Ready Capital (RC)

Frederick Herbst CFO and Secretary
Thomas Capasse Chairman and CEO
Jade Rahmani KBW
Jessica Levi-Ribner FBR Capital Markets & Co.
Scott Valentin Compass Point Research & Trading
Rajiv Patel Farallon Capital Management
Call transcript
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Go to everyone, and welcome to the Sutherland Asset Management Corporation Third Quarter 2017 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the call over to Rick Herbst, Chief Financial Officer. Please go ahead, sir.

Frederick Herbst

Thank you, Jenny, and good morning, and thanks to those of you on the call for joining us.

today federal forward-looking securities comments meaning within our the of laws. of will statements be the Some Such statements from are that could subject to numerous actual to risks results differ materially what expect. cause we and uncertainties should you on exercise and interpreting Therefore, relying in them. caution our condition. to for filings the you discussion future operating a impact that could refer our detailed results of SEC We more risks and financial

our should our be operating By access Both discuss results And call, non-GAAP GAAP. measure Investors measures, should for measures can turn we of have quarter supplemental performance. third can comparable everyone measures the section believe these is that Sutherland company's our the Capasse, will substitute in release the information. our be third reconciliation available now, supplemental the be A isolation to useful this prepared our in CEO. evaluating GAAP release quarter most During earnings we it in Tom a website. with considered and or directly XXXX in not over information. These to which I'll to of found in as accordance and now, financial our earnings

Thomas Capasse

Rick. Thanks,

small last objectives to small $XXX per are over we XX% properties commercial in loans the investor small XXXX with and square share increase robust are commercial the you, small balance a first originations. XX% in in quarter. XX% are progress commercial balanced loans administration of XX% million, highlights quarter. loan second XX,XXX We in few small our on significant ramp of There capital business for remind feet. our under quarter to growth in includes mortgage loans. raising as record with Originations And valued under million compared to a define the balance which on a to $X.XX loan a we secured the of execution grew strategic first Earnings $X pleased a X of just with focus making balance quarters by fund the

of million our comprising term XXXX these $XXX the growth fund notes reached this $XXX million million, liquidity $XXX issued capital-raising first of earlier ample quarter We loan provide issued to convertible Together, also year. notes goal through of next our offerings in August of and of year.

terms of million in have expected note proceeds been of deployment, of and to of the levered capital quarter-end cash no fully of from We loan we in small can drag Now, to estimate week, that the pool of result pool commercial proceeds. on of XXX% are as To the proceeds balance deployment earnings We quarter convert acquisition, will number on note Appending immediately close undeployed the XX% small $XX a potential deployed basis. opportunities. XX% the convertible plans June currently points. basis balance have this debt year a additional we acquisition. evaluating convert point, in issue a had commercial unless reinvest XX this next

securitizing rates, the to very closing XXXX. but first this receptive. in levered yields, assets we provides capital, secularizations last our with planned sheet X this more which demonstrated quarter where be levels. vertical. market right of falls now bottom balance continues major return line, the equity increasing or historical towards in margin, Notably, half liquidity completed our interest more call, we have incremental our of lending budget the third of net the in by every No X XXXX, for discussed for target Deployment securitizations consistent As the anticipate securitizations X year, to our we more on in are our

completions. offset commercial strength fundamentals X%. continued absorption less resulted loan lending which prices rate quarter by it's underpins is in are balanced, increases declining in few commercial strategy. with row in low in comments small flattening balance both quarter. property of reflected delinquencies the which and balance with Meanwhile, of in a precrisis Market secured net a has small market, markets small our approximately tight, This a Now fourth the the rent lower near on the as and a for the from X% as property commercial remains [indiscernible] in housing balance than properties comprised third senior

was to been direct have and needs, year-over-year. in nail salons, experiential is sector product to Now, the online adverse on one The of press note is which has big-box e-commerce impact in offering expenditures. stories stores. is benefited consumers' this, awash malls small-cap financial small-cap reason gourmet for the segment this on in of properties the service-oriented everyday primary of growth we this tenants that Their resilient to growth and grows stores, consumer market. retail from almost for liquor particular reason It's In lend retail. this we that the X% and cater food, sales. contrast The to overleverage ramps, with lend

balance difference, $XX large the only retail illustrate million, loan is nearly the footage large average If while million. is is loan of XX,XXX. square average XXX,XXX $X.X ours only retail while is a ours you square balance The feet,

on Finally, XX% credit loan book, than servicing, our less quality, X.X% originated -- retail are of special of terms our while we X large loans have in retail representing in loans. retail balance in of delinquency our

