Q1 2024 Ready Capital Corp Earnings Call

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Speaker Change: Greetings and welcome to ready Capital's first quarter 'twenty 'twenty four earnings conference call. At this time, all participants are in a listen only mode.

Operator: Greetings and welcome to Ready Capital's first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Andrew Ahlborn. Thank you. You may begin.

Speaker Change: Question and answer session will follow the formal presentation, if anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

Speaker Change: As a reminder, this conference is being recorded.

Speaker Change: I would now like to turn the conference over to your host.

Speaker Change: Andrew Albert Thank you you may begin.

Andrew Ahlborn: 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.

Andrew Ahlborn: Thank you, operator. And good morning to those of you on the call.

Andrew Ahlborn: 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 them.

Andrew Ahlborn: Such statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect.

Andrew Ahlborn: Therefore, you should exercise caution in interpreting and relying on them.

Andrew Ahlborn: We refer you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial conditions. During the call, we will discuss our non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. However, these measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

Andrew Ahlborn: 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.

Andrew Ahlborn: During the call we will discuss our non-GAAP measures, which we believe can be useful in evaluating the company's operating performance.

Andrew Ahlborn: These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

Andrew Ahlborn: A reconciliation of these measures to the most directly comparable GAAP measure is available in our first quarter 'twenty 'twenty four earnings release, and our supplemental information, which can be found in the investors section of the ready capital website and.

Andrew Ahlborn: A reconciliation of these measures to the most directly comparable gap measure is available in our first quarter 2024 earnings release and our supplemental information, which can be found in the investors section of the Ready Capital website. In addition to Tom and myself on today's call, we are also joined by Adam Zausmer, Ready Capital's Chief Credit Officer. I will now turn it over to Chief Executive Officer Tom Capasse.

Speaker Change: In addition to Tom and myself on today's call. We are also joined by Adam Geismar ready Capital's Chief Credit Officer.

Tom: I will now turn it over to Chief Executive Officer, Tom capacity.

Thomas Edward Capasse: Thanks, Andrew Good morning, everyone and thank you for joining the call today.

Thomas Edward Capasse: Thanks, Andrew. Good morning, everyone, and thank you for joining the call today.

Thomas Edward Capasse: The persistence of higher rates and inflationary pressures continue to weigh on the commercial real estate sector. At this point in the CRE credit cycle, RC's near-term ROE profile is impacted by three diverging trends. First, reduced ROE from credit impairment in the originated portfolio due to late cycle stress in the multifamily sector. Second, increased ROE from ongoing liquidation of the M&A portfolio, reduced operating expenses, and growth in our small business sector. The M&A portfolio comprises assets from the 22 Mosaic and 23 Broadmark acquisitions.

Thomas Edward Capasse: Assistance of higher rates and inflationary pressures continue to weigh on the commercial real estate sector. At this point in our CRE credit cycle Archie near term ROE profile is impacted by three diverging trends.

Thomas Edward Capasse: And third, more aggressive liquidation of targeted non-performing loans in our portfolio. In the quarter, we transferred $655 million of loans into held-for-sale, taking a $146 million valuation allowance against those loans. We have determined that the right path forward for this population, including all office loans without a short-term resolution, is to reposition the capital into market-yielding and cash-flowing investments. The NPV of repossessing this capital is greater than holding these assets through recovery and absorbing carry costs through the process. The book value for the share decline of 4.5% will be recaptured through reinvestment and share repurchase.

Thomas Edward Capasse: First reduced our away from credit impairment in the originated portfolio due to late cycle stress in the multifamily sector.

Thomas Edward Capasse: Second increased Roy from ongoing liquidation of the M&A portfolio reduced operating expenses and growth in our small business segment.

Thomas Edward Capasse: The M&A portfolio comprises assets from the 22 mosaic and twenty-three broad mark acquisitions.

Thomas Edward Capasse: And third more aggressive liquidation of targeted nonperforming loans in our portfolio in the quarter, we transferred 655 million of loans into held for sale, taking $146 million valuation allowance against those loans we.

Thomas Edward Capasse: We have determined that the right path forward for this population, including all office loans without a short term resolution is to reposition the capital into market, yielding and cash flowing investments.

Thomas Edward Capasse: And then N P D repossession hang up this capital is greater than holding these assets through recovery and absorbing carry costs through the process.

Thomas Edward Capasse: The book value per share a decline of four 5% will be recaptured through reinvestment and share repurchases.

Thomas Edward Capasse: In this regard, for analytical purposes, we have bifurcated our $9.4 billion gross portfolio into the originated 87% of the total, and M&A portfolios, which is 13%. Before we delve into credit metrics, it's important to reiterate that tail risk in our portfolio is mitigated by three factors. First, our concentration in multifamily and mixed-use at 78% of our portfolio. Although overall market multifamily delinquencies increased in the first quarter, longer-term valuations are supported by demand, with the average median home payment of $3,000, exceeding rent by 50%. The current distress in multi-family, particularly transitional lungs, is a trifecta of higher rates, declining rent growth from oversupply in certain markets, and inflationary increases in rents.

Thomas Edward Capasse: In this regard for analytical purposes, we have bifurcated, our $9.4 billion gross portfolio into the originated 87% of the total and M&A portfolios, which is 13% before.

Thomas Edward Capasse: Before we delve into credit metrics, it's important to reiterate that tail risk in our portfolio is mitigated by three factors.

Thomas Edward Capasse: First our concentration in multifamily and mixed use at 78% of our portfolio.

Thomas Edward Capasse: Though overall market multifamily delinquencies increase in the first quarter longer term valuations are supported by demand, but the average median home payment $3000 exceeding rent by 50%.

Thomas Edward Capasse: The current distressed multifamily, particularly transitional loans is that trifecta of higher rates declining rent growth from oversupply in certain markets and inflationary increases in opex.

Thomas Edward Capasse: Compared to the peer group as it relates to rent growth, our 2020-22 vintages benefited from our proprietary GeoTier model, which ranks markets 1 through 5, 1 being the best, with projected negative absorption a major factor. Recent data shows significant dispersion in rent metrics with supply influx in overbuilt markets causing mid-single-digit rent declines. As of March 31st, 91% of our originated portfolio is in markets ranked 3 or better. Overall, multifamily industry prices are down 16% from the 22 peak, with an additional 5% forecast for the 2024 bottom.

Thomas Edward Capasse: Compared to the peer group as it relates to rent growth our 'twenty 2022 vintages benefited from our proprietary G O tier model, which ranked markets one through five one being the bass with projected negative absorption a major factor.

Thomas Edward Capasse: Recent data showed a significant dispersion in rent metrics with supply influx and overbuilt markets, causing mid single digit rent declines.

Thomas Edward Capasse: As at March 31st 91% of our originated portfolio is in markets ranked three or better overall multifamily industry prices are down 16% from the 22 peak with an additional 5% forecast for the 'twenty 'twenty four bottom given our going in LTV at 62%. These changes result in our portfolio.

Thomas Edward Capasse: Given our going in LTV of 62%, these changes result in a portfolio mark-to-market under 100% versus office, where a 50% decline has created over 100% LTV. We do not believe the increased delinquency in our multifamily portfolio is indicative of further principal loss. The financial effect will be short-term earnings pressure for the interim period between default and modification, forbearance, or refinance.

Thomas Edward Capasse: Mark to market under 100% versus office, we're a 50% decline has created over 100% Ltvs.

Thomas Edward Capasse: We do not believe the increased delinquency in our multifamily portfolio is indicative of further principal loss the financial effect will be short term earnings pressure for the interim period between default and modification and forbearance or refinance.

Thomas Edward Capasse: Unlike other CRE sectors subject to the vagaries of the regional bank and CMBS markets, multifamily benefits from the government's put with $150 billion of annual GSE allocation providing a pathway for takeout of bridge loans requiring additional time to execute a business plan. Across the $1.3 billion of our loans that reached initial maturity over the last 12 months, 42% paid off, with 90% of the remaining loans qualifying for extension. Second, our concentration in lower to middle market loans. Our $9.4 billion total portfolio includes approximately 1,800 loans with an average balance of $4.4 million, avoiding single asset concentration risk.

Thomas Edward Capasse: Like other CRE sector is subject to the vagaries of the regional bank and see MBS markets multifamily benefits from the government put with 150 billion of annual G. S. T allocation, providing a pathway for takeout of bridge loans, requiring additional time to execute our business plan.

Thomas Edward Capasse: Across the one 3 billion of our loans that reached initial maturity over the last 12 months, 42% paid off with 90% of the remaining loans qualifying for extension.

Thomas Edward Capasse: Second our concentration of lower to middle market loans.

Thomas Edward Capasse: $9 $4 billion total portfolio includes approximately 1800 loans with an average balance of $4 4 million avoiding single asset concentration risk.

Thomas Edward Capasse: In the broader multifamily sector, the disparity on refinance risk is wide, where 95% of loans under $25 million are paid off at maturity, compared to 55% of loans over $25. We've seen this in our originated portfolio, where 16% of loans over $25 million are 60 days delinquent compared to 7% of loans under $25. And last, limited office exposure.

Thomas Edward Capasse: In the broader multifamily sector. The disparity on refinance risk is wide, where 95% of loans under 25 million paid off at maturity compared to 55% of loans over 25, we've seen this in our originated portfolio were 16% of loans over 25 million or 60 days delinquent compared to 7% of loans under 25.

Thomas Edward Capasse: Yeah.

Thomas Edward Capasse: And last limited office exposure as of March 31st our office portfolio consisted of 167 assets totaling $456 million only four 4% of our total portfolio. Further only 11 of those loans had a balance of over $10 million and were concentrated in central business districts 31 person.

