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Ready Capital (RC)

Participants
Andrew Ahlborn Chief Financial Officer
Tom Capasse Chief Executive Officer
Adam Zausmer Head of Credit Risk Management
Crispin Love Piper Sandler
Tim Hayes BTIG
Steve Delaney JMP Securities
Stephen Laws Raymond James
Randy Binner B. Riley FBR
Christopher Nolan Ladenburg Thalmann
Call transcript
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Operator

Greetings. Welcome to Ready Capital Corporation Fourth Quarter and Full Year 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note that this conference is being recorded. now Officer. conference I’ll Ahlborn, to time, Financial Chief this turn over the Andrew At Mr. may begin. you Ahlborn, now

Andrew Ahlborn

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

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

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

also by Zausmer, Adam joined we’re our Credit myself, and call. Tom on of to today’s addition In Head

us change will SEC our for Officer, would it recent to Tom, distributable now from non-GAAP over Capasse. Chief to we and no it turning earnings core peers REIT point guidance. our methodology measure aligns There I I changed with with This to calculating has to earnings have beginning change earnings. out Tom non-GAAP Before over quarter Executive like turn that measure. the our this mortgage in earnings been

Tom Capasse

our estate for recession thank debt quarter shocked our joining Good our great real COVID four earnings commercial in Andrew. featuring Ready key record a business Capital which marked delivered XXXX you due the model morning results aspects. fourth diversified market, to and yet Thanks, call. recession

earnings. First,

distributable servicing earnings portfolio $X.X highly government resilient with operations, billion commercial of and $XX.X portfolio interest markets. sale from sponsored our Our gain capital margin from to or supplemented access have stable SBC small our profitable which income all on billion comprising loans balance the net weather

Second, investment strategy.

lending of allocate dual Our and cycle. capital enables economic direct the to strategy efficiently us acquisitions across

our group. niche peers Third, write-downs leverage. XX% credit. deep conservative asset The we asset book SBC relative year with due credit versus peers, our up XX% end superior peer balanced in suffered COVID at overlaid strength credit versus sales. large to management approach to forced value the our of metrics evident Compared to is our a to infrastructure Fourth,

MSR height reserves to mark-to-market were modest and was value CECL of Our our decline met limited pandemic, declines. liquidity. book available the margin the exposure called liabilities with to on At mark-to-market modest

Let significant me XXXX accomplishments. highlight

half SBA number to We of among with loans, over over and on For Protection dividend non-bank average for Payment Balance lenders Mac originated capital credit Loan billion climbed and five ranked $X.X the recourse target acquired gain Mac residential be we sale the million $X.XX year, leverage we XX.X%, markets, managed the robust facilities ROE per of X.Xx XX% in and and surpassing six our different renewed Despite pandemic originations the shut were $X.X distributable with two share coverage. year, year-over-year earnings and a to and or loans Administration balance X.Xx. $XXX Freddie Despite table. we to Small league on billion, originated of businesses, $XXX Business securitized up SBA, number XX% of PPP. Freddie our loans SBC Small In sponsored held Plan additional government million or sheet. down

accretive portfolio to only The find first is portfolio X,XXX signing numerous foundation to $X.X our continue over our $XXX of lien with of billion Anworth million $XXX,XXX. benefits. and loans, business provides Finally, merger. our over with de-risked our of expand was our million, scale with This the we balances loan business SBC $XXX the ways Unlike granularity average peers loans. averaging

First, loan risk, asset low with single X% of exposure. largest our gross only

Second, big-box hospitality. COVID central beta our office SBC as large district and focus such avoids sectors high retail, business

strong balance housing Third, real the residential than from the housing correlated benefits to more which commercial fundamentals. large portfolio was estate, current

which Additionally, market. emphasizes markets plus types, held our large versus has balance in experienced at the sponsors, culture, and XX-day low-risk X% superior strong delinquencies credit CMBS collateral X.X%

average At growing and residential Mac revenue. average points of fee weighted duration of is loans a of core we over our The portfolio from serviced portfolio servicing loan dividend. XX supplemented by of our across Freddie stable years, the $XX.X this X.X% of margin seven net of and three coupon products. year-end, a a billion these With our fee is the interest basis with servicing platform SBA across weighted

