HCFT - Earnings call transcript Q1 2020 | Lument Finance Trust, Inc.

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Operator

Good morning and thank you for joining the Hunt Companies Finance Trust First Quarter 2020 Earnings 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 and good morning, everyone. our XXXX discuss financial joining Trust’s Companies for quarter first results. you call Hunt to Finance Thank With me Precilla on CEO; Real Mike the Debt call today President; Estate Briggs, are Jim CFO; and Strategies. Torres, of Larsen, Head Jim Flynn,

the filed release, a details our with provided results. and first issued On Monday, quarter XX-K SEC we on our press which

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

Securities course statements statements of of may would the call outlook, expects, like Jim, anticipate, and to made call during XXA indicate, Section and that XXXX. believes, other evaluate, Exchange intends everyone constitute meaning are handing based intended similar the When statements. Exchange Before used not Section I certain conference this forward-looking of and are the on Act as within to over remind Securities information of in XXXX of such to identify XXE historical will, of Act the expressions this the words forward-looking

to Form statements. Such forward-looking section cause reports the XX-K. XX-K of from its the forward-looking in the statements are discussed uncertainties those in contained in Risk and on differ SEC, various risks results the are with to actual reports Factors company’s uncertainties risks materially X-K, and could These XX-Q filed that and and including subject particular, Form our

currently may to will continue all and possible or future identify risks. uncertainties to amplified It's the by be amplified Additionally, such are many the and or these of amplified in COVID-XX predict risks not be outbreak.

speak will in only certain forward-looking hereof. any the place non-GAAP undue obligation of Furthermore, reliance these Listeners this these The financial to are statements, no date on to of call. discussed measures cautioned which update forward-looking conference be as statements. company undertakes not

be isolation in measures to filings non-GAAP in GAAP information accordance this Reconciliations in can presentation be as not most with the to substitute our comparable financial prepared accessed accordance the is these SEC. financial considered or measures presented a the through intended to GAAP. A of information of with with

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

Jim Flynn

Good Brendan. what first We for quarter Hunt to very the joining today us under Finance challenging call you, XXXX. Thank Welcome all. appreciate circumstances Trust morning, you for us earnings are everyone. all the of Companies

COVID-XX, and with you families express like to foremost, First healthy. staying regards and to hope I'd safe of that my and are your all

how work. have seen, and all As COVID-XX overall a is the having on we and significant pandemic we live the economy, our impact all industry

as measures We protect our with while disruption as continue operations employees take possible. continued to little to business ensuring

working continue of segments basis. continues on it been since been remotely functions all portfolio and the are monitoring servicing, as related monitoring organization a OREC We've the have mid-March. able on situation and actively we'll Leadership unfold. across investment daily employees asset Our to to management, execute management, all

unprecedented, and environment financial is on current are its we assets as and monitoring The our that economy and impact the the having as the Clearly, broader closely impact on is the markets. the pandemic well lending credit created pricing of and, overall asset extreme have availability volatility concerns lending associated activity. the COVID-XX and market, values, with reducing uncertainties impacted financing thus, around and bridge loan economic

mid-March, that originations stay-at-home at to significantly and be continue debt addition, lenders other manager to obtain of and opportunistic appraisals investment thoughtful, HCFT. restrictions and the limited have will have, evaluation reports. ability CRE third-party for new loan In in patient curtailed we some other opportunities our cases, orders With and mind, in travel HCFT's of in since we

any loans of portfolio, loans loans, not currently our briefly mezzanine portfolio, I'd like or environment, senior dividend. current any do investments by We of over regards and our With construction mortgage and the our backed financing to of hotels. consist loans, light address position liquidity sources our own our In our and mortgage-backed to participations. securities XX%

exposure Furthermore, the housing, do not exposure to have majority multifamily collateral, retail we health any limited our of care have currently properties. We assets seniors make skilled properties. to nursing up vast and or

to payments of XXX% XXX% Furthermore, of our payment. their payment were CRE XX, the With we XX in XXXX, March out have or of of I'd in made like of investment XX% CRE the XX portfolio that XX, loans of regards as April portfolio to the highlight the portfolio as current. loans May activity, loans. investment May received on

have XX. we granted May XX, on Borrowers May seven-day remaining these a were period borrowers payment We for three from payment XXXX. loans currently to the grace not to received receive on which yet expect