Thomas Edward Capasse: As of March 31st, our office portfolio consisted of 167 assets totaling $456 million, only 4.4% of our total portfolio. Furthermore, only 11 of those loans had a balance of over $10 million and were concentrated in central business districts. 31% of the office loans are delinquent. We believe that recovery of the current stress in the office sector is long-dated, and the NPV of repositioning this capital is greater than holding these assets through recovery and absorbing carry costs through the process.

Thomas Edward Capasse: Out of the office loans are delinquent.

Thomas Edward Capasse: We believe that recovery of the current stress in the office sector is long dated and the N. P. V. A repositioning of this capital is greater than holding these assets through recovery and absorbing carry costs through the process as such 72% or $140 million of our delinquent office loans are included in the population transferred to held for sale.

Thomas Edward Capasse: As such, 72%, or 140 million, of our delinquent office loans are included in the population transfer to held for sale. Post this transfer and liquidation, our office exposure will decrease to 3.3% of the population. Next, an update on the credit metrics in the originated portfolio. Please refer to slide 11 in the deck, where we present 60-day-plus delinquencies, non-accrual, and 4-5 risk-rated percentages. Overall, 60-day delinquencies increased to 9.9%, resulting in a rise in non-accrual loans to 7.2%.

Thomas Edward Capasse: This transparent liquidation our office exposure will decrease to three 3% of the population.

Thomas Edward Capasse: Next an update on the credit metrics and the originated portfolio.

Thomas Edward Capasse: Please refer to slide 11 in the deck, where we presented 60 day plus delinquencies non accrual in four to five risk rated percentages.

Thomas Edward Capasse: Overall, 60 day delinquencies increased to nine 9%, resulting in a rise in the non accrual loans to 7.2%. However, the fortify risk rated loans, a leading indicator of future 60 day, plus exhibited positive migration, improving 29% to nine 6%.

Thomas Edward Capasse: However, the four to five risk-rated loans, a leading indicator of future 60-day plus loans, exhibited positive migrations, improving 29% to 9.6%. Additionally, 46% of our top 10 delinquencies totaling $137 million are included in our held-for-sale bucket and have been marked to their expected liquidation value. Liquidity is being prioritized for capital solutions, including refinancing 4 or 5 rated loans and protecting our CLOs. As of April 30th, we had total liquidity of approximately $170 million.

Thomas Edward Capasse: 46% of our top 10 delinquency totaling 137 million are included in our held for sale bucket and had been marked to expected liquidation values.

Thomas Edward Capasse: Liquidity is being prioritized for capital solutions, including refinancing for a five rated loans and protecting our CLO as of April 30th we had total liquidity of approximately $170 million year to date, we have either refinance or repurchased $114 million of delinquent loans out of the CLO with another 190 million in process.

Thomas Edward Capasse: Year to date, we have either refinanced or repurchased $114 million of delinquent loans out of the CLOs, with another $190 million in process. For example, in March, we refinanced a $68 million loan on a Class A multifamily property located in an Austin, Texas, sub-market, which went delinquent due to high operating costs and lower rents from oversupply. The 18-month extension provides a path to reach projected occupancy of 94% from 90% today and 5% annual rent increases to $16.91 a month, both highly probable given the strength of the submarket and flattening absorption.

Thomas Edward Capasse: Yes.

Thomas Edward Capasse: For example in March we refinanced our $6 million to $8 million loan on a class a multifamily property located in Austin, Texas, Submarket, which went delinquent due to high operating costs and lower rents from oversupply.

Thomas Edward Capasse: The 18 month extension provides a path to reach projected occupancy of 94% from 90 today and 5% annual rent increases to 16 91, a month, both highly probable given the strength of the Submarket and flattening absorption.

Thomas Edward Capasse: The as-is LTV on the new loan is 88%, and funds and interest reserved to cover the 18-month term were priced at SOFR plus 585, resulting in a retained yield of 18%. In terms of projected liquidity through year end, accelerated asset sales will provide an additional $200 million per capital solution. As of the April 25th remittance date, five of our CRE CLOs were in breach of either interest coverage or over collateral

Thomas Edward Capasse: As is L T D and our new long as 88% funds an interest reserve to cover the 18 month term with price, it's sofa, plus 585, resulting in our retained yield of 18%.

Thomas Edward Capasse: In terms of projected liquidity through year end accelerated asset sales will provide an additional 200 million for capital solutions.

Thomas Edward Capasse: As of April 25th agreement and state five of our theories yellows were in breach of either interest coverage or Overcollateralization tests to date, we have approved $161 million of loan modifications with another $732 million in process and under review, we expect the cumulative effect of repurchases refinancing modifications.

Thomas Edward Capasse: To date, we have approved $161 million in loan modifications, with another $732 million in process and under review. We expect the cumulative effect of repurchases, refinance, and modifications to provide a path for compliance. One important factor to reiterate underlying Ready Capital's peer group comparison is that we use a third-party special servicer which requires additional lag time and less flexibility to execute modifications. As such, our modification ratio is lower, and delinquency is inflated versus the peer group.

Thomas Edward Capasse: To provide a path for compliance one important factor to reiterate underlying ready capital's peer group comparison, we.

Thomas Edward Capasse: We use a third party special servicer, which requires additional lag time and less flexibility to execute modifications.

Thomas Edward Capasse: As such our modification ratio is lower and delinquencies inflated versus the peer group for example, according to a Deutsche Bank series C. L. A report on April remittances, the top three commercial mortgage rates based on GAAP equity pad.

Thomas Edward Capasse: For example, according to a Deutsche Bank series CLO report on April remittances, the top three commercial mortgage rates based on GAAP equity had average 71% modifications and under 1% 60-day delinquencies versus 5% and 11% for RC, the fourth largest. We continue to work with our existing special servicer to rectify this issue, and if unsuccessful, we'll implement alternatives, such as another servicer or obtaining our own special servicer rating.

Thomas Edward Capasse: Had averaged 71 per cent modifications and under 1% 60 day delinquency versus 5% and 11% for our C. The fourth largest.

Thomas Edward Capasse: We continue to work with our existing special servicer to rectify this issue and if unsuccessful will implement alternatives such as another servicer or obtaining our own special servicer rating.

Thomas Edward Capasse: Furthermore, in our M&A portfolio. Please refer to slide 11 in the deck overall credit improved 60 day, plus declined 9%, resulting in a five 6% improvement in the nonaccrual percentage. Meanwhile, a 16, 5% decline in four or five risk rating long suggest future improvement.

Thomas Edward Capasse: Furthermore, in our M&A portfolio, please refer to slide 11 in the deck, overall credit improved. 60 days plus declined 9%, resulting in a 5.6% improvement in the nonaccrual percentage. Meanwhile, a 16.5% decline in 4-5 risk rating loans suggests future improvement. Turning to earnings, as outlined in our fourth quarter earnings call, we continue to undertake five initiatives to improve ROE. First, the reallocation of low-yield assets from the M&A portfolio into 15%-plus levered ROE current yields, such as the 18% Austin refinance previously discussed.

Thomas Edward Capasse: Now turning to earnings as outlined in our fourth quarter earnings call. We continue to undertake five initiatives to improve our Roe.

Thomas Edward Capasse: First reallocation of low yield assets from the M&A portfolio into 15% plus Levered ROE current yields such that the 18% Austin refinance previously discussed.

Thomas Edward Capasse: As of quarter end, the M&A portfolio had a levered ROE of 7.2%. As it relates to Broadmark specifically, which comprises 51% of the M&A portfolio, we liquidated an additional $50 million of assets, or 5% of the original portfolio, at our base fund. Second, leverage. Current total leverage at quarter end was 3.4x, below our target of 4x.

Thomas Edward Capasse: As of quarter end, the M&A portfolio, how to leverage our or we have seven 2% as.

Thomas Edward Capasse: Now as it relates to broad market, specifically, which comprises 51% of the M&A portfolio, we liquidated an additional $50 million of assets or 5% of the original portfolio at far basis.

Thomas Edward Capasse: Second as leverage current total leverage at quarter end was three point Forex below our target of Forex target leverage will be achieved from both access and the corporate debt markets and the leveraging of new investments at better advanced rates and terms and.

Thomas Edward Capasse: Target leverage will be achieved from both accessing the corporate debt markets and the leveraging of new investments at better advanced rates and terms. In April, we closed a $150 million five-year private term loan at SOFR plus 550. Third, the exit of residential mortgage banking. We continue to target the end of the second quarter to conclude our efforts to divest of our residential mortgage business. To that end, we are under contract to sell 40% of the MSRs, with the remaining 60% currently marketed for sale with an expected July settlement. Distributable ROE in the business has lagged at 6.8%.

Thomas Edward Capasse: In April we closed $150 million five year private term loan pricing at the Sofa plus 550.

Thomas Edward Capasse: Third the exited residential mortgage banking, we continue to target the end of the second quarter to conclude our efforts to divest of our residential mortgage business to that end, we are under contract to sell 40% of the M. S ours with the remaining 60% currently marketed for sale with an expected July settlement.

Thomas Edward Capasse: Distributable ROE in the business has lagged at six 8%.

Thomas Edward Capasse: Fourth, the growth of small business lending. Our stated long-term target for the platform is $1 billion in annual originations, with $194 million in the first quarter, $47 million over the prior quarterly record. To support this growth, we appointed Gary Taylor as CEO of Small Business Lending to continue the dual strategy of large and small loan 7A originations through continued integration of our FinTech iBusiness with the added benefit of cost efficiencies in loan origination and service delivery.

Thomas Edward Capasse: Fourth the growth of small business lending.

Thomas Edward Capasse: Our stated long term target for the platform is $1 billion in annual originations with $194 million in the first quarter 47 million over the prior quarterly record.