REIT to to markets. truly business. commercial record evident in compared in Ready Capital REIT was taxable unique on Now, stream. unique market subsidiary have significantly barriers supplemental in each in XXXX to on have a current owned earnings platforms sponsored excessive capital in as gain revenue three liquidity sale of of command the providing value by Each with is access carrying owns entry also it and This values, businesses across a model that lending REITs, government these stress

our X(a) subsidiary. Our and is SBA platform most lending differentiated significant

million acquired third and small of from only SBA, quarters in business $XX XXXX business of since companies originated fourth this XXXX the lending respectively. CIT, One licensed by non-bank has and million million XX the including $XXX in $XX inception,

unsecured XXXX excess leadership and $X rising guarantee SBA Two provided Miami-based of of with to PPP out will seven market support the and loans in with September have X(a) of originations volume X(a) six of months, on lender rounds loan development second bilateral tech XXXX and XX% Program current form Protection we officers, three SBA Integration Friday. principal X(a) the PPP totaled fin through increase XX% expanded lender. business from Paycheck XXXX lending government XX roll the as billion fourteenth increase averaging support business new added Throughout and billion program. last Further XX%. a the X(a) market and stimulus interest of or in capabilities secondary $X.X The grow the small guarantee the in to pandemic, to XX%. premiums and lender, affinity our in to from non-bank PPP over relationships. add share loan totaled programs. DC continue to evident small ninth last our XXXX in for in We largest is in

Mac banks pandemic. expand product GSE held Demand up property broader originating continues SBC operations and stable through $XXX in the continue low SBL rent due have and million in to our grow lending rates also market XXXX. as fundamentals to and to We to the collections relative Freddie for this growth

agreements we us agency correspondent in which two offer of into XXXX, suite to Additionally, a full entered products. allows GSE

expect XXX% margins to programs record XXXX, as the averaging It volumes out and achieve points, XXX We modest build up billion and new In GMFS at necessary profitability. originated experience in originations scale. volume to respectively. experience these of $X.X and was infrastructure we residential versus year GMFS XXXX growth Xx basis mortgage historic

in the The above trend million $X.X has XX% earnings portfolio means. In the servicing basis coupon at mortgage elevated balanced $XXX lowering looked levels through the XXXX, increased in originated performance of with we at while billion New continued a points. over to we target average weighted or X% Additionally, Year distributable year-to-date. XXX pre-COVID to number

quarter. the the began lending our of originated acquired acquisition SBC restart normalized in at is the Through February, reached and and quarter, which over the of which and XXXX. period the first we end $XXX in activities, volume comparable million, end the the third First, of X.Xx have levels

typically the tightened have and multifamily on recessionary we and risk including as focusing industrial. on Importantly, occurs lower metrics sectors, credit stronger cycle, sponsors up

the X(a) verticals, and industry guidance the we Small House became forward. loans increased which with by Committee plan volume February the benefit X(a) expand million Meanwhile, a Second, robust the for believe targeting wait end modest X(a) subsidiary SBA, and a the we through the guarantee conjunction extending the program. updated PPP of a We on X. we for yesterday, this network Friday start loan SBA XX. of X(a) driven higher of PPP second and the by to and with from XX% The of the primarily of loans. on from last guarantee prospects XX% to year profits funded in our expanding of resolution over X(a) developing in passing decision enhanced Through February, combination originated infrastructure round growth six-month going effective affinity is the May will of $XX from our PPP earnings window Business $X in billion result small our contribution continue through volume BDO increased capitalization to the will

sheet turning XX% by strategies. we previous years. benefit to with past is float merger. provides of our the nature and points. approximately balance flexibility $XXX business from one This over ratio leverage stockholder’s by to merger our Unlike Anworth providing of over XXX continue equity grow of in expected core begins million, more expect Anworth expense to The the shares increased the day Lastly, closing our portfolio reduced and to billion $X.X incremental into scale liquidity the to the basis mergers, operating liquid created operating the

now suited turn a for creating prudent over to it discuss expect results. Andrew best I’ll value We for financial to do shareholders. in to our this manner

Andrew Ahlborn

$X.XX Thank of our target share GAAP We of quarter, you, morning, record out earnings Tom $X.XX. per and earnings significantly XXXX share a third with returns and distributable with consecutive everyone. closed above per good

for were average earnings quarter or earnings distributable the year for average XX.X% a equity. equity. XX.X% equate million on a return the Our on to distributable $XXX.X return

in provide business these stable segments. $XXX to provisions driven upside, This by portfolios on million. sale $XXX redeployment the was before net portfolio, structured from our the loan earlier, increase highlight XX% of on to as profile from $XX.X into well loss loan as million is mentioned originations million continues servicing quarter-over-quarter The increased our Tom income realization net with gain current and of quarter’s to of capital earnings and operating payoffs. our interest discounts acquisitions of As the benefits. earnings

remained Our reserve total at CECL QX levels.

