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Ready Capital (RC)

Participants
Rick Herbst Chief Financial Officer
Tom Capasse Chief Executive Officer
Andrew Ahlborn Controller
Jade Rahmani KBW
Ben Zucker BTIG
Tim Hayes B. Riley FBR
Scott Valentin Compass Point
Christopher Nolan Ladenburg Thalmann
Crispin Love Sandler O'Neill
Raj Patel FCM
Call transcript
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Operator

Greetings and welcome to the Ready Capital Corporation Fourth Quarter and Year-End 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to your host Mr. Officer. Financial Chief Herbst, Rick Thank you.

may You begin.

Rick Herbst

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

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

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

Tom Capasse

significant a established business. expect REIT, loans, complete end to moment focuses stockholders' Ready base should discuss Thursday, equity Capital's meeting merger the Mortgage, will minimal balance own pending hold March very by XX, Thanks, operating expenses, small listed not will a Realty benefit we believe because Rick. the are like Ready a transaction estate our dusky dilution. transitional special positive of taking our of Capital both ratio shareholders to real that be we Good merger the with float reduced. vote, with our quarter. status a Further and finance morning. staff with loan and on the similar our originating take and increasing by to expense on We shareholder I'd the on commercial to Owens brief publicly

As to I just described encourage of a the The we quarter the companies marked numerous participation and anniversary public Ready proxy second shareholders both in Capital's benefit fourth are shareholder company. vote. as

to company's commenting Before last like two highlight quarterly over the accomplishments results, on our of years. the financial I'd some

First, our balance investment we've originated than activity as Quarterly doubled small company. a more or acquired commercial medium $X billion mortgage to has loans. since in first quarter public

our company Second, remains dividend and top equity of on peer public a since yields our becoming group. the at annualized return

improved in commercial have and across lines. our we balance financial product million corporate all leverage small $X.X in debt raising Third, billion securitizing $XXX loans

our shareholder continued return execution has Finally, business XX% the total becoming our since been of of public, reflective plan.

financial Now fourth to I'll turn quarter results.

per interest non-recurring rate inventory quarter record $X.XX share basis. our used discuss resulted an share. earnings nature core GAAP after-tax hedge in rate share per in treasury and the year-end this in in were earnings have by for core Absent a of in minutes. swap per would $X.XX core product yields been the per for were of positions reduction decline more this on earnings The will a adversely detail the securitization. GAAP negative marks sudden a affected quarter at and common fixed The prior high Rick First, $X.XX loss, of few to earnings this quarter share. on $X.XX to

in or small over administration we is or record originated with line loans. origination highs In transitional and SBA in robust. and quarter company's quarter, million $XXX XX% with origination and second commercial all-time increase balance the This SBA a highs our and in the the business Secondly, volumes. remains SBC; quarter, in acquisition loan record small activity the fourth third

of activity originated the investment as loans remains evening. Our strong in yesterday quarter of million $XXX acquired or with SBC

period total solid $XXX pursuing money We current be some and given first the the small shutdown we increased overall close in reductions originations higher this Freddie In of new a reduction which pending SBA but the volume $XXX months diversify the volume Separately disciplined Mac risk. have due said, four to approvals performance us of combined have seen approval. million in market. compared that to are by to quarter billion origination volume experienced the loan quarter-over-quarter are credit to XX% compared approach government's correlated X(a) to volumes down in SBA our cautious with to due a continued encouraged space on the quarter, product our for maintain million overall expect estate and Freddie balance that secured we We to will $X.X our market government of competition to business multi-family and to the in mix. a loans. lending reduced actively first note do That acquisitions, focus over remain a our sentiment year XX% increase month. decision Total for pipeline real increase first fiscal Mac

conditions. product to also the securitization, We're our legacy the size fourth collateralized loan million $XXX sourced obligation, previous comprising million launch transaction, $XXX in active asset million we quarter, of our at mortgage-backed rate remain strategy. markets. securitized a the securities debt was deals. we completed which In loan, ready January, double to $XXX In transitional getting closed commercial from the we subject Finally, fixed acquisition market fifth loan

