Q2 2024 Arbor Realty Trust Inc Earnings Call

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Please standby your program is about to begin.

Unknown Executive: Please stand by; your program is about to begin. Good morning, ladies and gentlemen, and welcome to the second quarter 2024 Arbor Realty Trust earnings conference call.

Speaker Change: Good morning, ladies and gentlemen, and welcome to the second quarter 2020 for Arbor Realty Trust earnings Conference call.

Operator: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this period, you will need to press star 1 on your telephone. If you want to remove yourself from the queue, please press star 2. Please be advised that today's conference is being recorded. If you should need operator assistance, please press star zero. I would now like to turn the call over to your speaker today, Paul Elenio, Chief Financial Officer. Please go ahead.

Speaker Change: At this time all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session.

Speaker Change: To ask a question. During this period, you will need to press star one on your telephone.

If you want to remove yourself from the queue. Please press star two.

Please be advised that today's conference is being recorded.

If you should need operator assistance, Please press star zero.

Speaker Change: I would now like to turn the call over to your speaker today, Paul ill Lineout Chief Financial Officer. Please go ahead.

Paul Elenio: Thank you, Angela. Good morning, everyone, and welcome to the quarterly earnings call for Arbor Realty Trust. This morning, we'll discuss the results for the quarter ended June 30, 2024. With me on the call today is Ivan Kaufman, our President and Chief Executive Officer.

Speaker Change: Thank you Angela and good morning, everyone and welcome to the quarterly earnings calls of all the royalty Trust. This morning, we will discuss the results for the quarter ended June 32024.

With me on the call today is Ivan Kaufman, our President and Chief Executive Officer.

Paul Elenio: Before we begin, I need to inform you that statements made in this earnings call may be deemed forward-looking statements that are subject to risk and uncertainties, including information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans, and objectives. These statements are based on our beliefs, assumptions, and expectations of our future performance, taking into account the information currently available to us. Factors that could cause actual results to differ materially from Arbor's expectations in these forward-looking statements are detailed in our SEC reports.

Speaker Change: Before we begin I need to inform you that statements made in this earnings call maybe deemed forward looking statements that are subject to risks and uncertainties, including information about possible or assumed future results of our business financial condition liquidity results of operations plans and objectives. These statements are based on our beliefs assumptions and expectations.

Speaker Change: <unk> of our future performance taking into account the information currently available to us.

Doctors that could cause actual results to differ materially from arbor's expectations. In these forward looking statements are detailed in our SEC reports listeners are cautioned not to place undue reliance on these forward looking statements, which speak only as of today Arbor undertakes no obligation to publicly update or revise these forward looking statements to reflect events.

Paul Elenio: As a cautionary measure not to place undue reliance on these forward-looking statements, which speak only as of today. Arbor undertakes no obligation to publicly update or revise these forward-looking statements to reflect events or circumstances after today or the occurrence of unanticipated events. I'll now turn the call over to Arbor's President and CEO, Ivan Kaufman. Thank you.

Or circumstances after today or the occurrences of unanticipated events I'll now turn the call of August President and CEO Ivan Kaufman.

Ivan Kaufman: Thank you, Paul, and thanks to everyone for joining us on today's call. As you can see from this morning's press release, we had another strong quarter as we continue to effectively navigate this extremely challenging environment. As we discussed in the past, we started preparing for the cycle well over two years ago, and a plan to appropriately position the company to navigate through and succeed for our investors in this challenging market is being executed in line with our expectations.

Ivan Kaufman: Thank you Paul and thanks to everyone for joining us on today's call as you can see from this morning's press release, we had another strong quarter as we continue to effectively navigate.

Speaker Change: Through this extremely challenging environment.

Ivan Kaufman: As we discussed in the past we started preparing for this cycle well over two years ago, and a plan to appropriately position the company to navigate through and succeed for our investors in this challenging market is being executed in line with our expectations.

Ivan Kaufman: We have a diversified business model with many counter-cyclical income streams, are focused on the right asset class with the appropriate liability structures, and are well capitalized, which has allowed us to continue to outperform our peers in every major financial metric. Last quarter, we posted some compelling charts on our website demonstrating this outperformance. We updated these slides again this quarter, and we encourage you to review them as they clearly demonstrate that our total shareholder return, dividend growth, and book value appreciation over the last five years have outperformed everyone else in our peer group.

Speaker Change: We have a diversified business model with many countless cyclical income streams are focused on the right asset class with the appropriate liability structures and a well capitalized which has allowed us to Canadians continue to outperform our peers in every major financial metrics last quarter, we posted some compelling cha.

Speaker Change: It's on our website demonstrating this outperformance we updated these slides again this quarter and we encourage you to review them as they clearly demonstrate that our total shareholder return dividend growth and book value appreciation over the last five years.

Speaker Change: Outperforming every well else in our peer group in fact, most of our peers have cut their dividends substantially.

Ivan Kaufman: In fact, most of our peers have cut their dividends substantially, experienced significant book value erosion, and generated a negative total shareholder return over the last five years. Clearly, this is not the position we are in, and we have continued to demonstrate over a long period of time that we are a consistent outperformer and a leader in this space. As we have communicated, we expected the first two quarters of this year to be the most challenging part of the cycle, and we have also predicted this period of peak stress affecting the third and fourth quarters as well, if rates remain higher for longer.

Speaker Change: <unk> experienced significant book value erosion.

Speaker Change: And have generated a negative total shareholder return over the last five years.

Speaker Change: Clearly this is not the position we are in and we have continued to demonstrate over a long period of time that we are a consistent outperformer and a leader in this space.

Speaker Change: As we have communicated we expected the first two quarters of this year it could be the most challenging part of the cycle and we have also guided to this period of peak stress affecting the third and fourth quarters as well if rates remained higher for longer.

Ivan Kaufman: Even in the most stressful part of the cycle, we continue to post very strong operating results, which we'll discuss more in detail on today's call. We are aware of certain erroneous information in the marketplace, which has been driven by short reports and is inaccurate. While a performance in this quarter speaks for itself, we would be remiss if we didn't point out certain factual inaccuracies, as well as ill-informed and or inaccurate statements that are causing the most concern. First...

Speaker Change: Even in the most stressful part of the cycle. We continue to post very strong operating results, which we'll discuss more in detail on today's call.

Speaker Change: We are aware of certain erroneous information in the marketplace, which has been driven by schroll reports and as inaccurate.

Speaker Change: While our performance in this quarter speaks for itself, we would be remiss, if we didn't point out certain factual and accuracy as well as ill informed and door inaccurate statements about it.

Speaker Change: Causing the most concern.

Speaker Change: First yes.

Ivan Kaufman: There has been a swath of misinformation regarding one transaction in particular called the West Chase Portfolio. For example, misinformation started that the transaction should have been reported in the first quarter when, in fact, the transaction closed in the second quarter and was appropriately and timely reflected in the company's financials. We believe that the merits of this deal were in the ultimate interest of the shareholders. Specifically, we had a $100 million bridge loan collateralized by a portfolio of properties in Houston, Texas, in which the bar defaulted.

Speaker Change: It has been a swap there's misinformation regarding one transaction in particular.

Speaker Change: All the West Chase portfolio.

Speaker Change: For example, misinformation started that detect transaction should've been reported in the first quarter. When in fact that transaction closed in the second quarter and was appropriately and timely reflected in the company's financials.

Speaker Change: We believe that the merits of this deal where the ultimate interest of the shareholders. Specifically, we had $100 million bridge loan collateralized by a portfolio of properties in Houston, Texas, which the Bard defaulted.

Ivan Kaufman: We immediately exercised our right to foreclose on these assets as we believed that there was a value above the debt. We simultaneously sold them to a new entity, which was capitalized with $15 million of fresh equity and a $95 million bridge loan that sold for plus 300 base points that we provided of the $15 million of capital that was invested in the transaction. $6.25 million, or 40%, was funded by the Austin Walker Fund, which is a private minority-owned real estate fund focusing on affordable housing that we have a 49% non-controlling limited partnership interest in.

Speaker Change: We immediately exercised our right to foreclose on these assets as we believe that there was a value above the debt we simultaneously sold it to a new entity, which was capitalized with $15 million of fresh equity and a $95 million bridge loan at Solta, plus 300 basis.

Speaker Change: We provided.

Speaker Change: Of the $15 million of capital that was invested in the transaction.

Speaker Change: 625 million or 40% was funded by the Austin Walker Fund.

Speaker Change: Which is a private minority owned real estate fund focusing on affordable housing that we have a 49% Noncontrolling limited partnership interest in <unk>.

Ivan Kaufman: The rest of the capital came from two independent, separate investors, one of which is a borrower with whom we have a longstanding relationship and who has a tremendous amount of expertise in renovating these types of assets and maximizing their value. We believe the stabilized value of these assets to be around $128 million, which is well above the capital stack of this deal, and the deal has now been recapitalized with the appropriate reserves, giving us confidence that the new ownership group will be able to hit the targeted business plan over the next few years. Westchase is an upstanding transaction that fits what we want, which is to lend to affordable housing communities.

Speaker Change: The rest of the capital came from two independent separate investors one of which is a bar that we have a longstanding relationship which is a tremendous amount of expertise in renovating these type of assets and maximizing their value.

Speaker Change: We believe the stabilized value of these assets to be around $128 million.

Speaker Change: Which is well above the capital stack of this deal and the deal has now been recapitalized with the appropriate reserves, giving us confidence that the new ownership group will be able to hit the targeted business plan over the next few years.

Speaker Change: West Chase is an outstanding transaction that fits what we want which is lend to affordable housing communities. We believe this transaction is a very effective workout with sound economics, and consistent with our values, yes, the short sellers.

Ivan Kaufman: We believe this transaction is a very effective workout with sound economics. Consistent with our values, yet the short sellers have levied what we believe are baseless criticisms about this transaction. Again, we are extremely pleased with the results of this transaction and the benefit it presents for our stakeholders. We continue to do an effective job of managing through our loan book, and this transaction represents management's capabilities in taking back an asset and replacing it with new sponsorship and having it appropriately recapitalized. Certain misinformation has been spread about the redemption of one of our CLOs.

Speaker Change: Levied what we believe are baseless criticisms about this transaction.

Speaker Change: Again, we are extremely pleased with the results of this transaction and the benefit of presents for our share of our stakeholders.

Speaker Change: We continue to do an effective job managing through our loan book and this transaction represents managements capabilities.

Speaker Change: Bakken asset and replacing it with new sponsorship and having it appropriately recapitalized.

Speaker Change: Second certain misinformation has been spread about the redemption of one of our CLO.

Ivan Kaufman: We have been a top issuer of CLOs for over 20 years, never once losing a single dollar of principal for our investors, even during the historic financial crisis. We are experts in managing these vehicles and have issued and repaid many of them, returning all invested capital to our bondholders. We called the CLO on June 17th in the ordinary course of business, and in doing so, we turned the principal investments of each bondholder in full, drove outsized returns on our capital, and maximized returns to our shareholders.

Speaker Change: We have been a TARP issuer of CLO for over 20 years never once losing a single dollar of principal for our investors.

Speaker Change: Even through the historic financial crisis.

Speaker Change: We are experts in managing these vehicles and have issued and repaid many vehicles returning all invested capital to our bondholders.

Speaker Change: We call the CLO on June 17 in the ordinary course of business and then sold in doing so we turned to principal investments of each bond hold that in full drove outsized returns on our capital and maximize returns to our shareholders.

Ivan Kaufman: Additionally, the Shaw reports have also stated that we did not give proper notice to our bondholders prior to the redemption or timely file the appropriate SEC forms out for the redemption, and that we committed securities fraud. The rules are very clear.

Speaker Change: Additionally, the short reports have also stated that we did not give proper notice top bondholders prior to the redemption with timely file the appropriate SEC forms out for the redemption and that we committed securities fraud.

Speaker Change: The rules are very clear we are required to give notice to our bondholders 10 days prior to the retention, which we did formerly food the trustee on May 31, and.

Ivan Kaufman: We are required to give notice to our bondholders 10 days prior to the redemption, which we did formally through the trustee on May 31st. And we are required to file an SEC form on the redemption 45 days after the quarter in which the redemption occurred, which is, in this case, not until August 14th. We have collapsed and redeemed over a dozen CLOs in the past 10 years, each time giving the proper amount of notice and filing all SEC-required documents in a timely manner.

Speaker Change: And we are required to file an SEC form on the redemption 45 days after the quarter in which the redemption occurred which is in this case not until August 14.

Speaker Change: Have collapsed and redeem over a dozen cielo has in the past 10 years and each time, giving the proper amount of notice and filing all FCC required documents in a timely manner.

