Broadmark Realty Capital Inc.

Greetings and welcome to the Ready Capital third quarter 2024 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Andrew Alborn, Chief Financial Officer. Thank you. You may begin.

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 uncertainties 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-debt 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 our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available in our third quarter 2024 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 Zasmar, Ready Capital's Chief Credit Officer. I will now turn it over to Chief Executive Officer Tom Capaci.

Thanks, Andrew. Good morning, everyone, and thank you for joining the call today. The third quarter marked what we believe to be at or near the bottom of the commercial real estate cycle, particularly in our core multifamily sector. We're seeing stabilization in both rent growth and property prices driven by three key factors, rate cuts, a nearly 50% reduction in multifamily starts, and strong occupant demand. To those points, we should begin to see the benefit of the improving market conditions over the coming quarters. Our CRE portfolio is showing stabilizing credit metrics, while our small business lending operations are achieving record growth, supported by strength in the broader economy. At Ready Capital, we continue to make significant progress on the strategic portfolio initiatives outlined at the start of the year, which focus on repositioning non-performing loans. Our $8.1 billion CRE portfolio consists of two segments, originated and M&A, representing 90% and 10% of the total, respectively, at quarter end. The originated portfolio declined 6% in the quarter to $7.3 billion. The rate of negative credit migration in the portfolio continues to stabilize. 60-day-plus delinquencies in the portfolio increased marginally by $53 million and equaled 6.2% of the total portfolio at quarter end. Within our originated portfolio, 21% has been modified with term extensions through the third quarter of 2025 being the primary modification. These modified loans are predominantly multifamily at 76%, with average stabilized LTVs of 73%. These loans, while modified, continue to produce cash flow and carry contractual interest rate of 9.2%, with 66% being cash paying. More broadly, The CRE portfolio features a 9% contractual rate, of which 78% is cash paying. Stronger multifamily fundamentals have increased transaction volume, leading to increased payoffs of $490 million. The majority of these proceeds went to reduce leverage in our existing CRE CLO structures. We are also gradually increasing our offensive stance, executing $246 million of new originations, and our pipeline has grown 34% since the second quarter to $730 million. Our M&A strategy has historically focused on acquiring and liquidating legacy non-core assets, then reinvesting the proceeds into our core CRE lending business. We continue to reduce our M&A portfolio, which now stands at $850 million, a 17% improvement. Our active asset management has stabilized 50-day delinquencies at 16%. The levered yield in our remaining M&A portfolio has increased to 13.7%. With the capital invested in our small business lending segment, Ready Capital has become a leading national non-bank lender to small businesses, providing a full suite of loan options, from $10,000 unsecured working capital loans to $25 million-plus real estate-backed USDA loans. This resulted in a record quarterly origination of $440 million. This consists of $355 million of Small Business Administration, or SBA, 7A loans, $39 million of USDA loans, and $46 million of small business working capital loans. Our dual SBA 7A strategy targeting both large and small loans has now exceeded our $1 billion annual target. This quarter's volume was split between our traditional large loan channel up to $5 million at 53% and our small loan channel below $350,000 at 47%. Our fintech iBusiness has grown to be a market leader in the origination of small SBA 7A loans. The strategic mix has generated higher SBA guarantee percentages and gain on sale premiums averaging 81% and 11% respectively. We are now the number one non-bank and fourth overall SBA lender in the country. We continue to execute four initiatives to navigate this CRE credit cycle. First, 72% of our portfolio repositioning efforts are complete following the settlement of $331 million in loan and REO sales across 44 assets. These sales generated $55 million in net proceeds and reduced negative carry by $0.08 per share. Our remaining loan inventory includes 23 assets totaling $218 million in carrying value comprised of 40% originated loans and 60% M&A loans, of which 5% are office assets, 21% land assets, and a mix of multifamily and industrial properties. We have 26 REO assets valued at $140 million currently listed for sale. We expect monetization of the entire position to extend to the first half of 2025. Second, our leverage position remains conservative. Our total leverage of 3.3x is below our long-term target of 4x. Improving sector liquidity has enabled us to pursue opportunities to raise accretive capital and optimize our existing capital structure. Of our 17 outstanding CRE securitizations, nine are eligible for call, with an average current advance rate of 73%. In the third quarter, we called a legacy fixed rate securitization, RCMT 2015-2, generating $9.3 million in liquidity and improving yields by 400 basis points. As discussed on prior calls, our static CLOs have less flexibility than typical managed CLOs in managing delinquent loans, which affects peer group credit comparisons. However, our CLOs remain strong. Six of our eight outstanding issuances passed their interest coverage and over-collateralization tests. October remittances showed delinquencies and loans in special servicing improving to 8.7% and 17%, respectively. We expect our next issuance in the first half of next year using collateral from both called legacy deals and new production. Third, growth in our small business lending operations reached new heights this quarter, marking the highest earnings contribution from the platform in our history. In total, our small business lending segment generated $21 million of pre-tax distributable income, or $0.12 per share. These results exclude any impact from Madison One, our USDA lender, or Funding Circle, our small business lending platform, acquired in the third quarter. Madison One and Funding Circle are expected to be accretive to earnings once fully ramped. During the quarter, these acquisitions posted a quarterly distributable earnings loss of $1.8 million, or a penny per share. This loss was due to timing of building a forward pipeline and recognition of post-acquisition operating efficiencies. Looking forward, the scale and high ROE capitalite nature of our small business lending segment provides a clear differentiator amongst our peer group, with the segment's book value at only 8% equity and a significantly higher market value. The growing earnings contribution, along with normalization of our CRE business to historical levels, should support a longer-term ROE premium to our peer group. Fourth, our exit from residential mortgage banking progresses well. We are currently marketing our remaining MSRs with a settlement plan for late November expected to generate approximately $40 million in net proceeds. The platform sale is expected to be completed over coming weeks with a settlement pending agency approval in early 2025. Ready Capital is well positioned to capitalize on the tailwinds in the CRE market. While it will take a few more quarters to fully realize the benefits, three key drivers will contribute to our future earnings growth. Our stabilizing CRE platform, continued turnover of our M&A portfolio, and sustained growth in our small business lending platform. With that, I'll turn it over to Andrew.