performance. Ready recap Capital's XXXX now me Let

XXXX SBC represents respectively, of ROE Total XX%. earnings our $X.XX equals resulting per target exceeding XXX% For origination and represented as were in our year XX% billion This asset to billion mark-to-market steady space. per others $X.X in compared return $XXX investments the of in $XX.XX growth have the acquisitions. earnings additional as basis. our a risk a to previous minimal a over $X.X $X.XX on year, we fairly with of our share and of $X.XX ROE over XX.X%, common GAAP value dividend book adjusted equity a XX.X% Furthermore, an ratio share, coverage core growing our core million in Total on core year. stated throughout in asset of remained both the on

quarter across market sectors. businesses I'd demand The tight few causing is Now, rent small low market. of observations the Strong in a combination commercial record make is XX% X% annual small to of occupancy limited SBC to the increases reduce to like X% property SBC strength of and fourth on demand. labor record X% to space and balance vacancies reflected space of

at XXXX result, three to billion lending real quarter have years commercial X% last through year over market. consecutive the credit large balance X% mark a SBC year, behind takeaway SBC third but of commercial in As late the year-to-date $XXX they reached cycle. Industry-wide originations will X% prices the safe assets, $XXX The although haven finally be likely risk estate quarter slowed remains sixth we'll that among decreased peak a senior this balance third billion. small versus

and Andrew been be the key a to our a with best over all a he happy working I assuming nine us in I profitable Now been future the has leaves how retirement. on well-earned helping X. today. of represents of I want finance our you in us and of nearly will closely Rick the company shape that Capital. I'd great executive, effective state create for personally well instrumental I congratulate he his Also June turn we years. has promotion retirement, Ahlborn Andrew Rick his to to transitions Andrew model in the am And for Ready on sustainable Rick, financial and example he and to joined Rick here CFO has strong and congratulate depth like role to retirement. as success. positioned wish call Rick before business team

Rick Herbst

Tom. you, Thank

Before stage and After I must into am and results, companies, under the time of guidance miss Tom, role the Andrew to life. decade team. of the in get rest that, my I a the public my here other and forward CFO Capital. I of said, gratitude everyone before and That admit the my I'm I'd next confident as appreciation of like to company's express at success the I looking here Ready two future for here and my will tremendous

included Tom decline losses due in to of hitting some mentioned. slides of swap I'd Before information discuss a in the million and interest supplemental rate the EPS in securitization Tom anticipation statement the taken to mentioned large core highlights the of $XXX items this mark-to-market income the was in GAAP outsized like positions deck, on few our quarter. the

lending We associated have with risk and our always rate hedged program. interest the fixed securitization rate

not did hedges. for hedge accounting use we these However,

fixed-rate $X.X losses we'll accumulated will will in securitization entered a January. record income January, mark-to-market quarter we financial sufficient rose track utilizing the be fourth in million million closed. fourth are our a and the yield the unrealized line forward. other so statements. do are of in losses The of going is to unrealized net into accounting treasury closed prior in the item as to Now The contracts by hedge and in net gain qualify, the rates derivative that have these for hedges on included the the $X.X with we securitization associated comprehensive time tax, quarter, totaled and fourth unrealized to of adjustment be quarter as covered amortized in quarter, starting loss

future. highlights Going derivatives XXXX, for year in related we the the gains summary see full and or the should for Slide as XXXX. to hedge fourth forward, for not these to intend four quarter well three, depict losses of we unrealized as accounting use them dramatic

performance the negatively the activity both five the high the the approximately in Company. Slide and in million Small investment we second commercial quarter. originations of components impacted record our we in the set equity. the Company's financial quarter, equal of shows fourth return remain quarter balance back encouraged unrealized losses fourth by $XXX the the on results of Although,

volumes, quarters segment. Transition origination various taxes Slide commercial our our are and in losses. SBA Freddie reduction on decline segment increased of both five income new a income for believe originations in presentation reduction by loan the to position effective usefulness operating were the pleased We to a sales, have SBA gains in decline a reduction offset expenses derivative for in to on Banking the balance loan the loan the previous sales. ROE. the we a the in segment. comparability to mark-to-market operating as small origination Residential updated and loss leverage and on related yields the well as Mortgage segment MSRs seasonal also decline enhances These due the in Mac the growth and breakout residential Loan reduced with The related the to those We over MSR declines due the was six leverage presentation corporate summarizes period-over-period and in

business XXXX. conventional quarter, third other flat Our remain strong the marketplace. of record products loan origination pressures the in surpassed Freddie Mac also only set volumes experienced from the due by competitive quarter-over-quarter, in to a volumes quarter