have average billion, realized Freddie premiums mortgage to XX% provide points. Freddie margins the XXX and given volume $XXX from delinquent in of revenue. the declined by to Mac net increased million. by earnings This improve XX increase we shifts the we reserves increased expect to the million $X.X during SBA million of on production. of offset reserves update in clean loans there in SBA on CL in servicing million XX% SBA guarantee, XX% is million basis quarter. $X.X the discernible last increase on on this a of loans from to in gains continued quarter. in servicing our been reserves $XX.X profile originated million. composition business despite remained calculation released of the quarter, residential over was included a release our SBL increase distributable flat of Net at the and $XX.X quarter, quarter-over-quarter portfolio $X.X of to reserves the SBA recent our increase balance. The delinquent to be $X.X addition guarantee relatively to million with return businesses points into X.X history decline and XX% assets The contributions due pay with $XX.X basis in to banking high million quarter-over-quarter averaged driven Although the Mac was a XX% and sales loans continued earnings revenue newly considerably. In earnings. were XX loans. the months. that strong

quarters declines. reflective levels. Our leverage liquidity reemergence balance adequate sheet strategies both X.X%. core core billion, portfolio and Performance the lending maintaining loan in our delinquencies in increased of return continued the portfolio the to two to growth on with consecutive after day the $X.X marking remaining our a quarter, stable and XX-plus portfolio below focus remains of is portfolio of

$XXX performance CRE best remains end, five-year X.X at at agency We March this The we previous our was activities $X.X lending of unsecured average your to SBA quarter diversity assets. to a liquidity, $XXX market continue on portfolio leverage superior note note large corporate in and believe the our recourse and focused million million debt debt. included million of to million will remain X.X%. debt. remain and our $XXX $XXX of in Forbearance low XX X% has execution. have fourth billion and times. liquidity portfolio total quarters, coupon that recourse inside low basis the support bound senior Recently, priced at CRE points five of was a of portfolio in three We deferments in in offering. cash currently in and the We deliver and

CLO end with stages of investment to two and $XXX of Additionally, facilities we quarter the at million plan negotiating come fund final first our in the warehouse market to to the pipeline. are the new

cost efforts and future focus reducing funds Our will reliance leverage. of on lowering mark-to-market on

profile have done, of on earnings slide segments we remarks. the we X, investment we includes of summary XX. the now over the of turn which metrics. profile, have update X. slide previously various on note, on X, provided a have company’s earnings our the included the company As for will strength closing a information on I slide to and supplemental earnings financial also it activities slide Tom and key it’s operating on deck, annual summary transaction

Tom Capasse

and has via close with merger to Anworth company, of return we merger, we of much the originated since small market. XX% Capped went been equity leading in Thanks, the return XX Mortgage ZAIS balance with $XX iShares our for our doubled model XX% from Over period, of billion over base Andrew. accomplished. completed total the the compares assets ETF. commercial securitizations four years, platform Estate In will Real favorably pending a developed or has acquired delivered Financial, which public shareholders, the this the our have the

and our segments. are revenue alpha embedded we’ll XXXX stream continue beyond servicing and lending to returns from the We and portfolios the and loan to to from ahead providing sponsored looking from committed in superior opportunities government benefit steady and

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

Operator

Piper you. And Thank questions. question line our please Love Instructions] with is from your from the of coming first Sandler. Crispin proceed [Operator

Crispin Love

and some Tom margins morning. Good were pressure sale Thanks. Andrew, on gain under the in quarter.

you commented you to expect XXX was margins the near I trending and would first you the and to leverage to quarter on the how respect margins wondering, around can I the think medium-term presentation, in bps. in in that’s with what are speak side.

Tom Capasse

banking residential mortgage you’re segment, correct? talking about the

Crispin Love

Exactly, Yes.