Speaker Change: Third.

Ivan Kaufman: We have been criticized for how we've been managing our book, our loan book, in this distressed environment when, in fact, the company has done a very effective job of maximizing return to our shareholders, which is again evidenced in the numbers that we have reported. This quarter, we successfully modified another $730 million of loans, with $23 million of fresh capital being injected into these deals from the sponsors. This includes cash-to-purchase no-interest rate caps.

Speaker Change: We have been criticized for how we've been managing our book our loan book in this distressed environment. When in fact, the company has done a very effective job in maximizing returns to our shareholders, which again are evidenced in the numbers that we've reported.

Speaker Change: This quarter, we successfully modified nevertheless, the $730 million of loans.

Speaker Change: With $23 million of fresh capital being injected into these deals from the sponsors.

Speaker Change: This includes cash to purchase new interest rate caps.

Ivan Kaufman: Fund Interest and Renovation Reserves, bring past due interest current, and pay down loan balances where appropriate. We also continue to make progress on approximately $1 billion of loans that are past due by either modifying these loans, foreclosing on them and taking them into REO, or bringing in new sponsorship either consensually or simultaneously with the foreclosure. In addition, we had an extremely successful quarter given the recent decline in interest rates by generating $630 million in payoffs, with $490 million of these loans being refinanced into fixed-rate agency deals.

Speaker Change: The interest in renovation reserves.

Speaker Change: During past due interest current and paid down loan balances where appropriate.

Speaker Change: We also continue to make progress on approximately 1 billion of loans that are past due by either modifying these loans.

Speaker Change: For clothing, and taking them into Oreo, while bringing in new sponsorship either consensually or simultaneously with the foreclosure.

Speaker Change: In addition, we had an extremely successful quarter given the recent decline in interest rates by generating $630 million of payoffs with $490 million of these loans being refinanced into fixed rate agency deals.

Ivan Kaufman: And as I've said in the past, if interest rates go below 4%, obviously, as they have done in the last week or so, we expect that this will become more meaningful to our business. Despite these facts, Arbor has been subject to repeated attacks in the reports generated by short sellers, and we expect these attacks will continue. The best response to these attacks, which we believe are unfair and unjustified, are our financial results and our earnings called here today.

Speaker Change: And as I've said in the past if interest rates go below 4%.

Speaker Change: <unk> done in the last week or so we expect that this will become more meaningful to our business.

Speaker Change: Despite these facts Abra has been subject to repeated attacks in our reports generated by short sellers and we expect these attacks will continue.

Speaker Change: The best response to these attacks and which we believe are unfair and unjustified or our financial results and our earnings call here today.

Ivan Kaufman: It has also been widely reported that in the wake of these attacks, over an 18-month period, Arbor has received requests for information from government agencies, including the Department of Justice. Arbor consistently has cooperated with and will continue to cooperate with any such requests. Likewise, it is our policy not to comment on any such inquiries.

Speaker Change: It has also been widely reported that in the wake of these attacks over an 18 month period Abra has received request for information from government agencies, including the department of Justice.

Speaker Change: <unk> consistently has cooperated and will continue to comp rate with any such requests. Likewise. It is our policy not to comment on any such inquiries.

Ivan Kaufman: That said, I would like to provide more detail about some additional results that have resulted from our execution of strategies to manage the business through an environment that poses market-wide challenges. One of the items I touched on earlier is how important having adequate liquidity and appropriate debt instruments are to your success in these types of markets. As a result, we have focused heavily on maintaining a strong liquidity position. Currently, we have approximately $700 million of liquidity between around $700 million in corporate cash and $200 million of cash in our CLOs, which results in an additional cash equivalent of approximately $50 million.

Speaker Change: That said I would like to provide more detail about some additional results that are resulting from our execution of strategies to manage the business.

Speaker Change: In an environment that poses market wide challenges.

Speaker Change: One of the items I touched on earlier is how important having abbott with adequate liquidity and appropriate debt instruments or to your success in these types of markets.

Speaker Change: As a result, we have focused heavily on maintaining a strong liquidity position.

Speaker Change: Currently we have approximately 700 million of liquidity between around $700 million of corporate cash and 200 million of cash now close.

Speaker Change: That results in additional cash equivalent of approximately $50 million.

Ivan Kaufman: And having this level of liquidity is crucial in this environment as it provides us with the flexibility needed to manage through the rest of the downturn and to take advantage of opportunities that will exist in this market to generate superior returns on our capital. We also continue to do an excellent job of deleveraging our balance sheet and reducing our exposure to short-term bank debt. We are down to approximately $2.8 billion in outstandings with our commercial banks from a peak of approximately $4.2 billion, and we have 67% of our secured indebtedness in non-mark-to-market, non-recourse, low-cost CLO vehicles.

Speaker Change: And having this level of liquidity is crucial in this environment as it provides us the flexibility needed to manage through the rest of the downturn and to take advantage of opportunities that will exist in this market to generate superior returns on our capital.

Speaker Change: We also continued to do an excellent job and deleveraging our balance sheet and reduce our exposure to short term bank debt. We are down to approximately $2 8 billion in outstanding commercial banks from a peak of approximately $4 2 billion and we have 67% of our secured indebtedness and non mark to market nonrecourse.

Speaker Change: Costs low cost CLO vehicles.

Ivan Kaufman: Our sale of vehicles is a major part of our business strategy as they provide us with a tremendous strategic advantage in times of distress and dislocation due to the nature of their non-mark-to-market, non-recourse elements. In addition, they contribute significantly to providing a lower cost alternative to warehousing banks, which in times like this have fluctuating pricing and leverage point parameters. In fact, one of the significant drivers of our income strains is our low-cost CLO vehicles, as well as the fixed-rate debt and equity instruments that make up a big part of our capital structure.

Speaker Change: Yellow vehicles on a major part of our business strategy as they provide us with a tremendous strategic advantage in times of distress and dislocation due to the nature of their non mark to market nonrecourse elements and.

Speaker Change: In addition, they contribute significantly to providing a low cost alternative to warehousing banks, which in times like this have fluctuating pricing leverage point parameters. In fact, one of the significant drivers of our income streams and our low cost CLO vehicles, as well as a fixed rate debt and equity instruments.

Speaker Change: That make up a big part of our capital structure.

Ivan Kaufman: We're very strategic in our approach to capitalizing our business with a substantial amount of low cost, low, long-term, long-dated funding sources, which has allowed us to continue to generate outsized returns on our capital. Another major component of our unique business model is our significant agency platform, which offers a premium value as it requires limited capital and generates significant, long-dated, predictable income streams and produces considerable annual cash flow. In the second quarter, we had a strong origination of $1.1 billion despite elevated rates for most of the quarter.

Rob: We're very strategic and Rob poach to capitalizing our business with a substantial.

Rob: So amount of low cost low long term, David long dated fund funding sources, which has allowed us to continue to generate outsized returns on our capital.

Rob: Another major component of our unique business model is a significant agency platform, which also has a premium value as it requires limited capital and generate significant long dated predictable income streams and produces considerable annual cash flow.

Rob: In the second quarter, we had a strong originations of $1 1 billion despite elevated rates for most of the quarter.

Ivan Kaufman: The recent drop in the 10-year and the 5-year, combined with tighter spreads, has allowed us to continue to build a strong pipeline of future agency deals, giving us confidence in our ability to grow our agency volumes going forward. We've also done a great job of converting our balance sheet loans into agency products, which has always been one of our key strategic initiatives and a significant differentiator from our peers. And it's also very important to emphasize that a significant portion of our business is in the workforce housing part of the marketplace.

Speaker Change: The recent drop in the tenure in our five year combined with tighter spreads has allowed us to continue to build a strong pipeline of future agency deals, giving us confidence in our ability to grow our agency volumes going forward.

Speaker Change: We've also done a great job in converting our balance sheet loans into agency product, which has always been one of our key strategic and a significant differentiator from our peers.

Speaker Change: And there is also very important to emphasize that a significant portion of our business is in the workforce housing part of the marketplace.

Ivan Kaufman: As we all know, Fannie and Freddie have a very specific mandate to address the workforce affordable housing needs, which is a major issue in the United States, making Arbor a great partner that continues to fulfill a very important mandate for the federal agencies as well as social needs of society.

Rob: As we all know Fannie and Freddie have a very specific mandate to address the workforce affordable housing needs, which is a major issue in the United States, making over a great partner that contingent continues to fulfill a very important mandate for the federal agencies as well as the social needs for.

Rob: Hey.

Ivan Kaufman: Our fee-based servicing portfolio, which grew another 3% this quarter and 12% year-over-year to $32.3 billion, generates approximately $124 million a year in reoccurring cash flow. We also generate significant earnings on our resco and cash balances, which act as a natural hedge against interest rates. In fact, we are earning 5% on around $2.4 billion of balances, or roughly $120 million annually, which, combined with our service and income annuity, totals $245 million of annual gross cash earnings, or $1.20 a share.

Speaker Change: Our fee based servicing portfolio, which grew another 3% this quarter and 12% year over year to $32 3 billion generates approximately $124 million a year and reoccurring cash flow.

Speaker Change: We also generate significant earnings on a risk on cash balances, which act as a natural hedge against interest rates.

Speaker Change: In fact, we're earning 5% on around $2 4 billion of balances or roughly $120 million annually, which combined with our servicing income annuity total is $245 million of annual arent at a annual gross cash earnings or $1 20, a share.

Ivan Kaufman: This is in addition to the strong gain on sale margins we generate from our originations platform. And it is extremely important to emphasize that an agency business generates 45% of our net revenues, the vast majority of which occurs before we even open our doors each day. This is completely unique to our platform.

Speaker Change: This is in addition to the strong gain on sale margins, we generate from our origination platform.

Speaker Change: And it is extremely important to emphasize that the agency had been.

Speaker Change: This generates 45% of our net revenues the vast majority of which occurred just before we even opened our doors each day.

Rob: This is completely unique to our platform.

Ivan Kaufman: In our single-family rental business, we continue to be the leader of choice in the premier market we traffic in. We had another strong quarter with $185 million of funding and another $280 million of combined signed-up commitment. We have a large pipeline and remain committed to this business, and it offers us returns on our capital through construction, bridge, and permanent lending opportunities and generates strong levy returns in the short term while providing significant long-term benefits by further diversifying our income streams.

Rob: In our single family rental business, we continue to be the leader of choice in the premium market we traffic in.

Rob: We had another strong quarter with $185 million of fundings and another $280 million of combined signed up commitments.

Rob: We have a large pipeline and remain committed to this business and it offers us returns on our capital through construction bridge and permanent lending opportunities and generate strong levered returns in the short term, while providing significant long term benefits by further diversifying our income streams.

Ivan Kaufman: We're also seeing steady progress in our newly added construction lending business. This is a business we believe can produce very accretive returns on our capital by generating 10 to 12% unlevered returns initially and eventually mid to high retained returns on our capital once we leverage this business. We continue to see a nice increase in our portfolio of potential deals with roughly $250 million under application, another $250 million in LOIs outstanding, and $850 million of additional deals we are currently screening.

Rob: We're also seeing steady progress in our newly added construction lending business. This is a business. We believe can produce very accretive returns on our capital by generating 10% to 12% Unlevered returns initially and eventually mid to high teens returns on that capital once we leverage this.

Rob: Business.

Rob: We continue to see a nice increase in our portfolio of potential deals with roughly $250 million under application another $2 $50 million to $250 million in LOI is outstanding.

Rob: <unk> outstanding and $850 million of additional deals we are currently screening.

Ivan Kaufman: We believe this product is very appropriate for our platform, as it offers us free turns on our capital through construction, bridge, and permanent agency lending opportunities. In summary, we had another very productive quarter and are working exceptionally hard to manage through the teeth of this dislocation. We feel we have done an excellent job working through our loan book and in getting borrowers to recapitalize their deals with fresh equity, as well as bringing in quality sponsors to manage underperforming assets and working through our non-performing loans.

Rob: We believe this product is very appropriate for our platform.

Rob: As it offers us returns on our capital, who construction bridge and permanent agency lending opportunities.

Rob: In summary, we had another very productive quarter and are working exceptionally hard to manage through the teeth of this dislocation.

Rob: We feel we have done an excellent job in working through our loan book and then getting borrowers to recap did deals with fresh equity as well as bringing in quality sponsors to manage underperforming assets and working through our nonperforming loans.