the business cautiously in from well three remain -- sheet and growth since lower lending to year. sales, Strong although them leverage up Freddie a market points attributable the remain resulted full not sales segment. the and During the delinquent originations is eight status, related delinquencies strong fixed will to gross our loan loan-to-value the the securitization loans as venture portfolio leverage levels, driven gains decline investment. we increased performance as due a increase loans, the in at the The bit interest end of dramatically in loans increases quarter. XX% strong remain date. portfolio. paid loan continues increase the SBC three traditional CIT supported been joint income seasonality provide had remains further This in largest loan acquired Slide optimistic the in in rate do due business. continued yield from loans The XX-plus-day balance quarter. losses the opportunities pricing mortgage credit origination in we the yields, lending capital percentage and portfolio. from of this quarter, these we've leverage XX segment match category to hired Volumes current our continue the third our business. double-digit successful and to of significant Slide of or due increase XX%, in declined Slide on the Of the and The primary. the competition. the permit. acquired in activities XX last was volumes low expected rate we'll Origination new segment. our a by Gross compression shows the of gains Based increased add of portfolio quarter from Mac Delinquencies rising returned to of as summary low, variable have we XX% officers for history, in increase a our the loan any to party despite January nine competition basis summarizes residential fixed and to return A quarters Slide fixed information SBA to the in covers summarizes ratios our XXX to previous yields by in funded portfolio. fixed the to and to workout in spread up stable to securitization. some anticipate

expenses assets natural which hedge to the dropped the legacy the of left within virtually origination SBC XX anticipated of XX update and loans now sensitivity The securitizations non-existent. the that to portfolio in Delinquencies loan to loss on and business of schedule million reflected rising shows closed rate number with Operating exceeds quarter-over-quarter, right-size is volumes. Slide completion interest matched side securitization summary $XXX,XXX Slide rate November. the a securitization includes done XX% debt. we've in of remain products information reduced fixed servicing January Our $X.X the rate billion our is that Capital portfolio portfolio. of about dramatically. rate provides rate environment. our $XXX believe we originated chart volumes this not are as The fixed Ready and fixed in the is serves we this an a

a go-forward As has on the see quarter on diversity of and few the adjustments capital does loan impact of reflect our the similar next liquidity on on originations. to servicing hedge numbers are in net interest the interest various have slides interest a and valuation you the on portfolio, positive potential quarters The basis. or sources. of rising rates of margin rates reflect end updated impact accounting previous to portfolio The rising new reflect include net can chart composition the as a our right and the based any slide, on on use to not income. of structure our chart here and been pools positive of the presented our loan those The impact

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

Tom Capasse

provide Capital's Ready should price and on the cycle Rick. the in small real commercial relative potential balance has against resiliency differentiated estate Thanks, commercial correction late We focus believe space continue to assets.

of we Owens With and non-dilutive origination fund the through merger XXXX. volume closing, will have accomplished capital acquisition goal generating another budgeted to

will we leverage network including agency origination lending Europe. to ahead, and business our expansion Looking small products programs, alternative explore new into continue products to

and XXXX this and our to building company are about We beyond excited value stakeholders. looking are for and forward

questions. I'll operator now it So up with for that, open

Operator

you. Thank

with We comes will now Please be Jade question of session KBW. question-and-answer line conducting with Instructions] Rahmani Our a [Operator proceed your question. first the from

Jade Rahmani

much. very Thanks

quarter, particularly with the in mortgage volatility in sales loan In and loan fourth qualifying to in borrowers extension or sell the portfolio able to an terms potential December, for not bridge see out any pickup a or loans? trying that REITs did space get refi debt certain situations market played funds the not of you

Tom Capasse

was Street. really starting Not that it a moved – more Christmas occurred was and – more at risk of really, Eve, culminating Wall end of because and the in Street August out that environment in off kind of Main this

seen the any side market. the haven't the banks We either related bridge on acquisition or secondary in impact

million, probably hundreds – our with average $XX $XX Now larger loan of to million the focus is and industry only bridge more $X our millions. latterly again, guys is million like an

you're a credits and projects that to in of become having running of business lot the workout – reserves thought our and having of default are – we now some competition are we or result terms ago seen interest a that market, those as out in hearing to not that year our situations. potential plans strong. But see intense of underwriting projects a haven't remain was So starting of any starting that are meeting

Jade Rahmani

the $XX of there default loan the playing experience in workouts? range of was in that might look track size record history that to given doing if loan million-or-so an rate your And area or is in length you a delinquency tick-up