Tom Capasse

Yes.

move maybe, you on the I offset quarter-to-date. industry. XX to by up actual upward basis and So, versus the the we this in XX But XX-year. a be the in with refi decline, purchase more. That points, partly Andrew think speaking demand. generally though, could XX% stating obvious prior points that’ll comment cycles year will the significant expect to basis be

the to XXXX So, a I levels. XX% think, we decline to to expect XX% versus origination up volume elevated

staff. cycle to margins, with continuing As and more given far you’re as that decline, refi burnout see the of availability typical

competitive point So, a level. rates see on a point lot that, XX we to more this normalize in and historically as own more that you’ll tends of said, and of competition terms GMFS, markets. it to some our you’ve basis the XXX result to basis the in and of expect tends lag margins prepays it quarter but seen by its to to third of of that, elastic ecosystem be more price year. both

with – what the know the quarter? kind in don’t what seeing I in Andrew, you trends that are macro of So backdrop,

Andrew Ahlborn

have margins they far year-end. down were at points, thus where come basis mean, I Yes. probably XX

some certainly, compression there. So

we of the quarters. GMFS, in raising $XX has last note MSR during effects billion that to I added close that eight million to that to it’s we’ve look lost at important time, And the $X close over value think, portfolio. into when the

So, as to some recovery value I of rates in be going certainly think asset well. those that move the there’s

Tom Capasse

Andrew it. valuation retain in book. as have We Crispin, the the you as this and subsequent hedge that’s like would an that in be MSRs production some quarter whipsaw you a in – and against when MSR sell to XX retain Yes. bankers factor saying for don’t quarters, year, expect important differentiating this mortgage an improved MSRs reflected a

Crispin Love

me. all Okay, great. That’s helpful. One more you. from Thank

– thinking you to what be about round we what million that and be remaining kind guess realized? Those to and from the should first what fees, recognized. PPP kind net those what’s then needs two And then how of would for around of of $XX round ballpark over be for I make would timeframe, in one expect fees? So, expect you sense

Tom Capasse

Yes. on income. net let Andrew comment I’ll the

extend one so two. has Committee give the program days. could with ahead. another Andrew. months that a would backdrop, Go Small voted the associated Business it, ago, longer, potential the of revenues XX round if to I’m longer, give two to extended Andrew, that the couple us or approve in days Just the Senate of a sorry, House us

Andrew Ahlborn

terms round were going to so two And million a least I round production, profitability where on year, in of round on there’s one at $XX one. be expect in to left be all current higher recognized. that to than recognized we percentage in the basis, significantly is be

at were going carrying And are – be or sheets, is so we we X.Xx, because one. the to either on financing in through expectation loans that revenue the some how There’ll round that treat balance through be differences we two my PPPLF. round with income, is in those where

earned yield loan, fees over recognized a the average which is adjustment the So, years. two life, there under will probably be on the

In addition going from carrying to get that, spread portfolio. that the to you’re

two could eight of you six have next, PPP earnings it do company So, call significant quarters on round the quarters. a fairly the think impact over to the

Crispin Love

Okay. to even $XX like think expecting don’t as of so a because round a and but did necessarily... just times, originations, million in were to like a – half fees, the in very and times in And to half I you clarify, one something – something we right. Not you one were kind in about like one a on talking you like do

Andrew Ahlborn

talking level dollar – on basis. dollar a a on

profitability I going that. million did we certainly two $XX to one, if exceed round at So, think is round

Crispin Love

helpful. Very Thank you. Perfect.

Operator

Our Tim next BTIG. with Hayes proceed line of from Please question. question with the is your

Tim Hayes

a to year. wrap Congrats challenging morning, on nice good Hey, guys. a

of rate maybe, kind impact LIBOR obviously, higher impact And from about GMFS, in impact. there. if the on rates month a long-term the rates be comments big First know your GMFS you and that And I ecosystem linearity question just helpful. thinking the like and a any could magnitude I like actually seems pipeline. benefit you said, there, higher your move around talk but that activity of mean disclosure, on would touched the difference, impact kind would higher and one for the you as broader short-term SBC but of about – about would mentioned NIM of the on from on it me, I you could you that but talk higher and transaction what for makes know

