HCFT - Earnings call transcript Q1 2019 | Lument Finance Trust, Inc.

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Operator

Good morning, and thank you for joining the Hunt Companies Finance Trust First Quarter 2019 Earnings Call. Today's call is being recorded and will be made available via webcast on the company's website. I would like to now turn the call over to Evan Abrams with Investor Relations at Hunt. Please go ahead.

Evan Abrams

Thank you, and good morning, everyone. our XXXX discuss Financial joining Trust's Companies for Quarter First Results. you call Hunt to Finance Thank With me CFO; on Strategies. Flynn, Head CEO; the Hunt call are Larsen, of James today President; Briggs, Estate Interim Real and Torres, Michael Prescilla Debt are James Friday, quarter our with results. and we the provided details filed release a press which XX, on May SEC On XX-Q issued our first

webcast supplemental on been provided a earnings materials this our uploaded and also can found presentation reference. We be your has website that for under for that

are not these results which discussed X-K, non-GAAP other believes, and are through accordance indicate, to will, that only with outlook, will and expressions within these constitute to Before Securities could are obligation its in and date the to XXXX. the company's and forward-looking statements now presented Reconciliations of Form Such these based used contained various as accordance those reliance Flynn, identify with to The handing SEC, of isolation not the cause intends Jim the of is the of call. Act the place meaning to with the the I our statements. generally and would When filed risks call be not statements forward-looking SEC over the historical of XX-K. XX-Q statements Furthermore, the in accepted conference on of Listeners undertakes financial subject Form Factors speak to uncertainties be like information uncertainties on certain hereof. substitute of reports turn anticipates, this cautioned and Exchange XX-K the information forward-looking Jim or particular accessed forward-looking that presentation statements. A similar intended actual this any this prepared company non-GAAP expects, statements to to XXXX made with remind such to XXE section update reports www.sec.gov. conference, Section measures certain discussed are words may Flynn. in XXA on no to of Section These course will of of the in during comparable the statement. in information and on differ over a of including are this from undue as Risk Jim, forward-looking materially most the financial call ahead. financial Securities risks Act everyone accounting in at can measures call to intended considered the measures our GAAP. filings be please as go principles I in forward-looking

James Flynn

joining Trust you, Finance of morning, today. for to everyone. first Welcome Thank Good us earnings Thank the Evan. you Companies call for quarter XXXX. the Hunt

During the the expenses. execute we our investment our reducing of and our strategy transition first continued quarter, improving structure while to capital

X.XX%. As million cumulative our a all fixed with rate the mentioned credit quarter, preferred A executed X.XX% facility an redeemable of our we stock X-year simultaneously in last of during and $XX.XX series initial call, redeemed

HCFT's this preferred of on to The portion impact fixed rate new from our capital in a plus of $X.XX stock, of the redemption X.XX%. LIBOR. of this based savings $XX X.XX% million EPS reduction the per LIBOR capital With of cost annual of on rate an current resulted of floating a reduced cost share

to XXXX over common in increase per announced increase dividend of XXXX. a $X.XX the also a XX% fourth QX quarter We the share,

further go-forward basis the our and expense reduce on on cap our from agreed its time earnings our for Hunt, core period to further a support reimbursements will manager. positively manager of shows which In addition, impact a

common by a shareholders, reported or which per were redemption charge to $X.XX million net share. the to our relating of significantly $X.X million HCFT the preferred These quarter, results stock. from a of transaction first stemmed of accounting impacted recognition the onetime For costs loss $X.X

quarter was detail. onetime $X.XX Jim shareholders earnings or to discuss for in Our $X.X per charge core million our the common shortly, results further share. Briggs including this will

had deployment we year. this $XX over We over CLOs the have will within that investment commercial core in of our which further earnings that deploying last remainder rate seen the we million to improve end, real of loans. we full our anticipate stability several continued core two now estate undeployed cash We anticipate our quarter the earnings. have At floating strategy our quarters transitioned

estate XXX we to spread continue Briggs, thoughtful, for who our Jim? will pressure opportunistic to will During acquired provide in opportunities debt a CRE that, average evaluation points. and Jim I'd loans activity With call of we $XX in like details mind, LIBOR the be With HCFT. patient the origination over quarter, turn on markets funded weighted and results. real our investment in spreads. Competitive financial to to and of particular rate basis above with that commercial floating loan of million continue further