Tom Capasse

always There's – if or see situation that's Rain plan. a We're business alerts shine, XXX we commercial Yeah. quarter. – second. last just back core a our stepping mortgage

large our again, unseasoned because number So there them project. copy is XXX with the have that team some fact maturity really, of of are REITs. obviously lot I going bridge they lenders. defaults public to I'd see experience say bankrolled or a about in as startups the And XX% of – the sponsors you're of definitely that don't a would

we prowl at to with would look yeah, always our these brokers team purchase projects to acquisition is discount. funds So, – on a the from the

Jade Rahmani

the terms of in servicing building ReadyCap can of are servicer? in of a remind the you set type value And rated whether platform again, skill and you operation? special interested is us a And special

Tom Capasse

is not a do from into or ReadyCap enable Controlled over that servicers us is special servicer. monitor Management utilizes decade manager manager looking the credit pricing we we becomes Asset to rated WCAM. values. ASRs anything to delinquent we the our model the Waterfall not basis. system our We team watch at We manage a monthly a that. that's or What on technology currently a called on over, built assign NOI at list, -- plug within It's and external the underlying that a values update look updated the and net external little

small we the experience with in recession. having delinquent, internal own own So to a large commercial that We the with we $X manage about balance that loan what has billion since loans collection, the the nonperforming bought do staff to we a -- servicer format our PNI low-cost a servicing MSR. do we delinquent -- is but

enables So of and from servicer to operational the low-cost all it's one enables to something the champion metrics. model to called challenger special same on the us servicing time pivot which control their based at us to another

Jade Rahmani

Turning for you originations across first to by what investment activity, the the products? give expect can for any of XXXX segment ranges quarter in various you

Rick Herbst

quarter can given rate conventional slightly in bottom a still we're where the the of product was we we to Yes fourth were transitional be The up fourth it The quarter. Jade, be strong will quarter. well. that the all pretty way pretty halfway fixed are color, business under going the should is fourth I give but the our were in the That probably, you where some in quarter, acquisitions quarter. loan close and through

So capital in total around deployed, were total, million. $XXX the

is think from with we on market down we've was slowdown then see what's bit a authorization will this we about weeks in agency and a Fannie tell product seen of but talked our think it dip bit Where but I and looks are very pipeline SBA should And slowing past the the more the next the bit, I in looking Obviously, be it'll quarter fourth there in reasonable and do a trend the a we in to going line. little little bit to little expand government fall shutdown year of -- business. pressures we the strong there. others it's are our the in a the side, where in like a estimate. is of to that close of couple range. hard a That we pricing Freddie and pipeline, Mac of were down little short the be

would So but will that of fourth quarter. we I -- over the record up a make had the we rest our think origination think year,

side. more couple SBA quarters be line think we going I previous were the to in with in of where the on they're

Jade Rahmani

Thanks very much.

Operator

you. Thank

Zucker next with your from with comes question. Please BTIG. the line Our proceed Ben question of

Ben Zucker

congratulations questions on my Thanks It's fun working taking you. with been retirement. and your for Rick

Rick Herbst

you. Thank

Ben Zucker

that mentioned roughly larger ever fixed lower increased biggest in rate receive that securitization and I'm wide up You by from and January guys fees a $XXX was might efficiencies margin. show did it transaction million you the being amortized? your definitely size wondering, any

Rick Herbst

almost kind certainly of fixed obviously it's -- We costs the a cost.

rates seen the were typical. it previous deals. in than the par the The high advanced with of of pretty outstanding much much on what XXs we've percentage deal So was lower

Ben Zucker

forward maybe and That's frequently maybe a securitizations, going do helpful. and but this expense do you And bigger a think like move less efficiencies? target the strategy change to improve is on in

Rick Herbst

Yes.

the on I maybe last here the think to like or yes, the where come north all But quarter ideally that we'd they've product depends so. them for million range. do two. volumes been strong hedge had, in I end large because we and of the It $XXX pretty a also huge should we way inventory obviously loss was but the rate of had the at it point such by the out that that securitization. year, towards movements a looking

closed more to recapture the were notional the amounts than on loss. We out all did million were. contracts hedges of -- hedge they January, were of those due we swap rate $X.X typically So that interest loans. that In because those we

of we that able So were the loss that -- to fourth quarter. some recoup the in we realized