Tom Capasse

largest compared of focused. bridge what’s a origination, of rates you’ll our question. for interesting most obviously, environment, rising a market. capital small pivoting Yes, correlation that’s segment obvious But that about bit of balance in a reasons. as in sectors and dedicated good we’re as it’s kind we residential credit the little where The is of And multi-family the recovery see, a industrial more to a is are CRE space case, the bull the – this to there NOI between rate in a and

impact purchase result, we it’s the which that seeing we bridge result of it a that a refi – forecast. that in may near regardless level, let’s large could we a we the a a in the impact small Freddie financing, need have And there. two only CRE rates. that a let’s but is as big at be that which off residential the for a space space. area don’t drives year-end, in the of at mid-market that where are the commercial street come GSC Mac increase XX-year, an have delta is as will the XXX in of demand so the you in is – see think balance, bottom. terms neutral purchase real the the kind we’re volume will nowhere on one So, estate and say, space volume that, focus incremental We that of half – actually say

book us I’d positive, So, our the LIBOR. it’s floating off rate say are rates based fact because on net is bridge balance, for rising of that a

Tim Hayes

dumb you if – kind a than XQ here. the that amount earnings helpful question – here it is Okay. business commercial of acquired in language guys That’s certain that This it. you or for wording but I about loans? was past, I for framing or the be – you’ve your in or guess think was was originated small release you the a origination that. but appreciate you XQ in forgot I what loans. it different as Are medium-sized used in activity, loans doing some of of usual terms guys? used bigger and still medium-sized might

Tom Capasse

Well, the – ahead, Andrew. go

Sorry.

Andrew Ahlborn

Yes.

activity sizes larger are the have segment. the there. of uptick $XX loan majority million, the Historically, excess So, of average doing loans seen haven’t bridge we loans our in has in And those first bridge in we been some in business, quarter below $XX million. but lending

that’s that in the reasoning So really for putting language.

Tom Capasse

we’re more some across be And with same doing properties sponsor, of did but one actually a we’re kind $X specific, size collateralized. where that $XX in number just to doing it million, cross to loans, of we

on squarely that that Again, which single $XXX focused midmarket value. it’s property So, larger kind plus to still the the are much property million as of deals. Yes. in compared CREs, –

Tim Hayes

or my to around budding the achieve up though Right. increased that go I competition kind to as coupon kind just players traditional little you is, question there, does against or bit of as – you’re the are of – yield a middle impact you’re bigger market get able you middle there higher able size. you and is in of more guess that

Tom Capasse

driving want of approval credit Actually, obviously it from the do you with loans take on current to Adam – side, – the you how the view were trends? point you these would your vantage

Adam Zausmer

of asset loans, terms of certainly through classes sticking performing COVID. with the larger kind highest in the think I

really gotten us and flowing certainly, have and us that are I which tend enables portfolio, keeps good transactions slightly specifically, doing cash the portfolio risk rates the our but than a think multi-family historically that’s improve and side. type competitive of sector, be profile. So at a really and self-storage on to industrial lower the bridge those to we enhances we overall

Tom Capasse

– so – tighter we’re COVID look with to COVID add to just affected And less moving if at that, spreads. to sectors you Yes.

any on Kind the the are zone? market Andrew, has offset more in XX such REOs, margin, the the REOs, that comeback However, lending in than CRE-CLO the of incremental the tightening running what?

Andrew Ahlborn

Yes, closer to XX.

Tom Capasse

Yes. Okay.

they’re of points quality to in the, the up credit about sector COVID. least XXX were they again, affected ups pre-COVID by to the the from So XXX than higher basis due going standpoint is

Tim Hayes

helpful get that’s you you’re what degradation was That’s side assets I it. should trying types as going financing yield more at to because for the of by some bridge of as business, than be up – like in we Got after things. that’s competition as anticipating the if the of type picks but it sounds offset

Tom Capasse

Yes.

Tim Hayes

sorry, But some just the your there’s as your facilities, as just tailwind and there leverage compete that costs – of kind are lines, warehouse you on if but well. Tom, to well Just bank there lower on market? as your with credit wondering have better seeing

Tom Capasse

terms Andrew, of facilities? what the seeing are in you

Andrew Ahlborn

Yes, I significantly where costs lower we’re don’t think seeing we’ve experienced historically.

think are now we the be then warehouse facility as opportunities a fund consistent our Right the million negotiating core we’re of other to lines midst our are midst facility in will lending in that now, our bring acquisitions to fairly origination accretive of are two with non-mark-to-market $XXX And business. of going partners. terms finalizing in mentioned once to existing activities. we in lines. fund And seeing new we we a Although in remarks, our warehouse forward,

we partners So seeing us. the expand who opportunities lend to are to

Tom Capasse

middle that in given the just interested we’re are we very now in Yes. these have warehouse types strengths that kind of the assets. kind lending add we’re doing, And loans, market to loans say certainly that the and larger credit Andrew, of partners I’d the asset of that these of classes larger

So them certainly lower from seeing costs. and financing some better advanced then rates

Andrew Ahlborn

attribution incremental in XXX, the mix points and pre-COVID, flowing cash to properties. rate both on were turn due And therefore ROE and we than XXX basis that ROE the to higher about property where in advance lower more to and the risk higher the cost again debt shift NIM sectors drives lower

Tim Hayes

again my Got guys. it. but morning. this into questions I’m it. appreciate taking now, for That’s queue thanks hop helpful, really going for I back to

Tom Capasse

Sure thing.

