HCFT - Earnings call transcript Q3 2020 | Lument Finance Trust, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning and thank you for joining the Hunt Companies Finance Trust Third 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 Charles Study with Investor Relations at OREC Investment Management. Please go ahead.

Charles Study

Thank you and good morning everyone. our XXXX discuss financial joining Trust's Companies for quarter third Results. you call Hunt to Finance Thank With me Precilla on CEO; Real Mike the Investment call today President; Estate Briggs, are James CFO; and Strategies. Torres, of Larsen, Head James Flynn, the frilled release, a details our with provided results. and third issued On Friday, quarter XX-Q SEC we on our press which

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

of course statements evaluate, statements of the Exchange Act Securities may indicate, discussed intends would expects, the and believes, actual call meaning and words forward-looking contained are subject like Such expressions from materially forward-looking of the Jim, These and uncertainties to are particular, are used XX-K to made in XX-Q call to during of of of that everyone on the that statements. constitute Act handing based forward-looking conference Factors the Before the those XXE Form the its XX-K. uncertainties in risks not When statements. intended X-K, identify will, other to and with company’s I certain this XXXX. reports anticipate, Risk Section XXA and Section in the Exchange in are of differ on similar within over outlook, XXXX as our SEC, various could remind risks information and Form including to section historical Securities filed the this and statements such reports results forward-looking cause

on Furthermore, by undertakes in as place obligation risks. to speak be risks to identify of discussed to any cautioned with undue financial is to statements, to in company intended presentation measures financial SEC the substitute statements. of update will measures I the a certain these information be A these predict can information turn in It are these which Listeners Reconciliations to GAAP. filings these no isolation such presented www.sec.gov. or date hereof. prepared financial will non-GAAP The will to forward-looking not our as maybe forward-looking are only GAAP are and accordance reliance the go considered non-GAAP is of amplified not comparable the this continue COVID-XX this accordance pandemic. many the amplified through amplified James conference accessed the call. and at currently not nor uncertainties the of possible to of or call be in by all ahead. future now be with Please most Flynn. measures in over with Additionally,

James Flynn

your that morning, Thank call Thank given the for first the to be everyone. we look for Hunt Trust about in stay what's I today. my and healthy. are on Companies are you, Hunt that quarter Charlie. safe that, Good challenging Finance hope many will say Welcome it you of more today. to third the of financial XXXX. under today results what earnings us and and stability country going let continuing Despite to forward COVID-XX to the for very joining express families pleased all you with the Finance regards me us continues pandemic, circumstances for here you telling With and Companies Trust to

how economy, and all pandemic industry, our on a work. we've have As impact live to political we our experienced all the COVID-XX and significant our continues environment

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

to Our do and they been so. will working continue since employees remotely mid-March have

concerns transparency as have our The parent the impact across levels organization and all execute markets. segments ORIX financial to the impact investment on able with assets, as associated of bridge economy COVID-XX management market, estate basis. environment our been is as monitoring portfolio bridge acquisition real general around servicing, lending unprecedented broader closely well asset levels. continued the pandemic we've on on reset has breadth driving on has is on of current to a to and monitoring availability the the daily asset of all its actively we financing. management up, returned it market are as and to lending functions economic not of as of continues values, monitoring well However, impact Notably related the Leadership Clearly the the the robust picked the COVID but volume the situation progress. --

of protection new We interim disruptions are the continue market the moratoriums But underwriting of realities including the economic constraints -- the for and while as tenant of to impact today's eviction well actively screening as increased COVID flow delinquencies rental mindful contends, delinquencies. potential and lender transactions. and potential environment ordinance on concessions with be local cash

and result As originations of a had heightened qualifications with markets a resilient on our late more have focus drivers. sponsor demand

debt investment opportunities will patient evaluation HCFT. our be We in continue to for CRE and thoughtful of opportunistic

a over majority of any currently and like properties. financing loans, position provide portfolio, by update we backdrop, brief have have not retail own housing, not health multi-family to consist to seniors We the I senior to XX% care exposure of or liquidity or nursing dividend. mezz portfolio, mortgage-backed exposure office backed do this of to and currently Furthermore, our our investments securities participations. our our do construction our our collateral facilities. any assets loans, make limited skilled regards Given would hotels. We With our loans vast up sources, and and on loans mortgage

CRE were our in I'd that of XXX% loans their in Furthermore, portfolio of like those XXX% of made October highlight XXXX payments. portfolio to Additionally, September as current. our XX, loans the investment