Thanks, Tom. Third quarter gap losses per common share were $0.07, while distributable earnings showed a loss of $0.28. Excluding realized losses on asset sales, distributable earnings were $0.25 per common share, representing an 8.4% return on average stockholders' equity. The distributable loss primarily reflects the timing difference between the valuation allowances recorded in the first and second quarters and realized losses from settlements in the third quarter. Three key factors impacted our quarterly earnings. First, revenue from net interest income, servicing income, gain on sale, and origination income increased 19 million, or 22% quarter over quarter, to 104 million. The change is primarily driven by $8.7 million growth in gain on sale revenue from our small business lending business, with sales of $254.3 million, generating gain on sale revenue of $24.2 million. $6.6 million growth in origination income from small business working capital loans through the Funding Circle platform and higher SBA 7A production. $2.1 million growth in servicing income from MSRs acquired through the Madison One and Funding Circle acquisitions. Net interest income held steady quarter-over-quarter at $51 million. Interest income declined $7.6 million, primarily from portfolio reductions through payoffs and liquidations. This was offset by lower interest expense from deleveraging of our series CLOs. Quarterly interest income was 73% cash and 27% accrued or paid in kind. This equates to a cash yield in the portfolio of 6.6%. Of the 27%, 50% related to construction assets acquired in the MOSAIC transaction, of which 74% are expected to be repaid at the end of the year. Non-accrual balances remain stable at $260 million, representing 2.8% of the portfolio. Second, the combined provision for loan loss and valuation allowance decreased $17.9 million. The $53.2 million increase in CECL reserves was due to a $4.6 million decrease in the general allowance, plus $57.8 million of specific reserves on several assets. The decrease in the valuation allowance is due to an $88.2 million recovery from loan sales, offset by a $17.2 million increase on loans remaining on the balance sheet at quarter end. The release of the valuation allowance is related to the settlement of $315.7 million of loans. Loan settlements had an incremental impact of $11.5 million net of tax. Third, as expected, operating costs rose 1% to $60.4 million, reflecting $11.5 million in funding circle costs and a $4.1 million increase in variable costs related to production. Non-cash REO charge-offs included in other operating expenses were $525,000 in the quarter, down from $9.1 million in the second quarter. We recorded a $32.2 million bargain purchase gain from the completion of the funding circle transaction, primarily driven by realizing a deferred tax asset net evaluation allowances. On the balance sheet, book value per share is now $12.59 per share versus $12.97 per share last quarter. The change was primarily due to declines of $0.31 per share related to CECL, $0.11 per share related to net realized losses, and $0.06 per share reduction from net changes in cash flow hedges through other comprehensive income. These declines were partially offset by a $0.13 per share increase related to the bargain purchase gain. Distributable earnings absent realized losses covered the dividends. Our strong liquidity position includes $181 million in unrestricted cash and $20 million in committed but undrawn borrowings. With that, we will open the line for questions.

Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Our first questions come from the line of Crispin Love with Piper Sandler. Please proceed with your questions.

Thank you. Good morning, Tom and Andrew. First, can you just give a little more detail on the loan sales in the quarter? I saw the $110 million loss. What was the the total sale amount, and the discount you sold it at. And then on what's left to sell, is it $218 million, or did I get that wrong?

Hey, good morning, Christian. So we settled in the quarter a total of $331 million. The pricing was relatively in line with what we disclosed last quarter, which was right around $70 million. The sales generated roughly $55 million in proceeds, And the EPS impact of those sales in the quarter was $0.11, a loss of $0.11. In addition to that, we do have a population of $218 million of loans remaining on the balance sheet that we anticipate selling. We took increased valuation allowances of roughly $15 million gross of the effects of tax, and that had a $0.13 effect on EPS.

Okay, I appreciate that, Andrew.

And then just in the third quarter, can you disclose how much interest income was from PIC and just expectations from PIC over the next few quarters?

Yeah, as Tom said in his comments, a little over 20% was either PIC or accrued. When you break those two components down, component is coming from construction loans acquired in the Mosaic transaction. The expectation is that a large portion of those, pushing 75%, clear out in the fourth quarter and turn to actually cash paying investments. The other subset relates to the modified loans. As Tom also mentioned, his Roughly 66% of that is cash paying with the component being accrued if the ultimate recoverability is supportable. So that's the breakdown.

Okay, great. And then, sorry, but is that 20% of interest income or net interest income?

It's on the top line. Great. Thank you, Andrew. Appreciate it.

Thank you. Our next questions come from the line of Douglas Harder with UBS. Please proceed with your questions.

Thanks. I guess thinking of the originated portfolio, you know, how do you expect the trajectory of, you know, of either delinquents or non-accrual assets to perform, you know, both resolutions and inflows of potential new problem assets?

Yeah. And do you want to comment on that? And just, yeah, actually, I think one thing to underscore is is the so-called denominator effect, which we're seeing in the industry in terms of the portfolio decline being greater than the new 60-day delinquents. But maybe, Adam, just comment on that more broadly.

Yeah, sure. And the originated portfolio, as we've been highlighting, the majority is multifamily product, right? So it's 70% 70% plus in multi. You know, we feel that there's strong equity in these deals. And certainly, you know, the market's improving. And as Tom and Andrew highlighted, you know, the commercial real estate space, you know, specifically the multifamily area where we're so heavily exposed, is certainly on a stabilizing path, you know, especially as rates begin to ease. You know, the fundamentals are certainly more favorable. I'd say that, you know, you know, Delinquency, you know, will remain volatile, right, as we work through the portfolio. But, you know, as we've highlighted, it certainly peaked our delinquency. And also, you know, the denominator effect, you know, as we're originating less new loans today, you know, that denominator is going down as loans are paying off. So we had about $700 million of of exits this year, which is certainly reducing that denominator, we've only had about $50 million of new 60-plus delinquency in the quarter. So, you know, that's, you know, although there was, you know, a 90 basis point increase in the 60 plus, it's only attributable to about, you know, $50 million of new 60 plus. So as Tom highlights, you know, that denominator effect is certainly impacting the delinquency increase.