Thomas Edward Capasse: Support this growth, we appointed Gary Taylor as C. A small business lending to continue the dual strategy of large and small loans seven eight originations through continued integration of our fintech business with the added benefit of cost efficiencies in the loan origination and servicing.

Thomas Edward Capasse: Additionally, we're excited to announce this week we signed a definitive purchase agreement to acquire Madison One Company, the nation's second-largest USDA originator. The transaction is expected to generate over $300 million of USDA volume annually, expanding our government-guaranteed small business offerings while increasing the company's gain-on-sale earnings.

Thomas Edward Capasse: Additionally, we're excited to announce this week, we signed a definitive purchase agreement to acquire the Madison one companies the nation's second largest U S. D. A originator the transaction is expected to generate over $300 million of U S. D. A volume annually expanding our government guaranteed small business offerings, while increasing the company's gain on.

Thomas Edward Capasse: <unk> earnings.

Thomas Edward Capasse: And last as Opex.

Thomas Edward Capasse: Given market conditions and expected activity levels, we reduced staffing 11% in April, resulting in annual savings of $8 million. Those reductions, in addition to $3 million in other fixed operating costs, resulted in a 46 basis point improvement to current ROE. The total 200-300 basis point ROE accretion from these five initiatives provides a significant offset to the ROE drag from an increased non-accrual percentage as the multifamily credit cycle matures. With that, I'll turn it over to Andrew.

Thomas Edward Capasse: Given market conditions and expected activity levels, we reduced staffing 11% in April resulting in an annual savings of 8 million those reductions in addition to $3 million in other fixed operating costs results.

Thomas Edward Capasse: It results in a 46 basis point improvement to current or are we.

Thomas Edward Capasse: The total 200 300 basis point ROE accretion from these five initiatives provides a significant offset to the army drag from an increased non accrual percentage as the multifamily credit cycle matures with that I'll turn it over to Andrew.

Andrew: Thanks, Tom quarterly GAAP and distributable earnings per common share were 44 cent loss and 29 cents respectively.

Andrew Ahlborn: Thanks, Tom. The quarterly gap and distributable earnings per common share were a 44 cent loss and 29 cents, respectively. Distributable earnings of $54 million equates to an 8.6% return on average stockholders' equity. Earnings were impacted by the following factors. First, revenue from net interest income, servicing income, and gain on sale declined 1.6% quarter over quarter. The $4 million decrease in net interest income was driven by the addition of $347 million of non-accrual loans and the addition of $97 million of leverage for which proceeds have yet to be invested.

Andrew: Distributable earnings of 54 million equates to an eight 6% return on average stockholders equity.

Andrew Ahlborn: This was partially offset by a $3.7 million increase in realized gains due to a 25% increase in gain-on-sale revenue driven by a record quarter in SBA 7A production. However, the leveraged yield in the portfolio remained flat quarter-over-quarter at 11.5%, as negative migration was offset by the continued reduction in equity allocated to our previous M&A deal.

Andrew: Earnings were impacted by the following factors.

Andrew Ahlborn: Second, operating costs improved 2% to $71 million. Absent the effects of REO impairment and ERC loss reserves, which equaled $18.8 million and are included in other operating expenses, total operating costs declined 14% to $52.1 million. The improvement was primarily due to a reduction in employment costs associated with staffing reductions and lower professional fees associated with employee retention credit or ERC production.

Andrew: First revenue from net interest income servicing income and gain on sale declined one 6% quarter over quarter.

Andrew: The $4 million decrease in net interest income was driven by the addition of 347 million of non accrual loans and the addition of $97 million of leverage for which proceeds have yet to be invested.

Andrew: This was partially offset by $3 7 million dollar increase in realized gains due to a 25% increase in gain on sale revenue driven by a record quarter in SBA seven eight production.

Andrew: The levered yields in the portfolio remained flat quarter over quarter at 11, 5%.

Andrew: Negative migration was offset by the continued reduction in the equity allocated to our previous M&A deals.

Andrew: So I cant operating costs improved 2% to 71 million.

Andrew: Absent the effect of Oreo impairment and E. R C loss reserves, which equaled $18 8 million and are included in other operating expenses.

Andrew: Operating costs declined 14% to $52 1 million.

Andrew: The improvement was primarily due to a reduction in employment costs associated with staffing reductions and lower professional fees associated with employee retention credit or E. R. C production.

Andrew: These improvements were partially offset by an additional $3 $4 million of servicing advances made in the quarter.

Andrew: Third a $120 million combined provision for loan loss and valuation allowance.

Andrew Ahlborn: These improvements were partially offset by an additional $3.4 million of servicing advances made in the quarter. Additionally, a $120 million combined provision for loan loss and valuation allowance was made. 56% of the increase relates to specific assets, primarily across office properties, each slated for liquidation in the coming months. At quarter end, the total provision and valuation allowance amounted to 2% of the unpaid principal loan balance. Last, a $27 million reduction in ERC income was offset by a $30.2 million income tax benefit. ERC production in the quarter totaled $2.5 million and is not expected to increase further going forward.

Andrew: 56% of the increase relates to specific assets primarily across office properties. Each later for liquidation in the coming months.

Andrew: At quarter end, the total provision and valuation allowance equaled 2% of the unpaid principal loan balance.

Andrew: Lost a $27 million reduction in your E com.

Andrew: Offset by $32 million income tax benefit.

Andrew: <unk> production in the quarter totaled two and a half million and is not expected to increase further going forward.

Andrew: The income tax benefit was the result of restructuring that allowed us to benefit from previously recognized losses.

Andrew Ahlborn: The income tax benefit was the result of restructuring that allowed us to benefit from previously recognized losses. On the balance sheet, book value per share was $13.43 compared to $14.10 on December 31st. The change was primarily due to the valuation allowance on loans held for sale. However, this was offset by a $0.07 increase from share repurchases, which totaled 2.1 million shares at an average price of $8.88. In the capital markets, we renewed four warehouse facilities totaling over $1 billion in capacity, each used to support our series business.

Andrew: On the balance sheet book value per share was $13 43 compared to $14 10 at December 31st.

Andrew: The change was primarily due to the valuation allowance on loans held for sale.

Andrew: This was offset by a 7% increase from share repurchases, which totaled $2 1 million shares at an average price of $8 88 sets.

Andrew: In the capital markets, we renewed four warehouse facilities totaling over 1 billion in capacity.

Andrew: Each use to support our CRE business.

Andrew: 75% of those renewals right, either net even or improved economics with the other bringing under market termed to market.

Andrew: On a go forward, we expect continued pressure on earnings per share with the benefits of the initiatives Tom outlined earlier.

Andrew Ahlborn: 75% of those renewals were at either net even or improved economics, with the other bringing under market terms to market. On a going forward basis, we expect continued pressure on earnings to persist with the benefits of the initiatives Tom outlined earlier reflected in earnings towards the end of 2024. With that, we will open the line for questions.

Andrew: Flex it in earnings towards the end of 'twenty 'twenty four.

Speaker Change: With that we will open the line for questions.

Speaker Change: Thank you.

Operator: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: At this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

Andrew: A confirmation tone will indicate your line is in the question queue. You May press star two if he like to remove your question from the queue.

Andrew: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.

Andrew: My first question comes from Steve Delaney with JMP Securities. Please proceed with your question.

Operator: One moment, please, while we poll for questions. My first question comes from Steve DeLaney with JMP Securities. Please proceed with your question.

Steven Cole DeLaney: Tom and Andrew you guys have been busy it sounds like.

Steven Cole DeLaney: and Andrew, you guys have been busy it sounds like. Just a fine point Andrew, the reserve on the 65, 650 million helper sale does that work out to about 85 cents per share hit to book value?

Steven Cole DeLaney: You said, a five point Andrew the reserve on the 65 $650 million held for sale.

Steven Cole DeLaney: Does that work out to about 85 cents per share hit to book value.

Steven Cole DeLaney: Hey, Steve the more area.

Andrew Ahlborn: Hey Steve, good morning. How are you? Yeah, sorry, I was on mute.

Andrew Ahlborn: Yeah, that's about right. It was a foot relates to a 4.4% decline in the book value. So doing the math there, it's a little less than the 80s in the mid.

Steven Cole DeLaney: Yes, sorry.

Steven Cole DeLaney: Yeah.

Steven Cole DeLaney: Yes, that's about right. It was add a foot religious about four 4% decline in the book value. So doing the math. They are it's a little less in the areas in the mid sixties.

Steven Cole DeLaney: Okay, got it. And Tom, the holding for sale, the $650 million, reminds me a little bit of what we used to call, what was it, good bank, bad bank, back in the RTC days, I guess, or back in the S&L crisis before that. How comprehensive, I mean, in terms of identifying risks across different segments of the portfolio. Is this primarily, you know, one group, whether it's bridge loans or is it pretty comprehensive, a little bit of everything? And, you know, what's your confidence level that you've circled, you know, 80-90% of the problems you're likely to have? Thank you.

Speaker Change: Okay got it.

Steven Cole DeLaney: Tom.

Steven Cole DeLaney: The held for sale to 650 million reminds me a little bit about what we used to call. What was it good bank Bad bank back in RTC days, I guess or back in the SNL crisis before that.

Steven Cole DeLaney: Our comprehensive I mean in terms of identifying across different segments of the portfolio.

Steven Cole DeLaney: Primarily you know one group, whether it's bridge loans or is it is it pretty comprehensive a little bit of everything and you know.

Steven Cole DeLaney: What's your confidence level that you you know that you've circled.

Steven Cole DeLaney: 80, 90% of the problems you're likely to have thank you.