Ivan Kaufman: We understand very well the challenges that lie ahead and feel we are well positioned. We have a diversified business model; we are invested in the right asset class with a very stable liability structure. We're also well-capitalized and have a best-in-class asset management function and a seasoned executive team, giving us confidence in our ability to navigate through this distressed environment. And despite the misinformation circulated in the marketplace about our business strategies, we continue to reiterate that we stand by our financials and our disclosures, and we have always conducted our business operations and practices in the best interests of our shareholders. I will now turn the call over to Paul to take you through the financial results.

Rob: We understand very well the challenges that lie ahead.

Rob: We are well positioned.

Rob: We have a diversified business model, we are invested in the REIT asset class with very stable liability structures.

Rob: We're also well capitalized and have the best in class asset management function and season as a seasoned executive team.

Rob: Giving us confidence in our ability to navigate through this distressed environment.

Rob: And despite the misinformation circulated in the marketplace that our business strategies, we continue to reiterate that we stand by our financials and our disclosures and we've always conducted our business operations and practices in the best interest of our shareholders I will now turn the call over to Paul to take.

Paul: You through the financial results.

Paul Elenio: Okay, thank you, Ivan. We had another strong quarter producing distributable earnings of $91.6 million or $0.45 per share, which translated into ROEs of approximately 14% for the second quarter. As Ivan mentioned, we successfully modified 28 loans in the second quarter, totaling $733 million. On approximately $398 million of these loans, we required borrowers to invest additional capital to recapitalize their deals, with us providing some form of temporary rate relief through a pay and accrual feature. Pay rates were modified on average to approximately 7.18%.

Paul: Okay. Thank you Ivan we had another strong quarter, producing distributable earnings of $91 6 million or <unk> 45 per share, which translated into <unk> of approximately 14% for the second quarter as Ivan mentioned, we successfully modified 28 loans in the second quarter totaled totaling $733 million on.

Rob: $398 million of these loans, we required borrowers to invest additional capital to recap their deals.

Rob: Thus, providing some form of temporary rate relief through a pay in a cool feature pay rates were modified on average to approximately 718% with $2 one 4% of the residual interest due being deferred until maturity of 155 million of these loans were delinquent last quarter and are now current in accordance with their modified.

Paul Elenio: 2.14% of the residual interest due is being deferred until maturity. 155 million of these loans were delinquent last quarter and are now current in accordance with their modified term. Our total delinquencies were $1.05 billion on June 30th compared to $954 million on March 31st. These delinquencies are made up of two buckets: loans that are greater than 60 days past due and loans that are less than 60 days past due that we are not recording interest income on unless we believe the cash will be received.

Rob: Terms.

Rob: Our total delinquencies were 1.15 billion at June 30, compared to 954 million at March 31.

Rob: These delinquencies are made up of two buckets loans that are greater than 60 days past due and loans that are less than 60 days past due that we are not recording interest income on unless we believe the cash will be received the.

Rob: 60, plus day delinquent loans, our nonperforming loans were approximately $667 million this quarter compared to $465 million last quarter due to <unk> approximately $264 million of loans progressing from less than 60 days delinquent to greater than 60 days past due.

Paul Elenio: The 60 plus day delinquent loans or non-performing loans were approximately $667 million this quarter compared to $465 million last quarter due to approximately $264 million of loans progressing from less than 60 days delinquent to greater than 60 days past due, a $9 million loan that went non-performing this quarter, which was partially offset by $62 million of loans being modified in the second quarter that are now performing. The second bucket, consisting of loans that are less than 60 days past due, came down to $368 million this quarter from $489 million last quarter, mostly due to $264 million of loans that progressed to non-performing and $138 million of loans being modified or that paid off during the quarter, which was partially offset by approximately $281 million of new loans this quarter that we did not accrue interest on. And while we expect to continue to make progress in resolving these delinquencies, at the same time, we do anticipate that there will be some new delinquencies in this environment.

Rob: $9 million loan that went nonperforming this quarter, which was partially offset by 62 million of loans being modified in the second quarter that on outperforming the second bucket consisting of loans that are less than 60 days past due came down to $368 million this quarter from $489 million last quarter most.

Rob: Due to 264 million of loans that progressed to nonperforming and 138 million of loans being modified or that paid off during the quarter, which was partially offset by approximately $281 million of new loans. This quarter that we did not accrue interest on.

Rob: And while we expect to continue to make progress in resolving these delinquencies at the same time, we do.

Rob: We anticipate that will there'll be some new delinquencies in this environment.

Paul Elenio: We're currently working through a number of these loans that we expect to resolve by taking back the properties and then working to improve these REO assets to create more of a current income stream. This could take 60 to 120 days, which will likely result in a low watermark for net interest income over the next couple of quarters until we have worked through this portfolio. This is what we expected and is consistent with our previous guidance that this would be the period of peak stress and the bottom of the cycle.

Rob: We're currently working through a number of these loans that we expect to resolve by taking back the properties and then working to improve these oreo assets to create more of a current income stream. This could take 60 to 120 days, which will likely result in a low watermark for net interest income over the next couple of quarters until we have worked through this.

Rob: Leo.

Leo: This is what we expected and is consistent with our previous guidance that this would be the period of peak stress in the bottom of the cycle.

Paul Elenio: We also continue to build our CECL reserves, given the difficult market backdrop, recording an additional $29 million on our balance sheet loan book in the second quarter. Seven and a half million were specific reserves we took on assets this quarter, with a balance in additional general reserves. The increase in general reserves from previous quarters was mainly due to changes in the assumptions in our models on real estate values given the challenging environment.

Rob: We also continued to build our seasonal reserves given the difficult market backdrop recording an additional $29 million on our balance sheet loan book in the second quarter $7 5 million were specific reserves. We took on assets this quarter with a balance and additional general reserves. The increase in general reserves from previous quarters was mainly due to change.

Rob: And the assumptions in our models on real estate values, given the challenging environment.

Paul Elenio: We feel it is very important to emphasize that despite booking approximately $145 million in CECL reserves across our platform in the last 18 months, $117 million of which was in our balance sheet business, we were still able to maintain our book value. This performance is well above our peers, the vast majority of which have experienced significant book value erosion in this market. Additionally, we're one of the only companies in our space that has seen significant book value appreciation over the last five years, with 30% growth during that time period versus our peers, whose book values have declined an average of approximately 20% in that timeframe.

Rob: We feel it is very important to emphasize that despite booking approximately $145 million in seasonal reserves across our platform in the last 18 months.

Rob: $17 million of which was in our balance sheet business, we still were able to maintain our book value. This performance is well above our peers. The vast majority of which have experienced significant book value erosion. In this market. Additionally, we were one of the only companies in our space that has seen significant book value appreciation over the last five years.

Rob: With 30% growth during that time period versus our peers, whose book values have declined an average of approximately 20% in that timeframe.

Paul Elenio: As discussed, as Ivan discussed earlier, we're pleased with the success we are having in working through our balance sheet loan book and in resolving our delinquencies. As we've stated many times, we have several recourse provisions in our loan documents that lend value to the resolution process. Last quarter, we realized a $1.6 million loss on an $11.3 million loan that was paid off at a discount. We immediately pursued one of our recourse provisions and are pleased to report that we received a $900,000 settlement payment in the second quarter related to this loan. We also had a very successful resolution on a legacy REO office property that we foreclosed on back in the fourth quarter of 2021.

Rob: As discussed as Ivan discussed earlier, we're pleased with the success, we are having in working through our balance sheet loan book and our resolving our delinquencies as we've stated many times we have several recourse provisions in our loan documents that lend value to the resolution process last quarter, we realized a $1 $6 million loss on alert.

Rob: One $3 million loan that paid off at a discount we immediately pursued one of our recourse provisions and I'm pleased to report that we received a 900000 hour settlement payment in the second quarter related to this loan. We also had a very successful resolution on our legacy Oreo office property that we foreclosed on back in the fourth quarter of 2020.

Paul Elenio: Through a lengthy marketing process, we were able to sell this asset above its carrying value, resulting in a second quarter gain of $3.8 million. In our agency business, we had a strong second quarter with $1.1 billion in originations and loan sales. However, the margins on our loan sales were flat at 1.54% for both the first and second quarters.

Rob: One two or Leslie marketing process, we were able to sell this asset above our carrying value, resulting in a second quarter gain of $3 8 million.

Rob: In our agency business, we had a strong second quarter with $1 1 billion originations and loan sales the margins on our loan sales was flat at 154% for both the first and second quarters. We also recorded a $14 5 million of mortgage servicing rights income related to $1 1 billion of committed loans in the second quarter.

Paul Elenio: We also recorded $14.5 million of mortgage servicing rights income related to $1.1 billion of committed loans in the second quarter, representing an average MSR rate of around 1.32%, which was also flat compared to last quarter. Our fee-based servicing portfolio also grew to approximately $32.3 billion on June 30th with a weighted average servicing fee of 38 basis points and an estimated remaining life of 7.5 years. This portfolio will continue to generate a predictable annuity income going forward of around $124 million gross annually. And this income stream, combined with our earnings on escrows and gain on sale margins, represented 45% of our net revenues for the quarter.

Rob: Ping, an average MSR rate of around 132%, which was also flat compared to last quarter.

Rob: Our fee based servicing portfolio also grew to approximately $32 3 billion at June 30, with a weighted average servicing fee of 38 basis points and an estimated remaining life of seven and a half years. This portfolio will continue to generate a predictable annuity of income going forward of around $124 million gross annually.

Rob: And this income stream combined with our earnings on escrow and gain on sale margins represented 45% of our net revenues for the quarter.

Paul Elenio: Our balance sheet lending operation, our $11.9 billion investment portfolio, had an all-in yield of 8.60% at June 30th compared to 8.81% at March 31st due to a combination of an increase in non-performing loans and some new loans that we did not make their full payment on, that we did not accrue interest on, which was partially offset by modifications in the second quarter on some of our previously delinquent loans. The average balance in our core investments was $12.2 billion this quarter compared to $12.5 billion last quarter due to runoff exceeding originations in the first and second quarter.

Rob: Our balance sheet lending operation are $11 9 billion investment portfolio had an all in yield of eight 6% at June 30, compared to $8 eight 1% at March 31, due to a combination of an increase in nonperforming loans and some new loans that we did not make their full payment that we did not accrue interest on which was partially.

Rob: Really offset by modifications in the second quarter on some of our previously delinquent loans.

Rob: The average balance in our core investments was $12 $2 billion this quarter compared to $12 5 billion last quarter due to run off exceeding originations in the first and second quarter. The average yield on these assets decreased to 9% from 944% last quarter due to substantially more modifications in the first quarter.

Paul Elenio: The average yield on these assets decreased to 9% from 9.44% last quarter due to substantially more modifications in the first quarter resulting in the collection of a significant amount of back interest owed combined with an increase in non-performing loans and some new non-accrual. Total debt on our core assets decreased to approximately $10.3 billion on June 30th from $11.1 billion on March 31st, mostly due to the unwind of CLO 15 and the pay down of other The all-in cost of debt was up to approximately 7.53% at $630 versus 7.44% at $331.

Rob: <unk> and the collection of a significant amount of back interest owed combined with an increase in nonperforming loans and some new non accrual loans in the second quarter.

Rob: Total debt on our core assets decreased to approximately $10 3 billion at June 30th from $11 1 billion at March 31.

Rob: Mostly due to the unwind of CLO <unk> and the pay down of other CLO debt with cash in those vehicles in the second quarter.

Rob: The all in cost of debt was up to approximately 753% at 630 versus 744% at $3 31.

Paul Elenio: The average balance on our debt facilities was approximately $10.8 billion for the first quarter compared to $11.4 billion for the last quarter. The average cost of funds on our debt facilities was up slightly, 7.54% for the second quarter compared to 7.50% for the first quarter. Our overall net interest spreads in our core assets decreased to 1.46% this quarter compared to 1.94% last quarter, again due to a significant amount of back interest collected in the first quarter for modification, and our overall spot net interest spreads were down to 1.07% on June 30th to 1.37% on March 31st, mostly due to an increase in non-performing and non-accrued loans during the quarter.

Rob: Average balance on our debt facilities was approximately $10 8 billion for the first quarter compared to $11 4 billion last quarter. The average cost of funds on our debt facility was up slightly 754% for the second quarter compared to seven 5% for the first quarter. Our overall net interest spreads on our core assets decreased to $1.

Rob: Four 6% this quarter compared to 194% last quarter again from a significant amount of back interest collected in the first quarter for modifications and our overall spot net interest spreads were down to one 7% at June 30th for 137% at March 31, mostly due to an IND.

Kris: Kris and nonperforming and non accrued loans during the quarter.

