HCFT - Earnings call transcript Q4 2019 | Lument Finance Trust, Inc.

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Operator

Good morning, everyone and thank you for joining the Hunt Companies Finance Trust Fourth Quarter 2019 Earnings Conference Call. Today’s call is being recorded and will be made available via webcast on the company’s website. I would now like to turn the call over to Brendan Gover with Investor Relations at OREC Investment Management. Please go ahead.

Brendan Gover

Thank you. everyone. morning, Good joining Trust’s for to Hunt discuss Thank quarter our XXXX Finance fourth financial Companies you call results. Head CFO; With me Mike Precilla Strategies. Briggs, CEO; Jim are Estate Torres, and on the Larsen, call President; today of Debt Real Flynn, Jim our we the with release, filed a fourth quarter SEC on provided details On our issued financial press XX-K Monday, and which results.

earnings found on We be also our can provided presentation that a supplemental website.

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

I now call over Jim go will to the Flynn. turn Please ahead.

Jim Flynn

certainly in certainly most unprecedented or Thanks sure country morning, Patrick’s These would and welcome St. memory. fourth Good Brendan. you, anyone’s the everyone. the Hunt Day perhaps Trust recent ever, this the York times. Companies quarter Day am in I memory Thank of Patrick’s again to XXXX. City Finance for joining St. for New extended us and earnings call be today. around the Happy are unique but

across recommended functions all I the us this First, a the like real execute Leadership the taken are of today to coronavirus management, employees, maintaining portfolio segment, ORIX currently continue all situation investment actively our ability asset to as little as basis. lines all continues call the and while are business management, unfold. monitoring being only are would the in the disruption of by monitoring Those not on all business remotely, acknowledge We protect to have with and outbreak it firm related measures the to spread. on disruption combat to related servicing, doing as a the as taking possible. we estate to on caused so operations measures but daily our

on having that outbreak financial is the watching and We impact market the are the our assets. closely

that HCFT. in loan opportunities debt our market lending remains around thoughtful, for risks, coronavirus and will valuation credit. have CRE in to we economic volatility market concerns bridge associated investment mind, created with With continue of uncertainties opportunistic competitive, the While patient extreme pricing be the and and

our I share. $X.XX were $X.XX for or on $X.XX the the the share. million financial end Net share, or will Core results fourth fourth full will quarter touch in $X.XX $X.XX and a more shortly. per Briggs was detail million Jim quarter $X.XX $X.XX briefly at results. share million for year earnings $X.XX the year per year, the full income million or or for per discuss for

million loans over $XXX average points CRE at the weighted we of floating a XXX basis acquired quarter, During and spread funded of LIBOR. rate

a XXX today. have of at successfully pleased the For QX cash in floating remain as points million majority announce weighted invested business of HCFT’s full to LIBOR. fully funded deployed $XXX CRE spread our we above that substantial am restricted and the undeployed in of accordance rate basis of year, loans plan, substantially we and average with acquired we I

quarter was assets Estate excess real portfolio servicing approximately Investment ORIX in combined OREC corporate, of ORIX HCFT in Capital’s announced solutions of $XXX is which concurrent Group, end the a an with production on the with approved Management Corporation Japan-based unanimously financial wide billion traded a independent of and the as Investment ORIX ORIX mutual has Management municipal of investment and and X-K publicly management range through subsidiary platform, exceed USA loan annual finance $X $XX Hunt a management and its billion. subsidiary a Investment under combination Real clients than X, more USA a The it January XXXX, billion new Corporation, the to entry agreement of ORIX provides $XXX of estate Corporation of Management management its management. Estate of Subsequent Real innovative sectors. termination Capital that of part Red the agreement the OREC and we LLC. and platform created billion services SEC Lancaster assets the and Pollard, A into finance capital company, Capital. LLC, noted with directors in has for filed Hunt

the million common stock the resulting company’s shares about purchased private aggregate an $X.XX in raise In of in million. the affiliate placement of connection ORIX a capital purchase a at the transaction, company with per of by of USA X.XX $X.X share, price

to We part platform its of large a from ORIX of and originations, institutional very sheet. through expansive support believe servicing look provides forward HCFT manager, platform strong are strong with and We HCFT USA enhancing leveraging scale balance with the be quality and asset management USA’s that ORIX the platform. to excited

who to would will I that, over Jim our like further With results. provide to Briggs financial call on details the turn