Operator

you. Thank

from Our Please next Delaney Steve with question JMP is your of the line proceed questions. with Securities.

Steve Delaney

on and truly under a year the circumstances. Tom Good morning, Andrew, congratulations and great

Freddie comment Thanks. or that mortgage with in community broader are some little brokers if curious than just source on you that your own you your independent mentioned added You had partnerships you’re a programs. to small balance Could network. Mac banks bit? correspondent loans developing that I’m

Tom Capasse

that Actually, why Yes. don’t you Adam, take one?

Adam Zausmer

we that agency the license. Yes, have sure. is The Mac Freddie SBL product

smaller folks So agency have balance the that extent a profile production are the type of financing. loan. larger of kind our of To Fannie that’s the of either that, opportunities size, fit in Freddie,

We’re don’t is those license the is where have we and licenses, partnering send lenders opportunities. that with various opportunities, then on them they send and our that specialty they have where smaller particularly the balance side us

of back kind each forth kind it’s partnership So of other. we and and a feed

Steve Delaney

Got it.

Okay.

reciprocity small to So program what you’re hopefully accessing the Is loans. the on balance licensees those I’m with program dust some hearing? maybe or there’s And the there, K show them [ph] simply that by side. working

Adam Zausmer

Exactly.

Steve Delaney

great. Okay,

you… I So think

Adam Zausmer

of takeout of sorry. that balance to we No, sure agency I also make out was then Yes. add. just where off works balance on well, I’m to it check larger sizes the that kind on to just And our just partners our the bridge side financing. agency side, going an opportunities

a then our partner when that kind bridge then lenders we loans agencies maturity, become of come stabilize, So takeout the really they products with again to our have those with we for – and partner those sorry, leading.

Steve Delaney

Yes.

keep very eye number of that’s licenses limited an out helpful, business we’ll No, that. on and and there. great Obviously, Okay.

the was know volatility you in the what year of people for ever lot we resi XXXX best IPOs think what all stocks. have. part Look, important definitely some and of are mortgage, I So missing of lot

year-to-date, for quarter say, I maybe XX% or XX% you going the is reasonably whatever view Did on of year. from resi the I it’s look while down next I I get probably XXXs XXX-plus and XXXX, high the a to XXXX normalization clear down make to to year for was guidance, best And down just second still mortgage going business. from think Our your that volume is fourth come be heard be accurate? by to to sure the low to the ever

Tom Capasse

Yes.

Steve Delaney

good. Okay, will account. into take all that I

got to Tim and of up And $XXX we’ve the like of mentioned the up you answered CLO earlier, bit Tim pricing thanks. sounds ever. targeted profile recently Hayes you’ve tight on speed a coming this think originated. financing a – the between of Okay, depending, terms and over combination CLO where question think pricing and you’ve is on Andrew seen about my execution I was little the loans, million It pick I as in return got

net exceed within Sounds the like your the Is accurate your the that expectation existing could that equity on CLO median portfolio. average return an takeaway? for the or that next

Tom Capasse

think I that’s Steve. Yes, right,

Steve Delaney

right. Well, for thank all Okay. the you comments. All

Tom Capasse

Sure, Steve.