Paul Elenio: Lastly, as we continue to shrink our balance sheet loan book, we have delevered our business 25% over the last 18 months to a leverage ratio of 3 to 1 from a peak of around 4 to 1. Equally important, our leverage consists of around 67% non-recourse, non-mark-to-market CLO debt with pricing that is below the current market, providing strong levered returns on our capital. That completes our prepared remarks for this morning, and I'll now turn it back to the operator to take any questions you guys may have at this time. Angela. Thank you.

Kris: Lastly, as we continue to shrink our balance sheet loan book, we have de Levered, our business, 25% over the last 18 months to a leverage ratio of three to one from a peak of around 401 equally as important our leverage consistent around 67% nonrecourse non mark to market CLO debt with <unk>.

Kris: <unk> that is below the current market, providing strong levered returns on our capital.

Kris: That completes our prepared remarks for this morning, and I'll now turn it back to the operator to take any questions. You guys may have at this time Angela.

Operator: As a reminder, to ask a question, please press star 1 on your telephone. To withdraw your question, press star 2. So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. We'll take our first question from Steve DeLaney on Citizens JMP. Please go ahead. Thank you.

Angela: Thank you as a reminder to ask a question. Please press star one on your telephone.

Angela: To withdraw your question press Star two.

Speaker Change: Others can hear your questions clearly, we ask that you pick up your handset for best sound quality.

Speaker Change: We will take our first question from Steve Delaney with citizens JMP. Please go ahead.

Steven DeLaney: Thank you. Good morning, Ivan and Paul.

Steve DeLaney: Thank you good morning, Ivan and Paul Congratulations on a solid performance in this difficult market.

Ivan Kaufman: Congratulations on a solid performance in this difficult market. One of the things we noticed, obviously, you're very active in modifying loans, the 60-day or less bucket. We did note that the number of loans and the dollar amount declined. You know the figures, but in the second quarter 2Q, fewer loans were to modify than in the first Q. Looking at the modifications, which I guess so far this year, 67 modifications, and two and a half billion dollars in loans.

Speaker Change: The things we noticed obviously, you're very active on modified loans.

Speaker Change: The 60 day or less bucket.

Speaker Change: We did note that that number of loans and the dollar amount declined.

Speaker Change: You know the figures, but in the quarter. Thank you.

Speaker Change: Loans to modify and in the first Q.

Speaker Change: Looking at the modifications, which I guess, so far this year 67 modifications.

Speaker Change: $2 5 billion of loans.

Ivan Kaufman: When we were looking at taking that data and then looking at the MPLs, which increased slightly in the second quarter, the 24 loans and 676 million. The question is, in terms of your process, is it still once you classify a loan as an MPL, are you still actively working to modify that? and get it back in its current state? Or once they go to NPL, is there a much higher probability that it might end up in REO? Thanks.

Speaker Change: Looking at taking that data and then looking at the Mpls.

Speaker Change: Which increased slightly in the second quarter with 24 loans and $676 million the.

Speaker Change: The question is this in terms of your process.

Speaker Change: Is it still once you classified loan as an NPL.

Speaker Change: Are you still actively working.

Speaker Change: Would you modify that London.

Speaker Change: Is it back in a current state or once they go to NPL is there a much higher probability that it might end up in <unk>.

Speaker Change: Thanks.

Ivan Kaufman: Thanks, Steve. Let me give you a little overall view of the process. You know, we're talking about an overall number of about a billion dollars, give or take, you know, give or take. And we believe we're pretty much in the peak, you know, part of the cycle with the most risks.

Speaker Change: Thanks, Steve Let me give you a little overall view of of of the <unk>.

Speaker Change: Process.

Speaker Change: Talking about an overall number of about $1 billion give or take.

Speaker Change: Give or take.

Speaker Change: We believe we're pretty much in the peak.

Speaker Change: Part of the cycle.

Ivan Kaufman: And as you know, the billion dollars has a negative effect on our financial performance, which is factored in because we're not accounting for the income from that. So, you know, it's really incumbent on us to give you a good view of how that billion dollars is going to fall through the system. I'm pretty involved in this stuff. So, you know, we look at it this way.

Speaker Change: With the most stress and as you know.

Speaker Change: The $1 billion has a negative effect.

Speaker Change: On our financial performance, which is factored in because we're not accounting for the income on that so.

Speaker Change: It's really incumbent on us to give you a good view of how that $1 billion.

Speaker Change: Through the system.

Speaker Change: Pretty involved in this stuff. So we look at it this way of the $1 billion we estimate.

Ivan Kaufman: Of the billion dollars we estimate, about 30% of it will go REO. That's the toughest part of it. Those are usual ones that are not consensual.

Speaker Change: About 30% of it will go Oreo that's the toughest part of it those usual ones that are not consensual.

Speaker Change: A bit of time.

Speaker Change: And.

Ivan Kaufman: They take a bit of time. And, you know, they're non-income producing for us for that period of time. And it could take anywhere from, you know, three months to a year, depending on the jurisdiction. And then we get into those assets and bring them up to speed, and then get them cash flow and sell them. So that's the stickiest part.

Speaker Change: Non income producing for us for that period of time and it could take anywhere from.

Speaker Change: Three months to a year, depending on the jurisdiction and then us getting into those assets and bringing them up to speed and then getting them cash flow and selling them. So that's the stickiest part.

Ivan Kaufman: There's about another 10 or 15% of that that we're working with the existing sponsors to bring in new sponsorship, and we believe that over a period of three to six months, those assets will have new buyers in them. And we estimate that, you know, just to be conservative, it'll flow off about a 6% return once that's done. In that billion dollars, we estimate it's going to be about 40% of payoffs, just because the assets are being sold. It's just a normal process. And then the other 40% are in the process of being modified. Mods take time.

Speaker Change: Theres about another 10 or 15% of that that we're working with the existing sponsors to bring a new sponsorship and.

Speaker Change: And we believe that over a period of us three to six months that those those assets will have new buyers in them and we estimate that.

Speaker Change: Just to be conservative it'll fall off about a 6% return once that's done.

Speaker Change: And that $1 billion, we estimate there's going to be about 20% of pay offs. This because the assets are being sold.

Speaker Change: It's just the normal process and then the other 40% are in the process of being Martin.

Speaker Change: Months' take time and a big part of what we do is we proceed to foreclosure when loans are paying and.

Ivan Kaufman: And a big part of what we do is proceed to foreclosure when a loan is not paid. And that path to foreclosure usually leads to a very effective process of getting modified. So we would estimate that that's the part that gets moved through the system the quickest.

Speaker Change: That path to a foreclosure.

Speaker Change: It leads to a very effective process of getting moderate so we would estimate that that's the part that gets moved through the system the quickest and.

Speaker Change: Generally the average time is probably 90 days and then it returns to an interest earning asset and we use about a 7% rate on that.

Ivan Kaufman: And generally, the average time is probably 90 days. And then it returns to an interest-earning asset. And we use about a 7% rate on that. So we're in the thick of it. It's about a billion.

Speaker Change: So we're in the thick of it it's about $1 billion, we expect to get it through the system there'll be some new ones coming in.

Ivan Kaufman: We expect to get it through the system. There'll be some new ones coming in, but that's what we're expecting. You know, clearly, this drop in interest rates is extremely favorable for the company and its business model, as it will stimulate, you know, more multifamily sales, and people will be able to buy these assets, which are more, you know, more affordable.

Speaker Change: But thats what were expecting.

Speaker Change: Clearly this drop in interest rates is extremely favorable for the company and its business model.

Speaker Change: It will stimulate more multifamily sales.

Speaker Change: And people will be able to buy these assets, which more and more affordable financing.

Ivan Kaufman: Well, what I heard you say there, Ivan, is that because something is currently classified. Yeah, I'm thinking about 40% of them based on, you know, me, based on what I see in the portfolio. I'm pretty intimate with the asset management group and the progress they're making. You know, it takes time for a lot of these borrowers to find the capital and get these things brought up to speed. So that would be the approximate number I would be using to get it modified, right and the 30% to REO.

Speaker Change: Got it well what I heard you say their iden.

Speaker Change: Something is currently classified as an NPL there is still a possibility.

Speaker Change: Loans could be modified.

Speaker Change: I hear you correct, yes, im thinking about 40% of them based on.

Speaker Change: Based on what I see in our portfolio I'm pretty intimate with it.

Speaker Change: Asset management and the progress they are making.

Speaker Change: It takes time for these borrowers to find the capital and get these things brought up to speed. So that would be the approximate number I would be using to get modified.

Paul: And the 30% are yet Paul on the balance sheet can you tell us what's in Oreo correctly, you had that in other assets.

Paul Elenio: Paul, tell us what's in REO; we have that other $78 million right now on our books. It's sitting in other assets. We did sell, I said, a South Carolina office property that we had on books for $10 million. So it was $88 million last quarter. It's $78 million this quarter. And of that $78 million, just to give you a little color, the two biggest ticket items are a $41 million New York City office property we took back in 4Q of 23 that we disclosed.

Steve: Steve Thanks.

Speaker Change: Absolutely do.

Steve: So it is in other assets.

Steve: Oreo is $78 million right now on our books at sitting in AR and other assets.

Speaker Change: We did sell set of South Carolina office property that we are on books for $10 million. So it was $88 million last quarter at $78 million this quarter and of that $78 million just to give you a little color. The two biggest biggest ticket items is a $41 million New York City Office property, we took back in <unk> of 'twenty three that we disclosed.

Paul Elenio: And that's a building that we brought in new sponsorship and are converting it into a condo. And that'll take some time. And then the other big pieces, we have about a $30 million multifamily deal in Texas that we took back in the fourth quarter of 22 that we're working through. And then there are some little odds and ends. But it's a small number. But as Ivan said, we are expecting that as we work through this billion dollars, a decent amount more could go REO, and that number will grow. Right, Ivan? That's what we're talking about. Yeah. That's the guy that gave you about 30%. Thank you both.

Speaker Change: And Thats a building that we brought in new sponsorship and are converting it to a condo and that'll take some time and then the other big pieces, we have about a $30 million multifamily deal in Texas that we took back in the fourth quarter of 'twenty two that we're working through and then there's some little odds and ends.

Ivan Kaufman: But it's a small number but as Ivan said, we are expecting as we work through this $1 billion that a decent amount more could go Oreo and that number will grow right. I mean, that's what we're talking about yes. That's the guidance I gave you about 30%.

Speaker Change: Yes.

Speaker Change: Thank you both for your comments.

Steve: Thanks, Steve.

Operator: Our next question comes from Stephen Laws with Raymond James. Please go ahead.

Speaker Change: Our next question comes from Stephen Laws with Raymond James. Please go ahead.

Stephen Laws: Hi, good morning. Just to follow up, a minor point on the REO, about how many assets is that? Is the average loan size consistent with kind of the $20 million for the portfolio, or how do you see that, I guess, $300 million of potential REOs from a property count standpoint?

Stephen Laws: Hi, good morning.

Speaker Change: Just a follow up.

Stephen Laws: Minor point on the Oreo about how many assets is that what is the average loan size consistent with kind of the $20 million for the portfolio or how do you see that I guess $300 million of potential <unk>.

Speaker Change: Property count standpoint.

Ivan Kaufman: We'll take a look at the list. I would make a guess, but Paul could be more accurate.

Paul: We'll take a look at the list I would take a guess, but Paul can be more accurate, it's probably an average loan size of around $30 million. Yes. We have some we have some chunkier stuff. We're looking at Steve and that is in the 50, maybe even 100, but that's not a lot of what we do.

Paul Elenio: It's probably an average loan size of around $30 million. Yeah, we have some chunkier stuff. We're looking at, Steven, that is in the $50 million, maybe even $100 million, but that's not a lot of what we do. And then we have some $10 million, $15 million, and $20 million. So it's hard to really project where these are all going to end up, but I would say that we think it's probably in the $30 million to $40 million average range.

Speaker Change: And then we have some turn in <unk> in 2000, and so it's hard to really project, where these are all going to end up but I would say that we're thinking it's probably in the $30 million to $40 million average range.

Stephen Laws: Great. And then, Ivan, I want to go back to something you commented on, you know, around interest rates, and you said, you know, we'll go below four, certainly beneficial. And I think since the last time we spoke, the long end of the curve's down almost 100 basis points, which is fairly close.

Speaker Change: Great and then I don't want to go back to something you commented on around interest rates and you said will go below four certainly beneficial and I think since the last time, we spoke that long into the curve is down almost 100 basis points.

Ivan Kaufman: You know, can you talk about maybe how, and I know the most recent move has only been a couple of weeks, but can you talk about how that maybe has changed behavior from sponsors? You know, do you think they're more likely to protect assets, and cheaper to buy new caps? And then, you know, how does it impact agency volumes as you move forward?

Speaker Change: Fairly close.