Thomas Edward Capasse: Yeah, no, that makes sense. And, you know, in terms of, and I'll hand it off, Adam, maybe you can kind of give Steve a little bit, even more detail in terms of the selection of the population. But what we've done analytically in this quarter is we've separated the gross portfolio into the originated portfolio, which includes, you know, the small amount of acquisitions that we've done over the years, as well as the M&A portfolio.

Steven Cole DeLaney: Yeah.

Speaker Change: Makes sense and in terms of.

Speaker Change: Is it off Adam maybe you can kind of.

Speaker Change: Kim.

Speaker Change: <unk>, a little bit more detail in terms of the selection of the population.

Adam Zausmer: But what we've done analytically and this this quarter as we have separated the gross portfolio into the originated portfolio, which includes the small amount of acquisitions that we've done over the years as well as the M&A portfolio. So we selected from both of those with.

Thomas Edward Capasse: So we selected from both of those with the idea of doing a net present value analysis where the discount versus book is recaptured via the, you know, significant reinvestment opportunities we have, which are between 15 to 20, low 20s, depending upon either direct lending or acquisitions, you know, and supplemented by share repurchases. That's the broader strategy. So Adam, maybe you could give a little bit of a specific color around the selection of

Speaker Change: The idea too.

Speaker Change: [laughter] do a net present value analysis, where the discount versus book is recaptured via.

Speaker Change: The significant reinvestment opportunities, we have which are 15 to 20 low twenties, depending upon the.

Speaker Change: Neither direct lending or acquisitions.

Speaker Change: And supplemented by share repurchases, that's the broader strategy. So.

Speaker Change: Maybe you could give a little bit of a specific color around the selection of the population.

Adam Zausmer: Yeah. Hey, Steve.

Speaker Change: Yeah, a hasty you know in terms of the selection of the portfolio.

Speaker Change: Certainly office as Tom highlighted our.

Speaker Change: Our office exposure relative to our peers is still fairly low, but I think as we evaluate the net present value of really repositioning.

Steven Cole DeLaney: You know, in terms of the selection of the portfolio, you know, certainly office space, you know, as Tom highlighted, you know, our office exposure relative to our peers is still fairly low. But I think, you know, as we evaluate the net present value of, you know, really repositioning our capital, we think that it's greater than, you know, holding these office assets through recovery and absorbing legal costs to foreclose and, you know, carrying costs to operate the property.

Speaker Change: Our capital, we think that that's greater than holding these office assets through recovery.

Speaker Change: And absorbing legal cost to foreclose, and and you know carry cost to operate the property.

Speaker Change: The office is a big component of that secondly, I'd say you know on the on the broad market side I think the continued high mortgage rates and construction cost.

Steven Cole DeLaney: So certainly, office is a big component of that. Secondly, I'd say, on the Broadmark side, I think, you know, the continued high mortgage rates and construction costs have certainly continued to impact our residential land and development portfolio from that merger.

Speaker Change: Certainly continued to impact our residential land and development portfolio from that merger, especially in secondary and tertiary markets. So it's really you know the non the noncore assets and you know really assets that would that would ultimately have large carry costs.

Adam Zausmer: and not part of your core ongoing lending program. That's what I'm gathering. That's exactly right, yes, you know, it's...

Speaker Change: And not not part of your core ongoing lending programs is what I'm gathering.

Speaker Change: Exactly right yes.

Speaker Change: Transactions not from your own you know targeting that market in your own underwriting you know within ready cap yeah.

Speaker Change: That's exactly right yes.

Thomas Edward Capasse: Yeah, and so it's really more of a, as we said, in the fourth quarter, this was the most impactful in terms of ROE accretion, selling lower-low yielding assets with, you know, long duration, which is essentially what this portfolio comprising Broadmark and, you know, after this, our office will be down to nearly three, a little over 3%. So anyway, that's, that's, that Thank you so much for the comments and compliments.

Speaker Change: And so I think it's really more of a as we said in the fourth quarter. This was the most impactful in terms of ROE accretion selling lower low yielding assets with a long duration, which is which essentially what this portfolio comprising broad mark and you know after this or office would be down to nearly three and a little over 3% something like that.

Speaker Change: That's the that's.

Speaker Change: That's how we selected the population.

Speaker Change: Thank you so much for the comments.

Speaker Change: Sure.

Speaker Change: Our next question comes from Jade Rahmani with K B W. Please proceed with your question.

Operator: Our next question comes from Jade Rahmani with KBW. Please proceed with your question.

Jade Joseph Rahmani: Thank you very much.

Jade Joseph Rahmani: Thank you very much. What do you think distributable earnings would have been excluding the tax benefit and what's a reasonable range you think going forward? I estimated in our note 14 cents, but wanted to get your comment on that.

Jade Joseph Rahmani: What do you think distributable earnings would've been excluding the tax.

Jade Joseph Rahmani: Benefits and what's a reasonable range do you think going forward I estimated in our note 14 cents.

Jade Joseph Rahmani: But wanted to get your comment on that.

Speaker Change: Yeah. So when you look at the the.

Andrew Ahlborn: Yeah, so when you look at the tax benefit. Roughly $20 million of the total was related to the restructuring, which equates to around $0.12.

Jade Joseph Rahmani: Tax benefit.

Jade Joseph Rahmani: Roughly 20 million.

Jade Joseph Rahmani: Related to that.

Jade Joseph Rahmani: Total related to the restructuring, which equates to around 12%.

Andrew Ahlborn: The one thing I will say is, given the structure of the business, it does provide us with the ability on a continual basis to optimize the tax impact of our operating company. And so certainly an outsized tax benefit this quarter, but I do expect that line item, you know, to be somewhat volatile as those businesses evolve. You know, on a go-forward basis, when you look at Core Earnings, I think there are several.

Jade Joseph Rahmani: The one thing I will say is given the structure of the business.

Jade Joseph Rahmani: It does provide us the ability I know.

Jade Joseph Rahmani: Continual basis too.

Jade Joseph Rahmani: To optimize sort of the tax impact of all of our operating companies and so certainly an outsized tax benefit this quarter, but I do expect that line item.

Jade Joseph Rahmani: You know to be somewhat volatile as those those businesses.

Jade Joseph Rahmani: Paul.

Jade Joseph Rahmani: On a go forward basis, when you look at core earnings I think there are.

Andrew Ahlborn: There are many moving pieces here to take into account. I think the first is when you look at the pace of putting non-accrual loans back on accrual status, that certainly will have one of the largest impacts. So the revenue, the lost revenue on our non-accrual population today is a little under $60 million. You think about as we work with our special servicer to move through that.

Andrew Ahlborn: And that equates to roughly close to $0.35 in annual core earnings, which is highly impactful. The next step is obviously transitioning over that health care for sale population, where the yields in that portfolio are negative today. So as that negative yield gets repositioned into market yielding assets, you're seeing go forward EPS accretion in the range of $0.12 to $0.15. So there are a variety of moving pieces, and what you will see as we work through those issues and clear out some of the underyielding acids is that some of the, sort of larger one-time items that have occurred over the last quarters, ERC income, some of the tax benefits, get replaced by, you know, a more steady stream of revenue that is approaching our 10% target.

Jade Joseph Rahmani: Accretion of.

Jade Joseph Rahmani: In the range of 12 to 15 times.

Jade Joseph Rahmani: So there's a variety of moving pieces and what what you will see as we worked through those issues and clear out some of that.

Jade Joseph Rahmani: Under yielding assets that some of the.

Jade Joseph Rahmani: Sort of larger onetime items that have occurred over the last quarters <unk> Thompson with attacks, but get replaced by you know them.

Jade Joseph Rahmani: More steady stream of revenue that.

Jade Joseph Rahmani: Is approaching our 10% target.

Jade Joseph Rahmani: So just to put that together distributable earnings was 29.

Andrew Ahlborn: So just to put that together, distributable earnings were $0.29. There was around $0.12 of tax benefit related to restructuring, so that gets to $0.17. And then there's $0.35 per year, or $0.09 per quarter of income from non-accruals, so the loss.

Jade Joseph Rahmani: There was around 12.

Jade Joseph Rahmani: Benefit related to restructuring so that gets to 17.

Jade Joseph Rahmani: And then there is 35.

Jade Joseph Rahmani: Her year or <unk> <unk> per quarter of income from non accruals. So lost income loss income.

Andrew Ahlborn: Lost Income. Lost.

Andrew Ahlborn: Yeah, so that's $0.12 remaining. That's what DE can look like until you redeploy capital.

Jade Joseph Rahmani: Yeah, so yeah, so that 12.

Jade Joseph Rahmani: <unk> remaining is what.

Jade Joseph Rahmani: The economic like until you redeploy capital.

Speaker Change: No no sorry, just to be just to be clear.

Andrew Ahlborn: No, no, sorry, just to be clear. The non-accrual assets are earning zero today, right? So as they get, and so the impact of those in the quartering state is nothing. So as those come back into accrual status through the work that we're doing with the special servicer, the financial impact on a go-forward basis will be positive.

Speaker Change: The non accrual assets, earning zero today right. So as they got and so the impact of those in the quoting stage nothing so as those come back into accrual status through the work that we're doing with the special servicer the financial impact on a go forward basis will be a possible.

Andrew Ahlborn: Were those non-accruals on non-accrual through the quarter?

Jade Joseph Rahmani: Were those non accruals on non accrual through the quarter.

Jade Joseph Rahmani: The majority of them, except for the additional ones I mentioned in the comments were there for the quarter.

Andrew Ahlborn: The majority of them, except for the additional ones I mentioned in the comments, were there for the quarter.

Jade Joseph Rahmani: Okay.

Jade Joseph Rahmani: Okay, and then the next question would just be the loans held for sale. Do you know what the delinquency rate in that pool is?