Overall, we have any or HCFT. defaults proactive With any believe write-downs from assets well all executed not are the warehouse forbearances repo And potentially the era. impacted experienced management at positioned nor not to on COVID or uncertainties. we during our financing financings asset any is have continue not of by repurchase loan on we portfolio lenders. focus that do our to therefore, facility or regards we broader economic subject utilize we our sources, calls to We margin currently assets of and warehouse

are two Our COVID-XX. matched have as a to From primary due we corporate experienced liquidity standpoint, to of as term sources date non-mark-to-market CRE any loan. events well CLOs not material a term liquidity financing adverse

While and I'm with focused and made process, GAAP coming coverage the what not to we the being $X.XXX economic uncertainty ratio for and accordance acknowledge the uncertainty, and and on September be share. we'll to we significant that With $X.XXX continue With continued significant impacted. management where ratio respect dividend economic -- that XXX% extent dividend, XXXX per dividend the of we dividend timing EPS the normal is coverage a comfortably the -- know per we position state With yet of a the to stand quarter, have to XX% on believe the quarterly ratio announce dividend on we and/or XXth, months the we declaration. and delinquencies of based today. in our and the course that QX the said, sufficient and share core EPS dividend exists depth In with the our XXX%. do mind, liquidity third increase from quarters. our over to remain pleased liquidity announced in length liquidity covered we today our potential recession portfolio in we may recession obvious defaults so to experienced we that

a to We Jim? the declare of our with income expect call expect in may results. to in QX special and necessary. taxable dividend to With make the early to I'd Briggs turn do discussing on will over XXX% our that like December course. James provide financial who our details if in determination our on after that We Board normal distribute dividend

James Briggs

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

also of to reported share share stockholders positive variance $X.X the QX the to to related company million prior issuance. quarter million to the $X.X of incurring or I primarily QX. to that $X.X on third by the non-core like stockholders $X.X income stockholders $XXX,XXX expenses the per current for from net a meaningful in experienced floors This per quarter, highlight compares quarter and $X.XX share. or the both by million driven the earnings was portfolio. income non-recurring quarter common This in third loans million quarter CLO the result The net we per would the of our prior exist two was common improvement for $X.XX common in in primarily $X.X For and to or the $X.XX we to prior approximately which of of LIBOR of the to Relative impacted was in income to that from declined expenses, of XXXX. postponed current prior benefit net interest million XXXX, XXX% items. quarter quarter a income of a in lower

our decline legacy $XXX,XXX speeds as associated these elevated of rights experience lower interest fair we in continue was to of rates. value mortgage first The with servicing the a prepayment portfolio

future remaining would limited carrying size generally the to of bottom-line. the we the value of the this fair to any asset expect $X.X be to reductions quarterly in value less X/XX, of was magnitude As million. the Due of asset meaningful

benefit experienced per item quarter to for for $X.XX our million GAAP common taxable to was activity After earnings items, this or REIT tax non-core core of attributed a subsidiary. our quarter income adjusting of pertaining was these $X.X two other The $XXX,XXX share. stockholders the

book with an was pleased equity on company generated EPS are X.X% of the this quarter the We by which basis. value yield annualized core

GAAP share. our with XXth value a year discussed additional we we a value amendment in instruments. began adopted I our share from referred is to not which we company book or we quarter, is at comprehensive reporting highlight September a by last share of SEC, current four is how the per value $X.XX XXXX stable have which per like has to recognize losses, share last of commonly the $X.XX financial per extremely $X.XX. XXXX-XX stand was like CECL to smaller yet but $X.XX to per quarters credit book at the credit book losses QX We'd represents This ASC as item as been million line as or remind as today. over expected that everyone $XXX.X that increase where on Our which of would One defined

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

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

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

any portfolio activity. record to I as continue over for will losses the impairments evaluate on Mike We now portfolio will will or investment and turn details call allowance credit provide to and Larsen the loan will our who composition incurred.

Mike Larsen

Thank you, Jim.

the Flynn Jim on earlier measured take call, we a As originations. new continue approach to to discussed

new with the fundings total loan $XX.X advances quarter, did six and one funding loans million. of acquired During on future we incremental

on loan secured a million fundings our during these assets. million of X.X% total All payoffs on of We the and loan multifamily by experienced loans $XX.X or of $XX.X UPB. decreased -- corner net portfolio basis, by quarter were

to market. While current new compelling patient continue investments, evaluation seeing our in of the be are and opportunities investment we thoughtful in we