XX multi-family. chronic to the shift balance in see Ready throughout a for quarter is rentals sector, is The Mac's Recall units.In saw a strong Business record loan Administration affordable XX. with Freddie and the low increase or over a Cap lenders. in the demand. small $XX rate business we undersupply one of with democratic loan X% X% third see originations Another balance increase in XX vacancy reflected this rent high-conviction billion ended X.X% Small year BNC small apartment to in September [indiscernible] housing, sectors The can it that continuing fiscal buildings small

top quarter our us will last and the only a we restarted Although put FDA third late volumes lending in already we are lender, year, top-XX XX.

economic commercial real estate of correlation balance large and small debt that indicative of tailwinds small calls, part As offers balance we of the small housing asset the asset earlier favorably in commercial with prior balance the the the later balance class. solid a with the of market our as the continued in the commercial real with growth With -- of signs think therein, suggest cycle, diversification of we compares believe where stage economic the and market cycle. class a risk/reward strategy the discussed in estate, earnings indicators

I'll discuss that, results. with Rick to hand off financial So it to

Frederick Herbst

X leverage the to yields the a included deck. of slides for X.X% line a of return some of our Thanks, take few Tom. on highlights basis. minutes in touch reconciles bottom I'll growth on on a XX.X% GAAP on supplemental the information of Slide the few to quarter equity the

gains this a are the bit sale. originations Small net of Freddie as Mac both so business table these originated loans, economics Administration from the lines on included of all now for are went this recurring changed products top and have not Realized these margin. section believe generated interest reflects we through the slide the of on of in better the nature of We just presentation Business increased which our by gains

Tom upward attributable increase in to operating loss on operating due structuring foreclosed trajectory mentioned, The volumes. in a carryforward. equity, recoveries X of was by net of in higher from and debt utilization proceeds in a Slide provision of delinquent due was This origination financial Tom of and the write-down speaks this volumes small primarily loan While increased on offerings the properties, we business. the advances itself loans every the expenses segment gross expenses quarter balance our the loan drag pleased commercial are increase as and a offset X point XX for there undeployed basis mentioned our to demonstrates of with was tax lower decrease an return earlier. of clearly to

officers summarizes volume we've market growth [indiscernible] X the as Slide investor the with just are with effective to and still loan conventional success programs business. enjoyed, financial is affinity X.X% small market. surface loan commercial our our improved lending scratching volume the penetration, balance other our Despite more we along represents partners. Our lending just of due we've added

I realized Mac to As a ago, returns moment Freddie include leverage from loans. modified mentioned the of presentation we've gains

will These of the balance of the of Business more from segments volumes which a slide, accurately XX% small we've accurately from Mac to Small commercial earnings earnings extremely reflect strong, this included derived credit depicts loan Mac to the we sale continue X.X% which in continues portfolio levered the the be for are the gains normal of held quality returns. previous this gains see continues this be provide X sale. delinquency. from presentation gains, we recurring Administration The Freddie As higher our Freddie component to on segment Slide than being believe loans business, to returns generated business, with range. to Similar this increase, and segment. summarizes loan total less exceptional

extremely pleased the last are loan is and during volumes quarter. increase the We with our in over XX% pipeline up quarter, XX%

recent X We in are information for in acquisitions business in fairly Small some quarters. remain Business this Slide returns the shows Levered now new Administration acquired country. line third-largest the summary slower lender the nonbank, were portfolio. as stable

