank liquidity that improves over the succeeding quarters more like a 10 to 11, which is the normalized premium rate.
Okay, great. Thank you.
Speaker 1: Thank you. The next question is from Jade Romani of KBW. Please go ahead.
Thank you.
Question is from Jade Rahmani of VW. Please go ahead.
Thank you very much.
Speaker 5: There's been some news this week about Freddie Mac and a multifamily broker, Meridian.
There's been some news this week about Freddie Mac and a multifamily broker meridian.
Speaker 5: and some issues with loan documentation and other such things. Can you talk to what's going on with GSE multifamily, if you're hearing any feedback from Freddie Mac that would change your originations outlook there and any of your processes? And also, do you, have you historically worked with brokers on the loan origination side for Freddie Mac?
And some issues with loan documentation and other such things can you talk to what's going on with GSE multifamily if you're hearing any feedback from Freddie Mac that would change your originations outlook. There in any of your processes and also do you have you historically worked with brokers.
The loan origination side for Freddie Mac.
Speaker 3: Adam, you wanna, you've basically been on top of that issue, you wanna...
Adam you want to add.
Basically you've been on top of that issue you want to.
Touch on that.
Yeah sure. Good morning, Jade. So you know on the on the agency side certainly noise in the market regarding certain brokers.
Speaker 2: Yeah, sure. Good morning, Jade. So, you know, on the on the agency side, you know, certainly noise in the market regarding, you know, certain brokers that may have engaged in fraudulent activity. And, you know, I think given the market dynamic where, you know, sponsors are, you know, certainly trying to, you know, refund, refinance their loans,
That may have engaged in in fraudulent activity and I think given the market dynamic where sponsors are certainly trying to re fan refinance their loans.
Speaker 6: and slow down an activity. I think being cautious of the broker market, I think is certainly at the forefront and certainly something that the agencies are making sure that lenders are aware. So from a process standpoint, we're doing differently today, given this noise in the market. We are doing things such as,
And you know a slowdown in activity I think being being cautious of the broker market I think is certainly at the forefront.
Certainly something that the agencies are making sure that lenders are aware so from a process standpoint.
You know what we're doing differently today, given given this noise in the market. We are you know doing things such as <unk>.
Speaker 6: obtaining source documents directly from the sponsors. I think historically, you know, brokers have provided the source documents themselves.
Painting source documents directly from from the sponsors I think historically you know brokers have provided to start to source documents themselves and so we're getting directly from the sponsorships you know, making sure that you know when we go to property visits but the sponsors are touring with us we're getting.
Speaker 6: And so we're getting directly from the sponsorships, making sure that when we go to property visits, that the sponsors are touring with us, we're getting into a significant amount of the units to confirm that they're occupied and that those units kind of match with the rent roles or saying.
Into.
A significant amount of the units to confirm that they're occupied and that those those units kind of match with the rent rolls are saying.
Speaker 6: In terms of ordering third-party reports, certainly staying on top of that, making sure that sponsors are not involved during the inspection process for the third-party inspectors and also that the brokers...
You know in terms of ordering third party reports.
Certainly staying.
On top of that making sure that you know sponsors or not.
Involved during the inspection process for the third party inspectors and also that the brokers.
Speaker 6: I do expect that this trend of seeing kind of additional fraudulent activity in the market is going to continue given.
Keep keep their distance.
Do expect that this this trend of seeing kind of additional fraudulent activity in the market is going to continue given given this environment.
Speaker 6: given this environment. Now I'd say on the agency side, probably 90% plus of our originations comes from the broker community. You know, certainly there are some, you know, very strong, solid, reputable brokers out there that we do business with, but certainly there are some that we have to be cautious.
Yeah, I'd say on the agency side, probably 90% plus of our originations comes from the broker community.
Certainly there are some very strong solid reputable brokers out there that we do business with.
But certainly there are there are some that we have to be cautious.
So does this change your forward outlook I know the third quarter had a fairly strong quarter with Freddie Mac does it change your forward originations outlook.
Yeah, No I mean I think.
Speaker 6: Overall the agency volumes down on probably around 30% versus last year. You know, when you see our uptick this year is more on our tax exempt affordable business.
Overall, the agency volumes down probably around 30, 30% versus versus last year.
You know where you see our uptick this year is more on our tax exempt affordable business. Those guys are expected to originate record volumes you know cigna.
Speaker 6: Those guys are expected to originate record volumes, significantly over where they originated last year. Our Freddie Mac's small balance lending, that is certainly slow compared to prior years. We do expect guys to move down a bit here that going into certainly the...