Jim Briggs

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

net quarter $X.X fourth we a for of common reported of per to of million or the $XXX,XXX or million XXXX, share quarter stockholders of per negative net For $X.X income of for per stockholders compares XXXX. $X.XX to income share comprehensive and fourth XXXX $X.XX or the common quarter the $X.XX loss of This to share. third

This deployed to quarter and of $X.XX for of the the Our share. per is in quarter-over-quarter to fully fact quarter cash core for capital that share The therefore fourth of with not $X.XX per of in interest our the was third earnings was lower decline per for or core XXXX common XXXX. attributed quarter. stockholders QX began share core compares million our the $X.X income $XX and driver we due primary of $X.XX million that during earnings XXXX quarter earnings of CLOs undeployed experienced to the

Flynn fully substantial and we deployed in of remarks, do as As remain substantially expect experience QX XXXX. mentioned of underinvestment invested HCFT’s we in restricted drag of majority today. undeployed Jim cash not we to his in opening this QX the Therefore,

core per in Another in generated share $XXX while exit exit payoffs experienced experienced driver of of of of per $XX.X of payoffs In million timing $X.XX we of loan of the $X.XX fees. exit which and the generated approximately earnings QX which share of payoffs, we was fees, quarter-over-quarter fees. XXXX XXXX, QX million decline

share. expect quarterly exit normalized to $X.XX fee We our per approximately be run-rate income

exit interest HCFT via the reimbursements exit via and note I fees GAAP if would manager financials, are waived. is the like income to expense to that if by recognized earned fee in reduction income our on

per book Our the becoming only value quarter QX book enhanced per stability share $X.XX and a and $X.XX book significantly QX value by X% was of XXXX changed HCFT’s Since first value full early $X.XX have as per QX of to which HCFT share total we compared share in XXXX, QX. as was has book of of manager manager. our as value of the since

composition and activity. call who the I will details Larsen provide on portfolio to over will Mike our turn now investment

Mike Larsen

last Thank investing focus mortgage everyone. comments, the quarter to has investments. you, first in continue been rate earlier on morning the and Jim our high-quality good Expanding floating over

During we XX% of made the portfolio XX% loan incremental million. with quarter XX total $XXX XX these fundings and loans quarter, fourth our to loans overall funding increased of future multi-family advances XX% at months acquired and were end from on multi-family.

to anticipate during believe anticipate related is of relevant the the to note being loan historically types market majority we in current continue reflected assets. this assets greatest downturn have property be during And particularly the true same multi-family the uncertainty. among Multi-family We this and environment. the different to we resiliency our will activity the

a weighted average initial maintain with of is on our continued activity we XX%, ensuring had This consistent focus and LTV quarter’s loans historical discipline. our reflects new which origination credit

XXX loans during the New average weighted over points. a had quarter LIBRO of spread originated basis

our decline floor floors, we have current has days, have LIBOR Based our a XXX% average floors loans basis portfolio LIBOR across our obtained the weighted the current the portfolio. rates and points floors QX on of a positively the persist average drastic floor a on on able impact earnings. floors of to we LIBOR LIBOR our XXX interest Should million $XX.X XX% floor anticipate On points LIBOR and $XX.X currently will difficult end levels We where said, to end, maintain in floors see We last of will that majority acquisitions. loans LIBOR. be million currently our with in of portfolio are weighted loan historically with and for in where LIBOR on market spreads. of our undeployed LIBOR rate it’s quarter. these XXX LIBOR of payoffs XX cash. basis our transition that pricing maintained. we both stands Therefore restricted portfolio dynamics current increased being experienced at loans a substantial with the including bridge the difficult net We will basis, on loan at economics, year have the environment, in clarity what portfolio With say during the invested to year it’s this and current impact of by market above

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

the the However, the disruption of monitor portfolio may on current we our performance the assets. market will and have continue actively impact