James Briggs

presentation, has investor for updates and summary Jim, Page you earnings supplemental for on our will quarter. provided our be presentation which X and referencing X uploaded XX-Q The as remarks. morning, the On first and website presentation everyone. on reference. of supplemental a been investor Friday and our you, evening, filed well Thank Form to during report we an good find your will quarterly webcast On the the we key

operating As include that of legacy legacy net discussed of quarters, portfolio. reflected those represents in certain periods GAAP GAAP -- not losses impact results better in previous comprehensive portfolio that income believe the related for our our we are gains better because presents income, GAAP impact reporting to and our the full

shareholders per we to of quarter million compared comprehensive $XXX,XXX of $X.X per reported $X.XX XXXX. XXXX, or share For quarter or loss comprehensive of the of share to a first loss the first a for common $X.XX

relation preferred deemed the quarter As Jim onetime million as included to in share, current of reflected common to of dividend $X.X per our previously or charge a is shareholders mentioned, the redemption $X.XX which a stock.

in its liquidation to sheet million were preference, by balance $X.X the first carried in 'XX. company that incurred shareholders these at stock stock quarter. issuance Upon of on issuance XXXX redemption preferred effectively Our our the costs transferred the the preferred in costs and was net common of our

item, first the income $X.XX per would in been or quarter this million share. XXXX of comprehensive have $X Excluding

with going in between the of previous anticipate income we noted differences and As our strategy, net calls, GAAP income material transition do GAAP not comprehensive any forward.

earnings our quarter-over-quarter. per shareholders million view share, Our indication the common or a core ongoing earnings to $X.X is per Core attributed that earnings better quarter share down provide first was for $X.XX $X.XX of is which capacity.

which when the previous is earnings to the QX's audit to that quarter note are several in decline quarter-over-quarter comprehensive due calculation is excluded primarily core and of first value weighted book core were This earnings from heavily income. of There year's that our impacted and/or were audit-related finalized. our fees items

the item $X.X First relating mentioned million common to to the which previously to note, impacts income of preferred only, charge stock. shareholders comprehensive our redemption is

Another XX% our $XXX,XXX. QX to income factor previous relating the XXXX. gross retest our nonrecurring professional of is, These professional for mentioned as on to amounted annual nonrecurring in failure call, significant fees fees

an value of servicing on of book expectations. resulted Lastly, to book we per have to $X.XX our losses share quarter at these higher Together, per compared rights legacy primarily at due $X.XX share adjusted in end recorded items of year prepayment value mortgage unrealized $XXX,XXX end.

the in adjusted during who activity. do composition over not investment on future. shares of first redemption turn Larsen, now for preferred the XXXX, Michael our call I value quarter book need we the to and provide of details anticipate of the With presentation an will the will portfolio our

Michael Larsen

in the Expanding comments, everyone. you, mortgage stock earlier expenses. reducing has Jim. floating and refinancing high-quality quarter our investments, last the on the continue Good investing morning, to completing our Thank of focus first over rate our preferred been

on the loans $XX acquired by driven continue future million. has and forward. loans with total assets our funding larger we we investments a the and remaining of X related were that advances period, be XX% quarter, during non-multifamily going will multifamily, first XX% XX of multifamily percent loan of incremental loans of the loans anticipate majority retail. activity During to being with these to made made X findings This increased

remained multifamily. end XX% quarter at portfolio loan overall Our

a $XX stability. to payoffs had a in million and which initial New LIBOR we to average portfolio over of basis competition average loan see points X% of a our while weighted of signs LTV a be XX% of and trend XXX experienced continues compression loans quarter-over-quarter weighted increase. and spread loan resulted during net $XX We a is the quarter increase some of which million, spread