Slide loan These closing X from $XX the a our summarizes is portion Administration expected excess generated of Business residential are acquisitions business. a Small close utilize liquidity and in last through million convertible will we $XX loan note December. from million on to week acquisition offering. the However, mortgage good another remaining

has in when decline. been production interest increase strategy on value the loans levels rate rights sold, to a new Our loan which rising in repay environment generally servicing

quarter consistent with are down third residential loan new volumes quarter Our year, industry. as to the last compared the broader this mortgage

of servicing These shows current of every geographically, shows the perspective the loan of our during investment for by the X levels our facilities were by placed and quarter, increase collateral platform. net where reflect specific next product of new origination successful and funds few reflect However, origination our the line increase provides volumes our Slide to quarter. million. type slide which $X by leverage. new could value portfolio showed summarizing size, contribution in in XX the originations quarter. the our on slides the pools financing by Virtually a improvement loan loan the income Slide The businesses. diversity size loan interest loan rollout the

that you line. back recourse convertible that more was One closed result a column slide this the of comment in may August. the to that final corporate [indiscernible] is loan accurately debt segment disclosure that as was to due to debt on notice $XXX in the added included This fact we the recourse reporting million individual to term quarter leverage business our release, note reflect as the in of overhead comparable despite separate press nonrecourse XX You'll that converting a last the in securitizations. breaks

some take we turn Now over questions. for some it final before I'll Tom to thoughts

Thomas Capasse

We Rick. we capital utilizing accretive Thanks, progress the our loan origination business plan, our significant we made XXXX believe in raised have franchise. have from in growth

As order be efficiently we as capital move possible our generate higher to to returns forward, to will our focus as for deploy in shareholders. continue

to have we market. addition reentered origination pool higher In acquisitions loan the volumes, loan

the confidence brand up look now and product into continued Chief marketing to and the to for hiring due for continued Officer you your franchise, your open we the in Operating growth cost our will in application recent and Ready like lines. Cap origination our With Officer, for loan company the in Moving on of questions. platform our that, we'd XXXX, Jenny, across a achieving line and technology, and support. process once operations awareness Chief with our to forward We efficiencies again thank focus be our expanding Technology of


our [Operator KBW. with I'll And first Instructions]. question Rahmani Jade from take

Jade Rahmani

I other the up, seeing trends. of with comment was And competition heated market? the if debt wondering on state competition you're in whether you on similar sectors, if you the could capital I wondering comment was markets increasing having in could

Thomas Capasse

our in so just with [indiscernible] small business commercial with This based Basically, Dallas. the -- stabilized CMBS-like -- properties right. securitization first All in is deal structure. balance in on loans I'll that that's the better product, segment-specific, loan investor executed

certain do community that, we there are this by offering. they let's not there banks few that is, recently at -- nonbank areas, in very market entrants competition equity aggressive regional point, -- but really say, are raised see an we what -- So

In Freddie there. no And and there's business, that to a no various nonbank lenders. Freddie -- in change that's so there's it's somewhat one-off, since there there Mac market limited that -- is entry competition spotty but has XX is no significant there, the

banks narrowing as Freds say, pretty to there over -- there XX lenders only solid, -- of, product. of or more would because our lenders I competition estate higher are X the market. Freddie within the there the really we're finally, But X in private think loan sorry, ranking The there's that in SBA maybe stick we're year. active. tend in A the again, middle X seen the have the transitional we XX pack typically -- are not in we've of of downstream product, non the a And have increase their of competition if have X approach. nonbank held the there going or sector, far last been, there XX no XX nonbank more credit quality as whereas real that banks to basis will, marginal some with at Mac loans looking the you to I'd points -- loans, And secured increase

limited was think to there. evidenced relatively quarter-over-quarter, the continued by loan as see see, it So I of in increase competition we there, volume -- around XX% we've

the we I -- lender And our that approaching been So significant point, lower of most issuing the definitely our been no at capital precrisis lows, costs. -- secularizations resulted competition see the margin in in entered this much that quarter. debt there don't taken -- that advantage spreads secured on of through the on the has pretty so nonbank space, -- has market -- any limited. a by is third nonbank And think, interest you have XXXX we've there's through side, widening net interest so are has balance,

Jade Rahmani

platform add move the into present of entities whether an could to space their whether small say you're to could competition, looking level approached the terms being opportunity? by And M&A balance and origination the space? other of maybe In of type that in you

Thomas Capasse

or in equation. in that refinancing side below example, services for loans see is unions, not don't sorry, of loans. million of What $XX M&A the FDA program, with I number a terms are the more of million, looking the special -- see we affinity on originating that it $XX credit for

it's XXXX. to of is over strategics focus terms more into time, So loan seeing ability team really in big is of origination which programs what affinity the our we're for moving grow