Speaker Change: Can you talk about maybe how I don't know the most recent.

Speaker Change: It's only been a couple of weeks, but can you talk about how that maybe has changed behavior from sponsors are you do you think.

Speaker Change: They're more likely to protect assets cheaper to buy new caps and then how do you think it impacts agency volumes as you as you move forward.

Ivan Kaufman: Well, let me address the cap issue. The cap has been an extremely expensive proposition for a lot of these sponsors.

Speaker Change: Well, let me let me address the cap issue. The cap issue has been an extremely expensive proposition for lottery to sponsors.

Ivan Kaufman: You know, assuming that for the last two years, they've had to pile in another six to eight points of capital to buy caps. We believe the curve is going to change, and the cost of caps is going to go down, which relieves their pain a little bit. That's on that side.

Speaker Change: We're assuming for the last two years they've had to pile in another six to eight points of <unk> capital to buy caps.

Speaker Change: We believe the curve is going to change in our cost of capital is going to go down which believes they are paying a little bit that's on that side, but the real meaningful issue as a drop in the five year and 10 year.

Ivan Kaufman: But the real meaningful issue is the drop in the five-year and the 10-year. I mean, you could effectively borrow it close to 5% off the five-year. Up till now, you know, people were paying close to six, six and a half percent.

Speaker Change: Could effectively borrow at close to 5% off the five year.

Speaker Change: Up till now.

Speaker Change: People were paying close to 665%, but spreads have tightened rates have come down. So if you are a borrower currently paying on a floating rate basis close to 9%.

Ivan Kaufman: But spreads have tightened, and rates have come down. So if you have a borrower currently paying on a floating rate basis, you know, close to 9%, he can then go ahead and pay 5%. So that's a great option for that particular borrower, even if they have to put a little more capital into it, and they can secure, you know, long-term financing and really put themselves from a negative cash position into a positive cash position. Assuming you have an asset, you know, that's 6.5 cap rate, all of a sudden you've created positive cash flow from negative cash flow. And that's becoming very

Speaker Change: You can then go ahead and pay 5%. So that's a great option for that particular borrowers even if they put a little more capital into it and they can secure long term financing and really put themselves from a negative cash position into a positive cash position, assuming you have an asset.

Speaker Change: That's 66 665 cap rate all of a sudden you've created positive cash flow from negative cash flow and thats, becoming very meaningful the <unk>.

Ivan Kaufman: The real key for people is, are they managing their assets well, are they stabilized? Because in order to get fixed-rate financing, you need, you know, 90 plus occupancy, somewhere in that range. So to the extent people have their assets stabilized, then that becomes a great option for them, and we'll relieve the pain of carrying those assets, which has been extremely painful. Make no mistake about it. When you go to borrow a loan and you're paying four and a half or 5%, and the next thing you're paying 9%, and it's for a prolonged period of time, you have a lot of capital needs.

Speaker Change: Real key for people is I think managing their assets well and they stabilized.

Speaker Change: Because in order to get fixed rate financing need 90, plus occupancy somewhere in that range.

Speaker Change: So to the extent people have their assets stabilized.

Speaker Change: And then that becomes a great option for them and we'll leave the pain of carrying those assets, which has been extremely painful make no mistake about it when you go into borrower alone and you're paying $4 five 5% and the next thing you're paying 9% and it's for a prolonged period of time.

Speaker Change: Do you have a lot of capital needs. So I think we're a great inflection point right now for many of these borrowers with their assets are stabilized.

Ivan Kaufman: So I think we're at a great inflection point right now for many of these borrowers, if their assets are stabilized, they can look to the fixed rate market and reposition their assets and not have negative drain.

Speaker Change: They can look through the fixed rate market and reposition their assets and not have negative trend.

Ivan Kaufman: Great. I appreciate those comments, Ivan. And one last one, if I may, on portfolio seasoning, origination volume was very strong in 21 and the first half of 22, really lightened up a lot in the second half of 22. You know, if you think about the seasoning of those loans, is it fair to say that, you know, you've covered the 1 billion in NPLs, but should we continue to see kind of the new 60-year delinquencies start to I know there'll be more, and some will move, but, you know, are we past the peak of identifying the problem loans as you think about your portfolio?

Speaker Change: Great appreciate those comments Ivan and one last one if I may on portfolio seasoning origination volume was very strong in 'twenty one in the first half of 'twenty two.

Speaker Change: Really lightened up a lot in the second half of 'twenty two.

Speaker Change: As you think about the seasoning of those loans.

Speaker Change: Fair to say that.

Speaker Change: The $1 billion of Npls, but should we continue to see kind of the new 60 day delinquencies start to start to decline and I know there'll be more and then some will move but are we past the peak of kind of identifying the problem loans as you think about your portfolio.

Ivan Kaufman: Well, I think that we've given pretty good guidance that the first and second quarter would be peak stress and, if rates remain higher for longer, would leak into the third and fourth quarter. I believe that with this rate move down, you'll see the market change a little bit. So perhaps the third quarter may be a little bit tough, but we're seeing a little bit of easing. And if rates remain at this level, I believe there'll be a lot of liquidity returning to the multifamily sector and a lot of trades being done. So I'm hopeful and optimistic that perhaps the second quarter was the peak, with a little leakage into the third, but we're definitely seeing the light at the end of the tunnel. Well, that's great to hear!

Speaker Change: Well I think that we've given pretty good guidance that the first and second quarter would be peak stress rates remained higher for longer would leak into the third and fourth quarter.

Speaker Change: I believe that with this rate move down I think youll see the market changed a little bit.

Speaker Change: Perhaps the third quarter, maybe a little bit tough, but we're seeing a little bit easing and if rates remain in this level.

Speaker Change: I believe there'll be a lot of liquidity returning to the multifamily sector and a lot of trades being done so.

Speaker Change: Awful and optimistic.

Speaker Change: Perhaps second quarter was the peak little leakage into the third.

Speaker Change: We're definitely seeing the light at the end of the tunnel.

Stephen Laws: Well, that's great to hear and nice job managing your assets in a difficult market. I look forward to next quarter. Thank you.

Speaker Change: Well, that's great to hear and nice job managing your assets a difficult market and look forward to.

Speaker Change: Next quarter. Thank you.

Steve: Thanks, Steve.

Operator: Our next question comes from Rick Shane with JP Morgan.

Speaker Change: Our next question comes from Rick Shane with J P. Morgan.

Richard Shane: Hey guys, thanks for taking my questions this morning. A couple different things.

Rick Shane: Hey, guys. Thanks for taking my questions. This morning, a couple of different things.

Paul Elenio: Just from a bookkeeping perspective, cash balances within the structured business declined by about 50%. I assume some of the decline in the restricted cash is from calling the CLO. But can you just help us understand what's going on there?

Rick Shane: Just from a bookkeeping perspective cash balances within the structured business declined by about 50% I assume some of the decline in the restricted cash is from calling D. C.

Speaker Change: Cielo, but can you just help us understand what's going on there.

Paul Elenio: Yeah, sure. I mean, the reason we called our CLO was because we were sitting on excess cash balances, and it was inefficient. So, you know, that's expensive to be sitting on cash balances that are not being deployed. So, in the normal course of business, when we have those excess cash balances and can't use them, that's why we recall a vehicle. And the efficiency of these vehicles is to keep the cash balances as low as possible. So it achieved exactly what we wanted.

Speaker Change: Yeah sure I mean, the reason we did call out cielo is because we were sitting on excess cash balances and that was inefficient.

Speaker Change: No.

Speaker Change: And it's expensive to be sitting on cash balances which are not.

Speaker Change: <unk> deployed some of the normal course of business.

Speaker Change: We.

Speaker Change: When we have those excess cash balances and can't use them.

Speaker Change: That's why we call a vehicle and.

Rick: The efficiency of these vehicles is to keep the cash balances as low as possible. So has achieved exactly what we wanted and to add to that Rick that is a big piece of it. The other piece of it is some of these vehicles as you know our auto replenishment period. So the naturally delevering as loans are running off so the restricted cash is paying down debt and that's part of the part.

Paul Elenio: Yeah, and to add to that, Rick, that is a big piece of it. The other piece of it is some of these vehicles, as you know, are at a replenishment period, so they're naturally de-levering as loans are running off. So the restricted cash is paying down debt, and that's part of the component as well. And then the third component is that we did pay off $90 million of unsecured debt in April, as you were aware. So those are kind of the three big components that got you a decrease in cash for the quarter.

Rick: The component as well and then the third component is that.

Speaker Change: We did pay off $90 million of unsecured debt in April issue, we're aware with cash. So those are kind of the three big components that got you to a decrease in cash for the quarter.

Rick: Okay.

Speaker Change: Thank you.

Paul Elenio: Okay, thank you. On the second topic, you talked about modifying $730 million in loans in the second quarter. We've gone through the disclosure in the last queue related to mods, and I'm going to be honest; I don't fully understand all of the implications. Can we just walk through clearly the implications of the mods in this quarter, in terms of what they mean for the difference in cash that you will receive and the difference in interest accrual?

Speaker Change: Second topic.

Speaker Change: You talked about modifying $730 million of loans in the second quarter.

Speaker Change: We've gone through the disclosure in the last Q related to mods.

Speaker Change: I'm going to be honest.

Speaker Change: I don't fully understand all of the implications can we just walk through clearly the implications of demands in this quarter in terms of what it means for the difference in cash that you will receive and the difference in interest accrual. So if you didn't modify.

Paul Elenio: So if you didn't modify the loans, what would you have expected to receive? How much are you giving up in cash over the next year or two? And what is the difference in the accrual rate? So we understand the implications of

Speaker Change: The loans would you have expected to receive.

Speaker Change: How much are you, giving up in cash over the next year or two and what is the difference in the accrual rate. So we understand the implications from an income perspective.

Paul Elenio: Okay, so let me try to attempt to answer that. It's a little more complicated than that, and our cue will be out early next week, we hope, so you'll get more details on that disclosure. But the way I think I look at it, and don't know if it'll completely answer your question, is we did mod a billion nine or two billion of loans last quarter. I think a billion one had pay and accrual features.

Speaker Change: Okay. So let me try to attempt to answer that it's a little more complicated than that in our Q will be out early next week, we hope so youll get more details on that disclosure.

Speaker Change: But the way I think I look at it and don't know if it will completely answer. Your question is we did mod.

Speaker Change: A $1 billion or $2 billion of loans last quarter. I think 1 billion won head pain accrual features and so what we did was we what management does as we look at every single loan we modify and we go through it on a loan by loan basis to determine how strongly we feel the value and the Mod has put us in a position we will still be able to recover the.

Paul Elenio: And so what we did was, what management does is we look at every single loan we modify, and we go through it on a loan-by-loan basis to determine how strongly we feel the value of the mod has put us in a position where we'll still be able to recover the accrued interest. If we don't feel we're in that position, we won't pay the accrued interest. If we do, we accrue it. For the most part, we accumulate it.

Speaker Change: Crude interest if we don't feel we're in that position, we won't accrue the accrued interest if we do we accrue it for the most part we accrue. It there are exceptions there are loans that we decide not to accrue the accrual rate after the mod if we think it's still a challenging asset.

Paul Elenio: There are exceptions; there are loans that we decide not to accrue the accrual rate after the mod if we think it's still a challenging asset. Having said that, in the first quarter, our mod generated about $ 850 million. I have it right here; I'm trying to get it in front of me.

Speaker Change: Having said that in the first quarter our mods Gen.

Speaker Change: Generated about Abbott right here trying to get it in front of me homage generated about call it $3 million of accrued interest that hit our P&L that wasn't cash in the second quarter of those first quarter mods.

Paul Elenio: Our mods generated about, call it 3 million of accrued interest that hit our P&L that wasn't cash. In the second quarter, those first quarter mods were now 6 million of accrued interest that didn't hit cash because it was for a full quarter. And the second quarter mods were 2 million in the second quarter of accrued interest. So our pick interest, as we'll call it, for 1Q mods was about 3 million in the first quarter.

Speaker Change: Now $6 million of accrued interest that didnt hit cash because it was for a full quarter in the second quarter mods were $2 million in the second quarter of accrued interest. So our pik interest as Youll quality for <unk> was about $3 million in the first quarter in the second quarter the <unk> six.

Paul Elenio: In the second quarter, the 1Q mods were 6 million, and the 2Q mods were 2 million for a total of eight. So that number will obviously grow because of the second quarter numbers, and the mods will be fully affected in the third and fourth quarters. And then if we modify any new loans, I don't know if that's answering your question, but those are the numbers for the first and second quarter adjustments of how those accrual rates that we accrued affected interest income, but not cash.