Jade Joseph Rahmani: And then.

Speaker Change: The next question would just be the loans held for sale do you know what the delinquency rate in that pool is.

Speaker Change: Yeah, so out of that the total pool that moved there 70% of that is in some state of delinquency.

Andrew Ahlborn: Yeah, so out of that total pool that moved there, 70% of that is in some state of delinquency.

Speaker Change: Okay.

Jade Joseph Rahmani: um I guess the constitution of that is the majority of that, the acquired loans from Broadmark and Mosaic, or is it originated loans?

Jade Joseph Rahmani: I guess the constitution of that is the majority of that the acquired loans from broad Mark and mosaic or is it originated loans.

Andrew Ahlborn: It is It is a little less than an even split, so 40% of that is coming from the M&A buckets, and 53% is coming from what, as Tom described, an RC loan. So it's really basically an even split.

Jade Joseph Rahmani: It is it is a little less than an even split of 40% of that is coming from.

Jade Joseph Rahmani: Our M&A buckets, and 53% is coming from what Tom described in RC loan.

Jade Joseph Rahmani: So it's really a basically an even split.

Jade Joseph Rahmani: And then just lastly, the G M Memefest transaction.

Jade Joseph Rahmani: And then just lastly, the GMFS transaction, do you already have a signed sale agreement and is that expected? Could you give a range of, you know, consideration that's expected?

Jade Joseph Rahmani: Do you already have a signed sale agreement and.

Jade Joseph Rahmani: Is that expected could you give a range of Ah.

Jade Joseph Rahmani: You know consideration that's expected.

Jade Joseph Rahmani: Yes, so it's being it'll be broken up into three different components.

Andrew Ahlborn: Yeah, so it'll be broken up into three different components. The first two are the sale of the MSRs broken into retail and non-retail, which is roughly 40% of the non-retail, 60% of the retail. The non-retail, we do have agreements to sell. The multiple on that is in the low to mid fives, which is right around where we are valued at year end. The Reach Out component is currently getting ready to go to market.

Jade Joseph Rahmani: <unk>.

Jade Joseph Rahmani: The first two are the sale of the Msr's broken into the retail and non retail which is.

Jade Joseph Rahmani: 40% of the non 60% on the retail.

Jade Joseph Rahmani: The non retail we do have agreements to sell the multiple that is in the low to mid fives, which is right around where we are mark.

Jade Joseph Rahmani: <unk>.

Jade Joseph Rahmani: Right.

Jade Joseph Rahmani: The retail component is currently.

Jade Joseph Rahmani: I'm getting ready to go to market I suspect that.

Jade Joseph Rahmani: You know the execution. There is also in the range of our Mark and then the last component will be.

Andrew Ahlborn: I suspect that, you know, the execution there is also in the range of our mark. And then the last component will be... you know, this sale of the platform, which we do not have under contract yet, but I suspect that that will take the form of, you know, book value plus an earn out, or book value plus a slight premium and earn out. You know, our expectation is that all of this gets cleared up over the next three to four.

Jade Joseph Rahmani: You know the sale of the platform, which we do not have under contract yet, but suspect that that will take.

Jade Joseph Rahmani: Take the form of no book value plus an earn out of both hotels at a slight premium an earn out.

Jade Joseph Rahmani: Our expectation is that all of this gets cleared up over the next three to four months.

Andrew Ahlborn: What's the range of proceeds just by adding all that together?

Speaker Change: What's the range of proceeds just adding all that together.

Jade Joseph Rahmani: Yeah, we expect the net proceeds after financing to be somewhere between $70 and $80 million. Thanks a lot. Our next question is from Douglas Harter with UBS. Please proceed with your question. Hi, this is Corey.

Speaker Change: Yeah, we expect the net proceeds ducker finance seem to be somewhere between $70 million to $80 million.

Speaker Change: Thanks, a lot.

Speaker Change: Yeah.

Speaker Change: Our next question is from Douglas Harter with UBS. Please proceed with your question.

Operator: Our next question is from Douglas Harter with UBS. Please proceed with your question.

Speaker Change: Okay.

Speaker Change: Hi, This is Cory Johnson on for Doug.

Speaker Change: <unk>.

Cory Johnson: Historically, you generally issued about two to three <unk> per year.

Cory Johnson: I don't believe you issue any ear to date, despite the CBS.

Speaker Change: <unk> market opening up.

Speaker Change: Could you maybe explain a little bit of like why why that is the case.

Speaker Change: Andrew you want touch on that I mean, obviously the origination volume is down currently.

Douglas Michael Harter: Andrew, you want to touch on that? I mean, obviously, the origination volume is down currently, but maybe just discuss the overall CRE-CL strategy. Yeah, so the drop off is just

Speaker Change: Maybe just discuss on the overall C series sales strategy.

Andrew: Yeah. So I think the drop off as Joseph mentioned that bridge originations have been.

Andrew Ahlborn: Yeah, so I think the drop off is just, as Todd mentioned, that bridge originations have been lower in the platform this year as I look at our back book and our future pipeline. I think there is a chance we could see a little market as we move towards the end of the year, potentially in the first quarter of next year. It'll continue to be a core part of how we finance the business.

Andrew: Lower in the platform this year as they look at R. R.

Andrew: Our back book and our future pipeline I think there is a chance we bring them.

Andrew: Cielo to market as we move towards the end of the year potentially in the first quarter of next year it'll continue to be a core part of how we finance the business.

Andrew Ahlborn: I think, you know, the structure it takes, whether it's a static or managed CLO, whether we outsource special servicing or we come up with a special servicer, all things we're working through in advance of that CLO, but it certainly will continue to be a core part of our planning.

Andrew: I think the structure it takes whether it's a static or managed care whether we.

Andrew: Outsourced special servicing or become a rated special servicer are all things, we're working through in advance of that CLO, but it certainly will continue to be a core part of our financing structure.

Speaker Change: Great. Thank you that was it for me.

Andrew: Our next question comes from Stephen Laws with Raymond James. Please proceed with your question.

Operator: Our next question comes from Stephen Laws with Raymond James. Please proceed with your question.

Stephen Albert Laws: Hi, good morning. I appreciate the comments so far. I wanted to touch base on the follow-up on your comments and prepared remarks about CLO and servicer. What is the process or timeline as far as changing your servicer or moving that internal? And your CLOs are static. I know you talked about that and the impact that has had a lot on the last call, but how would changing the servicer change your ability to either buy out loans before they dequeue or replace them or modify more quickly?

Stephen Albert Laws: Hi, good morning.

Stephen Albert Laws: Sure the comment so far wanted to touch base on the.

Stephen Albert Laws: A follow up on your comments in the prepared remarks about cielo in service or you know what is the the.

Stephen Albert Laws: The process or timeline as far as changing our servicer are moving not internal.

Stephen Albert Laws: And your CLO or static I know you talked about that and the impact that has a lot on the last call, but but you know how we're changing our servicer changed your ability to either buyout loans before the DQ or replace them or modify them more quickly.

Adam Zausmer: Adam, do you want to comment on that?

Stephen Albert Laws: Gautam you want to comment on that.

Adam Zausmer: Yeah, hey, hey, this is Adam. Yeah, I'll just make some commentary on that. I mean... [inaudible] In terms of replacing the servicer, you know, given that we're the directing certificate holder, we can certainly do that very easily. We just need to line up, you know, an alternative rated servicer to put into the CLL. So that would allow us to move quickly, and then also we'd have certainly significant flexibility on the modification front, utilizing our own extremely experienced team that knows these assets well, etc.

Stephen Albert Laws: Yeah, Hey, Hey, Hey, this is Andy I'll, just make some some commentary on that I mean.

Stephen Albert Laws: Yeah.

Gautam: In terms of replacing the servicer.

Andy: You know given given that where the directing certificate holder. We can certainly we can certainly do that very easily.

Speaker Change: We just need to wind up.

Speaker Change: An alternative rated service sort of put into the CLO. So that would allow us to move to to move quickly and then also we'd had certainly significant flexibility on the modification front, you're utilizing our own you know extremely experienced team that knows these assets well et cetera.

Adam Zausmer: I'd say from the servicing standpoint, the issues that we've been experiencing are that it's taking too long for the third-party servicer to efficiently process the resolutions. We're certainly encouraging them to have a greater sense of urgency to effectuate what's really a backlog of pending resolutions. So, assuming that we can get the special services there in terms of moving quicker, we've got like half a dozen modifications that are pending effectively north of $500 million, which we think is... You know, high probability to get, you know, you know, a very strong number of them resolved in this quarter.

Speaker Change: I'd say you know from the servicing standpoint, you know the issue is really you know that we've been experiencing is that it's it's it's it's taking too long for the third party servicer to efficiently process the resolutions.

Speaker Change: You know were certainly encouraging them to have a greater sense of urgency to effectuate, the what's really a backlog of pending resolutions.

Speaker Change: So you know.

Speaker Change: Once once we you know assuming that we can get the you know the special servicer. There in terms of if you don't moving quicker.

Speaker Change: We've got like half a dozen.

Speaker Change: Modifications that are pending.

Speaker Change: Effectively north of $500 million, which we think is high.

Speaker Change: A high probability to get you know you know a very very strong number of them resolved.

Speaker Change: In this in this quarter second I think you asked about us becoming a rated special servicer, you know that that that that full process from start to finish would take somewhere from six to nine months I'm. You know I think we have a solid team in place strong strong guidelines.

Adam Zausmer: Secondly, I think you asked about us becoming a rated special servicer, and that the full process from start to finish would take somewhere from six to nine months. You know, I think we have a solid team in place, strong, strong guidelines, you know, pretty, pretty good technology and whatnot. But, you know, I think, again, that would be like six to nine months.