Significantly over where they originated last year or Freddie Mac small balance lending.
That is certainly slow compared to prior years, we do expect as rates move down a bit here that.
Into certainly the.
Speaker 6: Q4 today we're certainly building pretty sizable portfolio which would close in Q1. So I think in 2024 outlook for the Freddie SPL, I think is strong and then, you know, expectations that we should originate more than we did this year. And then continue growth on the taxes that have been affordable.
Q4 today, we're certainly building pretty.
Pretty sizable portfolio, which would close in Q1, so I think 2024 outlook for the Freddie S. P. L. A I think a strong and expectations that we will we should originate more than we did this year and that continued growth on the tax exempt affordable site.
Speaker 5: So that sounds like you do not expect this Freddie Mac issue to curtail or reduce origination.
So that sounds like you don't you do not expect this Freddie Mac issued to curtail or reduce originations.
Speaker 6: That's right. That's right. Yeah. I don't think, you know, the noise with the, you know, with, with these brokers, I don't think is going to slow down our business. It's just going to cause us to, you know, really be extra cautious, you know, as we, as we underwrite these, these transactions and deal with the brokers. But yeah, I don't expect it to slow down volume at all.
That's right that's right Yeah, I don't think the noise with the with these brokers I don't think is going to slow down our business is just going to cause us to really be extra cautious.
We as we underwrite these these transactions and deal with the brokers, but yeah I don't expect it to slow down volume at all.
Thank you.
Sure.
Speaker 1: Thank you very much. The next question is from Henry Cossie of Whitbush. Please go ahead.
Thank you very much.
The next question is from Henry Coffey of Wedbush. Please go ahead.
Speaker 7: Good morning and thank you for taking my call.
Good morning, and.
Thank you for taking my call.
Speaker 8: Two things, if I heard you correctly, you're talking about potentially selling the residential mortgage business? Yeah, Andrew, you wanna touch on that?
Two things.
If I heard you correctly, you're talking about potentially sell.
All in the mortgage business there.
<unk> mortgage business.
Yeah, Andrew you want to touch on that.
Yeah, Yeah, no that's fair enough.
Yeah, I just wanted to look at it and Uh huh.
Oh I'm sorry go on.
Speaker 2: Yeah, just on those the residential mortgage banking business, you know, for quite some time we've talked about a strategy of simplifying
Yeah, just on the residential mortgage banking business you know her.
For quite some time, we've talked about.
Our strategy of simplifying.
Speaker 2: The reach to be a more purely focus on the lower and middle market theory space.
The REIT to be you know more purely focused on the lower to middle market CRE space.
Speaker 2: Over the last couple of months and quarters, we have taken time to explore a variety of strategic options for either downsizing or moving that business. And I think we are getting close to the conclusion of
Over the last couple of months and quarters, we have taken the time to explore a variety of strategic options for.
Either downsizing or moving that business.
We are getting close to the conclusion.
All of that that process than.
Speaker 2: of that process and, you know, expected as we move into the new year, we reposition that equity into, you know, our core track.
I expect that as we move into the new year.
We repositioned that equity into our core our core channels.
Speaker 7: There is actually demand for those assets, so it's usually at a fairly discounted price, perhaps at or below book value. Would it be simpler just to liquidate it and then let the brokers find their own spots? Or...
There is actually demand for those assets. So it's usually at a fairly discounted price, perhaps at or below book value.
Would it be simpler just to liquidate it or.
And then let the brokers find their own spots or.
Speaker 3: What are your thoughts about how that would kind of wind down over the next few quarters? Well, the large, I think you could touch on that, but just to comment on how the large percentage of the net equity invested in the business is a very stable and strong MSR portfolio. Mm-hmm.
What are your thoughts about about how that would kind of wind down over the next few quarters.
Well they are the large but maybe you could touch on that but just to comment on how the large percentage of the net equity invested in the business is a very stable and strong MSR portfolio.
Mhm.
And that right now.
Speaker 3: Yeah, that has a nice value for it. Okay. And plus, you know, it's located, concentrated in Louisiana, Alabama, Mississippi area, which has a lower convexity risk, then let's say a California MSR portfolio. So they tend to trade cheaper than...
Now that that is a nice value for it okay, yeah and.
And plus you know, it's located concentrated in Louisiana, Alabama, Mississippi area, which has a lower convexity risk than let's say, a California MSR portfolio. So they send it trade cheaper.
[noise] than.
And then.