Speaker Change: And the <unk> with $2 million for a total of eight.

Speaker Change: So that number will obviously grow because the second quarter numbers. The mods will be fully affected in the third and fourth quarter and then if we model the new loans I don't know if thats answering your question, but thats the numbers for the first and second quarter mods of how those are cool rates that we accrued affected interest income, but not cash.

Paul Elenio: All notes, it's a very thoughtful question to respond to a question I wasn't sure objectively that you would be able to answer. And so I was a little bit circumspect about asking that. So, thank you. It's very helpful. Last question, implicitly the mods.

Speaker Change: All know, it's a very thoughtful question too.

Speaker Change: Answer your question I wasn't sure.

Speaker Change: Objectively the goods.

Speaker Change: We'd be able to answer and so I was a little bit circumspect about asking it. So thank you it's very helpful.

Speaker Change: Last question.

Speaker Change: Implicitly the mods $23 million of additional capital on $730 million of mods, that's about a three point.

Richard Shane: Uh, 23 million dollars of additional capital on 730 million dollars of mods. That's about a 3.1, 315 basis point contribution of capital. I've been I'd love to understand that in the context of your comment an answer to go about caps running 6 to 8% for your borrowers. I'm just curious how we sort of square those 2 numbers.

Speaker Change: 315 basis point contribution of capital.

Speaker Change: I mean, I'd love to understand that in the context of your comment.

Speaker Change: In answer to go about.

Speaker Change: Caps.

Speaker Change: Running 6% to 8% for your borrowers I'm, just curious how we sort of square those two numbers.

Ivan Kaufman: Okay, it's six to eight percent over a two to three year period. Each year, the cap cost can be anywhere between one and a half to three, depending on, you know, depending on the loan. So in context, we're looking at more of an annual number than a cumulative number on that number. But Paul can give you a good number in terms of the mods and how they work for the second quarter. Sure, I can do that.

Speaker Change: Okay, it's 6% to 8% over two to three year period, each each year of cap costs can be anywhere between one and a half to three.

Speaker Change: Pending on that.

Speaker Change: Depending on alone.

Speaker Change: So in context, we're looking at more of an annual 10 accumulative on that number but Paul can give you a good number in terms of the months in how they were.

Paul: For the second quarter sure I can so of the 733 million of loans, we moderate and $23 million capital was committed to be injected $6 million of that capital went to buy rate caps and they're at all different strike prices.

Paul Elenio: So of the $733 million of loans we modifiable, and $23 million of capital was committed to be injected, $6 million of that capital went to buy rate caps. And they're at all different strike prices, Rick, some are, you know, out of the money strikes, some are way in the money strikes, and I think the average strike was about 3.7%. And then the rest; we had one loan that paid down the principal balance by $2 million.

Rick Shane: Rick somewhere out of the money strike similar way in the money strikes and I think the average strike was about three 7% and then the rest we had a we had one loan that paid down the principal balance by $2 million. We had past due interest of about $2 million that was collected and then the rest were to fund rental reserves interest reserves and Opex reserves.

Paul Elenio: We had past due interest of about $2 million that was collected. And then the rest was to fund rental reserves, interest reserves, and OPEX reserves. Those are kind of how it breaks out, if that helps you.

Speaker Change: Kind of how it breaks out if that helps you.

Paul Elenio: It does. Very thoughtful answers. I appreciate the time. I would throw in one last request.

Speaker Change: It does.

Speaker Change: Very thoughtful answers I appreciate the time I would.

Speaker Change: Throw in one last request there are a lot of numbers that get thrown around on these calls.

Richard Shane: There are a lot of numbers that get thrown around on these calls. You guys are unique amongst the companies that we follow in not providing a slide deck on the calls. And I think given the complexity of what Paul you've described, it would be really helpful if people could see the numbers and you could be walking through slides on the call. So I'm just going to throw that out there, but I appreciate the time, guys. Sure.

Speaker Change: You guys are unique amongst the companies that we follow and not.

Speaker Change: Providing a slide deck.

Speaker Change: On the calls and I think given the complexity of what.

Speaker Change: Paul you've described it would be really helpful.

Speaker Change: Could see the numbers and you could be walking through slides on the call. So I'm just kind of throw that out there, but I. Appreciate the time guys sure. Thanks. Thanks, Rick we appreciate we always want to be more transparent and have the best disclosures, we try to be when the Q gets filed there'll be a lot of good information in there and then we'll always take into consideration, whether we think we can put it in a better form.

Paul Elenio: Thanks, Rick. We appreciate it. We always want to be more transparent and have the best disclosures. We try to be, when the cue gets filed, there'll be a lot of good information there. And then we'll always take into consideration whether we think we can put it in a better form for readers. And thank you for that.

Speaker Change: <unk> for readers and thank you for that for that.

Speaker Change: That comment.

Speaker Change: Great. Thanks, guys.

Speaker Change: Yes.

Operator: The next question comes from Jade Rahmani with KBW.

Speaker Change: The next question comes from Jade Rahmani with K B W.

Jade Rahmani: Thank you very much. Can you please give the second quarter or six month year-to-date cash flow from operations members? Yeah, it's in the 10. Well, you don't have

Jade Rahmani: Thank you very much can you please give the second quarter or year.

Speaker Change: Year to date cash flow from operations number.

Paul Elenio: Yeah, it's in the 10. Well, you don't have the 10 Q. Obviously, it's not filed yet. So I'll give it to you.

Speaker Change: Yes, it's in the 10, well you don't have the 10-Q, obviously it is not filed yet so I'll give it to you.

Speaker Change: <unk>.

Speaker Change: Okay.

Speaker Change: One second.

Paul Elenio: So the cash flow from operations number is $335 million, but you have to back out the changes in the originations and sales of help-to-sale assets, which is a $220 swing. And then you've got $90 million in changes in operating assets. So call it $335 in cash flow from operations for the six months. And then you have a $220 positive swing on originations, less proceeds from sales, and a $100 million negative swing on the change in operating assets and liabilities.

Speaker Change: So the cash flow from operations number is $335 million, but you got to back out the changes in the originations.

Speaker Change: And sales of held for sale assets, which is $2 20 swing. So and then you've got $90 million and changes in operating assets. So call. It call. It $3 35 as cash flow from operations for the six months and then you have a 220 positive swing on originations less proceeds from sales at 100 million.

Speaker Change: Negative swing in the change in operating assets and liabilities.

Speaker Change: Okay, that's great.

Speaker Change:

Jade Rahmani: Okay, that's great. The NPLs of around $1 billion, do you have any numbers in mind as to where that total balance peaks?

Speaker Change: Yes.

Speaker Change: Npls of around $1 billion do you have any numbers in mind as to where that total balance peak.

Ivan Kaufman: I'd say we're within range of the peak right now. I mean, maybe, maybe you can go up a little bit more, but we're kind of in the peak period of time. Um, you know, we're pretty optimistic about the number we're giving you on the mods because we're pretty close to a conclusion on those mods. So, I think that's a good number to bullpup.

Speaker Change: I'd say, we're within range of the peak right now I mean, maybe maybe it can go up a little bit more but we're kind of in the peak period of time.

Speaker Change: We're pretty optimistic about the number I've given you all the mud speakers for pretty close to a conclusion on those months.

Speaker Change: So I think I think that's a good number to ballpark.

Paul Elenio: Yeah, it's a tough one to predict, as you know. I mean, I think Ivan's right.

Speaker Change: Yes, it's a tough it's a tough one to predict as you know I mean, I think items right.

Paul Elenio: It kind of has; it's gone up a little bit since the first quarter, not significantly, from 954 to 1,000,000. We do expect a few more delinquencies. Hopefully, we're at the peak, but we do have our eyes on a bunch of loans that are delinquent that we're gonna successfully mod. So hopefully, that number will not peak higher. And then we're gonna have some of those loans come out and be RE rated, right? They'll just be on a different line item, but they'll still be non-performing until we work through them. So it's a tough answer, but I think Ivan's right. I think we feel like it shouldn't be too significantly difficult. I mean, what I would do is:

Speaker Change: It's gone up a little bit since the first quarter not significantly $9 $54 billion to $1 billion 50, we do expect a few more delinquencies hopefully we're at the peak, but we do have our eyes on a bunch of loans that are delinquent that we're going to successfully mod. So hopefully that number will not peak higher and then we're going to have some.

Ivens: Those loans come out and BRL right I'll just be on a different line item, but there'll still be there'll still be nonperforming until we work through them. So it's tough to answer, but I think ivens right I think we feel like it shouldn't be significantly.

Ivan Kaufman: What I would do is, you know, the sticky part is the REO because it takes time to get your hands on the asset. And then once you get your hands on the asset, you have to stabilize that asset. That's the hard part. The rest

Speaker Change: What I would do is.

Speaker Change: The sticky part is the Oreo because it takes it takes time to get your hands on the asset.

Speaker Change: And then once you get your hands on the asset you got a stabilized that asset thats a sticky part the rest is somewhat transition.

Ivan Kaufman: And when you look at the NPL and take, you know, learning what's been going on in this cycle, do they have anything in common in terms of maybe one issue that's been driving it? Do you think the main issue is really the borrower's basis rather than having paid, you know, too much, or too low a cap rate for the assets? Or do you think, on the other hand, perhaps... Sponsorship, maybe leverage ratio, or the third category, property under performance. There are a whole slew of activities.

Speaker Change: And when you look at the NPL and taking learning what's been going on in this cycle.

Speaker Change: Do they have anything in common in terms of maybe one issue that's been driving it do you think the main issue is really the borrowers basis than having paid too much to lower cap rate for the assets.

Speaker Change: Thank you.

Speaker Change: Perhaps sponsorship.

Speaker Change: Sponsorship maybe leverage ratio.

Speaker Change: Or the third pad I think underperformance.

Ivan Kaufman: And, you know, clearly, when interest rates go up as dramatically as they did when everybody is within a low interest rate market forever, that's probably the single biggest driver. As I've said in many calls before, the impact of COVID had a very significant impact because people were not able to move out of tenants for many, many years. We've had, in some of these properties, you know, 10 to 15%, even 20%, economic occupancy where tenants are living for three, four years without paying rent.

Speaker Change: It's a whole slew of activities.

Speaker Change: Clearly.

Speaker Change: When interest rates go up as dramatically as they did what everybody believes we'd be in a low interest rate market forever.

Speaker Change: It's probably the single biggest driver.

Speaker Change: Said in many calls before.

Speaker Change: The impact of Covid.

Speaker Change: Had a very significant impact because people were not able to move out tenants for many many years, we've had in some of these properties.

Ivan Kaufman: That was a big factor. That's an unanticipated factor. A third factor, which we spoke about as well, is the increase in insurance costs. I mean, they doubled, tripled, and quadrupled. They're coming down a little bit now. The insurance costs, the economics, you can't predict those. So that created a lot of headwinds.

Speaker Change: 10% to 15%, even 20% economic occupancy where tenants so living for three or four years without paying rent.

Speaker Change: He was a big factor Thats, an unanticipated factor.

Speaker Change: A third factor, which we spoke about as well as the increase in insurance costs.

Speaker Change: Double triple and quadruple that coming down a little bit now the insurance cost the economic occupancy.

Speaker Change: You can't predict hours, so that created a lot of headwind.

Speaker Change: I think when people are going to a buying frenzy and a top market they focus on buying and not on management and all that.

Speaker Change: That's something that we've certainly learned a lot from because.

Speaker Change: It's one thing to be an effective capital raise or a buyer of an asset. That's one other thing can be an effective manager.

Ivan Kaufman: So management cures a lot of ills. And one of the things that's extremely important to us when we're modifying a loan is that if we don't think the asset's being managed appropriately, either we won't modify and we'll take it through REO, or we'll insist and make sure they bring in new management. Management is also a major part. That's excellent. Thank you.

Speaker Change: So management chores, a lot of hills.

Speaker Change: And one of the things that's extremely important to us one of them are modifying along.

Speaker Change: Is that if we don't think these assets being managed appropriately.

Speaker Change: We won't modify and we will take it through Oreo.

Speaker Change: That's just and make sure they bring in new management management's also is a major part.

Ivan Kaufman: My last question would just be on the GSEs. You know, we've seen a lot of stories around them being pretty cautious right now. You know, not just the Meridian issue, which started back in maybe the third quarter of last year, but there have been others, appraisers, you know, local, small, regional title companies. What exactly do you think is going on with the GSEs? Are they cracking down? Are they tightening their underwriting standards? Or are those just sort of a select few cases? I think in every cycle.

Speaker Change: That's excellent thank you.

Speaker Change: My last question would just be on the GSA is we've seen a lot.