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

have Our believe the loan was line Multifamily XX% quarter. same quarter greatest different overall environment. this at and historically types being property is the to portfolio anticipate during amongst prior current note the resiliency this a downturn period. assets multifamily reflected We we during in relevant the over end with in true

an balance significant diversity. of average of loan for at of loans asset $XX.X end. principal size an consisted $XXX of loans The portfolio which provides had portfolio with million million XX Our quarter rate outstanding floating total

of average has plus points. have able spread loan to basis as to existing on And levels, is floor floors Should above weighted Jim with XXX% average our on meaningful our LIBOR portfolio are financing, XXX continue anticipate loans that cost we financed we Our to LIBOR two on LIBOR our LIBOR our persist an average XXX Final note XXX current of financing impact portfolio of CLO a rates was to LIBOR with in positive noted, points. of portfolio maintain weighted going basis CRE X/XX and as we securitizations earnings. our with points. of of have basis floors the LIBOR a

points first the term our first during loan CLO to has remain cost runs give after Since a us these our specifically, on has attractive of that second million we payoffs the bond in financing highlight, With after occurred paydowns market of CLO LIBOR August of funds XXX non-mark-to-market respectively. leverage The and period to basis provide million through, QX. over during the have our quarter payoffs, end, these reinvestment CLO loan $X QX XX%, CLOs of of in like our payoffs reinvestment within first sequentially experienced additional and reinvestment XXXX. CLO which even continued additional paying at and and period an uncertainty, the this that that the matched With of plus ended, $XX these the XXXX begun ended, impact period protection. regards February securitization bonds. of down I'd CLO million $X

We conditions continue monitor CLO to in and actively refinancing evaluate as develop. options conditions our space, for CRE the

to CLO the during have the estate bonds. market are expected the across CRE capital of for to to we positive markets, including era. Furthermore, of managed the market, seen evaluation refinance return the are CLO, commercial come quarter encouraged CLO We the our alternatives. recent over COVID liquidity and secondary These CRE positive a first several and provide by developments CRE backdrop, issuance to coming signs real new issuances

facilities, providers are from line repo lenders. more and warehouse reviewing warehouse of requests terms financing In

out warehouse lenders put continued capital the certain on to due While to uncertainty. remain eager the others are sidelines, economic

not for remarks. levels. With the I'll to We have offered some closing returned seeing are Jim, improvement some terms in to well, as that, the pre-COVID call they pass albeit back

James Flynn

We about progress We progress. you Thank forward our appreciate we about excited firm. your make. we And we the our are continue company's its prospects. remain look the that you, positive outlook to Mike. and updating the and In quarter to summary, growth in interest on

to for my that Before to news that I reiterate treatments. Pfizer hopefully hope and I your bode and open you we safe the future. take big with for operator had Q&A, good announcement I'd and respect to vaccines the will a know remain today, With hopefully healthy that, the will like and questions. continued families well call so ask

Operator

Thank you.

ahead. from first question-and-answer Christopher The now will Thalmann. Ladenburg We the Instructions] begin session. [Operator Nolan of question today go Please comes

Christopher Nolan

Hi on CLO Mike the idea your timing? event? Could half comments first refinancing, any XXXX, guys. possible type on of this be a of

Mike Larsen

factors throughout as But to terms that we position a remain compared And There's into market. do have. would very that. the months And they the next year. to coming which of And have improved, know that, attractive market, continue we to we the and things continually mentioned, you definitely can change. a put And first as and looking all into in timing at the CLO lot because is current you the year say go to -- I the revisit have the have market obligation to that. refinance, in us will that no that what evaluated the

So it's market we'll to on, how depend continue to going develops. evaluate. the But

Christopher Nolan

your Great. is guess James of the for portfolio for average your coverage And borrowers? rate or I the interest by Flynn, what debt investments, companies your

James Flynn

some because of the a -- Over bridge question, debt these tricky borrowers? the It's are are the by loans. borrowers

doing and work. in going they're So

Precilla, something tell add some of know they're if more underwrite to that I in quite you but specific, yes. that, minimum So low, cases want is to I to while a covered more topic work. stabilize typically don't doing coverage the you we can XXX.

Precilla Torres

Sure.

