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spk00: Greetings and welcome to the Ready Capital first quarter 2023 earnings call. At this time, all participants are in needless and only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and then zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Andrew Alborn.
spk07: Thank you, and you may proceed.
spk05: Thank you, operator, and good morning to those of you on the call. Some of our comments today will be forward-looking statements within the meaning of the federal securities laws. Such statements are subject to numerous risks and uncertainty that could cause actual results to differ materially from what we expect. Therefore, you should exercise caution in interpreting and relying on them. We refer you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. During the call, we will discuss our non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our first quarter 2023 earnings release and our supplemental information, which can be found in the investor section of the Ready Capital website. In addition to Tom and myself on today's call, we are also joined by Adam Zasmer, Ready Capital's Chief Credit Officer. I will now turn it over to Chief Executive Officer Tom Capassi.
spk08: Thanks, Andrew. Good morning, everyone, and thank you for joining the call today. Given the seemingly full-on recession in CRE, ReadyCap was not immune to pressures we and others in the industry are navigating. That said, our core Capital Life, ReadyMac SBL, and SBA 7A originations and multifamily-centric credit metrics outperformed. While results did not quite achieve our 10% ROE target for the first time in 12 quarters, the business demonstrated its resiliency. Distributable earnings of 31 cents per share were pressured largely by non-recurring items, resulting in a 6 cent per share deviation compared to our 10% return on equity target. Approximately 50% of the shortfall was due to mark-to-market losses on our opportunistic investment allocations, such as CRE equity, and an additional 25% was due to higher operating costs from the build-out of our small business FinTech platform. Of note, the mark-to-market losses did not result from credit impairment, but increases in valuation metrics such as cap rate assumptions. In our lower middle market CRE lending business, originations declined to $411 million. Our volume was 94% multifamily, including 67% in our Capital Life Freddie Mac SBL channel. The year-over-year decline in our bridge lending was due to two main factors. First, the unfolding CRE recession stoked by reduced demand stemming from an approximate 100 basis point increase in multifamily cap rates and a doubling in debt costs to 7% reflected in the first quarter over 50% decline in overall CRE transaction volume compared to the same period last year. Of note, the change in demand for multifamily is less than other CRE sectors due to an estimated 4 million unit housing shortage in the U.S., particularly in Ready Capital's affordable multi-family segment. Second, at this stage of the credit cycle, more defensive loan pricing in terms of spread, credit, and projects has emerged. For the quarter, our average loan spread was SOFR plus 600 basis points, translating to a mid- to high-teens retained yield at current CRE CLO execution, versus low teens retained yield in the first quarter of 22. We continue to tighten credit with stabilized LTVs averaging 61% and debt yields increasing to 10%. Our ongoing focus is funding lower-risk affordable multifamily projects in the strongest markets with experienced and well-capitalized sponsors. Another significant differentiator for ReadyCap is our lower-risk credit profile versus the CREED peer group, where current historic share price discounts to book value reflect fears of future book value erosion and dividend cuts from CECL reserves. Our first quarter credit metrics continue to outperform the industry. This is exemplified by 60-day plus delinquencies and four to five high-risk assets in our originated portfolio, holding at only 2.7% and 5% respectively. This four to five higher risk asset exposure is currently only one-fifth of the current industry average. Our stronger credit metrics relative to the peer group reflect the following. First, our mid-market multifamily focus now accounts for 81% of the current portfolio. Multifamily continues to perform well, supported by continued rent versus buy dynamics and the ongoing housing shortages. While we believe potential credit losses in the books to be low, we remain vigilant on mitigating maturity defaults should the broader landscape further weaken. Second, we have limited exposure to the most stressed CRE sectors, particularly the COVID poster child office, which is weighing on CRE sector valuations. The national office market will continue to experience heavy lease rollover with tenants vacating or downsizing space, specifically in older vintage Class B properties located in central business districts. The 10-year term of leases will result in a protracted period of defaults and foreclosures for the sector. Our office exposure is the second lowest in the peer group at under 5%, with an average balance of only 2.6 million. Of the 5% exposure, only 19% or 92 million of our non-performing office assets are located in CBDs, one in downtown Manhattan and two in Chicago. Expected losses on these assets equal 11 million and have already been included in our CECL reserves. The balance of our office holdings, given their small balance, avoid CBDs, which face the greatest