I appreciate that. And as you think about, you know, kind of the pace of recovery within commercial real estate, you know, how do you... Or how do you think about the difference maybe between lower short-term rates but kind of a backup in longer-term rates and, you know, kind of which one of those is likely to have more of an impact on the market?

Yeah, I mean, certainly... Oh, go ahead.

I was going to say, just more broadly, we're definitely seeing unequivocally a flattening in the curve on the multifamily space, especially lower middle market, you know, Delinquencies on CoStar were flat at 5.8 for the first time in four or five quarters. Vacancy rates 5.8%. And rent growth has kind of flatlined at around 0.3. And even some of the negative markets you're starting to see, like Austin, which was down year over year 7%, you're starting to see that flatten out as well. So that's on the asset side, you're seeing a definitive stabilization in cap rates and property values. And our mark-to-market LTV is well under 100, especially on the loans that have been modified or have some four or five risk rating. So that's the relative positive there. As far as rates, it's an interesting dynamic. The short rates, as you see a steepening in the curve, the decline in short rates will definitely benefit our modified loans by improving the debt service coverage ratio, all else being equal, while they work out their business plans on a delayed basis and improve NOI. So there's kind of a – on the back end of the cycle, you're seeing the benefit of the debt service coverage expansion, which got crushed during the – when rates gapped out in 22. So I think that's going to benefit us. And then another sell thing we're seeing is that there's a lot of new private debt capital coming into the – into this multifamily market. And we're seeing some of our better loans that were extended and modified being taken out by bridge on bridge from private debt. So that dynamic is a tailwind. The headwind, however, though, is to the extent long rates, the 10-year stays elevated at above four and a half. That means the takeout from, and our takeout is focused on GSE, Fannie Freddie, it's going to be harder to hit that debt yield on a takeout. So those are the two countervailing trends in terms of rates.

I appreciate that answer. Thank you.

Thank you. Our next questions come from the line of Jade Romani with KBW. Please proceed with your questions.

Thank you very much. Other assets is a category I've been tracking and, you know, the large components include deferred loan fees and accrued interest, about 25%, goodwill and intangibles, similar ratio, and then deferred tax assets. Is there any risk of write-down or impairment of any of these categories as you sell non-performing loans? since presumably some portion of the deferred loan fees accrued interest relates to that, and potentially some of the goodwill relates to the Mosaic and Broadmark acquisitions.

Morning, Jade.

So I'll take them in the components. So the deferred tax asset gets evaluated regularly and impaired based on, you know, profitability expectations down at the TRS. We don't expect any impairment issues there based on the trajectory of those businesses. On the accrued interest, we are only accruing interest that we believe to be recoverable. With that being said, there are certain circumstances where the asset management staff may recommend something like a DPO, and in that case, you know, the accrued interest would be part of the write-off though. Although we, you know, we believe that the effects of that to be fairly minimal. You know, Goodwill also gets evaluated regularly. At this time, we don't see any impairment on the Goodwill.

And does any of the Goodwill relate to Broadmox or Mosaic? Both of those were bargain purchase gains. So is that a no? Yeah.

So the, the Goodwill, um, you can't have Goodwill if you have a bargain purchase game. So no, they do, they do not relate to the interest rates.

Okay. Uh, thank you, uh, for clarifying that. Um, and then just the, um, you know, in your mind, the balance, cause I know there's a lot of moving parts across the portfolio. Uh, you know, some of the non-performing loans in REO were, you know, uh, inherited through M&A, and clearly you anticipated some of that. But what's the balance today of non-performing loans and REO?

Yeah, Andrew, I want to touch on that in the context of the – Jay, the way we bifurcate the portfolio is the originated portfolio of $7.3 billion, and the M&A portfolio now is down to – what is it? It's only 10% of our total, $800 million. So maybe frame that question – the answer to that question in the context of those two portfolios.

Yeah, Adam, you want to touch on the bifurcation there?

Yeah, so from a dollar perspective, pardon me, let me just do the math here. So the originated has delinquency of about $400 million, just north of $400 million. And then on the acquired portfolio, you know, the M&A – excuse me, the M&A piece, it is – excuse me, one minute.

It is $150 million. And the balance of REO? The REO is $160 million.