diversity. the the or no significant are we floating the portfolio seen any provides in There and over not XX loans portfolio Our portfolio million average had of loan an rate $XX of size with total which portfolio million for delinquencies at of balance asset quarter. of and outstanding material change end. in principal geographic quarter have $XXX consisted loan The performance an defaults

the Our with all of financed and points. XXX CRE-CLO portfolio matched is LIBOR loan financing an basis term fully of securitizations X be against continues portfolio therefore average plus to with cost financing

first financing our basis. has Our year an XXXX, runs providing us with has runs a a second next and stable, of August on period attractive, to CLO period through through reinvestment of reinvestment that February non-marked that market ongoing

the we completed of mentioned equity preferred capital. during the As which significantly quarter previously, redemption cost reduced the of our

savings, HCFT. at we have on to addition this focused In expenses management been of the

reimbursements in capped prior stepped shareholders' noted of expense X.X% on Hunt As calls, adjusted at manager, its Hunt when as equity.

of X.XXX% of year, this equity adjusted in time. capped commencing a expense of shareholder further QX for addition, period In were at reimbursements

year. also very in on some fees to by in achieved our focused the been Hunt's professional call recurring us benefit broader have meaningful of beginning leveraging back this have We and I'll reductions remarks. will expenses G&A relationships pass our Jim reducing closing QX for that, With which

James Flynn

and relationship about Thank prospects. management the and Hunt shareholders. for company's long-term our Hunt continues the We the will And to to you, to HCFT company continue take Mike. and shareholders. be remain of its benefit growth excited summary, outlook this positive view its in to to long of In the committed

and our cash. operator ask the the CRE a to and portfolio questions. is remainder for all stage of our your company interest. your we forward in fully investments you on with I in continued any improvement We that appreciate investable the positioned With earnings And the expect as will transition we call this cycle, floating We time complete, at deploy look well open progress. believe that, the updating rate of we the to to

Operator

Instructions]. [Operator

Delaney first Securities. Steve JMP Our with today comes question from

Steven Delaney

the that the in on you congratulating by year. the given progress start inherited. to you like remarkable that past you made have It's situation just pretty I'd

job, we're So here. great happy

share about you caused that the to to I find be obviously like Obviously, thing did on commented two I'd I think to based Texas. the first and could it, not And any make opportunity it Austin, ask curious specific borrower you're just would about, properties Mike if that those multifamily. going we attractive. notice there in XXX% were The color you loans of retail

James Flynn

Sure. for the They were you assets, And the refinance but spread given loans are we reducing know loans in Austin, did opportunities from and in we keep heavy-transition were like that basically business we in The were plenty and Steve. sponsor you And spread, Appreciate are financing your of with two the which of lower willing they thank while well, say, that the already from support, that location Those assets, us and of and find the not borrower made were progress great us some sponsor actually business where they came guys had no comments. save the a loans with portfolio. story activity but executed away Austin. HCFT. loans. well that's going plan you. to would the they relationship, the of to the the to in when and terms away assets and were us their period, just well the And plan, came anticipated for our basically ahead first being negotiate story on refi financing we'll the they doubt in option extremely because us a they the of to in gave or to provide said if in

fixed lower keep with help But of stay portfolio probably spread financing worked decided execution the than them could Hunt. Frankly, we and/or with to to relationship leverage continue of higher So of to execution provided. those business complete the seamless we both long-term our plan. a got and to have them and a refi, their the given loans in and they they

Steven Delaney

more the the loan. take And make you you I either heavily decided the of that. comfortable, the obviously, pretty original when is I smaller And that improved get spread Jim, mean, refi nature that? loan. lose the Sure. to or loan on that profile sound I risk transitional am -- Is over clear a you

James Flynn

Yes, unquestionably.

first hadn't operating. lot -- that possession anchored done when of it certainly but to to It's and not store that one -- executed was now For example, by is a would not we yet the of the accurate open probably loan transitional a and call to assets get there needed TI take light be grocery was and overstated.