Our points. loan basis XXX an of portfolio average securitizations cost plus is financed financing X CRE CLO with with of LIBOR

With our mark-to-market February market stability reinvestment ended balance and non August term match in first right of sheet. this has side of CLO provides XXXX. that our second period runs our of the reinvestment The with in through the period a financing on year us current uncertainty, this additional

CLO. exploring been first to our have refinance We of

is there timing or for current CLO. us structure uncertain. volatility, the market And refinance refinancing requirement the is However, of with this to no

to markets develops. the the We of our options status as refinancing continue evaluate will capital for

pass will remarks. the back Jim to I call that, for With closing

Jim Flynn

you look progress updating We in call your all interest. the our the will remain remain uncertainty. and to to we to with operator summary, ask the this appreciate pleased your We optimistic and period continue volatility time of in today. questions. company’s still In long-term prospects, Mike. that, and cautious forward but and I have you, And with about the progress growth be made to Thank open we positive do

Operator

Delaney go Steve And ahead [Operator question Securities. with today first from your Instructions] JMP from question. Please comes our

Steve Delaney

everyone XX, are happening Jim, from we conditions, for but went anything last month closing an do the as this much me there guess terms explanation for very in is market I XQ Thanks. Can you I have moving there. to conditions, tell dip the over gave some thing actual so, and think last loans you Mike here. us was thank in detailed current that a or everyone. mind operational other you inside here the of of XX days? commitment front in into closing of earnings process any Jim, in the anything morning, that Good the of is

Jim Flynn

Yes.

handful a do now. loans So, we have of

deployed. HCFT call, essentially As we fully stated the is the on

Steve Delaney

Yes.

Jim Flynn

we have we our in we that assets as REIT. in on But sheet the assets to past do said balance payoffs as put loans have continue in the order to

but of we speaking say So are the evaluate close and of re-priced and close are with and we for circumstances will no borrowers is do process under the I commitment to current whether What that to a under to We have there those a to requirement application normal through or trying I asset risk need is what that closing. potentially delayed, think would the loans us be that. handful loans. be expect frankly moving and final do to in

finance We the opportunity might types or on just door with certainly to the certainly support continue and are assets doing We long-term the most without provide describe going them. best necessary are have be back to and and in but market close best clients to sponsors we want everything it and way cautious to looking of clients best don’t to to terms we so any perhaps on. much focused and certainly assets our slow are of that the it certainly taken more capital, evaluating

Steve Delaney

Sure.

Jim Flynn

thing, to And sellers regard in as understanding an what the at where there has is easy we will sponsors, there trying parties that’s positive. fairly been and very sponsors that’s I have and least do been have right the acquisition, a have end, discussion as seeing that and to well where say what general, the negotiation instances in of certainly a just is issues, been that are around all

Steve Delaney

do pricing come are given Great. you that of that of don’t hard That’s condition portfolio? half but expecting have great and obvious the here to know in to year you ends commitments up, market where really to for hear. the in sense first a sense where make when it’s Any the through we the prepays

Jim Flynn

ready I fair have think maybe would accelerate perhaps expect agency absolutely where in the we to potentially a to to, they any to price out our sale. go and those that, borrowers many can value or say that extent looking might I add it’s try are in an of to provide say, a financing that e-mail

expansion a than just or expansion, going in to we maybe So period that those an instances, have I extended suspect are not rather the prepayment.

the like business be XX% of So, something Typically, – year. I it that not the zero. certainly expect but the does depend sponsor. on probably over expect plan not we to a bit lower,

Steve Delaney

listen, everybody Well, thanks comments the morning great. this Okay, safe. for stay and

Jim Flynn

too. Yes, you Thank you, Steve.