challenges for the industry. Third is credit. In the fourth quarter of 21, we preemptively tightened credit guidelines. Specifically, we cut projected rent increases to 0% to 3%, lowered stabilized LTVs to 63%, and increased debt yields to over 9%. Our portfolio credit metrics provide a significant risk mitigation against maturity defaults, resulting from negative leverage in multifamily bridge loans where debt costs exceed cap rates and rent increases are under budget. This is an industry-wide credit issue for aggressive lenders in the 2021-22 vintage. Fourth, the granularity of the portfolio is unique relative to the sector. Our CRE portfolio is comprised of over 2,200 loans with an average balance of $4.3 million. The top 10 loans in the portfolio total only 10% of the loan book, and excluding the loans from the 22 mosaic merger, only 7%. Recalls of the mosaic loans are covered by a contingent reserve equal to 15% of the remaining outstanding balances. This granularity reduces the statistical skewness faced by large balance lenders, where a few large defaults can materially impact book value. Finally, portfolio concentration in strong CRE markets, the result of our proprietary geo-tier model, which scores MSAs one to five, one having the best CRE fundamentals and five the worst. Currently, 89% of the portfolio is in one and two rated markets, specifically avoiding certain MSAs with overbuilding and multifamily. Now, turning to our small business lending segment. To review, the SBA 7A program features two basic segments, large loans, $350,000 to $5 million, and and small loans under $350,000, which are underwritten using a credit scoring model. In the third quarter of 22, we launched a unique dual large loan BDO and fintech small loan model, capitalizing on the SBA's mission to promote the small 7A program benefiting women and minority-owned businesses. Our iBusiness funding division focuses on small loans and continues to invest heavily in their end-to-end lending software, lender AI, which is in addition to providing an origination edge for ReadyCap, may also generate fee income as a lending-as-a-service product. We invested an incremental $10 million over the last 12 months versus the prior 12 and expect a lag in revenue recognition from the resulting ramp in small loan originations. We firmly believe that this approach will advance our three-year 7A origination target of $750 million, or a 2.5% market share. In the quarter, we originated $92 million in 7A loans, comprising 65% large and 35% small loans. While total volume declined 8% year-over-year, small loan volume grew 3x, reflecting payoff of our tech investments in iBusiness. Average premiums on guaranteed loans increased 175 basis points, 9.5% in the quarter. We are ranked the number one non-bank and number five overall SBA 7A lender. In terms of the broader SBA landingscape, the bank crisis will curtail conventional financing in favor of 7A loan financing. Industry expectations are that as rate hikes stabilize, overall 7A lending volume will increase 10% year over year. Now, as we look forward, the company is well positioned to maintain a dividend consistent with our stated 10% target ROE while protecting book value. This is due to having strong credit metrics on the legacy multifamily book, but also the benefit of net interest margin accretion from reinvestment of $750 million in incremental liquidity. We were able to accomplish this due to two initiatives. First, a reinvestment of liquidity from the pending Broadmark merger, which is expected to close May 31st, into core lending products and acquisition of distressed bank commercial real estate portfolios. The Broadmark merger will provide operating leverage on an increased equity base, reduce leverage races by over a full turn, and most importantly, provide $500 million of incremental liquidity, supporting $1.5 billion of buying power. While our core direct lending products currently provide ROEs at 15%, another peer group differentiator is Ready Capital's counter-cyclical acquisitions business. Post the GFC, Ready Capital and predecessor funds were a top three buyer of small balance commercial loans from banks, purchasing over $5 billion. In the strong CRE markets of recent years, bank asset sales were sparse. However, with the unfolding bank crisis, regional banks facing deposit uplifts are targeting sales of small balance CRE portfolios. One of the many benefits provided by our external manager, Waterfall, is that it sources acquisitions for ready capital with an acquisition pipeline of $750 million at 18% to 20% projected ROEs. The current bank's state of play is price discovery, with asset sales targeted for the second half of this year providing reinvestment opportunity for our second half pending liquidity. Second, we plan to move out of lower-yielding non-core assets whose earning drag was compounded by the 22 rate rise and product lines over the next few quarters. These efforts are expected to generate $250 million of incremental liquidity, and losses on dispositions of these non-core assets will be recaptured through the significant higher returns on new investments. Our expectation is that second quarter lending volume in capital-intensive products, and thus earnings, will remain lower on a year-over-year comparative basis. But the efforts described previously, along with the strength of our portfolio, position the company beyond the second quarter to deliver with consistency on our 10% target return. With that, I'll now hand it over to Andrew to discuss our financials.