Jade Rahmani

basically that leveraging other the is reverse? force capital And or pools' your originations

Thomas Capasse

It's let's They lot that that -- example, lending. relationships, are of there. say, doesn't depository small credit the for union hasn't business doesn't former a but looking, have

certain to product of with refer yes, loan space, more is we would look look to a or could respect bank that would in they'll type. that But a at, a which the balance multi-family otherwise at make. let's So in doing doing high-quality bank say, a FDA a credits bank it lot be a us multi-family A+ we would story with turndown types the program are credits that the small

are the our with origination a leveraging -- having verticals. their are an private-label various or that these program -- lenders conventional a either by lenders lending that larger small program So referral balance platform

Jade Rahmani

or the the of leaving just on maybe terms aside of volumes balance originations terms In your quarterly can what capacity, small is residential, side, achieve? annual you in capacity that production

Frederick Herbst

we're We be volume quarter-to-quarter, going of hopefully, But some think you them in that's year, for over the with I some we'd to believe going quarter pleased our year to We, lower. some a finalizing $X representative. soon. saw volumes sustainable. to growth very to still third anytime next $X little We're to that. them year third like be of get a plans going going I year. certainly billion billion. was don't think quarter. the higher, the next a But to in obviously, We're, little think over next we're these be Obviously, see

Thomas Capasse

about that billion. commercial SBA, small billion, this remind you loans; investor so picture, outstanding, years macro maybe of that's But billion just goal little billion $XXX CRE balance the represents And X% our to X will in -- credit. year, the there under of just that to $XXX -- there's be total the X/X in over Maybe of market next XX $XXX have terms to which X is be space. share

Jade Rahmani


a do X in could those around might so a be? And closings, potential you the In December, accretion FDA terms acquisition and earnings How they loan of of these you long put about talk life could pools investments? what have? duration the also range

Frederick Herbst

larger those historically. kind relatively The acquisitions to much probably They're right pool both Both nonperforming. of assets. next line of average what with are Pretty short, in duration X returns. year are we've performing it's years X low-teens and is done


Jessica next [Operator we'll with to go Instructions]. Riley Levi-Ribner And B. FBR.

Jessica Levi-Ribner

or the On that made side, Do targets? on think you have cost you expense a goals Tom, comment, there are I any focused cutting. you

Frederick Herbst

Historically, we've been running around X%.

reduce time. looking over that to are We

a onetime little kind and number of higher pumped those had we -- say unusual I to was a This but up. want quarter items don't couple items, bit that of

to as moment. add we I'm keep not like XXX get it's to the and as we're looking going under And say we'd certainly it's sure at it So basis But points. can. it's something X, realistic low to

Jessica Levi-Ribner

down, expect Okay. in similar pipeline the a but The looks SBC fourth should still like we it's kind of quarter? lending quarter

Frederick Herbst

The pipeline on hit little is we're Based what same a we're the seeing, I'm sure to going down level. not bit.

strong going quarter. this whatever or for A be from it get I'm depends. things happen have for we're purposes either sequentially think I up tax a not year-end of sure others can or at off to lot quarter at reason other It reasons. where point. fall deals accelerated this will

kind to month happen. to predict going a So tough of exactly what's is December always

you. is sustainable. But as So current that's certainly, as can the much about we color think long I give term, rate

Jessica Levi-Ribner

the are SBC know you us And Maybe think how areas you you hiring across And what of I made platform? your both also at kind going give comments what the can Okay. and Tom, are you today? some of about call, beginning retail. the asset is attractive targeting? of most the SBA idea an

Thomas Capasse

a respect we volatility -- the recession. to we product, sectors least with at investor By net operating to a which mean the low we beta in have income. have look believe, We that,

currently, focused to strip I'm of product ratio very So the very use net the the retail of are mixed -- income yes, sorry, the yields, strong a in you, NOIs which retail malls rates the we're loan and on is operating in that -- have are cap small what and sense debt balance. the

-- a we're to in in we decade, to we SBA in verticals businesses coming investor rates where strong, then in we again, small recession. back which default the we to on business, [indiscernible] predict that the literally have have the a there -- So heavily our with these a enable models business. and to focused very very us respect believe terms those have sectors of resiliency And

businesses So tend on just loan or quarter on last we in officers was that dentists, about to focus we a like focus hired daycare et cetera. doctors, X -- Ohio team that