Ben Zucker

That's important great hear market for the I think to that's as to and well. hear

business generally. thanks I'm the of get pipeline part product allocated. So there business pretty trying like where your see healthy might or feel to capital a wondering Rick. is And any now. right ORM for looks you the most excited across about It I'm have you're we that a Tom,

even Or it distribution? right feel like So, going now? thinking what you are just to is

Tom Capasse

businesses. would regular four the beyond The quarters. seen utilized originations the incremental will we're definitely wholesale on way I channels incremental in say, probably in you've our over capital capital focus existing to of be both trailing terms

there. That's SBA track we non-owner that's example, businesses and conduit, banks the business origination wholesale businesses loans, which million managed did looking the have within for conventional -- the a in So, we're operating at and so a the by from doing legacy record securitizing. owner doing non-SBA secondary deal. channel loans We business, in -- community just buying $XXX also occupied

performing the dent which so-called deals, secondary out for that both deals the I on regulators banks cap tier have example, to a which multi-family, are your secondly, again. are of The a rate opportunity then And the extended money are now banks hitting opens there the you is and for XXX% spend put lot that of up forcing -- And excited XX we're more to scratch we it the ratings. small other where portfolio side, about, acquisitions. impacts there There's caps, have balance certain it's capital for capital. portfolios us think a regulators these still one reserve of growth XXX,

So buying a from we're terms global seeing a lot banks of in of those on interest basis.

the we're in three be transitional on we're as pipeline. are the we stabilized both to going or existing portfolios on as to to the So thing things. And that Those what two greater looking both just doing we’re the -- property here third focused the those the our three equal U.S. side, through London is deploy have lending. beyond those looking core ROEs stabilized -- at capital businesses and that than lending the areas are well team

Ben Zucker

That's I there. really follow-up helpful. And a could you then me led if since in sneak

of European mentioned some this team you peers expanding and your London and the Europe highly You're speak market. talking into about very of

is pieces So investment showing already? or capability? international do have the build-out this any there start you to in place Or you required for

Tom Capasse

in have the one of in We've waterfall Dublin. our London we they're a Europe. and a And various and team team office got dozen of in in led Pieces of about a three manager five about in they place. presence a -- jurisdictions London have a years for partners, NPLs had in buying by external

the same appraisals. diligence do due the and technology here for So all they we have infrastructure

focused $XXX not they're plus probably the greater one funds we of store work manager the returns. we our ReadyCap to – that properties is existing So where there we would less and now PE the that on market succumb million there small balance balance something We're greater middle assets, staff manage large still established. but small think with And to business with there, did small with competing again transactions. if focus competition on we yeah, to again

Ben Zucker

Great. for taking Thanks questions, my everyone.

Operator

you. Thank

question. question next with with Riley from of proceed Tim FBR. your the Our B. line Please Hayes comes

Tim Hayes

trending on the course question adding see operating first year? should about you And good at the Hey, chop Were there? company everyone. do of just GMFS? reductions. morning, to more there expense the the we OpEx And predominately My Is wood think those resources? more where how over

Rick Herbst

up, The it five, much and quarter – to that’s the up fortunately. relate to down origination there. line the – did things the that it in was opportunity them clarity make page more It it of just GMFS. running Part we're you're I volume we was get was to of. going not a various the speak as clean of the end would of slide GMFS to OpEx the really once year close calls and towards on the OpEx, up adding merger, year. over related, true volumes. then little things wasn't have we course think that top on this so We forward referring to the any we

so. a capital higher nominal we base very of have or had XX% OpEx, We but

So that should level. ratio the X% around down expense be

technology hit savings. we're will you doesn't sometimes it So, But implemented, in right until the get in ultimately some technology investments that cost result making some away.

Tim Hayes

Okay.

getting -- the I some Fannie talked obviously no other and mean SBC products and are you acquiring past So, the in license about ramping. I agency had business there know

if the wondering year of over any thinking around adding verticals? about you're the headcount course Just of more those

Rick Herbst

staff Nominally we dramatic. but support which shouldn't volume we today. be need hiring are to our that we within support volume, If think up higher, hope where current to loan it are additional will, we staff. from will loan capacity we new hire volume officers the handle some to have and it goes origination infrastructure We

Tim Hayes

your coming you point? around segment this this lending see you expect dubbish Do latter, more more lower Fed of at volatility? seemingly opportunities add Understood. And is then the do the Or you and expectation what getting back? with it's if banking for mortgage the higher view landscape to GMFS and And do per refis see inorganically? rates potentially