Speaker 3: more demand, especially in the MSR market, what we're seeing now, which could best be described as orderly, despite the obvious turmoil and the non-banked market space. So we think we're pretty comfortable with the ability.
And there's more demand, especially in the MSR market from what we're seeing now.
Which can best be described as orderly despite the obvious turmoil in the non bank mortgage space. So we think we're pretty comfortable with the ability to.
Speaker 3: monetize the existing MSR book at or near its current value.
Monetize the existing MSR book.
At or near its current value.
And then and then the.
The origination.
Speaker 7: The originator arm. I might add cells or just move the liquidate.
The cells are or just moves it liquidates.
Speaker 2: Yeah, that's what I was gonna say. You know, I think we firmly believe there is platform value in the business beyond the MSR. When you look at how, you know, the market share that business has in Louisiana, when you look at how well it's run, when you look at profitability, outside of the service thing across cycles, certainly we think there.
Yeah, Henry that's what I was going to say.
I think we firmly believe there is platform value and in the business beyond the MSR.
When you look at how the.
The the market share that business Hasnt, Louisiana, when you look at how well it's Ron when you look at profitability outside of the servicing across cycles.
Certainly we think there is demand and value for the business just beyond the MSR asset. So I do not expect this is a and.
Speaker 2: is demand and value for the business just beyond the MSR asset. So, you know, I do not expect this is...
Speaker 2: and exercise in telling MSRs and letting everything else on wine. And do believe we'll be able to recapture some of the values that's been created.
Size and selling MSR, and then letting it everything else unwind and do believe we'll be able to recapture.
Some of the value that's been created on the origination side as well.
Speaker 3: Yeah, I just add to that. Great. This is a very solid management team, 25 years experience.
Yeah, just to add to the rates that it did.
This is a very it's a solid management team 25 years' experience heavy retail and purchase percentage.
Speaker 3: a heavy retail and purchase percentage. And we believe the platform as a result will be very attractive to the fire ore, especially given the linkage of recapture that they've been able to...
And we believe the platform as a result will be a very attractive to the sapphire or especially given the linkage of recapture that they've.
<unk> been able to produce.
Produce over the last two decades.
Speaker 7: We've seen several acquisitions mainly by one.
Yeah, we we've seen several acquisitions mainly by one.
Speaker 7: prominent public company of a retail platform. So thank you for that. Number two, a completely unrelated in the construction development, fix and flip, whatever you want to call it, that whole.
Prominent public company of a retail platform. So thank you for that.
Number two.
Completely unrelated.
And the construction development.
Cliff whatever you want to call it that hole.
Speaker 7: subsection of the business. What are you seeing in terms of new demand and how are both both mosaic and broad fitting into that?
Subsection of the business what are you seeing in terms.
Of new demand.
And how are both mosaic and broad.
Fitting into that.
Speaker 3: Yeah, if you want to comment on the role out of the residential finance and small balance program.
Yeah do you want to comment on what kind of the rollout of the residential finance and small balance program in conjunction with the broad Mark acquisition, and what you're seeing there for demand.
Yeah.
Speaker 6: Yeah, I mean, good morning. You know, it's certainly demand, demand remains strong. You know, still, you know, the supply demand.
Good morning, certainly demand demand remains strong.
Still the supply demand.
Speaker 6: certainly in balance. Our team, since we announced the product, which is really a consolidation into a single high yield, we call the residential construction finance product, the demand's been significant. I think folks have a similar view to us that building ground up today specifically on
Certainly imbalance our teammates since since we announced the product, which is really consolidation to a single high yield.
It will be called the residential construction finance product. The demand has been insignificant I think folks have a similar view to us that building building ground up today specifically on.
Speaker 6: you know, projects such as multi-family and other components of the residential space in a market, you know, challenging market like today, I think, you know, as these projects stabilize in two to three years, we think that the demand...
Projects, such as multifamily and other components of the residential space and in a market you know a challenging market like today I think you know as these projects stabilize in two to three years, we think that the demand.
Speaker 6: and this is a lot and this, you know, that the demand is going to be significant, especially in the multi-family side. We're also able to lock in higher rates today, given pullback of banks, which is certainly attractive. And lending, you know, today's market, we're certainly going to come out, like I mentioned before, you know.
And Mr Block.
The debt that the demand is going to be significant you know, especially on the multifamily side. Yeah. We're also able to lock in higher higher rates today, given given the pullback of banks, which is certainly attractive.
And lending you know in today's market, we're certainly going to come out.
Like I mentioned before.