But was we X.XX mind, high times. fairly end of in keep was that the the of when floors have quarter, number calculated. it As

Christopher Nolan

Okay.

normally that? So, the than X.XX it's most was little recent, but a bit higher

Precilla Torres

of floors is our high. What I'm floors are suggesting there. The are that loans the

So it a if where result as were be it of you today normalize higher. to would is that, for LIBOR

Christopher Nolan

of debt the pre-interest much is the they're your your really or their about properties, interest? cover my whether debt rate how earnings and question -- Actually economics Yes. not underlying --

James Flynn

wide because a whether rate those retail rent what multifamily on as other that and there there So those if better the work -- receiving continuing blended I already to it's a units of, receiving the or are occupied but that is where they're are versus assets do range X.XX, is not are described or rent. is

rehabilitation at So we certain asset. blended I of think or during anything periods the one, over good a think because to going as one of be is that portfolio, are assets of expectation below

Christopher Nolan

Okay. And what at of then, guess I floors? your loans their are any percentage if

Precilla Torres

all They are.

James Flynn

they are, I think would all yes. suggest I

Christopher Nolan

floors? They're all at the Okay.

James Briggs

that. Just to to add

floors -- average points. weighted -- a basis weighted the XXX our the our of have average on average So, loans

So look at you it's below LIBOR, well that. if today

a current all of So, LIBOR LIBOR. floor our loans have above

Christopher Nolan

Okay, great. me. That’s for you, guys. it Thank

James Briggs

Thank you.

Operator

JMP next Delaney Please of Instructions] go comes question [Operator Steve from ahead. The Securities.

Steve Delaney

everyone. Congratulations quarter the average of that on the portfolio the and XX of morning, note Good remaining short, the months. performance the credit fairly is term portfolio. I

two your expect over So floors as current And slightly to can with additional LIBOR Thanks. loans to you the quarter? three comment seasoned to you given outlook for repayments the third access on over did quarters? you next do that, in have

James Flynn

of will But go the Precilla the them let general, but our on loans be most options little extension most borrowers, provide requirements with met. a more extension have are at some detail. through achievable I'll or -- of in

we can to and liquidity to our the or have place important, that have I answer possible So elevates. manager we'll as under sheet balance first into terms. then more think our balance second HCFT would extended of that question, part loans the is -- seasoned loan terms are that say expect I would some the access our on short And parent those the current your We that on that yes. it's sheet have the

the of mean picked a that a the think dictated hopefully duration? if we so I that we -- and I The being flow able or since to and so. Labor and anything as lot win amount of add through, is we've activity business. the and will Precilla, used the to Day really last fair our earlier, -- seen some or by we the always feel is then that -- will will stated in good what having quality to good LIBOR transaction to portfolio where up. And about tolerable We've from pretty So come has know month over portfolio put to in continue by market loans. but don't the on we current is, levels of, continue be terms floors and you want floors do floors, high

Precilla Torres

post Sure. No Jim Steve, of right. about market say activity as is term that, I of acceleration remaining volume I'm is the mentioned the the -- XX But terms given that picked screenings, in about have up it's XX seen months. Labor an The seasoning also Day. sorry has will in we acquisition

positive especially payments expect result We that with a news accelerate, only being the that that able through. as will come today refill to

Steve Delaney

Thanks. That's final Jim. And thing, helpful you. both one from of

ORIX road, is Thanks. that the rebrand there curious, you could platform? are the business or lines company. if the any loan And to to down the manager, Now HCFT plans products I'm add other

James Flynn

Sure.

managers. we So, branding Board with REIT discussions positioning the the our with have long-term our around and of preliminary had and

to So, we'll with come continue back those the the conclusions and on investor those. community to have discussions

that using answer potential. REIT the yes. potential that limited sticking have generate in some question, There been future the around and see, be from liquidity of we some diversifying we able that with or think the category, short I the and mezz that mean In have use your classes again that we answers, liquidity same typically about and already types is is do We any to related of is terms bridge other nature. but think, it that finance assets of whether of or I structured asset evaluating, to would second the fact some things financing loan that raise, investments of away just

potential being the that to for there down road. see do happen I So,

we in market, attractive. find those the credit of available all where profile course, are available that the to see Of are -- that and opportunities things both and subject we

think are there some. I

that So, to down road. fair the it's consider we say, would

Steve Delaney

I safe. Have appreciate stay a comments. everyone XXXX. the close And to good

all we'll think when glad I it's be over.

James Flynn

Thanks Steve. sir. Yes

Operator

Showing turn to Instructions] I session. our questions. like [Operator James closing conference to no over the further would question-and-answer remarks. any Flynn for back This concludes

James Flynn

say you. continue speaking We'll forward you I And healthy. everyone Stay to thank the to to want soon. to you. well. you Be the again for in soon. to Thank we'll you Thank good news hopefully, again to quarter. today. again look group. here joining Thank have just some speak fourth We

Operator

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

You disconnect. now may

Lument Finance Trust (LFT) 9 Nov 202020 Q3 Earnings call transcript