Tom Capasse

be going Yes. to refis total XX% the XX% Remember XX% down -- from are XXXX. of the in

Our focus ads, through -- purchase. homebuilders, and approach business -- direct focus risk historically, GMFS radio managed regarding on via that on regarding ads ads Internet of has purchase home

to down cuts well-positioned some the this they're and one and quarter think fourth quarter. So, hunker ongoing there've I OpEx been in

buy So, top ratio continue but they've to top of The most to the on a with they markets, that's market. producer the some operating expense the they their officers see focused the and right-sized than buy opportunities rather on lender companies. local loan purchase bolt-ons, focus refi, say were let's a another -- teams believe

they're market -- et fact that to a some with think which and they're the short is a buying maybe we're very acquisition. large provides their So, expansion year, portfolio is relation But a looking very purchase. taxes, version the given to it about to $X do not billion them production billion like have looking teams -- I expect good have in any -- about XX% We're not balanced we do Rick $X.X it's MSR -- business to they and cetera. a

think of ROE refi-focused. have more their double-digit as they less are job So, saying way longer low competitors the than of that I for decade over their continue with out a they'll a lot lot a and to plug do volatility a

Tim Hayes

the divested still made the anticipate next months? past the there. Okay. you question And upon final my half largely over two a of merger they Owens. one then just any to progress and several closing? divesting around years the comments portfolio Appreciate Have And over REO being do the assets

Rick Herbst

resort over XX to well. as then all they be larger of chunkier. condo there within will over and the Tahoe will fairly They that the a of property months. sold and of do have we both. will other one disposed obviously there ski And very be anticipate are steadily We a couple that handful Yes They there, properties go the do small relatively units the larger large next in period think projects ones. but they property, smaller out have disposed properties

Tim Hayes

it. Got

Okay. Thanks taking questions. for my

Rick Herbst

Yes.

Operator

Thank you.

the comes question. Valentin from your question next Scott Compass Please Our Point. line proceed of with with

Scott Valentin

Good morning everyone. question. Thanks for taking my

Tom Capasse

Thank you, Scott.

Scott Valentin

congratulations it. retirement the and on me. Rick all with working the Really over years the time appreciate spent enjoyed

luck So, best of there.

Rick Herbst

you. Thank

Scott Valentin

at of will provides -- you're running sheet? the then a the Owes coming basis about Is recourse. part with and think growth, right Owens leverage that is balance But to the step forward. I And mean leverage levels way -- deal and then is I on going it? to when think down consolidated the just on On X.X leverage keep now that is board and think capital? your are you on those XX, key capacity you're that comfortable Page that of X.X times obviously, then asset And the a growing about because on story

Rick Herbst

get Yes. leverage closing we the on leverage to up, these back sheet. and down Over really it returns. The on We're will back step we time, up levels that will want balance it lever at no as grow to lever that acquiring all immediately.

recourse think we'll So up -- we're to max. try to back X:X time it always I on side, a the the over as around get keep

after do On closes, the go well. as will the while will securitizations merger down up ramp back it that and we immediately as total leverage, more more

me as So year it capital. wouldn't surprise over that levels these deploy get be to we one to the back we a-year-and-a-half, next up

Scott Valentin

conventional. versus on a Okay. just And Was that's more then, in lot a the market terms you Or your origination that pricing? in again, you was, mentioned, effort of that transitional of where terms led part? SBC conscious conventional the

Rick Herbst

fourth the more probably couple loans, the doing much just if -- as be sometimes the million, of put similar average do almost that -- where we're overall twice average in on The business, an can size can the much a million where more something quickly more an is, but $X size conventional dollars in dollars. you on the of $XX of those work -- to the than we of million million, on versus and $XX conventional $XX we'll transitional basis million side average more and first did is, market the loans quarter transitional quarter. of It's to which

Tom Capasse

seeing property as We're volume driven transaction well. more in a lot million sponsored of in properties sub-$XX the value and market rehabilitating them. Also, terms buying

market volume. pullback So we're a more seeing as go more demand of a transaction you're upstream, Whereas -- you when just you're seeing lot seeing well. in

Scott Valentin

securitization. in mentioned I XXXX-FLX, Okay. know, XX-day The credits? XX% off that page securitization, true time a pretty Is Or comparable there? RCMF All it since large guess? of there's showed have delinquencies I or become listed by XX, that then delinquency it And if anything wondering, just you right. of quality one on is I'm credit current. number. paid you big X.X% on XX-day guys delinquencies

Rick Herbst

back. look have I to In that loan

of Let here, it see front me. have it me don't just have here. if I I in real quick

a you. take look me come can and I back to Let

Operator

Thank you.