Operator

Our comes with go your Mr. ahead Please Nolan, on Christopher question mute. Nolan Ladenburg is phone question. from Thalmann. from next our

Christopher Nolan

that did first mention the Mike, the you delinquencies or in that for no was there defaults, fourth ‘XX? quarter quarter were

Mike Larsen

delinquencies no or currently. are There defaults

So, have fourth or it’s don’t the both and currently defaults. in quarter we any delinquencies

Christopher Nolan

thinking of you or the And given about defaults go sort trajectory? how will coronavirus guys trajectory delinquency how are the

Jim Flynn

matter the tenants the with the industry their federal covered, I is at but of I just right wages lenders cooperative support of there level work a tenant think as shouldn't support to can be really but that and we in and whether the and that’s also ours here I is work which should with borrowers expect lack to majority it that's as of flow outstanding at levels in the our the is mean tenants the don't whether tenant, of otherwise I I the prepared there do borrowers that to and partisan given tenant, to vendors kind think has for see this I and discussion position it delinquencies pay a We new a been assets underlying Washington of support a significant all caucus out getting help to say among short tenant really and what all depends which rhetoric certainly or a multifamily of, needs but everyone and coronavirus issues will we be the I financing the rather of think that’s our of certainly to various with retail want defaults caused overwhelming less through which in the depth are great all Chris across outbreak folks. coronavirus will the in suspect bullet by of the top in or the of results asset. where starts in not rent, is the the hope of timing a a but on underlying general I as parties there Washington be is the the and pointed Certainly would they so dictate significance time ultimate decrease temporary where performance for mind mean and receives first all respect apply – for expansions but on lack applying I rhetoric our the

Christopher Nolan

leverage on the balance you question reinvestment one say given going longer sheet is where no your CLOs same, period, of final about are thoughts? what its leverage Then in thinking are down, your that go forward,

Jim Flynn

but relatively where be with that the it choose down. to it to but in anything come I expect will out in expect don't if maintain increase would reinvestment it it period we de-leveraging side occurring depending said a think see like given I the come that the that have I today I and on to overtime as as ratio mean would our the of in little certainly is have we down in we past an of bit CLO line with think okay we leverage not actual vehicle we type suggested should leverage to the certainly there is, grow we will that refinance

Christopher Nolan

Stay Great. it is That safe. for me.

Jim Flynn

Chris. Thanks, You too.

Operator

Our [indiscernible]. your with go next comes ahead Please from question. question

Unidentified Analyst

that on comment value book how quarter Hi, is shaping first could you up?

Jim Flynn

that one? to want you take Briggs, Jim

Jim Briggs

our to where MSRs, clearly coming will Yes, is need value we with in decrease our sure. rates. in the see there With

We spoken relatively as do to losses we have the lower expect from are have to there been QX. could value unrealized fair MSRs, otherwise some expecting unrealized we value contribute prospective P&L, book stable some value through QX there, a But which see we which in is a in

Unidentified Analyst

And how that would significant of… sort be what

Jim Flynn

is only $X.X asset. million a It

thousand So hundreds talking of the in we're there.

Unidentified Analyst

everyone. much. safe you so thank Okay Stay

Jim Flynn

You you. too. Thank

Operator

Please [indiscernible] [Operator Instructions] your question. with go ahead

Unidentified Analyst

of is Yes, hi, a duration guys What have average the loans? I question. your

Jim Flynn

it’s one I am I have? I know, around months, XX – to don’t that off make to I the want of answer know sure don’t if if believe XX more precise. I you believe Mike to have but I hand. you

Mike Larsen

Yes.

Jim Flynn

I don’t have but me, that number of exact the right. front in is

Our year loans model X extension so are it that and think generally terms month. typically with and – X that opportunities about they as them range, to in that is XX we

Mike Larsen

Page supplemental, the exercised was posted if are in of months all borrowers? Yes, extensions been as has which XX XX our by of XX/XX, it

Unidentified Analyst

you thank very Okay, much.

Operator

the ladies management conference that session. to like And back we for and gentlemen, conclude call question-and-answer turn remarks. any will over today’s closing with I’d to

Jim Flynn

joining. everyone to health, we be look to to speaking I forward everyone just you want thank for wish next well, and good be Obviously, quarter. safe well,

Operator

gentlemen, presentation. today’s you thank conclude do for We joining Ladies today’s and conference call. does that

may disconnect your now You lines.

Lument Finance Trust (LFT) 17 Mar 202019 Q4 Earnings call transcript