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Broadmark Realty Capital (BRMK)

Participants
Nevin Boparai Chief Legal Officer & Secretary
Brian Ward CEO & Director
David Schneider CFO & Treasurer
Steve Delaney JMP Securities
Call transcript
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Operator

Greetings, and welcome to the Broadmark Realty Capital's First Quarter 2022 Earnings Conference Call. [Operator Instructions]. It is now my pleasure to introduce your host, Nevin Boparai. Thank you, Nevin.

You may now begin.

Nevin Boparai

afternoon. Good joining Conference Broadmark Call. for Quarter Capital's today Earnings XXXX us you Realty for First Thank

detail which In this section a additional afternoon, to on we our addition the www.broadmark.com. filed supplemental press our website package the available in is release at issued on Investors results. with

today's remarks include call forward-looking statements. As a conference reminder, made on may

undertake update those Forward-looking results to actual forward-looking statements may discussed We light information that today. cause of are to subject or uncertainties to any do in statements future not materially our risks from obligation and new differ events.

more of and earnings detailed release For filings. our that a our results, quarter this SEC discussion to may company's affect the for to most factors refer please recent the

Chief certain these most contained Brian information call measures. comments, David During we this SEC non-GAAP afternoon's questions. some Broadmark's measures GAAP release call, financial prepared open and non-GAAP and to the after by measures we conference about and call Management your directly reconciliations make comparable our earnings Schneider. the are up financial discussing More Ward; in hosted filings. will This will is will financial Executive be Financial also to which, Chief Officer, Officer,

call Brian. over I'll Now the turn to

Brian Ward

your joined is as XXXX provide our X, Officer first for transition then Thank remarks last our up results, I'll activity Broadmark XXXX, then begin Executive that earnings success. how We'll on and investment a highlight first you, with and I'll briefly David quarter the I welcome on positioned open Nevin, to financial call. turn Broadmark leadership and to to for believe call I completing some and over detail XXXX additional year. also Chief quarter This afternoon, performance macro March our the on environment call began the the portfolio. questions.

real originating of background real spent management about and My addition recently on investments, on majority complex experience a for of allowed credit management want with my you, on career underwriting, clients' education, understanding Officer I've meet executing commercial and because to of in dig as a and my serving the Trimont And and management. Broadmark's investments wide of debt Business As credit, I University opportunities. quickly the equity on $XXX platform. begin expand I passionate of assets, hands professional with Personally, experience. advisers. realizing to across to of many and Real estate Harvard Stern plan Harvard asset opportunity commercial overseeing has to yet institutional billion a at Chief growth and to alumini little real this on returns estate successfully of their see science work, with most my I [indiscernible] organizational deepen and Executive Broadmark joined development tremendous I'm School, and those I estate and company than more assets me interest boards in I excellence. the NYU strong requirements servicing Estate under Advisors, range the by

role, foundation decade experience their has the next in Board the estate in business of diverse his fantastic into a and of small for our Schocken, over company's on set a which is have Broadmark Under build to my This sector. considerably balance deep grown grew predecessor and we a and Jeff force growth. real phase last medium commercial finance now Fortunately, to the this to leadership, Directors. credit Joe partner, founding Pyatt,

and grow to our and market shareholders. a macroeconomic national our future, current As for towards geographic share and drive holds Broadmark believe look we to I expand our navigate trends a strong position scale, consistent the strong returns footprint

greater even support many and to and industry, real a as Setting apart, origination investment at strategies Throughout Global possessing peers to the unique $XX in the mortgage estate among and the residential thrive XX-year balance providers uncertainty is evolve investment positioned on pressures is pursuing are flattened across around to has markets more defensive. our real range, are opportunities banks focused disciplined us strategy being world aggressive low million targeted leverage internally as and central is classes. more opportunities managed curve major notably appear. capital Broadmark Broadmark taking and our yield asset commercial investment leverage accelerate estate both its $X rates sheet Importantly, become a elevated, the inflationary in high. and fortress million all

and estate credit complex deep capital that understand a markets. changing real and have of experienced investment in rapidly underwrite experts ground-level team We can

We have raise allowing their only to shields to with interest us rates us response credit that who pricing uncertainties. and speed. yields but our fixed sheet escalating term relative in well more reprice a when the short rapidly not generally lenders as our standards compared revise low prices quickly also entire our the and makes other with loans with must rate debt competitive from our index-based leverage market And as nature, cost book target in balance are

investment Broadmark believe In and of or successfully any has capital thrive a any fact, into can in environment we've cycle over last the phase succeed opportunities. complex the we XX deploying long proven as restate of we years. history

our foundation and of out prudent in little underwriting credit was grew we many was financial it not, choice immediately sector. become when competition Our we were Through of and competitors. grew when available was when grew the and in they We trusted it We all, approach were when there there market when widely low. the lender global the historically crisis. relatively following grew were rates to elevated