Speaker Change:

Speaker Change: You know pretty pretty good technology in and whatnot, but I think again that that'd be like six months six to nine months. So we're certainly.

Adam Zausmer: So we're certainly, you know, we'll continue to have regular conversations with that third-party specialist servicer. But we're also, you know, as Tom and Andrew noted earlier, certainly exploring other alternatives to give us more, more flexibility as we work through the crisis.

Speaker Change: We're continuing to have regular conversations without third party special servicer, but we're also as Tom and Andrew noted earlier, certainly exploring other other alternatives to give us a more more flexibility as we work through the crisis here.

Thomas Edward Capasse: And just to add to Adam's comments, we've recently put in place an action plan with the existing servicer. We do have a relationship with another special servicer who is, you know, has a lot of experience in the transitional loan space. So that is definitely an option we're pursuing and pursuing it aggressively.

Speaker Change: Yeah.

Speaker Change: Add to Adam's comments, we we've had as recently as this week put in place an action plan with the existing servicer, we do have a relationship with another special servicer, who as you know a lot, but with a lot of experience in the transitional loan space. So that is definitely an option, we're pursuing and pursuing it aggressively.

Stephen Albert Laws: Great, and as a follow-up to the previous question regarding, you know, future CLOs and issuance, do you really think about that as new origination volume, or is any deal going to be collapsed with collateral rolled in, and, you know, as you think about those structures, when you look to do managed deals, do you feel like you get better pricing with the static, you know, nature of

Speaker Change: Great and then as a follow up to the previous question.

Speaker Change: You know future CLO issuance you know do you really think about that as new origination volume or any deal is gonna be collapsed with collateral of roll down and you know as.

Speaker Change: As you think about those structures, where you look to do manage deals do you feel like you get better pricing with the static.

Speaker Change: You know the nature of that you have with the existing kind of how do you think about how you structure those future silos, well historically, we are ready.

Thomas Edward Capasse: Historically, we at Ready Capital, if you look at the universe of companies that are probably, Adam, a dozen or more issuers? Market peak at about $30 billion a year in 21, 22.

Speaker Change: Ready capital if you look at the universe of there's probably what.

Speaker Change: A dozen or more issuers market peaked at about $30 billion a year in 'twenty one 'twenty two.

Speaker Change: We're the fourth largest issuer issuer since inception, our deals unequivocally have the most investor friendly.

Thomas Edward Capasse: We're the fourth largest issuer since inception. Our deals unequivocally have the most investor-friendly structures, and that's A, static, B, our triggers. 2 and The Industry is 5.

Speaker Change: Structures and that's a static b R. Triggers are triggers are like for example, what's the the OC test Adam is.

Speaker Change: Two in the industry's five.

Thomas Edward Capasse: So that's how we structured the deal, and we did one actually one one on the other side one percent. Yeah, even worse. Are you excited about even more conservative or investor friendly? So that did afford us pricing, you know, on the triples, best in class in the peer group. Now in the current market, we're probably now more leaning, we're looking at refis in our existing book and leaning more towards the managed structure.

Speaker Change: So thats, how we structured the deal and we did.

Speaker Change: One actually one one and the other side, 1% even worse.

Speaker Change: Even more conservative or investor friendly so.

Speaker Change: That data afford us a pricing.

Speaker Change: <unk>.

Speaker Change: On the triples.

Speaker Change: Best in class in the peer group now in the current market.

Speaker Change: We're probably now more leaning we're looking at Refis in our existing.

Speaker Change: Book and leaning more towards the managed structure, but you know they were.

Thomas Edward Capasse: But through the external manager, which manages our securitizations, we're one of the largest issuers across a broad array of ABS sectors. And I think at this stage of the credit cycle, we'll probably lean more towards more flexibility in exchange for slightly higher spreads on the triple.

Speaker Change: Through the external manager, which manages our securitizations.

Speaker Change: You know, we're one of the largest issuers across a broad array of a b S sectors.

Speaker Change: And I think at this stage of the credit cycle would probably lean more towards a more flexibility in exchange for slightly higher spreads on the triples.

Thomas Edward Capasse: Right, and there's just one thing I would just say, Tom, just in terms of the pool. I think, I think the pool would be, you know, really a combination of legacy assets, you know, some collapses, you know, some new issuance. And, you know, to Thomas' point, I think, you know, certainly evaluating the managed structure or some hybrid structure with certainly greater, greater flexibility. Great.

Speaker Change: Great and then just sorry.

Speaker Change: I would just say just Tom just in terms of that.

Speaker Change: I think I think the pool would be you know really a combination of legacy assets you know some collapses some new issuance.

Speaker Change: And I think you have to toss one I think you know certainly evaluating the managed structure or or or some hybrid structure with a certainly greater greater flexibility.

Stephen Albert Laws: Great, I appreciate the color on this. Thank you.

Speaker Change: Great I appreciate the color on this thank you.

Speaker Change: That's your questions our.

Operator: Our next question comes from Crispin Love with Piper Sandler. Please proceed with your question.

Speaker Change: Our next question comes from Crispin Love with Piper Sandler. Please proceed with your question.

Crispin Elliot Love: Thanks, good morning everyone. I'm just looking at the delinquency rates on the lower middle market slide of the presentation. First, do those rates include the loans held for sale, and if so, what would those delinquency rates look like absent the $655 million of loans held for sale on a portfolio basis? Any other color that you think would be helpful?

Crispin Elliot Love: Thanks, Good morning, everyone I'm, just looking at the delinquency rates on the lower middle market Slide presentation. Firstly those rates include the loans held for sale and if so what would those delinquency rates looked like absent the $655 million of loans held for sale on a portfolio basis and any other color that you can go.

Speaker Change: Would be helpful.

Crispin Elliot Love: Yeah, Adam or Andrew?

Crispin Elliot Love: Yeah, Adam or

Speaker Change: Yeah, Adam or Andrew.

Adam: Yeah, I'm looking at I'm looking at.

Adam: Alright.

Andrew Ahlborn: All right, Andrew. Andrew, go ahead.

Andrew: Andrew go ahead.

Andrew: So those those numbers do include the delinquency rates from the held for sale.

Andrew Ahlborn: So those those numbers do include the delinquency rates from the held for sale laws.

Andrew: Lauren so it is inclusive of the entire portfolio you know when you look at.

Andrew Ahlborn: So it's inclusive of the entire portfolio. You know, when you look at the properties held for sale, delinquency rates, as I said before, they're much higher. So, you know, roughly 70 percent of that population is in some state of delinquency. So on a comparative basis, once those are sold, we expect the delinquency rate to come down quite a bit.

Adam: The held for sale delinquency rates.

Andrew: As I said before there they are much higher so you know roughly 70% of that population is in some phase of delinquency. So on a comparative basis. Once those are sold we expect delinquency rates to come down quite a bit.

Lauren: Okay, Great. That's that's helpful. And then just following up on Jamie's question earlier, just how do you expect that the movement of loans held for sale to impact near term married interest income and distribute our earnings.

Crispin Elliot Love: Okay, great. That's, that's very helpful.

Andrew: I guess just related like what are your near term projections for core or are we maybe we're excited by good it's kind of like you said that you expect it to trend closer to the 10% target, but just curious over the next couple of quarters.

Speaker Change: Yeah, so in the short term.

Crispin Elliot Love: And then, just following up on Jade's question earlier, just how do you expect the movement of loans held for sale to impact near-term net interest income and distributor earnings? And, I guess, just relatedly, what are your near-term projections for core ROE? Andrew, it sounded like you said that you expected it to trend closer to the 10% target, but just curious over the next couple of years.

Andrew: On a net interest income standpoint, I think these this population of loans, we will continue to have.

Andrew Ahlborn: Yeah, so in the short term, on a net interest income standpoint, I think this population of loans will continue to have a very minimal effect, given that the majority of them, you know, are not accruing today. You know, as we move out of them, and we are working to do so over the next three months, and that capital gets repositioned, either into new originations at market yields or refinancing of existing loans at market yields, it should add an incremental 12 to 15 of Go Forward EPS, right? So the combination of that repositioning and the modification work that's being done in the TLOs, which we. You know, I expect to have...

Andrew: Very minimal effect given that the majority of them.

Andrew: They are not accruing today.

Andrew: As we move out of them.

Andrew: And we are working to do so over the next three months and that capital gets repositioned either into new originations at market yields or refinancings of existing loans at market yields.

Andrew: It should add an incremental 12 to 15.

Andrew: Of go forward EPS right. So the combination of of that repositioning.

Andrew: And the the.

Andrew: Vacation work, that's being done in CLO, which we.

Andrew: I expect to have.

Andrew: Let's call it a nine cents a quarter impact on EPS.

Andrew Ahlborn: It's called the 9-Cent per Quarter Impact on EPS. It pushes, as we move to the back of this year, core earnings back towards that 10% target. I think in the interim period, though, while we work through these, the financial effect will be fairly distinct.

Andrew: Pushes as you move to the back of this year core earnings back towards that 10% target I think in the interim period, though while we worked through those the financial effect would be fairly de minimis.

Speaker Change: Okay, Great and then just one last question.

Crispin Elliot Love: Okay, great. And then there's just one last question.

Crispin Elliot Love: When do you think the loans held for sale will be sold? And are you already in discussions with buyers for these loans? And just any details on what kind of buyers are looking at them, whether it's asset managers, or mortgage REITs, or mortgage finance companies, just anything that would be awesome. Thank you.

Speaker Change: When do you think the wounds held for sale will be sold in and are you already in discussions with buyers for these loans and.