Speaker 6: This project is kind of stabilizing. What we think is going to be improving, much improved Mark.
Just kind of stabilizing what we think is going to be an improving much improved market.
Two to three years.
Speaker 7: If you look at that overall equation, is most of the demand for sort of ground up building or fixing flip or...
If you look at that overall equation is is most of the demand for sort of ground up building or fix and flip or.
How would you react.
Speaker 6: Yes, I mean, it's really a mixed bag. I mean, I think our focus, it's really gonna be more on the multi-family side. We think there's a real opportunity in the market to really...
Yes, I mean, it's really it's really a mixed bag I mean, I think our focus.
It was really going to be more on the multifamily side, we think there's a real opportunity in the market to really.
Speaker 6: especially in the small balance space to really take a multi-family project from ground up, then convert that debt into a bridge product and then convert it again into our agency product. So really capturing three different products and keeping that sponsor with the firm is something that we're focused on. We'll certainly take a look at select
You know, especially in the small balance space to really take a project from multifamily project from ground up then confirm that.
That debt into into a bridge product and then converted again into our agency product, so really really capturing three different products.
And keeping that sponsor with the firm is something that we're focused on and we'll certainly take a look at select.
Speaker 6: built to rent projects. I think fixed in foot definitely less so, but really more focus on the multi-family.
Build to rent projects.
You know I think fixed and flip definitely definitely less so.
But really more focused on the multifamily rental side.
Speaker 7: And then it is the pricking on those loans fixed or variable.
And then it is the pricing on those loans fixed or variable.
Speaker 6: The pricing on those loans is variable.
Yeah.
The pricing on those loans.
<unk> is variable.
Thank you very much.
Sure.
Yes.
Speaker 1: Thank you very much. Ladies and gentlemen, as a reminder, if you wish to ask a question, you may press star and then 1 to join the queue or star 2 to remove yourself from the list.
Thank you very much ladies and gentlemen, as a reminder, if you wish to ask a question you may Please star one to go into Q.
Two to remove yourself from them.
Speaker 1: Our next question is from Matt Howlett of the Radio Securities.
Our next question is from Matt <unk> of B Riley <unk> Securities. Please go ahead.
Speaker 3: I don't know how you think, sorry, everybody, good morning. Just a, on capital allocation, maybe you could just go over it again. I know when you turn over the capital from Broadmark, you have a lot of see a range of options. You're more of a specialty find that's a lot more than you are a REIT. When I look at the options versus just originations and your core product.
Oh, hi, thanks, everybody good morning.
Just on.
On capital allocation, maybe you could just go over it again I know when you turn over the capital from broad markets you have less heat.
Our range of options, you're more of a specialty laminates model than your REIT.
When I look at the options versus pushes just originations in your core product.
Speaker 9: combined with those acquisitions from distressed loans and or buying back stock at a discount and or buying another origination platform. You just go over what you think, how do the capital allocation will change over the next year. You talk to think the last call but buying maybe an agency platform, something from the banks. You know, and the question, it didn't look like you bought back any stock this quarter. I mean, with the discount here, you got back a lot of stocks in June at 1082.
Combined with those acquisitions from distressed loans and or buying back stock at a discount and or buying another origination platform can you just go over.
I mean, what do you think you'll handle the capital allocation will.
Change over the next call it next year.
You talked I think last call about buying media agency platform something from the banks.
And of course, it didn't look like you bought back any stock this quarter I mean with a discount here you bought back less starts in June at 10 82.
Speaker 9: How much willing are you to really re-lever the balance sheet via buybacks here?
How about how willing are you to really re lever the balance sheet via buybacks here.
Yes, I'll, let Ann.
Andrew.
And tax left but just at a high level. What we do is we look at the.
Speaker 3: but just at a high level what we do is we look at the
The.
Speaker 3: through our liquidity and investment committee, we look at the available capital.
Through our liquidity and investment committee, we look at the.
Available capital for that that month, and the areas, where we can deploy the capital at the highest.
Speaker 3: areas where we can deploy the capital at the highest from our
Ro.
Speaker 3: So there's a number of you you've touched on a number of the silos, you know, one one I'll point out is
So there's a number of you've touched on a number of the silos.
One I'll point out is.
The in the current distressed environment, there are definitely opportunities to provide what we call solutions capital to our multifamily borrowers and.
Speaker 3: current distressed environment, there are definitely opportunities to provide what we call solutions capital to our most...
Speaker 3: in the form of Unitron or preferred to enable extension.