spk05: Thanks, Tom. Quarterly GAAP and distributable earnings per common share were $0.30, and 31 cents respectively. Distributable earnings of 38.1 million equates to an 8.5% return on average stockholders' equity. The quarter's shortfall on our distributable earnings target and dividend coverage were primarily due to market-to-market losses and opportunistic investments and higher operating costs related to year-end expenses and the continued build-out of our small business lending platform. interest income grew 10.5 million to 217.6 million as the portfolio WAC rose to 8.3% due to both the quarters rise in rate and a slight increase in average spread to 378 basis points. This growth was offset by higher interest expense due to higher quarter over quarter debt balances and slightly higher funding costs. Specifically, we moved $430 million of warehouse debt to securitized debt, resulting in a 32 basis point increase in average spread. Important to note, the change in net interest income was not the result of negative migration in the performance of the portfolio, and non-accrual assets remained flat at 2.5%. Realized gains grew to $11.6 million in the quarter. In the SBA 7A business, Average premiums in the quarter increased 175 basis points to 9.5%, with 74.3 million of sales producing 6.8 million of income. Originations in our Freddie Mac affordable business were seasonally high at 277 million, 82% growth when compared to the same period last year. This production contributed 3.3 million of gains in the quarter. Unrealized losses totaled $11.7 million, of which $7 million is included in distributable earnings. Additionally, lower income from unconsolidated joint ventures of $656,000 was driven by $2.5 million in mark-to-market losses inside of the JBs. The losses were not reflective of a deterioration of credit in the underlying collateral. The commercial real estate equity positions that sit inside of our unconsolidated joint ventures are expected to generate a 20% IRR over the next five years. Operating costs rose $7 million quarter-over-quarter, primarily due to increased investments in our iBusiness funding build-out and increased costs associated with year-end audit and valuation work. Net contribution from residential mortgage banking rose slightly to $3.7 million. On the balance sheet, our focus remains on maintaining higher liquidity, limiting mark-to-market debt exposure, and operating to conservative leverage levels. In the quarter, we completed our 11th CRE CLO, a $586 million deal with an expected retained yield of 13%. In the deal, we sold through 83% of the structure at a weighted average cost of plus 290 basis points. At quarter end, mark-to-market debt exposure is limited to 21% of total debt, and our recourse leverage ratio remained low at 1.4 times.
spk06: With that, we will open the line for questions.
spk07: Thank you.
spk00: We will now be conducting a question and answer session. If you would like to ask a question, please press star and then 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and then two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys. One moment please while we poll for questions. The first question comes from Steven Laws from Raymond James. Please proceed with your question, Steven.
spk04: Hi, good morning. Andrew, I wanted to start with the CECL Reserve release. It looks like $8.1 million in the SBC segment was recorded as a recovery. Can you talk about what drove that and the assumptions underlying that change, please?
spk05: Yeah, good morning. The way we approach CECL is the combination of applying TREP's model in addition to an overlay on an asset-by-asset basis by the asset management staff here. The majority of the recovery was driven by changes in some of the macro assumptions used by TREP, mainly their projections on the unemployment rate. And so what you find is as TREP moves these assumptions around, given the short duration nature of our bridge portfolio, it does create some volatility. So the movement in the quarter was purely related to TRAPP's movement in their assumptions. When you look at our diesel reserve today, approximately 50% of our total allowance is associated, is coming from TRAPP, with the other 50%, you know, determined by an asset-by-asset review of the asset management staff here. So that was really the main driver of the recovery.
spk04: Okay. Appreciate the color there. And I want to try and get to the, you know, think about portfolio earnings level and what we're going to go through the next quarter or two with Broadmark closing. And I know that's a lot of unlevered assets, which will take some time to optimize the returns there as you – look for ways to efficiently finance that. But I think you mentioned, Tom, six cents of one-time items in Q1, and we've got Broadmark closing. Can you talk about another 10% return on book that puts us somewhere around $1.50, but can you talk about how we should think about distributive earnings ramping over the year given the near-term pressure, you know, or current net interest income and the impacts of Broadmark and how we should think about distributable income versus the 40-cent dividend level.