Speaker Change: Just any detail on what kind of buyers are looking at them, whether it's asset managers or mortgage rates are mortgage land, sometimes just anything that would be awesome. Thank you.

Thomas Edward Capasse: Yeah, I mean, Andrew, maybe, I'm sorry, Adam, maybe you can comment on the overall strategy with specific brokers, and I would comment, though, and in terms of the buyers, it wouldn't, definitely not other mortgage rates, it's more private credit funds that have raised a lot of capital around the... the Distress CRE space, and as well as Mom and Pop for the smaller Broadmark assets. But Adam, maybe you can comment on Yeah, sure, I mean...

Speaker Change: Yes, I mean, Andrew maybe I'm, sorry, Adam maybe you can comment on the overall strategy with a specific brokers and I would comment though in terms of buyers wouldn't definitely not a hybrid mortgage REIT. That's more private credit funds that have raised a lot of capital around the.

Speaker Change: The distress CRE space.

Speaker Change: And as well as a mom and pop for these smaller brought mark assets, but Andrew.

Adam: And maybe just comment on that.

Adam Zausmer: Yeah, sure. I mean, listen. We've got a very large portfolio. This subset of loans is certainly very granular, mixed bags of mostly NPL and REO. I'd say a lot of the assets are already with brokers or have purchase and sale agreements executed. So specifically in the REO bucket, the majority of those are with individual brokers in the market. On the loan side, the plan is to likely go out in a bulk sale across a few different pools.

Andrew: Yeah sure I mean listen we've got a very large portfolio. You know this this subset of loans certainly very granular mixed bags of mostly NPL and Oreo.

Andrew: I'd say you know a lot of the assets are already with brokers and indoor have purchase and sale agreements.

Andrew: Executed so specifically around the Oreo bucket the majority of those are with individual.

Andrew: With with individual brokers in the market on the loan side.

Andrew: You know the plan is to is to likely go out in a bulk sale.

Andrew: On an on.

Andrew: Across a few different pools I think the.

Adam Zausmer: I think the You know, the buyer for these, I think it's going to be regional folks that want to take these assets on, you know, given that they're NPLs. And, and, and really, you know, come up with a new business plan to redevelop the assets, and then certainly there's going to be debt funds looking at these assets for, you know, some of the larger office deals where they can come in with operating partners for development.

Andrew: You know the buyer for these I think it's gonna be regional folks you know.

Andrew: But I want to take these assets on you know given that Theyre NPL.

Andrew: And it really.

Andrew: Really you don't.

Andrew: Come up with a new business plan to redevelop the assets and then certainly there's going to be debt debt funds looking at.

Andrew: These assets for some of the larger office deals.

Andrew: Where they can come in with operating partners.

Andrew: For development.

Speaker Change: Great. Thank you I appreciate you all taking my questions.

Crispin Elliot Love: Thank you. I appreciate you all taking my questions.

Andrew: Okay.

Andrew: Our next question comes from Matt Howlett with B Riley Securities. Please proceed with your question.

Operator: Our next question comes from Matt Howlett with B. Reilly Securities. Please proceed with your question.

Matthew Philip Howlett: Oh, hey, thanks for taking my question. Hey, just a big first question from a high level. I mean, Tom, where are we in the commercial real estate cycle? I'm assuming a lot of these delinquencies were 21, low cap rate advantages. Can you give us an indication whether you think the worst is over here?

Matthew Philip Howlett: Oh, Hey, Thanks for taking my question just Big first question from a high level I mean, Tom where are we in the commercial real estate cycle and I'm, assuming a lot of these delinquencies were 21 low cap rate vintages give it can you give us indication whether you think the worst is over here.

Thomas Edward Capasse: Yeah, I mean, there are eight food groups in Moody's End Creep, and there are eight answers to that question, but the one that's relevant for Ready is obviously multi-grain, and that's 80% of our exposure. So to answer that very briefly, yeah, we believe that it's rotational bottoms in submarkets, which are tied to negative supply hitting the market. You know, the multifamily starts were up, you know, since 2020, I think, to the peak early this year, late last year, up like 50, 60%.

Thomas Edward Capasse: Yeah, I mean, there's eight food groups in the Moody's on Creaking, there's eight answers to that question, but the one that's relevant for ready is obviously multi and Ah that's 80% of our exposure.

Thomas Edward Capasse: So to answer that very briefly yes, we believe that.

Thomas Edward Capasse: It's a rotational bottoms in submarkets, which are tied to a negative supply hitting the market that there you know that.

Matthew Philip Howlett: Multifamily starts were up.

Matthew Philip Howlett: <unk> 'twenty 'twenty I think to the big early this year or late last year up like 50%, 60%, they're now down year over year of 35%. So what youre seeing is.

Thomas Edward Capasse: They're now down year over year by 35%. So what you're seeing is price declines and, therefore, rent declines in select sub-markets where there's a lot of supply hitting the market. So certain markets, so to figure out the bottoms in each of the markets, you look at the amount of supply and how long it takes to absorb that excess supply before the market bottoms. And overall, we're down 16% in multifamily prices. We think we have another five to go.

Matthew Philip Howlett: Price declines in rent and rent therefore rent declines in select Submarkets, where there's a lot of supply hitting the market. So certain markets. So too to figure the bottoms in each of the markets you look at the amount of supply and.

Matthew Philip Howlett: And how long it takes to absorb that that excess supply before the market bottoms and overall, we were down 16% and multifamily prices. We think we have another five to go but broadly speaking we think the bottom is sometime in the late later later half of 'twenty.

Thomas Edward Capasse: But broadly speaking, we think the bottom is sometime in the latter half of 24, with significant variations in markets. And again, to reemphasize what we said in the earnings call, we use a geo-tier model for years to... Thank you all for joining us today.

Matthew Philip Howlett: 24, with Fitbit significant variations in markets.

Matthew Philip Howlett: And again to reemphasize, what we said in the earnings call. We use the G O tier model for years to.

Matthew Philip Howlett: Brake markets, one through five and one major input in the model as negative absorb our supply a negative absorption. So we've dodge a lot of the big bullets.

Thomas Edward Capasse: We're going to talk a little bit about how we rank markets one through five, and one major input in the model is negative absorb, or supply, and negative absorption. So we've dodged a lot of the big bullets, you know, like in Austin, Texas, for example. But, you know, that's so we think at the end of the day, the multifamily valuations are floored based on the huge delta between buy versus rent.

Matthew Philip Howlett: In Austin, Texas for example.

Matthew Philip Howlett: But.

Matthew Philip Howlett: So that's so we think at the end of the day. The multifamily valuations are are floored based on the <unk>.

Matthew Philip Howlett: Huge delta in <unk>.

Matthew Philip Howlett: Buy versus rent and the average monthly payment United States now has nearly $3000 for medium priced home.

Thomas Edward Capasse: The average monthly payment in the United States now is nearly $3,000 for a medium-priced home, and the average rent is a little under $2,000. That's a 50-year high. So that will underpin the demand for apartments in relation to [inaudible]. There's a government takeout through Fannie and Freddie, and they just need some time to work through the business plans, but the valuations, we think, are unlike office, which is, we think, a five-year secular decline; multifamily is solid.

Matthew Philip Howlett: Average rent is a little under 2000 and that's it.

Matthew Philip Howlett: That's a 50 year.

Speaker Change: Hi, so that that will underpin the demand for.

Speaker Change: Apartments in relation to.

Speaker Change: Our single family and also create a floor on on multifamily valuations, which is why we're highly confident in our.

Speaker Change: Our legacy book because of the going in L. T V of low sixties.

Speaker Change: Even with these declines.

Speaker Change: There is.

Speaker Change: There was a government take out through Fannie Freddie and they just need some time to work through the business plans and but the valuations. We think are unlike office, which is a we think a five year secular decline multifamily is solid.

Speaker Change: That's the way it's the way you explained it makes it makes complete sense out of it I appreciate that additional color and perhaps I should have started off with the first question I should congratulate everybody with the share repurchases, particularly in April and we can all do the math in terms of the MPV of buying back shares here selling of loans and buying back shares at.

Matthew Philip Howlett: The way you explain it makes complete sense now. I appreciate that additional color.

Matthew Philip Howlett: And perhaps I should have started off with the first question. I should congratulate everybody on this year's repurchase, particularly in April. And we can all do the math, you know, in terms of the NPV of buying back shares here, selling the loans, and buying back shares at 100% upside potentially. Ken, what can you tell me in terms of the pace of repurchases being up in April versus the first quarter? Would you like to see that April base continue? Could we see Dutch tenders when you get, you know, big pulls of capital in? Just curious about the share repurchase, and I have to really commend everybody there for buying back shares.

Speaker Change: 100 per cent upside potentially Ken what can you tell me in terms of the pace of repurchases are up in April versus the first quarter would you like to see that April base continue could we see Dutch tenders, when you get big pools of capital and just just curious on a share repurchase would have to really come in everybody. Therefore for buying back shares.

Matthew Philip Howlett: Thanks. Andrew, do you want to comment?

Speaker Change: Thanks.

Speaker Change: Andrew you want to comment.

Andrew Ahlborn: Yeah, so we, you know, we have $50 million remaining on our existing share repurchase program. I think we will continue to utilize the program while also balancing the need to use liquidity, both in terms of protecting our CLOs, as well as putting money to work in a very attractive environment. You know, as you mentioned, the return profile on repurchasing shares is very attractive at these levels, and certainly as we, as proceeds come in.

Andrew: Yeah. So we were $50 million remaining on our existing share repurchase program.

Andrew: I think we will continue to utilize the program while also balancing.

Andrew: The need.

Andrew: Do you use liquidity both in terms of.

Andrew: We're taking our clo's as well as putting money to work.

Andrew: Very attractive environment.