Okay. Which is all – you know, in a, in a sale process today.

Okay. The, could you give the dollar value of modifications were completed in the quarter? You know, the 20% pick is a really high number. It implies 45 million of, of pick interest in the quarter, which I think was up from, you said last quarter, 21 million. So it basically doubled.

If you could just give the dollar value of modifications and correct me if any of those numbers are not right Yeah, so the mock the modifications on the bridge book were about 250 million in The in the quarter previous quarter it was approximately 700 million So, you know across the entire bridge portfolio and the modifications are roughly a billion dollars across 32 assets, and the vast majority of those sit within CLOs.

Okay. But it is around $45 million of interest income. Do you think the $45 million increases or stays stable, decreases?

Andrew, do you want to talk about that?

Jade, as I said... you know, earlier, a good chunk of that is coming from those construction loans acquired in the Mosaic transaction. And the expectation is that 77% of that balance pays off at quarter end or is, you know, rolled into a cash flowing loan at quarter end. So I think that number is going to come down.

Okay. And when those pay off, you know, you think they're going to pay off at par and there won't be issues, credit issues there?

Well, the takeout of those loans can take a variety of forms. You know, part of the platform we built is staying involved in the economics of these projects through the life cycle. And so the payoff could come in in the form of an actual payoff via refi somewhere else or movement into a cash flow and bridge loan on our balance sheet. So it could take a variety of different forms.

Yeah, that's important differentiation, Ajay. Well, our business model now is to, you know, the whole life cycle. So you start with ground up construction, and once the project is near stabilization, it's flipped into a bridge loan. And ultimately, you know, if it's multifamily, we'll do a GSE loan. But we're looking to stay with these sponsors.

across the project lifecycle. Thank you.

Thank you. Our next question has come from the line of Stephen Laws with Raymond James. Please proceed with your questions.

Hi, good morning. Tom and Andrew, appreciate the color you guys have provided so far. You've covered a lot. I wanted to touch on CECL. Can you talk about the reserve build and how that's allocated between general and specific and, you know, what assets

of drove that that diesel reserve build this quarter i guess confidence around this level or uh you know considerations about potential increases in that uh as we can as we move forward yeah so that i'll let adam talk on the specifics but um overall the sea soul reserve today is a little over a percent and 32 of the total sea soul is in the journal bucket adam do you want to talk on the movements this quarter

Yeah, and then the movements this quarter, that $50 million, it's almost entirely in the M&A portfolio, across a broad range of property types, office, industrial, and there's some multi in there.

Okay, great. Appreciate some color there. As we think about the distrital earnings number, X loss is 25 cents. As we think about sequential change moving into Q4, what are the one-time items in that number that we need to think about, or do you feel comfortable that distributable earnings X losses can continue to cover the $0.25 billion?

Yeah, I think the $0.25 level is a good baseline. When I think about go-forward earnings, I think there are a few things that are important. The first is the contribution of the small business lending platform, given all the growth and capital investments we've made over the last couple quarters and years, is now substantial to the totality of the company, contributing over 350 basis points of return to the overall platform. And that is a level we expect is sustainable and grows as Some of the businesses we've purchased come online. And so when you think about how that affects go-forward earnings, as the CRE portion of our business, which accounts for the majority of the equity, rebounds and migrates back to historical return levels, you know, as the portfolio turns over and the M&A portfolio is repositioned, migrates back to that, you know, 600, 800 basis point return level, we get – closer to our original thesis of building the business this way, which is having that small business lending platform provide a premium to sort of competitive commercial real estate returns. And so I think there's a growth path from these levels. There are no one-time items that I'm aware of with the exception of there's still a bucket of loans held for sale where you are going to have the impact of realized losses flow through the distributable earnings cap. But absent those losses, I think there's a growth path headed into 2025.

Great. I wanted to touch on the CLOs. You know, you guys talked about them, I think, every quarter, every call this year. You know, they're different, as you mentioned, the static nature and Earlier this year, you talked about the special servicer and your thoughts on essentially changing that or doing it in-house. Can you talk about how that relationship is and your ability to kind of manage some of these assets and how quickly you can start, or do you have to continue to let them go bad before you can actually step in and start to do something?