Steven Delaney

And then the portfolio moving broader Okay, and great. loan activity. to on

growth really portfolio. had $XX the You solid in million net

kind growth you you to have they $XX As second quarter? in you visibility at at and expectation comment pipeline on additional the payoffs you first to -- whether were quarter fairly of look significant this because second an what million. the Can the especially looks enough quarter at point like for the net loan Do it? say have team whether and

James Flynn

Yes.

decline to We've are the grapple continues the some or I look fill think with we the this for in to it issue and as opportunities. out -- less net volume we expectation quality look pipeline today, easier at win long might reduce it's is And a a pipeline the slight about It growth. some just is Frankly, we to spread I have previous that at/or and when the decline. new what we around we our competitive do term. seeing concern compared argue and the been to slight want quality and but to challenge, and of a net it, That's I the spread environment able continue would the But as healthy be finding sponsor doing a right don't and and expect around say maintain to on I it to while our it's but of as profitability portfolio. we're I the maybe calls, discipline us loans. the stated easy, be still and spread. for been opportunity to where keep market, average loans

as taken more path the much spread disciplined right putting we've slower capital I maintain to discipline think the we a I little for out think have long approach. And run, the is a us. in

Michael Larsen

to add I'll And Steve. that,

timing at quarter year, and But and we the of variability. work. of in add one that just to rest quarter Looking to quarter, prepayments in the closing that through any the capital the of look provides we the obviously driven any put by to expect loan as to portfolio continue rest

Steven Delaney

sustainable things of on me, got one your you optimizing accomplished you've thing final it you capital you short question yield value that when And think and is yield think your And the Page way And dividend from your a just the the of do remaining Great. sort can that's those range can you on -- for list looked of is deck what achieve. dividend you've existing on guys, list the for a think now, a fair it of top, you that optimal of of I one at base, got But X, sort to long of steps. with book be? ask the me.

Michael Larsen

on say, we're Yes. providing What focused Steve, is what our we've dividend to continued -- market-level on book. that is

at X%. looking X% So to

Steven Delaney

Okay.

pretty had night. the at, the would book. much $X.XX Friday and mark. current agree. less X.X% or group something what, That on I the On Yes, We've

Operator

[Operator Instructions].

with today Nolan question from next comes Thalmann. Ladenburg Our Christopher

Christopher Nolan

to is that The operating of fees, $XXX,XXX the nonrecurring? related expenses professional

James Briggs

That is nonrecurring.

Christopher Nolan

Okay.

EPS. should the added that really, be should -- So into be it not core

So the EPS, $X.XX, $X.XX? be core than should rather

James Briggs

from that adjusted adjusted -- core earnings. calculation in we've of the that We've

Michael Larsen

in $X.XX. there If $XXX,XXX for earnings. to there's to the Page a comprehensive earnings adjustment income the supplemental. you walk the that provided is look, of core core from And a to onetime our There's get of X

Christopher Nolan

it. Got

did it see quarter? that? Okay. mention I was the Jim the investment I the Briggs, was you pointing in -- out. spread spread miss did it. what Thanks for Also, Or

Michael Larsen

loans XXX on spread LIBOR. over the that average had put were during books quarter new of The the an

Christopher Nolan

XXX?

Michael Larsen

right. That's

Operator

Instructions]. [Operator

like the concludes closing over to back are turn this no there any our Flynn for further question-and-answer Jim remarks. conference to session. I'd As questions,

James Flynn

thank for to in to quarters. want their interest, just speaking continued look I time everyone all. future and and you to forward Thanks,

Operator

you Thank concluded. presentation. attending now is conference The for today's

You now disconnect. may

Lument Finance Trust (LFT) 13 May 192019 Q1 Earnings call transcript