Our Nolan the proceed with question. of your Please Christopher line question next Thalmann. comes from Ladenburg with

Christopher Nolan

Wish congratulations. Rick you well. welcome. And Andrew

Rick Herbst

Thank you.

Andrew Ahlborn

Thanks, Chris.

Christopher Nolan

Owens, the X% for expectation On is EPS XXXX accretion in holds? still

Rick Herbst

said be the accretion. that I quarters subsequent less what than -- over know it don't X% we the will be is we fourth accretive would accretive. would specified the think and dilution I be it

So I...

Christopher Nolan

I on was asking as EPS, was just actually. That Okay. book recall. about value, I

are the or quarter. in quarter than And -- seeing was the it. the Because it pipeline me, great. this translate quarter deals you know origination year? so -- SBCs for seems commented materially that on sort I so third in sure the just to Are I the then, just excuse far higher wasn't you be quite caught the of Okay, in fourth to if earlier. this we I

Rick Herbst

We're seen up we've past, definitely bit, little rates the go bit. has little this a in the where a becomes falls of seeing when up the on the bit product competitive little fixed in Freddie's as up picked pipeline a conventional rates, side rate Freddie terms more and

those fixed pick kind rate bridge, the significantly. of on So and side because the are bridge because loans up size, and. of really loan can a couple seeing pipeline fluctuates up down, the the numbers pretty a we larger move of And

because and the results, on will see a day a clear, pipeline we other of into an more the picked to building is the that don't because impact we bottom and we results, on see Freddie, businesses on spreads. up, Again, they're whereas that Freddie Freddie. on one, the and pick which But the so gain closings. on an immediate anticipate sale just little seeing are forward we it's loan off our is impact yes, The of business has So, everybody's bit that for originations. that, the P&L very impact have longer-term they might yields that up line have the our accretive portfolio,

Christopher Nolan

asset Great. transitory? Is Final increased sensitivity quarter-over-quarter. have seems your question, that to

Rick Herbst

number fixed-rate goes post the loans, immediate the – It due up cleared securitization that we XX% goes Yeah. in do way It got That's as but we're always that down. securitization of XX. around down so of reduction. building out to inventory big impact inventory January, fixed-rate because December to

Christopher Nolan

taking Great. my questions. for Thanks

Rick Herbst

Sure.

Operator

you. Thank

Sandler question from comes Crispin next proceed with the of Please O'Neill. Our line Love with your question.

Crispin Love

questions. acquisitions you quarter acquisitions in heard the to Good seeing those and bit, what us little the I a what lower should kind in be of the was Could first I'm during then be you loan acquisitions earlier about more But $X quarter for about drove the morning. with line Thank you're looked loan my million. quarter's The quarter? little light it tell your comments during number? expecting loan Rick, bit higher. you something a that previous wondering, taking

Rick Herbst

going it's other. be it be $XX around between think $XX It million. million or the minus plus in – way one I somewhere will to might come around or

We have in not may pipeline that quarter. the of a by of the couple the or deals end may close

the We our where the the low are. and have the excess dedicate it's pipeline in on with couple is always historic the where pull quarters those ago, really So can our quarter that – down excess liquidity turn we deals and our million the to – we're We have timing We average. first we to and line capital $XXX were originations it's and on a pretty dial due but originations more to liquidity our a the to a acquisitions. depends of couple we originations able Fourth strong. capital. trigger acquisitions. always was not just can We the of capital of did if or allocate we deploy those, always on always up extent then to have really

situation are in So it really just depends on liquidity-wise. the where we

Crispin Love

just gain now? to X.X% in in came sale it How's at quarter thought, seeing I that margin. first SBA one what then right on about you're quarter. And the on comparing the in fourth the Okay.