So pivot again, predictive asset we to another, from will risk-management whereby, downturn. to are way resiliency the with along have of class and see saying, that we an malls strong, economic X

total. X So another goal million hiring of third XX officers, in growth. million question, SBA loan And years -- in year, new maybe $XX in XX, to record support upon typically of the add we business. depending probably these next very produce our officers in Each terms yes, investor linear. they and line. none product by officers $X the XX the -- anywhere loan to of loan from experience, business, to in hire achieve we it's officers have And the year-end, second the the the -- in XX did the loan roughly But quarter SB

of lending strong loan their way local this hiring we accretive we market. at our a the we're net essentially has see the individual in that's as in record adding interest -- know officer business very we're adding fixed cost point, that this our track So terms through because margin with -- in

Frederick Herbst

loan would SBA quicker add officers Tom. have hired loans just otherwise we've delivered thing, one the business we have in perhaps. than new assumed I'll The

while or the -- takes system loans it into closed build in recently we Sometimes the they out to product officers transfer book when hired already the loan. those delivered little The process. have our

So that's been positive.

Jessica Levi-Ribner

banks? some those loan are still hiring the from you of officers from? Where are coming larger And

Thomas Capasse

on are are in then, can officer that SBA It's the and with. that us credit hire recruiters. provide And with or tight constraints, as we, we investor regulatory producers in talented the side class, teams particular, credit banks, a have this the of on high loan the officers, interesting, yes, asset they with they that coming basically, side. and box thought because it's frustrated them both We see to -- originate more loan people that's a tempted actually, have lender, because we they loans -- nonbank more typically box been the expanded the

So coming loans terms loan financially migration a both it's that terms of otherwise credit been business officers loans. to of and of more does us nonbank constrained are as box of lender and only really the in banks, investor small the from both in waivers that


from Point. take we'll And our next Valentin Compass Scott question with

Scott Valentin

you Just you X.X%, excess from with guys cash ROE, drag kind it XX adjusted regard some posted of to and think basis the was ROE the think of some mentioned from convert. I I point the of of

normalized your at [indiscernible] So X.X%.

first you If to to the half say, it XX%. Is think get 'XX? XX% reduction, cost do in you some of push possible assume past with, you

Frederick Herbst

the want excess deploy but don't it, points XX able frame XX%, the cash sitting earnings cost balance leverage basically that our put a before represents running have returns sheet interest that been to on that basis power, cash our cash of XX%, to rises I on and that just the time dramatically.

the just flat So cost interest points more of points. just XX basis XX it's basis was The the cash. than

a we So should think will of originations we on cash, time we question, it the the we these into XX-or-so of I first quarter. majority shouldn't we've time, report the vast deploying acquisitions, we and on your earlier be the that it. But guess take here over about frame out the percent with -- call, deploy And over put of I then rest as coming quarter, new after answers as mentioned it it, again, as can can't XX%. but get that

Scott Valentin

of and business. do you gains, Okay. in Freddie you for [indiscernible] a welcome kind the terms Freddie Mac, mentioned account That's in that's helpful. of And the, how change SBA kind of given bonus realized Mac, then the of,

should we think long has on we But an gains can gains? For about of on history should terms think how of a loans Mac of sale out level? those the I gain type maybe the SBA how know figure in average kind about been of SBA, Freddie we what Mac, Freddie loans. with

Frederick Herbst

just we X% folks, clarify, accounting, change between as the presentation as just What realized the interest line always and every included those as like that margin, originate the clear we didn't recurring folks Generally, return we net we to in part the talking gains were and it's for we've we And with core to previously X.X% the by done because you, loan. contribution accounted the time well in wasn't was a Scott, it way of way. from had it it the what business. as product changed

So -- the GAAP a has presentation for always there purposes been includes accounting the those, always thing. but

Scott Valentin

final on then question quality, one still strong. asset And very just

going one mentioned which know forward? I forgot portfolio. about low the you of it think losses? provisions use rating for provisioning expectation you're and for How you mentioned I is, guys running we use kind use some rates I of they it should you rating very you seasons going delinquencies the very, think agency -- forward, but How in what as think about of should loss guidepost. the for portfolio agency loans as your of to the the maybe seasoning provisions we