Operator

Next of from questions. Laws Please line your question the Raymond James. proceed with Stephen is with

Stephen Laws

done, opportunities good the other like Hi, about And current the about Tom, when reallocation? does that think closes today? we how capital we think Are you segments? quickly business as how opportunities acquisition, when portfolio the do in mix think actively fully about ANH kind or that first how sell given morning. down as MBS that’s the we on investment of change business you

Tom Capasse

lock be investment, the one two based it’s the to the think acquisition Andrew, on in forecast – our funding loans. chime MBS quarter origination a step in it current reduction very a and in origination with SBC SBC portfolio investment business, in I Yes, looks to core in. and But the net linear

XXXX. Recall, platform funding potential looking said, are acquisition capital base That forecast re-lever of plus acquisition us quarter million for a in the plus of at to provides the So Anworth ability XXXX. there back all kind for $XXX that acquisitions across and we’re fourth financial more case with of bolt-on roughly the broadly. merger originations of our Knight of number our

So on acquisitions the we’re and demand that. you’d bridge potential that to we one acquisitions, lot capital originations a of we’re very maybe about that regular to space the if time between comment think seeing particular be a in in And post-COVID where to able redeploy these period. Andrew, bolt-on in quarter quickly two smaller way and going –

Andrew Ahlborn

right. that’s think I

that, of some where and we’ll leverage You items volatile But get investment have. bring think out the some in the of line with I existing runoff more pipeline. will to see outside the we meet to movement to of manage more their post-close

Stephen Laws

on $XX down last quarters. appreciate do color this item? this bit – an you also, operating that number of this more the kind to the right in us But year bit can give detail what’s that. of target, or a idea about on Is how touch the million Great, the forward? a expenses, quite other going a Andrew, in annualized four little expense is think line we

Andrew Ahlborn

Yes.

a was bonus So the for that compensation fourth to in banking the in business. lot quarter, the movement, mortgage residential adjustments due of

adjustment occurred that I as although – lot it’s line what the fourth So in can basis in percentage of you forward. think with of quarter, an expect profitability, going a more with a annualized on

some was the reduction I rate run think offset you new by more question, But with in annual accruals. answer increases year-end here yes, in the is second So line that what to your year. can in expect

Stephen Laws

Great. Thanks lot. a

Operator

Thank you.

with questions. is your next question from with Please B. proceed FBR. Randy Riley Our of the line Binner

Randy Binner

have what a we’ve just so I – thanks. covered Good few morning. the follow-up far. questions, Hey, across

on last which resi think XX% then year, think origination you first XX%. said overall refi on So, versus the down – down figure, and you I

towards So me that jump number out to to more a at kind comment want origination that’s I continues overall. that the or market resi understand if just your of book and

Tom Capasse

they’re last was data – obviously, origination said going decline overall industry go not to very I same quarter, down only that purchase refi GMFS in by increase by industry. frac like competitive – just lot is slower down homes markets the two one book sorry, on an it’s I is recently, offset of XX% the that refi probably demand, I’m volume to and look the at delta it’s that argue was The just decline the volumes. less quoting going view volume that’s be be secular of down originations. that shift a expect in did we XX%, in it’s where I still market, shortage purchase the in overall MBA again, that. be CPRs, the quarter a clear, but the this – XX% than XX%, will we they points therefore, a – that, this to would if And usually California. a there’s in I that is more the net-net – – hot sorry, quarter to year mean, to you or in offset significantly and that’s percentage and think, again, XX%-ish – significantly, XX%-ish, so the XX% about to just MSR from last so just

that of again, two tenure to more of anyway, decline that’s – above a being in so do view sort we GMFS. tied a it that – the tied that’s yes, overall expect So – broader to in of percent but helpful, and how that context thinking at we’re lower year-end, for of but so a about market the volume decline in the that’s

Randy Binner

your then And curious is just the mentioned that compare where of high might you price have question of pre-COVID up, you I is, do it’s and price a versus, a if now how versus the think would kind can level lower. higher Okay, CLL to book high it to, where – a where pre-COVID, price understood. for similar if sense you That have CLL on coming or helpful. guess, quality possible book

Tom Capasse

seniors, Yes. Andrew guys at I on here touch on pre-COVID, the the AA right? maybe, at L+ – AAA that Andrew, can seniors or we what maybe think are market. you Is but Adam, XXX, were in current were XXX. what

Andrew Ahlborn

Yes. It’s right.

Tom Capasse

I or dark Then, types. of pre-COVID worst Adam, to year, the the Andrew over that trades. it Is first of out in gapped quarter XXX Today, or seniors last we’re near out gapped days at, like correct? basically the think for

Andrew Ahlborn

Yes. correct. That’s Yes.