Speaker Change: Stories around them being pretty cautious right now not just the meridian issue, which started back in maybe the third quarter of last year, but there've been others appraisers local small regional title companies and what exactly do you think is going on with the GSE is are they tracking down are they tightening.

Speaker Change: Their underwriting standards or are those just sort of a select few cases.

Ivan Kaufman: I think in every cycle, you always have certain things that happen. And in this cycle, with all the volume, there are certain things that happen. And clearly, the agencies have changed their attitude towards brokers. And Meridian is just a broker, but brokers have played a major role and were very dominant in garnering a lot of volume. And in garnering a volume, obviously, they control a lot of the source documents. But the industry has changed. Fannie and Freddie have learned that if there are brokers in between that are not direct with them, they can't control the source documents, so they've changed the guidelines. I think that it was a long time coming.

Speaker Change: I think in every cycle.

Speaker Change: Have certain things that happen and in this cycle with all the volume.

Speaker Change: There are certain things that occur and clearly the agencies have changed there.

Speaker Change: Their attitude towards brokers and meridian as just a broker.

Speaker Change: Brokers have played a major role and we're very dominant in garnering a lot of volume and in garnering a volume obviously they control a lot of the source documents.

Speaker Change: And the industry has changed Fannie and Freddie have learned that if their brokerage and between that and not direct with them. They can't control of source documents. So they've changed the guidelines I think that was a long term long long time coming.

Ivan Kaufman: You have to understand that since 2010, basically, we've been on a tremendous run, and a lot of deals have been hidden. This is the first time there's been a prolonged downturn, and now you can see some of the things that were done in the industry that have finally caught up. I think that's going to be a healthy change that lenders have to deal directly with the borrowers, and that's a very healthy change.

Speaker Change: You have to understand that since 2010, basically we've been on a tremendous run and a lot of deals have been hidden. This is the first time. This is a prolonged downturn and now you can see some of the.

Speaker Change: Some of the things that were done in the industry that finally caught up so I think thats going to be a healthy change that lenders have to deal directly with the borrowers.

Speaker Change: And Thats, a very healthy change.

Ivan Kaufman: Appraisers have always been a sore point within this industry, right? We rely so much on appraisals. I believe that, you know, a big part of AI and a big part of technology will have a significant impact on improving the valuation process.

Speaker Change: Appraisers have always been a sore point within this industry right. We rely so much on appraisals I believe.

Speaker Change: That.

Speaker Change: Big part of AI, and the big part of technology.

Ivan Kaufman: And appraisers are sometimes aligned, sometimes not aligned. It's like any other process. It's human. Within the human process, there are always errors of corruption. And I think it happened to them. It's not abnormal. It's part of life. In every part of life, there's corruption. So they got hit with a little bit, not a lot, very small, relative to the overall thing.

Speaker Change: We will have a significant impact on improving the valuation process and appraisers are sometimes aligned sometimes not online it's like any other processes human within the human process are always hours of corruption and I think it happened to them not abnormal part of life.

Speaker Change: Every part of life. This corruption, so they got hit with a little bit not a lot very small.

Ivan Kaufman: And I think when they find a bad actor, it's called to light, you know, they eliminate the bad actor. But I think the whole appraisal process, which everybody's relied on, you know, valuations extensively, I think with technology, that's going to be a much better process going forward. Thank you very much. The next question comes from Jay McCanless with Wedbush.

Speaker Change: And relative to the overall thing in.

Speaker Change: I think when they when they find a bad actor its call to light.

Speaker Change: They eliminate the bad actor.

Speaker Change: But I think the whole appraisal process, which everybody has relied on.

Speaker Change: <unk> extensively.

Speaker Change: I think with technology, that's going to be.

Speaker Change: Much better process going forward.

Speaker Change: Thank you very much.

Speaker Change: Okay.

Speaker Change: The next question comes from Jay Mccanless with Wedbush.

Operator: Hey, good morning. Thanks for taking my question.

Jay Mccanless: Hey, good morning, Thanks for taking my question.

Jay Mccanless: Congrats again on covering the dividend, but that spread continues to narrow could you maybe talk to us about how comfortable you are with the current dividend level.

Speaker Change: And especially <unk>.

Speaker Change: Economic conditions worsen from here.

Jay Mccanless: Jay, it's Paul. Thank you for the question. I think it was clear in my prepared remarks that yard spreads have come in given the fact that we've got a billion dollars of loans not paying. I think one of the things we really need to stress is that because our business model is so diversified and because we have so many different income streams, the agency business being one specific one, our SFR business being another, that we continue to ramp up and get a 15% yield on our money. We have the ability to do things others can't, right?

Speaker Change: Sure a J it's Paul Thank you for the question.

Speaker Change: I think it was clear in my prepared remarks that yeah.

Speaker Change: Our spreads have come in given the fact that we've got $1 billion of loans not paying I think one of the things we really need to stress is that because our business model is so diversified and because we have so many different income streams. The agency business being one specific one our CFR business being another that we continue to ramp up.

Paul Elenio: We're not afraid to take back an asset, right, Ivan? And not afraid to work it through, even if it means it's going to be non-interest earning for a little bit. So I've guided you guys to a little bit of a low watermark for the third and fourth quarter. So it's possible that our numbers in the third and fourth quarter could approach that number or be slightly below it. It'll depend on how successful we are in getting back interest and getting those loans back online.

Speaker Change: Get a 15 yield on our money.

Speaker Change: We have the ability to do things others don't right, we're not afraid to take back an asset right and not afraid to work it through even if it means it's going to be noninterest, earning for a little bit.

Speaker Change: So I've guided you guys to a little bit of a low watermark in the third and fourth quarter. So it is possible our numbers in the third and fourth quarter could approach that number would be slightly below it it will depend on how successful we are and getting back interest in getting.

Paul Elenio: But what also will affect it is the drop in the 10 year, right? If the drop in the 10 year continues and our agency business starts to explode, that'll obviously offset any negative drag we have on non-performing loans. So it's a tough one.

Speaker Change: Those loans back online, but what also will affect it is the drop in the 10 year right. If the drop in the 10 year continues and our agency business starts to explode that'll obviously offset any negative drag we have on nonperforming loans. So its a tough one I would say, it's it's getting tighter and it will.

Speaker Change: Continue to get tighter it may even dip around there or below for a quarter or two but we're not concerned because we know that we're going to take this $1 billion of assets and some good portion of it is going to turn into interest, earning at some point and on top of that our agency business is going to continue to generate sizable returns and as Ivan said, we are working.

Operator: I'd say it's getting tighter, and it will continue to get tighter. It may even dip around there or below for a quarter or two, but we're not concerned because we know that we're going to take this billion dollars of assets and some good portion of it is going to turn into interest earnings at some point. And on top of that, our agency business is going to continue to generate sizable returns. And, as Ivan said, we are working on a bunch of assets now that we think are going to pay off.

Operator: And we're going to take that capital on loans that we're earning zero on, and we're going to deploy it back into our system, even at 10, 12, 13%, whatever it is we come up with on an unlevered basis, which will be accretive. So it'll be a little bit of a timing issue in that the third and fourth quarters may get tight, and we've talked about that, but long-term, we're very, very comfortable with the protection.

Ivan Kaufman: A bunch of assets now that we think are going to pay off and we're going to take that capital on loans that were earning zero and we're going to deploy it back into our system. Even at 10 to 12, 13% whatever it is we come up with on an unlevered basis, which will be accretive so it'll be a little bit of a timing issue and that the third and fourth quarter, maybe may get tight and we've talked about that but long.

Speaker Change: Term, we're very very comfortable with the protection.

Speaker Change: Okay, great. Thanks for taking my question.

Crispin Love: The next question comes from Crispin Love from Piper Zandler.

Chris <unk>: The next question comes from Chris <unk> from Piper Sandler.

Crispin Love: Thanks, Zach. Good morning.

Chris: Thanks. Good morning. Appreciate you taking my question just asking the GSE question from earlier, just a little bit differently can you discuss recent activity with Freddie and Fannie because we did see Fannie originations come down meaningfully in the first quarter, but may bounced back nicely in the second so I'm curious if there were any changes there on tightening standards.

Speaker Change: And the first versus the second quarter and then just what you expect going forward from the agencies.

Ivan Kaufman: Appreciate you taking my question. I'm just asking the GSE question from earlier, just a little bit differently. Can you discuss recent activity with Freddie and Fannie? Because we did see Fannie originations come down meaningfully in the first quarter, but they bounced back nicely in the second. I'd be curious, if there were any changes there on tightening standards in the first versus the second quarter, and then just what you expect going forward from the agency as well.

Speaker Change: I think it kind of mirrors a lot of the conversation. We've had is very much tied to interest rates I think that the agencies volumes is going to increase considerably.

Ivan Kaufman: I think it kind of mirrors a lot of the conversation we've had, and it's very much tied to interest rates. I think that the agency's volumes are going to increase considerably as rates drop. There are a lot of people who've been sitting on the sidelines waiting to refinance their loans when they got to a certain rate range. We're in prime Time rate range today with today's drop, the rates that have dropped, and I think the agency's volumes are going to really, really increase considerably. You have to also keep in mind that there hasn't been that much activity in multifamily sales. Very, very low.

Speaker Change: As rates drop there are a lot of people have been sitting on the sidelines waiting to refinance their loans when they got to a certain rate range, where in prime time rate range today with today's dropped rates that have dropped and I think the agencies volumes are going to.

Speaker Change: Really really increased considerably.

Speaker Change: You have to also keep in mind that there hasnt been that much in multifamily sales activity very very low I think that will pick up and that'll CD agencies as well.

Paul Elenio: I think that'll pick up, and that'll feed the agencies as well. So, I think I'm very optimistic that the agencies' volumes will really benefit from this, and they will increase, and they will grow. And then we'll go back to the same old problem of, oh, the agencies are backed up, things are taking longer. We're not that far away from that. We've experienced that. So I think that the agencies are going to have a very, very, very strong period of time relative to the last couple of quarters.

Speaker Change: So I think I'm very optimistic that the agencies volumes will really benefit off of this and we will increase from will grow and then we'll go back to the same old problem.

Speaker Change: All of the agencies are backed up things with Walker.

Speaker Change: That far away from that we've experienced that.

Speaker Change: So I think that the agencies, if you're going to have a very very very strong period of time relative to the last couple of quarters.

Crispin Love: Yeah, I think to add some color to that, Crispin, we did $360 million in volume in our agency business in July. So that number was actually just around the target we set for the second quarter. But we think, and as Ivan said, we think given the recent move in rates, some people are going to move off the dime here, and I think we're going to see an increase in that volume in August and September. That's our view,

Kristen: To add some color that Kristen, we did $360 million of volume in our agency business in July so that number was actually just around the target we did for the second quarter, but we think and as Ivan said, we think given the recent move in rates.

Speaker Change: Some people are going to move off the dime here and I think we're going to see an.

Ivan Kaufman: An increase to that volume in August and September that's our view.

Ivan Kaufman: Great, thank you. I appreciate the July number there as well. And then just one more from me.

Speaker Change: Great. Thank you I appreciate that July number there as well and then just one more for me can you just talk a little bit how do you expect the first couple of rate cuts at the end of the assuming they do happen at the end of the year and into 2025 could impact you and could be a net negative to your net interest income over the near term the structured business, but of course benefit.

Crispin Love: Can you just talk a little bit about how you expect the first couple of rate cuts, assuming they do happen, at the end of the year and into 2025 could impact you? And could it be a net negative to your net interest income over the near term in a structured business, but, of course, benefit originations and agency, as you mentioned? Just curious about how you think about the impacts there, especially in NII. I'm doing lower yields and lower cost of funds, but I'm unsure how much it would improve the borrower profile just with a couple of rate cuts. Thanks.

Speaker Change: Originations in agency as you mentioned.

Speaker Change: Just curious on how you think about the impacts there, especially in NII abdomen lower yields lower cost of funds side.

Speaker Change: I'm not sure how much it would improve the borrower profile just with a couple of rate cuts. Thanks.

Ivan Kaufman: I think we have to look at the rate cuts also in conjunction with what we've been talking about with the 5 and 10-year coming down. I think if there are rate cuts, two things will happen. It'll put the book in a better position because people can buy rate caps cheaper. I also think there'll be more transaction activity, and people will go into floating rate loans on some of these underperforming assets. So I think our book of floating rate loans will increase as well.

Speaker Change: I think we have to look at the rate cuts also in conjunction with what we've been talking about with the five and 10 year coming down.

Speaker Change: I think if there are rate cuts two things will happen.