Rick Herbst

It's of around X% so the actually in historically, that's XX%. mid rebounded a And X.X%. far little bit, been kind at

around X.X% hoping it we're will So stabilize XX%. to

others, need remind Just with premiums or the you be over to SBA. to split any XX-XX XX%

over So not it's it's to not XX% It's extent XX% impact – it to for a that. of $X goes $X us. the

of had the might the otherwise and little the little group as as is that rate different do They you mix of might not bit is. on lower So they type against bit premium, think. a where coupon there West of those assets a also lend interest loans of a product found And originators different given be dramatic given and a bit little a lower impact Coast. just new the slightly loans, our the we out

– were. back market on premiums given the So from have but on bring a out the the down they weighted bit premiums on average a quarter, a to where our rebounded

Crispin Love

Great. Okay. your and my questions Rick. Thank taking congratulations for retirement on you

Rick Herbst

Thank you.

Operator

FCM. Our Thank next Patel you question [Operator comes the Instructions] from with Raj line

Raj Patel

over Thanks, appreciate Rick. my it. as congratulations for the add well. years. last I'd effort like Really of to number Thanks the

Rick Herbst

Thank you, Raj.

Raj Patel

My of question bit a Owens' to I think question. the a tack-on is

acquire at – like? it ramp that that basis? earning? how securities? on can at does is you resort what you liquidity expect the the rest you up that can to update look an portfolio about looks left. Just is And what just Or the talked being us end in Tahoe So if the the – you've of on What ROE month And it the of on like? quickly least

Rick Herbst

had They million little about million, $XXX short $XXX over relatively duration. loans about XX a for all

I think date the average around maturity is nine months.

short get the they loans acquisition. – announced since have extended, but of fair sometimes off Now and even a relatively amount paid we

continue. So we that will think

loans So, those extended, should the for the most unlevered next then XX part the so. repay some majority or the moment. and vast over will but months off are at And those again, will pay get

year. puts the on or of and deploy business dozen The large so September. a warehouse them immediately It's next over little of a the bunch, was disposed and properties -- out maybe year put but report. asset one transactions, it's their disposed capital. all pretty line a but ORM they're other And much bunch a that get that a maybe since, but not I Tahoe, of the than to course the really dated then over here in assets, to properties. of normal then think in really they did a should on we one-off get some details going it's leverage smaller those they -- are -- have the few last REO We

Raj Patel

naturally the will since your up SBC time, you seems faster? on at stepped and anyway million any from you quickly that to money that do That question something to some the the up falling we get and book that last search hands $XXX be can work If off lever acquisitions? see get

Rick Herbst

absent acquisitions. a really upswing that'll be bridge dramatic some to coming to in deploy large Absent plan Yes. pipeline, loans the pipeline's but strong, the in

Tom Capasse

the specifically That M&A cetera context been have working source their be manager -- of to That could budget in trick. bank of these some opportunities. acquisition focus et XXXX directed to on is with part for

that given aggressively doing the the haven't been in We prior years two focus as on originations.

up ORM ramp to hope relatively to we that accretion the short the in So, from period. addition deploy that and and book a capital NIM get

Raj Patel

my then Okay. last And question.

cetera? Not Tom think TRS did impact that rusty Europe. I and mentioned London I'm how little stuff? the a or taxes et on you REIT the rules, structure

Tom Capasse

to but the of specific No, this I'll will Rick, defer there's TRS portfolios just no be outside acquiring and European--

Rick Herbst

same by -- we're loan real It's estate, they're against provision there, there's no at rules as the backed long as it’s lending.

Raj Patel

luck you. good to Rick, Again, much. very you Thank Great.

Rick Herbst

very much. Thanks

Operator

you. Thank

of session. to Mr. reached turn the Capasse over any to have our remarks. question-and-answer the for call end I'd back closing We like

Rick Herbst

with is little because it's as historical and that loans, getting We still the because floating collateral -- Just XX% California property of previous before loan rehab deal. of delinquency. schedule and the one the it project where project any went into run a question our that building. around XX-day I a value. time, anticipate a to delinquency bit It's on on a so I is was behind the don't LTV There Northern out want approvals answer the the was loss a on

as that over it delinquent on of to So, good December XX-day you. turn Tom, we're less is think but loan, money XX. we it

Tom Capasse

Yes.

look strong position welcome with financial in capital. decade. and a target maintain almost And for First believe his I've to and who non-dilutive I'd it raise Rick merger, -- to the deploy our improve way to -- a we Herbst company Andrew and our like smart ORM has worked think Rick congratulate he us for was a we We that to left with the returns. contribution

next that with call. I look forward to So, everybody's time the appreciate and

Operator

concludes today's This you. Thank teleconference.

Thank your day. your have disconnect time. wonderful at a and may lines you You this participation for