We is forbearances we'll by continue proactive our We impacted all asset potentially COVID-XX. assets to on focus and to have of date. executed believe portfolio that not any well positioned, management

respect of our assets With from we do And not a financing we currently warehouse HCFT. repurchase sources, any margin not utilize at are to our to facility financing warehouse calls subject therefore, on lenders. repo

as CLOs term primary a Our financing corporate two of term, well non matched sources loan. mark-to-market as CRE are

cash have range. unrestricted between therefore, on unrestricted continue within we events experienced have material liquidity operate basis. to $XX operated of adverse daily million cash perspective, $XX.X to on unrestricted quarter From date ended cash liquidity $X have million hand million we not and of We COVID-XX. and million to of And this today. with $X due a a Historically, with any the we

we we that to management liquidity future. experience defaults the in to in coming state the Significant based in or believe mind, the sufficient obvious, the length the coming of delinquencies is the economic months, months. over could liquidity exist we on depth and where does that liquidity over extent the While portfolio, focused our uncertainty around the And we on today impacted are position we stand our significant acknowledge With recession. the economic uncertainty today. be

per April we our we to have timing dividend, QX yet respect course With and with dividend the made accordance normal XXXX In QX of not declaration. $X.XXX dividend paid XX. XXXX share on a process,

in normal with course. Board make We expect our in on after dividend determination June a to the discussing

$X.X quarter in our our discuss for touch million $X.X income share. per $X.XX was earnings results. detail core first briefly shortly. million quarter more quarter and Net per financial share, I'll Now, on the results Jim the will $X.XX first Briggs or for or was first

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

As announced restricted majority of in HCFT's QX successfully substantial substantially a we invested XXXX. undeployed March, in as remain cash today. of deployed fully We

Briggs, results. I'd the call that, like With further detail to Jim? turn over Jim to on the will who financial provide

Jim Briggs

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

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

non-core was items. quarter The by current impacted two

and corresponding which an of our was $XXX,XXX The value rates decline in a mortgage portfolio, the increase prepayment declining fair interest first expected right servicing driven legacy these in rates. by primarily of was

times servicing compared million XX, a as or of of to of servicing March or fees of X.X million As at X.X the XXXX. times valued XX, multiple December $X.X XXXX, $X.X MSR multiple fees was

be pay While recurring this in the item. our experienced value do loans that valuation continue the a will amortize decline to will not quarter of MSR these off, anticipate we significant

at The other non-core quarter income item where taxable has to MSR subsidiary helped. was activity this a $XXX,XXX experienced our our related benefit asset REIT tax

of After share. quarter these first This of in the quarter-over-quarter XXXX million was million common to QX $X.X compares $X.X in XXXX. attributed $X.XX or improvement for per quarter $X.X was of $X.X earnings in the XXXX. per from driver and QX share of for for income per to in $X.XX for two earnings net increase The the core the an to core interest of core our adjusting quarter or million $X.XX million main items, or our prior share $X.X stockholders earnings million

the an a This increase to primarily QX. capital fees during earned the floors our be of and, can extent, exit quarter, benefit throughout in deployment LIBOR to lesser increase attributed improved our

from of our affiliate Our book $XXX.X an of million $X.XX million, $X.X an a increase of was reflects and January by share. March year-end XX value manager at million $X.X a of investment

QX Our book a QX XXXX value per was per compared XXXX book $X.XX of $X.XX. share to share value

previously like the non-core discussed, our $X.XX. to the impact I'd non-recurring increased would per items quarter-over-quarter book value have share that note to excluding of

losses, which losses would referred of CECL, adopted that instruments. note additional a to company SEC, how GAAP ASC as comprehensive An we reporting like financial recognize defined commonly the credit I expected as smaller or on current credit a as to to item have yet not by XXXX-XX amendment is is

XXXX. January continue reporting As a company, X, our incurred financial Until on smaller implement then, we we to model. would on loss an statements prepare CECL

loan March not of impairments have of recorded model allowance not any incurred impaired any XX, the do As in loans to quarter. loss and our consider current losses we under the or be for

COVID-XX of of performance properties economic current of healthy, on loan collateralize value borrowers our pandemic remains the impact that uncertainty exists, its about the commercial severity and the the and including While on commercial impact the mortgage the duration investments. our loan of portfolio

record the evaluate or losses, any We we'll as allowance loan to credit will continue for portfolio incurred. impairments and