Randy Binner

good. That’s

market’s curious, a mean, the I gotten bit Just quite tighter.

then of but opening that, technology I And we’d had I it you if but we were relationships was affinity fin like had that, relationships, could what just But affinity – I some like a hear so data and mentioned, is sounded Because me, those I you some kind there? of I is think guess kind well were second enabler think, to right, technology the what’s what you if just heard the activity the there’s the origination if heard thought last that play use? I in spend that I script, but inside, to that described. that’s – a one there – on point. pretty traditional, thing tech

Tom Capasse

an to fin documents front-end program – year. us on, it’s that that less not manually to scoring system and relates technology like that And which small respect Yes. develop they’re loans, business financial download lenders small with – use to business tech lender we’re use use methodology, last they online the custom unsecured, go ecosystem scoring which portals, go allows a and the and a utilize a what it so Knight part late scorecard through importantly, smaller small power of to the origination utilize reference, it the origination of enable scoring the company we unsecured and acquired – methodologies. platform, a loan obviously, these – has. the much intensive a first, that front-end product to able fit to you a SBA but

same have with X(a) adopted which a underwriting large authority the lender we’re the we’ve from So, the affinity. labor then for SBA. but from, it delegated that preferred a intensive, the more we’ll small out to roll loan loans, do are loans, And which we program use as to program, going

a have let’s what and – that or you. labeled So white can say, a bank, be that union credit to,

method, documents as are we’re that talking terms of opposed online ability both go system, referrals underwriting Business the that traditional said, is So, front-end portal those process. to Officers the score their what having – in and an and which to then loan that that’s will more the sort of traditional through then about Development is the a how and more BDOs download take

Randy Binner

much. Understood. Thanks so

Operator

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

Christopher Nolan

the Hey, the because to earnings book terms the interest guys. any the in value deal changes of expectations or for changes was accretion in Ready of announced, the for ANH Capital? since acquisition, for rate environment,

Tom Capasse

Yes.

September ANH through slightly. December is increased from So, XX book XX value

You the some modeled where given January XX. dilution at appreciation around, expect improved if we accretion February, saw in September up was slightly in we that to not from right but be it

Christopher Nolan

for of Tom, Great. core comments ROE target XXXX? And run of what is lower excuse me, it’s the comments terms – a follow-up of in expectations expense in terms given your Andrew’s terms Thanks. the question. in rate,

Tom Capasse

Yes.

view I would our we think with gain targeting say a is I sale incremental some on of return continuing businesses that the in that on ROE bridge the core increase pre-COVID; the book. on business, contribute. lending the the given coupled were post-COVID XX% to

they’ve the is not and the – mortgage to PPP be but the residential gain sort with the the those it also to guarantee round the segment. XX two banking clearly, going with banking from at think will And that increased SBA repeat business, X, that through I XXXX, in amount strong. the continued in mortgage of offset XX sale, incrementally those strength along will October on Freddie decline two

of that that that So in to we expect we targeting were target have ROE excess pre-COVID. XX%

Christopher Nolan

Great. Thank you.

Operator

Thank you.

proceed your the question. line Tim Our next question from is Hayes, with BTIG. of Please

Tim Hayes

Hey, guys.

bigger did Just on very one a dividend just than dividend, but know you going I to just context to trying ROE having all following tailwinds I’m dividend the before kind of bridge and be you’re your core here. the – where higher and board which going Anworth GMFS. a be $X.XX. business the want last put target of offset, what’s point, to I you’re more in what follow-up for we comments your was And expecting, good than if sale And to is the at these me. COVID, decision, seems of to the understand gain on more you’re coverage to ex-GMFS there might be acquisition businesses,

what an to current the dividend at what would or take So level? it for recommend increase point, you in at the guys

Tom Capasse

on Andy, do touch to want that? you

Andrew Ahlborn

Yes.

dividend calls, to is said as $X.XX the get first to earnings on previous back So, level. goal we that

that. speak, revenue the Anworth’s round expected on look well in our when terms No get to integration which could But the we’re said to that I PPP can’t certainly, again, goes as two, we quite it’s substantial. combination way board be think with the at probably to from how think a decision. board before, I I – is level, of going in I

fact given those otherwise with I return have might happen expected could than believe So, patterns, to as are PPP. quicker normal, been

Operator

the end the reached session. We’ve you. Thank question-and-answer of

remarks. over Capasse Mr. closing Thomas turn the Now, for to call I’ll

Tom Capasse

we’re feel and for time and XXXX everybody’s call. next appreciate to we XXXX, a after tough And positioned strongly look Yes. forward the we I and – earnings

Operator

conclude does conference. This today’s you. Thank

You for thank may we time you and at participation. disconnect your this lines your