Frederick Herbst

little a acquired or that's depend it's originated. different, on whether Yes,

back. and discounted loan-specific. flows On a kind analysis the cash it's acquired, very And we for do of loan-by-loan

something their originated agencies, those falls pool, the losing models. [indiscernible] assume in the that On you're

of similar, of we've is, we do history. The something it based news billion our purposes, analysis though accounting on loans. $X is For over originate good statistical

of real amount. currently, have X than We of -- less million we just $X loans have out modest are that that delinquent,

as And It's that of based statistical values, rating factor where well type history, the loan a blended market, the approach on we in been the so on a of given kind in that our based cycle. thing. do we've values, analysis agencies. latter We to as on based

Scott Valentin

we benefit. then about you question. call tax a it around mentioned And that X high rate? forward? tax, should was I running, to it How good this it pushed -- think tax final percentage. it going one the think you On maybe a quarter, Is single-digit NOL was

Frederick Herbst

running around Yes, it was XX%. X% to

think in think We going have forward. as you're a capacity of engineering I much a this did much reasonable. right, fair efficient around to a financial can. come [indiscernible] estimate we of I X% a and lot done kind But using as the XX% time -- that's we've to and is as NOL, optimize and benefit


our we'll today Rahmani take And from final questions Jade with KBW.

Jade Rahmani

if could the I originations mortgage was wondering on residential business. you touch

equity still core Just And how Sutherland? vertical that? for much a is if invested as it's viewed in

Frederick Herbst

second servicing as interest rights were they But $XX for little value due equity it's had grown returns what Yes, volumes the rising a rate business rights, is quarter, to the been take first very the is and a The rise, core around again, part. value of you It's the keep XX. servicing I'll XX%. if because bulk was adding -- of There a bit book, servicing portfolio million And profitable the to to us. not in continues are those -- asset been that the in quarter. this lower there quite little September their those environment. returns

Thomas Capasse

we history, We operating dominant it's the with in strategically, position solid. Alabama the improved And like business, XX management market, years' the team XX% Louisiana, purchase.

So in the in footprint, via Freddie mortgage currently the a SBA that, cross-selling Mac and banking is to multi-family. particular, -- subsidiary a regulated do through their products the don't not volatility we Louisiana, very there's compared have are as their loans earnings we And residential also and less the -- in entities. where much other --

Jade Rahmani

XX%, that capital? The is as a percentage equity common total or of

Thomas Capasse

over little is million This $XX a around

Jade Rahmani

on reform Positive, negative, market? neutral? tax views any the have impact your you and Do addressable Okay. on

Thomas Capasse

to market, in interest factor deduction debt, commercial loans. because, the it's will balanced is, for a which small balance to in small neutral similar commercial mildly -- the the For it's significant obviously, probably remain particular, big mortgage positive

XX of not X, issue. return so investment estate points a lower, in real your big from is terms about are -- the equity LTD's equity leverage factor Our total an

profile investment really that, these no properties. other So -- of import than of really I there's think the affects nothing there's small balanced that

small of large small deduction the can balance, are say, XX% there's that the company. speaking, impact. businesses, But as, terms the a side, generally some not and the interest have deductibility in of on much Fortune XXX On EBITDA, for rely SBA as let's businesses on cap terms interest of incremental -- in as levered on don't XX%

on neutral I mildly it's to So positive. balance, guess,

Frederick Herbst

that our Obviously, those whether CRS retain we it and to [indiscernible] to I but that we tax it is would in that there and earnings. RIET and have distribute does get want to Jade, ability we -- would so, I distribute the is. do But not terms we flexibility give end where if the think earnings operating have companies our -- where other to as distribute tax the have assets probably value for REIT holds of but that additional the not are, reduction the tax the been, numbers your loan, would from rate where a in corporate beyond shareholders, to add, it CRSs CRSs mean up lowered, obviously, extent, more to rate, the specifically income the we dividend than assets. the not rates up, above not will retained maybe depend other on increase up book it or us corporate the managing question, those our if the would -- assuming franchises, maybe

Thomas Capasse

terms have -- have of reform. marginal capital, cost operating would [indiscernible] like that value Yes, lower given manage how post to in flexibility lot Sutherland at argue after-tax of implementation tax earnings more grow the the and CRS broadly, a of book a we REITs the more