strategies continue move our and to will as credit ahead. evolve we We investment standards

achieved $XXX We first for an XX.X%. amendments to of in new Turning quarter yield quarter about our and unleverage average performance. originations million at the

we states grow diversified footprint, national look prudently now geographic strong we a continue will And opportunities platform. are in add in and states, active portfolio. providing more loan We access to result our we XX expand our to to that highly as

grew of growth This result, of billion selective portfolio as high-quality was As ratio our as weighted achieved escalate. by loans macroeconomic our even estate XX.X%. highly we real a $X.X with approximately with to at we investments global a remain average loan-to-value secured risks origination

processes disciplined can We we changes forward. and thoughtful will loan book, rapidly in we which we evolving tactical and conditions. pre investment note to withstand management are underwriting believe high-quality we origination that our our I a ensure approach that move post making asset and maintain some remain should to as both In regard,

and We've through me. and our to proactively prioritize connection plan well don't when more plan national compared resources. and financial standards to workout analysis with prefunding these credit our develop outside take business our robust our operate provide as goals asset efforts Underwriting go growing tactical which existing implement pre or and credit funding the sit material the will active approach more entire and more Head process. order primarily both management with management headcount get and these credit objective investments approach and funding, in loan primary greater back nonperforming do management loan will as relation teams. the a have on we'll We scale diversified, to team team with geographically on directly will focus review management take actions retention opportunity anticipate report to to our business. that, funding post Post focus checks to a increases and in National team efforts. in anticipate to their in team in underwriting Complex our teams while reallocation off supporting Broadmark a origination borrower our supporting real of existing smaller the the function asset production We oversight. post to this asset implemented and and will necessary loan team now objectives. increases around asset and plan event our We reallocate human for underwriting in the in estate does our capital of a of will the or while independent rigor to achieve uniform And either our headcount both to REO balances In resources Underwriting, changes. enhanced underwriting of greater origination implemented better capabilities, This costs pre for

the the principles to as like XX, our April of I and address would We personal XXXX. corporate my of have to now responsibilities. Officer commitment position including of Chief Operating commitment eliminated individual to ESG,

Broadmark experience to equity in employees experience communities strong will She's measurable relations, public seasoned has integral of Our delighted for been start progress to diversity, To ESG communications. corporate is in a supporting to committed perspective a our adds an practices first This not here, most that absolute to banking Board. stakeholders change. with Mayfield with our work and commitment sectors, all diverse an governance and I'm do committed inclusion. as a unwavering and principle our we our wealth Directors. welcome we're corporate end, brings but to always Pinky including Board Broadmark. have culture. and Pinky of core finance Furthermore, part companies, of to executive which to affairs and important an Like multiple

I like to treatable once have join leave conveying opportunity I'd ahead. the I'm excitement Broadmark to with again feel you the Finally, by we

David that, me commitment over hard welcomed the the I'll as we I'm to warmly and financials. team, for grateful have excellence review employees to it to With work forward. continued to their Our and move turn

David Schneider

everyone. afternoon, Thanks, Brian, good and

results Slide X detailed on presentation. are of operating earnings Our our

of share. investments and fee per on first prior was $XX.X on approximately nonrecurring quarter diluted million other $X.XX of a net for a to first reported share. quarter common quarter revenue loans income income earnings this Adjusting million GAAP income and share the in our the was income we reflects of million common first items, Interest net million. the per loss impact On were diluted the or of noncash of For XXXX, $X.XX costs $X.X basis, total $XX.X our $XX.X per and million. $XX.X realized distributable for

cash side, million. On and $X.X the had million compensation $X.X benefits the of expense for of G&A quarter, expense employee we and expense first

million the of the is regard origination to first we on achieved associated hiring and search we XXXX. year-over-year for of primarily volumes, approximately cash with Our XXXX. originations XX% increase, quarter up our and up and total of for the presentation, total first cash With onetime from XX% the Despite our earnings costs $XXX G&A this quarter due year the are which new of XXXX of from expenses of Slide compensation amendments, expense X CEO. $XX to expectation the various full maintain million presented in

naturally As reminder, based the volumes origination a vary closings. timing on of loan quarter-to-quarter from

average an benefit while In low. $X.X very enabled size the size us originations amendments increasing percentage XX and to to loan size executed We our our individual quarter, grow from first our which and keeping on risk-reducing loan average with any exposure continue scale of loan million. has to we

As credit cohort reaching larger efficiency typically we we said increase our perspective before, believe to a we ability from that metrics. that achieved has an borrower better greater as have we while underwrite loans, expense

As yield quarters, from in stabilize of March XX, XX%. our portfolio the the was ago. of to XX.X% a And to down year we over range XX% expect the yield coming portfolio XX.X%,