Adam, maybe kind of frame it in the context of the relative success we've had with the existing servicer in terms of changing the protocols around the how quickly we address mods and that dynamic with our asset management teams. Maybe touch on that.

Yeah, I think at the onset of this stress due to the rate environment towards the end of the last year, I think as we started to see relief requests from our clients, I think the special servicing industry, I think, struggled with how to address mods the environment, what type of modifications they would employ. I think early on, we certainly struggled to execute market modifications and to provide our clients with relief. I think in Q2 and especially this quarter, we have made significant progress with our special servicer. Again, continuing to execute industry standard mods to help these projects have some breathing room to navigate through this challenging environment. These modifications help the tenant base in terms of putting capital into these projects and not having to you know, utilize different alternatives, you know, versus a mod. So, you know, in summary, I'd say, you know, our relationship with our special servicer remains healthy, and the pace at which we are executing solutions for our clients is healthy as well.

Great. I appreciate the color on that, and good to see that relationship is improving. So, appreciate the comment tonight, and I hope you all have a great weekend.

Thank you. Our next questions come from the line of Christopher Nolan with Lattenberg-Thalman. Please proceed with your questions.

Tom, am I correct that your comments earlier were sort of you're thinking that you're through the worst of the commercial real estate cycle for Ready Capital?

Yeah, we're definitively seeing, as evidenced by Adam's comments in terms of the kind of sawtooth down in the absolute dollar delinquencies, And what we're seeing in terms of the migration of the four or five assets as it relates to the originated portfolio, it definitely is mirroring what you're seeing in terms of the macro data in the multifamily sector.

Great. And then in your earlier comments in terms of lower interest rates, improved coverage ratio, is your coverage ratio calculation before or after property taxes and other municipal fees?

Adam, do you want to comment on that in terms of the calculation on the DSCR? I mean, it's somewhat formulaic because we look at it from a Fannie Freddie methodology, but maybe, Andrew, comment on that in terms of the effects.

Yeah, sure.

Yeah, the coverage ratios are after taxes and reserves.

Okay, and final question is, given all that, What's the outlook for the 10% distributable ROE target you guys discussed in previous quarters?

So, absent the realized losses in the mid-eighths this quarter, given my comments before about the sustainability of profitability from the small business lending segment, As the CRE part of the business recovers, I think we marched towards that 10% target.

Okay. So the calculation should be excluding realized losses going forward? Because before I didn't think that was really an issue.

So the realized losses that we posted are related to the population of assets we transferred into health for sale primarily. not 100% of that bucket settled in the third quarter. So you are going to see some noise as the remaining $218 million settles into next year. So the economic impact of that transfer, for the most part, has been felt through the book value of the company. But you will see the realized components flow through distributable earnings. We think that distributable earnings, less realized losses, is an important metric just to have comparability of the core operations of the business across periods.

Okay. I'll follow up offline. Thank you very much.

Thank you. Our final questions will come from the line of Matt Howlett with B. Riley Securities. Please proceed with your questions.

Oh, hey. Hey, thanks, Tom and Andrew. Did you say you freed up $55 million in cash from the loan sales this quarter?

Yes.

So what would be, just walk me through the cadence of the loan sales in the fourth quarter, you get the mortgage company, how much cash are you going to continue to free up in the next few quarters from these sales?

Yeah. So the, maybe take the components on the, the resi side, as Tom mentioned, the, the MSRs are currently in market. The expectation is the sale of those, none of any financing, clears roughly 40 million of incremental cash. The platform itself most likely settles in the first quarter of next year, and the impact of that transaction is roughly $10 million in that range. So there'll be some earn-out component, but the upfront cash will be roughly $10 million. You know, absent that, we do expect you know, the settlement of the remaining assets to flow into next year. Um, and that should clear, you know, roughly 40 million or so of cash as well. And then you're just going to have the normal cadence of the portfolio paying off. Um, but those are the main items.