In the form of unit tranche or preferred.
To enable our extensions, which benefits us two ways, one is that the incremental capital being deployed at 18% to 20.
Speaker 3: which benefits us two ways. One is the incremental capital being deployed it.
Speaker 3: retained yield and it obviously is accretive to the
Retained yield.
And obviously.
Obviously as accretive to the too to the credit our credit protection. So that's one area and we're actually doing that also with third parties, where we know sponsors and are in touch with the multifamily market, where we can execute.
Speaker 3: credit protection. So that's one area and we're actually doing that also with third parties where we know sponsors and are in touch with the multi-family market where we can execute there. The other side
There the other side is the core.
Number two is supporting the core franchise around direct lending in the various silos that we have from the construction all the way through to the larger.
Speaker 3: Number two is supporting the core franchise around direct lending in the various silos that we have from the construction all the way through to the larger balance multi-family bridge.
<unk> multifamily bridge.
Speaker 3: And there we're seeing retain yields in the called mid to upper
And there we're seeing retained yields in the call it mid to upper teens.
Speaker 3: And the third is the Distressed Act Physicians, where we're just now starting to see some of the bank portfolios come to market. I was in a lot of surprise, given what happened in March, that we didn't see a lot more. But we're definitely seeing opportunities there, also with non-bank lenders that are liquidating portfolios. And there we're bidding those to the kind of that upper teens as well. So.
And the third is the distressed acquisitions, where we're just now starting to see some of the bank portfolios come to market that was I think a lot of surprise given what happened in March that we didn't see a lot more but we're definitely seeing opportunities. There also with non bank lenders that are liquidating portfolios and there were bidding those to the kind of that upper teens as well.
So.
Speaker 3: And then the M&A, obviously, there's definitely some M&A opportunities, which we look at from the standpoint of accretion in our core business, for example, additional licenses. And with those four silos, we then compare that to the R&W on Bibax. And right now...
And then the M&A, obviously, there's definitely some M&A opportunities, which we look at.
From the standpoint of.
Accretion in our core business for example, additional licenses and with those four silos. We then compare that to the ROE on buybacks and right now we're seeing the unique aspect of where ready capital stands today is due to the acquisition of an unlevered.
Speaker 3: unique aspect of where Ready Capital stands today is due to the acquisition of an unlovered Broadmark Portfolio.
Our broad market portfolio.
Speaker 3: our leverage is now down by...
Our leverage is now down by.
Speaker 3: 5x to 3.4x and we now have earnings drag from the low portfolio yield as well as
From five <unk> to three point Forex and we now have a earnings drag from the low portfolio yield as well as.
Speaker 3: uh... uh... being under levered from a recourse debt standpoint so so what we're doing is we're taking we have a very strong liquidity position as a result and we're looking at all four of those silos in relation to buybacks to determine the uh... the best allocation of capital but i think the punchline is uh... that the ROEs that we're seeing across the platform are
Being under Levered from a recourse debt standpoint, so those so what we're doing is we're taking we have a very strong liquidity position as a result, and we're looking at all four of those silos in relation to buybacks to determine the best allocation of capital, but I think the punch line is that.
The ROE so we're seeing across the across the platform.
Our.
Speaker 2: will generate significant nemecretion in large part due to the fact that they're roughly four or 500 basis points higher in ROE than where we were pre first quarter of 22.
Well generate significant NIM accretion in large part due to the fact that they're roughly four or 500 basis points higher.
ROE V than where we were pre the first quarter of 'twenty two.
Yes, it's just going to take that question, but that's that's kind of we're thinking about it.
Speaker 9: Another way, thank you for explaining. It's much more clearer now. I mean, the silos and the areas you have put the capital. The areas you can put the capital to work with. Those are always, no one, those doors are terrific. I guess, I mean, they all look attractive. I guess I just wanted zero and one and that was...
Thank you for explaining its much much clearer now let me do the silos in the areas you have put the capital to irritate you can put capital to work, but those are always know once those those are terrific I guess, they all look attractive I guess I just wanted to zero in on one and that would be the distressed third party acquisition from banks.
Speaker 9: You just said you just started seeing it. I mean our channel checks suggest the banks will be selling probably after the year end. They're all probably – do you have expertise to buy every type of commercial loan or is there one that you want to focus on? It just sounds like there's going to be waves of that going forward, and the pricing is going to be very attractive.
Just said you just started seeing it I mean, our channel checks suggest the base will be selling probably after the year end, they're all probably.