Speaker Change: The bulk in a better position because people can buy rate caps cheaper I also think there'll be more transactional activity and people will go with the floating rate loans on some of these underperforming assets. So I think a bulk of floating rate loans will increase as well. So I think there'll be more volume on that side I.

Ivan Kaufman: So I think there'll be more volume on that side. I think, offset by some revenue drop, you'll see the agency business pick up considerably. And I also think it'll stimulate some of the modifications and bring some of those modifications more online and create a lot of income-producing opportunities on that side to offset some declines in revenue. I think, net-net, the rate drops are beneficial for the company. That's the way I would look at it from my channel.

Speaker Change: I think offset of some revenue drop I think youll see the agency business pick up considerably.

Speaker Change: And I also think it will stimulate some of the modifications and bring some of those modifications more online and create a lot of income producing opportunities on that side to offset some declines in revenue.

Speaker Change: I think net net.

Speaker Change: The rate drops are beneficial for the company.

Speaker Change: I would look at it from my chair, Yeah, and I would say.

Paul Elenio: Yeah, and I would say I agree with Ivan, the timing may be something that's hard to predict. You're right.

Speaker Change: I agree with that and the timing, maybe something thats hard to predict youre right if rate strop year net interest income squeezes, but you've got $1 billion of loans not paying obviously the health of the portfolio will increase overall.

Paul Elenio: If rates drop, your net interest income squeezes, but you've got a billion dollars of loans not paying. Obviously, the health of the portfolio will increase with the rate drop, and then your agency business will pick up. But it's just a matter of timing. And that's the stuff that's hard to tell.

Speaker Change: They drop and then your agency business will pick up but it's just a matter of the timing and that's the stuff that's hard to tell.

Speaker Change: May have a little bit of a dip in net interest income right away and then it builds back up with your agencies, but long term and as Ivan said globally, that's a positive for us.

Crispin Love: You may have a little bit of a dip in net interest income right away, and then it builds back up with your agencies. But long term, and as Ivan said, globally, that's a positive for us. Yeah, and I want to also point out what we've talked about for a long time on the calls is that we've put a big investment into our single family SFR business, a construction lending business. That's a business that will scale up over time.

Ivan Kaufman: Wanted to also point that we always talked about for a long time on the call. So that we put a big investment through a single family a subpar business the construction lending business.

Ivan Kaufman: That's a business funds up over time, we have these commitments.

Crispin Love: We have these commitments, and those commitments and the equity deployed will go up, and that should be a mid to high-teens return. So that will offset some of the runoff in the portfolio, and that was clearly by design on our part.

Ivan Kaufman: And those commitments and the equity deployed will go up and that should be a mid to high teens return.

Ivan Kaufman: So that will offset some of the runoff in the portfolio and that was clearly by design on our part.

Operator: Great. Thank you. I appreciate you taking the time to answer my questions.

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

Speaker Change: Thanks, Chris.

Lee Cooperman: The next question comes from Lee Cooperman with the Omega Family Office.

Speaker Change: The next question comes from Lee Cooperman with Omega family Office.

Lee Cooperman: Finally... So let me ask you, hey, how are you doing? Let me first say, I'm not a pimp for you guys, but I just want to say I congratulate you on your performance. A year and a half ago, you told me how negative you were about the environment, and you couldn't have been more right. I detect a real frustration on your part in the beginning part of this call in dealing with the shorts. These are unmerciful, and, in this case, uninformed people, basically. And I will just tell you, he who laughs last, laughs best.

Speaker Change: Finally.

Speaker Change: So let me Hey, Lee.

Lee: How are you doing.

Speaker Change: Let me first.

Lee Cooperman: I'm not a pimp for you guys.

Lee Cooperman: I just want to say I congratulate you on your performance a year and a half ago. You told me how negative you worry about your environment.

Lee: <unk> been more right.

Lee Cooperman: It takes a real frustration you report.

Lee Cooperman: Part of this call and dealing with the shorts Tees.

Speaker Change: Merciful and in this case uninformed people basically and I guess would tell you. He last lastly of spreads.

Speaker Change: So youre performing they don't understand.

Speaker Change: The uniqueness of the company and how you position the company.

Ivan Kaufman: And so, you're performing; they don't understand the uniqueness of the company and how you position the company. And let me tell you, you've been very right, and I congratulate you, and I thank you as a large shareholder. Let me ask you a question since you've been more right than me about the environment. You think we're heading into a recession, number one. Number two, in terms of book value, I'm out on vacation, so I'm dialing in on a cell phone. What is our book value at the end of the quarter, and are you a buyer of your stock in the 10, 11, 12 area?

Speaker Change: Let me tell you <unk> been very right and I congratulate you and I. Thank you.

Speaker Change: A large shareholder let me ask you questions that should be more right than me about the environment do you think we're heading into recession and number one number two.

Speaker Change: In terms of the book value.

Speaker Change: I mean I'm out on vacation, so im dialing in on a cell phone what is the book value at the end of the quarter and are you a buyer of your stock and the load.

Speaker Change: 10, 11 12 area.

Speaker Change: Tanya.

Lee Cooperman: So, you and I have had a lot of conversations over the last year or two, and you know, I have told you my view on unemployment and the economy, and obviously, I've been more right than wrong about my view on interest rates, and we're exactly where I said we'd be, and we're exactly where I said we'd be, almost to the exact timing, and what I've said on the calls repeatedly. The first and second quarters being the most difficult.

Speaker Change: Yes, so so you and I have.

Tanya: <unk> had a lot of conversations over the last year or two.

Speaker Change: I have told you my view on unemployment.

Speaker Change: And the economy.

Speaker Change: And obviously.

Speaker Change: I've been more right and wrong.

Speaker Change: All right.

Speaker Change: My view towards interest rates, and where exactly where I said, we'd be and where exactly where I said, we'd be almost to the exact timing and what I've said on the calls repeatedly.

Speaker Change: The first and second quarter being the most difficult.

Ivan Kaufman: I get a good barometer for really the unemployment rate more on the, you know, workforce type of people, and I get a good read, and I do a lot of Intel. So, I think that the economy is soft, and I also get a good idea from, you know, building costs and trades, and there's like a 20% differential in the period of post-COVID. People were paying 10% to 20% premiums to build their projects. Now, they're getting a 10% discount.

Speaker Change: I get a good barometer for really the unemployment more on the <unk>.

Speaker Change: Workforce type of people and I get a good read and I do a lot of Intel So I think that the economy.

Speaker Change: As soft.

Speaker Change: And I also got a good idea from.

Speaker Change: Building costs and trades.

Speaker Change: It's like a 20% differential in the period of post Covid people were paying 10%, 8% premiums to build our projects now theyre getting a 10% discount. So you almost have a 20% to 30% differential from the peak in construction costs people are hiring crews more easily and readily.

Ivan Kaufman: So, you almost have a 20% to 30% differential from the peak in construction costs. People are hiring crews more easily and readily. Subcontractors are out there bidding and wanting jobs. So, I think you've seen a tremendous change.

Speaker Change: Subcontractors are out there bidding them wanting jobs, so I think <unk> seen a tremendous change.

Ivan Kaufman: So, I think we are in a bit of a recession, and I think that you have another big factor here. You have, you know, the shadow of unemployment being impacted by the 10, 10, plus million immigrants who have been let into this country, and, you know, they're going to be starting to work. They're only letting about 10 to 20,000 of them a month work. So that's having a big impact on unemployment.

Speaker Change: So I think we are in a bit of a recession.

Speaker Change: And I think that.

Speaker Change: Do you have another big factor here you have.

Speaker Change: The shadow unemployment being impacted by the 10 10 plus million immigrants, who have been led into this country and they're going to be starting to work their only loving about 10 to $20000.

Speaker Change: Month, working so that's a big impact on unemployment so.

Ivan Kaufman: So I do think that we're in a period of time where we'll be a little bit recessionary, and I think rates will remain in this range, and short-term rates should come down, which is all good for our business.

Speaker Change: I do think that we're in a period of time.

Speaker Change: It will be a little bit recessionary, and I think rates will.

Lee Cooperman: Remain in this range or in short term rates should come down which is all good for our business and as far as Lee its Paul our book value was $12 46 at the end of the 630 and to your question about buybacks, we certainly have around $140 million of capacity left in our buyback plan in either and I will always assess.

Paul Elenio: And as far as Lee and Paul are concerned, our book value is $1,246 at the end of $630. And to your question about buybacks, we certainly have around $140 million of capacity left in our buyback plan. And Ivan and I will always assess where we think it's appropriate based on our capital. And clearly, at levels that you talked about, we'd be active because it would be very accretive to one, our book value, and also to our earnings, right, Ivan? Yes,

Speaker Change: Where we think it's appropriate based on our capital and clearly at levels that you talked about we'd like to be we'd be active because it would be very accretive to one our book value and also to our earnings right.

Lee Cooperman: I know it's been very frustrating for you. These small guys are unmerciful. They come out with inaccurate accusations on a Friday afternoon when you're in your quiet period, and you can't respond. And it's just terrible with the damage you're doing to the public shareholders. But we're all lucky to have you guys in our corner because you've done a terrific job, and I appreciate it. Thank you.

Speaker Change: Yes.

Speaker Change: I know, it's been very frustrating to the short guys are unmerciful they come out with inaccurate accusations.

Speaker Change: On a Friday afternoon. When you are in your quiet period, and you can't respond.

Speaker Change: Just terrible damage you are doing to the public shareholders, but we're lucky to have you guys in a corner because you did a terrific job and I appreciate it. Thank you.

Ivan Kaufman: Thank you. Thank you, Lee. And, you know, as you know, we're in a heavily regulated environment. They're unregulated.

Speaker Change: Okay. Thank you thank you Lee and.

Speaker Change: As you know we're in a heavily regulated environment.

Ivan Kaufman: And, you know, we do get frustrated during blackout periods. And then we prepare very heavily for these earnings calls, where it's our day in court. And as I said on my call, the numbers speak for themselves and the company's performance, even in these very stressful times. You know, we are performing extraordinarily well. And when you compare us to our peers, it's not even the same group. We've posted those charts to do a comparison.

Speaker Change: They are unregulated.

Speaker Change: <unk>.

Speaker Change: We do get frustrated blackout periods and then we prepare very heavily for these earnings calls where it's our day in court.

Speaker Change: And as I said on my call the numbers speak for themselves and the company's performance even even in these very stressful times.

Speaker Change: We are performing extraordinarily well and when you compare us to our peers, it's not even the same group we've posted those charged to do a comparison. So we will continue to work hard to be thorough navigate these times and appreciate you as a shareholder and all our shareholders who have got a lot of confidence in us. So thanks for your remark.

Ivan Kaufman: So we'll continue to work hard, be thorough, navigate these times, and appreciate you as a shareholder and all our shareholders who have a lot of confidence in us. So, thanks for your comments. It's very meaningful to us and to our management staff, who've been working extraordinarily hard just to get back to break even. As an entrepreneur, I always work to grow companies. And, you know, it's not the most rewarding thing in the world to work to get back to break even.

Speaker Change: So, it's very meaningful to us and to our management staff, who have been working extraordinarily hard just to get back to breakeven is meant to printer I've always worked to grow companies and.

Speaker Change: Not the most rewarding thing in the world to work to get back to breakeven but.

Ivan Kaufman: But, you know, life is life, and that's part of our job. And we're working hard, and we've done a good job. And I think the quarter speaks for itself. And thank you again, Lee, for your comments.

Speaker Change: Life is life and that's part of our job and we're working hard and we've done a good job and I think the quarter speaks for itself and thank you again for your comments.

Lee Cooperman: It's my pleasure. They're well-deserved. Congratulations.

Speaker Change: Yes, my pleasure their well deserved.

Speaker Change: Graduations.

Operator: Thanks. Thanks, Luke.

Lee Cooperman: Okay. Thanks, Thanks Lee.

Unknown Executive: This does conclude today's question and answer period. I will now turn the program back over to our presenters for any additional or closing remarks.

Speaker Change: This does conclude today's question and answer period I will now turn the program back over to our presenters for any additional or closing remarks.

Operator: All right. Thank you, everybody, for listening today and for the long call and for your patience. And thank you for your participation in the call. Everybody have a great weekend and enjoy the rest of the summer.

Speaker Change: Alright, Thank you everybody for listening today and for the long haul and for your patience.

Speaker Change: Thank you for for.

Speaker Change: Participation in the call everybody have a great weekend.

Speaker Change: Joy the rest of the summer.

Speaker Change: Yes.

Operator: This does conclude today's program. Thank you for your participation. You may disconnect at any time.

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Speaker Change: This does conclude today's program. Thank you for your participation you may disconnect at any time.

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Speaker Change: Hello, Matt.

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