spk08: Yeah, I'll kind of give you the high frame and then Andrew can kind of drill down into some of the bridge to how we get to our high level of confidence in the 10. But the first point I want to make is this, besides those two non-recurring items, you know, the investment in the small business fintech, 10 million there, is the net interest margin. So the net interest margin this quarter, quarter over quarter, was down about 6.5 million. And if you boil it down to two factors, one was the fact that we refinanced $1.1 billion of warehouse debt into securitizations. Very few were able to achieve that in the capital markets. That impacted our margin by about 60 basis points, so it's about $1.5 million. And then there's another short-duration mosaic asset, which under the contractual terms, there was a step down in the loan interest rate from roughly $12 to $8. So that was another $3.7 million. So those two factors were really the lion's share of the NIMH. And so that's the noise in this quarter. And then we do expect some noise in the second quarter, just given all the moving parts, integration costs, et cetera. But in terms of the go-forward nimicretion, I think one of the big differentiating factors besides credit for ReadyCap is the fact that with Mosaic and the initiative we've undertaken with sales of low-yielding assets, which aren't credit impaired, they're just lower yielding, and those equal about 10% of our NAV. Those two activities together will generate three-quarters of a billion of liquidity, which equates to well over $2 billion of buying power, and the deployment of that capital into the current distressed environment where we're definitely seeing with this regional banking crisis a lot of these pending banks looking at asset sales because they can't sell their bonds because they're underwater. So those are, you know, we're showing a reinvestment at 15 to 20% versus pre-22 when we were, you know, in 12, that kind of 12 to 13% area. So those are the factors driving the decline this quarter, noise in the second quarter, but in terms of the core ability to generate a 10% ROE the NIM accretion from reinvestment of that liquidity positions us uniquely versus the peer group. And again, the other thing I want to underscore, obviously, is the relative outperformance of our multifamily small balance credit profile, which, as you can see in this quarter, also reduces the potential impact of significant CECL reserves due to declines in, you know, certain sectors, most notably office. So, anyways, that's maybe a long-winded answer to your question. I don't know, Andrew, if you would add to that, but that's how we think about the current earnings balance sheet profile and name accretion going forward.
spk05: Yeah, I mean, the only other thing I would add to that is, you know, our SBA business does experience some seasonality in it. So, you know, lending volumes tend to ramp up from the beginning of the year to the end of the year. And so production in 7A was, you know, was off around $40 million from the end of last year. So you will see a ramp in 7A production in the upcoming quarters, which obviously, you know, goes right to the bottom line. That'd be the only other thing that I would add to what Tom said.
spk06: Great. Thanks for highlighting that, Andrew. Appreciate the time as well. Thank you.
spk00: Thank you. The next question comes from Jade Romani from KBW. Please proceed with your question, Jade.
spk02: Thank you very much. The first question would be on the ROE target of 10%. Considering the company's leverage, the high returns generated by the licenses you have, the SBA, Freddie Mac, historic CLO securitization, these very high margin businesses, plus the opportunity to acquire these discounted portfolios. I mean, is the 10% ROE target, I just want to understand, a long-term, multi-year framework? But is it reasonable in your expectation to assume higher returns, say, over the next two years? How are you thinking about that?
spk08: I would say 10 is our base case based on a conservative... uh, redeployment of liquidity, uh, that we're getting at this stage and, and a, uh, you know, the, uh, peak credit losses that we're projecting in the portfolio. Um, so over the next two years, we're highly confident of the ability to sustain a 10. Is there an upside scenario if we, you know, get a few large bank portfolios and, uh, as we, we did back post GFC? Yeah, there, there could be, but I think 10 is a, uh, is our base case and is sustainable in terms of being fully covered over the next two years.
spk02: And if you were to say double the size of the company, do you have a number in mind of what that would do to ROE given in-place expenses, infrastructure, and the operating leverage that that would ensue? I mean, there's a number of mortgage REITs trading at discounted valuations and and perhaps there's the potential to further scale the business.
spk08: Yeah, I mean, that's a good point, Jay. There's a denominator effect clearly at this stage for ReadyCap, you know, with Broadmark will be a little shy of $3 billion. And, you know, let's say through M&A we were able to achieve $5 billion, we would more likely than not that would result in about 100 basis point reduction in OpEx due to the denominator effect. So that would bring that 10 up to 11. And so there's definitely potential accretion from M&A, just given the scale of the business and the fact that we don't need more bodies to make more loans as we grow the balance sheet.
spk02: Thanks very much. In terms of the scale of distress you're seeing and the opportunity loan portfolio sales, could you put any ranges in terms of volumes that you believe portfolio sizes that may come to market, and perhaps how much ready capital would look to deploy in that. And a follow-on would be on the signature portfolio, if that's something that ready capital is going to be looking at.