Andrew: You mentioned the.

Andrew: The return profile on repurchasing shares is very attractive at these levels.

Andrew: And certainly as we as proceeds come in.

Andrew Ahlborn: From sales and payoffs, we'll evaluate whether the $50 million is a sufficient amount allocated to repurchase when we get through it all. But I do expect that repurchases, assuming liquidity levels remain healthy, and margin risk in the portfolio remains really small, will be a part of what we do going forward.

Andrew: From a sales and payoffs well, we'll evaluate whether the $50 million it is a.

Andrew: A sufficient amount allocated for the repurchase you know when we get through it all but I do expect that repurchases assuming.

Andrew: Liquidity levels remain healthy.

Andrew: You know margin risk in the portfolio remains really small I do expect it to be.

Andrew: A part of what we do going forward.

Matthew Philip Howlett: My two cents for what it's worth is you can put capital worth something that could be worth 100% up. I know you're getting 20% on new investments, but clearly, share repurchases at these type of discounts, NAD, just look like the best use of capital. I mean, obviously, in the context of all the other liquidity that you're managing, and I appreciate you guys are out there doing it, and it's nice to see.

Andrew: My two cents for what it's worth it. So you can put capital to work some of it because we're 100 <unk> hundred per cent up versus you know I know, you're getting 20% on new investments, but clearly share repurchases at these type of discounts and a D J.

Andrew: It just looked like the best use of capital I mean, obviously in the context of all the other liquidity that you're managing and I. Appreciate you guys are out there doing it and it's nice to see.

Matthew Philip Howlett: Last question, Andrew, what was the coupon on the term loan? And then we're seeing the REITs out now issuing five-year paper, 8%, 9% unsecured. What can you tell me on the non-secured side? Are you going to be out in the market? Is that channel open to you?

Speaker Change: Last question, Andrew what was the coupon on the term loan and then we're seeing the reach out now issuing five year paper.

Speaker Change: Eight 9% unsecured.

Speaker Change: What is what can you tell me if you know on on the you know in the.

Speaker Change: And unsecured side, where you're going to be out in the market.

Speaker Change: Channel open to you.

Andrew: Yes, so that the terms on pricing so for plus $5 50 on a.

Andrew Ahlborn: Yeah, so the term amount price is SOFR plus $5.50 on a not tax-affected bill, so, you know, we will be able to tax back the interest cost of this issue when this issue ends, which will bring it down into the sevens. In terms of, you know, accessing other corporate markets, we've certainly seen deals get done. And, you know, we explore them on a continuous basis. I do think, as we move forward, and we evaluate the liquidity needs of the company, we'll consider all options.

Andrew: Not tax affected though so we will be able to talk about the interest cost of this.

Andrew: This issuance, which will bring.

Andrew: It down into the into the Sevens in terms of you know.

Andrew: Accessing other corporate markets. They certainly see deals get done and we had for them on a continuous basis and I do think.

Andrew: You know as we move forward and we evaluate the liquidity needs of the company at all.

Andrew: Consider all options.

Speaker Change: Great look forward to that that's for anybody.

Matthew Philip Howlett: Great. I look forward to that. Thanks, everybody.

Speaker Change: Yeah.

Speaker Change: As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.

Operator: As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. One moment while we poll for questions. Our next question comes from Jade Rahmani, with KBW. Please proceed with your question.

Jade Joseph Rahmani: Thank you very much. Can you give any color on the other income line, which is around 15 million, and also the other operating expenses, which are about 30 million?

Speaker Change: One moment, while we poll for questions.

Speaker Change: Our next question comes from Jade Rahmani.

Jade Joseph Rahmani: With K B W. Please proceed with your question.

Andrew Ahlborn: Yeah, so in the other income, the biggest driver is going to be the contingent equity right, which was offset by, you know, losses that are also included in the course of the net impact of that is zero on the operating side. The biggest one in there is impairment on REO, which flowed through that line item. That was roughly $17 million in the quarter. There are also carry costs on REO, tax expenses, etc. that flowed through there. But the main one was the REO impairment.

Jade Joseph Rahmani: Thank you very much can you give any color on the other income line, which is around $15 million and also the other operating expenses, which was about $30 million.

Speaker Change: Yeah. So in the the other income the biggest driver.

Jade Joseph Rahmani: <unk> is going to be the contingent equity right.

Jade Joseph Rahmani: Which was offset by.

Jade Joseph Rahmani: Losses that are also included in core so the net impact of that.

Jade Joseph Rahmani: Is.

Jade Joseph Rahmani:

Jade Joseph Rahmani: Is zero.

Speaker Change: The <unk>.

Speaker Change: The operating side.

Speaker Change: The biggest one than there is in.

Speaker Change: Impairment on Oreo, which flow through that through that line item that was roughly $17 million in the quarter. Theres also carry cost scenario like tax expenses etcetera that flows through there, but the main one was.

Speaker Change: The Oreo impairment score.

Speaker Change: Okay.

Speaker Change: So.

Jade Joseph Rahmani: I guess on the 15 million in other income. I mean, in the 10K.

Speaker Change: I guess on the $15 million of other income.

Speaker Change: I mean in the 10-K the.

Jade Joseph Rahmani: The description is that it includes a whole variety of stuff. Your 10-Q's not out yet, but Origination Income, Change and Repair, and Denial Reserve, Employee Retention, Credit, and Consulting Income. Are those line items expected to continue?

Speaker Change: The description is that it includes.

Speaker Change: A whole variety of.

Speaker Change: I'll stop your 10-Q is not out but origination income change in repair and denial reserve employee retention credit consulting income on those line items expected to continue.

Speaker Change: Origination income will continue so what I'll call. It through there are mainly fees received from Redstone that was down.

Andrew Ahlborn: Origination income will continue, so what will flow through there are mainly fees received from Redstone. That was down slightly, down $2 million quarter over quarter, so that will be a continuous item. The repair and denial reserve relates to the reserve we put on the books on the guaranteed portion of 7A loans in the event that a loan goes delinquent, and we do have to repair the SBA for that default.

Speaker Change: Slightly down 2 million quarter over quarter, so that'll be a continuous item the repair and denial reserve relates to the reserve we put on the books on the guaranteed portion of seven loans.

Speaker Change:

Speaker Change: In the event that a loan goes delinquent and we do.

Speaker Change: You'll have to repair the SBA for that default it's.

Andrew Ahlborn: The reason it's there in the income line item is that when we purchase the business from CIT, there's a fairly large reserve put in there. I would expect that line item to get smaller over time. Employee retention credit income in that line item was down $27 million quarter over quarter, but it's now included $2.5 million in Q1. I would expect that to trend toward zero as we move throughout the rest of the year.

Speaker Change: It's there in the income line item is that when we purchased the visits from city. There is a fairly large reserve putting.

Speaker Change: I would expect that dollar that line item to get smaller over time employee retention credit income.

Speaker Change: In that line item was down $27 million per quarter now included two and a half million dollars in Q1, I would expect that to trend towards zero as we move throughout the other.

Andrew Ahlborn: Then the contingent equity right, which is the last remaining bucket that's flowing through there, will also fade away as we get to the end of the Mosaic transaction. The main item inside, other income, absent other things that come through the business in the future, really is going to be our origination income. Okay. That's great.

Speaker Change: Throughout the rest of the year and then the contingent equity right, which is sort of the last remaining bucket that's flowing through there.

Speaker Change: We'll also fade away as we get to the end of the Mosaiq transaction. So the main items inside.

Speaker Change: Other income absent other things that come through the business in the future really is going to be our origination income.

Speaker Change: Okay.

Jade Joseph Rahmani: OK, that's great. And then capital plans. Aside from a potential CLO, are you contemplating anything at this point? Oh, we are not. Okay, I thought there was a plan for some sort of unsecured debt or preferred. I guess the term loan was issued, and maybe that's what you were previously referring to. Yeah, with the execution of the

Speaker Change: That's great and then capital plans.

Speaker Change: Aside from a potential CLO are you contemplating anything at this point.

Speaker Change: Oh, we're not.

Speaker Change: Okay I thought there was a plan for some sort of.

Speaker Change: Unsecured debt or preferred I guess the term loan was issued then maybe that's what you were.

Speaker Change: So you're referring to.

Speaker Change: Yeah with the execution of the term loan the proceeds from.

Jade Joseph Rahmani: Yeah, with the execution of the term loan, the proceeds from the sale of the helper sale loans, as well as just the natural liquidity projections in the business, we're pretty well positioned for the immediate term. Obviously, as we move to the back half of the year, we will balance the opportunity set on the investment side with the opportunities for raising additional debt at that point. But in the short term. The liquidity forecast for the company is quite healthy.

Speaker Change: The sale of the held for sale loans.

Speaker Change: As well as just the natural liquidity projections from the business.

Speaker Change: Well, we're pretty well positioned for the immediate term I said it obviously as we move to the back half of the year we.

Speaker Change: We will balance.

Speaker Change: You know the opportunity set on the investment side with the the.

Speaker Change: <unk> for raising additional debt at that point, but in.

Speaker Change: The short term.

Speaker Change: The liquidity forecast for the company is quite healthy.

Speaker Change: Thanks, a lot.

Speaker Change: Hey, Chad.

Speaker Change: We have reached the end of the question and answer session I'd now like to turn the call back over to Tom capacity for closing comments.

Thomas Edward Capasse: We have reached the end of the question and answer session. I'd now like to turn the call back over to Tom Capasse for closing comments.

Thomas Edward Capasse: We appreciate everybody's time and look forward to the second quarter earnings call.

Thomas Edward Capasse: I appreciate everybody's time and look forward to the <unk> second quarter earnings call.

Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.

Speaker Change: This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.