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

Mike Larsen

good Thank morning, everyone. Jim, you, and

of comments, significantly curtailed manager since quarter first originations the a at XXXX we mid-March, quarter. on while earlier pre-COVID the was primarily expanding HCFT's had loan Just new

acquire a quarter. advances we during loans, portfolio by million, $XX.X incremental basis, our million. experienced with increased the $XX.X fully of to And two did the quarter, XXXX of made funding payoffs total $X.X and loan million loan During fundings continue deployed. loans we on We net be future on

these quarter initial had in weighted weighted average New of LIBOR XXX new a the over of loans points. basis average of a investments were for and multifamily. spread XX% XX% loan LTV

activity of We a will assets. continue loan related multifamily to majority be to anticipate that our

over same downturn. multifamily, period. this is current worrisome line resiliency during the in this we're particularly We despite at greatest note And the the the Our the different relevant was employment seeing, the overall true portfolio year-end. historically quarter-end Multifamily is reflected in anticipate XX% assets environment. which trends being believe we to property have with types among

of such due we the which that note City, to significantly as to to certain portfolio, in like impacted central business also New have emphasis limited heavy market exposure loans middle have the COVID-XX. been would I York by our districts,

of of Our The the XX average floating quarter loan loans with an an principal The portfolio portfolio diversity. with million total had rate at size portfolio balance million end. outstanding of significant $XXX had $XX.X consisted loans of of asset of life basis XXX% rental floor with prior calls, points. loans average have as the basis on And average portfolio noted in weighted XXX floors weighted LIBOR of have points. a XXX a we we on

a rates XXXX to in rate. floors, currently LIBOR current recent above impact these current have we the and maintain we LIBOR, decline our of would on are positive persist XXX% portfolio able LIBOR that floors LIBOR Due floor to anticipate Should has a LIBOR our earnings.

on our note Final financing.

our CRE As of securitizations loan an was financing financed portfolio basis LIBOR with plus cost CLO two is average XXX mentioned, with points.

mark-to-market these uncertainty, additional term With non give CLOs us provide the and the market production that current stability. financing match

period on reinvestment of of February a our reinvestment XXXX. August ended period runs our in through that second XXXX first The CLO has and

refinance CLO. a exploring been have the first We of

We'll of requirement the with the markets the volatility, for our market CLO. options to refinancing the And However, capital refinancing there's continue of us to as structure status develops. uncertain. timing for the refinance current is no and/or the evaluate

With back call to that, the pass I'll Jim.

Jim Flynn

time the to positive on and optimistic its you, continue do current prospects despite company In the long-term. environment, the economic look you on of Thank about interest. future our appreciate forward and your we outlook updating to remain growth all and feel progress, we summary, Mike. We and

my reiterate healthy of families all you sincere and this your remain and to that the well like during and crisis. safe hope I'd remainder Finally, are

questions. With that, I'll ask call any for open the the operator to

Operator

begin our first the Christopher question-and-answer come will session. And will Ladenburg from Instructions] Thalmann. with now Nolan question [Operator We

Christopher Nolan

Hi, guys. Hope, well. is everyone

Jim Flynn

you? are How Chris. Hi,

Christopher Nolan

anticipate Jim for CECL do guess Briggs, I when Good. implementation? you

Jim Briggs

January XXXX. of We smaller would as reporting be company X implementing a

Christopher Nolan

then, looks to was terms in that’s insight what good with a in how quarter And try you it. everything by is but asset sort going think Got forth of, it I of quality your doing – And the can are any them? us all guess of around, big I a like being COVID it borrowers good, forward. topic work give so with impacted going and and on granular to you’re terms surprisingly

Jim Flynn

the obviously well. obviously Frankly, outside Fannie, just as and York. over expected Freddie, other performed, even concentration to Sure. over our can HCFT that distress. would past a billion we’ve forward that servicing are of all HCFT, you start is and concern I here classes start manager multifamily to so may that’s There’s actually think the market the footprint across the general, some obviously, reopen has I This portfolio than know REIT, seen in going I’ll as thoughts Jim. has experiencing asset different days we’ve the multifamily more a Precilla products than New space. the FHA better I say country But standpoint, including and larger certainly in in long-term week offer $XX or seen with the and including within come in some much from helped, is

versa, us – their vice we’ve that with And the and that’s very have all obviously, with borrowers question. and been proactive Most right. tenants big had