spk08: Yeah, on the first point, I think if we look at 24, because most of these sales are not going to probably happen until last half of this year going into 24, as these regionals, from what we're hearing, manage their balance sheets. So what we're seeing right now is price discovery, believe it or not, on office loans, which, you know, we're – I think we and other opportunistic private credit is in the – kind of in the 60s to upper 70s, and they're kind of offering more in the – based on their CECL reserves, kind of in the near 90s. So there's about a 20-point bid-ask. But I think what will happen is, just like GFC, you'll see sales of – clean to scratch and dent, uh, portfolios because there's not as much embedded leverage in the community banks. I think they account for, I think it's like 60% or some number like that of all, uh, CRE, uh, debt, um, CRE, uh, personally in mortgages. So what we're expecting is, yeah, you have probably something like in the, uh, uh, 20, I know there's a broad range, but 20 to 50 billion of sales, uh, with, uh, The large majority of that being more in the scratch and dent area where some of the decline in CRE prices will create LTVs that are above the regulatory minimum, but we're comfortable with it from a distressed debt standpoint. To answer your first question, that's what we're expecting in terms of that quantum. As far as signature, I don't want to comment on that specifically, but we always do look – the waterfall desk is very well connected with the FDIC, and we would look to involve ourselves in any process with respect to relatively small balance loans that fit our asset management capabilities. And just on that topic, we are hearing that the FDIC – These bank sales will likely revert to structured transactions, which provide embedded leverage. And actually, the banks themselves, that's an interesting point. The banks themselves are looking at these credit risk transfer structures to also provide more efficient deleveraging of their balance sheets. So it's really a question of do they need liquidity for deposit outflows? That's a cash sale. Or are they doing it for a capital RBC transaction? in which case they'd revert to something like a credit risk transfer.
spk02: Interesting comments, and thanks for taking the questions. Thanks, Ed.
spk00: Thank you. The next question comes from Steve Delaney from JMP. Please proceed with your question, Steve.
spk01: Thanks. Good morning, Tom and Andrew. You know, CECL is a beautiful thing in a lot of ways, but, you know, the – creates a lot of noise and you know the the nice thing about about distributable eps is we we get rid of that noise and we just try to focus on uh earnings including realized losses so looking at page 19 can you give us a sense of your 31 cent whether it's 30 31 but for distributable what are the amount of actual realized losses that you've taken on the portfolio against Distributable EPS in this first quarter? Thanks.
spk06: Good morning.
spk05: Yeah, so in the quarter, the realized amount of losses was really limited to the sale of one particular REO property, and it was roughly $500,000, so pretty immaterial. Other losses on the loan side were really offset by the contingent equity right from Mosaic. So it was really just that $500,000 sort of realized REO impairment.
spk01: Okay, and that $61 million definitely was going to ask about that, given the 30%, I think 60-day plus. So that's money you bought that portfolio, or you bought the equity in the portfolio from the prior manager. And was that $61 million of the consideration that was set aside in escrow and would be used to absorb principal losses? Is it that simple that if you have a loss on recovering one of those assets, you're able to tap into that $61 and reduce the reserve?
spk05: Correct. So when we structured the Mosaic transaction, part of the consideration was a contingent equity right that had a total value of roughly $90 million. And it basically serves as a first loss piece against losses from the Mosaic portfolio. And so what is remaining in terms of the cushion on that portfolio is roughly $61 million.
spk01: Okay. So you used roughly $30 million of it to this point to absorb real losses. Okay. Right. And, Tom, I know, you know, I like your – It's kind of hand-to-hand combat out there, obviously, on the credit side right now, but I like your long-term comments about strategic versus tactical or day-to-day. Tough question, I know, but in your view of the company two, three years down the road, is residential mortgage banking a core business for Ready Capital? Thanks, and that's my last question.
spk08: Yeah, I mean, we look wherever we can to continue to simplify the story in the company. Part of it was the initiative we call the One Team initiative to combine all of the commercial real estate lending businesses under one umbrella where we offer, you know, one loan officer offers all the products to their sponsor to improve the brand. So, you know, residential mortgage banking has been an incremental contributor to It's obviously shrinking in relation to the overall balance sheet, so I think we would look at options to potentially simplify the story as it relates to residential mortgage banking. But we currently have no intention to further invest in the sector from the standpoint of, again, the simplification of the ReadyCap product mix and brand.