Jade Rahmani

mentioned be to on make or trajectory Should headwinds to you of you plan and in earnings the there originations, week repayment? acquisitions terms loan In side the on based in earnings that are the upward on the December. we of timing terms expect expense next cadence, other or

Frederick Herbst

forward. But earnings marks Not put the on there's and what can't certain books and work, fluctuates lag, Obviously, aware obviously, control deployed equal assets. that to the tomorrow going we is capital today, from of else see along we any headwinds. [indiscernible] everything quarter-to-quarter just don't -- as the a on being put and are

else that the in again, fluctuate, being on have as on down. and We equal But a value the marks up have add upward fair other perfect of marks an they could the we type. and fair a those don't or We lot assets just valued, would everything book be MSRs don't go visibility are So earnings capital, trajectory. to but deploy that.

Thomas Capasse

think of maybe some be I what Yes, you you're headwinds intimating seeing. are might

these on transitional seeing out commercial lending balance sector, rapid to on earlier large those these focused loans than that expected. financing into markets, this are lot of last of taking very that increase REITs a you're large a the quarter For number transitional -- in with respect take-out example,

a the sorry, And -- have so and you're seeing -- a capitals acquisition face lot tailwind we head of more more in than I'm platform a of compression that issues. opportunities more have We the in reinvestment than have we margin our -- and repayment capital. the and business we investment sense origination

is that the a in where stage sense just So continue reinvest a community acquisitions, would banks we you saw credit that cycle. loan the the -- quarter, sell tend as assets origination, by to there at even -- into we at grow low this the loan to business capital, pivot to in -- pick cherry

Jade Rahmani

loans faster at seeing And and that of reinvesting lower higher-yielding So loans returns? originated problem not has repaid you're capital payoff?

Thomas Capasse

Absolutely increased -- where of you're at constant loans, on our million our they're dollars, of say, material are average of, not. is these modeled let's where modeled balance No, competition, a MSRs at terms our low very rates coming high the singles, $X million. loans hundreds seeing impact say, at doubles, our no million, of, number We're loan point stabilized at demand of not transitional there's The transitional prepayment say, high some in low There's large let's probably little the coming let's loans rate $XX only, in prepayment maybe teens. there. business, the to as projects. but been and talking stabilized bit and of

the in -- because SBA and/or the to -- with In ever prepayments, very before aggressive -- saw unexpected X% they coming -- the margin sort run crisis the lenders tends these suddenly business, the not to in the X%, of only on spiked SBA increase prepayments compression. any run I've -- even So credit there, we seeing doing we're of the to this time from since just which been all time XXXXs, only increase or XX% nonbank a a about in was basis. in

you're real mitch at the way in the conservative due [indiscernible] lending balance and rapid banks, seeing this loans. So commercial maintaining see long issues anyways, are terms in spreads very our don't large class that little a stance that on prepayments banks. of reinvestment to issue the be point, competition now a compression in that of really right saying large those market this tends to the we due estate space debt driven and then in to hence asset And by

Frederick Herbst

down August add years that the are quarter the are bit quarter, could first portfolio, I excited obviously, ago. portfolio. this month a with large We runs if In the in And about, we the as off. those third of SBA. for the acquired loans thing outpaced a of first runoff for new originations in pay the couple time one And portfolio time,

So for -- point in to where goal new seeing portfolios. to and our get this runoff would the outpay originations the was year the we're the servicing

time in pool several so runoff an ago. see for terms large the on track August, happened right we acquired we of of the But upswing a that. and the in it placing, more So the there years first that

Jade Rahmani

to class investors fairly myself new asset terms in and just particular, And the balanced. something is small in itself, of

tails soften, were real Let's down say already estate to range, volumes began commercial this X% and a spread. like year bid/ask in prices there's investment

the on estate said but to which next What in in a the year, balance to impact seems I decline say, small be? market, its you real let's pretty know least modest. footing the you've anticipate correlated more past it's now. housing would So commercial would right of at strong

Thomas Capasse

that, X.X, But increased with -- slide of have is month quarter, see last the index large real balance on XX As in to the saw correlation deck. page this to X.X you [indiscernible] but current to compared deck you commercial index correlation could [indiscernible]. our the of actually we that the it the has XX the estate correlation box large as balance with trailing beans --