have people to had that that to to to in us, But for we our the other their be early sure incentive agreements, I that’s good any to of an they’ve with significant there’s a sought the forbearance active challenges just actors, of our owner stability, and grant to get quality rent point they continue out standing. maintaining been handful pay, many key important our facing. So in you assets, dialogue good about behind make think remain as we they’re discounts borrowers equity long-term but I pay to and the properties maintaining assets, try specials come haven’t have think

all tenants normal downturn. I of a strong than right – borrowers, say. the would it thing seem sense reputationally almost a It there through the anecdotally, the think, doing way a from is I economic little does People different reputation, seems

to I a able through challenged So, come and be more high-quality than they continue do those borrowers have up. we work with to but we portfolio. to we others, with that have We as assets the are issues expect think them work some

the who’s PM want Precilla to there? Torres, here? any color you add Do

Precilla Torres

Sure.

only majority been that’s have – the assets that, substantial acquisition thing other have So critical pretty the is our of assets. historically

So invested behavior collections through their as of cash or equity challenging probability heightens a difficult manifested for in of transactions, the all of borrowers we and hence it seen our majority probability us assets course, of period in significant improves to-date. of the this matter, have our that and support have the

Christopher Nolan

then seems sensitivity I seems from the like at sounds the to interest sounds mean, quality Thank right. I steady, relatively All assets you it given the the that that benefiting seems to rates. It a would your asset momentum excuse you. also characterization? like and the be fairly least is for so overall have And me, dividend, mean. now sense, be rate earnings fair steady be changes in to interest

Jim Flynn

and have primarily the about on may thinking time, to be but keen if for getting current but basis a position a are relatively short-term going but things that pandemic remain on true, cartage I floors think last still think loan I see last Look, all the well we’re that keeping also basis that dying a long be of the Yes. some that just certainly or because very liquidity, better, getting, lot we and interest there’s we’re lot with a are rates, and very pretty there’s eye time. in But we’re abundance pleased quite are in this to that could seem a people to due of documents. our of for questions with that the to management

of we our and the portfolio. to going the our firms of as be other certainly, feel terms we with how well and of the we’re positioned there And that structure liquidity our we’re any as asset in the out short-term, quality prudent But definitely in manage loans.

Christopher Nolan

get Thank I’ll for questions. Okay. you back my in taking queue.

Operator

Overcap. Our question Zulch next with comes from Lee

Lee Zulch

Good morning. quick question. the floors Are there CLOs? LIBOR Thank you, and everyone any on a

Precilla Torres

There are none.

Jim Flynn

notes, liability? the On on the

Lee Zulch

Yes.

Jim Flynn

No.

Lee Zulch

you. And Thank Okay. one one. other just

see as ahead, looking business do what for biggest caused challenges by competitive model? COVID-XX, events you Excluding your the

Jim Flynn

I and we’re definitely and our right, desire size, environment as certainly to our costs. factor different a of of we’ve scale is – in our now. competition we’re For think a environment, terms limiting in a is certainly Overall with grow efficiencies us, challenging in spreading

but underlying normal conditions and what – market big to that’s of from to raise be So to challenge, just growth the capital. challenge the independent continue available needs

There this a in. to short the last very space of the a it that was of of a had towards was that put significant funds, entered of lot money years on the several a amount by of competition, pressure coming money on curve, new market lot which investment by the led lot very end new concentrated view over a

We’ve while we’ve the – money well in bit. our the maybe diversity certainly while whether most today, in challenges debt being like positioned certainly a relevant lot us. pool broadening for to certainly a that we’d continue that, of more think assets, will that or of currently, beyond seen is the stop market seen we’re not but think We CRE I – that just, not space in a little the

the function general, So, past that competition. that risk challenge really frankly, risk. over and commercial firms competition mortgage is probably paid not getting are or for that as industry a are My we for haven’t XX whether frankly overall, the in the is been personal in paid months the opinion of being been but people REITs an biggest in has so the

Lee Zulch

you very Thank much. Great.

Operator

Flynn hand any back no Jim like for closing [Operator Instructions] over call Seeing to remarks. the further questions, to I’d

Jim Flynn

good health forward We quarter. speaking you better everyone Thank coming to Wish look next and whole for thank the in everyone a safety to speaking for during to like just forward months you be soon. we’ll to you. I environment hopefully, and today. us Optimistically, to joining country. look the

Operator

today’s you Thank has now The concluded. presentation. attending for conference

disconnect. may You now

Lument Finance Trust (LFT) 12 May 202020 Q1 Earnings call transcript