Okay. So you have 180 million in cash. It seems like that's going to obviously go up with those sales. Uh, My question is this. You have one small maturity next year, like $120 million. My question is this. Financing, are you talking to the banks? We're hearing the banks are out there. They want to lend. Do you have assets available? If you're secured, obviously, could you do an unsecured deal? And then two, I'm assuming you didn't buy back any stock this quarter. Why wouldn't you really get aggressive with the buyback since the worst is over? Stock's at 60% of the book. Obviously, there's value in an SBA that's not reflective in the book. I think we'll both agree that. Why wouldn't you get aggressive here and take advantage of this discount if the worst is over?

Maybe I'll take it in. It's two components there. On the debt maturity for next year, we are certainly talking to all of our banking counterparts and previous lenders about refining that into a new issuance. With that being said, we are positioning the company to take care of that maturity in cash should those not materialize. And then on the buyback program, I think we agree that at this price, the stock looks attractive from the from a buyback perspective. And I do expect it's something you will see from the company, you know, in the upcoming months.

Okay. Well, I mean, obviously we can do the math, but it's enormously creative at this discount, but when you say paying into cash, I mean, why, I mean, could you, I mean, are there any financing, other financing options may not really elaborate on a recourse basis. I mean, there are other, you could play. I mean, yeah, sure.

We're, we are exploring, uh, Sorry to cut you off. Yeah, we are exploring all of those, you know, refining into an unsecured issuance. We have a significant amount of unencumbered assets on the balance sheet that we could use for a secured issuance. There's a variety of other structures we are also exploring. So that is obviously the preferred path. I think just to be conservative, you know, we are also planning the company's liquidity profile to make sure that that maturity is not an issue for us in the upcoming months.

Gotcha. Okay, good. Look, we look forward to that. Obviously, I think Mark will applaud any type of share or purchase at these discounts. I guess the last question is on the SBA, I mean, that digital business, you know, the iBusiness and the SBA, I mean, what could you do with that? Any sort of – how's that doing? You know, I mean, you've got this digital business. I mean, it could, you know, obviously in the world of fintechs get a much better multiple on its own. I just would love to hear sort of something you don't see in mortgage rates, and, you know, you guys have one.

Yeah, so the, you can see the, and I think it's significantly underappreciated in our peer group, just given that it's, you know, it is a nuanced, regulated, capital-light, government-insured business. But in terms of the iBusiness aspect, they, you know, we purchased them back in 2019. They were a, you know, a leader in unsecured small business lending. And then they adopted their tech to the PPP, which was very accretive. And since then, there's been the initiative within the SBA to emphasize small loans below $350,000, which many times are minority women-owned businesses. And so that's been a significant initiative by the SBA. So what we've done – and there you could use a scorecard methodology, which is very similar to how you underwrite unsecured loans. Right. What we've done is we've developed – iBusiness has developed a tech stack, which is now being marketed as a third-party underwriting model for banks. Banks just do not focus at all. Even if they do SBA loans, it's mostly for larger loans, again, above the $350 to the $5 million. So this – iBusiness – the idea with iBusiness is to grow the, if you will, the revenue stream from this software business. And then once it achieves, as you pointed out, the valuation in a mortgage REIT is nowhere near what it would be in a standalone C-Corp. So the idea would be to look at a kind of a backdoor IPO via a tax-free spinoff to shareholders. Again, that's kind of how we think of ReadyCap. In a way, for these capital-like businesses that achieve scale, it's like as if we're a private equity fund that has the ability to finance these businesses very cheaply versus venture capital and then spin it off. So anyway, it's a long way to answer to your question, but the growth you've seen in the SBA 7A business is testimony to that strategy in that they've, you know, we're achieving in our traditional large loan around 500 million and, you know, roughly 500 million this past on a run rate basis this past quarter in the small, the small loan as well.

But will you be, I mean, that could trade off a multiple to revenue. We begin providing a separate data on that at some point, you know, what it's doing and the financials on it.

Yeah. As the business scales and achieves what we believe to be, um, you know, scale in terms of the number of bank customers and revenue streams as it relates to that, we would look to do segment reporting.

Great. Look forward to that. Thanks, everyone.

Thank you. That concludes our question and answer session. I'd like to hand the call back over to Thomas Capassi for any closing remarks.

I appreciate everybody's time and look forward to next quarter's call.

Thank you. That does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.