Large forget way X much more I smaller balance they are So more the -- properties markets by saying that's it's cities balance. these cities, than driven just housing of in small but that is half index, over the are location. -- is and/or concentrated the quantitative local large in suburban-type ours whereas

a the in economic So expect would lag has small -- market, but caveat that in balance, that expect the the with balance from with CRE -- we we housing housing in X-year economic the supply/demand the from and large in terms cycle in the in X% of impact mean the traditional relationship to credit decoupled a price, to, believe, reversion market, we respect that would late we believe are to the -- we inflation. of going which is which cycle about X%, but to that home -- is housing say, with imbalance crisis the the creating over due result let's housing about, in

estate between cycle. balance real So and you're lower a see correlation to of small beta commercial -- a going with large in -- this terms balance commercial less that, in


with And from do we a have Raj Farallon. Patel question

Rajiv Patel

me? Can you hear

Thomas Capasse

Yes. Raj. Yes,

Frederick Herbst

Raj. Yes,

Rajiv Patel

for the accretive, with spend all would dilution to and right? fairly talking think add the it earnings I it core the I like numbers be financing, recent quickly? you could not it financings QX? close will you mean, playing pretty the actually spend it when recent and be about I'm part accretive seems the up, all earnings all when from be and but

Frederick Herbst

deployed it not not should still of be be we -- we're we drag. mean, there'll deployed. and have Yes, not Yes. going positive but than I it, will mean, to deploy have a more a I XXX%

it'll be yes, positive. So

Rajiv Patel

X market, Okay. don't do in loans dilution have can these to chunks you're these you the so the so you And when quarter you on and issued? since smaller we accretion, And ebb then can money see need of out this things will in that you flow again? raise kind get -- and the neutral

Frederick Herbst

big Yes, and couple which advantage did for believe a prospects we of we still our company. to have the market chunks. in good the good for -- now it took realize was August, a the of we trade is We goal long-term

secured believe. big or previous accretive the going give in Going we book largely do not to the market, bond raise forward, converts, opportunity those issuances to mainly going transaction. some have one, value. immediate the there done We million of not notes smaller in an there's to we to deal the if baby we're unless and have pipeline, in was the available of [indiscernible] kind $XX unless are the capital believe but million back or some capital. we're we they either transaction, some would markets a We're acquisitions, the equity -- be much rounds, to chunks we had we opportunity, below what of need for we've is big have not any $XX is us, the The which access to

piece So chunky is to we of us, the need anticipate acquisition originations. a and any, the having available accretive an just but do raises either or least -- believe we -- answer don't smaller your we at yes, should are market capital question, to fund to

Rajiv Patel

else equal the time out of earnings company? this hopefully, quarter, earnings, than rising next thinking confuses of kind that the a now always longer way, the ROE? going we looks Or about all should And or -- at are that as X X sequentially. track dividend there it on be it as for the new $X.XX the ROE? $X.XX And quarters. focus guys a getting record or How and the But earnings you said, dividend what and the core thought you being forward, increasing period should then like me, the with either there up your caught -- and all is have on --

Frederick Herbst

year what for dividend and year. the we We're at the do sustainable of that did short this for But was is, for year. year year a what the pennies it the is this year, to my Yes, whole guess set obviously, year we thought the make of we'd we'll and next the beginning announced couple board. recommendations we

be that the We'll recommendation also is dividend year. a we will make on minimum for better, of year. the on couple the is And the it So earnings, the get sustainable pennies make presentation my we'd dividend. there next again be as and we we taxable goes we do now what is, my for fourth quarter we're the previous as out. whole a a believe and the the obviously, think do dividend the from is we'll open if for -- would first for haven't to guess but board, dividend, quarters. sense likely yet, projecting numbers same the where will up not what would we make minimum we're, raising to then year, But sustainable year have which depends quarter, It the we'll thing because be we be -- to around and on, analyze the same the where the


remarks. call conference does our you, closing That turn any conclude additional Capasse, session. to Mr. At and answer the to or like back time, this I'd for

Thomas Capasse

Thanks, Jenny. in everybody's forward look the again year. reengaging appreciate We early to and support next


have Please conference. great Thank do today's day. conclude you. your for And a We you participation. does that thank