Did you have the expertise to buy every type of commercial loan or was there one that you want to focus on it just sounds like there's gotta be waves of that going forward and the pricing is going to be very attractive.
Speaker 3: Yeah, I mean most of what we, and then this is the expertise of the external manager waterfall.
Yes, I mean, most of what we this is the expertise of the external manager waterfall, which along with ready capital.
Speaker 3: Along with ready capital was one of the largest buyers of small balance.
Was one of the largest buyers of small balance.
Speaker 3: and commercial loans from banks after the GFC. We bought about 5.6 billion, worked out about 5,000.
Commercial loans from banks after the G. F C. He bought about five 6 billion worked out about 5000 loans.
Speaker 3: Our expertise is, we stick to our knitting and our knitting is lower middle market commercial loans. Commercial real estate loans. Do we have the ability to buy other asset classes? Yes.
Our expertise as you know, we stick to our knitting and and our.
Our knitting is is you know lower middle market commercial loans commercial real estate loans do we have the ability to buy other asset classes, yes, but.
But I think what we're gonna be focused on as more of these are you know small balance pools that will be sold by banks with a bias towards multi in and are less you know less opportunistic purchase for example of office. So that's where we historically had been focused and where would it be focus going forward.
Speaker 3: You know small balance pools that will be filled by banks you know with a bias towards multi and less
Speaker 3: you know, less opportunistic purchase, for example, of office. So that's where we historically have been focused and where will be focused going.
Speaker 9: And just the last question, you guys have always been creative with them in a minute.
Got it and just the last question I mean, you guys have always been creative with M&A.
Speaker 9: There seem to be more platforms out there today than there's been in a while. Would you look at what your excess capital, which is significant, nobody has the leverage, the low leverage that you have. Would you look at possibly buying one of these publicly traded reads or something else to really, you know.
It seems like there's more platforms out there today than they've been in a while.
Would you look at you know, what's your excess capital, which is significant nobody has the leverage to the low leverage that you have I mean would you look at possibly buying one of these publicly traded REIT or something else to really.
Put the money to work faster.
Speaker 3: I'm not sure on the publicly trained side, but there are definitely businesses embedded in banks and non-banks that have agency licenses which would dramatically expand our origination capabilities, especially given that we're one of the leading bridge lenders in the country to that lower middle market that Fannie and Freddie for example, traffic
I'm not sure I'm on the publicly traded side, but there are definitely.
Businesses embedded in banks and non banks that have agency licenses, which would dramatically expand our.
Origination capabilities, especially given that we're in and we're one of the leading bridge lenders in the country to the lower middle market that Fannie and Freddie for example traffic and.
Speaker 3: So, yes, I think they definitely gives us the ability to do with their high yield or other preferred to relover the equity base. It does give us some buying power for an acquisition along those lines, for which we're currently looking at opportunities. I already got time for more opportunities. Great.
So yes, so I think that definitely gives us the with the ability to do their high yield or were there other preferred not to re lever the equity base. It does give us some buying power for an acquisition or along those lines for which we're currently <unk>.
Looking at opportunities.
Great well, thank you for explaining it more clearer.
No problem Tom.
Speaker 1: Thank you very much. Ladies and gentlemen, we have reached the end of the Christian and the Council's session. And I would like to attend the call back to Tom Capacity for closing remarks.
Thank you very much.
Ladies and gentlemen, we have reached the end.
A question and answer session and I would like to turn the call back to Tom capacity for closing remarks.
Speaker 3: Again, we appreciate everybody's time and again, I think we highlighted in this quarter.
Again, we appreciate everybody's time and again I think we highlighted in this quarter. The the the temporary drag on earnings due to the broad Mark acquisition, which we're highly confident via deployment of capital in and re leveraging.
Speaker 3: the temporary drag on earnings due to the broad market acquisition, which we're highly confident.
Speaker 3: via deployment of capital and re-leveraging will result in a creation of at least 26 cents a share for that aspect to achieve our 10% core earnings target. So with that, we appreciate everybody's time and we don't speak in, which we won't have a good holiday.
It will result in a accretion of at least 26 cents a share.
For the <unk>.
For that that aspect to achieve our 10% core earnings target. So with that we appreciate everybody's time, and we don't speak English we won't have a good holiday.
Speaker 1: Thank you very much, ladies and gentlemen, that in concludes today's event, and you may now disconnect.
Thank you very much.
Ladies and gentlemen that concludes today's event you may now disconnect.
[music].
Speaker 10: I C can one.
Speaker 10: No.
Yeah.
Yeah.