spk01: Got it. That clarity is helpful. Thank you both for your comments.
spk00: Thank you. The next question comes from Eric Hagan from BTIG. Please proceed with your question, Eric.
spk09: Good morning. You got Ethan on for Eric. Just a couple from me. Are you seeing opportunities to pick up bulk packages of MSRs?
spk08: Yes, definitely. But to underscore Stephen's prior point, we are not bidding them into Ready Capital. Ready Capital is a... To be very clear, it's a small-balance direct lender that will look at opportunistic acquisitions in the space. But, yes, we are seeing MSRs, but that will not be a factor for our ReadyCaps investment strategy. The external manager is a bidder and has infrastructure to do that, and we're seeing a lot of opportunities because of the nuclear winter in mortgage banking. A lot of them are now selling MSRs to generate liquidity. along with these scratch and dent loans, but that's not a factor for ReadyCap's investment strategy.
spk09: Got it. That's helpful. And then second, how should we think about modeling net interest income following the CRE-CLO you issued?
spk05: Yeah, so the recent CRE-CLO, the debt cost increased roughly 30 basis points from warehouse. And so... slightly higher advance into the low 80s, but the debt costs increased roughly 30 basis points from warehouse.
spk06: Got it. That's helpful. Thank you.
spk00: Thank you. The final question comes from Matthew Hallett from B. Reilly. Please proceed with your question, Matthew.
spk03: Oh, hey, thanks for taking my question. With Mosaic set to close, any update on, you still expect double-digit accretion? How's the portfolio in terms of the turnover of the portfolio? How quickly?
spk08: Adam, you want to comment on that? I'm sorry, Andrew. I'm sorry.
spk05: Yeah, so we are looking to close the transaction on the 31st. The book value of the company is in line with where we projected this to be headed into close We have seen the portfolio turnover a little quicker, which is increasing the cash balances expected to be on balance sheet at close. I think when we look going forward past the close, as Tom mentioned in his remark, we are going to pull incremental capital out of the business via leverage that is expected to come on balance sheet upon close. and then reinvest that $500 million over the next quarter or two. So that, along with the operating synergies that are expected just by combining two public companies, should drive those double-digit returns we've been talking about.
spk03: Gotcha. So that was my follow-up on the question on what you're going to do with the balance sheet. How will Ready look when that capital is turned over? Will you pay down? more of the secured borrowings. I think you have one maturity, a small one later this year. Just walk me through, do you want to continue to move to securitized financing going into the back half of the year? Just walk me through how ready the balance sheet, the red side will look when this capital is turned over.
spk05: Yes, and certainly we have the convert from June to August. We are positioning ourselves to take that out in cash, if that is what is needed. We are expecting to do our 12th CRE CLO in the third quarter. We have an SBA securitization that is on the calendar. And then we do think there are other parts of the portfolio today, mainly some legacy acquired assets and some fixed rate products that will go into either our acquisition shelf or our fixed rate shelf. So I do think we'll be active in the securitization markets. In terms of growth capital, I think the majority of that liquidity is going to come from the asset level financing we plan to put on the existing Broadmark portfolio. And then that capital will be redeployed into some mix of our core, mainly bridge product, as well as some allocation into what I would call a revamped Broadmark products. So that's really the go-forward plan over the next, well, two to three quarters.
spk03: That's interesting. And I guess the follow-up, you guys have had a pretty good track record buying that stock. I mean, assuming the window will, when this closes, you'll have the ability to repurchase stock and be given the discount to Proforma and AV. I mean, it seems like a compelling opportunity. Can you just go over how willing you are to restart the buyback?
spk05: Yeah, so certainly coming out of the merger as we've demonstrated in the past. We believe that share repurchases to be a powerful tool in providing shareholder value. And so given the amount of liquidity we plan to have coming out of the merger, we certainly think share repurchases will be a way to drive book value for shares. So I do expect that to be a tool we use in the back half of the year. you know, if the price of our share stays sort of at this level.
spk06: Great. Thanks, Andrew. Thanks, everyone.
spk00: Thank you. That does conclude the question and answer session. I'd now like to turn the call over to Tom Capasi for closing remarks. Thank you, sir.
spk08: Yeah, again, we appreciate everybody's participation and look forward to the second quarter earnings call. Thank you, everybody.
spk00: Thank you. Ladies and gentlemen, that does conclude today's call. Thank you very much for joining us. You may now disconnect your lines.
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