Additionally, environment our to loans reduces weighted first evolves. origination term our quickly nimble short It pivot the to us term, months short-term fluctuations. to loans a as quarter. our average and XX the exposure rate at of for with The interest also remain allows be of nature

Turning to portfolio management.

default of portfolio a March had total by rate XX, we contractual the of of XX.X% value. As

rather are the on identification to potential this not these slightly down of proactive from problems quarter. percent, asset represent a And ensure management was but focused our investments. early reminder, as fourth monetary of protection defaults As a

first million foreclosed perspective, increase And on total an X commitments. quarter properties as million the default, offset an $XX quarter XX% had end, at of owned partially $XX resolved properties in principal earnings in we representing nonaccrual March in $XX status, quarter, During from loans million in carrying December From value. contractual in with X post XX, foreclosed loans and end. XX, we but down outstanding by we

continued drag foreclosed of share. For on $X.XX the a in properties status and result earnings nonaccrual approximately in to loans quarter, first per

achieve take Broadmark described changes to to to by and shareholders. work the continue tactical result enhance management, And default reduce new resolve defaults diligently issues likely will while expect to ultimately best the we time. for earlier, this these We is

Now balance our turning sheet. to

This our coupon cash our detailed Slide $XXX We XX on outstanding, a notes revolving remarks. competitive fortress March X-year, of sheet million had completes $XXX principle balance been of remain presentation, market. XX. fixed fully provides credit Maintaining of prepared a As our opportunities X% had and on in a foundational for advantage always will million facility. Broadmark, down on enable $XX of which that we we unsecured million as senior undrawn earnings execution a significant has

open the questions. for now line Operator? will We

Operator

Instructions]. [Operator

from Steve question first Securities. JMP comes from Delaney Your

Steve Delaney

there. footprint Jordan I'd and heard launched like word regional your we little had curious structure about Thomas, four because a back bit and April to then mentioned. national regions I've ask XXXX, I'm of Brian. four the currently senior Brian, When infrastructure the And VPs, in

in new new expand Just have curious importantly, oversight today regions remains Or if add place do if expanded that been person to it's structure you origination? to for leadership the near-term plans also already? four and or

Brian Ward

Steve. Thanks, Ward. this take Brian This first I'll is question.

Our plans a little changed have bit.

for The We goal [indiscernible]. mentioned of namely oversight the to terms oversight the to is regions, in East we're and each about you in our taking And we of we're approach Central under we're of have Brian But of Tom REITs. Central the consolidated the Dubin, is and robust how of Gunnison how in East, Graph, a more proactive three here oversight more the in future. under consolidated now have originators, Brian a under reports West going a including, little of Jordan of into sort approach have originating taken who and example, East. it West, the the

Steve Delaney

it. Got

access broadening et about didn't and relationships, your broker Am how new borrowers approach tools, So intend access school not network sounds a this you old the with to relationships, but these and it like sort an the thing, is of expansion I of cetera. of on correctly that necessarily have type ground not is other markets technology previously boots origination thinking to? really realtor

Brian Ward

Right.

You're in go of exactly about we're correct how to going it. terms

the business a a there focus heightened a lot combination and originations and mentioned. and this you originations subregional the I've on the that success at going of will leaders more under regions origination focus direct its of we've main If broker look platform, had forward with broker inside of origination be respective X and

Operator

is Delaney There are [Operator follow-up Securities. a -- from sorry, questions question Instructions]. further no Steve next JMP your question from

Steve Delaney

new hop Sorry, to a in, been I give I to others credit. flatten At the would your planning there the management existing chance. point, beat Chief on. sense. the Credit mean turn I career personnel in plans But credit report Brian, back you a for that's organization? what Or has this recruit want have no directly company? just makes to one great Officer within are the are use I to since decision credit any you the thought to

Brian Ward

are can origination new and do centralized bench a our plans to underwriting a your which Officer. clear, strong you [indiscernible], the very There connection question. Chief region. with management more in Credit not we the asset of if to provide will, be national Daniel With recruit lead to nationalized however, To discuss will underwriting, practice, to now we out underwriters We solid bandwidth team basically have the effort. in respect it,

we've that what function, for But done we've now go sat different the management previously than which that way originators up house. of inside it recall, bandwidth they're stripping the the asset inside And we're side our those a of it, the to positions at. underneath freed you regions do question by best If the out sits originations. the that's the credit hoping

Operator

remarks. There floor are further closing back questions would time. over to for at Brian like no to this the turn now I

Brian Ward

the to say be business Thank in shareholders this be Officer Chief for remarks driving than very time Officer, you, to concluding of of committed to Broadmark. Executive Executive other a in exciting It's further position honored have Chief the to operator. returns I'm I future. no the to and

working forward those and as of with think I'm front the realizing team go. great and us, are there we I to on opportunities looking in

Operator

teleconference. today's concludes This

lines disconnect participating. at you may time. your this Thank for You